The Hawai`i Intermediate Court of Appeals' (ICA) decision in Liberty Mut. Ins. Co. v. Sentinel Ins. Co., Ltd., No. 27429, 2009 Haw. App. LEXIS 134 (Haw. Ct. App. March 31, 2009) is unpublished and the facts are detailed, but it's a Hawaii insurance-related decision. So we submit the following.
Ms. Labrador, the insured, sustained injury when the car driven by Ms. Tolfree, and in which Labrador was a passenger, veered off the road to avoid an unidentified truck. Tolfree's car was insured under a policy issued by Sentinel Insurance Company and Hartford Insurance Group and a second policy issued by PEMCO Mutual Insurance Company. Both policies provided liability and uninsured motorist (UM) coverage. Labrador was insured by her father's policy with Liberty, which provided stacked UM coverage totaling $140,000 and stacked underinsured motorist (UIM) coverage totaling $140,000.
In arbitration, it was determined Labrador's damages amounted to $250,000, and that Tolfree was 60% at fault and the truck's driver was 40% at fault. Labrador settled with Tolfree's insurers for liability and UM benefits, and then sought UM and UIM benefits from Liberty. The circuit court ordered Liberty to pay Labrador $50,000 in UIM benefits.
The first argument on appeal was that the circuit court erred in holding Liberty was liable to Labrador for UIM benefits based on Tolfree's joint-and-several liability for all of Labrador's damages. The Intermediate Court of Appeals (ICA) disagreed. By statute, UM and UIM policies had to provide coverage for all damages which an insured was legally entitled to recover from the owner or operator of an uninsured or underinsured vehicle, which encompassed damage for which the owner or operator of an uninsured or underinsured motor vehicle was jointly and severally liable pursuant to Haw. Rev. Stat. sec. 663-10.9 and 663-11. The ICA rejected Liberty's citations to cases from other jurisdictions which held joint-and-several liability applied only to actions in tort and not to contractual actions for UM and UIM benefits.
Next, the ICA rejected Liberty's argument that it was entitled to a credit in determining its UIM obligation for amounts that Labrador received in UM benefits from Tolfree's insurers in determining that Labrador was underinsured. The circuit court correctly determined that the $250,000 in joint and several damages imposed against Tolfree exceeded the $200,000 in cumulative limits for bodily injury under Tolfree's two policies. Therefore, Tolfree met the statutory definition of an underinsured motorist, and Liberty was obligated to pay Labrador UIM benefits to compensate her for the $50,000 difference.
Finally, the ICA affirmed the award of attorneys' fees to Labrador under Haw. Rev. Stat. sec. 431:10-242 for having to sue the carrier for insurance benefits. Liberty's argument that Labrador had unsuccessfully sought UM benefits because Liberty's UM coverage was excess to the other insurers was unavailing. There was no authority for awarding fees to Liberty.
The ICA also addressed two issues raised by Labrador on appeal. First, the ICA found the circuit court did not abuse its discretion in denying prejudgment interest. Under Hawai`i law, prejudgment interest was allowed only in the discretion of the court.
Second, Labrador challenged Liberty's "other insurance" provision. This clause provided that "any insurance we provide with respect to a vehicle you do not own shall be excess over any other collectible insurance." This clause did not limit or reduce Liberty's liability for UM payments to Labrador. The clause legitimately designated the policy's coverage as excess if other coverage was available to the insured. Therefore, Liberty's "other insurance" clause was consistent with Hawai`i case law and statutes.
