Insurance Law Hawaii

Hawaii ICA Affirms Denial of Summary Judgment on Bad Faith Claim

   Following the jurisprudence set forth by the Hawaii Supreme Court, the Intermediate Court of Appeals affirmed the trial court's rejection of the insured's claim for bad faith. Stewart v. State Farm Mut. Auto. Co., 2012 Haw. Ct. App. LEXIS 148 (Haw. Ct. App. Feb. 10, 2012).

   The ICA agreed with the insured that the trial court had improperly determined that a bad faith claim can arise only if the insurer owed the insured a duty to pay and the insurer delayed or denied payment. The trial court's reasoning departed from the Supreme Court's decision in Best Place, Inc. v. Penn Am. Ins. Co., 82 Haw. 120, 133, 920 P.2d 334, 347 (1996). The Supreme Court previously held that, under some circumstances, an insured may pursue a bad faith claim even where there is no coverage under the policy.

   Nevertheless, the end result in dismissing the bad faith claim was correct. The insured alleged that the insurer failed to promptly and thoroughly investigate his claim before consenting to his settlement with the other driver's insurer. The insured, however, never complained about the insurer's pre-settlement investigation. The undisputed facts demonstrated that the insurer requested information from the insured regarding his injuries and his lost wages, performed an asset check of the other driver and had an adjuster speak with the other driver's carrier to ascertain that he had few assets to satisfy a potential judgment. This pre-settlement investigation fit the guidelines for UIM investigations established by the Hawaii Supreme Court.

   Therefore, the insured failed to show the existence of a genuine issue of material fact to establish that the insurer committed bad faith in the handling or investigation of the UIM claim. Consequently, the trial court properly granted summary judgment.

   Thanks to Keith K. Hiraoka, counsel for the insurer, for forwarding this case to me.

Hawaii ICA Affirms Determination of No Bad Faith

   Shilo Willis was injured when the uninsured car in which she was a passenger was struck by another vehicle. Willis v. Swain, 2012 Haw. Ct. App. LEXIS 131 (Haw. Ct. App. Feb. 3, 2012). Willis was enrolled under a "certificate policy" which was provided under Hawaii's Joint Underwriting Plan (JUP) to drivers receiving public assistance benefits. Although the JUP certificate policy provided personal injury protection benefits and bodily injury coverage, Willis's certificate policy with First Insurance did not include uninsured motorist (UM) coverage.

   Willis sustained bodily injuries, received medical treatment, and incurred medical bills. Her claim was assigned to First Insurance pursuant to Haw. Rev. Stat. sec. 431:10C-408. The case had previously been before the Hawaii Supreme Court, which vacated the circuit court's grant of summary judgment in favor of First Insurance. The Supreme Court determined that First Insurance was to pay appropriate beneifts under the assigned claim program. The Supreme Court did not address Willis's other claims, including a claim for bad faith.

   On remand, First Insurance paid benefits under the JUP assigned claims program and then moved for summary judgment with respect to the bad faith claim. The circuit court granted the motion, holding that as a matter of law there was no bad faith claim in the absence of a contract.

   The Supreme Court affirmed the dismissal of the bad faith claim. In Simmons v. Puu, 105 Hawaii 112 (2004), the court had determined that a contract must underlie the tort of bad faith. Here, Willis did not have an insurance contract on which to rely, but constructed an argument that statutory provisions related to assigned claims under the JUP established First Insurance's duty of good faith and fair dealing. The court was not persuaded. Therefore, the claims for bad faith failed as a matter of law for lack of an underlying contract. The circuit court's final judgment was affirmed.

   Thanks to my Damon Key blogging colleague, Mark Murakami (www.hawaiioceanlaw.com) for the heads up on this case.

Hawaii Supreme Courts Holds Insured Is Real Party In Interest When Pursuing PIP Benefits

   In Wilson v. AIG, 89 Haw. 45, 968 P.2d 647 (1998), the Hawaii Supreme Court held that an insured was not the real party in interest when challenging its auto insurer's refusal to pay benefits to the insured's medical provider. Relying on legislation post-dating its prior decision, the Court overruled Wilsonin an unanimous decision authored by Justice McKenna. Ahn v. Liberty Mut. Fire Ins. Co., No. 28314 and Kim v. Liberty Mut. Fire Ins. Co. No. 28315 (Haw. Sup. Ct. Oct. 4, 2011) [Decision here]. Prior posts on Kim and Ahn are here, here and here.

  Liberty Mutual denied Personal Injury Protection ("PIP") benefits to Ms. Kim and Ms. Ahn for treatment after their respective motor vehicle accidents. In proceedings before the Insurance Commissioner, Liberty Mutual's motions for summary judgment were granted because the insureds were deemed to not be the real parties in interest for pursuing PIP benefits. The circuit court concluded Act 198 had legislatively overruled Wilson, and thatthe insureds were real parties in interest to challenge Liberty Mutual's denials. Therefore, the Insurance Commissioner's final order was reversed. The Hawaii Intermediate Court of Appeals affirmed the circuit court.

   Act 198, enacted in 2006, amended the no-fault law in Hawaii. The Act's legislative history expressed its intent to overrule Wilson. Further, the Act specifically stated that if there was a dispute between the provider and the insurer regarding payment of a claim, "the provider, insurer, or claimant may submit the dispute to the commissioner, arbitration, or court . . . ."

    The Supreme Court first held that the ICA erred in affirming the circuit court's reversal of the Insurance Commissioner's final order. Act 198 was not effective until June 14, 2006, after the Insurance Commissioner's final orders. To conclude that Act 198 conferred real party in interest on these insureds, the Act would have to have retrospective effect. Here, the Act was not retrospective because the legislature did not choose to make it so.

    Nevertheless, the Court held that Wilson should be overruled. Even though Act 198 was not retrospective, it was still instructive. The Act's legislative history clearly expressed the Legislature's view that insureds should be real parties in interest to pursue all PIP disputes whether through the Insurance Commissioner, arbitration, or a court.

    Rebecca Copeland (www.recordonappeal.com) gives her appellate perspective on the cases here.

     

Oral Argument Heard in Ahn and Kim Cases

   We previously posted here and here on decisions by the Hawaii Intermediate Court of Appeal in Ahn v. Liberty Mutual Fire Ins. Co. and Kim v. Liberty Mutual Fire Ins. Co.  As you recall, the issue in the two cases was whether the insured could seek administrative review when the insurer denied coverage or was the right to seek review limited to the medical provider. 

   My blogging colleague, Rebecca Copeland, attended last week the oral argument in the two cases before the Hawaii Supreme Court.  Rebecca's recent post [here] gives us a flavor of how the oral argument went.  We will now wait for the Supreme Court's decision.

Cert. Granted in Companion Personal Injury Protection Benefits Case

   We reported here that the Hawaii Supreme Court granted certiorari in Kim v. Liberty Mutual Fire Ins. Co.  The Supreme Court has now granted certioari in a companion case, Ahn v. Liberty Mutual Fire Ins. Co.  

   As in Kim, the issue in Ahn is whether Haw. Rev. Stat. 431:10C-308.5(e) overruled the Supreme Court's decision in Wilson v. AIG, 89 Haw. 45, 968 P.2d 647 (1998).  In Ahn, the plaintiff sought review of LIberty Mutual's denial of personal injury protection benefits she received after an auto accident.  Liberty Mutual contended only the provider, not the patient, could pursue administrative remedies if a dispute arose over the amount charged. 

   Relying on Kim, the Intermediate Court of Appeals affirmed the circuit court's decision that Ahn was a real party in interest and could pursue claims for unpaid medical bills against the insurer.  Liberty Mutual's application for certiorari was granted by the Supreme Court.

   We will watch these cases with interest.  For the insight of an appellate practitioner on these developments, see this post by my Damon Key blogging colleague, Rebecca Copeland.

Hawaii Supreme Court To Decide If Claimant Can Challenge Denial of PIP Benefits

    In January, we reported on the Hawaii Intermediate Court of Appeal's decision in Kim v. Liberty Mutual Fire Ins. Co., 124 Haw. 415, 245 P.3d 488 (Haw. Ct. App. 2010) (prior post here).  The ICA determined that legislation had overruled the Supreme Court's decision in Wilson v. AIG, 89 Haw. 45, 968 P.2d 647 (1998), which held that an insured was not the real party in interest to challenge its auto insurer's refusal to pay benefits to the insured's medical provider. 

     Act 198, enacted in 2006, amended the no-fault law in Hawaii.  The Act's legislative history expressed its intent to overrule Wilson.  Further, the Act specifically stated that if there was a dispute between the provider and the insurer regarding payment of a claim, "the provider, insurer, or claimant may submit the dispute to the commissioner, arbitration, or court . . . ."  The ICA determined in Kim that Act 198 rendered Wilson obsolete.  Kim therefore qualified as a real party in interest to pursue her administrative action against Liberty Mutual.  

   Liberty Mutual applied for a writ of certiorari.  It argued that the ICA's decision conflicted with the plain language of Act 198.  Liberty Mutual noted the first sentence of the Act provides, "In the event of a dispute between the provider and the insurer over the amount of a charge . . . ."  Haw. Rev. Stat. 431:10C-308.5 (e).  This language, Liberty Mutual submitted, limited the provision to disputes solely between a provider and the insurer.  Liberty Mutual further argued the ICA's decision erroneously departed from Wilson. 

   On April 27, 2011, the Supreme Court accepted Liberty Mutual's application for the writ and noted oral argument will be scheduled.  We will keep an eye on this case as it further develops.

  From her appellate practice prospective, my Damon Key blogging colleague, Rebecca Copeland (http://www.recordonappeal.com/record-on-appeal/), has a post here on the writ being granted in Kim. 

Lack of Coverage for Named Insured Does Not Negate Coverage for Additional Insured

   Although the commercial auto policy excluded coverage for the named insured, coverage was still possible for the additional insured.  Great West Casualty Co. v. Terminal Trucking Col., LLC, 2011 U.S. Dist. LEXIS 30356 (D. S.C. March 22, 2011).

   Wellman, Inc. sold bales of polyester fiber to Milliken & Company.  Wellman contracted with Terminal Trucking Company to deliver the bales of fabric to Milliken.  In August 2007, Wellman loaded a trailer with bales of fabric and a Terminal driver delivered the loaded trailer to Milliken.  Before leaving, the driver unhitched the trailer from his truck and left the trailer on Milliken's property, as instructed by a Milliken employee. 

   The next morning, Sutton, a Milliken employee, approached the trailer to unload the fabric.  A bale inside the trailer fell through the door, hit Sutton, and caused serious injury.

   Sutton sued Terminal and Wellman.  Terminal had a commercial general liability policy and a commercial auto insurance policy with Great West Casualty Company.  Wellman was an additional insured on both policies.  Great West sued for a declaratory judgment, contending there was no coverage for either Terminal or Wellman.

   On motions for summary judgment, the court found there was no coverage under the CGL policy.  An exclusion for aircraft, auto or watercraft provided there was no insurance for bodily injury arising out of the loading or unloading of a trailer.  This exclusion applied not only to the named insured, Terminal, but also to the additional insured, Wellman.  An endorsement stated that coverage provided to the additional insured was subject to all exclusions in the policy.

   Nor was Terminal covered under the commercial auto policy.  The Completed Operations exclusion provided when all work was completed at a site, there was no coverage.  The additional insured endorsement for the auto policy provided coverage for liability based on "the conduct of an 'insured' . . . and only to the extent of that liability."  Unlike the CGL policy, however, the additional insured endorsement did not incorporate all of the exclusions.  Therefore, the Completed Operations exclusion did not apply to Wellman.

   Nevertheless, coverage was available only if Wellman was ultimately found liable for damages resulting from Terminal's conduct.  Sutton alleged the bales of fiber were improperly loaded,the bales shifted during transit,Terminal failed to train its driver to understand the cargo may shift during transit, and Wellman and Terminal had no procedure by which to make sure the load was safe for unloading.  The determination as to whether Wellman's liability was based on Terminal's conduct had to be determined in the underlying litigation.

 

Hawaii Court Rules Insured Is Real Party In Interest for Challenging Denied Claim

   In Wilson v. AIG, 89 Haw. 45, 968 P.2d 647 (1998), the Hawaii Supreme Court held that an insured was not the real party in interest to challenge its auto insurer's refusal to pay benefits to the insured's medical provider.   The issue before the Hawaii Intermediate Court of Appeal was whether the legislature had overruled the Supreme Court 's decision in Wilson.  See Kim v. Liberty Mut. Fire Ins .Co., 2010 Haw. App. LEXIS 888 (Haw. Ct. App. Dec. 23, 2010).

   After being involved in a motor vehicle accident, Kim had acupuncture therapy administered by his provider, Dr. Chai's Health Center Inc.  Liberty Mutual paid for the acupuncture for three and a half months, but then refused to make further payment, deciding such treatment was no longer warranted.  Kim requested a administrative hearing before the Insurance Commissioner, seeking review of Liberty Mutual's refusal to pay the bill submitted by the Health Center.  

   Relying on Wilson, the Insurance Commissioner decided in Liberty Mutual's favor.  The circuit court disagreed with the Insurance Commissioner, finding that the legislature's Act 198 effectively overruled Wilson.  Act 198, enacted in 2006, amended the no-fault law in Hawaii.  The Act's legislative history expressed its intent to overrule Wilson.  Further, the Act specifically stated that if there was a dispute between the provider and the insurer regarding payment of a claim, "the provider, insurer, or claimant may submit the dispute to the commissioner, arbitration, or court . . . ."

   The ICA agreed with the circuit court that Act 198 rendered Wilson obsolete.  Kim therefore qualified as a real party in interest to pursue her administrative action against Liberty Mutual.  The case was remanded to the Insurance Commissioner.

   For an appellate practitioner's view of the Kim case, see my Damon Key blogging colleague Rebecca Copeland's post here. 

Fees Not Available Under Hawaii's Assumpsit Statute for Declaratory Judgment Actions

   The Hawaii Intermediate Court of Appeals overturned an award of attorney fees in a declaratory relief action filed by the insurer.  See Allstate Ins. Co. v. Silva, 2010 Haw. App. LEXIS 806 (Haw. Ct. App. Dec. 9, 2010).

   Silva was injured on his motorcycle when struck by an auto driven by Ponce.  Silva sued Ponce for negligence and requested, among other relief, reasonable attorney fees.  Ponce defaulted.  Silva wrote to Ponce's auto insurer, Allstate, requesting its position on the matter.

   Allstate filed an action for declaratory relief, seeking to establish that neither Ponce nor Silva were entitled to coverage.  The Circuit Court granted declaratory relief to Allstate.  The Hawaii Supreme Court vacated the Circuit Court's decision, holding that Allstate had a duty to defend and/or indemnify under the policy.  Allstate then paid $25,000 to Silva, the policy limits for bodily injury. 

   Two years later, Silva filed a motion for entry of judgment and attorney fees.  Allstate opposed the motion, arguing the case was moot because policy limits had been paid.  Further, Allstate argued attorney fees were unavailable under Haw. Rev. Stat. 607-14 because its declaratory relief action was not in the nature of assumpsit, as required by the assumpsit fee statute. 

   Nevertheless, the Circuit Court granted the request for Entry of Judgment and Silva's request for fees under Haw. Rev. Stat. 607-14.  Ponce had assigned to Silva all claims for relief Ponce had against Allstate, including a breach of contract claim based on Allstate's initial failure to pay the liability claim.

   The ICA vacated the judgment and award of fees.  Allstate only sought a declaration as to its rights or responsibilities as the insurer, not money damages.  Thus, its declaratory relief action was not in the nature of assumpsit and the Circuit Court erred in awarding fees to Silva under Haw. Rev. Stat. 607-14.

Hawaii Auto Policy Entitles Insured To Uncapped Wage Loss Benefits

   The insured was injured in an auto accident on the Big Island on March 26, 1998.  See First Ins. Co. of Hawaii, Ltd. v. Dayoan, Sr., 2010 Haw. App. LEXIS 697 (Haw. Ct. App. Nov. 18, 2010).  He was covered by a Personal Auto Policy issued in February 1998 by First Insurance.  The policy provided coverage for wage loss to any insured who suffered "bodily injury" which prevented the insured from engaging in his employment. 

   The accident left the insured disabled and unable to engage in his usual occupation as a kitchen helper/dishwasher.  He was sixty years old at the time of the accident.  First extended coverage and in a letter dated April 3, 1998, explained that that the policy included optional wage loss benefits that would terminate upon the insured's death. First commenced to pay $1500 in month wage loss benefits pursuant to the policy.

   After paying wage loss benefits for almost seven years, First filed for declaratory relief on April 21, 2005, seeking a judgment that it was no longer obligated to extend wage loss benefits to the insured, now sixty-eight years old.  The complaint was based on amendments to the Hawaii Insurance Code in 1997 and 1998.

    The purpose of the 1997 Amendments was to reduce motor vehicle insurance premiums and to preserve adequate protection of drivers' rights.  Costly mandatory coverage for wage loss was converted to optional coverage.  The 1997 Amendments became effective on January 1,1998, after the insured's accident.  In 1998, further amendments were made by reducing the wage loss benefit option and permitting wage loss caps per accident.  The 1998 Amendments continued to permit insurers to offer higher wage loss coverage limits for a higher premium. 

     First moved for summary judgment, arguing the 1998 Amendments capped the amount of wage loss benefits to which insureds were entitled.  First argued that although the amendments were enacted subsequent to the accident, they clarified the legislature's intent in adopting the 1997 Amendments, and thereby capped the insured's lifetime recovery for wage loss at $9,000.  Otherwise, First argued, the statute was illogical because an insurer would have to continue paying benefits to an insured who was no longer able to work and would not have suffered any wage loss.

    The Circuit Court denied First's motion for summary judgment and granted summary judgment to the insured.  Further, attorney fees were awarded to the insured at the rate of $250 an hour.  First appealed the ruling on summary judgment and the fee award.

    The Intermediate Court of Appeals affirmed.  Under both the 1997 Amendments and the policy, the insured was entitled to $1,500 per month in wage loss benefits.  The fact that the legislature amended the statute in 1998 to allow wage loss benefit caps was not sufficient to establish that it meant to require the caps in 1997. 

   Further, the attorney fees award was appropriate.  The statute allowed the insured to recover reasonable fees when the insured contested its liability under a policy and was ordered to pay benefits.  Haw. Rev. Stat. 431:10-242.  First sought declaratory relief establishing it was no longer responsible for paying the wage loss benefits.  The Circuit Court denied relief and ordered that First had an obligation "to pay wage loss benefits."  First further argued a rate of $250 an hour was unreasonable because the Insurance Commissioner had approved the rate of $125 per hour in an unrelated administrative proceeding.  The Commissioner's decision did not preclude the Circuit Court from determining that $250 per hour was a more appropriate rate under different circumstances.  Further, the insured provided evidence that $250 per hour was well within the prevailing rate for experienced attorneys in Hawaii.