Insurance Law Hawaii

Bad Faith, Emotional Distress Claims Reinstated Against Health Insurer

    The Hawaii Intermediate Court of Appeals reversed the trial court's grant of summary judgment to the health insurer, reinstating the insured's claims for bad faith and emotional distress. Groeger v. Kaiser Foundation Health Plan, Inc., 2023 Haw. App. LEXIS 308 (Haw. Ct. App. Aug. 29, 2023). 

    In March 2012, Christian Groeger was diagnosed with Guillian-Barre Syndrome, an illness in which a person's immune system attacks part of the peripheral nervous system. Christian was in the hospital from April 2012 to February 2013 while insured under a medical plan with Kaiser Health Plan. Christian's mother and father, Knut and Peninska, spent time with Christian during his treatment at Kaiser Hospital. 

    The Groegers sued Kaiser for mishandling numerous requests for medically necessary services that Christian needed to overcome his serious condition after being admitted to the hospital. At one point, Kaiser lowered Christian's level of care to that of "nursing facility" and he was using up his sixty-day benefit. In February, 2013, doctors from Germany, where the family was from, visited the hospital and said they would have provided different treatment from that received from Kaiser. Christian was finally relocated and admitted to a German hospital, where he subsequently recovered. 

    The trial court granted summary judgment to Kaiser on plaintiffs' claims for bad faith, intentional infliction of emotional distress (IIED), and negligent infliction of emotional distress (NIED). In support of the motion, Kaiser submitted the Service Agreement, asserting that it set out the medical coverage to which Christian was entitled during his hospitalization. The court determined that no Kaiser physician prescribed or recommended the treatment at the German hospital and therefore, "as a matter of law, the requested treatment was not 'Medically Necessary' as defined by the Service Agreement." 

    On appeal, the Groegers contended that Kaiser never established that the Service Agreement was provided to the Groegers. Thus, the document should not have been applied to grant summary judgment. The Court of Appeals agreed that Kaiser failed to demonstrate that the Service Agreement submitted to the trial court was the agreement or plan that Peninska had reviewed and that she understood the applicable terms. This created genuine issues of material fact whether the terms of applicable medical coverage were met and whether the Groegers were properly informed of the coverage or agreement terms. 

    Further, Knut and Peninska submitted declarations stating they made numerous requests for specific treatment for Christian, and their requests were ignored and denied without much, if any, explanation. Peninska stated that a respiratory therapist told her he would do more for Christian but was not permitted to do so by those who were higher up. Given this record, there were genuine issues of material fact and summary judgment in favor of Kaiser on the bad faith claim was not warranted.

    Further, granting summary judgment Kaiser on the IIED and NIED claims was improper. The IIED and NIED claims were based on alleged delay and denial of coverage for medical services.

Harvard's Claim Rejected for Untimely Notice

    Harvard College's claim for excess coverage was properly denied for failure to provide timely notice on a claims-made policy. President and Fellows of Harvard College v. Zurich Am. Ins. Co., 2023 U.S. App. LEXIS 20715 (1st Cir. Aug. 9, 2023). 

    Harvard had a one year liability policy with National Union Fire Insurance Company of Pittsburgh, Pennsylvania. The claims-made policy had lmits up to $25,000,000. The policy required prompt notice of any claim filed against Harvard. In addition, Harvard also purchased an excess policy from Zurich to insure against an additional $15,000,000 should a claim exhaust the National Union coverage. The Zurich policy required notice "in the same matter required by the terms fo the [National Union] policy." Under both policies, therefore, a claim had to be reported within ninety days of the end of the policy period. Both policies had policy periods ending on November 1, 2015. Therefore, any claim had to be reported no later than January 30, 2016. 

    On November 17, 2014, Harvard was sued by students for violating Title VI of the Civil Rights Act of 1964. Harvard gave notice to National Union and thereby secured coverage under hte policy. Harvard neglected, however, to notify Zurich until May 23, 2017 - well beyond the excess policy's ninety day notificaiton window. Consequently, Zurich denied coverage for failure to provide timely notice. Harvard sued. The district corut granted summary judgment to Zurich.

    On appeal, the First Circuit noted that under Massachusetts law, notice provisions of claims-made policies were enforced even if the insurer was not prejudiced by the late notice. Therefore, Zurich had every right to deny coverage.

    Harvard argued for the first time on appeal that the notice requirement was ambiguous and further discovery might show Zurich had notice through a newspaper or other mediat outlet. The argument was rejected, however, because it was not raised below. 

Insured's Claim Against Broker Dismissed for Not Being Ripe

    The insured hospital's claim against its broker for allowing a policy to lapse was dismissed on ripeness grounds. WakeMed v. Willis Towers Watson Southeast, Inc., 2023 U.S. Dist. LEXIS 139115 (W.D. N.C. Aug. 9, 2023).    

    WakeMed was a hospital system providing health services. WakeMed hired Willis Towers Watson Southeast Inc. (Willis), an insurance broker, to assist WakeMed in purchasing insurance policies and reporting claims. 

    Willis helped WakeMed purchase a cyber liability policy from Tokio Marine on October 1, 2020. The initial policy period was October 1, 2020, to October 1, 2021, with an automatic 60-day extended reporting period through November 30, 2021. By mid-2021, WakeMed informed Willis that it would not be renewing the cyber policy. However, on October 19, 2021, WakeMed changed its mind and decided to buy a one-year extended reporting period. Wills confirmed it had procured the additional 12-month extended reporting period and the coverage extended through October 1, 2022. 

    On September 1, 2022, two patients filed a putative class action against WakeMed for alleged online privacy violations, contending that WakeMed unlawfully disclosed the patients' protected information. WakeMed reported the claim to Tokio Marine on October 21, 2022. Tokio Marine denied coverage because the underlying claim was not reported by October 1, 2022, the date the policy's extended reporting period expired. WakeMed disputed this coverage decision through arbitration.

    Although the class action and arbitration remained unresolved, WakeMed sued Willis for failing to provide coverage for the extended period. Willis moved to dismiss.

    The court granted the motion to dismiss because the matter was not ripe. The underlying claim against WakeMed remained to be adjudicated. Further, if the arbitration determined WakeMed was covered, then WakeMed would have no claim against Willis because the alleged injury would be nonexistent. There was not yet a determination that WakeMed was liable in the underlying claim, and even if WakeMed were held liable, there was no determination that WakeMed's liability was not covered by Tokio Marine's cyber policy. 

Tenth Circuit Reverses District Court's Ruling that Contractor Entitled to a Defense

    After the district court granted the insured contractor's motion for judgment on the pleadings on the duty to defend, the Tenth Circuit found there was no coverage and reversed. Owners Ins. Co. v. Greenhalgh Planning & Development, Inc., 2023 U.S. App. LEXIS 20137 (10th Cir. Aug. 4, 2023). 

    Greenhalgh remodeled a house and barn for Michelle and Steven Pickens. After completion of the project, the Pickens sold the property to Teague and Michelle Cowley. The Cowleys later sued the Pickenses asserting various fraud and breach of contract claims. The complaint alleged that the Pickenses misled them into reasonably believing that the barn was a habitable structure, even though it did not qualify as such under the applicable building code because it lacked a fire-sprinkler system. 

    The Pickenses, in turn, filed a third-party complaint against Greenhalgh for breach of contract. Greenhalgh tendered to its insurer, Owners, who agreed to defend, but filed a declaratory relief action seeking a determination it had no duty to defend. The district court granted Greenhalgh's motion for judgment on the pleadings and determined Owners owed a duty to defend.

    On appeal, Owners agreed that the alleged inablity to use the barn as a habitable structure becuase it lacked a fire-sprinkler system was a loss of use that could constitute property damage. But Owners contended that the alleged property damage was not caused by an "occurrence."

    The Tenth Circuit agreed with Owners. Because the natural and expected consequence of the alleged negligent construction was that the barn could not be used as a legally habitable structure, the alleged property damage was not caused by an occurrence.

    Greenhalgh argued that Owners should defend because a subcontractor may have caused the damage. A federal district court had predicted that the Utah Supreme Court would hold property damage from faulty or negligent subcontractor work would constitute an "occurrence." The Tenth Circuit rejected this argument. The underlying complaint asserted that it was Greenhalgh, as the general contractor, who was responsible for ensuring code compliance.

    Further, the your work exclusion barred coverage even if a subcontrator performed work on Greenhalgh's behalf.

Maryland Federal Court Holds Appraisal Subject to Federal Arbitration Act

    The Maryland Federal District Court granted the insured's motion to dismiss because the matter was appropriate for arbitration. Travelers Cas. Ins. Co. of Am. v. Papagiannopoulous, 2023 U.S. Dist. LEXIS 130876 (D. Md. July 27, 2023). 

    The insured's property was damaged by fire. A claim was filed with Travelers. Both Travelers and the insured had inspectors conduct estimates of damage. The insured demanded arbitration and appointed its inspector as appraiser. Travelers declined to name an appraiser, arguing that the insured's appraiser was not impartial. 

    Travelers filed suit seeking a declaratory judgment disqualifying the insured's choice as appraiser. The insured filed a motion to compel appraisal and to stay the action pending an appraised award. The insured also moved to dismiss for improper venue. 

    The court acknowledged that other courts had long interpreted appraisal to be analogous to arbitration. Further, a court could not entertain an attack upon the qualifications or partiality of arbitrators until after the conclusion of the arbitration and rendition of an award. The Federal Arbitration Act (FAA) contained no provision expressly granting courts the authority to remove a party-appointed arbitrator prior to the conclusion of the arbitration.

    The insured's motion to dismiss argued that the appraisal dispute should be referred to an arbitration panel pursuant to the FAA. The court agreed. It did not have subject-matter jurisdiction to consider the dispute, because the parties' appraisal dispute was subject to the FAA. In addition, Travelers' challenge to the insured's appraiser was premature because such a challenge could not be raised until after the party had completed the appraisal process. Therefore, the insured's motion to compel arbitration and motion to dismiss were granted. 

Insureds' Experts Insufficient to Survive Insurer's Motion for Summary Judgment

    The magistrate recommended that insurer's motion for summary judgment be granted due to the insureds' expert's inability to present genuine issues of material fact. Walker v. Century Sur. Co., 2023 U.S. Dist. LEXIS 142408 (E.D. Texas July 17, 2023). 

    The insureds' property sustained damage from Hurricane Laura. Colonial Claims inspected the property for Century and reported that a portion of the roof was damaged by the hurricane. Century paid insureds $2,212,34. Van Fisher, an engineer with Envista Forensics, then inspected the interior of the property on Century's behalf. Fisher reported that there was some covered interior damage caused by a leak from a storm-created opening in the roof. However, Fisher further reported that there was other interior damage caused by existing water leaks not attributed to the hurricane and thus not covered by the policy. Century then paid the insureds an additional $485.05 based on Fisher's inspection. 

    The insureds sent to Century an estimate prepared by Nikki Seals of Damage Reports LLC, which reported approximately $291,376 of damage to the property. Van Fisher then re-inspected the property and reaffirmed the findings from his first inspection. He opined that one portion of the roof was damaged from the hurricane, and a different portion of the roof was also damaged, but not by the hurricane. Therefore, neither the portion of the roof not damaged by the hurricane nor the interior damage attributable to it was covered by the policy. The insured's representative, Eric Foshee, who observed Fisher's re-inspection, commented in an email on Fisher's opinions and concluded that the interior damage was directly associated with wind driven rain. 

    The insureds filed suit and Century moved for summary judgment. Century pointed to the reports from Fisher and Colonial Claims, which indicated that only a portion of the damage was covered by the policy and Century made payments for that damage. The insureds designated Nikki Seals as an expert and contended she would testify regarding "cost and causation, scope of estimated costs for repair and/or replacement of the damage."

    Century argued that Seals' report was not competent summary judgment evidence. The report was undated, did not reference wind or hurricane, and had no narratives. The magistrate agreed. Seals' report was nothing more than a series of photographs and cost estimates for repairing various line items. This was not sufficient to carry the insureds' summary judgment burden of demonstrating a genuine issue of material fact. An estimate that merely described observed damage with no reference to the cause of that damage was not sufficient to carry the insureds' summary judgment burden. 

    Nor were the email comments for Foshee sufficient to carry the insureds' burden. Foshee's comments did not provide any support for the insureds' position that the property damage was attributable to a storm-created opening. Rather, Foshee's comments indicated the disputed damage was the result of water entering through an already-existing and not-storm created opening, namely the AC ducts. 

    Therefore, the insureds failed to demonstrate there was a genuine issue of material fact as to causation.

       

Maui Fire Claims Addressed on Think Tech Hawaii

    Thank you to Think Tech Hawaii and my partner Na Lan for inviting me to discuss pursuing claims after the Lahaina fire. The video of the interview is here.

Certified Question Asks Hawaii Supreme Court to Determine Coverage for Allegations of Greenhouse Gas Emissions

    The federal district court certified questions to the Hawaii Supreme Court regarding coverage for underlying allegations of greenhouse gas emissions. Aloha Petroleum, Ltd. v. Nat'l Union Fire Ins. Co. of Pittsburgh, 2023 U.S. Dist. LEXIS 156211 (D. Haw. Sept. 5, 2023). 

    Aloha was sued in two lawsuits, one filed by the County of Maui and the second filed by the City and County of Honolulu. The underlying lawsutis alleged that Aloha disregarded known risks of harm to the counties when selling its fuel products that would inevitably combust and produce greenhouse gasses, particularly carbon dioxide, thereby changing the climate and causing harm to the counties. 

    Aloha tendered the suits to AIG. Coverage was denied based on AIG's determination there was no "occurrence" and the pollution exclusion barred coverage. Aloha sued AIG in federal district court seeking a declaratory judgment on AIG's obligations under the policy.

     The parties filed cross-motions for summary judgment. The court found two issues for which it sought guidance from the Hawaii Supreme Court. First, the parties' dispute hinged on whether recklessness could amount to an "accident" as the term has been defined by the Hawaii Supreme Court. If so, were greenhouse gas emissions the release or escape of "pollutants."

    The court noted that in the Hawaii Supreme Court's decision Tri-S Corp. v. Western World Ins. Co., 110 Hawaii 473, 135 P.3d 82 (2006), the court held that an exclusion in an occurrence policy did not exclude coverage for recklessness. The Supreme Court considered whether a "wilful and wanton' misconduct claim was excepted from coverage by a clause exlcuding "expected or intended" injuries. "Wilful and wanton" misconduct comprised recklessness, so the court focused on the recklessness mental state. The court found that the exclusion might not apply to the wilful and wanton claim because the possibility existed that the insured could be found liable for recklessness, which did not involve intent or expectation. Thus, the wilful and wanton act could be an occurrence. 

    On the other hand, some cases from the Hawaii Supreme Court defined an "accident" to require injuries that were neither the "expected nor reasonably foreseeable result of the insured's own intentional acts or omissions." E.g., AIG v. Estate of Caraang, 74 Haw. 620, 636, 851 P.2d 321, 329 (1993). Therefore, a conflict existed between Tri-S implyng that an "accident" could be the result of recklessness and Carrang saying that an "accident cannot be "reasonably foreseeable" from the insured's perspective, a standard almost synonymous with the subjective foreseeability required by recklessness. 

    If the Hawaii Supreme Court found that recklessness could be an "accident", the federal district court then asked whether greenhouse gases were "pollutants," defined in the AIG policies to mean "any gasseous . . . irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste." On the one hand, the Hawaii Air Pollution Control statutes defined "air pollutant" to include greenhouse gases. Further, it was reasonable to assume that greenhouse gases were "gaseous" "chemicals" that were known to cause harm to persons and property through climate change. 

    On the other hand, it was also reasonable that greenhouse gases, such as carbon dioxide, were emitted around people daily, but were relatively harmless to immediate health, particularly in limited amounts.

    Therefore, the following questions were certified to the Hawaii Supreme Court:

1) For an insurance policy defining a covered "occurrence" in part as an "accident," can an "accident' include recklessness?

2) For an occurrence insurance policy excluding coverage of "pollution" damages, are greenhouse gasses "pollutants," i.e., "gaseous" "irritants or contaminants, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste"?

 

Arbitration Compelled for Parties to Policy, But Not for Non-Party to Policy

    The court denied the non-insureds motion to compel arbitration, but compelled arbitration for the insurer and insured. Ill. Cas. Co. v. Kladek, Inc., 2023 U.S. Dist. LEXIS 131677 (D. Minn. July 31 2023).

    In the underlying case, several models sued Kladek, Inc., alleging that Kladek used photos of them in advertisements for its strip club without their consent or authorization. Kladek was insured by Illinois Casualty Company (ICC) under a Businessowners policy. ICC sought a declaratory judgment that it owed no duty to defend or indemnify Kladek in the underlying case. The Models were named as interested parties in UCC's lawsuit

    A Cyber Protection Endorsement to the policy included an arbitration agreement, unlike the Businessowners Liablity Coverage portion of the policy. The Models moved to compel arbitration and stay proceedings. Both Kladek and ICC opposed the Models requests based upon lack of standing. Separately Kladek moved to compel arbitration of only the Cyber Endorsement dispute.

    The court first concluded that the Models could not use equitable estoppel to compel Kladek and ICC to arbitrate their dispute. Under Minnesota law, a non-signatory to an arbitration agreement could compel arbitration by equitable estoppel when the non-signatory party's claims arose directly from violations of the terms of a contract containing an arbitration clause. Here, however, ICC's declaratory judgment claim did not arise out violations of the terms of a contract. Nor did ICC assert any claims against the Models. Rather, ICC sought clarification of its legal oblgations under the policy and named the Models as an interested party. The arbitration agreement only applied to "us", ICC and an "insured." Because the Models did not have standing to compel arbitration, their motion was dismissed. 

    ICC also opposed Kladek's motion to compel arbitration because Kladek failed to provide timely notice of the underlying case. The court decided this procedural issue should be left for the arbitrator to decide. Further, the arbitrator was the proper one decide the scope of the arbitration and whether the arbitration agreement only covered the Cyber Endorsement.

    Finally, the court agreed to stay instead of dismiss the declaratory judgment action becasue the arbitration would not resovle the entire controversy.

Claimants Misrepresentation Claim by Agents Denied

    The claimant's argument that he was misled by agents on benefits under disability policies was overruled on summary judgment and affirmed by the appellate court. Wooten v. Northwestern Mut. Life Ins. Co., 2023 Tex. App. LEXIS 5653 (Tex. Ct. App. July 31, 2023).

    Wrenn Wooten, a MRI radiologist, purchased seven policies from Northwestern Mutual. Three were disability income policies. Four were various whole-life polices. Wooten purchased and reviewed the last of the policies in December 2005.

    More than a decade later, Wooten filed suit against Jim Zara, Patrick Matthews, both of whom were agents, and Northwestern Mutual. He alleged Zara sold him the policies, misrepresented coverage and benefits, wrongfully advised him and concealed misrepresentations. Further Zara misrepresented that the policy would provide disability income even if Wooten was able to work in another field. When Matthews became his agent, Wooten alleged he failed to disclose the disability policies were not occupation specific and that the life insurance policies were not suitable for retirement income as promised. Wooten alleged Northwestern Mutual was vicariously liable for the conduct of Zara and Matthews. 

    Wooten never filed a disability claim. Defendants moved for summary judgment. The lower court found the suit was barred by the statute of limitations. The suit limitation for claims for negligent misrepresentation and for violation of the Texas Insurance Code was two years. The limitations period for breach of fiduciary duty was four years. Summary judgment was granted to defendants.

    The court found appellees carried their summary judgment burden of conclusively proving Wooten's claims accrued at the time he purchased each policy. An insured had a duty to read the policy, and failing to do so, was charged with knowledge of the policy's terms and conditions. 

    Wooten, however, argued the discovery rule delayed accrual of his claims and that he timely filed his lawsuit. Wooten hired someone to read the policies and was then informed he was not property insured. Within two years of this advice, he sued, although it was long after the applicable statute of limitation periods. 

    The summary judgment evidence conclusively demonstrated Wooten actually reviewed the policies. He knew or should have known at the time he bought the policies that they did not provide the coverage or benefits appellees allegedly represented. Consequently, appellees conclusively demonstrated in the trial court that the alleged injuries were not "inherently undiscoverable" and that the discovery rule did not apply