The Hawaii Supreme Court found that an insurer assigned a claim under the Hawaii Insurance Joint Underwriting Program (JUP) owed a duty of good faith and fair dealing to the insured. Willis v. Swain, 2013 Haw. LEXIS 210 (June 7, 2013). We previously posted on the Intermediate Court of Appeals decision [here] and the Supreme Court's granting of cert [here].

   Under the JUP, claims of victims for whom no policy was applicable, such as a hit-and-run victim who is not covered by a policy, are assigned to allow coverage even if the individual does not have a policy. Insurers operating in Hawaii are required to participate in the JUP. The JUP specified the duties of insurers participating in the program. The insurer who was assigned a claim had the same rights and obligations as if it had issued a policy. Haw. Rev. Stat. 431:10C-403.

   Ms. Willis was a passenger in an uninsured vehicle that rear-ended another vehicle. The uninsured vehicle was owned and operated by Craig Swain. At the time of the accident, Ms. Willis, a public assistance recipient, owned her own vehicle and had a certificate policy issued through the JUP. The policy, however, did not have uninsured motorist coverage. Ms. Willis' claim was assigned by the JUP Bureau to First Insurance. Coverage was denied because Ms. Willis did not have uninsured motorist coverage.

   Ms. Willis sued First Insurance for breach of contract and bad faith. When the trial court entered summary judgment to First Insurance, the Supreme Court reversed and remanded for First Insurance to pay appropriated benefits under the assigned claims program. First Insurance paid Ms. Wills the bodily injury liability policy limit of $20,000.

   First Insurance then moved for summary judgment on the bad faith claim. The trail court granted the motion, concluding because there was no contract of insurance between First Insurance and Ms. Willis, there could be no cognizable claim of bad faith. 

   The Supreme Court vacated and remanded. The statute established a relationship between the insurer and the assigned claimant that was akin to a contract. See Haw. Rev. Stat. 431:10C-403. Consequently, the legislature imposed a duty of good faith and fair dealing on insurers handling assigned claims by equating the relationship between an insurer and an assigned claimant to the contractual relationship between an insurer and an insured. No underlying contract was necessary to give rise to the relationship and its concomitant rights and obligations because that relationship was created by statute.