The Hawaii Intermediate Court of Appeals reversed the trial court's granting of summary judgment to the insurer on the insured's bad faith claim. Carvalho v. AIG Hawaii Insurance Company, Inc., 2020 Haw. App. LEXIS 382 (Haw. Ct. App. Nov. 16, 2020).
Plaintiff Carvalho's son was killed in a two-car accident. The other car and driver were uninsured. The deceased son was covered by a policy issued by AIG to his maternal grandparents. Plaintiff made a clam for uninsured motorist (UM) and underinsured motorist (UIM) benefits under the AIG policy. AIG claimed that only non-stacked UM and UIM coverages totaling $70,000 were available.
Carvalho filed suit against AIG seeking a declaratory judgment for increased and stacked UM and UIM coverage totaling $1.2 million under the AIG policy. AIG later agreed that the stacked maximum UM and UIMj coverage limits were $1.2 million. AIG maintained, however, that the value of the wrongful death claim had not yet been resolved.
The court proceeding was stayed so that an arbitration could take place pursuant to the policy. An arbitration award of $1.75 million was made to the son's estate and Carvalho. AIG paid $1.2 million to Carvalho, reflecting policy limits. Once the stay was lifted, AIG moved for summary judgment on all remaining claims. The trial court granted AIG's motion.
On appeal, AIG argued Carvalho could not establish that she had incurred any damages as of February 18, 2008, the date that AIG by letter recognized the increased UM/UIM policy limits, where it was not until April 2, 2009 that the arbitrator determined the amount of damages to be awarded.
The appellate court noted, however, that under Hawaii law an insured could maintain a claim against an insurer for bad faith mishandling of the insured's claim even where the insurer had not contractual duty to pay any benefits. Further, Carvalho was not required to prove that she suffered economic loss caused by AIG's alleged bad faith in order to recover emotional distress damages caused by AIG's alleged bad faith, which she sought in her complaint. Accordingly, contrary to AIG's argument, summary judgment was not appropriate on the basis that the February 18, 2008 letter acknowledged the increased UM/UIM policy limits, before the arbitration award was made in excess of AIG's payment. AIG's obligation to act in good faith was independent from its contractual obligation to tender benefits to the insured.
Therefore, summary judgment not he bad faith claim was not appropriate. Thanks to my blogging colleague, Mark Murakami (www.hawaiioceanlaw.com) for flagging this case.