298 P.3d 1034 (Hawai‘i 2013), SCWC-29868, Jou v. Schmidt

Docket Nº:SCWC-29868.
Citation:298 P.3d 1034, 129 Hawai'i 270
Opinion Judge:NAKAYAMA, Acting C.J.
Party Name:Emerson M.F. JOU, M.D., Petitioner/Provider-Appellant, v. J.P. SCHMIDT, Insurance Commissioner, Department of Commerce and Consumer Affairs, State of Hawai‘i, Respondent/Respondent-Appellee, and Dai-Tokyo Royal Insurance Company, Respondent/Respondent-Appellee.
Attorney:Stephen M. Shaw, Del Mar, for petitioner/provider-appellant. J. Patrick Gallagher, for respondent/respondent-appellee Dai-Tokyo Royal Insurance Company. Elmira K.L. Tsang, Honolulu, for respondent/respondent-appellee J.P. Schmidt, Insurance Commissioner, Department of Commerce and Consumer Affair...
Judge Panel:NAKAYAMA, Acting C.J., ACOBA, McKENNA, and POLLACK,[1] JJ., and Circuit Judge KIM, In Place of RECKTENWALD, C.J., Recused.
Case Date:April 16, 2013
Court:Superior Court of Hawai'i
 
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Page 1034

298 P.3d 1034 (Hawai‘i 2013)

129 Hawai'i 270

Emerson M.F. JOU, M.D., Petitioner/Provider-Appellant,

v.

J.P. SCHMIDT, Insurance Commissioner, Department of Commerce and Consumer Affairs, State of Hawai‘i, Respondent/Respondent-Appellee,

and

Dai-Tokyo Royal Insurance Company, Respondent/Respondent-Appellee.

No. SCWC-29868.

Supreme Court of Hawai‘i.

April 16, 2013

Page 1035

Stephen M. Shaw, Del Mar, for petitioner/provider-appellant.

J. Patrick Gallagher, for respondent/respondent-appellee Dai-Tokyo Royal Insurance Company.

Elmira K.L. Tsang, Honolulu, for respondent/respondent-appellee J.P. Schmidt, Insurance Commissioner, Department of Commerce and Consumer Affairs, State of Hawai‘i.

NAKAYAMA, Acting C.J., ACOBA, McKENNA, and POLLACK,1 JJ., and Circuit Judge KIM, In Place of RECKTENWALD, C.J., Recused.

OPINION

NAKAYAMA, Acting C.J.

When a medical provider has challenged a reduction or denial of payment from an insurer prior to exhaustion of benefits under an insured's policy, the provider's pursuit of his or her claim for those benefits, even if ultimately unsuccessful, is not unreasonable for the purpose of seeking attorney's fees and costs pursuant to Hawai‘i Revised Statutes (HRS) § 431:10C-211 (a).

In this case, Petitioner/Provider-Appellant Emerson M.F. Jou, M.D. challenged the partial denial of personal injury protection benefits after treating a patient insured by Respondent/Respondent-Appellee Dai-Tokyo Royal Insurance Company (DTRIC). While Jou's request for an administrative hearing was pending in the Insurance Division of the State Department of Commerce and Consumer Affairs (DCCA), the insured's available benefits under her policy were exhausted on account of payments to Jou and other medical providers. Due to the exhaustion, the Insurance Division dismissed Jou's claim, and the Circuit Court of the First Circuit 2 and the ICA affirmed that decision.

Jou also requested attorney's fees and costs under HRS § 431:10C-211(a), which allows fees and costs to be awarded even when a party does not prevail on its claim for benefits; pursuant to a remand order of the ICA, the circuit court denied the request because it found Jou's pursuit of the benefits to be unreasonable given that DTRIC's obligation to pay benefits to the insured's medical providers was satisfied once the insured's policy limits had been reached. The ICA also affirmed that decision; consequently, only the issue of fees and costs is before us in this case.

Because we disagree with the circuit court and the ICA that Jou's claim was unreasonable for the purpose of awarding attorney's fees and costs under HRS § 431:10C-211(a), we vacate the judgments of both the ICA and the circuit court and remand this case to the circuit court for further proceedings.

I. BACKGROUND

A. Background in Appeal No. 28106

1. Factual Background and DCCA Hearing

Norma Agbayani was injured in a motor vehicle accident on November 27, 1995; she was insured by DTRIC and treated by Jou and other doctors. After treatment, Jou sent a total of three separate bills to DTRIC requesting payment; DTRIC paid Jou, but based on reductions in payments made after the billing statements were reviewed by DTRIC, Jou claimed that DTRIC wrongly withheld payment in a total amount of $1,189.65 between December 1995 and May 1996.

On December 9, 1998, Jou requested a hearing with DCCA's Insurance Division to review the payment reductions. On May 2,

Page 1036

2002, the Insurance Division's Office of Administrative Hearings docketed Jou's request for a hearing; however, on May 20, 2002, the status conference on the matter was taken off the calendar due to Jou's failure to file a prehearing statement. 3

Thereafter, on February 10, 2003, DTRIC notified Jou that Agabayani's no-fault benefits in the amount of $20,000.00 had been exhausted as of February 3, 1999.

On January 27, 2005, after the matter had been restored to the calendar, the administrative hearings officer held a hearing on DTRIC's motion for summary judgment. The hearings officer held that because Agbayani's no-fault benefits had been exhausted, Jou's request for payment of the withheld $1,189.65 amount was moot; accordingly, the hearings officer recommended on April 13, 2005 that DTRIC's motion for summary judgment be granted and that the matter be dismissed. On May 12, 2005, Insurance Commissioner J.P. Schmidt adopted the hearings officer's findings and recommended order, granted DTRIC's motion, and dismissed the matter. As the hearings officer recommended, Schmidt also ordered that the parties bear their own attorney's fees and costs.

2. Circuit Court Proceedings

On June 13, 2005, Jou filed his notice of agency appeal to circuit court pursuant to Hawai‘i Revised Statutes (HRS) § 91-14.4 In his agency appeal, Jou primarily argued that Schmidt erred by deciding that the case was moot, due to the exhaustion of Agbayani's no-fault benefits, in lieu of reaching the merits of the case regarding the billing dispute between Jou and DTRIC. Jou also argued that DTRIC was required, but failed, to issue a formal notice of denial after it reduced his payments. In response, both Schmidt and DTRIC pointed out that Jou never challenged the hearing officer's finding of fact that Agbayani's no-fault benefits were exhausted as of February 3, 1999. However, they maintained that even if Jou had challenged the finding, his claim for payment would still fail because DTRIC's contractual obligation to pay no-fault benefits ceased once DTRIC had paid all of the $20,000 in benefits provided for in Agbayani's policy. DTRIC also argued in its brief that Jou's claims were barred because, pursuant to HRS § 431:10C-212,5 Jou was required to request a hearing regarding DTRIC's denial of his claim for payment within sixty days of the denial; however, he did so on December 9, 1998, more than two years after the last challenged denial dated June 13, 1996. In an order dated July 18, 2006, the circuit court affirmed Schmidt's decision, concluding that the Insurance Division's findings of fact were not erroneous and conclusions of law were correct. Final judgment was also entered on July 18, 2006.

Page 1037

3. The ICA's August 27, 2008 Summary Disposition Order

Jou timely appealed on August 16, 2006. In the ICA, Jou argued that the circuit court

(1) erred in finding DTRIC was not required to issue a Notice of Denial after it made reduced and partial payments on his claims; (2) erred in finding his claim against DTRIC was moot on the grounds that [Agbayani]'s no-fault benefits had already been exhausted; (3) erred in failing to order DTRIC to pay interest, attorney's fees and costs; (4) erred in affirming erroneous Findings of Fact and Conclusions of Law; and (5) violated his due process and equal protection rights, and made a "regulatory taking" of his interest in balances, in violation of the Hawai‘i and U.S. constitutions.

Jou v. Schmidt, No. 28106, __ Hawai‘i __, 2008 WL 3919856, at *1 (Haw.App. Aug. 27, 2008) (SDO) (formatting altered). Pursuant to a different case also entitled Jou v. Schmidt, 117 Hawai‘i 477, 486, 184 P.3d 792, 801 (App.2008), the ICA agreed with Jou's first point of error that the circuit court "erred in finding that DTRIC was not required to issue a formal notice of denial of benefits pursuant to HRS § 431:10C-304(3)(B)[6] after it made both reduced and partial payments on Jou's claims." Id. However, the ICA rejected Jou's other arguments or otherwise found them to be without merit, noting that insurers may limit liability by the terms of an insurance policy and agreeing with Schmidt and the circuit court that Jou was not entitled to payment after Agbayani reached the $20,000 limit of available no-fault benefits. See id. at *2 (citing Salviejo v. State Farm Fire & Cas. Co., 87 Hawai‘i 430, 434-35, 958 P.2d 552, 556-57 (App.1998); Crawley v. State Farm Mut. Auto. Ins. Co., 90 Hawai‘i 478, 484, 979 P.2d 74, 80 (App.1999); Foote v. Royal Ins. Co. of Am., 88 Hawai‘i 122, 125, 962 P.2d 1004, 1007 (App.1998); Hosp. for Joint Diseases v. State Farm Mut. Auto. Ins. Co., 8 A.D.3d 533, 779 N.Y.S.2d 534, 535 (2004)). The ICA so concluded based on a plain reading of HRS § 431:10C-304(1) (Supp.1998), which provided:

Except as otherwise provided in section 431:10C-305(d), in the case of injury arising out of a motor vehicle accident, the insurer shall pay, without regard to fault, the provider of services on behalf of the following persons who sustain accidental harm as a result of the operation, maintenance, or use of the vehicle, an amount equal to the personal injury protection benefits as defined in section 431:10C-103.5(a) payable for expenses to that person as a result of the injury:

(A) Any person, including the owner, operator, occupant, or user of the insured motor vehicle;

(B) Any pedestrian (including a bicyclist); or

(C) Any user or operator of a moped as defined in section 249-1[ .]

Id. at *1 (emphasis in original). Thus, "[o]nce DTRIC paid the full amount of the policy limits, its obligation to pay any additional outstanding bills due to the providers was extinguished." Id. at *2. The ICA specifically noted that Jou never challenged that the policy limit was $20,000, but only the conclusion that DTRIC "had no further responsibility for the bills incurred by the insured." Id. Because Jou did not appeal the finding of fact that Agbayani's benefits were exhausted, the ICA concluded that "the [c]ircuit [c]ourt did not err in rejecting Jou's claim that he was entitled to additional payment from DTRIC." Id. The ICA also rejected Jou's argument that he should have been granted costs, attorney's fees, and interest pursuant to HRS § 431:10C-304(4) and (5). HRS §...

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