87 Hawai'i 136, State Farm Mut. Auto. Ins. Co. v. Dacanay, 19757
| Citation | 952 P.2d 893 |
| Decision Date | 27 February 1998 |
| Docket Number | No. 19757,19757 |
| Parties | 87 Hawai'i 136 STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Plaintiff-Appellee, v. Machelle DACANAY and Lourdes Flores, Defendants-Appellants. |
| Court | Hawaii Court of Appeals |
Kenneth T. Okamoto and Lawrence R. Cohen, Price Okamoto, Himeno & Lum, on the briefs, Honolulu, for defendants-appellants.
Randall Y.S. Chung and Thomas Tsuchiyama, Matsui Chung Sumida & Chang, on the brief, Honolulu, for plaintiff-appellee.
Before WATANABE and ACOBA, JJ., and DEL ROSARIO, Circuit Judge, in place of BURNS, C.J., recused.
We hold that for purposes of determining the amount to be paid to an insured on an insurance policy claim for underinsured motorist benefits, a "general damages only" settlement between the underinsured motorist and/or that motorist's insurance company on the one hand, and the insured on the other, does not conclusively establish, as a matter of law, the value of the general damages, but is evidence of the general damages suffered by the insured.
Because it is evidence pertinent and material to determining the amount of an insured's damages for bodily injury, a general damages only settlement must be considered by the arbitrator in an arbitration proceeding to determine underinsured motorist benefits. We conclude that the foregoing premises would apply in this case.
The arbitrator, however, did not consider the general damages only settlement entered into by the insureds, Defendants-Appellants Machelle Dacanay (Dacanay) and Lourdes Flores (Flores) (collectively Appellants) in the arbitration proceeding with their insurer, Plaintiff-Appellee State Farm Mutual Automobile Insurance Company (State Farm). Nevertheless, because Appellants did not move to vacate, modify, or correct the award, we conclude that the award became final.
Accordingly, we affirm the March 7, 1996 declaratory judgment of the first circuit court (the court) in favor of State Farm and against Appellants, although on grounds different from those relied on by the court.
On May 26, 1989, Dacanay and Flores were passengers in a motor vehicle operated by Rosalee P. Lum (Lum) and insured by State Farm. Lum's motor vehicle was struck by a motor vehicle operated by Hae Suk Hinokuma (Hinokuma). Dacanay and Flores both suffered injuries as a result of the accident. Because occupants of Lum's vehicle were "insured" persons under the terms of her automobile insurance policy with State Farm, both Dacanay and Flores were persons entitled to benefits under the policy.
By a letter dated June 13, 1990, Appellants notified State Farm of their intention to settle a portion of their personal injury claims with Hinokuma's insurer, Allstate Insurance Company (Allstate), and to pursue underinsured benefits under Lum's policy with State Farm. Appellants cite this letter as evidence that State Farm did not object to the terms and conditions of the proposed "general damages only" settlement after State Farm "was given the chance to review and, if it chose, to object to the proposed partial settlement of Appellants' bodily injury claims." 1
On June 22, 1990, Appellants settled their bodily injury claims for general damages against Hinokuma and Eric Hinokuma 2 (collectively the Hinokumas) for $35,000 each, the full limits of the Hinokumas' policy. The relevant provisions of the release agreements signed by Dacanay and Flores stated as follows:
I hereby agree that, as further consideration and inducement for this compromise settlement, this settlement shall apply to all unknown and unanticipated injuries and damages resulting from said accident, casualty or event, as well as those now disclosed.
I understand that the parties hereby released admit no liability of any sort by reason of said accident and that said payment and settlement in compromise is made to terminate further controversy respecting all claims for damages that I have heretofore asserted or that I or my personal representative might hereafter assert because of said accident.
I further understand that such liability as we may or shall have incurred, directly or indirectly, in connection with or for damages arising out of the accident to each person or organization released and discharged of liability herein, and to any other person or organization, is expressly reserved to each of them, such liability not being waived, agreed upon, discharged nor settled by this release.
This is a settlement for general damages only. This settlement is intended to be for general damages only and not intended to duplicate those damages which have been paid for medical and/or wage loss incurred.
(Emphases added.)
In a letter dated June 23, 1994 to State Farm, Appellants set forth the history of their claim. This letter stated, in relevant part:
As you are aware, each of our clients settled her bodily injury claim for the policy limits of the negligent driver of $35,000, general damages only. Before the settlements were effected State Farm was notified of the potential resolution of our clients' claims, the terms of the potential resolution and the imminent [underinsured motorist] claims that would thereafter be pursued. In fact, in order to verify the terms of the bodily injury settlements State Farm demanded copies of the release documents and the declaration page of the negligent driver's insurance policy. Clearly, State Farm has always known the settlements were for general damages only. More importantly State Farm did not object at anytime to the settlements.
(Emphasis in original.)
Believing that the settlement with the Hinokumas and Allstate compensated them for general damages 3 only, Appellants sought payment for their special damages under the underinsured motor vehicle (the UIM) provision 4 4
4 of Lum's State Farm policy. 5 Dacanay sought payment for special damages in the amount of $14,863.60 and Flores sought payment for special damages in the amount of $15,000. The UIM provision provided, in pertinent part, that:
[State Farm] will pay damages for bodily injury an insured is legally entitled to collect from the owner or driver of an underinsured motor vehicle. The bodily injury must be caused by the accident arising out of the operation, maintenance or use of an underinsured motor vehicle.
(Bold-faced and italicized emphases in original.)
The policy defined an "Underinsured Motor Vehicle" as:
a land motor vehicle:
1. the ownership, maintenance or use of which is insured or bonded for bodily injury liability at the time of the accident; but
2. whose limits of liability for bodily injury are less than the liability imposed by law for the insured's damages.[ 6
(Bold-faced and italicized emphasis in original; underscored emphases added.)
The policy went on to define an "insured" as, inter alia, "any person occupying [the policyholder's] car...."
If the insured and State Farm could not agree that "the insured [was] legally entitled to collect damages from the owner or driver of the underinsured motor vehicle" or "in what amount" the damages were, the policy provided that these questions "be decided by arbitration upon written request of the insured or [State Farm]." 7 (Bold-faced and italicized emphases in original.)
While the record indicates that Appellants sought payment of their special damages under the UIM provision, it is unclear who requested the matter be submitted to arbitration. Both parties agree, however, that arbitration was initiated under the foregoing policy provision.
On April 28, 1993, the arbitrator issued his award. Pursuant to the parties' agreement, the award segregated Appellants' damages into the three categories of "Medicals," "Wage Loss," and "General Damages." The relevant portion of the arbitration award stated:
I [the arbitrator] have not made any reductions or deductions from this award. Specifically, I have not deducted for any settlement of the underlying bodily injury claim, nor have I made any deductions for no-fault payments received by the parties. Further, pursuant to your agreement and instructions I am breaking down my award into medicals, wage loss and general damages.
MACHELLE DACANAY
Medicals $ 9,077.04
Wage Loss 5,786.56
General Damages 23,000.00
[Total $37,863.60]
LOURDES FLORES
Medicals $ 9,799.45
Wage Loss 10,495.95
General Damages 20,000.00
[Total $40,295.40]
Thus, the arbitrator's findings of general damages were $12,000 less than the amount obtained in Dacanay's settlement agreement and $15,000 less than the amount obtained in Flores' settlement agreement. Neither Appellants nor State Farm moved to vacate, modify, or correct the arbitration award as allowed by Hawai'i Revised Statutes (HRS) chapter 658 (1993), which governs arbitration proceedings, or moved to clarify the award.
State Farm subsequently tendered $2,863.60 to Dacanay, calculated by subtracting the $35,000 settlement payment from the total arbitration award of $37,863.60, and $5,295.40 to Flores, calculated by subtracting the $35,000 settlement payment from the total arbitration award of $40,295.40. State Farm cited the following "limit of liability" policy provision as the basis for its tender:
Limit of Liability
....
4. The most we pay will be the lesser of:
a. the difference between the amount of the insured's damages for bodily injury and the amount paid to the insured by or for any person or organization who is or may be held legally liable for bodily injury;
or
b. the limit of liability of this coverage.
(Bold-faced and italicized emphases in original.)
Appellants rejected State Farm's tender and requested payment of special damages in the amount determined in arbitration. State Farm refused Appellants' request.
On May 13, 1995, State Farm filed a complaint for declaratory or other relief with the court. In the complaint, State...
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