87 Hawai'i 337, AIG Hawaii Ins. Co., Inc. v. Rutledge
| Decision Date | 31 March 1998 |
| Docket Number | No. 20036,20036 |
| Citation | 955 P.2d 1069 |
| Parties | 87 Hawai'i 337 AIG HAWAII INSURANCE COMPANY, INC., Plaintiff-Appellant, v. Ruth RUTLEDGE and Jonathan Rutledge, Defendants-Appellees. |
| Court | Hawaii Court of Appeals |
Carleton B. Reid and Kathy M. Sarria, Reid, Richards & Miyagi, on the briefs, Honolulu, for plaintiff-appellant.
Paul A. L'Ecuyer, on the brief, for defendants-appellees.
Before BURNS, C.J., and WATANABE and ACOBA, JJ.
We hold that when an insured motorist, who has received uninsured motorist (UM) benefits from his or her insurer as a result of a motor vehicle accident with an uninsured motorist, obtains a tort recovery from the uninsured motorist or a party jointly liable which fully compensates the insured for damages sustained in the accident, the insurer may enforce a policy provision requiring the insured motorist to reimburse the insurer for UM benefits paid. This will ensure that the fully-compensated insured does not receive duplicative compensation in contravention of the purpose of the UM statute. Accordingly, in light of their recovery of the damages caused by the uninsured driver from the joint tortfeasor, the City and County of Honolulu (the City), Defendants-Appellees Ruth Rutledge (Ruth) and Jonathan Rutledge (Jonathan) (collectively referred to herein as the Rutledges) must return the UM benefits paid to them by Plaintiff-Appellant AIG Hawaii Insurance Company, Inc. (AIG). Under these circumstances, we endorse the principle of full but not duplicative recovery for insureds receiving UM benefits. Therefore, we vacate the July 11, 1996 summary judgment of the first circuit court (the court) to the contrary and conclude that AIG is entitled to reimbursement for the UM benefits paid to the Rutledges.
On August 3, 1991, an unidentified driver in a white pick-up truck swerved in front of Ruth, causing her to turn her vehicle out of its path and into a boulder. Ruth and Jonathan, her passenger, sustained injuries for which medical treatment costs were in excess of the statutory "no-fault tort threshold." 1
AIG paid UM benefits to Ruth in the amount of $35,000 and to Jonathan in the amount of $35,000, in accordance with AIG's automobile insurance policy (policy). The policy provided that AIG must be reimbursed for its payments from any recovery the Rutledges obtained "from another":
A. If [AIG] make[s] a payment under this policy and the person to or for whom payment was made has a right to recover damages from another we shall be subrogated to that right. That person shall do whatever is necessary to enable us to exercise our rights and shall do nothing after loss to prejudice them.
B. If [AIG] make[s] a payment under this policy and the person to or for whom payment is made recovers damages from another, that person shall hold in trust for us the proceeds of the recovery and shall reimburse us to the extent of our payment.
(Emphasis added.) 2
Subsequently, on August 5, 1992, each of the Rutledges signed a separate Release and Trust Agreement (the release) provided by AIG. The release stated, in relevant part, that AIG was entitled to repayment of the "proceeds of any settlement or judgment ... against the owner or operator of the uninsured automobile involved":
I, ... in consideration of [$35,000] ... paid by ... [AIG] ... do hereby for myself ... forever discharge the said [AIG] from ... any and all claims for damages instituted against the said [AIG] under the Uninsured Automobile Coverage ... by me, or by any other person ... for the purpose of enforcing a claim for damages on account of injuries suffered by me as the result of [the] accident involving [the] Uninsured Vehicle....
I agree that [AIG] shall be entitled to the extent of such payment hereunder to the proceeds of any settlement or judgment that may result from the exercise of any rights of recovery by me against the owner or operator of the uninsured automobile involved in the accident causing the injury on account of which such payment is made.
I also agree ... to take through an Attorney designated by ... [AIG] and at [its] sole expense ... such action or actions as may be necessary or appropriate to recover from the owner, operator, persons or organizations responsible for the operation of the uninsured automobile causing the injury and damage ... and furthermore, agree to hold any monies received as a result of settlement or judgment in Trust for [AIG] ... provided, however, that any sum received in excess of the amount paid by [AIG] shall be retained by me.
(Emphases added.)
On May 17, 1993, the Rutledges filed suit against the City and against "third[-]party defendants," alleging negligent design of the roadway and negligent maintenance of the roadway shoulder. 3 The case was subsequently accepted into the Court Annexed Arbitration Program. 4
On June 22, 1994, a nonbinding arbitration award was rendered. 5 The award reflects that the arbitrator apportioned the negligence for the accident as follows: "10% [to Ruth], 0% [to Jonathan], 30% [to the City] and 60% to the phantom driver." 6 Ruth's damages were determined to be $70,000 in general damages and $44,483.61 in special damages; taking into account her 10% comparative negligence, Ruth was awarded $63,000 in general damages and $40,035.24 in special damages. Jonathan's damages were determined to be $25,000 in general damages and $24,195.80 in special damages; Jonathan was awarded the full amounts.
Because no party filed a written "Notice of Appeal [from the arbitration award] and Request for Trial De Novo," the award became a final judgment twenty days later, pursuant to Hawai'i Arbitration Rules (HAR) Rule 21. See infra part IV.A.1. The City paid the judgment amount in full.
On October 24, 1994, AIG filed a complaint for breach of contract against the Rutledges. The complaint sought recovery of "the total of the [UM] benefits paid and/or received by [the Rutledges]" and an award of attorneys' fees and costs associated with the case. AIG alleged that the policy issued to Ruth required the Rutledges to reimburse AIG.
On June 23, 1995, the Rutledges filed their motion for summary judgment, claiming that (1) reimbursement was barred under the terms of the release they signed as a condition of receiving the UM benefits from AIG, and (2) AIG had waived its right to reimbursement because it did not participate in the suit against the City.
AIG opposed the motion, arguing that (1) the policy terms directed "that if [AIG] makes a payment under the policy and the person receiving payment has a right to recover damages 'from another,' AIG is subrogated to that right," and (2) as represented in AIG's assistant manager's affidavit, AIG was unaware of the Rutledges' suit against the City until more than a month after the arbitration award was filed. AIG further maintained that the policy required the amount recovered "be held in trust" and "be used to reimburse [AIG]."
On August 4, 1995, the court heard the motion and took it under advisement. 7 The court also instructed each party to submit additional memoranda addressing the issue of "whether or not the payment of the judgment by [the City] can be credited to the uninsured phantom vehicle."
On September 14, 1995, the court issued a minute order granting the Rutledges' motion. The minute order stated:
AIG's Release and Trust Agreement is unambiguous. AIG's rights to recover payments it made under its uninsured motorist coverage is monies obtained by the insured "against the owner or operator of the uninsured automobile involved in the accident causing the injury on account of which such payment is made."
Furthermore, Caberto v. National Union Fire Ins. Co., 77 Hawai'i 39 (1994), is instructive in this case. The [Hawai'i] Supreme Court has strictly construed the insurer's right to subrogation. In the instant case, by its payment of uninsured motorist coverage, AIG is subrogated to the [Rutledges'] rights to recover against the uninsured motorist. [The Rutledges'] judgment and recovery was against [the City,] not the uninsured motorist. Counsel notified of court's decision. [Defense counsel] to prepare the order.
(Emphasis added.)
On October 27, 1995, the written order granting the Rutledges' motion for summary judgment was filed.
On November 28, 1995, the Rutledges moved for attorneys' fees pursuant to Hawai'i Rules of Civil Procedure Rule 11 and Hawai'i Revised Statues (HRS) § 607-14.5 (1993) 8 asserting that AIG had no reasonable basis for filing the action.
On February 6, 1996, the court entered its written order denying the Rutledges' request for attorneys' fees.
On July 11, 1996, final judgment granting the Rutledges' motion for summary judgment but denying their motion for attorneys' fees and costs was filed.
On August 6, 1996, AIG appealed.
AIG maintains that under the policy terms, the release does not limit AIG's right to reimbursement from the Rutledges' recovery of damages "from another." The precise issues presented by AIG are (1) whether AIG is entitled to be reimbursed under the terms of the policy; (2) whether the releases signed by the Rutledges waived or released AIG's rights; (3) whether AIG is estopped from relying on language in the policy; and (4) whether the Rutledges' double recovery violates the policy behind the no-fault law.
In response, the Rutledges 9 argue that the release bars any claim for reimbursement, because they recovered damages from the City, not from "the owner or operator of the uninsured automobile involved in the accident." Also, the Rutledges reiterate their defense that AIG "waived its right to reimbursement of any UM benefits" because "it did not participate in the underlying lawsuit" against the City. 10
Irrespective of whether the policy provision or the release provision controls, 11 we must determine whether permitting reimbursement of UM benefits here would be in conformity or conflict with...
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