88 Hawai'i 442, Christiansen v. First Ins. Co. of Hawaii, Ltd.
| Decision Date | 18 March 1998 |
| Docket Number | No. 19968,19968 |
| Citation | 967 P.2d 639 |
| Parties | 88 Hawai'i 442 James R. CHRISTIANSEN and Jane-Barrie Christiansen, Plaintiffs-Appellants, v. FIRST INSURANCE COMPANY OF HAWAII, LTD., Defendant-Appellee, and Does 1 through 15, Inclusive, Defendants. |
| Court | Hawaii Court of Appeals |
James R. Christiansen and Jane-Barrie Christiansen, plaintiffs-appellants pro se. Jeffrey A. Griswold (Lyons, Brandt, Cook & Hiramatsu, of counsel) on the brief, Honolulu, for defendant-appellee.
Before WATANABE, ACOBA and KIRIMITSU, JJ.
This case presents two issues of first impression in this jurisdiction: (1) whether a claim alleging the tort of bad faith in the context of a first-party insurance claim is (a) an action independent of the insurance policy and, therefore, not subject to the policy's one-year limitation provision and (b) governed by the appraisal process provided for in the policy; and (2) whether a claim alleging a legal breach of contract and seeking compensatory damages for actual loss to damaged property is (a) governed by the policy's one-year limitation period and (b) governed by the appraisal process.
We agree with Plaintiffs-Appellants James R. Christiansen and Jane-Barrie Christiansen (the Christiansens) and hold that an action for the bad faith handling of a homeowner's insurance claim is independent of the insurance policy and, consequently, not governed by the one-year limitation period contained in the policy or by the appraisal process; but that a claim for a legal breach of contract, versus a tortious breach of contract, is subject to the policy's one-year limitation period and the policy's binding appraisal process.
The Christiansens appeal the Fifth Circuit Court's June 5, 1996 final judgment (final judgment) granting Defendant-Appellee First Insurance Company of Hawaii, Ltd.'s (First Insurance) May 20, 1994 Motion to Dismiss or in the Alternative for Summary Judgment (motion to dismiss). The Christiansens raise several points of error that we decline to address, 1 because our present holding is outcome-dispositive of the other issues.
For the reasons stated below, we reverse in part and vacate in part the circuit court's final judgment and November 10, 1994 Order Granting Defendant First Insurance Company of Hawaii, Ltd.'s Motion to Dismiss or in the Alternative for Summary Judgment and remand for further proceedings consistent with this opinion.
On or around September 9, 1991, the Christiansens purchased a homeowner's insurance policy with First Insurance for extended home insurance coverage, up to $220,000, for their rental home on Kaua'i. 2 There is no dispute over the policy's validity or that it covered the damage alleged in this case. 3
On September 11, 1992 (the date of loss), the Christiansens' Kaua'i property suffered extensive damage from Hurricane I'niki. 4 Soon after the date of loss, the Christiansens allege that they filed a claim with First Insurance for approximately $79,000. At First Insurance's request, the Christiansens obtained contractors' bids on the cost of repairing the damage caused by Hurricane I'niki and, allegedly, submitted those bids to First Insurance or its agents five times between January to May 1993.
First Insurance allegedly failed to respond to the Christiansens' claim for several months. When First Insurance's adjuster did schedule a time to inspect the property, the adjuster was allegedly late and was
On June 15, 1993, First Insurance issued a reimbursement check for $12,583.31, with a letter stating, in pertinent part:
From our investigation your roof is repairable and does not have to be replaced. We disagree with your claim that the roof has to be replaced.
We believe that we owe as follows:
....
... $12,583.31. This amount reflects your deductible and depreciation on the contents.
....
The policy provides a method of resolving disagreements of the amount of loss. Under the CONDITIONS section of the policy, on page 7, it states:
If you are not accepting this draft as our final payment then consider this letter as our written demand for appraisal, and we are naming Donald Richardson [ (Richardson) ] as our appraiser.
(Emphasis added.)
The Christiansens took proper action to dispute the amount of loss and, on July 6, 1993, selected John Mankin (Mankin) as their appraiser. Though both parties appointed appraisers, the appraisal process did not move forward in a timely manner. Mankin found First Insurance's appraiser, Richardson, unwilling to expeditiously appraise the Christiansens' property or act as an "independent" appraiser. An affidavit submitted by Mankin stated:
3. Several unsuccessful attempts were made to get the cooperation of Donald L. Richardson, the appraiser appointed by First Insurance Company of Hawaii, Ltd. However, it was not until after James R. Christiansen sent a letter to First Insurance Company of Hawaii [allegedly threatening to pursue legal action] ... that Mr. Richardson agreed to meet and discuss the damages [sic] to the property of [the Christiansens].
4. I met with Mr. Richardson in October 1993, at the real property in question, and we investigated each, every, and all of the items of damages [sic]. We agreed that the damages caused to James R. Christiansen would be as set forth as hereinafter set forth [sic]:
....
Total agreed upon insured losses, __________
less the above deduction $51,823.00
5. When I met with Mr. Richardson, as set forth above, he stated that he had to check with First Insurance Company before he could approve the damage to the concrete piers and for the loss of rent. On the loss of rent, he stated he needed to deduct the rental expenses. Mr. Richardson's need to check with First Insurance came as a surprise to me since I had the understanding that Mr. Richardson was an independent appraiser who should exercise his own judgment instead of taking directions from First Insurance Company.
6. Mr. Richardson said he would draw up the document of our agreement and send it to me for my signature. When it did not arrive, I made several telephone calls to Mr. Richardson, who did not return my calls.
7. Unexpectedly, I began to rapidly lose my vision at the beginning of November, 1993, and as a result ... was totally disabled until approximately February 1, 1994. When I recovered sufficiently, I telephoned Mr. Richardson regarding our agreed upon values. He stated that the First Insurance Company would not go along and agreed to FAX a copy of his letter to me of November 17, 1993, which I had not seen before.... The contents of this letter and First Insurance's interference with the Appraisal process were not communicated to Mr. Christiansen until February, 1994.
8. During my telephone conversation with Mr. Richardson after I became aware of his letter of November 17, 1993, he was well aware of the provision in the insurance policy limiting the time for when an action should be filed, claiming it was then "too late."
The policy provision to which Mankin referred is a valid provision in the insurance policy that provides, "No action shall be brought unless there has been compliance with the policy provisions and the action is started within one year after the loss." 5 First Insurance argues that this provision bars the Christiansens from bringing suit against it.
On September 8, 1993, after the appraisal process had begun but before it was concluded, the Christiansens filed a complaint with the circuit court, alleging: (1) bad faith handling of their insurance claim, including allegations of negligence, fraud, unfair and deceptive trade practices, and tortious breach of contract; and (2) breach of contract, for which they claimed compensation, inter alia, in the amount of $67,332.69 for the actual loss suffered from the damage to their property. Though the complaint was filed, it was never served on First Insurance. 6 The Christiansens obtained an Order Extending Time for Service, and timely filed and served their amended complaint on March 7, 1994.
First Insurance promptly filed its motion to dismiss, arguing that the Christiansens' original complaint was not the "start" of an action under the policy limitation provision because it was not properly served. First Insurance asserted that the amended complaint was filed approximately six months after the one-year limitation period had expired, and, therefore, both the bad faith and breach of contract actions were barred by the policy's limitation provision.
First Insurance...
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