Allstate Ins. Co. v. Ponce

• Decision Date: 06 October 2004
• Docket Number: No. 23835.,23835.
• Citation: 105 Haw. 445,99 P.3d 96
• Parties: ALLSTATE INSURANCE COMPANY, Plaintiff-Appellee, v. Brian E. PONCE, Defendant-Appellee, and Alberto A.F. Silva, Defendant-Appellant.
• Court: Hawaii Supreme Court

99 P.3d 96

105 Haw. 445

ALLSTATE INSURANCE COMPANY, Plaintiff-Appellee, v.Brian E. PONCE, Defendant-Appellee, andAlberto A.F. Silva, Defendant-Appellant.

No. 23835.

Supreme Court of Hawai'i.

October 6, 2004.

Lisa Ginoza, Philip W. Miyoshi, Honolulu, (McCorriston, Miller, Mukai, MacKinnion) on the briefs, for the plaintiff-appelleeAllstate Insurance Company.

Philip L. Carey, of Ahmadia & Carey, on the briefs, for defendant-appellantAlberto A.F. Silva.

MOON, C.J., LEVINSON, NAKAYAMA, ACOBA, and DUFFY, JJ.

Opinion of the Court by LEVINSON, J.

The defendant-appellantAlberto A.F. Silva appeals from (1) the findings of fact (FOFs) and conclusions of law (COLs), entered August 29, 2000, and (2) the judgment, entered September 26, 2000, of the circuit court of the third circuit, the Honorable Greg K. Nakamura presiding.On appeal, Silva argues that the circuit court erred in granting declaratory judgment in favor of the plaintiff-appelleeAllstate Insurance Company[hereinafter, "Allstate"], insofar as: (1) Allstate violated Hawai'i Revised Statutes (HRS) § 431:10C-111(1993)¹ by cancelling the defendant-appelleeBrian Ponce's²"Hawai'i Joint Underwriting Plan"³(HJUP) no-fault motor vehicle insurance policy; (2)"construing Allstate's confusing and contradictory [correspondence] ... in favor of Ponce, cancellation was attempted after only 27 days notice and is invalid under [HRS§ 431:10C-112(1993)⁴]"; (3) pursuant to (a) HRS §§ 431:10C-407(1993)⁵ and 431:10C-111, (b)Hawai'i Administrative Rules (HAR)§§ 16-23-73(1993),⁶ 16-23-77 (1993),⁷ 17-654-3 (1994),⁸ and 17-654-5 (1993),⁹(c) the express terms of the "`Certificate of Eligibility' for Hawaii No-Fault Insurance through the [HJUP] Bureau,"¹⁰ and (d) the prior practices of the State of Hawai'i Department of Human Services(DHS) in administering the HJUP, only the DHS should be authorized to cancel an HJUP no-fault insurance policy; (4) assuming arguendo that Allstate was authorized to cancel Ponce's policy, Allstate's method of cancellation was unreasonable under the circumstances; and (5)the circuit court's FOF No. 15 that "[o]n or about June 10, 1997, Allstate sent to the DHS an advisory that it was not able to validate the Certificate of Eligibility because Ponce did not provide a current vehicle registration in his own name[,]" and COL No. 14 that Allstate "properly reported to the DHS that Allstate could not validate the Certificate of Eligibility[,]" were clearly erroneous based on the evidence adduced at trial.Silva also challenges COL No. 16, which granted declaratory judgment in favor of Allstate on the bases that Allstate owed no duty (1) to defend or indemnify Ponce regarding the subject motor vehicle accident (MVA) or (2) to make payments to any person or entity under the subject policy in connection with the MVA.

Allstate responds that the circuit court did not err in concluding that "Ponce's failure to submit proof of registration terminated his policy" because: (1)"Ponce failed to meet an absolute requirement for HJUP insurance for public assistance recipients"; (2)"Allstate properly issued a temporary policy to allow Ponce to comply with HJUP requirements"; and (3)"Allstate acted in accordance with policies promulgated by the HJUP Board."Allstate further asserts (4) that the circuit court did not err in finding that Allstate sent the DHS a notice of termination, (5) that "Allstate's actions were reasonable under the circumstances[,]" and (6) that "Allstate properly provided Ponce with a notice of cancellation[.]"

Silva replies: (1) that, notwithstanding Allstate's contention that it "properly issued a temporary policy,"(a) Ponce's policy was not "temporary," and (b) even assuming arguendo that it was temporary due to the expiration date on the "no-fault" cards, Allstate's request that Ponce return the cards after 27 days would have cancelled the policy and violated HRS § 431:10C-112;(2)"Allstate's failure to notify Ponce or DHS of the cancellation was unreasonable and a breach of its duty of good faith towards Ponce"; (3)"Allstate had other methods and means to give reasonable notice to Ponce of the cancellation"; and (4)"Allstate does no favor to DHS recipients by enforcing DHS requirements[.]"

For the reasons discussed infra in section III, we hold: (1) that HRS § 431:10C-111 is applicable to all HJUP policies, which take the form of Certificates of Eligibility that have been validated by insurers and returned to the DHS and not the no-fault insurance identification cards issued pursuant to HRS § 431:10C-107(1993);(2) that, other than for the reasons stated in HRS § 431:10C-111, an insurer may not cancel an HJUP insurance policy; (3) that the "temporary no-fault identification card" procedure, apparently approved informally by the HJUP Board, has never been promulgated as a regulation in the HAR; and (4) that the authority to ensure that applicants have registered their vehicles is vested in the insurance commissioner and the DHS.Accordingly, we(1) vacate the circuit court's (a) FOFs and COLs, entered August 29, 2000, and (b) judgment, entered September 26, 2000, and (2) remand this matter to the circuit court for further proceedings consistent with this opinion.

I.BACKGROUND

The present matter arises out of an MVA in which a vehicle operated by Ponce collided with a motorcycle operated by Silva, causing Silva "serious personal and bodily injuries; including [the] los[s] of his spleen, half of his pancreas and damage[ to] his kidney[.]"

We adopt the following FOFs by the circuit court, which are undisputed except where otherwise noted:

FINDINGS OF FACT

1.Ponce acquired an interest in a 1985 Toyota vehicle.

2.The certificate of title showing the transfer of the 1985 Toyota to Ponce indicates that Ponce acquired his interest in the vehicle on March 21, 1997.

3.At that time, Ponce was a public assistance recipient.He applied for a motor vehicle insurance policy under [the HJUP].

4.On or about March 31, 1997, an official of the [DHS] signed a Certificate of Eligibility relating to the 1985 Toyota.

5.The Certificate of Eligibility required that an applicant for a policy deliver the "vehicle registration" to a "servicing carrier of the [HJUP]" in order to obtain a policy.

6.Ponce went to Allstate to obtain a policy pursuant to the Certificate of Eligibility.

7.On April 9, 1997, Allstate validated the Certificate of Eligibility and returned it to the DHS.

8.On April 9, 1997, Ponce signed a document provided by Allstate under which Ponce acknowledged that he understood that he must provide to Allstate a current vehicle registration indicating the registration is in his name.The document further stated that if the registration [was] not provided, then the policy would be canceled within 60 days from the date of the document.

9.Ponce was given a no-fault identification card which provided coverage for the period from April 9, 1997 until June 9, 1997.

10.On April 10, 1997, the certificate of eligibility was received by the DHS.

11.On May 6, 1997, Allstate sent a letter to Ponce indicating that his policy would be canceled on June 10, 1997 because of his failure to provide a current vehicle registration in his name.

12.On May 20, 1997, Ponce obtained a Certificate of Registration under which the 1985 Toyota was registered in his name.

13.Ponce did not send a copy of the Certificate of Registration to Allstate.

14.On June 10, 1997, coverage under the policy issued by Allstate to Ponce terminated.

15.On or about June 10, 1997, Allstate sent to the DHS an advisory that it was not able to validate the Certificate of Eligibility because Ponce did not provide a current vehicle registration in his own name.[¹¹]

16.On June 19, 1997, the underlying accident occurred in this case.

On October 20, 1997, Silva filed a complaint in the circuit court of the third circuit, Civil No. 97-516, against Ponce alleging, inter alia, that Ponce "operated and controlled a motor vehicle negligently, carelessly, without due care, and/or ... was inattentive to his driving, and as a proximate result of said conduct the motor vehicle he was operating collided with the [m]otorcycle operated by [Silva]," causing Silva various damages.Silva prayed for the following relief: (1) general damages; (2) special damages; (3) reasonable attorneys fees, expert witness fees, and costs; (4) interest on damages and losses he suffered from the date of the MVA and/or damage computed at the judgment rate provided by law; and (5) such other and further relief as the circuit court might deem just and proper.By letter dated May 22, 1998, Silva informed Allstate that he had brought suit against its insured (i.e., Ponce), that he had served process on Ponce on April 22, 1998, and that "the twenty days to answer or plead otherwise ha[d] expired."Silva further requested notification "as to Allstate's position in [the] matter[.]"

On October 14, 1998 Allstate filed a complaint for declaratory relief in the present matter seeking

a declaration that neither Ponce nor Silva are entitled to coverage and/or insurance benefit including without limitation a defense and/or indemnity under Ponce's Allstate automobile insurance policy no. 407 086 497 ... with respect to any claims arising out of Ponce's involvement in [an MVA] which occurred on June 19, 1997, including any claims asserted in an action entitled Alberto A.F. Silva v. Brian E. Ponce, et al.,Civil No. 97-516, Circuit Court of the Third Circuit of the State of Hawaii[.]

Based on the facts alleged in the complaint, Allstate prayed for the following relief: (1)"a binding declaration by the circuit court that Allstate has no duty to defend and/or indemnify Ponce under the [HJUP][p]olicy for any claims arising out of the [MVA], including without limitations any claims asserted in [Civil No. 97-516]"; (2)"a binding declaration that Allstate has no duty to make any payments to any person or...