Baird v. State Farm Mut. Auto. Ins. Co.

• Decision Date: 29 May 1998
• Docket Number: No. CIV. 97-00721 ACK.,CIV. 97-00721 ACK.
• Citation: 11 F.Supp.2d 1204
• Parties: Larry BAIRD, Plaintiff, v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, et al., Defendant.
• Court: U.S. District Court — District of Hawaii

Page 1204

11 F.Supp.2d 1204

Larry BAIRD, Plaintiff, v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, et al., Defendant.

No. CIV. 97-00721 ACK.

United States District Court, D. Hawaii.

May 29, 1998.

Steven T. Brittain, Robinson & Chur, Honolulu, HI, for Plaintiff.

Stacey M. Robinson, McCorriston, Miho, Miller & Mukai, Honolulu, HI, for Defendants.

ORDER GRANTING DEFENDANT'S SUMMARY JUDGMENT MOTION

KAY, Chief Judge.

STATEMENT OF FACTS

On December 28, 1988, defendant State Farm Mutual Automobile Insurance Company ("State Farm" or "defendant") issued an automobile insurance policy to plaintiff Larry Baird ("plaintiff") which provided for, amongst other things, Underinsured Motorist benefits ("UIM") with a $35,000.00 limit. On April 28, 1989, plaintiff was involved in an auto accident with Wade Gaal in which plaintiff sustained numerous injuries. On February 23, 1993, plaintiff recovered $35,000.00, the bodily injury policy limit, from Mr. Gaal's insurance company, Allstate. Thereafter, plaintiff filed a demand to State Farm for UIM benefits. State Farm counter-offered.

Apparently the parties were unable to reach an agreement as to the value of plaintiff's accident related injuries. Pursuant to the provisions of the policy, the parties submitted their claim to arbitration. On April 24, 1994, the appointed arbitrator, Robert Kessner, Esq., issued his total damages award in plaintiff's favor for $130,000.00.¹ On May 26, 1994,² State Farm paid $35,000.00, the UIM policy limit, to plaintiff and proceeded to close plaintiff's case file.

On May 1, 1997, plaintiff filed the complaint at issue against State Farm. Plaintiff alleges, in part, that:

21. Defendant State Farm's wrongful failure to provide UIM benefits voluntarily and/or its failure to engage in meaningful settlement negotiations constitutes an unreasonable delay of payment of benefits and an express and/or implied breach of insurance contract.

22. As a direct and proximate result of said breach of contract,... Plaintiff was subjected to unnecessary arbitration and suffered sever mental anguish, emotional distress and worry in an amount to be shown at trial.

23. As a further and direct and proximate result of said breach of contract, ... plaintiff did not receive the UIM benefits contracted for from State Farm and was compelled to incur legal expenses in order to extract same ....

24. The aforesaid acts and omissions of said Defendants were done in a willful, wanton, and/or grossly reckless and negligent manner ... and said Defendants are therefore liable for punitive damages to be shown at trial.

On February 27, 1998, defendant filed its summary judgment motion contending that all of plaintiff's claims essentially arise under UIM benefits from an insurance contract and are thus barred by the two year statute of limitations imposed by Hawaii Revised Statute ("H.R.S.") § 294-36. On April 23, 1998, plaintiff opposed defendant's summary judgment motion. Plaintiff argues that the complaint does not set forth a cause of action regarding the UIM benefits, but rather states claims for relief for unreasonable delay of insurance benefits, breach of contract,³ emotional distress and punitive damages. Defendant filed its reply brief on April 30, 1998. This matter came on for hearing on May 11, 1998.

STANDARD OF REVIEW

Summary judgment shall be granted where there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c). One of the principal purposes of the summary judgment procedure is to identify and dispose of factually unsupported claims and defenses. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986).

The United States Supreme Court has declared that summary judgment must be granted against a party who fails to demonstrate facts to establish an element essential to his case where that party will bear the burden of proof of that essential element at trial. Celotex, 477 U.S. at 322, 106 S.Ct. 2548. "If the party moving for summary judgment meets its initial burden of identifying for the court the portions of the materials on file that it believes demonstrate the absence of any genuine issue of material fact [citations omitted], the nonmoving party may not rely on the mere allegations in the pleadings in order to preclude summary judgment." T.W. Elec. Serv. v. Pacific Elec. Contractors Ass'n, 809 F.2d 626, 630 (9th Cir.1987).

Rather, Rule 56(e) requires that the non-moving party set forth, by affidavit or as otherwise provided in Rule 56, specific facts showing that there is a genuine issue for trial. T.W. Elec. Serv., 809 F.2d at 630. At least some "significant probative evidence tending to support the complaint" must be produced. Id. Legal memoranda and oral argument are not evidence and do not create issues of fact capable of defeating an otherwise valid motion for summary judgment. British Airways Bd. v. Boeing Co., 585 F.2d 946, 952 (9th Cir.1978).

The standard for a grant of summary judgment reflects the standard governing the grant of a directed verdict. See Eisenberg v. Ins. Co. of North America, 815 F.2d 1285, 1289 (9th Cir.1987) (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986)). Thus, the question is whether "reasonable minds could differ as to the import of the evidence." Anderson, 477 U.S. at 250-51, 106 S.Ct. 2505.

The Ninth Circuit has established that "[n]o longer can it be argued that any disagreement about a material issue of fact precludes the use of summary judgment." California Architectural Bldg. Products, Inc. v. Franciscan Ceramics, Inc., 818 F.2d 1466, 1468 (9th Cir.1987). Moreover, the United States Supreme Court has stated that "[w]hen the moving party has carried its burden under Rule 56(c), its opponent must do more than simply show that there is some metaphysical doubt as to the material facts." Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986).

Indeed, "if the factual context makes the nonmoving party's claim implausible, that party must come forward with more persuasive evidence than would otherwise be necessary to show that there is a genuine issue for trial." Franciscan Ceramics, 818 F.2d at 1468 (emphasis in original) (citing Matsushita, 475 U.S. at 587, 106 S.Ct. 1348). Of course, all evidence and inferences to be drawn therefrom must be construed in the light most favorable to the nonmoving party. T.W. Elec. Serv., 809 F.2d at 630-31.

DISCUSSION

I. Hawaii Revised Statute § 431:10C-315⁴

In its summary judgment motion, State Farm contends that all of plaintiff's claims essentially seek to recover benefits under UIM coverage of the insured's policy and as such are barred by H.R.S. § 431:10C-315. In his opposition, plaintiff categorically states that the instant action "alleges a breach of contract claim and a claim for punitive damages due to a refusal to deal in good faith by Defendant, not a claim for UIM benefits under the UIM policy ...." Opposition, p. 4 (emphasis in original). Moreover, at the hearing on this matter, plaintiff's counsel expressly stated that the complaint does not attempt to state a claim for recovery of UIM benefits.

That being said, the Court GRANTS summary judgment with respect to any claim seeking to recover UIM benefits under the State Farm policy. Hawaii law clearly states that H.R.S. § 431:10C-315, which imposes a two year limitations period for suits on contracts for "optional benefits coverage" extends to suits for UIM benefits and begins to run when the insured has exhausted his last UIM payment. Honbo v. Hawaiian Ins. & Guaranty Co., Ltd., 86 Hawai`i 373, 375-76, 949 P.2d 213 (1997), cert. denied; Allstate Ins. Co. v. Wolcott; 847 F.Supp. 787, 789-90 (D.Haw.1994) (applying H.R.S. § 294-36 (repealed)). In Honbo, the Hawaii Intermediate Court of Appeals ("ICA") expressly held that H.R.S. § 294-36(a), recodified as H.R.S. § 431:10C-315(a), "by its clear and unambiguous terms" applies to first-party insurer bad faith claims. 86 Hawai`i at 382, 949 P.2d 213. See also Best Place, Inc. v. Penn America Ins. Co., 82 Haw. 120, 126, 920 P.2d 334 (1996)(stating that H.R.S. § 431:10C-315 "sets forth the applicable statute of limitations for a bad faith cause of action against insurer"). Thus, the applicable limitations period is two years. Plaintiff received his final UIM payment on May 26, 1994, therefore, the statute of limitations lapsed on May 26, 1996. As the instant complaint was not filed until May 1, 1997, any claim regarding UIM benefits, including the bad faith denial thereof, is barred by the limitations period set forth in H.R.S. § 431:10C-315.

Moreover, the Court notes that any claim to recover UIM benefits would be futile. Subsequent to the arbitration, State Farm paid plaintiff $35,000.00, the policy limit. The $35,000.00 limit is in excess of the statutory minimum for UIM coverage, thus State Farm may not be held liable for any claim or judgment in excess of the policy limit. Moorcroft v. First Ins. Co. of Hawaii, Ltd., 68 Haw. 501, 504, 720 P.2d 178 (1986).

II. Breach of the Implied Covenant of Good Faith and Fair Dealing

Paragraph 21 of plaintiff's complaint states that "State Farm's wrongful failure to provide UIM benefits voluntarily and/or its failure to engage in meaningful settlement negotiations constitutes an unreasonable delay of payment of benefits and an express and/or implied breach of insurance contract." The Court reads paragraph 21 as alleging a claim for breach of the implied covenant of good faith and fair dealing. Under the current state of Hawaii law, allegations of breach of the implied covenant of good faith and fair dealing may give rise to two distinct types of claims: (1) bad faith denial of benefits⁵ which sounds in tort; and (2) tortious breach of contract which sounds in contract but provides for compensatory tort damages. The Court addresses...