First Ins. Co. of Haw., Ltd. v. A & B Props., Inc.

• Decision Date: 14 March 2012
• Docket Number: No. SCAP–10–0000213.,SCAP–10–0000213.
• Citation: 126 Hawai'i 406,271 P.3d 1165
• Court: Hawaii Supreme Court
• Parties: FIRST INSURANCE COMPANY OF HAWAII, LTD., Plaintiff/Appellee, and Joseph G. Toro, Plaintiff–Intervenor/Appellant, v. A & B PROPERTIES, INC., Defendant/Appellee.

126 Hawai'i 406

271 P.3d 1165

FIRST INSURANCE COMPANY OF HAWAII, LTD., Plaintiff/Appellee,andJoseph G. Toro, Plaintiff–Intervenor/Appellant,

v.A & B PROPERTIES, INC., Defendant/Appellee.

No. SCAP–10–0000213.

Supreme Court of Hawai‘i.

March 14, 2012.

Matthew S. Kohm, Wailuku, for plaintiff-intervenor/appellant.

Keith K. Hiraoka (James R. Ferguson and Jodie D. Roeca of Roeca Luria Hiraoka LLP with him on the briefs), Honolulu, for defendant/appellee.

RECKTENWALD, C.J., NARAYAMA, ACOBA, DUFFY, and McKENNA, JJ.

Opinion of the Court by RECKTENWALD, C.J.

Joseph G. Toro, an employee of Diversified Machinery, Inc., was allegedly involved in a work related accident on property owned by A & B Properties, Inc. First Insurance Company of Hawaii was Diversified's insurance carrier. While paying Toro's workers' compensation benefits, First Insurance timely-filed suit in the Circuit Court of the Second Circuit within the two year limitations period set forth in Hawai‘i Revised Statutes (HRS) § 657–7, asserting its right of subrogation under Hawaii's workers' compensation law. Toro did not file his own lawsuit against A&B. First Insurance and A & B reached an agreement to settle, but Toro refused to consent. After the two-year limitations period had elapsed, Toro then sought to intervene in First Insurance's suit, and the circuit court granted Toro's request. A & B subsequently moved for summary judgment, on the ground that HRS § 386–8 (1993), which governs the right of an employee to intervene in an employer's third party liability lawsuit under the workers' compensation law,¹ did not allow an employee to intervene after the statute of limitations had expired. The circuit court granted A & B's motion for summary judgment and entered judgment against Toro.² Toro appealed pursuant to a Hawai‘'i Rules of Civil Procedure (HRCP) Rule 54 certification. We granted a discretionary transfer of the case.

This case requires us to interpret HRS § 386–8, which provides in relevant part: "[e]xcept as limited by chapter 657, the employee may at any time commence an action or join in any action commenced by the employer against such third person." Thus, the central issue is whether an employee can intervene in his or her employer's timely filed lawsuit after the two year limitations period established by HRS § 657–7 has passed.

Toro argues that the statute is ambiguous and its legislative history supports a determination that the statute of limitations was not intended to bar intervention, but rather to limit the time in which an injured employee could initiate his or her own action. A&B contends that the statute is unambiguous, and that it does not allow an injured employee to intervene in an employer's timely suit after the statute of limitations has expired.

We hold that Toro may intervene in First Insurance's action against A&B because HRS § 386–8 does not limit Toro's right to intervene in First Insurance's timely filed lawsuit. Accordingly, we hold that the circuit court erred in granting A&B's motion for summary judgment. Therefore, we vacate the circuit court's final judgment and remand to the circuit court for further proceedings.

I. Background

A. Proceedings in the Circuit Court

On May 1, 2008, First Insurance filed a Complaint against A&B alleging, inter alia, that Toro sustained injuries because of A&B's negligence (hereinafter the subrogation action).³

According to the complaint, on July 13, 2006, Toro was working as an equipment operator for Diversified Machinery, Inc. at a property owned by A&B in Makawao, Hawai‘i. Toro was seriously injured when the excavator he was operating fell into a 10–foot deep cesspool. On the date of the accident, Diversified had a workers' compensation insurance policy with First Insurance. At the time the complaint was filed, First Insurance continued to pay workers' compensation benefits to and/or on behalf of Toro pursuant to that policy.

In its complaint, First Insurance alleged that pursuant to HRS § 386–8, quoted infra, it was entitled to recover from A&B: CD the reasonable value of the medical services rendered to and/or on behalf of Toro as a result of the injuries he sustained in the July 13, 2006 accident; (2) all workers' compensation benefits that were incurred in relation to the July 13, 2006 accident; and (3) special and general damages incurred as a result of A&B's negligence.

First Insurance and A&B subsequently agreed to settle the subrogation action. The settlement involved dismissal of the subrogation action with each party bearing its own fees and costs, i.e., the parties agreed to "walk away [.]" Pursuant to HRS § 386–8, which provides, in pertinent part, that "[n]o release or settlement of any claim or action under this section is valid without the written consent of both employer and employee[,]" and Shimabuku, 79 Hawai‘i at 357–58, 903 P.2d at 53 (holding that HRS § 386–8 "requir[es] the written consent of both employer and employee before any release or settlement is valid"), Toro's written consent to the settlement was requested. Toro, however, did not consent to the settlement.

On November 14, 2008, A&B filed a motion to dismiss the subrogation action, arguing, inter alia, that Toro's consent to the settlement was not necessary. A&B argued that Toro was not a party to the subrogation action and that he had provided no valid legal basis for withholding his consent. Additionally, A&B asserted that Toro did not file a third-party liability or personal injury lawsuit relating to the accident within the two year statute of limitations period provided in HRS § 657–7, and that any claims by Toro were accordingly time barred.⁴ A&B also argued that the settlement agreement had no adverse effect on Toro because the settlement "w[ould] not deprive Toro of any money because there [wa]s no money to be paid by A&B" and thus, there was no issue of how to apportion any recovery between First Insurance and Toro. First Insurance, pursuant to HRCP Rule 7, joined A&B's motion to dismiss.

On December 16, 2008, the circuit court heard argument on A&B's motion to dismiss. Toro appeared at the hearing pro se and indicated that he would like additional time to file "something" that "would protect his interest in this matter." The circuit court continued A&B's motion and gave Toro 60 days, or until February 16, 2009, "to file whatever papers you're going to file with the [c]ourt."

On February 17, 2009, Toro, now represented by counsel, filed a memorandum in opposition to A&B's motion to dismiss and argued, inter alia, that the motion should be denied because Toro has a "continuing interest in the legal claims" of First Insurance and because of the "derivative nature of those claims." In addition, Toro argued the lawsuit involved his general and special damages, and thus, First Insurance "needs Toro to prove the reasonableness and necessity of the expenses, and for all factors of the general damages claim." Toro also filed a motion to intervene in the subrogation action pursuant to HRS § 386–8⁵ and HRCP Rule 24, which governs intervention. On March 17, 2009, the court heard argument on the pending motions. During the hearing, A&B's counsel stated, "with respect to [Toro's] motion to intervene, ... on a legal basis, I recognize the statute and take no position on the motion." The court denied A&B's motion to dismiss and granted Toro's motion to intervene.

Toro's Complaint in Intervention, filed on March 25, 2009, alleged that his injuries were sustained because of A&B's negligence. Toro sought general damages, special damages, attorney's fees and costs, and pre- and post-judgment interest. On May 29, 2009, A&B filed an Answer to Toro's Complaint in Intervention, which asserted, inter alia, a statute of limitations defense.

Trial was initially set for August 17, 2009, but was continued to May 24, 2010, by stipulation of the parties, to allow sufficient time to participate in the Court Annexed Arbitration Program.⁶

On May 10, 2010, Toro sought leave to amend his complaint by certifying three Doe Defendants, Robert Chin (Diversified civil engineer), Wilson Padilla (Diversified project engineer), and Matthew Emmanuel (Diversified job site foreman).

On May 20, 2010, A&B filed a motion for summary judgment. A&B argued that Toro's complaint in intervention was untimely pursuant to the "clear and unambiguous" language of HRS § 386–8, which, A&B argued, limits an employee's right to intervene to the applicable statute of limitations under HRS chapter 657. Additionally, A&B pointed out that during Toro's February 9, 2010 deposition, Toro stated that he knew there was a two year statute of limitations on his claim, and he admitted to having a workers' compensation attorney since January 2007.

In its memorandum in opposition, First Insurance contended, inter alia, that employers and employees share the same cause of action arising from the employee's injuries. Accordingly, if either commences an action within the statute of limitations, the other's intervention will not prejudice the defendant's ability to defend. First Insurance further argued that failing to allow an employee to intervene before trial is inconsistent with the provision in HRS § 386–8 that gives both employers and employees the power of consent before any action can be settled or dismissed.

In his memorandum in opposition, Toro argued, inter alia, that HRS § 386–8 does not provide a third party such as A&B with an affirmative statute of limitations defense because: (1) the statute is liberally construed to preserve, not limit, an employer's and employee's right of action; and (2) the statute of limitations does not apply if an employee intervenes in an employer's timely filed action. Toro also argued that A&B's motion should be denied on procedural grounds because, in failing to object to Toro's motion to intervene, A&B waived the issue and the issue was res judicata.

On July 27, 2010, the circuit court heard A&B's motion for summary judgment, along with...