Moranz v. Harbor Mall, LLC
| Docket Number | SCWC-17-0000006 |
| Decision Date | 11 January 2022 |
| Parties | PATRICIA MORANZ, Petitioner/Plaintiff-Appellant, v. HARBOR MALL, LLC, Respondent/Defendant-Appellee, and DTRIC INSURANCE COMPANY, LTD., Respondent/Intervenor-Appellee. |
| Court | Hawaii Supreme Court |
CERTIORARI TO THE INTERMEDIATE COURT OF APPEALS (CAAP-17-0000006; CIVIL NO. 14-1-0172)
Susan L. Marshall, for petitioner/plaintiff- appellant
Ronald M. Shigekane, for respondent/intervenor- appellee
Petitioner/Plaintiff-Appellant Patricia Moranz ("Moranz") was injured near her place of employment on August 28, 2012 and received workers' compensation ("WC") benefits from her employer's WC insurance carrier, Respondent/Intervenor-Appellee DTRIC Insurance Company, Ltd. ("DTRIC") shortly thereafter. In 2014, Moranz brought suit in the Circuit Court of the Fifth Circuit ("circuit court") against Harbor Mall, LLC, ("Harbor Mall") the owner of the building in which she was injured, and in 2016, reached a settlement with Harbor Mall for $200, 000.00 ("Harbor Mall settlement"). Around the time of the Harbor Mall settlement, DTRIC sought reimbursement of those WC benefits it had paid to Moranz after her accident under Hawai'i Revised Statutes ("HRS") § 386-8 (2015)[1] and Alvarado v. Kiewit Pacific, Co., 92 Hawai'i 515, 520, 993 P.2d 549, 554 (2000).[2] Under HRS § 386-8 and Alvarado, when an injured employee recovers a third-party settlement, an insurer[3] is entitled to reimbursement of all WC benefits it has paid the employee, less its "share" of reasonable attorney's fees and costs incurred by the employee in pursuing the third-party action. Per HRS § 386-8 and Alvarado, we now clarify (1) the proper timing of Alvarado calculations, which determines the reimbursement due the insurer from the third-party settlement and (2) the reimbursement process for an insurer when the amount of WC benefits the insurer has already dispensed to the employee ("paid compensation") is less than the amount it owes the employee for its "share" of attorney's costs and fees for the third-party action. Here, the parties disagreed over whether certain WC benefits that DTRIC owed Moranz ("DTRIC settlement") were properly classified as "paid compensation" or benefits that DTRIC owed Moranz in the future ("calculable future benefits") under the Alvarado formula. The parties also disagreed over the process of DTRIC's reimbursement of WC benefits because DTRIC's "share" of attorney's fees and costs exceeded the amount it had previously contributed to Moranz as "paid compensation."
We now clarify that Alvarado calculations shall be performed based on the date on which the employee receives the third-party recovery. In this case, at the time Moranz received the third-party recovery (i.e., the Harbor Mall settlement) on or about September 20, 2016, DTRIC had not yet paid its settlement; thus, the DTRIC settlement should have been categorized as a "calculable future benefit" rather than "paid compensation" under the Alvarado formula.
We also emphasize that an insurer's "share" of the attorney's fees and costs the employee incurs while pursuing third-party recovery is based on the insurer's total WC liability. Thus, we now clarify that the insurer must pay its full pro rata "share" regardless of the amount the insurer has contributed in "paid compensation" versus the amount it still owes in "calculable future benefits" at the time the employee receives the third-party recovery. In this case, DTRIC owes its full "share" of Moranz's attorney's fees and costs in the amount of $89, 140.17, based on its total WC liability of $189, 062.13 ($63, 245.41 in "paid compensation" plus $125, 816.72 in "future calculable benefits"). Under HRS § 386-8(d), DTRIC is entitled to reimbursement of the $63, 245.41 it has expended in "paid compensation." Further, under HRS § 386-8(i), DTRIC is "relieved from the obligation to make further compensation payments to [Moranz] . . . up to the entire amount of the balance of the settlement or the judgment," meaning that Moranz must exhaust $125, 816.72 in "calculable future benefits" from the remainder of the Harbor Mall settlement. After paying her attorney's fees and costs ($94, 298.29), reimbursing DTRIC its "paid compensation" ($63, 245.41), and exhausting "calculable future benefits" ($125, 816.72) from the $200, 000.00 Harbor Mall settlement, Moranz retains the remainder: $5, 779.75 in excess of her WC benefits.
I. BACKGROUND
Moranz was injured while working on August 28, 2012 after she fell in a stairway near her place of employment in Lihue, Kaua'i. Moranz filed a claim for WC benefits, and received "WC medical, indemnity[, ] and vocational rehabilitation benefits" from DTRIC pursuant to chapter 386 of the HRS.
On August 25, 2014, Moranz filed a civil lawsuit against Harbor Mall, alleging negligence in maintaining the stairway. Before trial was set to begin in July 2016, Moranz and Harbor Mall reached a settlement agreement, in which Harbor Mall agreed to pay $200, 000.00 in general damages and maintained its denial of liability. A check for the $200, 000.00 settlement was transmitted from Harbor Mall to Moranz on September 16, 2016. On September 22, 2016, the circuit court granted a Motion to Intervene filed by DTRIC.[4] On September 28, 2016, with the consent of all parties, Harbor Mall was dismissed from the lawsuit.
On May 24, 2016, Moranz filed a "Motion for Determination of Validity of Claim of Lien of DTRIC" and argued that DTRIC was not entitled to reimbursement under HRS § 386-8 for the WC benefits it had previously paid Moranz because: (1) DTRIC could not prove "duplication" within the settlement of the WC benefits it had paid, (2) DTRIC was entitled only to reimbursement of special damages for "medical and rehabilitative expenses and lost income" and the settlement was for "general damages only," and (3) considering equitable principles, Moranz would not be "made whole by receiving only a portion" of the settlement. Moranz also alleged that DTRIC had failed to provide her with WC documentation, which "necessitated" bringing the lawsuit against Harbor Mall, and that DTRIC continued to refuse to cooperate and provide her with necessary WC documentation.
DTRIC maintained that it was entitled to reimbursement of WC benefits it had paid Moranz, initially claiming a lien in the amount of $66, 177.35.[5] DTRIC asserted that, under HRS § 386-8 and Alvarado, it was entitled to the entire amount of its lien less "reasonable attorney fees and its proportional share of cost of litigation." DTRIC contended that HRS § 386-8 and case law did not support Moranz's argument that only special or duplicated damages were eligible for reimbursement. DTRIC argued that it was also entitled to a credit on future benefits, that is, relief from the obligation to make further compensation payments, up to Moranz's net recovery from the Harbor Mall settlement.
At oral argument on the Motion, Moranz asked the circuit court to resolve three issues: (1) the amount, if any, of the Harbor Mall settlement that should be eligible for reimbursement to DTRIC; (2) the amount of DTRIC's lien; and (3) DTRIC's entitlement to a credit against future benefits. Moranz emphasized that this court regarded the Alvarado formula as a "starting point" for reimbursement, and argued that the circuit court's discretion was not limited to determining an insurer's "share" of attorney's fees and costs. Moranz also asked the circuit court to apply the "make-whole" doctrine, which would prioritize the Moranz's right to recovery over DTRIC's right to reimbursement. DTRIC argued that Moranz sought to "avoid the lien issue" by claiming DTRIC could not recover from a settlement designated as "general damages only." DTRIC emphasized that HRS § 386-8 limited the circuit court's power to setting reasonable attorney's fees and costs. DTRIC objected to the reliance on equitable remedies such as the "make-whole" doctrine where, as here, there was an established method (i.e., the Alvarado formula) to determine its lien and "share" of costs and fees. DTRIC also represented to the circuit court that a WC settlement of $125, 816.72[6] ("DTRIC settlement") based on permanent partial disability liability was currently pending approval by the Department of Labor and Industrial Relations ("DLIR").
The circuit court noted that a ruling that settlements designated "general damages only" cut off an insurer's right to reimbursement would create "a tidal wave of general damages claims to avoid these liens[.]" The circuit court upheld DTRIC's right to reimbursement from the Harbor Mall settlement, and found that while DTRIC had generally consented to the settlement, it had not agreed to reducing its lien.[7] Thus, the circuit court held that DTRIC was "entitled to assert its lien." The circuit court clarified that the "only reduction" needed was for "reasonable litigation expenses and the amount of attorney's fees," pursuant to HRS § 386-8 and Alvarado. The circuit court directed the parties to calculate the appropriate deductions in accordance with Alvarado.
On September 1, 2016, DTRIC and Moranz signed a Stipulation and Settlement Agreement and Order for the DTRIC settlement. The $125, 816.72 DTRIC settlement was transmitted to the DLIR for approval on September 12, 2016, and approved on September 28 2016. Following this approval, on October 18, 2016, DTRIC "made payment" of $19, 732.89 to Moranz, which reflected: a settlement in the amount of $125, 316.72, [9] minus $5, 927.13 of attorney's fees and costs and a...
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