Zane v. Liberty Mut. Fire Ins. Co.

• Court: Hawaii Supreme Court
• Writing for the Court: Levinson
• Citation: Zane v. Liberty Mut. Fire Ins. Co., 165 P.3d 961, 115 Hawaii 60 (Haw. 2007)
• Decision Date: 14 August 2007
• Docket Number: No. 27317.,27317.
• Parties: Dawna C. ZANE, Plaintiff-Appellee-Respondent, v. LIBERTY MUTUAL FIRE INSURANCE COMPANY, Defendant-Appellant-Petitioner.

165 P.3d 961

Dawna C. ZANE, Plaintiff-Appellee-Respondent, v. LIBERTY MUTUAL FIRE INSURANCE COMPANY, Defendant-Appellant-Petitioner.

No. 27317.

Supreme Court of Hawai`i.

August 14, 2007.

Ward F.N. Fujimoto (Ward F.N. Fujimoto and Randall Y.S. Chung, of Matsui Chung, on the briefs), Honolulu, for the defendant-appellant-petitioner Liberty Mutual Fire Insurance Company.

Bert S. Sakuda (Bert S. Sakuda and Geoffrey K.S. Komeya, of Cronin, Fried, Sekiya, Kekina & Fairbanks, on the brief), Honolulu, for the plaintiff-appellee-respondent Dawna C. Zane.

MOON, C.J., LEVINSON, NAKAYAMA, and DUFFY, JJ., and Circuit Judge STRANCE, in place of ACOBA, J., Recused.

Opinion of the Court by LEVINSON, J.

On January 23, 2007, the defendant-appellant-petitioner Liberty Mutual Fire Insurance Company (Liberty Mutual) filed an application for a writ of certiorari urging us to review the published opinion of the Intermediate Court of Appeals (ICA) in Zane v. Liberty Mut. Fire Ins. Co., No. 27317 (Oct. 31, 2006) [hereinafter, "slip op." or "Zane I"], which vacated the first circuit court's April 25, 2005 judgment, the Honorable Eden Elizabeth Hifo presiding, granting summary judgment in favor of the plaintiff-appellee-respondent Dawna C. Zane and against Liberty Mutual, and remanded the matter to the circuit court for further proceedings. In its application, Liberty Mutual urged that: (1) notwithstanding DaimlerChrysler's settlement with Zane in the underlying tort action, see infra section I.C, its self-insurance was "applicable" within the meaning of Hawai`i Revised Statutes (HRS) § 431:10C-103 (Supp.1999)<sup>1</sup> such that its bodily injury (BI) coverage limit should offset the amount of Zane's underinsured injuries for which Liberty Mutual, as her underinsured motorist (UIM) carrier, would otherwise be responsible; and (2) Liberty Mutual's consent to Zane's settlement with DaimlerChrysler did not estop Liberty Mutual from asserting the aforementioned offset pursuant to Taylor v. Gov't Employees Ins. Co., 90 Hawai`i 302, 978 P.2d 740 (1999), and Gov't Employees Ins. Co. v. Dizol, 176 F.Supp.2d 1005 (D.Haw. 2001).² Zane filed a timely response.

We accepted Liberty Mutual's application to correct the ICA's erroneous holding that DaimlerChrysler, solely by virtue of it (1) never having been adjudicated liable to Zane and (2) apparently having settled only for the anticipated expenses of litigation and not an amount representing a compromised or pro rata discount of clear liability value, as a matter of law could not be a "tortfeasor" for purposes of the Taylor rule, see supra note 2, such that Zane's UIM benefits were not offset by an amount equal to the gap between the amount of DaimlerChrysler's settlement and its (in this case, effectively infinite) BI limit. For the reasons discussed infra in section III.B, we hold that there remains a genuine issue of material fact as to whether Liberty Mutual represented to Zane that it would not employ the Taylor rule as a basis for reduction of her benefits and, accordingly, vacate the ICA's opinion in Zane I and the judgment arising therefrom, vacate the circuit court's judgment, and remand this matter to the circuit court for further proceedings. As guidance on remand, should the trier of fact find that no estoppel occurred, we disagree with Zane's position that a settling but—by agreement of the parties— factually non-liable party is, per se, not a "tortfeasor" for purposes of the "Taylor rule." Inasmuch as Zane failed to brief her alternative argument on appeal, advanced instead in her April 25, 2007 motion for reconsideration, that the insurance of a non-owner/operator of an underinsured motor vehicle is not applicable to the Taylor gap, that contention is waived for purposes of this appeal, and we do not consider it at this time.

I. BACKGROUND

A. The Taylor Line

Despite the parties' agreement with the general rule of Taylor and its progeny, we recite the relevant analysis of those cases by way of orientation.

In Taylor, the plaintiff Rosalina Taylor, who held a UIM insurance policy through the defendant Government Employees Insurance Company (GEICO), "was injured in a collision with a vehicle driven by Mary McKaig, who was insured ... by State Farm Mutual Automobile Insurance Company (State Farm)." 90 Hawai`i at 304, 978 P.2d at 742. In accordance with a consent-to-settle clause in GEICO's UIM policy (i.e., "[UIM] coverage does not apply ... if the insured ... has made a settlement . . . without our prior written consent" (emphasis omitted)), Taylor informed GEICO "that State Farm had offered to settle [her] claim" and requested GEICO's "permission to settle." Id. GEICO responded that it "w[ould] not grant concurrence with regard to ... [Taylor's] settlement as [she] ha[d] not obtained the [BI] policy limits of [State Farm]." Id. (emphasis and internal quotation signals omitted). Nevertheless, Taylor settled with and released McKaig and State Farm for an amount less than the BI limits of McKaig's policy, after which GEICO refused to pay UIM benefits and Taylor sued for declaratory relief. Id. at 305, 978 P.2d at 743. The circuit court granted GEICO's motion for summary judgment, and Taylor appealed. Id. Our analysis centered on the validity of GEICO's consent clause and the reasonableness of GEICO's refusal to give consent. We declined to disapprove consent-to-settle clauses in UIM policies across the board, but held that "a UIM carrier's grounds for denying UIM benefits under a consent-to-settle provision in a UIM policy must be reasonable, in good faith, and within the bounds of the intent underlying HRS § 431:10C-301(b)(4) [(requiring motor vehicle insurance policies to include UIM coverage)]." Id. at 309, 311-12, 978 P.2d at 747, 749-50; accord id. at 315, 978 P.2d at 753 (Nakayama, J., concurring). GEICO's asserted reason for denial—essentially that Taylor sought to settle for less than State Farm's BI limit—was unreasonable inasmuch as it denied Taylor "the perfectly reasonable choice of saving months, if not years, of delay, trial preparation expense, and all the ensuing wear and tear by simply accepting the offer and, as a condition of proceeding with h[er] UIM claim, foregoing the difference between the tortfeasor's policy limit and the tortfeasor's insurer's offer." See id. at 313-14, 978 P.2d at 751-52 (majority opinion); cited in Granger v. Gov't Employees Ins. Co., 111 Hawai`i 160, 168, 140 P.3d 393, 401 (2006) (where plaintiff had compromised with tortfeasors for $90,000.00 of their $100,000.00 limit, reaffirming that "[i]f the victim does accept less than the tortfeasor's policy limits, his [or her] recovery against his [or her] UIM carrier must nevertheless be based on a deduction of the full policy limits" (emphasis and internal quotation signals omitted) (some bracketed material added and some in original)). Consequently, because "[t]he UIM carrier will not be responsible for covering [the difference or "gap" between the settlement amount and the tortfeasor's liability policy limits] as a component of its obligation to compensate its insured for injury and damage exceeding the tortfeasor's policy limits ..., there is no legitimate reason for the UIM carrier to refuse to consent to a settlement on that basis." Taylor, 90 Hawai`i at 314, 978 P.2d at 752.

In Dizol, the decedent Kevin Dizol was a passenger in a van the driver of which had been drinking at a bar before the subject accident. 176 F.Supp.2d at 1009. The driver was covered by a $35,000.00 BI policy. Id. at 1010. Dizol's estate sued the bar and the deceased driver's estate, and settled (1) with the bar for less than its BI limit and (2) with the driver's estate for its policy limit. See id. Dizol's "projected loss of earnings" was greater than the total of the payments actually received, by a difference of $17,177.00, but less than the sum of the defendants' BI policy limits. See id. Dizol held a UIM policy for $70,000.00, but his estate had settled without the consent of his UIM insurer. Id. The UIM insurer brought a declaratory action against Dizol's estate, seeking "a set off against" the estate's UIM benefits "of ... the full amount of [BI] coverage available to ... [the bar]." See id. at 1012. The UIM insurer subsequently moved for summary judgment, which the United States District Court for the District of Hawai`i granted in relevant part. See id. at 1030-31, 1032 & n. 33, 1033. While the UIM insurer was unaware of and had not consented to the tort settlement, the court extended the Taylor rule to the facts of Dizol. The court concluded "that under Hawai[']i law, amounts forgone in below[-]policy[-]limits settlements with joint tortfeasors without the UIM carrier's consent are properly used to offset the carrier's liability." Id. at 1033 (emphasis added).

B. The Motor Vehicle Accident

The present matter arose out of a February 10, 2000 motor vehicle accident. Zane was a passenger in a Dodge Neon automobile that was manufactured by DaimlerChrysler, driven by Richard Thomas, and insured by Liberty Mutual under both BI and UIM coverages. Slip op. at 2-3. The Neon and another vehicle, driven by Sarah Kim and insured by State Farm, collided at an intersection in Honolulu. Id. at 2. The accident rendered Zane a paraplegic. Id. Zane sued Thomas, Kim, and DaimlerChrysler. Id. at 3.

C. The Settlement And Proceedings Before The Circuit Court

Through mediation with retired circuit court judge E. John McConnell, Thomas and Kim and their insurers, Zane, and DaimlerChrysler reached a settlement, under the terms of which DaimlerChrysler contributed $200,000.00, Kim contributed her BI limit of $100,000.00, and Thomas contributed his BI limit of $1,350,000.00; furthermore, under a prior settlement agreement, Zane's parents' insurer, AIG Hawai`i Insurance Company, Inc. (AIG), contributed $40,000.00.³ Thus, Zane recovered a total of $1,690,000.00. Id. The parties readily agree that the total value of Zane's...