Barabin v. AIG Hawaii Ins. Co., Inc.

Citations: 921 P.2d 732; 82 Haw. 258; 1996 Haw. LEXIS 78Docket: 18914

Court: Hawaii Supreme Court; July 23, 1996; Hawaii; State Supreme Court

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Timothy John Barabin appealed a summary judgment from the First Circuit Court favoring AIG Hawai'i Insurance Company and American International Adjustment Company in a no-fault automobile insurance coverage dispute. The circuit court ruled that Barabin's refusal to comply with the policy's examination under oath (EUO) provision justified the denial of his claims. Barabin argued that the EUO provision was unenforceable, claiming it lacked approval from the insurance commissioner. The case background details that Barabin's vehicle was slightly damaged in a rear-end collision on October 22, 1993. After treatment for injuries, Barabin submitted his chiropractic bills to AIAC, which paid $1,747.58. AIG requested an EUO on December 7, 1993, as required by the policy, but Barabin refused, asserting the provision’s unenforceability. AIG reiterated the request on December 27, 1993, warning of potential denial of benefits for noncompliance. Following Barabin's continued refusal, AIG denied an additional $4,665.58 in no-fault payments for outstanding bills on January 20, 1994, citing noncompliance with the sworn statement requirement in the policy. The Supreme Court of Hawai'i affirmed the circuit court's decision.

On February 17, 1994, Barabin filed a complaint against appellees seeking damages for various claims, including breach of contract and violations of Hawai'i's Unfair Settlement Practices Act, along with claims for intentional infliction of emotional distress, negligence, and punitive damages. In response, appellees counterclaimed for declaratory relief, asserting that AIG was not obligated to pay benefits due to Barabin's failure to submit to an Examination Under Oath (EUO), which they argued was a condition precedent for coverage under the insurance policy. The circuit court granted summary judgment in favor of appellees on July 15, 1994, ruling that Barabin's refusal to comply with the EUO constituted a material breach of the insurance policy, thereby relieving AIG of its obligation to provide benefits. Subsequently, Barabin's motion for certification of the summary judgment was denied, and appellees successfully moved to dismiss Barabin's original complaint, resulting in a judgment for appellees on April 4, 1995. Barabin appealed the decision.

In reviewing the summary judgment, the court noted that it is appropriate when there are no genuine issues of material fact and the moving party is entitled to judgment as a matter of law. Barabin contested the enforceability of the EUO provision, arguing that it was void because it had not been approved by the insurance commissioner. The court disagreed, emphasizing that statutory language takes precedence over conflicting contract terms and asserting that the applicable statutes do not mandate approval of every new policy provision by the insurance commissioner. Barabin's reliance on Hawai'i Administrative Rules was found to be misapplied, as the rules do not require such extensive oversight for policy provisions.

HRS 431:10C-214 mandates that the insurance commissioner adopt necessary rules to ensure the effective implementation of the insurance code and fair handling of motor vehicle accident claims. HAR 16-23-60 requires that any no-fault insurance policy issued or renewed post-September 1, 1974, must include no-fault coverage and that insurer-drafted endorsements need commissioner approval. However, this does not necessitate the commissioner’s approval of every provision within each endorsement. Barabin contends that since the law does not explicitly authorize an Examination Under Oath (EUO), AIG's EUO provision is unenforceable. This interpretation is rejected, as HRS 431:10C-214 empowers the commissioner to establish rules, and HAR 16-23-60 allows insurers to draft policies within those guidelines without the requirement for exhaustive commissioner approval of each endorsement provision. Barabin's argument that the absence of explicit EUO authorization in HAR 16-23-60 implies its prohibition is flawed, as it would incorrectly suggest that the commissioner must outline every permissible policy condition, which is not the intent. Additionally, Barabin incorrectly cites the Vega decision as supporting his position; the case does not establish that any policy provision requiring unauthorized investigative methods is unenforceable.

After receiving no-fault benefits for a period, Vega's claims were investigated by AIAC, leading to a demand for an independent medical examination (IME) which she refused, citing that the no-fault statute did not mandate such examinations and that any policy requiring them was unenforceable. AIAC subsequently retroactively terminated her benefits. Vega filed a lawsuit and the circuit court ruled in her favor, concluding that the legislature intended to exclude compulsory medical examinations from no-fault policies, as they are permitted in other insurance contexts. On appeal, the court found the IME provision void due to the insurance commissioner's failure to comply with HRS chapter 91 in promulgating the rule allowing such a provision. The court clarified that while the commissioner could create endorsements, this did not allow evasion of statutory requirements. The relevant rule was deemed a "rule" as defined by HRS 91-1(4) and should have been properly adopted. Barabin argued a similar invalidity for a policy's examination provision, but the court rejected this, noting that Barabin's reasoning mirrored that of Vega and the circuit court, which the appellate court had not endorsed. The court emphasized that the earlier ruling did not invalidate the IME provision based on inconsistency with statutory insurance frameworks or administrative rules.

The Vega court ruled that the Independent Medical Examination (IME) provision was not validly adopted as a 'rule' under the Administrative Procedure Act but did not address its compatibility with the No-Fault Insurance Law. The court clarified that the IME provision aligned with the no-fault endorsement issued by the insurance commissioner, thus not supporting Barabin's claims regarding unenforceability due to lack of approval. Following Vega, the court rejected the notion that only exclusions explicitly legislated are valid, as established in Kang v. State Farm, where a policy exclusion for uninsured and underinsured motorist benefits was deemed valid despite not being expressly authorized in HRS chapter 431, as it aligned with legislative intent.

Regarding the Examination Under Oath (EUO) provision, Barabin argued its placement outside the no-fault coverage section created ambiguity. However, established law mandates that insurance contracts be interpreted in their entirety. While ambiguities in contracts of adhesion are typically construed in favor of the insured, this does not apply unless a genuine ambiguity exists. A provision or policy complexity does not inherently create ambiguity; it arises only when reasonable differing interpretations are possible. The policy clearly states that AIG has no duty to provide coverage unless there is full compliance with specified duties, including submission to examination under oath, which is unequivocal and applicable to all policy coverages.

Appellees argue that various courts have consistently interpreted similar contractual language as unambiguous, particularly regarding the Examination Under Oath (EUO) provision, which is understood in its ordinary sense as involving questioning and responses. The court concurs that the EUO provision and the requirement for full compliance with policy terms before pursuing legal action against the insurer are both clear and unambiguous. Barabin contends that an affidavit from a former AIG employee creates a material factual issue that should preclude summary judgment; however, the court finds the affidavit irrelevant to the legal question of the EUO provision's enforceability under applicable statutes and regulations. The court concludes that AIG has no obligation to pay benefits to Barabin because he breached his contractual duty to cooperate by not submitting to the EUO. Consequently, the judgment of the circuit court is affirmed. Additionally, Barabin's argument regarding AIG's failure to seek amendments to rules is rejected, as the court maintains that the EUO provision remains valid despite lacking explicit approval from the insurance commissioner. It emphasizes that insurance contracts must be interpreted in their entirety, following all terms and conditions outlined in the policy.