Thanks for visiting! Welcome to a new way to research case law. You are viewing a free summary from Descrybe.ai. For citation and good law / bad law checking, legal issue analysis, and other advanced tools, explore our Legal Research Toolkit — not free, but close.
Hawaiian Insurance & Guaranty Co. v. Higashi
Citations: 672 P.2d 556; 4 Haw. App. 608; 1983 Haw. App. LEXIS 150Docket: NO. 9110; CIVIL NO. 4598
Court: Hawaii Intermediate Court of Appeals; November 10, 1983; Hawaii; State Appellate Court
In the case Hawaiian Insurance Guaranty Company, Limited v. Ronald G. Higashi and Shizue Higashi, the Intermediate Court of Appeals of Hawaii reviewed a judgment favoring the Higashis in a dispute over an indemnity agreement. The court found that the trial court erred in determining that the Higashis, as indemnitors, were not liable. The key facts established that the Higashis executed a general indemnity agreement in favor of Hawaiian Insurance (HIG), which issued performance bonds for R.G. Higashi Plumbing, Inc. A dispute arose between Plumbing and Pacific Construction Co. Ltd., leading to a settlement where HIG paid Pacific $13,333.33. HIG subsequently pursued indemnification from the Higashis for this payment. The trial court concluded that the Higashis were not liable because the principal's liability had not been established. However, the appellate court held that the trial court's finding was irrelevant, emphasizing that an indemnitee must prove actual liability when settling claims without a clear determination of rights, thus reversing the trial court's judgment. Indemnitees can claim indemnity under specific circumstances, namely when the claim is based on a judgment, when the indemnitor declines a defense tender, or when the claim is rooted in a written indemnity agreement. In such cases, the indemnitee only needs to demonstrate potential liability. The interpretation of a written indemnity agreement is crucial, as seen in the case where the agreement mandates that the indemnitors indemnify the surety for any liabilities incurred in executing a performance bond, including related legal fees and costs. The agreement also waives the requirement for the surety to notify the indemnitors of any claims affecting their rights, granting the surety exclusive authority to decide on defense actions, which are binding on the indemnitors. The Higashis authorized HIG to settle a third-party claim without prior notice, which HIG did, thus establishing the Higashis’ liability for the settlement amount and related expenses, regardless of any judicial determination of Plumbing's liability. Consequently, the trial court's finding on Plumbing's liability was deemed irrelevant, as the Higashis remained liable under the indemnity agreement. The Higashis argue that the payment of $13,333.33 made by H.I.G. to Pacific was unreasonable and reckless, asserting that settlements must be both reasonable and made in good faith, as established in National Surety Corp. v. Peoples Milling Co. Inc. An indemnitor can challenge a settlement's reasonableness or the indemnitee's good faith only by affirmatively pleading and proving such claims, as supported by several legal precedents. The Higashis failed to plead this affirmative defense, resulting in a waiver of their right to raise it on appeal. Consequently, the judgment is reversed, and the case is remanded for the trial court to determine the amounts owed by the Higashis to H.I.G. The record notes that at the time of settlement, R.G. Higashi Plumbing, Inc. was in bankruptcy, and the settlement required Bankruptcy Court approval. Additionally, it is noted that settlements are generally presumed fair and reasonable, placing the burden of proof on the party contesting good faith.