Court: Hawaii Intermediate Court of Appeals; March 22, 1984; Hawaii; State Appellate Court
First Insurance Company of Hawaii, Ltd. appeals a summary judgment favoring defendant Gerald Jackson, asserting its right to reimbursement from a $25,000 settlement Jackson reached with tortfeasor Oscar Jasper and his insurer, Maryland Casualty Company. First Insurance had previously paid Jackson no-fault benefits totaling $8,459.74 for medical expenses, lost earnings, and mileage after Jackson was injured in a January 2, 1981, automobile accident. Jackson and his wife subsequently filed a negligence action seeking $100,000 in general damages for Jackson and $10,000 for Yvonne. After denying liability, Jasper settled the case for $25,000, with a release executed by Jackson and Yvonne stating that the payment was for general damages and did not duplicate the no-fault benefits received. The appeal centers on whether there are genuine issues of material fact, which the court affirms exist, thus leading to a reversal of the summary judgment.
The Release applies to all claims and damages, encompassing both known and unknown claims, and serves as a full and final release for OSCAR JASPER and MARYLAND CASUALTY COMPANY. GERALD JACKSON and YVONNE JACKSON agree to indemnify and hold harmless OSCAR JASPER and MARYLAND CASUALTY COMPANY from any liabilities, costs, or claims, including No-Fault Insurance Benefits, arising from injuries related to a specified accident, and to defend them against such claims. A Stipulation for Dismissal With Prejudice was filed on January 11, 1982, in Civil No. 67847. Subsequently, on September 21, 1982, First Insurance initiated a lawsuit against Jackson to enforce a statutory subrogation right to fifty percent of no-fault benefits paid, per Hawaii Revised Statutes § 294-7. Jackson moved for summary judgment on January 10, 1983, which was granted by the circuit court on March 28, 1983, prompting this appeal.
The standard for reviewing summary judgment aligns with that applied by the circuit court, requiring affirmation only when there are no genuine issues of material fact and when the movant is entitled to judgment as a matter of law. First Insurance contends that genuine issues exist regarding whether Jackson received duplicative no-fault benefits through the release and whether the release pertained to general damages only or both general and special damages. Jackson argues that the release is clear and integrated, that there are no claims of fraud, that the parol evidence rule prevents extrinsic evidence from contradicting the release, and that the release indicates the consideration was for general damages only, justifying his summary judgment.
The court holds that genuine issues of material fact remain concerning the good faith of Jackson's settlement and release of his tort claim. The discussion also addresses whether the parol evidence rule restricts First Insurance, as a stranger to the release, from introducing extrinsic evidence to alter the release's terms, with prior case law clarifying that the rule does not apply to strangers to an integrated contract.
In Akamine v. American Security Bank, the court affirmed that the parol evidence rule applies broadly to disputes involving the rights and duties established by a legal instrument, allowing both parties and non-parties to challenge the validity of the instrument on grounds of fraud. However, since First Insurance did not allege fraud regarding the release in question, the court focused on HRS § 294-7, which governs the insurer's rights under Hawaii's Motor Vehicle Accident Reparations Act (No-Fault Act). The No-Fault Act aims to provide compensation for damages from motor vehicle accidents without assigning fault, while limiting tort liability. HRS § 294-4 mandates no-fault insurers to pay benefits regardless of fault, and HRS § 294-6 abolishes tort liability unless specific threshold conditions are met, allowing for a tort claim in some instances.
When these threshold requirements are met, HRS § 294-7 allows an insurer to seek reimbursement of 50% of paid no-fault benefits if the insured recovers damages through tort litigation that overlaps with the no-fault benefits received. Despite having this subrogation right under HRS § 294-7, the insurer cannot pursue the tortfeasor directly for the no-fault benefits. Importantly, the insured retains control over their tort claim settlement; however, this control does not extend to preventing the insurer's statutory reimbursement rights by simply wording the release to exclude no-fault benefits. The court stressed that the legislature intended HRS § 294-7 to have practical effect, emphasizing that statutory interpretation should ensure laws are effective rather than null.
An insured cannot circumvent an insurer's statutory right to reimbursement simply by designating tort recovery in a release document. Under HRS § 294-7, insured individuals must act in good faith according to objective standards when settling tort claims to ensure that their insurer’s right to reimbursement is not unjustly denied. In this case, Jackson and Yvonne settled for $25,000 despite seeking $110,000 in damages, with Jackson having received approximately $8,500 in no-fault benefits. Jackson's release of claims included a broad waiver of all damages while specifying recovery for general damages only, suggesting potential duplicative recovery of no-fault benefits. This raises questions about the legitimacy of the settlement terms, indicating that Jackson may have attempted to extinguish the insurer's reimbursement rights without a valid basis. Consequently, genuine issues of material fact exist, precluding Jackson from obtaining summary judgment. The decision is reversed and remanded for trial. Relevant legal definitions and precedents regarding no-fault benefits and subrogation rights are also noted.
