Sunday, November 21, 2010

Benefits-for-Life Provisions Deemed Permissible (under old law)

First Insurance Co. v. Dayoan (ICA November 18, 2010)

Background. Dayoan was injured in a motor vehicle accident in 1998. He was 60 years old. He had an insurance policy with First Insurance. The accident left Dayoan disabled and unable to work as a kitchen helper and dishwasher at Jimmy's Drive Inn in Hilo as well as growing produce for additional income. Dayoan applied for benefits pursuant to his insurance policy. First insurance paid Dayoan $1,500 a month. The policy stated that wage loss benefits could continue "only if the treating health care provider determines the 'insured' is disabled from employment to which the 'insured' is suited by education, training and experience." The wage loss benefits would expire upon Dayon's death. Dayoan's inability to work is not in dispute.

After paying wage loss benefits for about seven years, First Insurance brought a declaratory judgment action. The action sought the circuit court to interpret the policy so that First Insurance would no longer be obligated to pay the wage loss benefits. Dayoan filed a motion for summary judgment, which was granted. Dayoan then filed a motion seeking $10,885.35 in fees and $659.99 in costs. The circuit court granted the motion in part and awarded $10,450.00 in fees and $695.00 in costs. First Insurance appealed.

The Statute. HRS § 431:10C-302 regulates optional benefits (i.e., coverage benefits that the insurer chooses to make available). Wage loss benefits are optional benefits. Nothing in the statute prohibits the insurer from paying wage loss benefits from the time of the accident to the death of the insured. Rather, First Insurance argued that interpreting HRS § 431:10C-302 to allow benefit payments for the rest of the insured's life leads to an unjust and absurd result.

Nothing Absurd, Unjust, or Illogical. "Where the language of the statute is plain and unambiguous, our only duty is to give effect to its plain and obvious meaning." Liberty Mut. Fire Ins. Co. v. Dennison, 108 Hawai'i 380, 384, 120 P.3d 1115, 1119 (2005). "Departure from the literal construction of a statute is justified only if such a construction yields an absurd and unjust result obviously inconsistent with the purposes and policies of the statute." Leslie v. Bd. of Appeals, 109 Hawai'i 384, 393, 126 P.3d 1071, 1086 (2006). The ICA held that the circuit court did not err in ruling for Dayoan. The ICA explained that HRS § 431:10C-302 was amended in 1997 so that wage loss benefits were optional ones rather than mandatory ones. The cost-saving purposes was the fact that it was optional rather than mandatory. Simply because it was possible that wage loss benefits could be payable until the death of the insured, did not mean that it was absurd, unjust, or illogical.

Tricky Statute to Interpret. The tricky part about interpreting this statute was that the language of the statute was nowhere to be found in this opinion.

The Later Amendments do not come into the Picture. The ICA also rejected First Insurance's arguments that the subsequent amendments to HRS §431:10C-302 should have been considered in interpreting the policy. After 1997, argued First Insurance, the statute was amended to reflect a cap in the total of wage loss benefits. The ICA disagreed. "[T]he statute in effect at issue as of the policy's effective date, governs the policy at issue and is part of the contract with full binding effect upon each party." Allstate Ins. Co. v. Kaneshiro, 93 Hawai'i 210, 214, 998 P.2d 490, 494 (2000). The ICA found no reason to depart from this general rule.

Subsequent Amendments Should be Weighed Carefully when Interpreting the Older Statute. First Insurance also argued that the subsequent amendments to the statute effectively capping wage loss benefits should be considered because they were amended to "clarify the intent" of the 1997 statute. The ICA formulated this rule of statutory construction based on two HSC cases: "Although we look to subsequent legislative history to confirm our interpretation of earlier statutory provisions, Macabio v. TIG Ins. Co., 87 Hawai'i 307, 317, 955 P.2d 100, 110 (1998), we weigh such arguments with 'extreme care.' Hawaii Providers Network, Inc. v. AIG Hawaii Ins. Co., 105 Hawai'i 362, 370 n. 19, 98 P.3d 233, 241 n. 19 (2004)." The ICA noted that although it did not reject "subsequent legislative action as a basis for interpreting a previously adopted statute," a single conference committee report is a slender reed for First Insurance's argument. Ultimately, the ICA held that the fact that the Legislature capped wage loss benefits in 1998 did not signify that it meant to cap them in 1997.

Re-enter the Hierarchy of Legislative History. This is not the first time the ICA treaded lightly in evaluating legislative history. In State v. Vierra, the ICA noted that a single conference committee report did not have the same weight as the reports of the whole. Here, the ICA seems to be taking a similar approach. A single conference committee report in 1998 had no bearing on the interpretation of the 1997 statute. Vierra was not cited by the ICA here.

Subsequent Amendments did not Apply Retroactively Either. The ICA also rejected First Insurance's argument that the subsequent amendment should apply retroactively. "No law has any retroactive operation, unless otherwise expressed or obviously intended." HRS § 1-3. That statute, however, "is only a rule of statutory construction and where the legislative intent may be ascertained, it is no longer determinative." State v. Nguyen, 81 Hawai'i 279, 290, 916 P.2d 689, 670 (1996). After combing the legislative record, the ICA held that there was no indication that the Legislature intended on the post-1997 amendments to apply retroactively.

The Attorneys' Fees Issue. The ICA also held that there was no abuse of discretion in awarding attorney's fees and costs to Dayoan's lawyers.

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