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Yukumoto v. Tawarahara

Supreme Court of Hawaii

May 26, 2017

RUTH TAWARAHARA, Defendant-Appellee. HAWAII MEDICAL SERVICE ASSOCIATION, Intervenor-Plaintiff-Appellant,
RUTH TAWARAHARA, Defendant-Appellee.

         APPEAL FROM THE CIRCUIT COURT OF THE FIRST CIRCUIT (CAAP-15-0000460; CIV. NO. 14-1-001245; CIV. NO. 15-1-000105)

          Dianne Winter Brookins for appellant

          Woodruff K. Soldner for appellees Gregory Yukumoto and Diane Yukumoto (Charles J. Ferrera for appellee Ruth Tawarahara, with him on the brief)



          RECKTENWALD, C.J.

         This case presents an issue of first impression: whether health insurers have subrogation rights against third-party tortfeasors who cause injury to their insureds. For the following reasons, we conclude that a health insurer does not have a broad, unrestricted right of subrogation, but rather is limited to reimbursement rights established by statute.

         I. Background

         A. The Accident

         This case arises from an accident that occurred on March 20, 2014, when Gregory Yukumoto was driving his moped in Honolulu. Ruth Tawarahara, who was driving an SUV, attempted to make a left turn in front of Yukumoto, and struck him with her vehicle. Yukumoto sustained serious injuries, including brain injury, traumatic hemorrhagic shock, acute respiratory failure, left tibial fracture, right fibula fracture, L2 compression fracture, multiple wounds, and multiple hematomas.

         B. Circuit Court Proceedings

         Gregory Yukumoto and his wife, Diane, filed a complaint against Ruth Tawarahara in the Circuit Court of the First Circuit. Hawai'i Medical Service Association (HMSA) subsequently filed its "Notice of Claim of Lien, " contending that HMSA had paid $325, 824.33 for medical expenses associated with Yukumoto's injuries as of September 20, 2014.

         The Yukumotos filed a Petition for Determination of Validity of Claim of Lien by HMSA pursuant to Hawai'i Revised Statutes (HRS) § 663-10 (Petition). According to the Petition, Yukumoto's wage loss and general damages claim was "approximately $4, 000, 000." The Yukumotos contended that Ruth Tawarahara had only $1, 100, 000 of insurance coverage through a State Farm Insurance policy, which State Farm agreed to pay "pursuant to a general damages only release." The Yukumotos and Tawarahara had agreed to their settlement on November 6, 2011. Tawarahara did not admit fault for the accident. Coupled with a $50, 000 "underinsured motorist claim" that the Yukumotos submitted to GEICO Insurance, the Petition contended that the Yukumotos' "total recovery, before payment of attorneys' fees and costs, was $1, 150, 000" and that "[t]hey remain undercompensated by approximately $2, 850, 000." Gregory Yukumoto's HMSA health insurance was provided through his employer, the State of Hawai'i.

         The Yukumotos sought "a ruling that HMSA has no lien nor subrogation rights in their personal injury settlements because HMSA cannot satisfy the provisions of" HRS § 663-10.[1] They alleged that under HRS § 663-10, "[f]or a health insurer to receive any portion of a plaintiff's recovery from the defendant, the health insurer has the burden of proving that the settlement or recovery duplicates medical expenses that were paid by the health insurer."

         Lienor HMSA filed a memorandum in opposition, arguing that the Petition should be denied because HRS § 663-10 "does not abrogate HMSA's contractual lien or subrogation rights, but rather provides HMSA with an independent statutory right to assert its lien on any amount that [the Yukumotos] recover." (Emphasis in original.) HMSA also filed an Amended Notice of Claim of Lien for the amount of $337, 351.79, and a motion to intervene in the action.

         At a hearing on the Petition, the court requested that the parties submit supplemental briefing on the legislative history and intent of HRS § 663-10.[2] Following the submittal of the supplemental briefing, the court held another hearing. At that hearing, HMSA contended that its "rights under 663-10 to be reimbursed by Plaintiffs . . . are greatly facilitated by intervention" because it would be able to make "formal discovery requests." HMSA represented that the purpose of the discovery would be to assist the court in making its "determinations under [HRS §] 663-10" as to whether there was any duplication between the settlement funds paid by Tawarahara and the medical expenses paid by HMSA. The Yukumotos contended "that Hawaii's Unfair Claims Practices Act makes it illegal and an unfair claims practice to limit the coverage to a Plaintiff who has a third-party claim." They argued that HRS § 431:13-103(10) was "specifically applicable to mutual benefit societies and HMSA[, ]" and HMSA was violating the statute by "'refusing to provide or limiting coverage available to an individual because the individual may have a third-party claim.'" The Yukumotos further maintained that HRS § 663-10 was an "anti-subrogation statute" and HMSA's exclusive remedy, and that the legislative history of HRS § 663-10 supported their position.

         The court orally granted HMSA's motion to intervene at the hearing and subsequently filed an order limiting discovery to "what is contemplated under HRS § 663-10." The court also ruled that HRS § 663-10 abrogated HMSA's right of subrogation against Defendant Tawarahara, holding that the statute provided HMSA's exclusive remedy "in this particular type of situation, " based on "the statute itself, the legislative history, and the absence of any particular case law[.]"

         HMSA filed its complaint in intervention (Complaint) in January 2015. HMSA contended that it was a mutual benefit society as defined in HRS Chapter 432 and that it was a "'lienholder or person claiming a lien' pursuant to applicable laws, including but not limited to HRS § 663-10, and has rights of subrogation and other reimbursement rights arising from its contract with Plaintiff Gregory Yukumoto and at common law." HMSA asserted that it had "extended benefits on behalf of Plaintiff Gregory Yukumoto in the amount of $339, 255.40 as of January 5, 2015." HMSA sought judgment against Defendant Tawarahara in the sum of $339, 255.40 "with interest thereon at the rate of 10% per annum from date of judgment until paid, " as well as payment of its fees and costs. HMSA also filed a separate complaint against Tawarahara, seeking to ensure its subrogation claim was preserved and to obtain payment of medical benefits it extended on behalf of Mr. Yukumoto.

         Tawarahara filed a motion for partial dismissal of HMSA's Complaint, arguing that HMSA asserted subrogation claims which the court determined "do not exist as a matter of law." The Yukumotos filed a substantive joinder to Defendant Tawarahara's motion for partial dismissal and a motion to dismiss Defendant Tawarahara with prejudice, pursuant to Hawai'i Rules of Civil Procedure (HRCP) Rule 41(a)(2) (2012).[3] HMSA opposed the motion, largely reiterating previous arguments.

         In their answer to HMSA's Complaint, the Yukumotos contended that the Complaint was barred by HRS § 431:13-103(a)(10)[4] and 663-10, and that because "[the Yukumotos'] settlement with Defendant Ruth Tawarahara was for general damages only, " HMSA "cannot meet its burden of proving a duplication of benefits and therefore has no reimbursement rights herein." In response, HMSA argued that it would be prejudiced by Tawarahara's dismissal because it would lose its "contract and common law" rights of subrogation against her.

         At a hearing on the motions, the court noted that the legislature has set up a protocol that is "very detailed in terms of addressing HMSA's lien regarding its validity, regarding the dollar amount" and that, regarding duplication of funds, "they have set up a process whereby discovery is intended, and the court is allowing HMSA to conduct discovery as to whether or not there is duplication such that their lien rights under [HRS §] 663-10 [are] protected because if it's duplicative, then there is a reimbursement."

         The court subsequently entered an order granting the Yukumotos' motion to dismiss Defendant Tawarahara, dismissing all claims against her with prejudice. The court also ordered the Yukumotos' counsel to retain $339, 255.40 from the settlement funds received from Tawarahara in their client trust account, as that was the amount set forth in HMSA's Notice of Claim of Lien.

         Tawarahara filed a motion to consolidate HMSA's separate lawsuit against her with the underlying Yukumotos' lawsuit, which HMSA opposed. The court granted Tawarahara's motion to consolidate.

         Two days before the court granted the motion to consolidate, HMSA filed a supplemental memorandum in opposition to the Yukumotos' Petition. HMSA asserted that it did "not believe it [would] be able to meet its burden to establish by a preponderance of the evidence that the settlement proceeds paid by Defendant Ruth Tawarahara to Plaintiffs duplicate the medical benefits paid by HMSA."

         Defendant Tawarahara filed a motion to dismiss the case. Tawarahara argued that HMSA had no standing to bring an action against her because the court had ruled that HMSA's subrogation rights were abrogated. In opposition, HMSA argued that "its right of subrogation against Tawarahara is separate and independent from its right of reimbursement from Mr. Yukumoto under HRS § 663-10, and will survive the Court's ruling as to a distribution of the proceeds of the pending settlement under HRS § 663-10, " and that "a ruling by the Court that the settlement does not duplicate the medical benefits paid by HMSA will conclusively establish that Tawarahara is still liable to HMSA for that element of damages resulting from her tortious conduct."

         The court held a hearing on both the Yukumotos' Petition and Tawarahara's motion to dismiss, and orally granted the motion to dismiss and agreed to release the Yukumotos' settlement funds to the Yukumotos' counsel. The court entered its order granting the Yukumotos' Petition, ruling that "HMSA is not entitled to a payment of the amount of its claimed lien, " and permitting Plaintiffs' counsel to release the settlement proceeds that were being held in their client trust account to the Yukumotos. The court entered final judgment on May 28, 2015. HMSA timely filed its Notice of Appeal.

         C. HMSA's Appeal and Application for Transfer

         In its opening brief, HMSA argued that the "circuit court erred in ruling that HRS § 663-10 and/or HRS § 431:13-103(a)(10) abrogates Appellant HMSA's contractual and common law rights in subrogation against a third-party tortfeasor responsible for injury to its insured."

         The Yukumotos and Tawarahara (Appellees) filed a joint answering brief, which detailed the legislative history of the two statutes, stating that the Hawai'i legislature "made clear that health insurers have no subrogation rights in personal injury settlements, and specifically defined a health insurer's 'right of reimbursement' as codified under HRS § 663-10" and "determined that a health insurer should be reimbursed from a personal injury settlement to the extent that the settlement duplicated benefits paid by the health insurer."

         In its reply brief, HMSA argued that there was no evidence of legislative intent to abrogate its subrogation rights and that "[n]one of [Appellees'] arguments provide citations to the legislative history, because they find no support there." (Emphasis in original.) HMSA also argued that State Farm Fire and Cas. Co. v. Pacific Rent-All, Inc., 90 Hawai'i 330, 978 P.2d 768 (1999) is directly applicable to this case, and should have been applied by the circuit court.

         HMSA filed an application for transfer to this court, which we granted.

          II. Standards of Review

         A. Statutory Interpretation

         "Statutory interpretation is a question of law reviewable de novo." State v. Wheeler, 121 Hawai'i 383, 390, 219 P.3d 1170, 1177 (2009) (internal quotation marks omitted). This court's construction of statutes is guided by the following rules:

First, the fundamental starting point for statutory interpretation is the language of the statute itself. Second, where the statutory language is plain and unambiguous, our sole duty is to give effect to its plain and obvious meaning. Third, implicit in the task of statutory construction is our foremost obligation to ascertain and give effect to the intention of the legislature, which is to be obtained primarily from the language contained in the statute itself. Fourth, when there is doubt, doubleness of meaning, or indistinctiveness or uncertainty of an expression used in a statute, an ambiguity exists.

Id. (quoting Citizens Against Reckless Dev. v. Zoning Bd. of Appeals of the City & Cty. of Honolulu, 114 Hawai'i 184, 193, 159 P.3d 143, 152 (2007)).

         "[W]e may only resort to the use of legislative history when interpreting an ambiguous statute." State v. Valdivia, 95 Hawai'i 465, 472, 24 P.3d 661, 668 (2001).

         B. Motions to Dismiss

         "A trial court's ruling on a motion to dismiss is reviewed de novo." Kamaka v. Goodsill Anderson Quinn & Stifel, 117 Hawai'i 92, 104, 176 P.3d 91, 103 (2008) (citation omitted).

         III. Discussion

         The issue presented here is whether health insurers retain their subrogation rights against third-party tortfeasors who cause injury to their insureds.

         HMSA argues that under State Farm, its "equitable common law right of subrogation" is protected in the context of health insurance. According to HMSA, this common law right allows for insurer's rights in subrogation to be "independent . . . and take priority over the insured's interest in settling with a third party." HMSA additionally argues that the legislative history of HRS ยงยง 663-10 and 431:13-103(a)(10) does not support a finding that the laws abrogate its claimed subrogation rights. Further, HMSA argues that it ...

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