GREGORY SHIGEO YUKUMOTO and DIANE YUKUMOTO, Plaintiffs-Appellees,
RUTH TAWARAHARA, Defendant-Appellee. HAWAII MEDICAL SERVICE ASSOCIATION, Intervenor-Plaintiff-Appellant,
RUTH TAWARAHARA, Defendant-Appellee.
FROM THE CIRCUIT COURT OF THE FIRST CIRCUIT (CAAP-15-0000460;
CIV. NO. 14-1-001245; CIV. NO. 15-1-000105)
Winter Brookins for appellant.
Woodruff K. Soldner for appellees Gregory Yukumoto and Diane
Yukumoto (Charles Ferrera for appellee Ruth Tawarahara, with
him on the brief).
RECKTENWALD, C.J., NAKAYAMA, McKENNA, POLLACK, AND WILSON,
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.
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.
Circuit Court Proceedings
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,
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
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.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
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
hearing on the Petition, the court requested that the parties
submit supplemental briefing on the legislative history and
intent of HRS § 663-10.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.
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[.]"
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.
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). HMSA opposed the motion, largely
reiterating previous arguments.
their answer to HMSA's Complaint, the Yukumotos contended
that the Complaint was barred by HRS §
431:13-103(a)(10) 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.
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."
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.
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
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."
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."
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.
HMSA's Appeal and Application for Transfer
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."
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."
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.
filed an application for transfer to this court, which we
Standards of Review
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
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
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
Motions to Dismiss
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)
issue presented here is whether health insurers retain their
subrogation rights against third-party tortfeasors who cause
injury to their insureds.
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
§§ 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 ...