Lee v. Government Employees Insurance Company et al
Filing
53
ORDER GRANTING IN PART AND DENYING IN PART DEFENDANT GOVERNMENT EMPLOYEES INSURANCE COMPANY'S MOTION FOR SUMMARY JUDGMENT 28 AND DENYING PLAINTIFF CINDY LEE'S CROSS MOTION FOR SUMMARY JUDGMENT 34 . Signed by JUDGE LESLIE E. KOBAYASHI on 11/28/2012. [Order follows hearing held 11/1/2012. Minutes: doc no. 51 ] (afc) CERTIFICATE OF SERVICEParticipants registered to receive electronic notifications received this document electronically at the e-mail address listed on the Notice of Electronic Filing (NEF). All participants are registered to receive electronic notifications.
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF HAWAII
)
)
Plaintiff,
)
)
vs.
)
)
)
GOVERNMENT EMPLOYEES
INSURANCE COMPANY, a Maryland )
corporation, DOES ONE through )
ONE HUNDRED, inclusive, and
)
)
of each them,
)
)
Defendant
_____________________________ )
CINDY LEE,
CIVIL NO. 11-00782 LEK-BMK
ORDER GRANTING IN PART AND DENYING IN PART DEFENDANT GOVERNMENT
EMPLOYEES INSURANCE COMPANY’S MOTION FOR SUMMARY JUDGMENT AND
DENYING PLAINTIFF CINDY LEE’S CROSS MOTION FOR SUMMARY JUDGMENT
Before the Court are: (1) Defendant Government
Employees Insurance Company’s (“GEICO”) Motion for Summary
Judgment (“Motion”), filed on July 11, 2012 [dkt. no. 28]; and
(2) Plaintiff Cindy Lee’s (“Plaintiff”) Cross Motion for Summary
Judgment (“Cross Motion”), filed on September 5, 2012 [dkt. no.
34].
The parties filed their respective memoranda in opposition
on October 5, 2012 (“Plaintiff’s Opposition” and “GEICO’s
Opposition”), [dkt. nos. 44, 42,] and their replies on October
12, 2005 (“GEICO’s Reply” and “Plaintiff’s Reply”) [dkt. nos. 47,
46].
These matters came on for hearing on November 1, 2012.
Appearing on behalf of GEICO was Patrick Gallagher, Esq., and
appearing on behalf of Plaintiff was John Choi, Esq.
After
careful consideration of the Motion and Cross Motion, supporting
and opposing memoranda, and the arguments of counsel, GEICO’s
Motion is HEREBY GRANTED IN PART AND DENIED IN PART, and
Plaintiff’s Cross Motion is HEREBY GRANTED IN PART AND DENIED IN
PART for the reasons set forth below.
BACKGROUND
On November 29, 2011, Plaintiff filed her First Amended
Complaint (“Complaint”) against GEICO in state court.
On
December 23, 2011, GEICO removed the instant action to this
district court based on diversity jurisdiction.
[Dkt. no. 1.]
On and prior to October 4, 2008, GEICO insured
Plaintiff and her husband, Clarence Lee (“Mr. Lee,” collectively,
“the Lees”), under an automobile insurance policy that Mr. Lee
first purchased on December 13, 2001 (“GEICO Policy”).
When
Mr. Lee purchased the GEICO Policy, he rejected uninsured
motorist (“UM”) and underinsured motorist (“UIM”) coverage for
his two vehicles.
[Complaint at ¶¶ 10-11, 15.]
Plaintiff claims that, in selecting from the different
GEICO insurance coverage options, “the Lees relied on the
expertise of Defendant GEICO, and/or other Defendants to advise
them, in accordance with Hawai`i law, on selecting insurance
coverage under the GEICO policy.”
[Id. at ¶ 12.]
Plaintiff
alleges that GEICO failed to inform Mr. Lee of the benefits of UM
and UIM coverage, such as additional protection in case of loss
2
where the liable party was uninsured or underinsured.
Plaintiff
contends that GEICO only informed Mr. Lee that rejecting UM and
UIM coverage would result in “‘cheaper premium payments.’”
at ¶ 16.]
[Id.
Plaintiff thus argues that Mr. Lee had no meaningful
understanding of GEICO’s presentation of UM and UIM coverage.
[Id. at ¶¶ 16, 25, 27.]
On October 24, 2004, the Lees added a third vehicle to
the GEICO Policy.
Plaintiff contends that, because this addition
constituted a material change in the GEICO Policy, GEICO was
required, but failed, to make a new offer to Mr. Lee to purchase
or reject stacked and/or increased UM and UIM coverage.
On or
about July 23, 2008, the Lees added a fourth vehicle to the GEICO
Policy.1
Again, Plaintiff contends that GEICO failed to offer
Mr. Lee the option to purchase or reject stacked and/or increased
UM and UIM coverage when adding the fourth vehicle to the GEICO
Policy.
[Id. at ¶¶ 17-22 (citing Allstate Ins. Co. v. Kaneshiro,
93 Hawai`i 210, 221, 998 P.2d 490, 501 (2000)).]
On or about October 4, 2008, Plaintiff was driving her
1994 Toyota Camry, when it was struck by another vehicle
(“subject collision”), rendering Plaintiff’s vehicle a “total
1
Plaintiff contends that on or about July 23, 2008,
Mr. Lee added the Lees’ oldest daughter, Karen Lee (“Karen”), to
the GEICO Policy as a new driver. [Cross Motion, Aff. of Cindy
Lee (“Cindy Aff.”) at ¶¶ 10-11; id., Aff. of Clarence Lee
(“Clarence Aff.”) at ¶¶ 9-11.] GEICO, however, argues that
Plaintiff did not allege this fact in her Complaint. [GEICO’s
Reply at 2-3.]
3
loss.”
[Id. at ¶ 6.]
The vehicle of the liable driver, Jas Rae
Nesmith, was also insured by GEICO for $20,000/$40,000 per
person/accident in bodily injury (“BI”) coverage.
8.]
[Id. at ¶¶ 7-
Plaintiff contends that the negligence of Jas Rae Nesmith
caused the subject collision, triggering all applicable UIM
coverage.
[Id. at ¶ 9.]
As of the date of the subject collision, the Lees had
four vehicles insured under the GEICO Policy, including
Plaintiff’s 1994 Toyota Camry, the vehicle involved in the
subject collision.
The GEICO Policy provided the following
coverage: (a) BI limits of $100,000/$300,000 each
person/accident; (b) property damage (“PD”) limits of $100,000
each accident; and (c) personal injury protection (“PIP”) limits
of $10,000 each person.
[Id. at ¶ 24; Cross Motion, Decl. of
Counsel (“Pltf.’s Counsel Decl.”), Exh. 2 (summary of insurance
purchases and policy declaration sheets)).]
In sum, with respect
to Mr. Lee’s purchase of the GEICO Policy on December 13, 2001
and the addition of vehicles on October 24, 2004 and July 23,
2008 (collectively, “relevant dates”), Plaintiff alleges that:
(1) GEICO failed to explain to Mr. Lee what UM and UIM insurance
provided under the GEICO Policy; (2) Mr. Lee reasonably relied on
the expertise of GEICO to offer UM and UIM coverage; and (3)
GEICO failed to offer UM and UIM coverage, as required by Hawai`i
law.
[Complaint at ¶¶ 25-35.]
4
According to the Complaint, on October 24, 2004 and
July 23, 2008, GEICO’s maximum available limit for UM and UIM
stacked or non-stacked coverage under its policies was
$300,000/$300,000 each person/accident for each insured vehicle.
[Id. at ¶¶ 36, 40.]
Plaintiff alleges in the Complaint that, if
GEICO had offered UM/UIM coverage on these two dates, Mr. Lee
would have purchased stacked UM/UIM coverage at the same amount
as his bodily injury liability coverage, $100,000 available limit
under the GEICO Policy for the Lees’ four covered vehicles.
[Id.
at ¶¶ 38, 42.]
GEICO has informed Plaintiff, through her counsel, that
no UIM coverage is available to the Lees under the GEICO Policy.
[Id. at ¶ 43; Pltf.’s Counsel Decl., Exh. 4 (letter from GEICO
denying Plaintiff’s UIM claim).]
Plaintiff asserts that she is
entitled to make a claim for stacked UIM coverage under the GEICO
Policy because of GEICO’s failure to make new offers to the Lees
to purchase or reject stacked UM and/or UIM coverage between
December 23, 2001 and October 4, 2008.
In essence, Plaintiff
urges this Court to conclude that, based on Kaneshiro and/or
Hawai`i law, the GEICO Policy provided stacked UIM coverage with
limits of $100,000 for each of the Lees’ four covered vehicles,
totaling $400,000 in UIM coverage for the subject collision.
[Id. at ¶¶ 44-45 (citing Kaneshiro, 93 Hawai`i at 221, 998 P.2d
at 501).]
Both of the instant motions focus on Plaintiff’s First
5
Cause of Action, which seeks a declaratory judgment with respect
to the issue of whether Plaintiff is entitled to UIM benefits
under the GEICO Policy.
The Complaint also asserts the following: Second Cause
of Action - Negligence; Third Cause of Action - Breach of
Contract and/or Contractual Warranties; Fourth Cause of Action Unfair and/or Deceptive Trade Practices, in violation of Haw.
Rev. Stat. Chapter 480; Fifth Cause of Action - Breaches of
Covenant of Good Faith and Fair Dealing; Sixth Cause of Action Negligent and/or Intentional Infliction of Emotional Distress;
and Seventh Cause of Action - Punitive Damages.
In her Second Cause of Action, Plaintiff asserts that,
as late as December 13, 2001, GEICO knew or reasonably should
have known that it had duties to timely offer Mr. Lee an
opportunity to purchase or reject stacked and/or increased UM and
UIM coverage whenever a material change was made to the GEICO
Policy.
[Id. at ¶ 47 (citing Kaneshiro, 93 Hawai`i at 221, 998
P.2d at 501).]
Plaintiff alleges that GEICO breached its
aforementioned duties from December 13, 2001 through October 4,
2008.
Due to GEICO’s breach, Plaintiff asserts that she
sustained general and special damages.
[Id. at ¶¶ 48-51.]
Plaintiff alleges breach of contract and/or contractual
warranties in her Third Cause of Action.
According to Plaintiff,
the Hawai`i Supreme Court’s “‘material change’ to an existing
6
policy’ doctrine . . . is a public policy that is included in and
governs the terms and conditions of UM and UIM coverages in the
GEICO [P]olicy.”
[Id. at ¶ 54 (quoting Kaneshiro, 93 Hawai`i at
221, 998 P.2d at 501).]
Plaintiff contends that GEICO failed to
offer stacked and/or increased UM and UIM coverage to the Lees
and, relying on Kaneshiro, contests GEICO’s position that the
GEICO Policy does not provide UIM coverage for the subject
collision.
Plaintiff therefore argues that GEICO’s actions
constitute breaches of contract and/or breaches of contractual
warranties.
[Id. at ¶¶ 55-57.]
In Plaintiff’s Fourth Cause of Action, she alleges that
GEICO’s acts and/or omissions were unfair and/or deceptive trade
practices, in violation of Haw. Rev. Stat. § 480-2.
[Id. at
¶¶ 59-63.]
Plaintiff’s Fifth Cause of Action alleges that GEICO’s
refusal to acknowledge that Plaintiff is entitled to stacked UIM
coverage totaling $400,000 for the subject collision constitutes
a breach of the covenant of good faith and fair dealing.
[Id. at
¶¶ 64-66.]
Plaintiff’s Sixth Cause of Action is for GEICO’s
negligent and/or intentional infliction of emotional distress.
[Id. at ¶¶ 67-69.]
Finally, Plaintiff’s Seventh Cause of Action is for
punitive damages.
Plaintiff asserts that, in denying Plaintiff
7
stacked UM and UIM coverages under the GEICO Policy, GEICO’s acts
and/or omissions were “willful, wanton, oppressive, reckless,
committed with such malice as implies a sprit of mischief or
criminal indifference to civil obligations, and/or exhibits and
entire want of care that would raise the presumption of a
conscious indifference to the consequences.”
[Id. at ¶ 71.]
Plaintiff seeks: a declaratory judgment; special,
general, treble, and/or exemplary damages; attorneys’ fees and
costs pursuant to Haw. Rev. Stat. §§ 431:10-242, 480-13 or other
Hawai`i law; prejudgment interest; and any other appropriate
relief.
I.
[Id. at pgs. 12-13.]
GEICO’s Motion
First, GEICO argues that, since the time of purchase,
the GEICO Policy did not provide UIM coverage.
[Mem. in Supp. of
Motion at 1-2; Concise Statement of Facts in Supp. of Motion
(“GEICO’s CSOF”), Decl. of Linda Langley (“Langley Decl.”),2 Exh.
C (the Lees’ policy declaration sheet and policy contract form).]
According to GEICO, under Hawai`i law, automobile insurance
policies do not include UM or UIM coverage if “‘any named insured
in the policy’ rejects such coverage in writing.”
[Mem. in Supp.
of Motion at 6 (quoting Haw. Rev. Stat. §§ 431:10C-301(b)(3)(4)).]
GEICO points to Plaintiff’s own admission that Mr. Lee
2
Linda Langley is GEICO’s Sales and Service Manager.
[Langley Decl. at ¶ 1.]
8
initially rejected UM and UIM coverage when purchasing the GEICO
Policy for his first two vehicles on December 13, 2001.
[Id.
(citing Complaint at ¶ 15).]
Second, GEICO contends that it is entitled to summary
judgment because, as a matter of law, the Lees’ subsequent
addition of two vehicles to the GEICO Policy did not require
GEICO to re-offer UM/UIM coverage to the Lees.
GEICO heavily
relies on Kaneshiro for the proposition that “‘a new offer of
[UM/UIM] coverage is not required with every policy change, but
only when there is a material change in the policy.’”
(quoting Kaneshiro, 93 Haw. at 216, 998 P.2d at 496).]
[Id. at 8
GEICO
contends that, “[t]o constitute a ‘material change,’ a change
‘must have a significant impact on the legal relationship and
obligations between insurer and insured under the policy, and the
impact of that change must be considered in light of any other
changes in the policy and the public policies [behind the UM/UIM
statute].’”
500).]
[Id. (quoting Kaneshiro, 93 Haw. at 220, 998 P.2d at
GEICO maintains that, pursuant to Kaneshiro, the events
since Mr. Lee’s purchase of the GEICO Policy did not constitute
material changes so as to require GEICO to extend a new offer of
UM/UIM coverage to the Lees.
§ 431:10C-301(e)(2)).]
[Id. at 9 (citing Haw. Rev. Stat.
By analogy to the facts of Kaneshiro,
GEICO asserts that the Lees never made a material change to the
GEICO Policy so as to significantly impact the legal relationship
9
between the parties, and thus GEICO was not required to extend a
new offer of UM/UIM coverage.
[Id. at 9-11.]
Specifically, GEICO emphasizes the fact that UM/UIM
coverage attaches to the named insureds, rather than the insured
vehicles.
GEICO then points out that the Lees have been named
insureds throughout the duration of the GEICO Policy, whereas
Kaneshiro involved the change of the policy holder as a result of
the insureds’ divorce.
Compare Mem. in Supp. Motion at 13, with
Kaneshiro, 93 Hawai`i at 220, 998 P.2d at 500.
GEICO therefore
argues that the addition of vehicles had no impact on the legal
relationship between GEICO and the Lees, and did not constitute
material changes in the GEICO Policy.
[Mem. in Supp. of Motion
at 13.]
GEICO further argues that the additions of the Lees’
third and fourth vehicles cannot have constituted material
changes because the GEICO Policy “already contemplated the
extension of existing coverage to any vehicles acquired during
the policy period.”
[Id. at 14 (emphasis in original).]
GEICO
argues that this position is consistent with the holdings in
similar cases from other jurisdictions.
[Id. at 14-16 (citing
Makela v. State Farm Ins. Co., 497 N.E.2d 483, 489 (Ill. Ct. App.
1986); El-Habr v. Mountain States Mutual Casualty Co., 626 S.W.2d
171 (Tex. Ct. App. 1981); Torgerson v. State Farm Mutual Auto.
Ins. Co., 957 P.2d 1238, 1287 (Wash. Ct. App. 1998); Wright v.
10
Pemco Mutual Ins. Co., No. 64233-2-I, 2010 Wash. App. LEXIS 727,
at *11 (Wash. Ct. App. Feb. 25, 2010)).]
GEICO further contends that the public policy behind
§ 431:10C-301 does not support the requirement that a new offer
of UM/UIM coverage be made each time vehicles are added to a
policy.
[Id. at 18-19.]
According to GEICO, “public policy
favors avoiding the expense and inconvenience (to both insureds
and insurers) of obtaining written rejection of UIM each time a
new car is added to the policy.”
[Id. at 20.]
GEICO therefore
argues that it was not obligated to re-offer UM/UIM coverage to
the Lees for each of their subsequently added vehicles after
Mr. Lee rejected such coverage when he initially purchased the
GEICO Policy.
[Id.]
Based on these arguments, GEICO urges the Court to
grant summary judgment in its favor.
II.
Plaintiff’s Opposition
A.
GEICO’s Withholding of Information
As an initial matter, Plaintiff asserts that GEICO
failed to disclose to the Court the fact that Karen was added to
the GEICO Policy on July 23, 2008.
Clarence Aff. at ¶¶ 9-11.]
[Cindy Aff. at ¶¶ 10-11;
Plaintiff urges the Court to deny
GEICO’s Motion based on GEICO’s omission alone.
12-13.]
11
[Pltf.’s Opp. at
Furthermore, according to Plaintiff, GEICO should have
offered the Lees the option to purchase UM/UIM coverage when they
purchased another policy for their fourth vehicle in 2008.
Plaintiff contends that, when Mr. Lee purchased an insurance
policy for the Lees’ fourth vehicle, he informed GEICO that Karen
would be the primary driver.
Plaintiff asserts that GEICO’s
memorandum to the Court includes no mention of Karen in the GEICO
Policy.
Plaintiff, therefore, urges the Court to deny the Motion
on the ground that it is based on an incomplete record, which,
Plaintiff asserts, is contrary to summary judgment law.
[Id. at
12-13.]
B.
The Addition of Karen to the GEICO Policy
Plaintiff argues that the addition of Karen to the
GEICO Policy altered the legal relationship between GEICO and the
Lees so as to constitute a material change.
Plaintiff contends
that, because Karen was a newly licensed teenager, adding her to
the GEICO Policy increased GEICO’s exposure to loss.3
[Id. at 14
(citing Kaneshiro, 93 Haw. at 220, 998 P.2d at 500).]
3
Plaintiff cites the Center for Disease Control and
Prevention for its report that “teen drivers between the ages of
16 to 19 are three times more likely than drivers aged 20 and
older to be in a fatal crash.” Plaintiff urges the Court to take
judicial notice of “the fact that teen drivers pose a greater
risk of loss than other drivers.” [Pltf.’s Opp. at 14 n.4
(citing Center for Disease Control,
http://www.cdc.gov/motorvehiclesafety/teen_drivers/teendrivers_fa
ctsheet.html).]
12
Relying on Matheny v. Glen Falls Insurance Co., 152
F.3d 348 (5th Cir. 1998), Plaintiff asserts that the “addition of
a newly licensed driver to an automobile policy constitutes a
material change.”
[Id.]
In Matheny, the Fifth Circuit Court of
Appeals, applying Louisiana law, held that, when the insured
added his newly licensed child as an insured driver to the
automobile insurance policy, the insurer was required to make a
new offer of UM/UIM coverage to the insured.
152 F.3d at 354.
Plaintiff asserts that the Lees paid GEICO $200.20
every six months to cover their fourth vehicle under the GEICO
Policy, which reflected a thirty-seven percent increase from the
three-vehicle policy premium, and a forty-six percent increase4
from the two-vehicle policy premium.
[Pltf.’s Opp. at 15;
Pltf.’s Counsel Decl., Exh. 2 at 1, 8.5]
By purchasing insurance
for their fourth vehicle, the Lees’ six-month insurance premium
increased by $133.90.
Decl., Exh. 2 at 1.]
[Pltf.’s Opp. at 15-16; Pltf.’s Counsel
Plaintiff interprets GEICO’s acknowledgment
that the addition of a driver to a policy is “‘in persona’” to
mean “any insurance company bears more risk of loss[.]”
[Id. at
4
Plaintiff’s memorandum actually states that the addition
of the fourth vehicle resulted in a forty-seven percent increase
from the two-vehicle policy premium. [Pltf.’s Opp. at 4.] This
appears to be a mathematical error.
5
Because Exhibit 2 contains multiple documents with
varying forms of pagination, and the Exhibit as a whole is not
consecutively paginated, the Court’s citations to Exhibit 2
reflect the page numbers in the CM/ECF system.
13
16 (citing Mem. in Supp. of Motion at 11).]
Plaintiff also contests GEICO’s argument that the
Kaneshiro court did not even consider whether the addition of a
vehicle constitutes a material change to a policy.
[Id. at 16.]
Plaintiff’s next argument relies on Kaneshiro for the proposition
that an increase in their premium significantly impacted the
legal relationship and obligations between GEICO and the Lees.
According to Plaintiff, Kaneshiro establishes that “insurance
premiums are vital in assessing whether a material change has
been made to the policy[.]”
[Id. at 17.]
On October 24, 2004,
when the Lees purchased automobile insurance for their third
vehicle, their six-month premium increased from $431.40 to
$538.40.
[Id.; Pltf.’s Counsel Decl., Exh. 2 at 1.]
Then, on
July 23, 2008, the Lees’ six-month premium increased to $673.30
after they purchased automobile insurance for their fourth
vehicle.
1.]
[Pltf.’s Opp. at 17; Pltf.’s Counsel Decl., Exh. 2 at
Plaintiff therefore asserts that these increases in the
GEICO Policy premium altered the legal relationship and
obligations between the parties so as to constitute material
changes.
[Pltf.’s Opp. at 17.]
Plaintiff also argues that the Lees’ increase in the
number of insured vehicles under the GEICO Policy from two to
three vehicles constituted a material change.
In support of her
argument, Plaintiff relies on Donaghey v. Cumis Insurance
14
Society, 600 So. 2d 829, 831 (La. Ct. App. 1992), which was also
cited by the Kaneshiro court.
In Donaghey, the trial court
granted the defendant insurance company’s motion for summary
judgment, finding that the addition of a car to the automobile
insurance policy was not a material change.
On appeal, the
Louisiana Court of Appeals reversed, holding that the plaintiff’s
addition of a vehicle to his automobile insurance policy was not
a “renewal or reinstatement” under the policy, and therefore
required a separate rejection of UM insurance.
Donaghey, 600 So.
2d at 830-31.6
According to Plaintiff, the Donaghey court based its
reasoning on the fact that the “addition of the third car
increased the coverage provided by the insurer even though none
of the other coverage levels had changed.”
(citing Donaghey, 600 So. 2d at 831).]
[Pltf.’s Opp. at 19
Plaintiff thus argues
that the Lees’ subsequent purchases of insurance for their third
and fourth vehicles increased the GEICO Policy’s coverage, even
6
Donaghey has since been superseded by La. Rev. Stat.
§ 22:1295 (“Section 1295”). See Am. Deposit Ins. Co. v. Myles,
783 So. 2d 1282, 1289 (La. 2001) (recognizing that the Donaghey
rule was legislatively overruled by Section 1295). Section
1295(1)(a)(ii) states, in pertinent part, “[a]ny changes to an
existing policy, regardless of whether these changes create new
coverage, except changes in the limits of liability, do not
create a new policy and do not require the completion of new
uninsured motorist selection forms.” Under Section 1295,
therefore, automobile insurers are not required to re-offer
UM/UIM coverage when an insured merely adds a new vehicle to
their existing automobile insurance policy.
15
though the Lees made no changes to the bodily injury limits.
[Id.]
Plaintiff argues that, pursuant to Kaneshiro, Hawaii’s
UIM statute “‘is a remedial statute that must be liberally
construed[.]’”
[Id. at 19-20 (quoting Kaneshiro, 93 Haw. at 218,
988 P.2d at 498).]
Plaintiff asserts that, under the totality of
the circumstances, GEICO is required to provide her with stacked
UIM coverage, and thus Plaintiff urges the Court to deny the
Motion as to the First Cause of Action.
C.
[Id.]
Bad Faith
With regard to her allegation of GEICO’s bad faith,
Plaintiff asserts that GEICO unreasonably denied her claim and,
therefore, failed to consider her interest with equal footing to
its own.
Plaintiff urges the Court to consider the following
list of principles when considering the Motion as to her Fifth
Cause of Action:
•
An insurer [sic] is not precluded from
bringing her bad faith claim even where there
is no coverage liability on the underlying
policy. Enoka v. AIG Hawaii Ins. Co., 109
Haw. 537, 128 P.3d 850 (2006).
•
An insurer is liable for bad faith where it
unreasonably delays or denies payment of
benefits. Best Place Inc. v. Penn American
Ins. Co., 82 Haw. 120, 133[, 920 P.2d 334,
347] (1996).
•
An insurer that acts maliciously towards its
insured may be held liable for punitive
damages. Id.
16
•
The implied covenant is breached, whether the
carrier pays the claim or not, when its
conduct damages the very protection or
security which the insured sought to gain by
buying insurance. Id. at 131.
•
Where insurance company fails to deal fairly
and in good faith with its insured by
refusing, without proper cause, to compensate
its insured for a loss covered by the policy,
such conduct may give rise to a cause of
action in tort for breach of the implied
covenant of good faith and fair dealing. Id.
(citation omitted).
•
In securing the reasonable expectations of
the insured under the insurance policy, there
is usually an unequal bargaining position
between the insured and the insurance
company. Id. at 128.
•
In delineating the benefits which flow from
an insurance contract relationship, we must
recognize that in buying insurance an insured
usually does not seek to realize a commercial
advantage, but, instead, seeks protection and
security from economic catastrophe. Id. at
129.
•
The whole purpose of insurance is defeated if
an insurance company can refuse or fail,
without justification, to pay a valid claim.
Id. at 128-9.
•
An insurance company must treat its insured’s
interest equally with its own. Delmonte v.
State Farm Fire and Cas. Co., 90 Haw. 39[,
975 P.2d 1159] (Haw. 1999).
[Id. at 20-21.]
Based on this list of legal principles,
Plaintiff argues that GEICO’s conduct was in bad faith and urges
the Court to deny the Motion as to her Fifth Cause of Action.
[Id.]
17
D.
Public Policy
Plaintiff next urges the Court to deny the Motion “[i]n
light of Hawaii’s strong public policy and liberal application of
its UM/UIM statutes[.]”
[Id. at 22.]
Plaintiff asserts that
public policy supports providing her with UIM benefits so that
she can be “fairly and reasonably compensated for the three
bulging discs in her spine.”
[Id. (citing Cross Motion, Pltf.’s
Counsel Decl., Exh. 5 (Pltf.’s MRI Report dated 12/8/08).]
Plaintiff challenges GEICO’s argument that public policy favors
reducing costs for insurers so that such savings can be passed on
to consumers.
Plaintiff contends that this argument has been
rejected by Mollena v. Fireman’s Fund Insurance Co. of Hawaii,
Inc., 72 Haw. 314, 816 P.2d 968 (1991).
[Id. at 22.]
Plaintiff
states, “‘[GEICO] argues that requiring repeat offers in every
renewal is cost prohibitive and contrary to the legislative
intent to provide coverage at the lowest possible cost.
That is,
the increase in administrative costs will be transferred to the
consumer.
We find this argument unpersuasive.’”
[Id. at 22-23
(quoting Mollena, 72 Haw. at 326, 816 P.2d at 974).]
Plaintiff asserts that, in making a new offer of UM/UIM
coverage to the Lees, GEICO would have only incurred expenses in
the form of printing and postage, at most on three occasions.
Plaintiff therefore contests GEICO’s argument of cost reduction,
and argues that the stronger public policy is to require GEICO to
18
follow Hawai`i law regarding UM/UIM coverage.
Plaintiff asserts
that such action will send a clear message to the insurance
industry regarding what type of conduct is reasonable and what is
disallowed.
E.
[Id. at 23.]
The Statutory Requirements of a UIM Coverage Offer
Plaintiff argues that the GEICO UM/UIM Offer Form,
which Mr. Lee signed in 2001 at the initial purchase of the GEICO
Policy (“2001 UM/UIM Offer Form”), contains terms that contravene
statutory provisions and public policy and, therefore, must be
stricken.
[Id. at 24; Pltf.’s Counsel Decl., Exh. 1 (2001 UM/UIM
Offer Form).]
Plaintiff also urges the Court to find that “the
2001 UM/UIM Form is unenforceable to the extent that [GEICO]
seeks to deny [Plaintiff] UIM benefits.”
[Pltf.’s Opp. at 24.]
Pursuant to Haw. Rev. Stat. § 431:10C-301(d), insurers
are required to make a new offer of UM/UIM coverage with “each
motor vehicle insurance policy.”
Plaintiff again asserts that
Mr. Lee purchased “another motor vehicle insurance policy” for
the Lees’ third vehicle in 2004.
[Id.]
Plaintiff argues,
therefore, that the statutory language of § 431:10C-301(d),
specifically the term “each,” required GEICO to make a new offer
of UM/UIM coverage to the Lees when the Lees purchased an
automobile insurance policy for their third vehicle.
In support
of her argument, Plaintiff asserts that “‘each’ vehicle in the
[GEICO Policy] had its own separate and distinct premium.”
19
[Id.
(citing Pltf.’s Counsel Decl., Exh. 2).]
Plaintiff makes the
same argument as to the addition of the Lees’ fourth vehicle to
the GEICO Policy in 2008.
[Id.]
Plaintiff asserts that, pursuant to Kaneshiro,
automobile insurers must offer insureds the opportunity to
purchase UIM coverage for every new insurance policy, with the
exception of “‘renewal or replacement policies.’”
[Id. at 25
(quoting Kaneshiro, 93 Haw. at 215, 998 P.2d 495).]
Plaintiff,
once again relying on Kaneshiro and Donaghey, contests GEICO’s
argument that the insurance policies purchased for the Lees’
third and fourth vehicles constitute renewal or replacement
policies.
According to Plaintiff, the insurance policies
purchased for the Lees’ third and fourth vehicles in 2004 and
2008, respectively, do not constitute renewals because the
vehicles were not previously insured by GEICO by the Lees.
Again, Plaintiff appears to argue that the Lees purchased
separate automobile insurance policies for vehicles three and
four.
Plaintiff’s next argument, however, is that the insurance
policies for vehicles three and four do not constitute “renewals”
because the number of vehicles under the GEICO Policy increased
with the Lees’ addition of vehicles in 2004 and 2008.
25.]
[Id. at
Based on these arguments, Plaintiff argues that “the
purchase of additional policies in 2004 and 2008 were not
‘renewals’ or ‘replacement’ policies[.]”
20
[Id. at 26.]
Furthermore, Plaintiff points to the 2001 UM/UIM Offer
Form statement, “‘I further understand that my coverage
selections and rejections will apply at any subsequent issuance,
renewal, transfer, reinstatement or re-issuance of my policy.’”
[Id. at 26 (emphases in Pltf.’s Opp.) (quoting Pltf.’s Counsel
Decl., Exh. 1 at 4).]
Plaintiff points out that this language is
broader than the statutory “renewal or replacement policy”
language contained in § 431:10C-301.
Plaintiff asserts that “the
terms of a statute in effect at the time an insurance policy is
written are read into the contract and becomes part of the
insurance policy[,]” and that “courts will not enforce terms of a
contract that are against public policy or contravene statutory
limitations that control at the time the contract is written.”
[Id. at 26-27 (some citations omitted) (citing Taylor v.
Government Employees Ins. Co., 90 Haw. 302, 306, 978 P.2d 740,
744 (Haw. 1999)).]
Plaintiff appears to argue that the 2001 UM/UIM Offer
Form language is so broad as to contravene § 431:10C-301.
Plaintiff therefore urges this Court to find that the 2001 UM/UIM
Offer Form is unenforceable.
Alternatively, Plaintiff urges the
Court to at least render this allegedly “offensive” clause
unenforceable.
[Id. at 27.]
Moreover, Plaintiff argues that Hawaii’s UIM statute is
remedial in nature, and was “enacted to provide protection to
21
persons injured in motor vehicle accidents at the least possible
cost when injured by motorists who fail to purchase sufficient
coverage.”
498).]
[Id. (citing Kaneshiro, 93 Haw. at 218, 998 P.2d at
Plaintiff also argues that insurance contracts, as
contracts of adhesion, must be “construed liberally in favor of
the insured in accordance with the reasonable expectations of a
layperson.”
[Id. (some citations omitted) (citing Kaneshiro, 93
Haw. at 218, 998 P.2d at 498).]
Based on these principles,
Plaintiff asserts that requiring an insurance company to obtain a
written rejection of UIM coverage under circumstances similar to
the instant case is not overly burdensome.
Plaintiff contends
that finding otherwise would be in contravention of the public
policy that all insured drivers should be afforded the
opportunity to purchase UIM coverage to protect themselves and
their loved ones.
Plaintiff therefore urges the Court to find
that the 2001 UM/UIM Offer Form is unenforceable as to the
purportedly separate 2004 and 2008 policies.
[Id.]
Plaintiff next criticizes GEICO’s contention that the
addition of new vehicles to an existing policy is contemplated in
the GEICO Policy.
Plaintiff asserts that such a provision
actually “refers to different situations where the insured
neglects to purchase another policy for his/her newly acquired
vehicle, or the newly acquired vehicle is a replacement for a
vehicle in the policy.”
[Id. at 28.]
22
According to Plaintiff,
because Mr. Lee “promptly purchased” automobile insurance for the
Lees’ third and fourth vehicles, [Clarence Aff. at ¶¶ 6, 9,] the
GEICO Policy’s provision contemplating the addition of vehicles
is inapplicable to the instant case.
[Id. at 28-29.]
With regard to this same provision, Plaintiff appears
to argue that, regardless of the GEICO Policy’s anticipation of
newly purchased vehicles, GEICO still has a duty to make a new
offer of UM/UIM coverage in the event of a material change.
Plaintiff states, “[w]hen [GEICO] argues that the anticipation of
newly purchased vehicles in the policy makes the event a nonmaterial change, it rests on the faulty premise that fails to
account for persons who will be driving the newly acquired
vehicle.”
[Id. at 29.]
Plaintiff then argues that the
simultaneous addition of a newly licensed driver and purchase of
insurance for an additional vehicle constitute a material change,
requiring a new offer of UM/UIM coverage.
[Id.]
Plaintiff asserts that GEICO’s distinction between an
additional insured and an additional driver is a “superficial
distinction.”
[Id.]
Plaintiff argues that the “only relevant
fact is that Karen was added to the policy as a newly licensed
teenage driver[.]”
F.
[Id.]
The Mollena Requirements of a UIM Coverage Offer
Plaintiff next contends that the 2001 UM/UIM Offer Form
fails to meet the legal standards set by Hawai`i UM/UIM statutes
23
and Mollena.7
Plaintiff asserts that Mr. Lee only recalls being
told that rejecting UM/UIM coverage would result in lower
premiums.
[Clarence Aff. at ¶ 3.]
Plaintiff points out that
Exhibit B attached to the Motion, titled “Uninsured Motorists
(UM) & Underinsured Motorist (UIM) Coverages”, appears to be
pages three and four of a four-page document, and that GEICO has
not produced pages one and two.
Plaintiff offers the Hawaii
Mandatory & Optional Coverage Selection Form as an example of
provisions that may be contained within the first two omitted
pages.
[Id. at 30 (citing Pltf.’s Counsel Decl., Exh. 10).]
Assuming that these pages properly represent the provisions in
the omitted pages of Exhibit B Plaintiff asserts that the 2001
UM/UIM Offer Form fails the Mollena standard because it “lumps
all optional coverages together, taking away the importance of
the UM/UIM offering.”
[Id.]
Although Plaintiff concedes that GEICO satisfied the
first two Mollena requirements, Plaintiff alleges that GEICO
failed to intelligibly advise Mr. Lee of the nature of UM/UIM
coverage.
In support of this argument, Plaintiff contends that,
even with the advice and expertise of the GEICO agent, Mr. Lee’s
insurance selections did not provide any real protection for the
Lee family.
Plaintiff asserts that “the Lee family would have
7
See Discussion, Section II for the recitation of the
Mollena four-factor analysis.
24
been better protected with a $50,000 bodily injury limit together
with $50,000 UM/UIM for about the same policy premium as $100,000
bodily injury only policy.”
[Id. at 30-31.]
Plaintiff next contends that GEICO failed the final
requirement under Mollena to include the fact that UM/UIM
coverage is available for a modest increase in premium in the
2001 UM/UIM Offer Form.
GEICO’s agent told Mr. Lee that
“rejecting UM/UIM would result in cheaper premium payments[,]”
which, according to Plaintiff, does not satisfy the fourth
requirement.
[Id. at 31.]
Plaintiff also argues that GEICO did
not satisfy the fourth Mollena requirement because “declaration
pages and notices mailed to the Lees’ home with the words
‘Insured Rejects’ satisfy the UM/UIM offering requirements under
the statute.”
G.
[Id. (citing Mem. in Supp. of Motion at 1).8]
Unfair and Deceptive Trade Practice
Plaintiff claims that GEICO’s conduct violates Haw.
Rev. Stat. Chapter 480.
The 2001 UM/UIM Offer Form contains the
following language: “[box to check] I reject Underinsured
Motorist Coverage on all vehicles insured.
You must sign here to
acknowledge your rejection of the Underinsured Motorist
Coverage.”
original).]
[Pltf.’s Counsel Decl., Exh. 1 at 3-4 (emphasis in
Mr. Lee checked this box and signed the line next to
8
Plaintiff’s citation appears to be incorrect, as the
referenced page of GEICO’s Motion does not discuss any notices
mailed to the Lees.
25
this provision.
At that time, Mr. Lee was insuring only the
Lees’ first two vehicles under the GEICO Policy.
Plaintiff
asserts, however, that GEICO uses the underlined portion of the
provision to actually read, “‘all vehicles insured now and in the
future.’”
[Pltf.’s Opp. at 33.]
Plaintiff argues that this
practice by GEICO is unfair, deceptive, and “not what the Lee
family bargained for.”
[Id.]
Plaintiff contends that, although
her UIM claim is lawful, GEICO committed UDAPs by continuing to
deny, delay, and litigate.
Plaintiff therefore argues that she
is entitled to treble damages under Haw. Rev. Stat. Chapter 480.
[Id.]
G.
Intentional/Negligent Infliction of Emotional Distress
Plaintiff claims that, under Hawai`i law, GEICO is
liable for her emotional distress resulting from the denial of
her claim for UIM benefits.
Plaintiff asserts that the denial of
benefits, in addition the physical pain that she suffers on a
weekly basis from the subject collision, causes her “constant and
severe” emotional distress.
[Id. at 34.]
Accordingly, Plaintiff urges the Court to deny the
Motion.
Plaintiff argues that the Court should instead order
GEICO to pay Plaintiff stacked UM/UIM coverage with a limit of
$100,000 for each vehicle under the GEICO Policy, totaling
$400,000.
[Id.]
III. GEICO’s Reply
26
A.
Claims Raised for the First Time
GEICO maintains that claims not in the Complaint are
not properly before this Court for summary judgment.
GEICO
emphasizes the fact that, as the moving party, it is “only
required to address matters ‘in the record.’”
2 (citing Fed. R. Civ. P. 56(c)).]
[GEICO’s Reply at
Accordingly, GEICO urges the
Court to disregard Plaintiff’s arguments regarding GEICO’s
initial offer of UIM coverage to Mr. Lee and the addition of
Karen as a driver to the GEICO Policy.
[Id.]
GEICO further asserts that “‘[a] pleading that states a
claim for relief must contain a statement’ sufficient to ‘give
the defendant fair notice of what the claim is and the grounds
upon which it rests.’”
[Id. (alteration in GEICO’s Reply)
(quoting Fed. R. Civ. P. 8(a); Bell Atl. Corp. v. Twombly, 550
U.S. 544, 555 (2007)).]
GEICO recognizes that it had independent
information regarding the addition of Karen as a driver to the
GEICO Policy, but GEICO takes issue with the fact that it did not
have notice that Plaintiff would rely on this fact for her
argument that a material change took place.
GEICO also asserts
that Plaintiff did not provide notice that she would be
challenging the content of the 2001 UM/UIM Offer Form.
[Id. at
2-3.]
GEICO therefore urges the Court to disregard these
claims.
GEICO, however, argues that, even if the Court considers
27
Plaintiff’s new claims, the Court shout grant the Motion.
B.
GEICO’s 2001 Offer of UIM Coverage
GEICO reasserts that it fulfilled all four requirements
for a legally sufficient offer of UIM coverage as set forth in
Mollena when Mr. Lee purchased the GEICO Policy in 2001.
GEICO contends that, by providing a UIM coverage explanation
in the 2001 UM/UIM Offer Form, GEICO intelligibly advised the
Lees of the nature of UIM coverage.
GEICO argues that Hawai`i
law does not require insurers to provide an explanation of UIM
coverage on a form separate from other types of coverages.
Furthermore, GEICO asserts that its agent’s oral representation
to Mr. Lee that “‘rejecting UM/UIM would result in cheaper
premium payments’ was accurate . . . and did not negate the
written explanation of UIM.”
[Id. at 4 (quoting Pltf.’s Opp. at
31).]
GEICO argues that it also satisfied the fourth Mollena
requirement, apprising the Lees that UIM coverage was available
for a relatively modest increase in premium, by showing Mr. Lee
the specific costs of various levels of GEICO’s UIM coverage
options.
In response to Plaintiff’s critique that GEICO did not
use the exact phrase, “‘available for a modest increase in
premium,’” GEICO argues that the “Mollena test does not require
‘the use of any particular words to convey the necessary
information that the insured may purchase the increased coverage
28
for a small additional amount.’”
[Id. at 5 (quoting Pltf.’s Opp.
at 31; Taruc v. State Farm Mutual Auto. Ins. Co., 578 N.E.2d 134,
139 (Ill. App. Ct. 1991)).]
GEICO emphasizes that the focus of
the fourth Mollena requirement is to allow insureds the
opportunity to evaluate the cost of coverage, not to require
insurers to repeat a specific phrase.
GEICO therefore argues
that it apprised the Lees that UIM coverage was available for a
relative modest increase in premium by advising Mr. Lee of the
exact costs associated with GEICO’s available UIM coverage
options.
[Id. at 5-6 (citing Macabio v. TIG Insurance Co., 87
Haw. 307, 314, 316, 955 P.2d 100, 107, 109 (Haw. 1998); Ranger v.
State Farm Ins. Co., 333 F. Supp. 2d 935, 940 (D. Hawai`i
2004)).]
C.
Plaintiff’s Interpretation of Kaneshiro
According to GEICO, “the Kaneshiro court did not hold
that the addition of a vehicle to the policy was a material
change.”
[Id. at 6-7 (emphasis in original).]
In a footnote,
GEICO points out that the Kaneshiro court characterized the
insurance coverage for new vehicles as being added to the
existing policy, not as new insurance policies.
GEICO contends
that the Kaneshiro court focused more on the substitution of the
named insureds of the subject policy, and less on the addition of
the second vehicle, when evaluating the significance of the
impact on the legal relationships and obligations between the
29
insured and the insurer.
Although the Kaneshiro court may have
found the change from a single-vehicle to a multi-vehicle policy
to be noteworthy, GEICO argues that this point is inapplicable to
the instant action because the Lees’ GEICO Policy was always a
multi-vehicle policy.
GEICO therefore argues that the Lees’
subsequent addition of vehicles to their already multi-vehicle
policy has an even less significant impact on the legal
relationship and obligations between GEICO and the Lees.
[Id. at
8 & n.2 (citing Kaneshiro, 93 Haw. 210, 219-20, 998 P.2d at 490,
499-500).]
GEICO contests Plaintiff’s argument that, under
Kaneshiro, “‘insurance premiums are vital in assessing whether a
material change has been made to the policy.’”
(quoting Pltf.’s Opp. at 17).]
[Id. at 8
Instead, GEICO asserts that the
Kaneshiro court noted the increase in premium without commenting
upon its significance.
GEICO contends that changes in premium
have little significance in the determination of a material
change because “[s]uch variations in premium have no bearing on
the privity between insured and insurer or the initial decision
to reject UIM coverage.”
[Id. at 8-9.]
GEICO also contests Plaintiff’s assertion that the
Kaneshiro court approved, followed, or adopted, Donaghey.
GEICO
contends that the Kaneshiro court actually gave weight to cases
in favor of GEICO’s position, like Makela v. State Farm Ins. Co.,
30
497 N.E.2d 483, 489 (Ill. Ct. App. 1986), where the Illinois
Court of Appeals held that “‘the addition of a vehicle to a
multi-vehicle policy did not require a new offer of coverage.’”
[Id. at 9 (quoting Kaneshiro, 93 Haw. at 217, 998 P.2d at 479
(citing Makela, 497 N.E.2d at 490-91)).]
GEICO also contends
that the Kaneshiro court’s approval of Lewis v. Lenard, 694 So.
2d 574, 577 (La. Ct. App. 1997), is favorable to its position.
GEICO asserts that, because the Lewis court found that the
removal of vehicle from an insurance policy does not constitute a
material change, the addition of a vehicle cannot constitute a
material change.
[Id. at 10.]
GEICO therefore argues that
Plaintiff has misinterpreted Kaneshiro.
D.
The Addition of a Driver
If the Court considers Plaintiff’s argument that the
addition of Karen to the GEICO Policy constituted a material
change, GEICO argues that it did not constitute a material
change.
GEICO bases its argument on the distinction between
drivers and named insureds for the purposes of automobile
insurance, and the fact that the Lees merely added Karen as a
driver and not an insured.
GEICO asserts that, because Karen was
added as a driver who was subject to the Lees’ decisions of
coverage, adding her to the GEICO Policy did not have any impact
on the legal relationship between the parties.
31
[Id. at 11.]
E.
The Additions of Vehicles
GEICO asserts that Plaintiff’s characterization of the
insurance coverage purchased for the Lees’ third and fourth
vehicles as separate insurance policies is meritless.
According
to GEICO, Plaintiff has admitted that these vehicles were added
to the Lees’ existing GEICO Policy.
at ¶¶ 17, 20).]
[Id. at 12 (citing Complaint
GEICO also refers to Plaintiff’s
characterization as “illogical” because would mean that Mr. Lee
was carrying two or three distinct policies at the same time.
[Id. at 12-13.]
F.
Public Policy
GEICO argues that public policy does not support an
award of UIM benefits for Plaintiff when the Lees explicitly
rejected, and never paid for, UIM coverage.
GEICO contends that
it repeatedly sent the Lees renewal packets, which indicated that
the Lees had rejected UIM coverage.
GEICO argues that
“[l]aypersons would reasonably expect that they would not receive
coverage that they had rejected in writing and never paid for.”
[Id. at 13 (emphasis in original) (citing Kaneshiro, 93 Haw. at
220, 998 P.2d at 500).]
As to Plaintiff’s citation to Mollena “for the
proposition that repeat offers of UIM coverage would not be cost
prohibitive[,]” [id. (quoting Pltf.’s Opp. at 22-23),] GEICO
points out that the Mollena court was actually interpreting the
32
predecessor of Haw. Rev. Stat. § 431:10C-301, which mandated a
new offer of UIM coverage with “every policy ‘delivered, issued
for delivery, or renewed.’”
325, 816 P.2d at 973-74).]
[Id. (quoting Mollena, 72 Haw. at
GEICO asserts that the State
Legislature, in response to Mollena, subsequently “amended the
statute to specify that written rejection of UIM coverage was
only required when a policy was first issued or (for pre-existing
policies) first renewed.”
[Id. at 14 (emphasis in GEICO’s Reply)
(citing Kaneshiro, 93 Haw. at 219, 998 P.2d at 499).]
GEICO
therefore contends that the current version of § 431:10C-301
reflects a public policy which does not support a finding that
Plaintiff is entitled to UIM benefits under the GEICO Policy.
[Id.]
In sum, GEICO argues that, because the Lees made no
material changes to the GEICO Policy since Mr. Lee purchased it
in 2001 on behalf of Plaintiff, GEICO was not required to reoffer UIM coverage.
GEICO argues, therefore, that the GEICO
Policy does not provide UIM benefits.
GEICO further asserts
that, because Plaintiff is not entitled to UIM benefits, her bad
faith claims must also fail as a matter of law.
IV.
[Id. at 14-15.]
Plaintiff’s Cross Motion
In her Cross Motion, Plaintiff primarily asserts the
same arguments contained in Plaintiff’s Opposition.
In addition to her previous arguments, Plaintiff
33
further contends that the Lees purchased “two new automobile
insurance policies for their third and fourth vehicles[,]” which,
together with the addition of Karen, a newly licensed teenage
driver, constituted a material change to the GEICO Policy.9
[Mem. in Supp. of Cross Motion at 9 (emphasis added).]
Again,
Plaintiff points out that the Lees’ purchase of new insurance
policies for their third and fourth vehicles increased their
premium amount.
Similar to her previous arguments, Plaintiff
contends that the resulting increases in the Lees’ premiums
significantly impacted the legal relationship and obligations
between GEICO and the Lees so as to constitute a material change.
[Id. at 14-15.]
Plaintiff further argues that, in failing to
acknowledge this material change, GEICO also failed to make a
legally sufficient offer for UM/UIM coverage to the Lees,
pursuant to Mollena.
Plaintiff therefore asserts, “[w]hen an
insurance company fails to make an adequate offer of UM/UIM
coverage, claimants are entitled to stacked UM/UIM coverage ‘as a
9
Plaintiff refers to the insurance purchased for the Lees’
third and fourth vehicles as separate policies. Plaintiff is
unclear as to whether she is arguing that Karen was added to the
Lees’ existing GEICO Policy, or if Karen was added to the
purported new insurance policy purchased for the Lees’ fourth
vehicle. See, e.g., Mem. in Supp. of Cross Motion at 11 (stating
both that the Lees added Karen to “their policy,” and that Karen
was “added to the [fourth] policy at the time of the purchase on
July 23, 2008”). In many instances, Plaintiff merely states that
Karen was added to “the policy,” without indicating the specific
policy to which she is referring. See, e.g., id. at 12.
34
matter of law’ for amounts equal to bodily injury limits.”
[Id.
at 9 (quoting Mollena, 72 Haw. at 324, 816 P.2d at 974).]
Plaintiff urges the Court to declare that GEICO must
pay her stacked UM/UIM coverage with a limit of $100,000 for each
of the Lees’ four vehicles insured under the GEICO Policy,
totaling $400,000.
Plaintiff further urges the Court to grant
the Cross Motion with respect to her remaining claims.
V.
GEICO’s Opposition
In GEICO’s Opposition, GEICO primarily relies on the
same arguments set forth in the Motion and GEICO’s Reply.
A.
Initial Rejection of UIM Coverage
GEICO maintains that it intelligibly advised the Lees
of the nature of UIM coverage.
According to GEICO, satisfaction
of this requirement entails providing a “‘definition or examples
or description of the nature of underinsured motorist coverage.’”
[GEICO’s Opp. at 8 (quoting Mollena, 72 Haw. at 322, 816 P.2d at
972).]
GEICO contends that this requirement is fulfilled by a
provision contained in the 2001 UM/UIM Offer Form, which
provides:
Uninsured Motorists (UM) & Underinsured Motorist
(UIM Coverages)
. . . .
Underinsured Motorist applies to you, your
resident relatives and occupants of the insured
auto. Underinsured Motorist Coverage is separate
and distinct coverage from Underinsured [sic]
35
Motorists Coverage. Underinsured Motorist
Coverage provides protection to persons insured
under this policy who are legally entitled to
recover damages for bodily injury, including
death, arising from accidents with motorists who
have insurance but the coverage limits under all
bodily injury policies applicable at the tie of
the accident are less than the total damages for
bodily injury or death resulting from the
accident.
[Id. at 9 (quoting Langley Decl., Exh. B (2001 UM/UIM Offer Form)
at 3).]
In addition to this provision, GEICO asserts that its
argument is supported by Mr. Lee’s recollection that the GEICO
agent also orally informed Mr. Lee that purchasing UM/UIM
coverage would result in an increase in his insurance premiums.
GEICO thus argues that it intelligibly advised Mr. Lee about the
nature of UIM coverage.
[Id. at 10 (citing Clarence Aff. at ¶
3).]
According to GEICO, Plaintiff argues that Mr. Lee was
not sufficiently advised on the nature of UIM coverage because
Plaintiff believes, in retrospect, that Mr. Lee made a poor
decision to reject the UIM coverage.
GEICO asserts that this
argument fails because § 431:10C-301 and the requirements as
stated in Mollena are “designed to preserve an insured’s right to
choose whether to pay for UIM coverage, and the ultimate wisdom
of the insured’s decision is irrelevant.”
[Id. at 11 (citing
Kaneshiro, 93 Haw. at 219, 998 P.2d at 499).]
GEICO further
challenges Plaintiff’s argument that the GEICO Policy provided no
protection for the Lees, pointing out that Mr. Lee could have
36
chosen alternatives to protect his family such as no-fault
coverage, health insurance, or even setting aside the money he
saved through the lower premiums that resulted from his rejection
of the UIM coverage.
GEICO argues that, if the State Legislature
believed that UIM coverage was always the best protection for
insureds, this belief would be reflected in the statutory
provisions.
[Id. (citing Mem. in Supp. of Cross Motion at 24).]
GEICO also maintains that its agent apprised Mr. Lee of
the availability of UIM coverage for a relatively modest increase
in premium by providing him with the exact costs of various
levels of UIM coverage.
GEICO asserts, that, for example, it
gave a coverage form to Mr. Lee, which specified that the “UIM
limits of $100,000 per person/$300,000 per accident would cost an
additional $35.50 for non-stacked coverage or $37.50 for stacked
coverage.”
[Id. at 12 (citing Langley Decl., Exh. B at 3).]
GEICO asserts that, by providing Mr. Lee with the exact
amounts of premium increases, GEICO permitted him to reach his
own conclusions about the value of UIM coverage.
[Id. at 13-14.]
GEICO contends “the focus of the fourth [Mollena] factor is on
allowing insureds to evaluate the cost of coverage, not on the
repetition of any specific phrase.”
[Id. at 13 (emphasis in
original) (citing Macabio v. TIG Insurance Co., 87 Haw. 307, 314,
316, 955 P.2d 100, 107, 109 (Haw. 1998)).]
37
GEICO further argues that, because Mr. Lee executed a
valid rejection of UIM coverage at the time he purchased the
GEICO Policy, his rejection is also valid against Plaintiff.
GEICO points out that, “[u]nder Hawaii law, a motor vehicle
policy does not include UM/UIM coverage ‘if any named insured in
the policy’ rejects such coverage in writing.”
[Id. at 14
(quoting Haw. Rev. Stat. § 431:10C-301(b)(3), (b)(4)).]
GEICO
therefore asserts that Mr. Lee’s valid rejection of UIM coverage
precludes Plaintiff from recovering such benefits for injuries
sustained in the subject collision.
[Id. at 14-15.]
Based on these arguments, GEICO maintains that it made
a legally sufficient offer of UIM coverage to Mr. Lee, who later
executed a valid rejection of GEICO’s offer.
Accordingly, GEICO
urges this Court to find that the GEICO Policy did not afford
Plaintiff UIM coverage from the time that it was initially
issued.
B.
[Id. at 15.]
Whether Other Offers Were Required
Again, GEICO argues that, because Karen was only a
driver under the GEICO Policy, not a named insured, the addition
of Karen to the GEICO Policy did not constitute a material
change, and Mr. Lee’s initial rejection of UIM coverage controls.
[Id. at 17-18.]
GEICO contends that its argument is further
supported by the fact that Karen was an insured under the GEICO
Policy before the Lees formerly added her as a driver.
38
GEICO
asserts that Karen, as the Lees’ “resident relative” under the
GEICO Policy, was entitled to bodily injury liability insurance
under the GEICO Policy.
at 5).]
[Id. at 18 (citing Langley Decl., Exh. C
GEICO emphasizes that “Karen’s status as a resident
relative would also have qualified her for UIM coverage if her
parents had not rejected such coverage.”
Decl., Exh. C at 3).]
[Id. (citing Langley
Because of Karen’s previously existing
status as a “resident relative,” GEICO asserts that adding her as
a driver had “no impact on the legal relationship between GEICO
and the Lees,” and did not constitute a material change.
[Id. at
19.]
GEICO then contends that Plaintiff’s cited case,
Matheny v. Glen Falls Insurance Co., 152 F.3d 348 (5th Cir.
1998), “does not reflect Hawaii law[,]” and urges the Court to
disregard it.
[Id.]
Alternatively, GEICO argues that, even if
the Court were to apply Matheny, the addition of Karen as a
driver still would not constitute a material change to the GEICO
Policy.
According to GEICO, the Matheny court’s finding of a
material change relied heavily upon the increase in the policy
premium.
GEICO argues that, in the instant case, “there is no
evidence of an increase in premiums attributable to the addition
of Karen as a driver on the [GEICO Policy] . . . in 2007.”
at 20 (citing Cindy Aff. at ¶ 5).]
[Id.
GEICO therefore contends that
the addition of Karen as a driver to the GEICO Policy did not
39
have a significant impact on the legal relationship between GEICO
and the Lees so as to constitute a material change and require
GEICO to make a new offer of UIM coverage.
[Id.]
GEICO further maintains, for the same reasons as set
forth in its Motion, that the addition of a vehicle to an
automobile insurance policy does not constitute a material
change.
GEICO claims that this assertion is supported by
Kaneshiro.
Although Kaneshiro also concerned the addition of a
vehicle to an insurance policy, GEICO draws attention to the
Kaneshiro court’s indication that “there would have been no
significant impact on the legal relationship between the parties
if the former named insured had remained a named insured . . . .”
[Id. at 21 (citing Kaneshiro, 93 Haw. at 220, 998 P.2d at 493).]
GEICO interprets the Hawai`i Supreme Court’s comment to suggest
that “the mere addition of a vehicle would not have had a
significant impact on the legal relationship between the
parties.”
[Id.]
GEICO contests Plaintiff’s argument that, under
Kaneshiro, an increase in premium significantly impacts the legal
relationship between the insurer and the insured.
Instead, GEICO
asserts that the Kaneshiro court merely mentioned in passing that
the vehicle was added to the insurance policy with an associated
increase in premium.
GEICO argues that the Kaneshiro court’s
focus was actually on the resulting impact of the substitution of
40
the named insured, which ultimately did not by itself constitute
a material change.
GEICO therefore contends that, pursuant to
Kaneshiro, the “mere addition of a vehicle does not constitute a
material change.”
[Id. at 21-22 (citing Kaneshiro, 93 Haw. at
219-21, 998 P.2d at 499-501).]
GEICO next points out that, had the Lees purchased
UM/UIM coverage, they would have been covered in any vehicle,
regardless of whether or not it was insured by the GEICO Policy.
GEICO argues that, because the Lees rejected UIM coverage, the
addition of vehicles to the GEICO Policy was irrelevant and had
no impact on the legal relationship between GEICO and the Lees
with regard to UIM coverage.
[Id. at 22 (citing Dines v. Pacific
Ins. Co., Ltd., 78 Haw. 325, 328, 893 P.2d 176, 179 (Haw.
1995)).]
GEICO notes that the GEICO Policy anticipated the
addition of vehicles during the policy period, and thus the
addition of the third vehicle and the addition of the fourth
vehicle should not be considered material changes.
Accordingly,
GEICO maintains that the Lees’ addition of vehicles to the GEICO
Policy constituted “renewal” or “replacement” policies, and did
not require GEICO to make a new offer of UM/UIM coverage.
[Id.
at 22-23 (citing Langley Decl., Exh. C at 3; Makela v. State Farm
Ins. Co., 497 N.E. 2d at 483, 488-89 (Ill. Ct. App. 1986);
Kaneshiro, 93 Haw. at 217, 998 P.2d at 497).]
41
C.
Public Policy
In addition the public policy arguments contained in
its Motion, and in response to Plaintiff’s contention that the
extent of GEICO’s expenses in making a new offer of UM/UIM
coverage to the Lees would have been limited to mailing and
printing costs, GEICO argues that its “cost concern actually
stems from obtaining the insured’s written rejection of UIM[.]”
[Id. at 24.]
GEICO reasons that its insureds, who have already
rejected UIM coverage, would often fail to return such subsequent
rejection forms after making insignificant changes to their
insurance policies.
GEICO argues that, because UM/UIM coverage
is implied by law if the insured does not provide written
rejection, see Mollena, 72 Haw. at 326, 816 P.2d at 974, an
unrequested premium increase for implied UIM coverage, where an
insured had previously made a valid rejection, “would lead to
confusion, frustration, and expenses on all sides.”
[Id. at 25.]
GEICO therefore contends that, like the instant case, “where the
very same insureds have made the affirmative decision to reject
UIM coverage, public policy favors avoiding the expense and
inconvenience (to both insureds and insurers) of obtaining
written rejection of UIM each time a new driver or car is added
to the policy.”
[Id. at 26 (emphasis in original).]
GEICO reasserts that the Lees executed a valid
rejection of UIM coverage, and concedes that the State
42
Legislature has endorsed the Lees’ right to do so.
GEICO adds
that the Lees also have the right to reject UIM coverage without
being required to reconsider this decision every time the GEICO
Policy is renewed or modified in a way that does not affect their
initial rejection.
Essentially, GEICO argues that “significant
public policy considerations favor not requiring a new written
rejection of UIM coverage each time a driver or vehicle is added
to an existing policy.”
VI.
[Id. (emphasis in original).]
Plaintiff’s Reply
Plaintiff reasserts the same arguments made in
Plaintiff’s Opposition and her Cross Motion.
Plaintiff urges the
Court to grant her Cross Motion based on the fact that GEICO’s
Opposition fails to acknowledge that Karen was added to the
policy that the Lees purchased for their fourth vehicle on July
23, 2008.
Plaintiff asserts that the arguments in GEICO’s
Opposition are meritless, and she criticizes GEICO for not
including affidavits of the GEICO insurance agents who sold the
Lees the GEICO Policy in 2001, as well as the additional coverage
in 2004 and 2008.
[Pltf.’s Reply at 2.]
Plaintiff contends that the arguments GEICO includes in
GEICO’s Opposition lack legal or factual basis.
[Id. at 4.]
Plaintiff points to GEICO’s “reference to an ‘alleged oral
representation’ by [a GEICO] agent” that was made in response to
Plaintiff’s allegation that the GEICO agent gave Mr. Lee a
43
deficient explanation of UIM coverage.
GEICO’s Opp. at 1).]
[Id. at 4 (quoting
Plaintiff asserts that, because GEICO’s
reference is not substantiated by an affidavit or declaration,
Plaintiff’s argument that the 2001 UM/UIM Offer Form was a
legally insufficient offer of UM/UIM coverage is effectively
unchallenged.
[Id.]
Plaintiff asserts that GEICO’s argument that the Court
should disregard Plaintiff’s claim that the addition of Karen to
the GEICO Policy constituted a material change is legally
baseless.
Plaintiff argues that, because this Court must follow
Hawai`i law, which has adopted a “notice pleading” standard,
Plaintiff is not required to plead precise legal theories.
Plaintiff asserts that GEICO has always possessed the documents
that establish that Karen was added to the policy on July 23,
2008.
Plaintiff therefore contends that it “would be incumbent
upon [GEICO] to internally investigate the material change
allegation for July 23, 2008.”
[Id. at 5.]
In response to GEICO’s argument that the 2001 UM/UIM
Offer Form’s description of coverage was legally sufficient,
Plaintiff argues that the form itself contradicts this argument.
According to Plaintiff, the language, “‘the explanations of these
coverages are intended only to be brief descriptions[,]’”
contradicts the argument that the 2001 UM/UIM Offer Form is
sufficient as an offer of UM/UIM coverage.
44
[Id. at 5-6 (quoting
Langley Decl., Exh. B at 4).]
Moreover, Plaintiff criticizes
GEICO’s claim that it “‘prominently offers UIM coverage’” by
pointing out that UM and UIM coverage are both listed at the
bottom of the list of GEICO’s optional coverages.
Langley Decl., Exh. B at 3).]
[Id. (citing
Plaintiff asserts that, because UM
and UIM coverage are listed at the bottom of the non-alphabetical
list, readers would get the impression that these optional
coverages are the least important.
Plaintiff argues that placing
UM and UIM coverage options at the top of the list would
highlight their prominence.
[Id.]
Plaintiff next points to GEICO’s argument that Mr. Lee
made a “‘poor choice’” in rejecting UM/UIM coverage.
(quoting GEICO’s Opp. at 10).]
[Id. at 7
Plaintiff asserts that GEICO’s
argument, coupled with Plaintiff’s contention that Mr. Lee relied
on the advice of the GEICO agent, leads to the conclusion that
the GEICO agent gave Mr. Lee poor advice.
Plaintiff states,
“[i]t does not make sense that a married business man with an
electrical engineering degree and three minor children would
choose to reject UIM and purchase only $100,000 unless he was
given ‘poor advice.’”
[Id.]
Plaintiff also argues that the Kaneshiro court cited
Matheny with approval, and that the latter rejects GEICO’s
argument that Karen was already an insured as a resident relative
of the Lees, the named insureds under the GEICO Policy.
45
According to Plaintiff, “[t]he Matheny Court rejected that
argument and found that ‘the risk of injury caused by an
uninsured or underinsured driver to a passenger is not
necessarily the same faced by an inexperienced new driver.’”
[Id. at 7-8 (quoting Matheny, 152 F.3d at 354).]
Pursuant to
Matheny, Plaintiff offers the fact that the addition of the
fourth vehicle and Karen to the GEICO Policy led to a forty-seven
percent increase from the two-vehicle policy.
Plaintiff contends
that this fact is undisputed and entitles her to summary
judgment.
[Id. at 8.]
With regard to the parties’ dispute over whether any
increase in premium attributed to the addition of Karen to the
GEICO Policy, Plaintiff asserts that the rules of summary
judgment require GEICO to come forward with evidence to the
contrary.
Plaintiff contends that she has met her burden with
affidavits and policy declaration sheets, whereas GEICO has just
made unsubstantiated denials of Plaintiff’s claims.
[Id.]
Plaintiff contests GEICO’s argument that the Kaneshiro
court noted the relativity of an increase in premium to the
impact on the legal relationship and obligations between the
parties “‘in passing.’”
21).]
[Id. at 8-9 (quoting GEICO’s Opp. at
Plaintiff argues that the Kaneshiro court actually heavily
relied on the increase in premium in its finding a significant
impact on the legal relation and obligations between the
46
plaintiff insured and the defendant insurer.
[Id. at 9.]
Plaintiff contends that GEICO has only made conclusory
allegations in response to her argument that the Lees purchased
separate policies for the Lees’ third and fourth vehicles, as
opposed to merely adding them to the existing GEICO Policy.
Plaintiff argues that such conclusory allegations are
insufficient to deny summary judgment.
Plaintiff contends, “[i]t
is commonly known that ‘each’ vehicle has its own policy from
which its premium is derived.”
[Id. (citing GEICO’s Opp. at 21
n.8).]
Again, Plaintiff asserts that the Hawai`i Supreme
Court’s opinion in Mollena rejects GEICO’s public policy argument
that reducing costs of insurers will, in turn, result in lower
costs for consumers.
[Id. at 10 (citing GEICO’s Opp. at 26).]
Furthermore, Plaintiff contends that “[c]overage and
bad faith issues are separate and an insured is not precluded
from bringing a bad faith claim even where there is no coverage
liability on the underlying policy.”
[Id. (citing Enoka v. AIG
Hawaii Ins. Co., 109 Haw. 537 (2006)).]
According to Plaintiff,
GEICO’s argument is that, if her coverage claim fails, all of her
claims must fail.
Plaintiff interprets GEICO’s argument to mean
that, if her coverage claim is successful, then her other claims
must also succeed.
47
Accordingly, Plaintiff urges the Court to grant her
Cross Motion on all claims.
[Id. at 10-11.]
DISCUSSION
The standard for summary judgment is well-known to the
parties and does not bear repeating here.
See, e.g., Rodriguez
v. Gen. Dynamics Armament & Technical Prods., Inc., 696 F. Supp.
2d 1163, 1176 (D. Hawai`i 2010).
The Court also notes that GEICO removed the instant
case based on diversity jurisdiction.
[Notice of Removal at 2.]
“Federal courts sitting in diversity apply state substantive law
and federal procedural law.”
Estate of Rogers v. Am. Reliable
Ins. Co., Civil No. 10–00482 SOM/RLP, 2011 WL 2693355, at *3 (D.
Hawai`i July 8, 2011) (citing Mason & Dixon Intermodal, Inc. v.
Lapmaster Int’l LLC, 632 F.3d 1056, 1060 (9th Cir. 2011) (“When a
district court sits in diversity, or hears state law claims based
on supplemental jurisdiction, the court applies state substantive
law to the state law claims.”); Zamani v. Carnes, 491 F.3d 990,
995 (9th Cir. 2007) (“Federal courts sitting in diversity
jurisdiction apply state substantive law and federal procedural
law.” (quotations omitted))).
The Court now turns to the merits of Plaintiff’s
claims.
I.
Whether There Were Material Changes to the GEICO Policy
GEICO’s and Plaintiff’s respective motions focus on
48
whether or not Plaintiff is entitled UIM benefits under the GEICO
Policy.
This district court has recognized:
The burden is on the insured to establish coverage
under an insurance policy. See Sentinel Ins. Co.
v. First Ins. Co. of Haw., 76 Haw. 277, 219 n.13,
875 P.2d 894, 909 n.13 (1994) (as amended on grant
of reconsideration); Crawley v. State Farm Mut.
Auto. Ins. Co., 90 Haw. 478, 483, 979 P.2d 74, 79
(App. 1999). The insurer has the burden of
establishing the applicability of an exclusion.
See Sentinel, 76 Haw. at 297, 875 P.2d at 914.
Id. at *3.
The Hawai`i Supreme Court has stated: “[t]he
objectively reasonable expectations of [policyholders] and
intended beneficiaries regarding the terms of insurance contracts
will be honored even though painstaking study of the policy
provisions would have negated those expectations.
Those
‘reasonable expectations’ are derived from the insurance policy
itself . . . .”
Del Monte Fresh Produce (Haw.), Inc. v.
Fireman’s Fund Ins. Co., 117 Hawai`i 357, 368, 183 P.3d 734, 745
(2007) (some alterations in original) (citations and some
quotation marks omitted).
The relevant Hawai`i UM/UIM statute states, in
pertinent part:
If uninsured motorist coverage or underinsured
motorist coverage is rejected, pursuant to section
431:10C-301(b):
. . . .
(2) No further offers or notice of the
availability of uninsured motorist coverage and
49
underinsured motorist coverage are required to be
made in connection with any renewal or
replacement policy; and
(3) The written rejections required by section
431:10C-301(b) shall be presumptive evidence of
the insured’s decision to reject the options.
Haw. Rev. Stat. § 431:10C-301(e).
The seminal Hawai`i case relating to required offers of
UM/UIM coverage is Allstate Insurance Co. v. Kaneshiro, 93
Hawai`i 210, 998 P.2d 490 (2000).
In Kaneshiro, Clyde Kaneshiro
(“Clyde”) purchased a motor vehicle insurance policy (“Allstate
Policy”) from the defendant, Allstate Insurance Co. (“Allstate”),
on September 1, 1974.
Four years later, Clyde added Ann
Kaneshiro (“Ann”) as his spouse and an insured driver to the
Allstate Policy.
In December 1990, and again on March 1, 1993,
Allstate offered Clyde UM/UIM coverage, and Clyde rejected both
offers in writing.
Kaneshiro, 93 Hawai`i at 213, 998 P.2d at
493.
On March 3, 1994, Clyde requested several changes to
the Allstate Policy.
Up to this point, Clyde was the only named
insured, although Ann and Clyde’s daughter, Kristy, were listed
as drivers.
Clyde informed his Allstate agent that, because he
and Ann were getting a divorce, he wanted to take his name off of
the Allstate Policy.
Clyde subsequently signed a release, which
deleted himself as a named insured, and made Ann the sole named
insured under the Allstate Policy.
50
While these changes were
being implemented, “Allstate did not offer UM/UIM coverage to
Clyde or Ann, and Ann did not request or pay for such coverage.”
Id.
On September 1, 1994, when Ann renewed the Allstate
Policy, she also added another vehicle.
On September 10, 1996,
Ann sustained injuries in an automobile accident.
Allstate paid
her no-fault benefits, but denied her claim for UM/UIM benefits.
Id.
“Allstate filed suit in the federal district court, seeking
a declaration that [Ann]’s policy did not include UM/UIM coverage
on the date of the accident because Clyde’s 1993 written
rejection was legally sufficient and binding on [Ann].”
Id.
The
federal district court then certified the following question to
the Hawai`i Supreme Court:
Where a named insured whose spouse is listed as a
covered driver under an automobile insurance
policy rejects [UM and UIM] coverage in writing in
connection with the first renewal of the subject
insurance policy after January 1, 1993 and
thereafter asks the insurer’s agent to remove his
name from the policy and to substitute his spouse
as the named insured under the policy, and an
additional vehicle is added to the policy, is the
insurer required to offer [UM and UIM] coverage to
the new named insured pursuant to [HRS] §
431:10C-301?
Id. at 212-13, 998 P.2d at 492-93 (alterations in original).
In
deciding the certified question, the Hawai`i Supreme Court turned
to § 431:10C-301, which governed the Allstate Policy.
Based on
the statutory language, “the dispositive issue in this case [was]
whether the March 1994 policy issued to [Ann] was a ‘renewal’ or
51
‘replacement’ policy within the meaning of HRS § 431:10C-301(d)
or a policy requiring a new offer of UM/UIM coverage.”
215, 998 P.2d at 495.
Id. at
The Hawai`i Supreme Court interpreted §
431:10C-301(e) to mean that, “when a material change is made to
an existing policy, the resulting policy is not a ‘renewal or
replacement policy’ and a new offer of optional UM/UIM coverage
is required.”
Kaneshiro, 93 Hawai`i at 217, 998 P.2d at 497.
Pursuant to Kaneshiro, the dispositive issue in the
instant case is whether or not a material change was made to the
GEICO Policy, from the date it was initially purchased until the
date of the subject collision, so as to require GEICO to make a
new offer of optional UM/UIM coverage to the Lees.
Specifically,
the determination of Plaintiff’s ability to receive UIM coverage
depends on whether or not the addition of vehicles and/or the
addition of Karen, as a new driver, constituted material changes
to the GEICO Policy.
The Kaneshiro court mentions in its
analysis the fact that vehicles were added to the Allstate
Policy, but this appears to be only in addition to the primary
fact that the named insured changed.
500.
Id. at 220, 998 P.2d at
When Ann replaced Clyde as the sole named insured under the
Allstate Policy, Allstate, in effect, obtained a new client.
Although the Lees’ addition of vehicles and a newly-licensed
driver were certainly changes to the GEICO Policy, these changes
are distinguishable from the type of material change to which
52
Kaneshiro speaks.
Under Kaneshiro, therefore, the mere addition of a
driver, as opposed to the replacement of a named insured, does
not constitute a material change to an automobile insurance
policy.
Both Mr. Lee and Plaintiff appear to have been named
insureds under the GEICO Policy since Mr. Lee purchased it on
December 13, 2001.
Exh. 2.]
[Pltf.’s Opp. at 7; Pltf.’s Counsel Decl.,
The Lees added Karen as a driver, not as a named
insured, under the GEICO Policy.
2.]
[Pltf.’s Counsel Decl., Exh.
In fact, the Lees remained the only named insureds from the
date of purchase through the date of the subject collision.
The
addition of Karen as a driver, therefore, did not alter the legal
relationship between GEICO and the Lees so as to constitute a
material change to the GEICO Policy.
This Court is not persuaded
by Plaintiff’s citation to Matheny v. Glen Falls Insurance Co.,
152 F.3d 348 (5th Cir. 1998), in support of her argument that the
addition of a driver constitutes a material change to a policy.
Matheny is a case from the Fifth Circuit Court of Appeals,
applying Louisiana state law, and is not binding upon this Court.
Without more, the addition of vehicles and the addition of Karen
to the GEICO Policy were not the type of “material changes” that
the Kaneshiro court required.
The Court therefore finds that
there are no issues of material fact, and the Court CONCLUDES, as
a matter of law, that no material changes were made to the GEICO
53
Policy which would have required GEICO to make a new offer to
purchase UM/UIM coverage to the Lees.
See Fed. R. Civ. P. 56(a).
This Court GRANTS GEICO’s Motion as to Plaintiff’s First Cause of
Action insofar as GEICO is entitled to an order declaring that
neither the addition of the Lees’ third and fourth vehicles nor
the addition of Karen as a covered driver required GEICO to make
a new offer of UM/UIM coverage to the Lees.
Plaintiff’s Cross
Motion is DENIED as to that portion of her First Cause of Action.
II.
GEICO’s Initial Offer of UM/UIM Coverage
The Complaint alleges: “On or about December 13, 2001,
Defendant GEICO failed to reasonably inform Mr. Lee the benefits
of UM and UIM coverage of his two vehicles other than rejecting
the UM and UIM policy would result in ‘cheaper premium
payments.’”
[Complaint at ¶ 16.10]
Based on Plaintiff’s Complaint and memoranda, Plaintiff
appears to argue that she is entitled to UIM benefits because
GEICO’s initial offer of UM/UIM coverage on December 13, 2001,
which Mr. Lee rejected, was legally insufficient.
[Complaint at
¶ 16; Pltf.’s Opp. at 23-32; Mem. in Supp. of Cross Motion at 1925.]
The Hawai`i Supreme Court previously identified a four-part
10
Clarence states that “[t]he only recollection I have from
that meeting with the [GEICO] agent is that the agent told me
that my insurance premium would be cheaper if I signed the paper.
I have no recollection of any explanation of
uninsured/underinsured motorist insurance . . . .” [Clarence
Aff. at ¶ 3.]
54
test to determine whether an offer of UM/UIM coverage is legally
sufficient.
Mollena v. Fireman’s Fund Ins. Co. of Haw., Inc., 72
Haw. 314, 320, 816 P.2d 968, 971 (1991).
Under the four-part test, an offer is legally
sufficient when all of the following are met: (1) if
made other than face-to-face, the notification process
must be commercially reasonable; (2) the limits of
optional coverage must be specified and not merely
offered in general terms; (3) the insurer must
intelligibly advise the insured of the nature of the
optional coverage; and (4) the insurer must apprise the
insured that the optional coverage is available for a
relatively modest increase in premium.
Id. (citing Hastings v. United Pac. Ins. Co., 318 N.W.2d 849
(Minn. 1982)).
Pursuant to Mollena, the insurer bears the burden
of proving that it made a legally sufficient offer of UM/UIM
coverage.
If the insurer is unable to demonstrate that it met
all four parts of the test, “then coverage is implied as a matter
of law.”
Id. (citations omitted).
Although Plaintiff admits that GEICO satisfied the
first two requirements of the Mollena test, she argues that GEICO
failed to meet the third and fourth requirements.
at 30; Mem. in Supp. of Cross Motion at 24.]
[Pltf.’s Opp.
Whether or not
GEICO intelligibly advised Mr. Lee of the nature of UM/UIM
coverage, and whether or not GEICO apprised Mr. Lee that such
coverage was available for a relatively modest increase in
premium, are both issues of material fact.
Further, the Court
also notes that the parties have not addressed the issue whether
Plaintiff has timely raised her claims challenging the validity
55
of the 2001 offer of UM/UIM coverage.
The Court therefore CONCLUDES that summary judgment is
improper as to all of Plaintiff’s claims based on the validity of
the 2001 offer of UM/UIM coverage.
Both GEICO’s Motion and
Plaintiff’s Cross Motion are DENIED as to those claims.
III. Plaintiff’s Remaining Claims
Plaintiff’s Second Cause of Action alleges that GEICO
was negligent in failing to offer Mr. Lee UM/UIM whenever there
was a material change to the coverage in the GEICO Policy.
[Complaint at ¶ 47.]
The Court finds that the Second Cause of
Action does not allege negligence based on the alleged deficiency
in the 2001 offer of UM/UIM coverage.
Although paragraph 46 in
Plaintiff’s Second Cause of Action refers to all prior paragraphs
in the Complaint, the specific allegations in Plaintiff’s Second
Cause of Action refer only to the duty to make a new offer of
UM/UIM coverage upon a material change to the GEICO Policy.
In
light of the Court’s ruling that neither the addition of the
Lees’ third and fourth vehicles nor the addition of Karen as a
covered driver was a material change requiring GEICO to make a
new offer of UM/UIM coverage, Plaintiff’s Second Cause of Action
fails as a matter of law.
GEICO’s Motion is GRANTED and
Plaintiff’s Cross Motion is DENIED as to Plaintiff’s Second Cause
of Action.
56
Similarly, insofar as Plaintiff’s Third Cause of Action
alleges that GEICO breached the insurance contract and/or its
contractual warranties by failing to make the Lees a new offer of
UM/UIM coverage when there were material changes to the GEICO
Policy, that portion of Plaintiff’s Third Cause of Action fails
as a matter of law.
[Id. at ¶¶ 54-56.]
GEICO’s Motion is
GRANTED and Plaintiff’s Cross Motion is DENIED as to that portion
of Plaintiff’s Third Cause of Action.
Assuming, arguendo, that
Plaintiff’s Third Cause of Action also alleges breach of
contract/breach of contractual warranties based on deficiencies
in the 2001 offer of UM/UIM coverage, the Court finds that there
are genuine issues of material fact for reasons set forth in
Discussion, Section II.
Both GEICO’s Motion and Plaintiff’s
Cross Motion are DENIED as to that portion of Plaintiff’s Third
Cause of Action.
Although not clearly stated, it appears that
Plaintiff’s Fourth Cause of Action and Plaintiff’s Fifth Cause of
Action are based on both the alleged deficiencies in the 2001
offer of UM/UIM coverage and the failure to make new offers of
UM/UIM coverage upon the alleged material changes to the GEICO
Policy.
[Id. at ¶ 59 (incorporating all prior paragraphs of the
Complaint in Plaintiff’s Fourth Cause of Action); id. at ¶ 64
(incorporating all prior paragraphs in Plaintiff’s Fifth Cause of
Action).]
For the reasons set forth supra, GEICO’s Motion is
57
GRANTED and Plaintiff’s Cross Motion is DENIED as to the portion
of Plaintiff’s Fourth Cause of Action and the portion of
Plaintiff’s Fifth Cause of Action based on the alleged material
changes, and both GEICO’s Motion and Plaintiff’s Cross Motion are
DENIED as to the portion of Plaintiff’s Fourth Cause of Action
and the portion of Plaintiff’s Fifth Cause of Action based on the
alleged deficiencies in the 2001 offer of UM/UIM coverage.
As to Plaintiff’s Sixth Cause of Action for negligent
and/or intentional infliction of emotional distress, in light of
this Court’s finding that Plaintiff did not allege a negligence
claim based on the alleged deficiencies in the 2001 offer of
UM/UIM coverage, this Court also finds that Plaintiff’s Sixth
Cause of Action alleges a negligent infliction of emotional
distress claim as to the alleged material changes only, but it
alleges an intentional infliction of emotional distress claim as
to the alleged deficiencies in the 2001 offer of UM/UIM coverage.
For the reasons stated supra, GEICO’s Motion is GRANTED and
Plaintiff’s Cross Motion is DENIED as to the portion of
Plaintiff’s Sixth Cause of Action alleging negligent infliction
of emotional distress and the portion of Plaintiff’s Sixth Cause
of Action alleging intentional infliction of emotional distress
based on the alleged material changes in the GEICO Policy.
Both
GEICO’s Motion and Plaintiff’s Cross Motion are DENIED as to the
portion of Plaintiff’s Sixth Cause of Action alleging intentional
58
infliction of emotional distress as to alleged deficiencies in
the 2001 offer of UM/UIM coverage.
Finally, this district court has recognized that,
“[u]nder Hawaii law, a ‘claim for punitive damages is not an
independent tort, but is purely incidental to a separate cause of
action.’”
Mullaney v. Hilton Hotels Corp., 634 F. Supp. 2d 1130,
1152 (D. Hawai`i 2009) (quoting Ross v. Stouffer Hotel Co., 76
Hawai`i 454, 466, 879 P.2d 1037, 1049 (1994));
see also Ribiero
v. Safeway, Inc., Civ. No. 09-00175, 2011 WL 5520934, at *2 (D.
Hawai`i Nov. 14, 2011) (quoting Mullaney, 634 F. Supp. 2d at
1152).
Accordingly, GEICO is entitled to summary judgment as to
Plaintiff’s Seventh Cause of Action for punitive damages because
a claim punitive damages is not a separate cause of action under
which Plaintiff can recover.
The Court, however, emphasizes that
Plaintiff may still be able to recover punitive damages as a
remedy, if she can establish that she is entitled to such damages
in connection with one of her remaining claims.
GEICO’s Motion is GRANTED and Plaintiff’s Cross Motion
is DENIED as to Plaintiff’s Seventh Cause of Action.
CONCLUSION
On the basis of the foregoing, GEICO’s Motion for
Summary Judgment, filed on July 11, 2012, is HEREBY GRANTED IN
PART AND DENIED IN PART, and Plaintiff’s Cross Motion for Summary
Judgment, filed on September 5, 2012, is HEREBY DENIED in all
59
respects.
Specifically, GEICO’s Motion is GRANTED as to: 1) the
portion of Plaintiff’s First Cause of Action seeking a
declaration that the addition of the Lees’ third vehicle and
fourth vehicle, and/or the addition of Karen Lee as a covered
driver were material changes requiring GEICO to make a new offer
of UM/UIM coverage to the Lees; 2) Plaintiff’s Second Cause of
Action; 3) the portion of Plaintiff’s Third Cause of Action,
Plaintiff’s Fourth Cause of Action, and Plaintiff’s Fifth Cause
of Action based on the alleged material changes to the GEICO
Policy; 4) the portion of Plaintiff’s Sixth Cause of Action
alleging negligent infliction of emotional distress; 5) the
portion of Plaintiff’s Sixth Cause of Action alleging intentional
infliction of emotional distress based on the alleged material
changes to the GEICO Policy; and 6) Plaintiff’s Seventh Cause of
Action.
GEICO’s Motion is DENIED WITHOUT PREJUDICE as to: 1)
the portion of Plaintiff’s First Cause of Action seeking a
declaration that the initial offer of UM/UIM insurance to Mr. Lee
in 2001 was invalid; 2) the portion of Plaintiff’s Third Cause of
Action, Plaintiff’s Fourth Cause of Action, and Plaintiff’s Fifth
Cause of Action based on the alleged deficiencies in the 2001
offer of UM/UIM coverage; and 3) the portion of Plaintiff’s Sixth
Cause of Action alleging intentional infliction of emotional
60
distress based on the alleged deficiencies in the 2001 offer of
UM/UIM coverage.
IT IS SO ORDERED.
DATED AT HONOLULU, HAWAII, November 28, 2012.
/S/ Leslie E. Kobayashi
Leslie E. Kobayashi
United States District Judge
CINDY LEE V. GEICO; CIVIL 11-00782 LEK-BMK; ORDER GRANTING IN
PART AND DENYING IN PART DEFENDANT GOVERNMENT EMPLOYEES INSURANCE
COMPANY’S MOTION FOR SUMMARY JUDGMENT AND DENYING PLAINTIFF CINDY
LEE’S CROSS MOTION FOR SUMMARY JUDGMENT
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