Case Title: Zane v. Liberty Mutual Fire Insurance.

Citation: 115 Haw. 60

Docket Number: 

State: hawaii

Court: Hawaii Supreme Court

Date: 2007-08-14T00:00:00Z

Document:
++ FOR PUBLICATION IN WEST'S HAWAT'T REPORTS AND PACIFIC REPORTER +#4

 

IN THE SUPREME COURT OF THE STATE OF HAWAT'T

=--000---

 

    
    
 
 
 

DAWNA C. ZANE, Plaintiff-Appellee-Respondent,

ve. =

LIBERTY MUTUAL FIRE INSURANCE COMPANY, %
Defendant -Appellant-Petitioner.

gat?

NYA

an8 HY 41 ONY Lone

No. 27317

CERTIORARI TO THE INTERMEDIATE COURT OF APPEALS
(CIV. NO. 02-1-1140-05)

AUGUST 14, 2007

MOON, C.J., LEVINSON, NAKAYAMA, AND DUFFY, JJ., AND
CIRCUIT JUDGE STRANCE, IN PLACE OF ACOBA, J., RECUSED

OPINION OF THE COURT EY LEVINSON, Ja

 

on January 23, 2007, the defendant-appellant-petitioner
Liberty Mutual Fire Insurance Conpany (Liberty Mutual) filed an
application for @ writ of certiorari urging us to review the
published opinion of the Intermediate Court of Appeals (ICA) in

Zane, Liberty Mut, Fire Ins, Co., No. 27317 (Oct. 31, 2006)
(hereinafter, “slip op.” or “Zane 1"], which vacated the first

 

circuit court's April 25, 2005 judonent, the Honorable Eden
Elizabeth Hifo presiding, granting summary judgment in favor of
the plaintiff-appellee-respondent Dawna C. Zane and against
Liberty Mutual, and remanded the matter to the circuit court for
further proceedings. In its pplication, Liberty Mutual urged

that: (1) notwithstanding DaimlerChrysier’s settlement with Zane
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in the underlying tort action, see infra section 1.¢, ite self-
insurance was “applicable” within the meaning of Hawai'i Revised
Statutes (HRS) § 431:10C-103 (Supp. 1999)? such that its bodily
injury (BI) coverage Limit should offset the anount of Zane's
underinsured injuries for which Liberty Mutual, as her
underinsured motorist (UIM) carrier, would otherwise be
responsible; and (2) Liberty Mutval’s consent to Zane’
settlement with DaimlerChrysler did not estop Liberty Mutual from
asserting the aforenentioned offset pursuant to Tavlor vs Gov't
Employees Ins, Co., 90 Hawai'i 302, 978 P.2d 740 (1999), and
Gov't Emplovees Ins. Co. v. Dizol, 176 F. Supp. 24 1005 (D. Haw.
2001).

 

Zane filed a timely response.

We accepted Liberty Mutual's application to correct the
ICA’ s erroneous holding that DaimlerChrysler, solely by virtue of
it (1) never having been adjudicated liable to zane and

(2) apparently having settled only for the anticipated expenses

4 WRS § 431:100-103 defines “[u]néerinsured motor vehicle” as “a

notor vehicle with respect to the cumership, maintenance, or use for which
the] sun of the linits of all (BI) liability insurance coverage and
self-insurance applicable et the tine of loss is lees than the iiebility for
imposed by law." (Enpharis added.) Effective april 19 and 27, 2000,
the legislature amended this tecticn in réspecte not gernane to the present
matter: Sse 200¢ Haw. Sess, L. Act 10, §6 13, 14, and 18(3) and (4) at 24-25;
2000 Haw. Sess. L. Act 24, §§ 4 and 18/at 41,47, net 66, 85 l and? at 122.

 

 

 

 

+ We noted in Zavlor that, by settling with an alleged tortfeasor in

2 notor vehicle persona! injury case fer less than the olleged tortfeascr’s Bf
policy Limits, « *UIM insured agrees te forego compensation for the difference
Between the séttlenent anount and tne tortfessor'e liability policy limits,
‘The UIM carrier will not be responsible for covering thet “gap,’* 90 Hawai’
at313, $1e P.zd at 751. For further sisevssion, gee antra section I-A. We
Feaffiimed this principle in oe i PTL Hewes
160, 266, 140 F.3d 293, (02 (2006), and the United States Oletrice Court for
the District of Hawai'i recognized it in Dizol, 176 F. Supp. 26 at 1031
(Westher the present appliceticn nor Jane Tite: Granger) although st ws
handed down cefere Zane1, on hugust §, 200€.| in the presene necer,
Concedes that the Javier rule would control but for, as she naineaine,
Dainlerchrysier's leck ef tortfeasor status. See infra section 1.0.2.

   

 

     

 
 
 

 

 

    

 
 

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of litigation and not an amount representing @ compromised or pro
rata discount of clear liability value, as a matter of law could
not be a “tortfeasor” for purposes of the Taylor rule, see

supra note 2, such that Zane’s UIM benefits were not offset by an
amount equal to the gap between the amount of DaimlerChrysler’ s
settlement and its (in this case, effectively infinite) Br limit.
For the reasons discussed infra in section I11.B, we hold that
there remains a genuine issue of material fact as to whether
Liberty Mutual represented to Zane that it would not employ the
Tavlor rule as s basis for reduction of her benefits and,
accordingly, vacate the ICA’s opinion in Zane I and the judgment
arising therefrom, vacate the circuit court’s judgnent, and
remand this matter to the circuit court for further proceedings.
As guidance on remand, should the trier of fact find that no
estoppel occurred, we disagree with Zane’s position that 2
settling but -- by agreement of the parties ~~ factually non~
Liable party is, per g¢, not a “tortfeasor” for purposes of the

“Taylor rule.

 

Inasmuch as Zane failed to brief her alternative
argument on appeal, advanced instead in her April 25, 2007 motion
for reconsideration, that the insurance of @ non-cyner/operator
of an underinsured moter vehicle is not applicable to the Tavlor
gap, that contention is waived for purposes of this appeal, and

we do not consider it at this time.
 

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1. BACKGROUND

A, The Taylor Line

Despite the parties’ agreement with the general rule of
Taylor and its progeny, we recite the relevant analysis of those
cases by way of orientation.

In Tavlor, the plaintiff Rosalina Taylor, who held a
UIM insurance policy through the defendant Government Employees
Insurance Company (GEICO), “was injured in a collision with a
vehicle driven by Mary McKaig, who was insured . . . by State
Farm Mutual Automobile Insurance Company (State Farm).” 90
Hawai'i at 304, 978 P.2d at 742. In accordance with a
consent-to-settle clause in GEICO’s UIM policy (ie., “[UIM)
coverage does not apply . . . if the insured. . . has made a
settlement . . . without our prior written consent” (emphasis
omitted), Taylor informed GEICO “that State Farm had offered to
settle [her] claim” and requested GEICO's “permission to settle.”
Id, GEICO responded that it “wlould) not grant concurrence with
regard to. . . (Taylor's) settlement as [she] ha[d) not obtained
the [BI] policy limits of [State Farm].” Id, (emphasis and
internal quotation signals omitted). Nevertheless, Taylor
settled with and released Nckeig and State Farm for an amount
Jess than the BI limits of McKaig’s policy, after which GEICO
refused to pay UIM benefits and Taylor sued for declaratory
relief. Id, at 305, 978 P.2d at 743. The circuit court granted
GEICO’s motion for summary judgment, and Taylor appealed. Id.
Our analysis centered on the validity of GEICO’s consent clause

and the reasonableness of GEICO’s refusal to give consent. We
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declined to disapprove consent-to-settle clauses in UIM policies
across the board, but held that “a VIM carrier's grounds for
denying UIM benefits under a consent-to-settie provision in a UIM
policy must be reasonable, in good faith, and within the bounds
of the intent underlying HRS § 431:10C-301(b) (4) [ (requiring
notor vehicle insurance policies to include UIM coverage)}." Id.
at 309, 311-12, 978 P.2d at 747, 149-50; accord id. at 315, 978
P.2d at 753 (Nakayama, J., concurring). GEICO's asserted reason
for denial -- essentially that Taylor sought to settle for less

it

 

than State Farm's BI limit -- was unreasonable inasmuch

 

denied Taylor “the perfectly reasonable choice of saving months,
if not yeare, of delay, trial preparation expense, and all the
ensuing wear and tear by simply accepting the offer and, as @
condition of proceeding with hier] UIN claim, foregoing the
difference between the tortfessor’s policy limit and the
tortfeasor's insurer's offer.” See ids at 313-14, 978 P.2d at
781-52 (majority opinion): cited in Granger v. Gov't Emplovees
Ins. Cou, 112 Hewai"s 160, 168, 140 P.34 393, 401 (2006) (where
plaintiff had compromised with tortfeasors for $90,000.00 of
their $100,000.00 limit, reaffirming that “[i]f the victim does
accept less than the tortfeasor’s policy limits, his (or her]
recovery againet his [or her] UIM carrier must nevertheless be
based on 2 deduction of the full policy limits” (emphasis and
internal quotation signals omitted) (sone bracketed material
added and some in criginal)). Consequently, because “[t]he UIM
carrier will not be responsible for covering [the difference or

“gap” between the settlement amount and the tortfeasor's
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Liability policy Limits] as @ component of its obligation to
compensate its insured for injury and damage exceeding the
tortfeasor’s policy limits . . . , there is no legitimate reason
for the UIM carrier to refuse to consent to @ settlenent on that
basis.” Tavlor, 90 Hawai'i at 314, $78 P.2d at 752.

In Dizol, the decedent Kevin Dizol was 2 passenger ina
van the driver of which had been drinking at 2 bar before the
subject accident. 176 F. Supp. 2d at 1009. The driver was
covered by a $35,000.00 BI policy. Id, at 1010, Dizol's estate
suéd the bar and the deceased driver's estate, and settled
(1) with the bar for less than its BI limit and (2) with the
driver's estate for its policy limit. See id, Dizol’s
“projected less of earnings” was greater than the total of the
payments actually received, by @ difference of $17,177.00, but
less than the sum of the defendants’ BI policy limits. see ide
Dizol held @ UIM policy for $70,000.00, but his estate had
settled without the consent of his UIM insurer. Id. The UIM
insurer brought @ declaratory action against Dizol’s estate,
seeking “a set off against” the estate’s UIM benefits “of .

the full amount of (BI) coverage available to. . . [the bar].”

 

See id, at 1012. The IM insurer subsequently moved for summary
judgment, which the United States District Court for the District
of Hawai'i granted in relevant part. See id. at 1030-31, 1032 &
n.33, 1033. While the UIM insurer was unaware of and had not
consented to the tort settlement, the court extended the Tavlor
rule to the facts of Dizol. The court concluded “that under

Hawai['Ji law, amounts forgone in below(-]policy|-]limits
‘S46 FOR PUBLICATION IN MEST’S HAWAI' REPORTS AND PACIFIC REPORTER +

 

settlements with joint tortfeasors without the UIM carrier's
consent are properly used to offset the carrier's liability.”
Id. at 1033 (emphasis added) .
B. The Motor Vehicle Accident

The present natter erose out of a February 10, 2000
motor vehicle accident. Zane was a passenger in a Dodge Neon
automobile that was manufactured by DaimlerChrysler, driven by
Richard Thomas, and insured by Liberty Mutual under beth BT and
UIM coverages. Slip op. at 2-3. The Neon and ancther vehicle,
driven by Sarah Kim and insured by State Farm, collided at an

Antersection in Honolulu, Id, at 2, The accident rendered zane

 

‘a paraplegic. Id, Zane sued Thomas, Kim, and DaimlerChrysler.
Id at 3.
C. the Settlement And Proceedings Hefore The Circuit Court
Through mediation with retired circuit court judge E.
John McConnell, Thomas and Kim and their insurers, Zane, and
DaimlerChrysler reached a settlement, under the terms of which
DaimlerChrysler contributed $200,000.00, Kim contributed her BI
Limit of $100,000.00, and Thomas contributed his BI limit of
$1,350,000. 0

 

furthermore, under a prior settlement agreement,
Zane’s parents’ insurer, AIG Hawai'i Insurance Company, Inc.

(AIG), contributed $40,000.00.? Thus, Zane recovered a total of
$1, 690,000.00. Id, The parties ri

 

ily agree that the total
value of Zanes injuries would exceed $1, 690,000.00.

 

+ esther the record nor the parties address whether the BI limits

under the AIG policy exceeded $€0, 000.00

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At some point, Zane applied for UIM benefits
representing the difference between $1, 690,000.00 and her actual
Gamages. As both parties agree, “Liberty Mutual initially
accepted coverage, but” then “refused to tender [UIM] benefits on
the theory that ‘it appear(ed) that . . . Kim,’ ive, the driver
of the “other” car and, hence, the underinsured motorist from
Zane’s perspective,‘ “twas net negligent for the bodily injuries
sustained by . . . Zane.’" Liberty Mutual having denied her
claim, Zane initiated the present matter, seeking a declaratory
judgment in the circuit court that she was entitled to UIM
benefits as Thonas’s passenger. Id. The parties agree that
Liberty Mutual gave prior consent to the act of settling with
DaimlerChrysler and its codefendants, but disagree as to whether
Liberty Mutual also represented to Zane that it understood and
either agreed or did not dispute that CaimlerChrysler’s limitless

self-insurance’ would be excluded from the calculation of the

« _dane's status ag Liberty Motual’e UIM insured ie grounded in the

UIM policy's definition of "(insured as, inter alia, “[elay other person
cecupying your (Assur the insured signatery"e) covered ate.” (Enphases

 

 

' ip ner April 28, 2007 notion fer reconsideration, zane contends

that, in ur earlier version of this cpinien, Zane v. Liberty Mutual Fire Ins.
Gos, ‘tio. 27335 (Haw, Apr. 16, 2007), we. incorrectiy deecribed
Delmierchrysier's Bi coverage as "eelf-incurance."” Zone argues thet
“oainlerchrysier is ‘self-insured in the lay, general sense of the term (uc.
not insured by a commercially purchases (BI) 1sebility ineurance policy), bot
Clearly net with respect to an ‘unserincurea meter vehicle.'” In ether woras,
in Dare’ view, “self-insurance” ie term of art referring to the BI coverage
cf motor venicie ouners who formeliy register se “eelf-aneurere” by the
Procedure set forth in HRS § 31210-1058. Dainlerchryeler apparently net
Being 2 “eelf-insurer” for purposes of HRS § 4s1:10C~i05, Zane Believes that
Deimierchrysier's #1 limit ir “frustratingly ambiguous” becaue, whereas
Seelfsineurers” must "providel] . . . securities stfording security
substantially equivalent to thet afferced under a motor vehicle insurance
policy,” Cainiercheysier's 81 limit was never fixes through formal
{eontinved...)

 

 

 

 

   

 

   

   

 
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Tavlor “cap,” i.e., that Liberty Mutual would compensate Zane for
her damages exceeding the settlement amount without regard to
DaimlerChzysier’s infinite BI self-insurance coverage. The
manner by which Zane communicated the terms and circumstances of
the settlement, Liberty Mutual's understanding thereof, and its
representations, if any, to Zane, determine whether Liberty
Mutual was estopped from deducting the value of the Zavlor “gap,”
inclusive of DaimlerChrysler’s unlimited BI self-insurance, from
Zane's UIM benefits. See discussion infra section I1I.B.
1. Circuit court filings
In her May &, 2002 complaint, Zane averred, inter alia,

as follows:

   

+. Mberty Mutual ingvired about the ters of
the Dainieréntysier settlenent. On December 20, 2001
Uiberty istond senior claim apectazset{ Colin Chang

TNlab' informed that the Oainlerchrysler contribution was
00,000.

  

    

Liberty mutual thereupon gave its verbal approval
of the ibn Uispilsty settlement and therestter confirmed

1s continued)
regietestion or by operation of # contract. We di:
conclusion.

From the outset, Zane has held ovt, and we have therefore essuned for
purposes cf cur analysis, that Oainlerchtyeler carried BT “insurance,” which
hee “unlimited for “Javier gap" purposce. See, e.0,, Zane’s Not. for Sumnery
Mae's ("ineurance coverage for DaimlerChrysler if, fer all practical
purposes, unlinites."); Transcript of Proceedings 6/4/03 at 12-13. (Zane:
Siosinierichrysier’s sneurance is, for all practice) purposes,

ree with Zane’s

 

 

 

       

  

unlinseed for this case it is."]. In other words, zene hi
Ecretstentiy Sanitced thet Cainlercnrycler war covered -~ though probably by
Ste own coffers =~ in an anount that exceeded the total anount of zane’s

   

otherwise unvecovered Ganages.

‘ie acknowledge zane’ concern that if, in 2 different case, a settling
defencont were un~ or underinsured, and yet heppened to be endowed with grei
wealth of valve that was not crystallized by sgreenent of the parties or
Judlelal eaniecion, to characterize the defendant es “insured” oF "self
jneures" voule invite 2 dispute over the Lasit of the defencent’s BI
Scoverage.” Nevertheless, thet is fot the cere before us. By Zanes
Unavering juaselel aczistsen, Deinlerchrysier's deep pockets are a source of
Ef "insurance" the Limit of which ss definitive fer present purposes.

    

 

 

 

 
 

‘44 FOR PUBLICATION IN WEST’ HAWAI'T REPORTS AND PACIFIC REPORTER

= + by letter dated Decenber 20, 2001 that “we
fot coiece to. (Zane) zesaising hex (Si) Liability ciaies”
aosinet the liable partion ™

15." Liberty Mutual also requested a copy of the
DaimlerChrysler Release for its flies on Janusty. 7, 2002
Bane Sdvised Liberty Matusi that the formal settlement
agreenent wae not yet finelized and thereafter forvarded @
copy of the finalized and signed release.

 

 

 

de) “Lib wal con: ives
(Emphases added.) Zane prayed for “[a) declaration of the rights
and obligations of the parties under the Liberty Mutual policy”
and “[a] declaration that Liberty Mutual must provide [VIM]
coverage to Zane." On May 20, 2002, Liberty Mutual removed the
present matter to the United States District Court for the
District of Hawai'i. On May 21, 2002, in the United states
District Court, Liberty Mutual filed its answer to Zane’s
complaint and appended its ovn counterclaim. In its anewer and
its responsive pretrial statement, Liberty Mutual admitted the
averments in Zane’s complaint, set forth supra, with the
exception of the boldface language. Liberty Mutual also conceded
in its responsive pretrial statenent that it “consented to the

liability settlement with DaimlerChrysler end may not now object

 

‘inher preteial statement, Zane adced that
Liberty mutual, despite having given its consent to settle the
Lisbillty claine ang Zene"s dismiseol of the lsability clsime in
Feliance on Liberty Mutual's consent, hag now reneges on ite
Consent. ... Of course it ie now inpossible for Jane to recover
the balance of her daneges from OsinierChrysler because

settled the liability clsim end Giemissea the action age
Deiniercarysler with prejudice

consent and in reliance thereon.

     

 

 

      

10
 

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to that settlement as a basis for denying [UIM) benefits.”
(Bnphases added.) On June 28, 2002, in the United States
District Court, Liberty Mutual filed an amended counterclaim
against Zane in which it alleged in relevant part that
DaimlerChrysier's self-insurance should conpletely offset Zane’s
claim for IM benefits:

[Liberty Mutual) is entitied to a credit for the total
Anite of any and oll 181) 1Labiisey insurance and self
ingurance available to satisfy [Jane]’s claims . « . and the
foetal snount of sich inite exceeds the ancunt Of domages
+P Tana)

[Liberty Motual] is entitled to a credit for the
total Enount of settlement proceeds paid fer the benefit of
[Zane] in connection with [her] claims « . ~ -[')

 

 

  

 

 

Liberty Mutual prayed for a declaratory judgment “that [Zane] is
not entitled to... [JUIM. . . benefits from [Liberty
Mutual).

‘The United States District Court remanded the case to
the state circuit court on October 31, 2002.

on May 16, 2003, both parties moved for summary
judgment. In her motion, Zane characterized DaimlerChrysler’ s
settlement enount as “nuisance value” and argued that, inasmuch
as “[nJeither [she], Liberty Mutual nor State Farm were able to
develop 2 viable product liability claim” against
DaimlerChrysler, DaimlerChrysler was not an “actual responsible
tortfeasor[)” and its insurance or self-insurance did not
constitute an “applicable [BI] liability . . . policy” to “be

exhausted before payment of UIM benefits.” (Emphasis in

Lane does net conti
accompanying text

this second premise, See infra note 13 and

 
 

‘4% FOR PUBLICATION IN MEST’S HAWAI'I REFORTS AND PACIFIC REFORTER

original.) (Internal quotation signals omitted.) (Quoting
Taylor, 90 Hawai'i at 313, 978 P.2d at 7517 Dizol, 176 F. supp.
26 at 1027, 1030, 10337 Mulholland v. State Farm Mut. Auto, Ins,
Go, $27 N.E.2d 29, 35-36 (T11. App. Ct. 1988); Arenson vs Am
Reliance Ins. Co., 665 A.2d 394, 397 (N.J. Super. Ct. Law Div.
1994); Colonial Penn Ins, Co, v, Salti, 446 N.¥.S.2d 77, 80-€1
(app. Div. 1982).) (Citing Tate v. Secura Ins., 587 N.E.2d 665
(ind. 1992) .)

In her May 27, 2003 memorandum in opposition to Liberty
Mutual’s motion for summary judgment, Zane contended that Liberty
Mutual’s consent to the settlement reflected not only its
willingness to waive any subrogation rights against
DaimlerChrysler, but also its understanding that
DaimlerChrysler’s settlement emount was merely “nuisance value”
and that its self-insurance would not be available to offset
Zanes UIM claim. Zane attached to her memorandum in opposition
(2) affidavits by her attorneys Keith K. H. Young, Denise K. H.
Kawatachi, and Bert S$. Sakuda, and (2) the various exhibits that
they purported to authenticate. Young averred that he had

 

spoke [n] to Chang and fully advised Liberty Mutual of the
facts of the settlement, circumstances requiring abendonsent,
of the procuct Iiabslity claim for 2

enulsance value
seve exinat Ln .
the reesons(*] that no viable product Tisbilsty cial

existes, end requerted consent to the Liability
lithout prejudicing Zane’ right co payment of Ul

 

    

AShanal_acknowledsed understanding the situation and
sutended Literey Mutual's consent to-settlenent of the
Wabissy cline as discussed wishout preiucicine Zanes

iment Bee {tit wes onaerstood
That Liberty Mtoe! would continue froccssing Zene's request

 

Young presumably means either “and the reasons” or “the reason

being.”

12
‘64 FOR PUBLICATION IN KESTY'S HAWAI'T REPORTS AND PACIFIC REFORTER ++

for UIM benefits {which had already been requested) on the
merits given Liberty Mutual's consent te the 1iability
Eettlenent

(Emphases added.) Young further attested that,

[uJp until the tine Zane finalized the... settlenent
vr von March 6, 2002, communications to’ and from Liberty
tiuivai were al2 premised on the understanding thee Zene's
UIM claim wes being processed without any claim that Liberty
Matval cid not owe UIM benefits because of the failure to
Shhoust Deimierchrysler’s policy limits. Had Liverty Mutua
Feneged on ite consent end cenied benefits... « at any time
ey he (sic) would not have proceeded with the Liability
settienent

 

 

The attached Exhibit 1 appears to be Chang’s January 30, 2002
letter to Kawatachi, implying his awareness of the impending
settlement.

In Liberty Mutual’s May 27, 2003 memorandum in
opposition and its own cross-motion, it argued that: (1) by
virtue of DaimlerChrysler’s posture as a settling defendant,
Liberty Mutual was entitled to the Zavlor offset in the amount of
DaimlerChzysler's “unlimited” BI self-insurance (a) regardless of
Liberty Mutual's consent and (b) regardless of whether

DaimlerChrysler’ s compromise reflected mere “nuisance value”; and

 

(2) in any case, Daimlerchrysier’s $200,000.00 settlenent “cannot
be reasonably described as ‘nuisance valve.'" (Citing, eiga,
Taylor, 90 Hawai'i at 313-41, 978 P.2d at 751-82 Dizol, 176 F.
Supp. 2d at 1027-33.) Furthermore, in its May 30, 2003 reply to
Zane’s menorandun in opposition, Liberty Mutual challenged Zane’s
characterization of the cormunications between the parties.
Liberty Mutual countered that Zane was aware that it planned to
rely on the Tavlor rule to offset her UIM claim, inasmuch as it

“did, in fact, communicate the Dizol . . . case to [Zane’s]
 

{194 FOR PUBLICATION IN WEST'S HAWAI'I REPORTS 28D PACIFIC REFORTER +4

 

counsel's attention as early as January 8, 2002." Liberty Mutual
continued:

{2one) can point to no aftimmative representation oF
conduct by Liberty Motual specifically indicating that such
fan offset or credit would got spply and any reliance by
{Zane} upon the absence of such s representaticn or
affimetive conduct would have been cnreasonable

z_lore smportanttyy »  [dTuring a January
2002 telephone conversation between . «chang ands.
Kawatacni.... with regard to... Zane's UIM claim,
Guang) specisicaliy fold’. «+ Kawitaens at LEG often

 

 

- aT S that she would Took
i and get back to. [bia], but never did.
= (Zane) did aot finelite her settlenent with

   

   

 

Lezchrysler ‘unt March 6, 2002,
(Some emphases added and some in original.) (Some capitalization
omitted.) Liberty Mutual cited the attached declaration of

Chang, which, indeed, propounded that he spoke with Kawatachi on
January @, 2002 and informed her “that [the] offset discussed in
+ + + Dizol. . . may be applicable to. . . 2[ane]'s claim.
The hearing in the circuit court

At the circuit court's June 4, 2003 hearing, Zane

 

conceded the general principle of the Taylor rule, see supra
note 2; however, she urged that DaimlerChrysler was not an actual
tortfeasor in light of the “nuisance value” of its settlement
payment and that, consequently, its self-insurance was not
“applicable,” see HRS § 431:10C-103, supra note 1, to the Tavlor
offset:

 

 

UZANE:] . . . Javlor hele that a credit is due the
[wn carrier for ihe cifference in the anount of the
settlement paig and the policy limits of the [UIH)
tort (Jfeascr. = +

nd we don't have a problem with that...

Eut what ie tort(|feaccr? “A tort l)feacer de --

and thie is 6 definitsen cut of Blacki']e (Law

 

uu
 

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Dictionary] ~~ @ wrongdcer, an individual or a business that
Conaite of i gulity of tort

Now, «2 Injone of the parties here could establish
any wrongdoing or a tort that (Dsinler]Chrysier was guilty
of

ind hone of those parties covld develop 9 vieble
procuct Liability claim against [Dsimlerjcnrysier. And that
Tnondieputed. : «+ Therefore, [Daimler] Chrysier was not 8
torti}éecsor. And not being e tort{) fessor, favor simply
Soesn’t apply when it speaks of s credit that’s cue for the
policy Limits -

Yaseilio(_v. Daimler Chrvaler Com,, 013 A.28
S47 (lo! Soper. Ct. Ape Dav. 2002), rev'd in-bart on other
arounds, 039 A.24 863 (N.9. 2008),) @iecuss(ea) the
Htvstion were. . - 2 party has'no Liebility(.) And...
Wihen you speak of available inesrance, you speak of
Gvaliable insurance for’. actual, responsible

foet]feasorsy a2 opposed to parties thet don’t nave
IfabiLity oF responeabitity.

OY Subnet land) cones to the sane conclusion, that
when you talk ebovt a credit, yop are talking about » credit
Rgsinge an ects! tore ()fessor- I")

‘nd WalbolL (and) sctusily discusses... the
situation where @ plointiff files suit initially ageinst
everyboay that night be invelves, [Als the case goes
or and it is determined that there le no Mability against,
certain parties,

tee het’ okay... « Because the alternative
Je'thet the plasntit? only sues the most Liable one,
ine UI carrier then loses its subrogation rights
st all the other potential tort(]feasors. «ss

Ey eving everyone initially, ‘the plaintise
actually ends up protecting the subrogation rights of the
bie farrier against all potentie! tore |)feseors. And then
Pes p You sort out the lisbility. .

fab counr: °. Tare’ you saying that you nave to have

jedgnent ?

TEANE): No.

LIL irenues of asapsticy . . 5 are under one
policiés the subject of arbitration.

So, « ff the parties disagree whether the
compromise iat due to Just simply wanting to forgo the
Gapenses of litigation, of whether it wae 9 Liability
Goesticn, that weulé be an issue for arbitration. Although
PERK in gost caces that becores pretty cbvicus. Where
you savie) §,000 [dellars) off the policy, . » « that's
Being done for convenience.

linere you takie) five percent of the policy, . .
obviously there are sone 1isbility questions.

 

 

 

 

 

 

 

 

 

 

 

 

+ Bus gee intra section 121.0.¢.b.
15
 

FOR PUBLICATION IN WEST'S HAWAI'I REPORTS AND PACIFIC REPORTER

 

Zane then broached the issue of Liberty Mutual's

representations, if any, concerning its intention to forgo the

 

Javlor credit:
In this case, [Zane) hale) from day one been very
specific about whet was consented to, Pull disclosure wae
ability.
“He were taking $200,000. And to nake sure we didn't

(Emphases

Wwe Sinply went to [Liberty Mutual] and caie 1cok, this 1s)
fhe situation. We want your consent to this, #0 that we can

Brocees with the Orit claim’

UL ian [ste] reply menorendum Liberty Mutual has
attached the declaration of the aciuster hisself whe
Participated throughout the entire proceeding. - ~

WS (itl says only that sometime in Jansary he
telked to |. . (Zane)"s lawyer sna Brought up the Diged

1! ang what's realy telling about this affidavit
is not what it says, but what it doesn't say.

This efticavit acesh’t say no, 1 never agreed with
{2ane}'# lawyer when he called Be sh (ete) cecenber,
20th. < . that this sertlenent wae for nuisance velue

 

 

added.) Liberty Mutual responded that

DaimlerChrysler ic 3 joint tortiIfeasor, . . . (Uinder our
[Windform (Contribution. (Alnong [Tort feasors {Aletl, HS
coh. 663, pt. IT (Supp. 1999) (UEATAI,"") it's not necessary
that a judgient or. : . a(n) vitimate finding of Liability
be nade in order fer & party to be determines te be 2 joint
tore{]Feaser.

 

irine parties reached 2 settienent in the ancunt
of $200,000 . Bot . =. reasonably speaking st cannot
be determined that's £200,000 settienent 1¢ 2 nuisance velve
settlement.
‘The injuries in this case were indeed high. But
ussance ‘value does not depend necessarily on the in3ur
Ihlvisance value is a case in which there 12 ne
Lsapiisty and the defendant merely throws sone money oh the
Esble, In other words, notwitnstancing the finding of
Liebility. “(sic == presumably, “notwithstancing the Lack of
@ finding ef 2isbilsty)

   

 

 

the UCATA in innaterial respects. See 2003 Haw. Sees. Le hee

 

ature amended
ees land €

 

Effective cune 28, 2001 and June 4, 2003, the Jegi

 

 

et 343-44; 2002 Haw. Sess, L, Ret 300, §§ 3, 6, and) at 876-77

16
‘04 FOR PUBLICATION IN MEST’ HAMAI'T REPORTS AND PACIFIC REPORTER ++

And An this case the amount of the settlement,
ae well as the fact of the settlenent itself, confira(]
Baimierchrysler's position oss joint tort(]feasor~

DL ipver examples... $n (Gupe vs madame
Stores, 93°sawos's €17, 5 P34 407 {2000}], MUlccenale’ e,
The settling defendant, was considered to be a joint
Eort{]feacor, even though there was no vitinete finding of
ability. ss

St | itjney did make a settlement. And in the
court’£ Gite thet confirmed thesr statue as 2 Josnt,
torti}feasor. « . « (Under HRSI §] 663-11[") the
definition of a joint tort []feasor again does net turn on
the ultinate finding of liability or non-liability, What it
basically states 1s that a party can be deened to be a Joint
tort(]feaser, whether of not judgnent is recovered against
Sil or sone Of the tort []feasars in the ca
1 + T2ane} ¢id request that Liberty Mutual consent.
‘that's undisputed. “Te is undisputed that Liberty Mutual
consented io the settlensnt.. .

ne Season why we attached (Chang's declaretion te cur
May 30, 2003 repty). sis that in (her May 27, 2003),
etorancum in cppoeition what [ane] wae areving nas
hat {ehel didn't know aboue thie Ques, the tavior/bigor
Tull] Before they finalized the setelement

of the’ sop] stable Taw:

[Il ie (zane) ds making an estoppel claim), «
ints simply not supported on the record Before the Court.
And any reliance by (Zane) ~~ for one thing, shere waz oo
Peprestntstion nage © ‘cheng that

‘Silence cannot create an estoppel: And

‘shy Feltence upon that wouldn’®

LI Linder gevter (4t) ie simply not our place te
object ‘to the settienent. And Javier strongly auvises [UIM)
Sneurere to consent to settlenent. And we id that an this

 

 

 

 

[Blut . . . it woule be counter-intuitive .
to suggest ‘that every tine | UIM] insurer consents to's
settlement [,]_. . » that would foreclose it from asserting
the credit and the offset). + +

 

11 F believe that [Zavlar] did everything bet sely)
that yoe'have te consent. Got 1 think what tney were trying

 

BARS § 663-11 (1993), entitled “Jcint torttessor# defined,”
provides: “For the purpose of {the UCATA,] the term "Jeant tortfeasors’ means
Ewe or sore persone jointly or severally iisble in tort fer the same anjury to
pereen or property, whether or net judgrent has been recovered against all or
Sone of thes.

 

 

v7
‘06 FOR PUBLICATION IN WEST'S HAWAI'I REPORTS ND PACIFIC REPORTER ***

to do again 1s to encourage [VIM] insurers to consent, s0
that they woule not get in the way of an underlying [ST]
settlerent

(Emphases added.) Liberty Mutual enphasized that “the Taylor
credit” -- ise,, the insured’s waiver of the difference between
the settlement amount and the “applicable” BI limits -—

opplies irrespective of whether or not [the insurer's)
Consent is obtained. . . « [Blecause that's the exact thing
that they were teyang to encourage fy giving the corriers
the credit on the back Rand. And what they wanted to tell
the Corrier is there 4e'no reason fer you net te coneinoe as
long 8s you get the credit on the Back nang.

fv Tess undisputed thet Liberty Mstual consented
to the sétiienent. . . s Our only point a2 that we should
be entities to the foil credit’: Sunder. ss

 

 

 

Nevertheless, the circuit court ruled that

 

tthe purpose of getting the consent, which was nade known to
Liberty Mutual, was so that the credit would not kick in.
And no’ one’s argued to the Court, snd the Court does not
find, that even if you are entitied to the credit that you
con't give it up. And the Court finds that they did.

: (Winder the peculiar, undisputed facts of this, the
consent constituted not only a consent but also a waiver of
fany claim to 8 credit beyond the 200,000 dollars)

Accordingly, the circuit court granted summary judgment in Zane’s

favor and against Liberty Mutual:

Liberty Matus) would heve Been entitled to 2 credit for
Joint tortfeascr Daimlerchrysler + in connection with
the underlying sceident, but, having consented te the
Liability setelenent with DaimlerChrys

fay not now object to that settlement

 

 

for denying

 

    

(bim} benefits, end ‘nly not now Claim sig credit
andl] accordingly, the Court grants = = 2a

Sumary Jusgnent ang denies ©. Liberty Mot

for Sunmary Judgment

Tesues releting to the Liability of kin of
Zone’s canages ray be submitted to arbitration :

‘The circuit court's April 25, 2005 judgment effectively “ordered
Liberty Mutual to provide full . . . UIMI) coverage benefits to
Zane, without any credit/offset for . . . self-insurance

applicable to . . . DaimlerChrysler[].” See slip op. at 1-2.

ae
‘4+ FOR PUBLICATION IN MEST’S IANAI'T REPORTS AND PACIFIC REPORTER ++

D. Proceedings On pir 2
on direct appeal, Liberty Mutual noted Chang's May 30,

2003 declaration, see supra section 1.C.1, and argued that the

circuit court erroneously “equat (ed) Liberty Mutual’s «

consent to the liability settlement . . . with the substantively

different proposition that [it] waived its rights to” invoke the

Tavlor rule:

In order to sustain such an estoppel, [Zane] bears the
burden of showing that (1) Liberty Mutual Engaged in an
affirmative representation or conduct, (2) [zane]
Getrimentaily Feliea upon that sffirastive representation or
Conduct, and. (3) such reliance was reasonable. (#)

[Zane] ‘can point to no affirmative
representation or conduct by Liberty Mutual specifically
Indicating thet such an oftset cr credit would not apply
and, since Liberty Motul communicated its intent to sssert

offset/eredit before the finelization of (tane]"e
erchrysier settienent, any reliance by [Zane] upon the
absence of such # representation or affirmative conduct
would have been unressonsble. ss

 

  

 

 

    

 

Lsberty Mutual heeded Zavior and consented to [2anel’s
underiyang settienent ang shovle Tot be pensiites for doing
what Tayler told it to do.

(Emphases in original.) (Internal quotation signals and some
capitalization omitted.) (Citing County of Kaua'i v. Scottsdale
Ins. Co., 90 Hawai'i 400, 403 n.1, 978 P.2d €38, 641 n.1 (1999).)
In its reply brief, Liberty Mutual emphasized that a
representation by @ party that may give rise to a waiver or an

As generel matter, we believe Liberty Mutusl correctly describes
the elenents of equitable estoppel. [T]he party invoking equitable estoppel
must show that ‘he or she has cetrimentally relied on the representation oF
Conduct of the person sought te be estopped, and thet such reliance was
Feasonable. Suh requirement, however, nay be dispensed with in crder to
Prevent manifest insustice.’” AiG-isw, Ine, Co, v.-ansthy 1 Howsis 174,
Vis;"es1 P.za 261, 266 (1998) lemphasit and citations omittea) (quoting

 

    
   

Boherty vs Hartford Ine. Group, $6 Hew. $70, $73, 57€ F.2d
Tivve}], dusted in State fare ty Aue, ins, Co. y. GTi liewsiian Tel Cos, €2

Howei't 235,

 

SiS de 158b, 158s US8e)

ae
‘0+ FOR PUBLICATION IN MEST’S HAMAI'T REPORTS AND PACIFIC REPORTER +*+

estoppel “must be clearly made to appear” and “*leave no
opportunity for ar
(Emphasis omitted.) (Quoting Anderson v, Anderson, 59 Haw. $75,
587, $85 P.2d 938, 945 (1978); Hewahewa v. Lalakea, 3$ Haw. 213,
220 (1938)

 

sonable inference to the contrary.’*

 

In her answering brief, Zane cited Young’s May 27, 2003
affidavit and reiterated her position that Liberty Mutual's
consent to her settlenent with DaimlerChrysler waived its
entitlement to invoke the Zavlor rule.

In Zane_L, the ICA first addressed the estoppel
question. The ICA concurred with Liberty Mutual that, on the
Present record, its conduct did not give rise to estoppel as a
matter of lew:

(There are gensine issues of materiel fact regerding (2)
whether Zane relied on Liberty Mutual's consent? (2) if Zane
Feliea on Liberty Mutual's consent, whether Zane reasonsbl:
understood saie consent to sean that Liverty Mutuel would
hot aasert ite right te a credit/ofisets anc (3) if zane
Feliea on Liberty Mstual's consent, whether Zanes reliance
war reasonable, given that Liberty Mutua: clains it notified
Lene of ite intention to assert ite right tea creditiofises
prior to the finalisation of dane's settienent with
Deinlerenrysler

    

 

 

SLip op. at 17. Specifically, with respect to the reasonableness
of any reliance by Zane, the ICA noted that, “[iJn her Complaint,
Zane claimed that ‘[a]ithough Liberty Mutual was itself involved
in the [BI] liability suit, zane nonetheless went through the
formality of requesting written permission to settle the
liability claims in order to preserve [UIM) penefits.’" id. at
19 (emphasis in Zane I) (some brackets added and some in
original). The ICA seens to have implied that this statenent, as

well as the “[a]dmitted [f]act[)” that “Liberty Mutual consented

20
‘104 FOR PUBLICATION IN MEST’ HAWAT'Z REPORTS AND PACIFIC REPORTER *+*

to the liability settlement with DaimlerChrysler and may not now
object to that settlement as a basis for denying [UIM] benefits,”
see supra section I.C.1, is subject to multiple interpretations
See slip op. at 19-20, Moreover, the ICA recognized an
unresolved genuine issue of material fact concerning the
existence and content of alleged communications between Chang and
Kawatachi. See id. at 20-21. Accordingly, the ICA held that
“the circuit court erred by . . . holding that Liberty Mutual was

estopped from asserting its right to 9 credit/offset.” Id. at 21

 

(emphasis omitted).
Nonetheless, the ICA deemed the circuit court’s error
to be “harmless” inasmuch as Liberty Mutual was not “entitled to
an offset for the ‘gap’ referred to in Zaylor and Dizol . . «
because DaimlerChrysler was not an actual tortfeasor.” See ids

The ICA acknowledged that this court

  

wrote én Tevlor + 90 Hawai'i [at] 314, 978 P26 fat)
382... thet “(bjy’ settling for less then policy Limite,

 

the O1m ingured agrees to forego compensation for the
difference between the settlement enount and the
tortfeasor’s Liability policy limite.” This means that the
“ulm carrier will not be reszonsible for covering that "335"

‘a Component cf its cbligation to compensate its insured
fer injury and damage exceecing the tortfeseer's policy
Limits.” Ud. Additionally, the United states District
cour Cxplained in Qigol'. .'. that "a UIM carrier has
a statutory raphe to be contractually liable to indennify
ite Insured only fer the ancunt in excess of the

sor's Liability coverage.” + 176 F. Supp. 2d at

 

 

 

  

However, the ICA agreed with Zane that

DainlerChrysier was not a tortfeasor:

 

1497 (7th ed. 1999) defines ‘tortfeasor’ as ‘[o]ne who commits =
tort; a wrongdoer.’ In the instant case, Judge McConnell did not

find DaimlerChrysler to be liable to Zane or, in other words, @

2
“s+ FOR PUBLICATION IN MEST’ HAWAT'T REPORTS AND PACIFIC REFORTER *+*

tortfeasor.” Id. at 22 (brackets in original). The ICA
essentially accepted at face value Zane’s characterization of
DaimlerChrysler’® settlement amount as “nuisance value” and
concluded that, as a matter of lay, DaimlerChrysler was not 2
tortfeasor because of the “undisputed” facts that:

(2) Discovery and case preparation aid not support &
viable product liability claim against Oainlerchryeter:

(2) Because no viable basis for liability existed, the
Product Tiability claim against Deimlerchrysier could
ot be successfully resolved.

(3) The best that Judge Mcconnell could achieve was
mediated settlement for a "nuisance value” payment of
$200,000 by DaimlerChrysler

(4) Young reccnnended to Zane that she accept the neds.
settienent because there was no visble product 1
Elain ageinet Osinierchrysier and nore
of recovering more fron Deinlerchrysler

(5) Young spoke to Cheng and fully advised Liberty mutwal of
the facts of the settienent and the circunstatces
Fequiring abandonment of the product Lisbility claim for
a nuisance voiue settienent of $200,000 nd
Young requested consent to the lisrility eettlenent
without prejusicing Zone'® right to payment of Jit
Benerite

Forthernore, there is nothing in the record on appeal
indicating that Oainierchrysier was Liable te Zane for the
accigent.

 

 
  

 

Jd. at 24-25. In short, the ICA adopted Zane’s position that the
maximum “applicable” coverage beneath which an insured is not
entitled to UIM benefits does not include the BI coverage of @
party who has settled with the insured but is not an “actual

tortfe

 

or," viewing “actual tortfeasor” to mean a defendant who
has undergone the “*equivaient [of] an adjudication of liability
through litigation or arbitration.’” See id. at 22, 23 6 0.5, 26
(quoting Vassiliu, 813 A.2d at 583; Arenson, 665 A.2d at 396-977
Allstate Ins. Co. v. Detbod, 618 7.26 608, 611-12 (Wash. Ct. APP.
agen)).
+4 FOR PUBLICATION IN MEST’ S HAMAI'T REPORTS AND PACIFIC REPORTER ++#

Finally, the ICA held that Liberty Mutual was entitled
to a $200,000.00 offset representing DaimlerChrysier’s actual
settlement proceeds, contrary to the circuit court's
conclusion." See id, at 27. On that basis, the ICA vacated and
remanded the circuit court's April 25, 2005 judgment for further
proceedings. See ids

On Janvary 23, 2007, Liberty Mutual timely filed the
present application for a writ of certiorari. On February 6,
2007, Zane filed her timely response. On April 16, 2007, we
handed down an opinion in this matter (Zane II). On April 25,
2007, Zane moved for reconsideration, after which we vacated Zane
LL, ordered that it remain unpublished, and replaced it with this
amended opinion.

IT. STANDARD OF REVIEW

We review the circuit court’s grant er denial of
summary Jesgrent de nove. Hawai” 7

94 Fowait 213, 201, 11 P-3d 7, 9 (2000)
The standard for granting @ notion for summary judgment ss
sorties

 

Islumnery Judgnent 42 appropsiate if the
pleadings, cepositicns, answers to
Gnterrosetories, ang admissions on file,
together with the affidavite, if any, show that
there is no genuine issue as to any material
fact ane that the moving party is entitled to
Judgment oe a matter of law. A fact Le saterial
Ef'proot of thet fact would have the effect of

 

    

1 The ICR noted that, based upon the Language of ite UIM policy,
Liberty Mutual": UIM coverage “‘appl(ied) over and above all suns... (p)aie
Because of the Bodily injury by or on behalf of pertone oF orgonszatione whe
may be legally responsipie.’” Slip op. at 27 (seme emphases omitted and one
Yh criginal) (some brackets added sng tore in orsginsl). (ellspeis in

originel].. The Teh. concluded that baimierChrysler "aay" have *belen] . .
legally responsible” ang, therefore, its payment of $200,000.00 to Zane
entitleg Liberty Mutual toe pro {ante credit. Jd, zane does net contest
this aepect of the ICA's decision, end we agree with it

 

2
‘4+ FOR PUBLICATION IN WEST'S HAWAI'T REPORTS 2M PACIFIC REPORTER #4

establishing or refuting one of the essential
Glenents of a cause of action or defense
Severted by the parties. The evidence must be
‘viewed in the Light most favorable to the
on-noving party, Th cther words, we must view
all of the evicence and the inferences cram
therefrom in the light most favorable to the
Barty cppoeing the notion:

 

Id, (citations and interne quotation marke omitted) .
Querubin v. Thomas, 107 Hawai'i 48, $6, 109 P.3d 689, 697 (2005)
(quoting Durette v. Aloha Plastic Recycling, Inc., 105 Hawai'i
490, 501, 100 P.3d 60, 71 (2004) (quoting Simmons v. Puy, 105
Hawai'i 112, 117-18, 94 P.34 667, 672-73 (2004) (quoting Kahale
v.City & County of Honolulu, 104 Hawai" 341, 344, 90 P.3d 233,
236 (2004) (quoting SCI Momt, Corp, v, Sims, 101 Hawai'i 438,
445, 71 P.3d 389, 396 (2003) (quoting Coon vy, City & County of
Honolulu, 98 Hawai'i 233, 244-45, 47 P.3d 348, 359-60
(2002)))))).

 

TIT. piscussioy
A. Introduction
In its application for a writ of certiorari, Liberty
Mutual argues that: (1) “any dispute as to DaimlerChrysler’s
status as a ‘joint tortfeasor’ was never properly before the ICA”
inasmuch as Zane “did not file any cross-appeal” (quoting Doe v.
Doe, 29 Hawai'i 1, 12-13, 52 P.3d 285, 266-67 (2002));" (2) in

this point te neritiess
court's adeption ef her poetics

hardly aggrieved by the circuit
jine why Zane Would or snoule
peal the circuit court's
‘the Tavior role woule have fevered Liberty tutual were St net
stopped. in any case, while, “[o}rainerily, en appellee ie not entities on
ppellate review to attack 2 judgment without o crete appeallo) ) for The

 

 

29
 

196 FOR PUBLICATION IN WEST'S HAWAI'I REPORTS AND PACIFIC REPORTER

 

 

proposition that it is entitled to 2 credit for even non
Table parties. Neither cose eupports that claim. ©

it makes no sense to require Zane to forego the . .
contribution from DaimlerChrysler... where it was obvious
thet (st) was truly for nuisance value, "=

1 |. Linerty Mutual's contention that Zane (shoule)
be required to pursue # non-liable party conflicts with

Taylor's rationale»... It is implicit from the context
lang ressoning ...., thet the court's reference to recovery

Of the “tortfeasor's Iiability coverage” refers £0
fortfessor thet st liable to the pleintiff. it seens
Academie that one who is not liable to the plaintiff se by
Sefinition not» “tortfeasor.”

 

 

Lsherey mutuals policy requizenent to exhaust
Angurance policy linite applies only to “eppliceble”
policies. |. .  Deinlerchrysle:"s policy tes not applicable
Because there sae no Liability.

ccs s [i]nesrance coverage of parties that are not
Liable are sinply'not “applicable” to the less and oo not
violate Liberty Mutual's provision reqbiring exhaustion of
applicable 1ability policies

(Citation omitted.) Then, in her response to Liberty Mutual's

 

 

cert application, Zane argued:

Liberty Mutual does not challenge the undisputed fact that
discovery and case preparation eid not support © cleim
aginst Dainlerchrysier ihence

kertfeasor! ‘The Tea’s conclusion that
Dasnlerchrvsie® vet not Lesslly responsinle for zene"

‘Aniuriss 1 clearly supported.
Si. : [T]he ICA Gecieion wes based on the fact that

11 parties agreed thet
after discovery and case preparation failed to cevelop &
viable theory ef Liability against Osinlerchryeler
Il [ujetike . . . zevter, in the instant case it
wos undisputed that Dainierchrysler{] was oot legally
Fesponsiple for Zane’s injuries and(,] enue, nots

. Therefore, DalinjlerChrysier"e” snsurance was
Det less than its lisbility- , . because it was got

Sy party ig Liable within the mesning of THRE
§) 663°21, age gupta nete 5.) If the injurea person could
hove recovered damages ine direct sction agsinst that
party[] had the injured percon chosen te porsve such an
Detion.” Gump posh Mamas [et] 422, 5 8-34

Tay diz oe

30
 

48 FOR PURLICATION IR MEST’ HAWAI'T REPORTS AND PACIFIC REPORTER

(Some emphases added and one omitted.) (Heading omitted.)
(Quoting Zane I at 24.) In sum, Zane represented on appeal"
that DaimlerChrysler’s BI coverage did not apply to the Taylor
gap because DaimlerChrysler, having settled for what the parties
agree was nuisance value rather than a Liquidation of “actual”

fault, was not a tortfeasor for purposes of the avlor rule.

% tn nindesght, we realize that, at oral argunent, Zane may have
alluded to her new argument, which we gesunea was a reiteration of her general
theory that, insemuch as Deimberchrysler was not “legally Feeponsible,” ste
self-insurance wes not epplicable:

 

     

(zane?) In our argunent below, we sai [the Zavlor
credit] dich’ apply in this particular cose for several Teasons
Nonber one, the policy steelf distinguishes how you hondie the
policy lisits ef s[ UM) and of anybocy else. Ag to the (UTM) the
Folicy is very specific. The policy says (ang in this case the
{UIm) would have been... Kin), «We will pay under this
coverage only aster the linite of idsbiity under any applicable
{EI} iiability bonds cr policies, have been exhausted by’ payment
Cf] jucgnent{s er settienents].” That ie in the “ZNSURING
AGREEMENT dealing with underingured rotor vehicle(s]. ~

[Justice Levineons)” Which ss snother wey of froming, Lente
it, the question whether DainlerChrysier's unlimited Br seif=
ingurance was applicable or not?

 

 

 

 

 

 

  

 

(Zanet] ss No, Because [ene “LIMIT OF LIasrLrTY®
section]: - applies te sther And it says thie: "Any
Inounts cthernice payable for danages under this coverage apply
Over and above sil fume: 1. Palos» . by oF on behelf of

 

 

persons of orgenization
(Emphasie omitted.)
[Justice Levinson:) In other words, tort feasors
(Zane:]. Cezrect, Non-auto tortfeators. But there, you
don’t get a cvedit for the policy limit; you get a credit for the
yunt paid. So the policy itself sete up thet distinction. And
Ettela very important distinction because you don’t need te reach
issues Of waiver or tortfeacor[ status]. =

 

no may be legally responsible."

 

       

 

MP3: Oral Argument, Hawai" Supreme Co (war. 21, 2007),
auallable at nttp://stave.ni.ue/jud/ee | Tismr mp3. Nonetheless,
Te goes without saying that legal grounde raises for the first time in oral

nt "before the co leet fecort are late te tne cance. See, Gee,
Rewari Rule of Appellste Procedure 28(c) concerning answering briefs)
Houahcaidine cx fe. Stecre ve Oe La Mun, 22 How. 430, 444 (2820): ana Ranch
ce ve -Kenois, 2 Fen, APP Fiza 283, 295-86 11382)

   

 

      

     
‘+ FOR PUBLICATION IN MEST’S HAWAI'I REPORTS AND PACIFIC REPORTER *+*

3. Zane" basis for rec: ion
In her motion for reconsideration, Zane attempts to
recast her position on appeal as being that DaimlerChrysler was
not an ouner or operator of an underinsured motor vehicle.
Citing (for the first time ever) State Farm Mut, Auto, Ins Co. vw
Motley, 909 So. 2d 806, 809, 818-21 (Ala. 2005), Zane argues
that, inasmuch as (1) she implicated DaimlerChrysler as =
defendant upon 2 theory of products liability, and (2)
DaimlerChrysler was not an owner or operator of a motor vehicle,
DaimlerChrysler’ funds “have nothing to do with motor vehicle
insurance,” whereas HRS §§ 431:10C-103 and -301(b) (4) (Supp.
1998)" “expressly and exclusively refer{] to motor vehicle [81]
insurance and motor vehicle self-insurance.” Zane adds that,
pursuant to Kang v, State Farm Mut, Auto, Ins. Co., 72 Haw. 251,
815 P.2d 1020 (1991), Thonas’s vehicle, in which Zane rode, was
not an underinsured motor vehicle, inasmuch as Zane was covered
by Thomas's BI policy end cannot simultaneously recover from his
UIM insurance. In essence -~ from Zane's newly resurrected
perspective --, DaimlerChrysier was not an owner or operator of
any vehicle, let alone an underinsured one, and its BI insurance

is not “applicable” within the meaning of HRS § 431:10C-103. We

  

believe this argument to be belated and, accordingly, waived for

purposes of this appeal. There is no reason why Zane could not

 

HRS § ¢31;20C~301(b) provides An relevent pert
A meter vehicle ineursnce policy shall include:
ia} Coverage for loss resulting from {E11

persch legally entities to recover ca
Eperstors ef underincurea rotor vehicles:

suffered by any

   

   

 
4104 FOR PUBLICATION IN WEST'S AWAI'T REFORTS AND PACIFIC REFORTER #¢

 

have asserted this theory as an alternative to the position that
she actually raised -- that a UIM insured cannot forfeit the BI
coverage of a settling defendant that is not a tortfeasor.
Indeed, she is free to raise it on remand.
4
“nuisance value” does not, absent nore, erase an

amount equal to the tortfessor’s forgone BI coverace.

Having clarified the narrow scope of Zane’s argument,
We now proceed to answer the sole question she has preserved for
cur review: does the fact that a defendant has settled with the

plaintiff for an amount that the parti

 

acti

 

represents only
the costs of litigation and not a liquidation or compromised
representation of liability, absent more, remove that defendant's
BI coverage from the universe of insurance “applicable” as @
Tavlor offset? We answer the question in the negative.

In the event that the circuit court, on remand, rejects
Zanes estoppel theory, we now provide guidance on the
applicability of the Tavlor rule under circumstances in which a
settling defendant pays arguably negligible consideration for
its release, We conclude that the record did not enable the ICA
to conclude as a matter of law that DaimlerChrysler was not a

tortfeasor for Tavlor offset purposes.

% we cannot help but notice that “negligible” does not roll off the
tongue when cne speaks of $200,000.00, ainost twelve percent of
$1, €30,000.00 settienent

 

 

33
 

[FOR PUBLICATION IN WEST'S HAWAI'I REPORTS AND PACIFIC REPORTER #+#

 

a. Taylor, Dizol, and Grenger labeled the settling
of adjudication. ~
The inescapable implication of Tavlor is that, in the
context of @ motor vehicle tort, it is the plaintiff's
prerogative to settle with an alleged tortfeasor and thereby
waive any UIM coverage of the gap between the compromise and the
tortfeasor's BI limit. We believe that the choice of whether or

not to settle with

 

y particular defendant, with ite consequent
benefits and detriments, remains with the plaintiff even when
discovery is fruitiess. We disagree with 2ane’s implication that
adjudication, arbitration, or admission of fault is a
precondition of a Tavlor offset. We agree with Liberty Mutual
that, where a UIM insured has settled with an alleged tortfeasor,
the UIM insurer is not barred from discounting its financial
responsibility for its insured’s damages merely because the
insured asserts that the defendant was not liable, regardless of
(1) the defendant’s “negligible” settlement amount and/or (2) the
UIN insurer's consent to the mere act of settling (holding aside
the estoppel controversy) «

Zane’s attempt to distinguish DaimlerChrysler from the
alleged tortfeasors in Taylor, Dizol, and, by implication,
Granger, is unpersvasive. In none of those cases was a single
settling defendant actually adjudged to be factually liable, yet
both this court and the Dizol court deemed the settling

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defendants to be “joint tortfeasors” for UIM purposes." Many,
A£ not most, settlement agreenents contemplate that the settling
defendant will be absolved of further liability to the plaintiff
land the plaintiff's potential subrogee insurer. Nevertheless, we
believe that a plaintif£/UIM insured who nanes 2 defendant and
retains the defendant in the suit all the way to settlement
assumes both the potential benefit of a defendant's anple
insurance and the risk that the defendant’s BI limit may far
exceed the feasible settlexent value; a defendant's settlement
alone does not extinguish its “tortfeasor” status for purposes of
offsetting a UIM claim. Cf, s.c., Doe Parents No. 1v, State,
Dep't of Educ, 100 Hawai'i 34, 41, 58, $6 6 n.30, 87 n.50, 58
P.3d 545, 552, 566, 567 6 n.30, $96 n.50 (2002) (where trial
court dismissed plaintiffs’ claims against one of two
codefendants before trial because the claims had earlier been
discharged in bankruptcy, the dismissed party could not be @
“joint tortfeasor”).

b. De Jhollen

‘The ICA erroneously relied on foreign authority that is
dissonant with the Zaylor line.

The Washington Court of Appeals’s holding, in Deibed,
that “[t)he fact that a liability carrier voluntarily settles

. does not, without more, establish . . . that [its]

insured’s [BI] policy is ‘applicable’ to the claimant," 818 P.2d

 

The Dinah court avoided the iseue that now confronte us beceuse
wile [wale gndsscuted thot [the ariver) and [the bar] were "Joint
tortfessere.’* See I7€ F. Supp. 2¢ st 1022 (emphasis acced)

 

35
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at 612, is simply incompatible with Tavlor and Granger, in which
we contemplated the offset of settling defendants’ entire BI
Limits despite the lack of any adjudication of fault. cf. supra
sections I.R and 111.¢.4.a.

In Vassiliu, the widow of the decedent UIM inured had
sued (1) the driver of the other motor vehicle in the subject
accident and (2) DeimlerChrysler, which was the manufacturer and
seller of her husband's car. 813 A.2d at 549. The parties
agreed that the plaintiff's burden against Oaimlerchrysler
revealed itself to be “insurmountable,” and DaimlerChrysler
“settled for $215,000.00 without concession of 1isbility on its
part.” 1d, at 550, The plaintiff sought a declaratory judgment
against the decedent’s UIN insurers for the full extent of the
governing UIM policies. See id, at 550-51.

The defendant insurers argued that they were not
obliged to cover any of the decedent's injuries inasmuch as the
$215,000.00 payment from DaimlerChrysler exceeded the total UIM
Limits of $200,000.00. Id. at $51. The New Jersey Superior
Court's Law Division disagreed, and the Appellate Division
affirmed. Id, at S51, 552-53, $86, Construing a New Jersey

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‘10 FOR PUBLICATION IN WEST'S HAWAI'I REPORTS AND PACIFIC REFORTER +1

 

statute similar to HRS § 431:10C-103's definition of an
underinsured motor vehicle, see supra note 1,* the Appellate
Division reasoned, in the portion of its opinion quoted by the

ICA, slip op. at 23, that

 

[Jahon the statute... speaks of ‘available’ insurance
Goverage, it plainly refere to thet of persons who are
Sctual seeponsible tortfeasor end net that of those who may
Reve been “invelved’ in the accident without being itable

 

 

noes the ‘To-rule othersice would lesd to tne result

Reasiie insured. (7)
£13 A.2d at 553 (emphasis added) (quoting Gold v. Aetna Life &
Gas. Ing. Co., $88 8.26 854, 657 (N.J. Super. Ct. App. Div.
1989)).

The ICA overlooked @ critical distinction from the
present matter. After the settlement in Vaseiliu, the remaining
driver and the plaintiff proceeded to a bench trial. Id, at 550
6.2. The judge adjudicated liability with respect to the
driver, allocating 100% of the fault to hers “{h]e found no
evidence of fault on the part of [DaimlerChrysier).” See ide
at 550.

Finally, Zane completely misapprehends Mulholland.

‘That case concerned a UIM insurer’s exhaustion clause, which

 

© wo. State ann. §

 

26-1.1.e(1) provices in relevent part:

A motor vehicle is underinsured when the sun of the limits of
Liability under ail [Bt] end property canage liability bends and
insurance policies available to 6 person against whom recovery 18
Sought fer [21] oF property conage is, et the cane of the
Sceicent, less than the applicable limits for (UIM) coverage
Sffcrsec' under the moter vehicle insurance policy hele By the
Berscn seeking that recovery.

lEsphasis edées.)

 

 

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provided that “‘there is no coverage until the limits of
Lsability of all [BI] . . . insurance policies . . . that apply
+ + + have been used up by payment of judgments or settlements.”
527 N.B.2d at 35 (emphases omitted). An Tllinois trial court had
construed the term “apply” narrowly, ise, such that an insured
need not exhaust the coverage of tortfeasors against which “ta
reasonably viable cause of action'” did not exist. Id. at 35-37.

The Illinois Appellate Court disavowed, at least in
dictum, the lower court’s analysis to which Zane alluded in the
dune 4, 2003 hearing. The appellate court balked at the
practical difficulty of “pretry{ing] the case and rul{ing] on the
+ + + Feasonabi[e] viab[ility)” of @ claim, but affirmed on
unrelated grounds, to wit, that “the exhaustion clause . . . is
against public policy and therefore unenforceable,” accord
Taylor, 90 Hawai'i at 312, 313 & n.10, 978 P.2d at 750, 752
&n.10. See $27 N.E.2d at 37, 40-41.

cc. Gump

In addition to Taylor, Dizol, and Granger, Gump
illustrates that we have applied the term “Joint tortfeasor” to
erstwhile defendants whose fault wae never adjudicated. In that
case, the plaintiff “slipped on a french fry outside [a]

Mebor

 

d's restaurant but inside the premises of Wal-Mart and
sustained injuries. The restaurant [wals located inside the
93 Hawai'i at 419, 5 P.3d at 408. The

 

- . Wel-Mart.

 

plaintiff released McDonald's pursuant to settlement, but

 

proceeded to trial against Wal-Mart. Id. After “[t]he jury

 

+. apportioned liability 95% to Wal-Mart and $8 to” the

 

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RANA REPORTS AND PACIFIC REPORTER ++

plaintiff and awarded damages, Wal-Mart moved for “a new trial in
which McDonald's [w]ould be included on the special verdict
form.” Id, The trial court denied the motion and Wal-Mart
appealed. Id. On certiorari to the ICA, we ultimately upheld
the trial court’s omission of McDonald’s from the special verdict
form inasmuch as Wal-Mart had not cross-claimed against
McDonald's, but we agreed that McDonald’s was @ joint tortfeasor,
on no other basis than its having been named as a defendant. See
ids at 422-23, 5 P.3d at 412-23.

4. Summary

 

An actual adjudication of fault is not a prerequisite
to a party's qualification as a “tortfeasor” for purposes of the
Taylor rule. Having elected not to proceed to an adjudication of
DaimlerChrysier’s fault, Zane bore the consequences of recovering
any settlement anount, however “neager,” from DaimlerChrysler.
Moreover, a UIM insurer's consent to settlement, absent nore,
does not constitute @ waiver of the Jaylor “gap.”

Still, the record on appeal reflects a genuine issue of
material fact with respect te whether Liberty Mutual communicated
to Zane that it did not consider Daimlerchrysler’s self-insurance
exceeding $200,000.00 to be @ Tayler “gap.” Inasmuch as the
estoppel question was not ripe for summary judgment, we remand to
the circuit court. On remand, the parties may, if they wish,
file new motione for sunmary judgment on whatever supportable

grounds they choose to assert.
‘++ FOR PUBLICATION IN WEST’ HAWAI'I REPORTS AND PACIFIC REPORTER

 

IV. CONCLUSION
We (1) vacate the ICA’s opinion in Zane I and the

Judgments of the ICA and the circuit court and (2) remand to the

circuit court for further proceedings consistent with the

foregoing analysis.

Ward P.N. Fujimoto
(Ward F.N. Fujimoto and
Randall ¥.s, Chung, of
Matsui Chung, on the briefs),
for the defendant-appellant-
petitioner Liberty Mutual
Fire Insurance Company

 

Bert S. Sakuda (Bert S. Sakuda
and Geoffrey K. S. Komeya,
of Cronin, Fried, Sekiya,

Kekina & Fairbanks, on the
brief), for the plaintiff-
appellee-respondent

Dawna C. Zane

40

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