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IN THE SUPREME COURT OF THE STATE OF HAWAIʻI

---o0o---

________________________________________________________________

PATRICIA MORANZ,

Petitioner/Plaintiff-Appellant,

vs.

HARBOR MALL, LLC,

Respondent/Defendant-Appellee,

and

DTRIC INSURANCE COMPANY, LTD.,

Respondent/Intervenor-Appellee.

________________________________________________________________

SCWC-17-0000006

CERTIORARI TO THE INTERMEDIATE COURT OF APPEALS 

(CAAP-17-0000006; CIVIL NO. 14-1-0172)

JANUARY 11, 2022

RECKTENWALD, C.J., NAKAYAMA, McKENNA, WILSON, AND EDDINS, JJ.

OPINION OF THE COURT BY WILSON, J.

Petitioner/Plaintiff-Appellant Patricia Moranz 

(“Moranz”) was injured near her place of employment on August 

28, 2012 and received workers’ compensation (“WC”) benefits from 

Electronically Filed

Supreme Court

SCWC-17-0000006

11-JAN-2022

08:12 AM

Dkt. 13 OP
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her employer’s WC insurance carrier, Respondent/IntervenorAppellee DTRIC Insurance Company, Ltd. (“DTRIC”) shortly 

thereafter. In 2014, Moranz brought suit in the Circuit Court 

of the Fifth Circuit (“circuit court”) against Harbor Mall, LLC,

(“Harbor Mall”) the owner of the building in which she was 

injured, and in 2016, reached a settlement with Harbor Mall for 

$200,000.00 (“Harbor Mall settlement”). Around the time of the 

Harbor Mall settlement, DTRIC sought reimbursement of those WC 

benefits it had paid to Moranz after her accident under Hawaiʻi 

Revised Statutes (“HRS”) § 386-8 (2015)1 and Alvarado v. Kiewit 

Pacific, Co., 92 Hawaiʻi 515, 520, 993 P.2d 549, 554 (2000).2 

 

1 HRS § 386-8 provides in relevant part:

(d) No release or settlement of any claim or action under

this section is valid without the written consent of both

employer and employee. The entire amount of the settlement 

after deductions for attorney’s fees and costs as provided 

in this section is subject to the employer’s right of 

reimbursement for the employer’s compensation payments 

under this chapter and the employer’s expenses and costs of 

action.

. . . .

(f) If the action is prosecuted by the employee alone, the 

employee shall be entitled to apply out of the amount of 

the judgment for damages, or settlement in case the action 

is compromised before judgment, the reasonable litigation 

expenses incurred in preparation and prosecution of the 

action, together with a reasonable attorney’s fee, which 

shall be based solely upon the services rendered by the 

employee's attorney in effecting recovery both for the 

benefit of the employee and the employer. After the 

payment of the expenses and attorney’s fee, there shall be 

applied out of the amount of the judgment or settlement 

proceeds, the amount of the employer’s expenditure for 

compensation, less the employer’s share of the expenses and 

attorney's fee. On application of the employer, the court 

(continued . . .)
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Under HRS § 386-8 and Alvarado, when an injured 

employee recovers a third-party settlement, an insurer3 is 

 

(. . . continued)

shall allow as a first lien against the amount of the 

judgment for damages or settlement proceeds, the amount of 

the employer’s expenditure for compensation, less the 

employer’s share of the expenses and attorney’s fee.

HRS § 386-8. Under chapter 386, “[t]he insurer of an employer is subject to 

the employer’s liabilities[.]” HRS § 386-1 (2015). However, the insurer is 

also “entitled to rights and remedies under [chapter 386] as far as 

applicable.” Id. DTRIC is the WC insurance carrier for Moranz’s employer. 

Thus, DTRIC is entitled to the “rights and remedies” afforded to Moranz’s 

employer under chapter 386 in the course of Moranz’s WC action and 

settlement.

2 The formula established by the supreme court in Alvarado is as 

follows:

[U]nder HRS § 386–8, the starting point to determine an 

employer’s “share” is to be calculated as (1) the fraction 

equal to the amount of workers’ compensation expended, plus 

calculable future benefits, divided by the total amount of 

the settlement. This fraction will then be (2) multiplied 

by the total amount of reasonable attorney’s fees and costs 

incurred by the employee in the course of pursuing the 

recovery action. This “share” (computed in steps 1 and 2) 

should then be (3) subtracted from the total compensation 

already expended to date, by the employer. This results in 

a first lien that the employer may assert against the 

settlement amount. However, prior to the execution of the 

lien, the remainder of the attorney’s fees and costs should 

be (4) deducted from the settlement corpus. Then, (5) the 

amount of the employer’s first lien (already calculated as 

compensation expended minus share of the attorney’s fees 

and costs) may be asserted against the settlement. If a 

portion of the settlement corpus remains after the 

employer’s execution of the lien (6), the employee is 

entitled to that remainder, subject to the requirement that 

the employee first exhaust all necessary future workers’

compensation payments from that remainder prior to 

requesting future compensatory payments from the employer 

or its insurance carrier for the compensable injuries 

arising out of the same incident.

Alvarado, 92 Hawaiʻi at 518–19, 993 P.2d 552–53.

3 DTRIC is referred to as the “employer” in the lower court 

proceedings. Although DTRIC is “subject to the employer’s liabilities” and 

(continued . . .)
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entitled to reimbursement of all WC benefits it has paid the 

employee, less its “share” of reasonable attorney’s fees and 

costs incurred by the employee in pursuing the third-party 

action. Per HRS § 386-8 and Alvarado, we now clarify (1) the 

proper timing of Alvarado calculations, which determines the 

reimbursement due the insurer from the third-party settlement

and (2) the reimbursement process for an insurer when the amount 

of WC benefits the insurer has already dispensed to the employee 

(“paid compensation”) is less than the amount it owes the 

employee for its “share” of attorney’s costs and fees for the 

third-party action. Here, the parties disagreed over whether 

certain WC benefits that DTRIC owed Moranz (“DTRIC settlement”) 

were properly classified as “paid compensation” or benefits that 

DTRIC owed Moranz in the future (“calculable future benefits”)

under the Alvarado formula. The parties also disagreed over the 

process of DTRIC’s reimbursement of WC benefits because DTRIC’s

“share” of attorney’s fees and costs exceeded the amount it had 

previously contributed to Moranz as “paid compensation.”

We now clarify that Alvarado calculations shall be 

performed based on the date on which the employee receives the

 

(. . . continued)

“entitled to rights and remedies” of the employer under chapter 386, DTRIC is 

not Moranz’s employer and, thus, will be referred to as the “insurer” in this 

opinion. HRS § 386-1; see supra note 1.
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third-party recovery. In this case, at the time Moranz received 

the third-party recovery (i.e., the Harbor Mall settlement) on 

or about September 20, 2016, DTRIC had not yet paid its 

settlement; thus, the DTRIC settlement should have been 

categorized as a “calculable future benefit” rather than “paid 

compensation” under the Alvarado formula. 

We also emphasize that an insurer’s “share” of the 

attorney’s fees and costs the employee incurs while pursuing 

third-party recovery is based on the insurer’s total WC 

liability. Thus, we now clarify that the insurer must pay its 

full pro rata “share” regardless of the amount the insurer has 

contributed in “paid compensation” versus the amount it still 

owes in “calculable future benefits” at the time the employee 

receives the third-party recovery. In this case, DTRIC owes its 

full “share” of Moranz’s attorney’s fees and costs in the amount 

of $89,140.17, based on its total WC liability of $189,062.13

($63,245.41 in “paid compensation” plus $125,816.72 in “future 

calculable benefits”). Under HRS § 386-8(d), DTRIC is entitled 

to reimbursement of the $63,245.41 it has expended in “paid 

compensation.” Further, under HRS § 386-8(i), DTRIC is 

“relieved from the obligation to make further compensation 

payments to [Moranz] . . . up to the entire amount of the 

balance of the settlement or the judgment,” meaning that Moranz 

must exhaust $125,816.72 in “calculable future benefits” from 
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the remainder of the Harbor Mall settlement. After paying her 

attorney’s fees and costs ($94,298.29), reimbursing DTRIC its

“paid compensation” ($63,245.41), and exhausting “calculable 

future benefits” ($125,816.72) from the $200,000.00 Harbor Mall 

settlement, Moranz retains the remainder: $5,779.75 in excess 

of her WC benefits.

I. BACKGROUND

A. Factual Background & Circuit Court Proceedings

Moranz was injured while working on August 28, 2012 

after she fell in a stairway near her place of employment in 

Lihue, Kauaʻi. Moranz filed a claim for WC benefits, and 

received “WC medical, indemnity[,] and vocational rehabilitation 

benefits” from DTRIC pursuant to chapter 386 of the HRS. 

1. Harbor Mall Lawsuit and Settlement

On August 25, 2014, Moranz filed a civil lawsuit 

against Harbor Mall, alleging negligence in maintaining the 

stairway. Before trial was set to begin in July 2016, Moranz 

and Harbor Mall reached a settlement agreement, in which Harbor 

Mall agreed to pay $200,000.00 in general damages and maintained 

its denial of liability. A check for the $200,000.00 settlement 

was transmitted from Harbor Mall to Moranz on September 16, 

2016. On September 22, 2016, the circuit court granted a Motion 
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to Intervene filed by DTRIC.4 On September 28, 2016, with the 

consent of all parties, Harbor Mall was dismissed from the 

lawsuit. 

2. DTRIC’s WC Lien

On May 24, 2016, Moranz filed a “Motion for 

Determination of Validity of Claim of Lien of DTRIC” and argued 

that DTRIC was not entitled to reimbursement under HRS § 386-8 

for the WC benefits it had previously paid Moranz because: 

(1) DTRIC could not prove “duplication” within the settlement of 

the WC benefits it had paid, (2) DTRIC was entitled only to 

reimbursement of special damages for “medical and rehabilitative 

expenses and lost income” and the settlement was for “general 

damages only,” and (3) considering equitable principles, Moranz 

would not be “made whole by receiving only a portion” of the 

settlement. Moranz also alleged that DTRIC had failed to 

provide her with WC documentation, which “necessitated” bringing 

the lawsuit against Harbor Mall, and that DTRIC continued to 

refuse to cooperate and provide her with necessary WC 

documentation. 

DTRIC maintained that it was entitled to reimbursement 

of WC benefits it had paid Moranz, initially claiming a lien in 

 

4 The Honorable Randal G.B. Valenciano presided.
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the amount of $66,177.35.5 DTRIC asserted that, under HRS § 386-

8 and Alvarado, it was entitled to the entire amount of its lien 

less “reasonable attorney fees and its proportional share of 

cost of litigation.” DTRIC contended that HRS § 386-8 and case 

law did not support Moranz’s argument that only special or 

duplicated damages were eligible for reimbursement. DTRIC 

 

5 DTRIC claimed in its Memorandum in Opposition it paid $63,518.41 

in WC benefits ($30,747.48 in medical benefits, $20,276.43 in indemnity 

benefits, and $12,494.50 in vocational rehabilitation benefits) to Moranz. 

However, based on a declaration from DTRIC Claims Examiner Aurelia C. 

Gamponia, it appeared DTRIC had paid only $63,245.41 in benefits ($30,474.48 

in medical benefits, $20,276.43 in indemnity benefits, and $12,494.50 in 

vocational rehabilitation benefits). This discrepancy appears to stem from a 

clerical error in a figure Gamponia used in her declaration: $30,474.48 in 

medical benefits as opposed to the correct $30,747.48 figure. The error 

discussed above does not explain the $2,658.94 difference between the WC 

benefits paid and the total lien amount claimed by DTRIC in its Opposition.

In a later filing, DTRIC changed its requested lien figure to 

$63,518.41, which represents the amount of WC benefits DTRIC claimed it had 

paid Moranz. 

DTRIC filed a separate memorandum under seal containing its 

Alvarado calculations. In its memorandum, DTRIC categorized $125,816.72 in 

permanent partial disability benefits as “calculable future benefits,” which 

led to a negative lien figure in step 3, as its share exceeded its WC 

expenditures. However, DTRIC represented its figure for “paid compensation”

as the appropriate lien figure in step 5. DTRIC also noted it would be 

entitled to exhaust $125,816.72 in future benefits against Moranz’s remaining 

recovery: 

(1) $63,518.41 [paid comp.] + $125,816.72 [future benefits] 

$200,000.00 [Harbor Mall settlement] = 95%

(2) 95% x $93,000.00 [costs and fees] = $88,350.00

[DTRIC’s share]

(3) $63,518.41 [paid comp.] - $88,350.00 

[share] = -$23,831.55 [lien]

(4) $200,000.00 [Harbor Mall settlement] - $4650.00 

[remainder of costs and fees] = $195,350.00

(5) $195,350.00 - $63,518.41 [lien] = $131,831.59 

(6) $131,831.59 - $125,816.72 [future benefits] = 

$6014.87 [remainder]
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argued that it was also entitled to a credit on future benefits, 

that is, relief from the obligation to make further compensation 

payments, up to Moranz’s net recovery from the Harbor Mall 

settlement. 

At oral argument on the Motion, Moranz asked the 

circuit court to resolve three issues: (1) the amount, if any, 

of the Harbor Mall settlement that should be eligible for 

reimbursement to DTRIC; (2) the amount of DTRIC’s lien; and 

(3) DTRIC’s entitlement to a credit against future benefits. 

Moranz emphasized that this court regarded the Alvarado formula 

as a “starting point” for reimbursement, and argued that the 

circuit court’s discretion was not limited to determining an 

insurer’s “share” of attorney’s fees and costs. Moranz also 

asked the circuit court to apply the “make-whole” doctrine, 

which would prioritize the Moranz’s right to recovery over 

DTRIC’s right to reimbursement. DTRIC argued that Moranz sought 

to “avoid the lien issue” by claiming DTRIC could not recover 

from a settlement designated as “general damages only.” DTRIC 

emphasized that HRS § 386-8 limited the circuit court’s power to 

setting reasonable attorney’s fees and costs. DTRIC objected to 

the reliance on equitable remedies such as the “make-whole” 

doctrine where, as here, there was an established method (i.e., 

the Alvarado formula) to determine its lien and “share” of costs 

and fees. DTRIC also represented to the circuit court that a WC 
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settlement of $125,816.726 (“DTRIC settlement”) based on 

permanent partial disability liability was currently pending 

approval by the Department of Labor and Industrial Relations 

(“DLIR”). 

The circuit court noted that a ruling that settlements

designated “general damages only” cut off an insurer’s right to

reimbursement would create “a tidal wave of general damages 

claims to avoid these liens[.]” The circuit court upheld 

DTRIC’s right to reimbursement from the Harbor Mall settlement, 

and found that while DTRIC had generally consented to the 

settlement, it had not agreed to reducing its lien.7 Thus, the 

circuit court held that DTRIC was “entitled to assert its lien.” 

The circuit court clarified that the “only reduction” needed was 

for “reasonable litigation expenses and the amount of attorney’s 

fees,” pursuant to HRS § 386-8 and Alvarado. The circuit court 

 

6 DTRIC and Moranz signed a Stipulation and Settlement Agreement 

and Order on September 1, 2016, which included: $19,671.43 for temporary 

total disability, $605.00 for lost wages, $125,316.72 for permanent partial 

disability, and $500.00 for disfigurement. To avoid confusion, see infra

note 12, for the purposes of this opinion, “DTRIC settlement” refers to the 

$125,316.72 for permanent partial disability plus the $500.00 for 

disfigurement, for a total amount of $125,816.72.

7 DTRIC communicated its consent to the Harbor Mall settlement in a 

letter sent to Moranz on March 12, 2016, and filed its formal consent to the 

settlement on September 12, 2016. In its March 12 letter to Moranz, DTRIC 

stated that it would consent to a settlement with Harbor Mall “provided the 

settlement is $200,000.00 or more[,]” but noted that “the issues regarding 

the lien repayment to DTRIC and applicability of the [future] credit 

[available to DTRIC] have yet to be determined.” 
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directed the parties to calculate the appropriate deductions in 

accordance with Alvarado. 

3. DTRIC Settlement8

On September 1, 2016, DTRIC and Moranz signed a 

Stipulation and Settlement Agreement and Order for the DTRIC 

settlement. The $125,816.72 DTRIC settlement was transmitted to 

the DLIR for approval on September 12, 2016, and approved on 

September 28, 2016. Following this approval, on October 18, 

2016, DTRIC “made payment” of $19,732.89 to Moranz, which

reflected: a settlement in the amount of $125,316.72,9 minus 

$5,927.13 of attorney’s fees and costs and a $99,656.70 

“subrogation credit” for its lien. 

4. Disputes Over Alvarado Calculations

There was lengthy correspondence between the parties 

to resolve the form of the circuit court’s order and to 

determine the correct Alvarado calculations. 

 

8 Due to what appears to be a mistake on DTRIC’s part, the DTRIC 

settlement was not pending approval at the time of the August 23 hearing, as 

DTRIC had represented to the circuit court. The DTRIC settlement was 

transmitted to the Director of the DLIR for approval on September 12, 2016.

9 Although the correct amount of the DTRIC settlement is 

$125,816.72, DTRIC based its October 18, 2016 payment to Moranz on an amount 

of $125,316.72. See supra note 6; infra note 12.
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On September 15, 2016, Moranz submitted a proposed 

order and Alvarado calculations to the circuit court.10 Moranz 

used the below numbers in her calculations: 

DTRIC’s paid compensation:11 $63,245.41

(WC benefits paid to Moranz)

DTRIC’s calculable future benefits: $125,816.72

(DTRIC settlement)

DTRIC’s share of fees and costs: $89,140.17

Based on the above calculations, Moranz concluded that because 

DTRIC’s “share” of fees and costs ($89,140.17) exceeded its 

“paid compensation” ($63,245.41), DTRIC was due no reimbursement 

from the $200,000.00 Harbor Mall settlement. Moranz contended 

that if she received the Harbor Mall settlement before the DTRIC 

settlement, DTRIC would not be entitled to a lien. However, 

 

10 On September 27, 2016, Moranz submitted a proposed order to the 

circuit court that was identical to her September 15 submission except that 

the caption had been updated to reflect that DTRIC had been accepted as a 

plaintiff-intervenor. 

11 “Paid compensation” refers to both “amount of [WC] expended” and

“total compensation already expended to date.” Alvarado, 92 Hawaiʻi at 518–

19, 993 P.2d 552–53. Our example in Alvarado confirms these terms are 

synonymous:

Assume a settlement in the amount of $200,000, attorney’s 

fees and costs totaling $60,000, [WC] expenditures to date 

equaling $100,000, and it is agreed that the injured 

employee will require $25,000 in future [WC] benefit 

payments. The fraction would be (1) $100,000 plus $25,000 

divided by $200,000 or .625. This fraction should then be 

(2) multiplied by $60,000, or $37,500. This share should 

then be (3) subtracted from the $100,000 compensation paid, 

resulting in a lien of $62,500. 

Id. at 520, 993 P.2d at 554 (emphasis added). 
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Moranz conceded that if DTRIC paid the DTRIC settlement before 

she received the Harbor Mall settlement, DTRIC would have a lien 

in the amount of $99,921.96. 

On September 19, 2016, DTRIC submitted a proposed 

order and Alvarado calculations. DTRIC included two versions of 

Alvarado calculations: one in which the DTRIC settlement was 

treated as “paid compensation” and one in which it was treated 

as a “calculable future benefit.” Like Moranz, DTRIC concluded 

that if it paid Moranz the DTRIC settlement before she received 

the Harbor Mall settlement--i.e., if the DTRIC settlement was

categorized as “paid compensation”--DTRIC would have a 

$99,656.70 lien.12 DTRIC also conceded that if Moranz received 

the Harbor Mall settlement before it paid the DTRIC settlement--

i.e., if the DTRIC settlement was categorized as a “calculable 

future benefit”--Moranz would be entitled to the entirety of the 

Harbor Mall settlement, provided that DTRIC would be entitled to 

a $99,656.70 credit against the DTRIC settlement. 

 

12 The circuit court sought clarification from the parties as to why 

their Alvarado calculations resulted in different lien amounts: $99,921.96 

(Moranz) versus $99,656.70 (DTRIC). The discrepancy was due to different 

figures used to calculate future benefits: Moranz used an amount of 

$125,816.72, while DTRIC used $125,316.72. The discrepancy was explained by 

a $500.00 disfigurement payment, which Moranz had factored into future 

benefits, but which DTRIC had not. DTRIC admitted its mistake and confirmed 

that it believed $99,921.96 to be the correct lien amount. 
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On October 27, 2016, DTRIC filed a proposed order

reflecting an updated lien amount of $99,921.96.13 Moranz 

objected to DTRIC’s October 27 proposed order, arguing that 

because “the Alvarado formula is applied at the time of the 

third party settlement[,]” there was no basis to include the 

DTRIC settlement as “paid compensation” because it was still 

pending at the time the Harbor Mall settlement was paid.14 

Moranz proposed the below Alvarado calculations:

Step 1: The fraction equal to the amount of workers’

compensation expended ($63,245.41), plus calculable future

benefits ($125,816.72), divided by the total amount of the

settlement ($200,000) equals 94.53% ($63,245.41 + 

$125,816.72 = $189,062.13 / $200,000 = 94.53%).

Step 2: The fraction, 94.53%, is then multiplied by the 

total amount of attorney’s fees and costs incurred by

the employee in the course of pursuing the recovery action, 

$94,298.29, to determine DTRIC's “share” of Plaintiff’s 

attorneys[sic] fees and costs. Thus, DTRIC’s “share of the 

fees/costs is $89,140.17 (94.53% x $94,298.29

attorneys[sic] fees and costs = $89,140.17).

Step 3: This “share” (computed in steps 1 and 2) is then 

subtracted from the total compensation already expended to 

date, by the employer, in order to determine the first lien 

that the employer may assert against the settlement. The 

Paid Compensation ($63,245.41) less DTRIC’s share of the 

fees and costs ($89,140.17) equals $ -25,894.76 ($89,140.17 

- $63,245.41 = $-25,894.76), a negative number.

Because DTRIC’s share of the fees and costs 

($89,140.17) exceeds the amount of compensation benefits 

paid to date ($63,245.41), there is no reimbursement due 

out of the third party settlement[.] . . 

Step 4: Prior to the execution of the lien, the

remainder of the attorney’s fees and costs should be

 

13 See supra note 12. 

14 As stated above, DTRIC “made payment” on the DTRIC settlement to 

Moranz on October 18, 2016, about a month after Moranz received payment on 

the Harbor Mall settlement on or about September 20, 2016.
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deducted from the settlement corpus. The remainder of the 

attorney’s fees and costs to be deducted is $5,158.12 

($94,298.29 attorneys[sic] fees and costs - $89,140.17 

DTRIC’s share of the fees and costs = $5,158.12). The 

settlement corpus is the full $200,000. The net settlement 

is therefore $105,701.71 ($200,000 - $94,298.29 = 

$105,701.71). . .

Step 5: Then, the amount of the employer’s first lien

(already calculated as compensation expended minus share of 

the attorney’s fees and costs), $-25,894.76 (a negative 

number), would be asserted against the settlement. 

However, a negative number indicates there is no lien due 

out of the settlement proceeds.

On December 5, 2016, the circuit court entered an 

order (“December 5 Order”) denying Moranz’s Motion for 

Determination of Validity of Claim of Lien of DTRIC, and finding 

that DTRIC was entitled to a lien in the amount of $99,921.96

against the Harbor Mall settlement.15 The circuit court entered 

its Judgment on December 27, 2016. The circuit court’s December 

5 Order did not include any Alvarado calculations.

B. Appellate Proceedings

1. ICA Appeal

On appeal to the Intermediate Court of Appeals 

(“ICA”), Moranz presented three points of error, claiming the 

circuit court erred when it: (1) declined to consider common 

law and equitable principles to limit DTRIC’s subrogation and 

reimbursement rights; (2) awarded a lien based on unpaid 

 

15 The circuit court did not include in its Order a copy of the 

Alvarado calculations it used. It appears the court used the latest 

calculations and order proposed by DTRIC, which calculated a lien of 

$99,921.96: $63,245.41 [past WC benefits] + $125,816.72 [DTRIC settlement] = 

$189,062.13 [total paid compensation] - $89,140.17 [DTRIC’s share of 

attorney’s fees and costs] = $99,921.96 [first lien].
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benefits; and (3) relied on unpaid future compensation when 

calculating the lien reduction for attorney’s fees and costs. 

The ICA affirmed the circuit court’s December 5 Order and 

December 27 Judgment. First, the ICA held that the circuit 

court correctly interpreted HRS § 386-8 and found that the 

statute’s “plain and unambiguous terms do not provide or allow 

for the [application of] equitable considerations[.]” Next, the 

ICA concluded that the circuit court did not err in calculating 

the amount of DTRIC’s lien. The ICA reasoned that because 

Moranz had “executed a stipulated [WC] settlement” before the 

circuit court entered its December 5 Order, the circuit court 

did not err in including the $125,816.72 DTRIC settlement as 

“paid compensation” in calculating DTRIC’s lien. The ICA 

calculated the same lien amount--$99,921.96--as the circuit 

court and included the following Alvarado calculations:16

Step 1: The fraction equal to the amount of workers’

compensation expended, plus calculable future

benefits, divided by the total amount of the

settlement equals .9453 ($189,062.13 ÷ $200,000).

Step 2: The fraction is multiplied by the total amount

of reasonable attorney’s fees and costs incurred by

 

16 Like DTRIC and the circuit court, the ICA used the $189,062.13 

figure for DTRIC’s paid compensation, comprised of:

$30,474.48 medical expenses

$20,276.43 indemnity payments

$12,494.50 vocational rehab

$125,316.72 DLIR Settlement (permanent partial disability)

$500.000 disfigurement

——————————————————————————————————————————————————————————

$189,062.13 Paid Compensation
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Moranz in the recovery action, which results in

DTRIC's “share” of $89,140.17 (.9453 x $94,298.29).

Step 3: This “share” is subtracted from the total

compensation already expended to date, by the

employer, which is the first lien in the amount of

$99,921.96 ($189,062.13-$89,140.17) that DTRIC may

assert against the settlement amount.

Step 4: Prior to the execution of the lien, the

remainder of the attorney’s fees and costs should be

deducted from the settlement corpus, resulting in

$194,841.88 ($200,000-$5,158.12).

Step 5: The amount of the employer’s first lien may be

asserted against the settlement, $194,841.88-

$99,921.96.

Step 6: If a portion of the settlement corpus remains

after the employer’s execution of the lien, the

employee is entitled to that remainder, which is

$94,919.92.

2. Application for Writ of Certiorari 

Moranz filed a timely Application for Writ of 

Certiorari with this court on March 18, 2021. In her

application, Moranz presents two questions: (1) whether the ICA 

gravely erred in interpreting HRS § 386-8 without considering 

equitable subrogation principles when determining the insurer’s 

right of reimbursement; and (2) whether the ICA gravely erred in 

interpreting HRS § 386-8 “to allow an insurer to claim

unexpended future benefits in its right of reimbursement.” 

Moranz’s Application was granted.

III. STANDARDS OF REVIEW

A. Statutory Interpretation

“Statutory interpretation is a question of law 

reviewable de novo.” State v. Wheeler, 121 Hawaiʻi 383, 390, 219 
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P.3d 1170, 1177 (2009) (internal quotation marks omitted). This 

court’s construction of statutes is guided by the following:

First, the fundamental starting point for statutory 

interpretation is the language of the statute itself. 

Second, where the statutory language is plain and 

unambiguous, our sole duty is to give effect to its plain 

and obvious meaning. Third, implicit in the task of 

statutory construction is our foremost obligation to 

ascertain and give effect to the intention of the 

legislature, which is to be obtained primarily from the 

language contained in the statute itself. Fourth, when 

there is doubt, doubleness of meaning, or indistinctiveness 

or uncertainty of an expression used in a statute, an 

ambiguity exists.

Id. (quoting Citizens Against Reckless Dev. v. Zoning Bd. of 

Appeals of Honolulu, 114 Hawaiʻi 184, 193–94, 159 P.3d 143, 152–

53 (2007)). When there is ambiguity in a statute, “the meaning 

of the ambiguous words may be sought by examining the context, 

with which the ambiguous words, phrases, and sentences may be 

compared, in order to ascertain their true meaning.” Id. A 

court may also resort to extrinsic aids in determining 

legislative intent, such as legislative history or the reason 

and spirit of the law. Id.

IV. DISCUSSION

A. The ICA Did Not Err by Declining to Consider Equitable

Subrogation Principles When Determining DTRIC’s Right of 

Reimbursement Under HRS § 386-8

Moranz argues that common law equitable subrogation 

principles should apply to limit DTRIC’s right of reimbursement 

under HRS § 386-8. The ICA rejected this argument, finding that 

HRS § 386-8’s “plain and unambiguous terms do not provide or 
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allow for” the application of equitable principles. The ICA is 

correct: the language of HRS § 386-8 is plain and unambiguous, 

such that it would be inappropriate to use equitable principles 

in its interpretation.

When interpreting a statute, “the fundamental starting 

point . . . is the language of the statute itself” and “where 

the statutory language is plain and unambiguous, [this court’s]

sole duty is to give effect to its plain and obvious meaning.” 

Wheeler, 121 Hawaiʻi at 390, 219 P.3d at 1177 (quoting Citizens 

Against Reckless Dev., 114 Hawaiʻi at 193–94, 159 P.3d at 152–

53). Thus, we turn to the language of HRS § 386-8, which 

provides that when an injured employee reaches a settlement with 

a third party, the employee’s WC insurer is entitled to 

reimbursement out of that settlement:

(f) If the action is prosecuted by the employee alone, the 

employee shall be entitled to apply out of the amount of 

the judgment for damages, or settlement in case the action 

is compromised before judgment, the reasonable litigation 

expenses incurred in preparation and prosecution of the 

action, together with a reasonable attorney’s fee, which 

shall be based solely upon the services rendered by the 

employee's attorney in effecting recovery both for the 

benefit of the employee and the [insurer]. After the 

payment of the expenses and attorney’s fee, there shall be 

applied out of the amount of the judgment or settlement 

proceeds, the amount of the [insurer]’s expenditure for 

compensation, less the [insurer]’s share of the expenses 

and attorney's fee. On application of the [insurer], the 

court shall allow as a first lien against the amount of the 

judgment for damages or settlement proceeds, the amount of 

the [insurer]’s expenditure for compensation, less the 

[insurer]’s share of the expenses and attorney's fee.

HRS § 386-8(f) (emphasis added). The statute requires such 

settlements to be approved in writing by both the employee and 
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the insurer in order to be valid, and clarifies that “[t]he 

entire amount of the settlement after deductions for attorney’s 

fees and costs as provided in this section is subject to the 

[insurer]’s right of reimbursement for the [insurer]’s 

compensation payments under this chapter and the [insurer]’s 

expenses and costs of action.” HRS § 386-8(d) (emphasis added).

The language of HRS § 386-8 is plain and unambiguous: 

an insurer is entitled to the “amount of the [insurer]’s 

expenditure for compensation” less its “share” of costs and 

fees, deducted from the “entire amount of the settlement.” HRS 

§ 386-8(d), (f). HRS § 386-8(f) states plainly that the insurer 

is entitled to reimbursement of its “expenditure for 

compensation”; there is no additional language limiting 

reimbursement to “special damages” or those benefits the insurer 

can prove are “duplicated” by the settlement. HRS § 386-8(d) 

also states plainly that the “entire amount of the 

settlement . . . is subject to the [insurer]’s right of 

reimbursement.” (emphasis added). The statute’s use of the 

word “entire” is logically opposed to any argument that DTRIC is 

entitled only to reimbursement from a portion of the settlement. 

Had the legislature intended to limit an insurer’s reimbursement 

to a portion of the employee’s third-party settlement, it could 

have done so by expressly limiting reimbursement in HRS § 386-8 

to duplicated benefits or special damages, or to only a portion 
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of the employee’s recovery.17 The legislature did no such thing. 

The language of HRS § 386-8 unambiguously indicates that an 

insurer is entitled to reimbursement from the entire settlement 

amount, and we decline to use equitable principles to alter this 

interpretation. 

Likewise, nothing in Alvarado constitutes an 

endorsement of using equitable principles to adjust the amount 

of an insurer’s reimbursement or an employee’s recovery under

HRS § 386-8, beyond adjusting the insurer’s “share” of costs and 

fees. While we stated in Alvarado that the formula is a 

“starting point[] in determining an employer’s share of 

reasonable attorney’s fees and costs[,]” we also explained that 

“the circuit court retains the discretion to consider each case 

on its merits” if the court finds that the insurer’s “share” is 

“not reasonable in light of the particular circumstances of a 

 

17 See, e.g., HRS § 392-46 (stating that “the insurer . . . 

providing disability benefits shall be subrogated to, and have a lien upon, 

the rights of the individual against the third party to the extent that the 

damages include wage loss during the period of disability for which temporary 

disability benefits were received in the amount of such benefits” (emphasis 

added)); HRS § 431:10C-307 (“Whenever any person effects a tort liability 

recovery for accidental harm, whether by suit or settlement, which duplicates 

personal injury protection benefits already paid under the provisions of this 

article, the motor vehicle insurer shall be reimbursed fifty per cent of the 

personal injury protection benefits paid to or on behalf of the person 

receiving the duplicate benefits up to the maximum limit.” (emphasis added)); 

HRS § 663-10(a) (“The judgment entered . . . shall include a statement of the 

amounts, if any, due and owing to [a valid lienholder] and to be paid to the 

lienholder out of the amount of the corresponding special damages recovered 

by the judgment or settlement.” (emphasis added)); HRS § 346-37 (“The lien 

shall be satisfied from that portion of the settlement, award, or judgment 

allocated or allocable to payments by the department for medical assistance 

and burial payments.” (emphasis added)). 
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case[.]” 92 Hawaiʻi at 520, 993 P.2d at 554 (emphasis added). 

For example, if an insurer “does not cooperate and/or hinders an 

employee’s attempt to pursue recovery,” id., the circuit court 

might order the insurer to pay a larger “share” because the 

insurer’s bad faith actions directly increased costs and fees

and it would be unfair to force the employee to shoulder these 

higher costs and fees proportionally. However, discretion 

extends only to a court’s ability to “determin[e] an [insurer]’s 

share of reasonable attorney’s fees and costs.” Id. Our 

emphasis in Alvarado on exacting a “share” from the insurer that 

reflects reasonable costs and fees parallels the language of HRS 

§ 386-8, which entitles an employee

to apply out of the amount of the judgment . . . or 

settlement . . . the reasonable litigation expenses 

incurred in preparation and prosecution of the action, 

together with a reasonable attorney’s fee, which shall be 

based solely upon the services rendered by the employee’s 

attorney in effecting recovery both for the benefit of the 

employee and the [insurer]. 

HRS § 386-8(f) (emphasis added). Thus, while the circuit court 

retains discretion to adjust what “share” of costs and fees it 

deems reasonable to impose on an insurer, there is no basis in 

the language of HRS § 386-8 to conclude that the circuit court 

also has discretion to (1) decrease the reimbursement due an 

insurer or (2) increase the remainder of the settlement 

ultimately awarded to an injured employee who the court feels is 

not “made whole” by her recovery. 
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In the present case, the circuit court could have 

determined that DTRIC’s “share” of attorney’s fees and costs of 

$89,140.17, calculated under the Alvarado formula, was not 

reasonable, especially given Moranz’s allegations that DTRIC 

failed to cooperate in and hindered her attempt to pursue 

recovery from Harbor Mall. The circuit court could have 

increased DTRIC’s “share” of attorney’s fees and costs, thereby 

increasing Moranz’s recovery. However, the circuit court did 

not make this determination and chose not to adjust DTRIC’s 

“share.” The ICA was correct in rejecting Moranz’s argument 

that equitable or common law subrogation principles apply to HRS 

§ 386-8.

B. The ICA Erred by Including the DTRIC Settlement as Paid 

Compensation Under the Alvarado Formula

Moranz argues that the $125,816.72 DTRIC settlement

should have been treated as a “calculable future benefit” rather 

than “paid compensation” in DTRIC’s lien calculation because she 

received the DTRIC settlement payment after she received the 

Harbor Mall settlement payment. The ICA rejected this argument, 

finding that the DTRIC settlement was properly regarded as “paid 

compensation” at the time of the circuit court’s December 5 

Order, resulting in a lien calculation of $99,921.96. The ICA 

was incorrect; the DTRIC settlement should have been included as 

a “calculable future benefit” under the Alvarado formula.
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The issue here, then, is: at what point in time is an 

item previously categorized as a “calculable future benefit” 

properly regarded as “paid compensation”? The resolution of 

this issue turns on when the Alvarado calculation is performed. 

Under Moranz’s approach, the key date (i.e., the date on which 

Alvarado calculations should occur) is the day on which the 

third-party recovery is received by the employee; any WC 

benefits or settlement paid after receipt of the third-party 

recovery is not “paid compensation,” but rather, a “calculable 

future benefit” under the Alvarado formula. Under the approach

used by the ICA, the key date is the day on which the circuit 

court enters its order; any WC benefits or settlement paid 

before the circuit court’s order is “paid compensation,” and 

anything paid after the circuit court’s order is a “calculable 

future benefit.” Under the ICA approach, the date on which the 

third-party recovery is received by the employee is irrelevant.

In the present case, Harbor Mall transmitted its 

settlement check on September 16, 2016 and Moranz received the 

payment on or about September 20, 2016. DTRIC did not transmit 

its settlement check until October 18, 2016, though Moranz and 

DTRIC had previously signed a “Stipulation and Settlement 

Agreement and Order” for the DTRIC settlement on September 1, 

2016. 
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The most sensible date on which to perform Alvarado

calculations is the date on which the employee receives the 

third-party recovery. As we stated in Alvarado, “this court is 

bound to construe statutes so as to avoid absurd results.” 92 

Hawaiʻi at 517, 993 P.2d at 551. Therefore, a statutory 

interpretation that is “rational, sensible[,] and 

practicable . . . is preferred to one which is unreasonable[,] 

impracticable . . . inconsisten[t], contradict[ory], and 

illogical[ ].” Id. (quoting Keliipuleole v. Wilson, 85 Hawaiʻi 

217, 221–22, 941 P.2d 300, 304–05 (1997)). It is practicable to 

direct circuit courts to categorize benefits based on the date 

of the third-party recovery: any WC benefits paid before the 

employee receives the third-party recovery is “paid 

compensation,” any WC benefits paid after is a “calculable 

future benefit.” 

This approach is consistent with HRS § 386-8, titled 

“Liability of third person,” as the language therein focuses on 

the pursuit of third-party recovery. The legislative history of 

HRS § 386-8 recognizes that a third-party action can result in 

“recovery from a third person which benefits both the employee 

and the [insurer,]” even when the action is prosecuted by the 

insurer or employee alone. H. Stand. Comm. Rep. No. 375, in 

1973 House Journal, at 912 (emphasis added); see also S. Stand. 

Comm. Rep. No. 864, in 1973 Senate Journal, at 974 (stating 
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similar). Thus, HRS § 386-8’s provisions ensure that an 

employee and insurer share proportionally: (1) liability for 

the costs and fees associated in bringing the third-party action 

and (2) recovery from any judgment or settlement. Given this 

focus on the third-party action, the relevant timeline is the 

duration of such third-party action, and the date on which the 

insurer’s Alvarado “share” (i.e., its liability for costs and 

fees) should be calculated is the date on which the third-party 

action is brought to an end, by way of either judgment or 

settlement.

This approach is also consistent with our opinion in 

Alvarado, which uses an illustrative example to clarify that an 

employer’s “share” is subtracted from “compensation paid,” and 

not from “compensation paid” plus “future [WC] benefit 

payments.” Alvarado at 520, 993 P.2d at 554. 

Because Moranz received the Harbor Mall settlement on 

or about September 20, 2016, before DTRIC paid the DTRIC 

settlement for future WC benefits on October 18, 2016, the DTRIC 

settlement is properly regarded as a “future calculable benefit”

under the Alvarado formula. Defining the DTRIC settlement as

“future benefits” rather than “paid compensation” results in

DTRIC’s “share” of costs and fees exceeding its “paid 

compensation.” Thus, DTRIC is not, as the ICA held, entitled to 

a lien in the amount of $99,921.96; Moranz is correct that DTRIC 
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is not entitled to any lien. However, where an employee obtains

a third-party settlement, under HRS § 386-8, DTRIC is entitled 

to reimbursement out of the settlement for its “paid 

compensation” and is relieved from further compensation payments 

up to the balance of the settlement after deduction of fees and 

costs.18 HRS § 386-8(d), (i).

Given that the parties agree that DTRIC has paid 

$63,245.41 in past WC benefits, the proper Alvarado calculations 

are as follows:

Step 1: Calculate the fraction equal to “paid 

compensation” ($63,245.41, past WC benefits) plus 

“calculable future benefits” ($125,816.72, DTRIC 

settlement), divided by the total amount of the

Harbor Mall settlement ($200,000.00)

$63,245.41 + $125,816.72 = $189,062.13 / 

$200,000.00 = 0.9453

Step 2: The fraction (0.9453) is then multiplied 

by the attorney’s fees and costs incurred by

Moranz in pursuing the action against Harbor Mall

($94,298.29) to determine DTRIC's “share” of the 

attorney’s fees and costs

0.9453 x $94,298.29 = $89,140.17

Step 3: This “share” ($89,140.17) is then 

subtracted from “paid compensation” ($63,245.41) 

 

18 See HRS § 386-8(d) (“The entire amount of the settlement after 

deductions for attorney’s fees and costs . . . is subject to the [insurer]’s 

right of reimbursement for the [insurer]’s compensation payments . . .”); id.

§ 386-8(i) (“After reimbursement for the [insurer]’s compensation payments, 

the [insurer] shall be relieved from the obligation to make further 

compensation payments to the employee under this chapter up to the entire 

amount of the balance of the settlement or the judgment, if satisfied, as the 

case may be, after deducting the cost and expenses, including attorneys’

fees.”).
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to determine the first lien that DTRIC may assert 

against the Harbor Mall settlement

$63,245.41 - $89,140.17 = -$25,894.76 

Step 3, above, shows that DTRIC’s “share” of attorney’s fees and 

costs ($89,140.17) exceeds its “paid compensation” ($63,245.41) 

by $25,894.76. Because Step 3 of the Alvarado formula yields a 

negative number due to DTRIC’s “share” exceeding its “paid 

compensation,” DTRIC has no lien, but must still contribute its 

full pro rata “share” of attorney’s fees and costs. DTRIC owes 

its full “share,” regardless of the amount it has contributed in 

“paid compensation” versus “calculable future benefits” in 

recognition of the fact that “the [employee’s] attorney guarded 

[DTRIC]’s interests . . . when [DTRIC]’s attorney had not been 

active in litigation.” Alvarado at 519, 993 P.2d at 553; see

also Takahashi v. Loomis Armored Car Serv., 625 F.2d 314, 316 

(9th Cir. 1980) (“[T]he assessment against the employer for its 

pro rata share of the attorney’s fee in the third party tort 

recovery [is] . . . measured by his total compensation liability 

under the act, however much the obligation may remain 

unfulfilled at the time of the third party recovery, rather than 

the compensation payments then actually made to the work[er].”) 

(quoting Teller v. Major Sales, Inc., 313 A.2d 205, 207 (N.J. 

1974)). Thus, DTRIC owes its full original “share” of Moranz’s 

attorney’s fees and costs:
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Step 3a: DTRIC owes its full original “share” 

($89,140.17) toward Moranz’s attorney’s fees and 

costs ($94,298.29)

$94,298.29 (full amount of Moranz’s attorney’s 

fees and costs) - $89,140.17 (DTRIC’s “share” of 

attorney’s fees and costs) = $5,158.12 (Moranz’s 

“share” of attorney’s fees and costs)

Moranz owes her “share” of attorney’s fees and costs, taken out 

of the Harbor Mall settlement:

Step 4a: Moranz’s “share” of attorney’s fees and 

costs ($5,158.12) is deducted from the 

$200,000.00 Harbor Mall settlement

$200,000.00 - $5,158.12 = $194,841.88

However, under HRS § 386-8(d), DTRIC is still entitled to 

reimbursement of its “paid compensation”: 

Step 5a: DTRIC is entitled to reimbursement of 

its “paid compensation” ($63,245.41) 

$194,841.88 (remainder of Harbor Mall settlement 

after deduction of Moranz’s “share” of attorney’s 

fees and costs) - $63,245.41 (DTRIC’s “paid 

compensation”)= $131,596.47

Further, under HRS § 386-8(i) and Alvarado, 92 Hawaiʻi at 520 

nn.4–5, 993 P.2d at 554 nn.4–5, Moranz must draw “future 

benefits,” including the $125,816.72 DTRIC settlement, from her

$131,596.47 recovery. DTRIC, in turn, is “relieved from the 

obligation to make further compensation payments to the 

employee . . . up to the entire amount of the balance of the

settlement or the judgment[.]” HRS § 386-8(i). Moranz is then 
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entitled to the $5,779.75 remainder of the $200,000.00 Harbor 

Mall settlement:

Step 6: Moranz must collect “calculable future 

benefits” (e.g., the $125,816.72 DTRIC 

settlement) from the remainder of the Harbor Mall 

settlement

$131,596.47 (remainder of Harbor Mall settlement)

- $125,816.72 (DTRIC settlement) = $5,779.75 net

recovery to Moranz from the $200,000.00 Harbor 

Mall settlement 

Under these calculations, DTRIC pays approximately 95% of 

attorney’s fees and costs ($89,140.17 “share” of $94,298.29), 

and, therefore, has a gross recovery of approximately 95% of the 

Harbor Mall settlement, not taking into account its obligation 

regarding attorney’s fees and costs: DTRIC recovers a

$63,245.41 reimbursement for its “paid compensation” and is 

relieved from paying $125,816.72 in “calculable future benefits”

($189,062.13 of $200,000.00 settlement). Likewise, Moranz pays 

approximately 5% of attorney’s fees and costs ($5,158.12 “share”

of $94,298.29) and her gross recovery is approximately 5% of the 

settlement ($10,937.87 of $200,000.00 settlement), not taking 

into account her obligation regarding attorney’s fees and costs. 

This outcome is also consistent with the general 

principle that the employee should not receive double recovery, 

that is, both WC benefits and a third party settlement. See

First Ins. Co. v. A&B Properties, 126 Hawaiʻi 406, 418, 271 P.3d 

1165, 1177 (2012) (“Under [HRS § 386-8’s] framework, and 
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consistent with the general notion of avoiding double recovery 

for an employee, the employer recovers any money that it 

advanced as compensation, with the excess going to the 

employee.”); 82 Am. Jur. 2d Workers’ Compensation § 13 (2021) 

(“A substantial part of the legislative purpose and intent of a 

[WC] statute is to provide for subrogation and prevent double 

recovery.”). Here, it cannot be said that Moranz receives

unfair double recovery because she recovers only $5,779.75 (paid 

by Harbor Mall) in excess of her WC benefits (paid by DTRIC). 

Indeed, the above calculations--wherein DTRIC recoups its total 

WC liability of $189,062.13, Harbor Mall pays $200,000.00 in 

damages, and Moranz receives a net recovery of $5,779.75--is 

fair to all of the parties to the Harbor Mall action: DTRIC, 

“the [insurer], who, in a fault sense, is neutral, comes out 

even;” Harbor Mall, “the third [party,] pays exactly the damages 

[it] would ordinarily pay[;]” and Moranz, “the employee[,] gets 

a fuller reimbursement for actual damages sustained than is 

possible under the compensation system alone.” 1 Lex K. Larson, 

Larson’s Workers’ Compensation Law § 110.02 (Matthew Bender, 

Rev. Ed. 2021).

The above method of computation most clearly reflects 

the language of HRS § 386-8 where an insurer’s “share” of 

attorney’s fees and costs exceeds the amount of its “paid 

compensation.”
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V. CONCLUSION

For the foregoing reasons, the ICA’s December 15, 2020 

Memorandum Opinion and January 22, 2021 Judgment on Appeal 

affirming the circuit court’s December 5, 2016 Order and 

December 27, 2016 Judgment are vacated, and the case is remanded 

to the circuit court for further proceedings consistent with 

this opinion.

Susan L. Marshall, /s/ Mark E. Recktenwald

for petitioner/plaintiffappellant /s/ Paula A. Nakayama 

Ronald M. Shigekane, /s/ Sabrina S. McKenna

for respondent/intervenorappellee /s/ Michael D. Wilson

/s/ Todd W. Eddins