Source: https://www.insurancelawhawaii.com/insurance_law_hawaii/2008/05/?asset_id=6a00e551d65ac7883300e552139c2d8833
Timestamp: 2019-04-22 10:02:09+00:00

Document:
In a recent case, the U.S. District Court for the District of Hawaii determined the insurer's duty to indemnify was unripe for decision because the underlying litigation was still ongoing in state court. See Western World Ins. Co. v. The County of Hawaii, 2008 U.S. Dist. LEXIS 40118 (D. Haw. May 15, 2008).
The Court previously ruled in March that Western World had a duty to defend because there was a possibility of coverage in the underlying state cases. The Court also determined the insurer's duty to indemnify could only be established by the resolution of the issue of liability in the underlying actions.
The insured subsequently filed a Motion for Clarification, essentially arguing the Court should have granted summary judgment on the indemnification issue. The Court disagreed. It was clear that the indemnification issue was not yet ripe. Substantial factual issues needed to be resolved in the underlying actions. A substantive ruling in the coverage case on the indemnification issue would unnecessarily entangle the federal court in an area that was properly being adjudicated in the state court.
Therefore, dismissal without prejudice of Western World's declaratory action on the duty to indemnify was appropriate. Following the resolution of the underlying actions, Western World could re-file its declaratory judgment action on the duty to indemnify should the facts developed in the underlying cases support such a filing.
The Hawaii legislature recently passed HB No. 2224, a bill requiring group health issuers to offer small group health plans to self-employed individuals. The effective date of the bill is September 1, 2008. The bill authorizes the Insurance Commissioner to exempt certain group health plans if the group health issuer does not have the capacity to deliver services adequately to new enrollees given the issuer's obligation to existing employer groups. The bill will be repealed on July 1, 2013.
Although the governor has been busy signing bills, this bill has not yet been signed.
Coverage for an additional insured is typically limited to instances where the insured's negligence causes injury. For example, in First Ins. Co. of Hawaii, Inc. v. State of Hawaii, 66 Haw. 413, 665 P.2d 648 (1983), the state was named as an additional insured in a policy issued to a contractor building a highway for the state. The state was covered "with respect to liability arising out of operations performed for the additional insured by the named insured." An endorsement, however, excluded coverage arising out of any act of the additional insured, "other than general supervision of work performed for the additional insured by the named insured."
When a motorist was killed, the heirs sued both the contractor and the state. The verdict in the underlying suit absolved the contractor, but found the state was 15% negligent. First Insurance refused to indemnify the state. The Supreme Court agreed there was no duty to indemnify because the state was only covered for liability arising from the named insured's negligence or from an act of the state arising from its general supervision of the work performed by the named insured. Since a jury found the named insured was not negligent, the state was not covered. First Ins. Co., 66 Haw. at 424, 665 P.2d at 656.
A similar result was reached in a recent case decided by the New York Court of Appeals. Worth Construction Co., Inc. v. Admiral Insurance Co., No. 52 (N.Y. Ct. App. May 1, 2008) (found here). Worth Construction Co. was hired to construct an apartment complex. Worth subcontracted with Pacific Steel for construction of a staircase and hand railings. Pacific provided a commercial general liability policy naming Worth as an additional insured. The additional insured endorsement provided Worth was an insured, but only with respect to liability arising out of Pacific's operations.
Pacific completed the installation of the staircase and left the job site. Concrete then had to be poured before Pacific could return to install the hand railings. Before Pacific returned, plaintiff was injured when he slipped on a fireproofing installed by another subcontractor. Pacific played no role in contracting for or applying the fireproofing.
The plaintiff sued the owner and Worth. Worth sought a defense and indemnification from Pacific's insurer, Farm Family, but the tender was denied. Worth then filed a third-party complaint against Pacific in the underlying case. Worth also sued Farm Family for declaratory relief.
In the underlying case, Worth eventually conceded that Pacific was not negligent and should be dismissed. Farm Family then moved for summary judgment in the declaratory relief action, asserting that Worth now conceded the underlying plaintiff's injury did not arise out of Pacific's work or operations. The motion was granted.
The Court of Appeal affirmed. Pacific's operations involved only the installation of a staircase and handrails. A separate company was responsible for applying the fireproofing material. At the time of the accident, Pacific was not on the job site. By admitting in the underlying case Pacific was not negligent, Worth could no longer argue in the coverage action that there was any connection between plaintiff's injury and the risk for which coverage was intended. Therefore, the result was similar to that in First Ins. Co.
The Intermediate Court of Appeals recently decided two cases regarding a doctor's billing disputes with Island Insurance Company, Ltd. See Jou v. Schmidt, No. 27369, 2008 Haw. App. LEXIS 213 (Haw. Ct. App. April 29, 2008); Jou v. Schmidt, No. 27370, 2008 Haw. App. LEXIS 215 (Haw. Ct. App. April 30, 2008).
In No. 27369, Island reduced reimbursement claims submitted by the doctor for services rendered to Island's insured, but never provided formal notice pursuant to Haw. Rev. Stat. 431:10C-304 (3)(B). Both the Insurance Commissioner and Circuit Court determined statutory notice was not required for billing disputes on no-fault benefits, only for denial of claims. The ICA reversed, in light of the Supreme Court's decision in Orthopedic Assocs. of Hawaii, Inc. v. Haw'n Ins. & Guar. Co., Ltd, 109 Haw. 185, 124 P.2d 930 (2005). There, the Supreme Court held the notice requirements were applicable to billing disputes. The same result applied here. The statute's notice requirement was triggered by a partial denial of claims in the form of reduced or partial payments by the insurer. Further, the doctor was entitled to interest under Haw. Rev. Stat. 431:10C-304(4) on the balance withheld by Island. The legislative intent behind the interest provision was to encourage insurers to investigate and act on claims promptly. Failure to do so would result in the payment of interest.
The doctor did not do as well in the second case, No. 27370. There, his invoice for reimbursement was also reduced and no notice was provided. The doctor failed, however, to request an administrative hearing for over two years. The ICA determined even though notice should have been sent by Island under Haw. Rev. Stat. 431:10C-304 (3)(B), the applicable two year statute of limitations, Haw. Rev. Stat. 431:10C-315, was not tolled by the failure to provide notice.

References: v. 
 v. 
 v. 
 v. 
 v. 
 v.