Opinion ID: 2584147
Heading Depth: 2
Heading Rank: 5

Heading: DTRIC's Motion to Dismiss or for Summary Judgment

Text: Jou's fifth point of error asserts that the circuit court erred by granting DTRIC's motion for dismissal, or for summary judgment, inasmuch as [t]he court was violating state law of equitable tolling, the right to sue insurers in tort notwithstanding administrative proceedings, and settled law of third party beneficiaries.
For purposes of clarity, we first address Jou's third sub-argument  that the circuit court erred by concluding that he was not an intended third-party beneficiary to the insurance policy agreements between DTRIC and its insureds. For support, Jou relies heavily on Allstate. However, that reliance is misplaced. In Allstate, Thomas L. Stratham (Stratham), an enlisted member of the United States Navy, was injured in a motorcycle accident on August 21, 1982. 69 Haw. at 291, 740 P.2d at 551. The injured serviceman was initially treated at Castle Memorial Hospital, a civilian medical facility, then transferred to Tripler Army Medical Center. Id. The United States reimbursed Castle Memorial Hospital for the cost of the serviceman's medical care and subsequently made a claim against Stratham's no-fault insurer, Allstate Insurance Company (Allstate). Id. at 292, 740 P.2d at 551. Allstate tendered a check in the amount of the reimbursement that the United States paid to Castle Memorial Hospital but refused to pay the government for the expenses incurred in connection with the serviceman's treatment at Tripler Army Medical Center. Id. The United States then filed a complaint in the United States District Court for the District of Hawai`i. Id. The district court granted judgment in favor of Allstate. Id. On appeal, the United States Court of Appeals for the Ninth Circuit certified the question whether the United States may recover from a serviceman's no-fault insurance carrier the costs of medical care furnished in a government hospital to the serviceman who was injured in a motor vehicle accident. Id. at 291, 740 P.2d at 551. The United States argued before this court that (1) the Hawaii no-fault laws provide a statutory basis for recovery; (2) it is entitled to recover as a third-party beneficiary of the insurance contract; and (3) Allstate has received a windfall and [has] been unjustly enriched and is, therefore, . . . liable . . . for the costs of [the] health care provided. Id. at 294, 740 P.2d at 552 (brackets in original) (ellipses in original). Initially, we noted that the certified question was limited to whether the United States had a statutory basis for recovery, and we therefore stated that we [would] not address the government's contract and equity arguments separately. Id. at 294 n. 7, 740 P.2d at 552 n. 7. Reviewing the Hawai`i Motor Vehicle Accident Reparations Act, then codified as HRS chapter 294, we concluded that the United States may recover the costs of medical care received by Stratham. Id. at 294, 740 P.2d at 552. Under HRS chapter 294, recovery was limited to a person, insured who suffered a loss from accidental harm. Id. at 296, 740 P.2d at 553-54. Nevertheless, we opined that denying the United States' claim was inconsistent with (1) Chapter 294's declared purpose to create a no-fault system of reparations, (2) its limitation of tort liability, (3) its establishment of right to `no-fault benefits' for loss from accidental harm arising out of the operation of a motor vehicle[,] and (4) the comprehensive scheme designed to provide `a speedy, adequate and equitable reparation for those injured or otherwise victimized' by motor vehicle accidents. Id. at 296-97, 740 P.2d at 554 (citations omitted). We thus interpreted the term person, insured to include the United States and the term loss from accidental harm to include the expenses incurred by the United States in connection with Stratham's treatment at Tripler Army Medical Center: [W]e read the terms person, insured and loss from accidental harm in HRS § 294-3(a) [(1985)] expansively to effectuate the avowed legislative purpose of the Motor Vehicle Accident Reparations Act to create a system of reparations for accidental harm and loss arising from motor vehicle accidents, to compensate these damages without regard to fault, and to limit tort liability for these accidents. Id. at 299, 740 P.2d at 556 (citing HRS § 294-1(a) (1985)) (emphasis in original). We added that: [t]o allow [Allstate] to demand and receive from [Stratham] the same insurance premium which it receives from all others not so favorably situated, and then to disclaim liability for the benefits it has agreed to pay because such benefits have been paid by the Government under mandatory requirements of law, would create a windfall in [Allstate's] favor and bring about an unconscionable and inequitable result. Id. at 300, 740 P.2d at 556 (citing United Servs. Auto. Ass'n v. Holland, 283 So.2d 381, 386 (Fla.Dist.Ct.App.1973) (brackets in original). We therefore answered the certified question in the affirmative. Id. Jou is, to some extent, correct that his position as a medical services provider is analogous to the United States' position in Allstate. However, he mischaracterizes the import of that similarity. As mentioned, the sole question in Allstate was whether the United States could recover under the nofault insurance statutory scheme then in effect. Indeed, HRS chapter 294 did not expressly afford medical service providers with a statutory right of action against insurers. See HRS § 294-3(a) (1985) (If the accident causing accidental harm occurs in this State, every person, insured under this chapter, and the person's survivors, suffering loss from accidental harm arising out of the operation, maintenance or use of a motor vehicle has a right to no-fault benefits.); HRS § 294-4(1)(A) (1985) (obligating insurers to pay benefits for accidental harm to any person . . . who sustains accidental harm as a result of the operation, maintenance, or use of the vehicle. . . .). This explains the need to expansively construe the terms person, insured and loss from accidental harm. As such, this court pointed to the inequity that would result from precluding the United States to recover its expenses from Allstate in toto. Here, however, there is no question as to Jou's statutory right to recover. See HRS § 431:10C-304 (obligating the insurer to pay the provider of services on behalf of the injured insured). [8] Rather, Jou argues that Allstate also authorizes recovery in tort. In that regard, Jou appears to suggest that Allstate supports his assertion that medical providers are intended third-party beneficiaries in the no-fault automobile insurance context. Jou's reading of Allstate is incorrect. In Allstate, this court did not address the United States' claim that it was an intended third-party beneficiary, instead deciding the matter on statutory and equitable grounds. We also disagree with Jou's subsequent assertion that HRS § 431:10C-304 establishes his status as an intended third-party beneficiary. Ordinarily, third-party beneficiary status is a question of fact as to whether the terms of the insurance policy reflect an intent to benefit the provider. See Elsner v. Farmers Ins. Group, Inc., 364 Ark. 393, 220 S.W.3d 633, 636 (2005) (holding that the trial court properly granted defendant-appellee's motion to dismiss inasmuch as there [was] nothing in the contract to indicate that [plaintiff-appellant] was an intended third-party beneficiary. . . .); United States v. United Servs. Auto. Ass'n, 431 F.2d 735, 736 (5th Cir.1970), cert. denied by 400 U.S. 992, 91 S.Ct. 459, 27 L.Ed.2d 440 (1971) (concluding that, under the terms of the policy, the United States was clearly an intended third-party beneficiary); United States v. State Farm Mut. Auto. Ins. Co., 455 F.2d 789, 792 (10th Cir.1972) (We hold that the United States qualifies as a third-party beneficiary under the policy . . . .) (Emphasis added.); Postlewait Constr. Inc. v. Great Am. Ins. Cos., 106 Wash.2d 96, 720 P.2d 805, 807 (1986) (In order to be a third-party beneficiary entitled to recover on an insurance contract, it is not enough that it be intended by one of the parties to the contract and the third person that the latter should be a beneficiary. Both parties must so intend and must indicate that intention in the contract. ) (Citation omitted.) (Emphasis added.); Bergerud v. Progressive Cas. Ins., 453 F.Supp.2d 1241, 1247 (D.Nev.2006) (Whether a party is considered a specific intended third-party beneficiary must be gleaned from reading the contract as a whole in light of the circumstances under which it was entered.) (Citing Canfora v. Coast Hotels & Casinos, Inc., 121 Nev. 771, 121 P.3d 599, 605 (2005).) (Internal quotation marks omitted.); Cal. Emergency Physicians Med. Group v. PacifiCare of Cal., 111 Cal.App.4th 1127, 1138, 4 Cal. Rptr.3d 583, 595 (Cal.Ct.App.2003) (Third party beneficiary status is a matter of contract interpretation.); 17 Lee R. Russ & Thomas F. Segalla, Couch on Insurance 3d § 241:25 at 241-34 (2000) (In order for a third party to maintain an action against an insurer, an intent to make the obligation inure to the benefit of such person must clearly appear in the contract of insurance, and, if any doubt exists, the contract should be construed against such intent.) (Footnotes omitted.). In resolving the foregoing factual inquiry, this jurisdiction follows the framework set forth by the Restatement (Second) of Contracts § 302 (1981), as follows: (1) Unless otherwise agreed between promisor and promisee, a beneficiary of a promise is an intended beneficiary if recognition of a right to performance in the beneficiary is appropriate to effectuate the intention of the parties and either (a) the performance of the promise will satisfy an obligation of the promisee to pay money to the beneficiary; or (b) the circumstances indicate that the promisee intends to give the beneficiary the benefit of the promised performance. (2) An incidental beneficiary is a beneficiary who is not an intended beneficiary. See also Hough v. Pac. Ins. Co., Ltd., 83 Hawai`i 457, 468 n. 15, 927 P.2d 858, 869 n. 15 (1996) (quoting Restatement (Second) of Contracts § 302). Here, Jou does not argue that the insurance policy agreements in the present case recognize him as a third-party beneficiary. Rather, he claims that HRS § 431:10C-304 creates the alleged quasi-contractual relationship by operation of law. HRS § 431:10C-304 states, in relevant part, the following: Every personal injury protection insurer shall provide personal injury protection benefits for accidental harm as follows: (1) Except as otherwise provided in section 431:10C-305(d), in the case of injury arising out of a motor vehicle accident, the insurer shall pay, without regard to fault, to the provider of services on behalf of the following persons who sustain accidental harm as a result of the operation, maintenance, or use of the vehicle, an amount equal to the personal injury protection benefits as defined in section 431:10C-103.5(a) payable for expenses to that person as a result of the injury: (A) Any person, including the owner, operator, occupant, or user of the insured motor vehicle; (B) Any pedestrian (including a bicyclist); or (C) Any user or operator of a moped as defined in section 249-1; provided that this paragraph shall not apply in the case of injury to or death of any operator or passenger of a motorcycle or motor scooter as defined in section 286-2 arising out of a motor vehicle accident, unless expressly provided for in the motor vehicle policy. . . . (Emphases added.) Relatedly, HRS § 431:10C-308.5(f) precludes a provider from billing an insured directly or from recovering from the insured the difference between the provider's full charge and the amount actually paid by the insurer. See HRS § 431:10C-308.5(f) (The provider of services . . . shall not bill the insured directly for those services but shall bill the insurer for a determination of the amount payable. The provider shall not bill or otherwise attempt to collect from the insured the difference between the provider's full charge and the amount paid by the insurer.). Admittedly, these statutory sections impose an obligation on the insurer to pay the provider directly. However, they do not establish Jou's status as an intended third-party beneficiary under the Restatement (Second) as a matter of law. The Restatement (Second) approach contemplates two types of intended third-party beneficiaries: creditor beneficiaries and donee beneficiaries. See Restatement (Second) of Contracts § 302 cmt. b, c. According to the Restatement (Second), a third party is an intended creditor beneficiary under § 302(1)(a) if recognition of a right to performance in the beneficiary is appropriate to effectuate the intention of the parties and . . . the performance of the promise will satisfy an obligation of the promisee to pay money to the beneficiary. . . . At first glance, it may appear that DTRIC's payment to Jou (performance of the promise) would satisfy an obligation of the insured (the promisee) to pay money to Jou (the beneficiary) in exchange for medical services rendered. However, there is persuasive authority that the obligation referred to must pre-exist the contract. See Sher v. Cella, 114 Hawai`i 263, 269, 160 P.3d 1250, 1256 (App. 2007) (stating, in relevant part, that a broker was an intended third-party beneficiary of an acquisition agreement inasmuch as the benefit was intended in satisfaction of a pre-existing obligation to that party (the requirement . . . that the Seller pay a commission to the brokers in the event of a sale) . . .); E.I. DuPont de Nemours & Co. v. Rhone Poulenc Fiber & Resin Intermediates, S.A.S., 269 F.3d 187, 196-97 (3d Cir.2001) (Under Delaware law, which is the law the parties discuss, to qualify as a third party beneficiary or a contract, . . . the benefit must have been intended as a gift or in satisfaction of a pre-existing obligation to that person. . . .) (Emphasis added.); Guardian Constr. Co. v. Tetra Tech Richardson, Inc., 583 A.2d 1378, 1387 (Del.Super.Ct.1990) (It is abundantly clear to the Court that Plaintiffs were not creditors . . . at the time the . . . contract was made. . . .). Here, the obligation of the insured to compensate Jou for medical services rendered did not pre-exist the insurance contract. Thus, Jou does not qualify as an intended creditor beneficiary under § 302(1)(a). Jou also does not qualify as a donee beneficiary under § 302(1)(b), which states that a third party is an intended beneficiary if recognition of a right to performance in the beneficiary is appropriate to effectuate the intention of the parties and . . . the circumstances indicate that the promisee intends to give the beneficiary the benefit of the promised performance. We need not delve too deep inasmuch as it is clear that payment to Jou was not a gift. See Restatement (Second) of Contracts § 302 cmt. c (stating that § 302(1)(b) pertains to situations involving a gift promise or a donee beneficiary); Guardian Constr. Co., 583 A.2d at 1387 (It is abundantly clear to the Court that Plaintiffs were not creditors . . . at the time the . . . contract was made nor were they the subject of [a party's] generosity. ) (Emphasis added.). Accordingly, inasmuch as (1) this jurisdiction's no-fault legislative scheme does not establish his status as a third-party beneficiary as a matter of law, and (2) Jou does not assert that the insurance contract establishes him as a third-party beneficiary, we conclude that his present point of error is without merit. [9]
Jou also contends that the statutes of limitations, codified as HRS §§ 657-7 and 431:10C-315, were subject to the tolling rule applied in State Farm Mut. Auto. Ins. Co. v. Murata, 88 Hawai`i 284, 965 P.2d 1284 (1998) and Wright v. State Farm Mut. Auto. Ins. Co., 86 Hawai`i 357, 949 P.2d 197 (App.1997). However, because Jou has failed to establish his standing as a third-party beneficiary to assert a bad faith tort claim, the statute of limitations issue is moot.
Jou's final sub-argument asserts that Judge Hifo reversibly ruled that [Jou] forwent his suit for insurer bad faith by requesting administrative relief under HRS § 431:10C-212. Jou misreads the circuit court's order. The circuit court precluded Jou from reasserting his statutory claims regarding his bill payment dispute with DTRIC in the court proceedings because he elected administrative remedies. The circuit court did not preclude his tort claim. Rather, as discussed supra, the circuit court rejected Jou's bad faith tort claim because he lacked standing as an incidental, rather than intended, third-party beneficiary. DTRIC conceded below that the DCCA did not have jurisdiction over tort claims and that the election of remedies defense, set forth in Moss v. Am. Int'l Adjustment Co., Inc., 86 Hawai`i 59, 947 P.2d 371 (1997), did not preclude the filing of a tort claim for bad faith in the circuit court. The circuit court's holding was not to the contrary.