Opinion ID: 1388811
Heading Depth: 2
Heading Rank: 1

Heading: General Legal Principles, Controlling Hawai`i Statutes, And The Plain Language Of The FICH Policy

Text: We begin our analysis with the observation that `liability insurers have the same rights as individuals to limit their liability, and to impose whatever conditions they please on their obligation, provided they are not in contravention of statutory inhibitions or public policy.' First Ins. Co. of Hawai`i, Inc. v. State, 66 Haw. 413, 423, 665 P.2d 648, 655 (1983) (quoting 6B Appleman, Insurance Law and Practice § 4255, at 40 (1979) [hereafter Appleman]). As such, [insurance] policies are subject to the general rules of contract construction; the terms of the policy should be interpreted according to their plain, ordinary, and accepted sense in common speech unless it appears from the policy that a different meaning is intended[.] Id. at 423-24, 665 P.2d at 655 (citations omitted). Moreover, [every] insurance contract shall be construed according to the entirety of its terms and conditions as set forth in the policy[.] Hawai`i Revised Statutes (HRS) § 431:10-237 (1987 Spec. Pamphlet); see State Farm Mut. Auto. Ins. Co. v. Fermahin, 73 Haw. 552, 556, 836 P.2d 1074, 1077 (1992); Smith v. New England Mutual Life Ins. Co., 72 Haw. 531, 534, 827 P.2d 635, 636 (1992). Nevertheless, adherence to the plain language and literal meaning of insurance contract provisions is not without limitation. We have acknowledged that [b]ecause insurance policies are contracts of adhesion and are premised on standard forms prepared by the insurer's attorneys, we have long subscribed to the principle that they must be construed liberally in favor of the insured and [any] ambiguities [must be] resolved against the insurer. Sturla, Inc. v. Fireman's Fund Ins. Co., 67 Haw. 203, 209, 684 P.2d 960, 964 (1984) (citations and internal quotation marks omitted) (cited with approval in Fermahin, 73 Haw. at 556, 836 P.2d at 1077). Put another way, the rule is that policies are to be construed in accord with the reasonable expectations of a layperson. Id. In addition, [insurance] policies are governed by statutory requirements in force and effect at the time such policies are written.... Such provisions are read into each policy issued thereunder [] and become a part of the contract with full binding effect upon each party. AIG Hawai`i Ins. Co., Inc. v. Estate of Caraang, 74 Haw. 620, 633, 851 P.2d 321, 328 (1993) (citations and internal quotation marks omitted). [1] Consequently, [w]hen the terms of an insurance contract are in conflict with statutory language, the statute must take precedence over the terms of the contract. Sol, 76 Hawai`i at 307, 875 P.2d at 924; see also Methven-Abreu v. Hawaiian Ins. & Guar. Co., Ltd., 73 Haw. 385, 395-96, 834 P.2d 279, 285, reconsideration denied, 73 Haw. 625, 838 P.2d 860 (1992); Olson, 69 Haw. at 563-64, 751 P.2d 666, 669 (1988); Walton v. State Farm Mut. Auto. Ins. Co., 55 Haw. 326, 328, 518 P.2d 1399, 1400-01 (1974); Columbia Casualty Co. v. Hoohuli, 50 Haw. 212, 214-15, 437 P.2d 99, 102 (1968). As of October 21, 1988, UM coverage under the FICH auto policy was primarily governed by the provisions of two Hawai`i statutes. The first, HRS § 431:10-213 (1987 Spec. Pamphlet), [2] provided in relevant part: Automobile liability; coverage for damage by uninsured or underinsured motorist. (a) No automobile liability or motor vehicle liability policy insuring against loss for bodily injury or death suffered by any person arising out of the ownership, maintenance or use of a motor vehicle shall be delivered, issued for delivery, or renewed in this State unless the policy provides coverage for the protection of the persons insured who are legally entitled to recover damages from owners or operators of uninsured motor vehicles. [3] ... The second, HRS § 431:10C-301 (1987 Spec. Pamphlet), [4] provided in relevant part: Required motor vehicle policy coverage. . . . . (b) A motor vehicle insurance policy shall include: . . . . (3) With respect to any motor vehicle registered or principally garaged in this State, liability coverage ... for bodily injury or death ... for the protection of persons insured thereunder who are legally entitled to recover damages from owners or operators of uninsured motor vehicles because of bodily injury, sickness or disease, including death, resulting therefrom; provided, however, that the coverage required under this section shall not be applicable where any insured named in the policy shall reject the coverage in writing. As a general proposition, UM statutes such as HRS §§ 431:10-213 and 431:10C-301(b)(3) are considered to be remedial in nature [5] designed to afford maximum protection to a state's residents, and to fill the gaps in compulsory insurance plans. Their purpose is to provide a remedy where injury is caused by an uninsured motorist; or, as has been more frequently stated, to provide a remedy to the innocent victims of irresponsible motorists who may have no resources to satisfy the damages they cause. [6] This recourse [] is provided, then, to cover the situation of a wrongful or tortious act of an uninsured motorist or a hit and run driver, or that of another unknown motorist. ... Ideally, the purpose is to place those insured in the same position they would have occupied had the tortfeasor carried liability insurance.... 8C Appleman § 5067.45, at 41-46 (1981) (footnotes omitted). Being remedial statutes, HRS §§ 431:10-213 and 431:10C-301(b)(3) are to be construed liberally in order to accomplish the purpose for which [they were] enacted.... [Remedial] statutes are liberally construed to suppress the [perceived] evil and advance the [enacted] remedy. Flores v. United Air Lines, Inc., 70 Haw. 1, 12, 757 P.2d 641, 647 (1988) (citations and internal quotation marks omitted) (some brackets in original). Two general principles apply to UM insurance coverage. First, either [a]n insured or an insured vehicle must be involved in the accident in order to collect under the UM endorsement. 12A J. Couch, Cyclopedia of Insurance Law § 45:634, at 127 (R. Anderson and M. Rhodes 2d ed. 1981) [hereafter Couch] (emphasis added). This is because [t]he uninsured motorist policy is personal to the insured[,] Palisbo v. Hawaiian Ins. & Guar. Co., Ltd., 57 Haw. 10, 15, 547 P.2d 1350, 1354 (1976) (emphasis added), or, put differently, the UM coverage follows the insured's person. Accordingly, [t]he nature of uninsured motorist insurance is such that an insured is covered whether or not he or she is injured while in a vehicle which is insured under the policy.... [A]n insured under the ... policy... [is] entitled to recover uninsured motorist insurance benefits ... even though she [is] injured while operating a vehicle not covered by the policy. Allstate Ins. Co. v. Morgan, 59 Haw. 44, 47-48, 575 P.2d 477, 479-80 (1978). Second, almost all modern forms of UM coverage include passengers, [7] or occupants, of an automobile injured by an uninsured motorist; indeed an exclusion of them would, in most states, be invalid. 8C Appleman § 5080.45, at 255-56 (1981) (footnote omitted and emphasis added). Construing a statute similar in all material respects to HRS §§ 431:10-213 and 431:10C-301(b)(3), the Connecticut Supreme Court aptly elaborated upon these general principles as follows: ... [R]equired uninsured motorist coverage is person oriented. ... [T]he public policy embodied in [the UM statute] directs that uninsured motorist coverage be provided to insureds when they are not occupants of insured vehicles as well as when they are. Our uninsured motorist insurance statute... provides coverage for  persons insured thereunder who are legally entitled to recover damages from owners or operators of uninsured motor vehicles.... (Emphasis added.) The coverage attaches to the insured person, not the insured vehicle. Thus, this court has held that an injured party may receive the benefits of a policy even though not occupying a vehicle insured under that policy.... . . . . An insured's status at the time of the injury, whether passenger, pedestrian, or driver of an insured or uninsured vehicle, is irrelevant to recovery under the statutorily mandated coverage. The coverage is portable: The insured and family members... are insured no matter where they are injured. They are insured when injured in an owned vehicle named in the policy, in an owned vehicle not named in the policy, in an unowned vehicle, on a motorcycle, on a bicycle, whether afoot or on horseback or even on a pogo stick or in a rocking chair on [one's] front porch. Uninsured motorist statutes place no geographical limits on coverage and do not purport to tie protection against uninsured motorists to occupancy of an insured vehicle. Uninsured motorist protection of coverage for persons, not for vehicles. Harvey v. Travelers Indem. Co., 188 Conn. 245, 248, 250, 449 A.2d 157, 159-60 (1982) (citations and internal quotation marks omitted) (emphasis added). Consistent with the foregoing principles and pursuant to the insuring agreement of the UM coverage section of its auto policy (Part C-1), FICH obligated itself to pay damages: (1) sustained by a covered person; (2) which the covered person is legally entitled to recover from the owner of operator of an uninsured motor vehicle; (3) arising out of the ownership, maintenance, or use of the uninsured motor vehicle; [8] and (4) which is caused by an accident. On the record before the circuit court, and by the plain language of the FICH auto policy, it is uncontrovertible that: (1) Dawes, at least in her capacity as administrator of Bockhorn's estate, sustained damages; (2) the damages arose out of the use ( i.e., operation) of the maroon Honda Accord, which was uninsured; (3) the damages were caused by an accident; and (4) Dawes is legally entitled to recover from the operator of the Accord. Thus, the outcome-dispositive issue in the present appeal is whether, at the time of the accident, Dawes's decedent, Bockhorn, was a covered person within the meaning of the FICH auto policy, as constrained by the public policy underlying HRS §§ 431:10-213 and 431:10C-301(b)(3).