Opinion ID: 2611817
Heading Depth: 2
Heading Rank: 3

Heading: Stacking of UIM Coverages

Text: As previously noted, Allstate contends that our case law allowing stacking of UM coverages has been based on the existence of a stated statutory minimum for UM coverage. Pointing to the 1985 amendment, Allstate focuses on the language in limits for bodily injury or death set forth in section 287-7 and with respect to any motor vehicle in subsection (a), dealing with UM coverage, which phrases are conspicuously absent from subsections (b) and (c), dealing with UIM coverage. Consequently, Allstate maintains that the distinguishing factor that renders the UM stacking cases inapplicable to the case at bar is the legislature's failure to include a statutory minimum for UIM coverage. Hirose, on the other hand, argues that because this court held in Mollena v. Fireman's Fund Insurance Co., 72 Haw. 314, 816 P.2d 968 (1991), that the statutory minimum amount that insurers must offer for UIM coverage was the same as for UM, this court's basis for allowing stacking in UM cases should be applied to UIM cases. Allstate, however, maintains that the Mollena opinion is devoid of any suggestion that UM and UIM coverages are identical or that the coverage requirements of one necessarily appl[ies] to the other. We disagree. In Mollena, Fireman's Fund Insurance Company (Fireman's), in accordance with HRS § 431-448(b), forwarded a letter to its policyholders in early 1986 purporting to offer optional UIM coverage. Fireman's offer letter stated, in part, underinsured/uninsured motorist coverage $35,000 limit. Appellants Mollena and Costa, Fireman's policyholders, were each injured in separate automobile accidents in late 1986 and 1987. Both recovered liability policy limits of $35,000 each from the third-party tortfeasor involved in their respective accidents, and both sought UIM benefits from Fireman's; however, their claims were denied on the basis that their respective policies did not include UIM coverage. Although Mollena and Costa alleged that they had never received Fireman's offer letter, they contended that the letter was not a legally sufficient offer under HRS § 431-448 and, therefore, UIM coverage must be implied as a matter of law. The primary issue on appeal was whether, based on the language of section 431-448, written rejection of UIM coverage by Fireman's policyholders was required to relieve an insurer from providing such coverage. In our analysis, we explained: HRS § 431-448 is divided into three subsections: subsection (a) relates to uninsured motorist coverage, the offer of coverage [in the minimum amount of $35,000], and written rejection; and subsections (b) and (c) relate to underinsured motorist coverage. The phrase under this section and as used in this section in HRS § 431-448(a) and (c), respectively, illustrate the fact that subsections (a) and (c) apply to the entire section (or statute), and not just within their respective subsections. As Costa notes, if the word section were replaced with subsection, HRS § 431-448 would be meaningless. Further, the legislature carefully distinguished between the use of section and subsection in Act 181. As a part of Act 181, HRS § 431-448 was amended to add underinsured motorist coverage. See Act 181, §§ 1-8, 1985 Haw.Sess.Laws 309-313. We conclude, therefore, that HRS § 431-448(a) which requires written rejection of uninsured coverage also applies to offers of underinsured motorist coverage described in HRS § 431-448(b) and (c). Id. at 323-24, 816 P.2d at 973. We also noted that in State Farm Mutual Automobile Insurance Co. v. Robinol, 699 F.Supp. 819 (D.Haw.1988), the United States District Court for the District of Hawaii held the phrase shall be delivered, issued for delivery, or renewed, found only in subsection (a), also applied to subsections (b) and (c), that is, that offers of UM coverage must be made when the policy is delivered, issued for delivery, or renewed. Mollena, 72 Haw. at 324, 816 P.2d at 973. We adopted the Robinol court's reasoning that [because] the underinsured provisions were made a part of the statute which contained offer of coverage provisions, the legislature intended that pre-existing language be applied to underinsured motorist coverage as well. Id. (citation omitted). We declared that [i]t is clear that HRS § 431-448(b) and (c) should be read in conjunction with HRS § 431-448(a). Id. Because we determined that HRS § 431-448(b) and (c) should be read in conjunction with HRS § 431-448(a), id., and because subsection (a) required minimum UM coverage with respect to any motor vehicle  the statutory language this court relied on in holding that stacking of UM coverage was allowed in Walton, Morgan, and Takahashi  we held that the required offer of UIM coverage to Mollena and Costa, pursuant to HRS § 431-448, was the statutory minimum of $35,000 each. Mollena, 72 Haw. at 326, 816 P.2d at 974. In so holding, we specifically stated that Mollena and Costa are entitled, as a matter of law, to implied offers in the minimum amount to be offered for uninsured motorist coverage as required under HRS §§ 287-7, 294-10(a), and 431-448, [8] which in this case amounts to $35,000 each to Mollena and Costa. Id. Allstate essentially argues that this court's determination of the amount of $35,000 was purely as a result of the fact that the amount was consistent with Fireman's legally insufficient offer of $35,000 and had no bearing on the statutory minimum of $35,000 required to be offered for UM coverage. We believe that Allstate's position is untenable because it disregards this court's construction, in pari materia, of the interrelated subsections of HRS § 431-448, as well as our holding, which specifically incorporated HRS §§ 287-7 and 294-10(a). Based on Mollena, we must read HRS §§ 431:10C-301(b)(3) and (b)(4) in conjunction with each other when construing the various subsections of the statute. In so doing, we reach the same conclusion as we did in Mollena that the UM and UIM provisions in subsections (b)(3) and (b)(4) are also interrelated and overlapping. For example, we note that under the UIM provision, subsection (b)(4) states that UIM may be offered in the same manner as UM provided that such offer of both shall comply with subsections (b)(4)(A), (B), and (C). We further note that subsection (b)(3) of the UM provision refers to the requirement that rejection of UM coverage by the insured must be in writing, while subsection (b)(4)(C) reiterates the identical requirement of written rejection of UIM coverage. Whether the overlapping was intentional or coincidental, it confirms the legislative intent that both coverages be treated alike and that the subsections be read in conjunction with each other. Given the legislature's expressed intent that UIM and UM coverages be treated alike, we assume that in promulgating the 1988 amendment, the legislature was then aware of the present treatment of UM coverage, that is, that this court, since 1974, had consistently ruled in favor of stacking UM coverage, commencing with Walton. See Marsland v. Pang, 5 Haw.App. 463, 485, 701 P.2d 175, 192, cert. denied, 67 Haw. 686, 744 P.2d 781 (1985) (we must ... assume that the legislature was aware of the state of the law ... at [the time it legislated]). Moreover, Allstate concedes that it, like other insurance companies, routinely allowed UIM stacking after the adoption of the initial UIM statute in 1985 and continued this practice through the 1988 legislative session. Our review of the 1988 legislative history confirms the correctness of our assumption that the legislature was aware of the ongoing practice of stacking UM coverage. The legislative history also reveals that the legislature considered proposals to prohibit the practice of stacking not only UM but UIM coverage, which reasonably implies that the legislature was also aware of the ongoing practice of stacking UIM coverages as well: The DCCA [Department of Commerce and Consumer Affairs] testimony further stated that the case law does not allow carte blanche stacking of uninsured/underinsured motorist coverages; rather, the Supreme Court has established very explicit guidelines limiting recovery to only those seriously injured claimants who would fail to receive fair compensation in the absence of stacking. Your Committee, upon consideration of DCCA testimony, has amended this bill by deleting the proposed new Subsection (d). Sen. Stand. Comm. Rep. No. 2062, in 1988 Senate Journal, at 892. Notwithstanding proposals to ban stacking of UM/UIM coverages, the 1988 legislature, as previously noted, [left] the issue of stacking to judicial determination. Sen. Conf. Comm. Rep. No. 215, in 1988 Senate Journal, at 675. Nevertheless, in November 1989, Allstate issued its policy amendment precluding UIM stacking and readjusted its premium to reflect anti-UIM stacking because it believed that the legislature did not intend to require stacking of UIM coverage. Allstate explains that the reason it permitted UIM stacking under its pre-1989 amendment policy was because its pre-November 1989 provision was admittedly ambiguous as to stacking. Allstate also contends that the legislative history establishes that Hawai`i's legislature did not intend to require stacking of UIM benefits because, with regard to the original (1985) version of the UIM statute, the legislature had considered setting statutory minimum limits for UIM coverage, but specifically chose not to do so. Allstate argues that the legislature intended the insurers and their policyholders to agree on the amount of UIM coverage. In support, Allstate cites to the following: Testimony on the underinsured coverage provision indicated that such optional coverage would provide additional protection to the injured party. Since the intent of the no-fault law is to provide speedy and adequate protection to the injured party at the least possible cost, your Committee is in favor of the underinsured coverage. The coverage being optional, however, your Committee believes that the coverage amounts of $125,000 and $150,000 should not be stated in the law but should be a matter between the insurance company and the insured. Sen. Stand. Comm. Rep. No. 689, in 1985 Senate Journal, at 1181. We disagree with Allstate's interpretation of the legislative history. Indeed, the 1985 legislature received proposals to set the minimum UIM coverages at $125,000 and $150,000. We believe, however, that by rejecting these proposals and indicating that such substantial amounts should be a matter between the insurance company and the insured, id., the legislature did not intend to imply that there was no minimum UIM coverage and that any amount of such coverage would be left to negotiations between the parties. Allstate's reading of the legislative history, as it relates to the interpretation of the 1985 UIM statute, would produce absurd and unjust results and distort the intent and purpose of UIM protection if the amount of UIM coverage were left to the insurance companies and its policyholders. Statutes should be interpreted according to the intent, meaning, and purpose of the overall statutory scheme and not in a manner that would lead to absurd and unjust results. Franks v. City and County of Honolulu, 74 Haw. 328, 334-35, 341, 843 P.2d 668, 671, 674 (1993); see also Methven-Abreu v. Hawaiian Ins. & Guar. Co., 73 Haw. 385, 834 P.2d 279, reconsideration denied, 73 Haw. 625, 838 P.2d 860 (1992); Schmidt v. Board of Dir. of Ass'n of Apartment Owners of Marco Polo, 73 Haw. 526, 836 P.2d 479 (1992). [I]nsurance policies are contracts of adhesion and are premised on standard forms prepared by the insurer's attorneys[.] Sturla, Inc. v. Fireman's Fund Ins. Co., 67 Haw. 203, 209, 684 P.2d 960, 964 (1984). Because such contracts of adhesion reflect the unequal bargaining power between an insurer and its policyholders, we cannot take seriously Allstate's suggestion that the legislature intended such parties to negotiate the amount of UIM coverage. Traditional contract law was designed for a paradigmatic agreement that had been reached by two parties of equal bargaining power by a process of free negotiation. Today, however, in routine transactions the typical agreement consists of a standard printed form that has been prepared by one party and assented to by the other with little or no opportunity for negotiation. Commonplace examples include purchase orders for automobiles, credit card agreements, and insurance policies.... . . . . Dangers are inherent in standardization, however, for it affords a means by which one party may impose terms on another unwitting or even unwilling party. Two circumstances facilitate this imposition. First, while the party that proffers the form has had the advantage of time and expert advice in preparing it, the other party is usually completely or at least relatively unfamiliar with its terms. That party may have no real opportunity to read the form, and is often not expected to do so. The opportunity to read it may be diminished by the use of fine print and convoluted clauses. Second, bargaining over terms may not be between equals or, as is more often the case, there may be no opportunity to bargain at all. The standard form may be used by an enterprise with such disproportionately strong economic power that it simply dictates the terms. Or the form may be a take-it-or-leave-it proposition, often called a contract of adhesion, under which the only alternative to complete adherence is outright rejection. It would, indeed, defeat the purpose of standardization if the other party were free to negotiate over its terms. E. Allan Farnsworth, Contracts, § 4.26, at 310-12 (2d ed. 1990). Thus, it would be absurd to believe that the legislature intended an insurer would be able to comply with a statutory obligation to offer UIM optional coverage unless there were at least some minimum requisite amount. See Mollena, supra . To hold otherwise would allow insurers to offer UIM coverage in such minimal amounts that the purpose and intent of protecting the victims injured by financially irresponsible motorists would be undermined.