Opinion ID: 1205488
Heading Depth: 3
Heading Rank: 2

Heading: Settlement Offer

Text: In January 1990, at a settlement conference for this case, counsel for Penn communicated to counsel for Best Place an offer of settlement in the amount of $48,000.00. Best Place rejected this offer. On August 5, 1991, Penn filed a motion in limine to exclude evidence of the settlement offer. Penn asserted that Best Place was precluded from introducing evidence of the offer under Hawai`i Rules of Evidence (HRE) Rule 408, which provides: Evidence of (1) furnishing or offering or promising to furnish, or (2) accepting or offering or promising to accept, a valuable consideration in compromising or attempting to compromise a claim which was disputed as to either validity or amount, or (3) mediation or attempts to mediate a claim which was disputed, is not admissible to prove liability for or invalidity of the claim or its amount. Evidence of conduct or statements made in compromise negotiations or mediation proceedings is likewise not admissible. On March 11, 1992, the trial court filed an order granting Penn's motion to exclude evidence regarding the settlement offer. The trial court's order stated in relevant part: IT IS HEREBY ORDERED that Penn America Insurance Company's Motion in Limine re Admissibility of Settlement Offer is hereby granted and Plaintiff is precluded from using any pleadings, testimony, remarks, questions, or arguments that might inform the jury of the existence of Defendant Penn America's offer of $48,000 to Plaintiff in settlement of Plaintiff's claim on the fire insurance policy issued by Penn America. Best Place contends that the trial court erred in precluding evidence of the settlement offer under HRE Rule 408. Traditionally, the rule concerning the admissibility of evidence.... is that the trial court is vested with discretion to admit or exclude evidence, and the court's discretion will not be reversed absent an abuse of that discretion. Kealoha v. County of Hawai`i, 74 Haw. 308, 313, 844 P.2d 670, 673, reconsideration denied, 74 Haw. 650, 847 P.2d 263 (1993) (citations omitted). However, we have reviewed evidentiary rulings according to a standard other than abuse of discretion, depending on which particular rule of evidence was at issue. Id. Based upon a review of the hearings, as well as the memorandum in support of Penn's motion to exclude evidence of the settlement offer, it appears that the trial court granted Penn's motion based on HRE Rule 408. The record in this case further indicates that the $48,000.00 offer clearly falls within the rule insofar as it constituted an offer of compromise or was made in compromise negotiations. However, such evidence is inadmissible only if it is used to prove liability for or invalidity of the claim or its amount. The only question remaining for the trial court, then, was whether the settlement offer would be used as such. Because the trial court would have had no discretion to admit the evidence if the settlement offer were being used to prove liability for or invalidity of the claim or its amount, the trial court's ruling is reviewed under the right/wrong standard. Kealoha, 74 Haw. at 319, 844 P.2d at 676. Best Place argues that, although the settlement offer cannot be used to prove liability on the breach of contract claim, it should be admitted to show bad faith claims handling. Best Place cites White v. Western Title Ins. Co., 40 Cal.3d 870, 221 Cal.Rptr. 509, 710 P.2d 309 (1985), as the principal case in support of its contention. In White, the insured filed suit against a title insurer for breach of contract, negligence, and breach of the implied covenant of good faith and fair dealing. The court held that the insurer's two offers of settlement were admissible on the issue of breach of the duty of good faith and fair dealing. White, however, is clearly distinguishable because the insurer's offers of compromise were submitted before the insured had filed a claim for damages for breach of the covenant of good faith and fair dealing. In addition, both offers sought only to compromise the insured's original contract and negligence claim. White, then, should not be read as standing for the proposition that offers of settlement, while not admissible to prove contractual liability, are always admissible to prove liability for breach of the covenant of good faith and fair dealing. As stated by the California Court of Appeal, [i]f an action or claim is pending based on a theory of bad faith violation of the covenant of good faith and fair dealing, and an offer to compromise the claim is made, we have no doubt that the offer would not be admissible in the subsequent lawsuit (unless some ground for admission could be established other than to show liability on the claim). Zeitounian v. Farmers Ins. Group, 25 Cal.App.4th 929, 30 Cal. Rptr.2d 882, 887 (1994) (citation omitted). In this case, Best Place filed suit on June 20, 1988, asserting breach of contract and tortious breach of the implied covenant of good faith and fair dealing. Penn's settlement offer in January 1990, then, sought to compromise Best Place's entire claim, including a claim for breach of the duty of good faith and fair dealing. Therefore, the settlement offer is not admissible under HRE 408. Accordingly, we hold that trial court's determination that the offer would be used to prove liability for or invalidity of the claim or its amount was correct, and, therefore, the trial court did not err in granting Penn's motion to exclude evidence of the settlement offer.