Court Opinion

ID: 4643153
Source: CourtListenerOpinion
Date Created: 2020-12-15 19:02:40.753018+00
Date Added: 2024-06-11T08:00:38.019427
License: Public Domain

NOT FOR PUBLICATION IN WEST'S HAWAI#I REPORTS AND PACIFIC REPORTER

                                                  Electronically Filed
                                                  Intermediate Court of Appeals
                                                  CAAP-XX-XXXXXXX
                                                  15-DEC-2020
                                                  07:56 AM
                                                  Dkt. 79 MO
                            NO. CAAP-XX-XXXXXXX

                 IN THE INTERMEDIATE COURT OF APPEALS

                         OF THE STATE OF HAWAI#I

                 PATRICIA MORANZ, Plaintiff-Appellant,
                                   v.
                 HARBOR MALL, LLC, Defendant-Appellee,
                                  and
                         DOES 1-10, Defendants

         APPEAL FROM THE CIRCUIT COURT OF THE FIFTH CIRCUIT
                        (CIVIL NO. 14-1-0172)

                          MEMORANDUM OPINION
      (By:    Ginoza, Chief Judge, Hiraoka and Wadsworth, JJ.)

          This appeal arises from a tort action in which a
workers' compensation lien is in dispute. Plaintiff-
Intervenor/Appellee DTRIC Insurance Company, Ltd. (DTRIC),
intervened in the case to enforce a lien against a settlement by
Plaintiff-Appellant Patricia Moranz (Moranz) for injuries Moranz
sustained at Harbor Mall in Lihue, Kaua#i, which is owned and
operated by third-party Defendant-Appellee Harbor Mall, LLC
(Harbor Mall). Moranz appeals from the "Order Denying
Plaintiff's Motion for Determination of Validity of Claim of Lien
of DTRIC" (Lien Order) entered on December 5, 2016, and Judgment
thereon filed on December 27, 2016, by the Circuit Court of the
Fifth Circuit (Circuit Court).1
          On appeal, Moranz contends the circuit court erred in
(1) refusing to consider common law and equitable principles that

     1
         The Honorable Randall G.B. Valenciano presided.
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limit DTRIC's right to subrogation and reimbursement,
(2) awarding a lien based on unpaid benefits, and (3) calculating
the lien reduction for attorney's fees and costs based on unpaid
future compensation.
          Based on our interpretation of Hawaii Revised Statutes
(HRS) § 386-8 (2015 Repl.), we conclude the Circuit Court
properly determined DTRIC had a valid workers' compensation lien
and properly determined the amount of the lien. We therefore
affirm.
                          I. Background
          On August 28, 2012, Moranz, an employee of a restaurant
located in Harbor Mall, suffered a work-related injury when she
fell down a stairwell. Moranz filed a claim for workers'
compensation benefits with DTRIC, her employer's insurance
carrier, and received medical, indemnity and vocational
rehabilitation benefits.
          On August 25, 2014, Moranz filed a complaint against
Harbor Mall, alleging it was negligent for the stairwell's unsafe
condition which caused her to fall, and she sought general and
special damages due to the August 28, 2012 accident.2 In early
2016, Moranz and Harbor Mall arrived at a proposed settlement
(Third-Party Settlement).3 DTRIC consented to the proposed

      2
         "General damages encompass all the damages which naturally and
necessarily result from a legal wrong done, . . . and include such items as
pain and suffering, inconvenience, and loss of enjoyment which cannot be
measured definitively in monetary terms." Kanahele v. Han, 125 Hawai #i 446,
451 n.8, 263 P.3d 726, 731 n.8 (2011) (internal quotation marks omitted)
(quoting Bynum v. Magno, 106 Hawai#i 81, 85, 101 P.3d 1149, 1153 (2004), as
amended (Dec. 2, 2004)). Special damages are "the natural but not the
necessary result of an alleged wrong[,]" and are "often considered to be
synonymous with pecuniary loss and include such items as medical and hospital
expenses, loss of earnings, and diminished capacity." Bynum, 106 Hawai #i at
85-86, 101 P.3d at 1153-54 (quoting Ellis v. Crockett, 51 Haw. 45, 50, 451
P.2d 814, 819 (1969); Dunbar v. Thompson, 79 Hawai #i 306, 315, 901 P.2d 1285,
1294 (App. 1995)).
      3
         DTRIC was invited to participate in mediation.   We further note that
HRS § 386-8 (2015 Repl.) provides, in relevant part:
            If the employee commences an action against such third
            person he shall without delay give the employer
            written notice of the action and the name and location
            of the court in which the action is brought by
                                                              (continued...)

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Third-Party Settlement, provided the settlement was for a
specified amount or more, but disputed the amount of lien
repayment, which would "be determined at a later date." Moranz
and Harbor Mall agreed to a settlement in the amount of $200,000,
general damages only.
          On May 24, 2016, Moranz filed a "Motion for
Determination of Validity of Claim of Lien of DTRIC," (Motion to
Determine Lien), asserting DTRIC had no right of reimbursement
related to the Third-Party Settlement. DTRIC opposed the motion,
requesting that the Circuit Court declare DTRIC's lien to be
valid for past workers' compensation benefits paid, to declare a
credit for up to the entire amount of the balance of the Third-
Party Settlement after deducting attorneys' fees and costs, and
for reimbursement for past worker's compensation benefits paid to
or on behalf of Moranz.
           On July 29, 2016, DTRIC intervened in the case for the
limited purpose of determining the validity and amount of its
lien. On September 28, 2016, Harbor Mall was dismissed with
prejudice by stipulation.
           On December 5, 2016, the Circuit Court issued the Lien
Order, in which it ruled that DTRIC "has a valid lien on the
proceeds of [Moranz's] settlement with Defendant Harbor Mall,
LLC" and that DTRIC is entitled to a workers' compensation lien
in the amount of $99,921.96, calculated in accordance with the
formula set forth in Alvarado v. Kiewit Pacific Company, 92
Hawai#i 515, 993 P.2d 549 (2000). Judgment was thereafter
entered on December 27, 2016.
                          II. Discussion
A.   The circuit court properly applied HRS § 386-8
          In her first point of error, Moranz argues that the
Circuit Court erred in reducing DTRIC's lien amount only by its

(...continued)
          personal service or registered mail. The employer
          may, at any time before trial on the facts, join as
          party plaintiff.

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share of expenses and reasonable attorney's fees pursuant to HRS
§ 386-8. Instead, Moranz argues the Circuit Court should have
construed the statute to incorporate equitable principles and
remedies to fully compensate Moranz for her extensive injuries.
Moranz further contends the Circuit Court should have considered
whether any amount of the Third-Party Settlement included amounts
duplicative of the workers' compensation benefits paid by DTRIC,
and if so, from what amount could DTRIC seek reimbursement.
Moranz further argues that the legislative history of HRS § 386-8
did not deprive workers of the equitable protections inherent in
the common law doctrine of subrogation.
          DTRIC counters that the plain and unambiguous terms set
forth in HRS § 386-8 do not allow the Circuit Court to reduce
DTRIC's reimbursement by anything other than attorneys' fees and
costs. Thus, DTRIC argues that the "equitable considerations"
asserted by Moranz are not authorized under HRS § 386-8.
          "Appellate courts review statutory interpretation de
novo." Ihara v. State Dep't of Land & Nat. Res., 141 Hawai#i 36,
41, 404 P.3d 302, 307 (2017) (citing Van Ness v. State, Dep't of
Educ., 131 Hawai#i 545, 558, 319 P.3d 464, 477 (2014), as
corrected (Feb. 4, 2014)). "When construing a statute, our
foremost obligation is to ascertain and give effect to the
intention of the legislature, which is to be obtained primarily
from the language contained in the statute itself." Id. (quoting
Van Ness, 131 Hawai#i at 558, 319 P.3d at 477).
          Based on our review of HRS § 386-8,4 there is no
ambiguity as to an employer's5 right of reimbursement for
workers' compensation payments. HRS § 386-8 allows an injured

      4
         The applicable version of HRS § 386-8 was in effect at the time of
Moranz's 2012 accident. In 2016, amendments were made to the statute,
including enumerating the paragraphs and providing for apparently non-
substantive minor edits.
      5
         HRS § 386-1 (2015 Repl.) provides, in part, "[t]he insurer of an
employer is subject to the employer's liabilities . . . and [is] entitled to
rights and remedies under this chapter as far as applicable." For purposes of
HRS § 386-8, the term "employer" means the employer and/or the employer's
workers' compensation insurance carrier.

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worker entitled to recover workers' compensation benefits to also
recover damages from a liable third party, stating:
             When a work injury for which compensation is payable
             under this chapter has been sustained under
             circumstances creating in some person other than the
             employer or another employee of the employer acting in
             the course of his employment a legal liability to pay
             damages on account thereof, the injured employee ...
             may claim compensation under this chapter and recover
             damages from such third person.

However, HRS § 386-8 further provides, in relevant part:
             No release or settlement of any claim or action under this
             section is valid without the written consent of both
             employer and employee. The entire amount of the settlement
             after deductions for attorney's fees and costs as
             hereinafter provided, is subject to the employer's right of
             reimbursement for his compensation payments under this
             chapter and his expenses and costs of action.

             If the action is prosecuted by the employee alone, the
             employee shall be entitled to apply out of the amount of the
             judgment for damages, or settlement in case the action is
             compromised before judgment, the reasonable litigation
             expenses incurred in preparation and prosecution of such
             action, together with a reasonable attorney's fee which
             shall be based solely upon the services rendered by the
             employee's attorney in effecting recovery both for the
             benefit of the employee and the employer. After the payment
             of such expenses and attorney's fee there shall be applied
             out of the amount of the judgment or settlement proceeds,
             the amount of the employer's expenditure for compensation,
             less his share of such expenses and attorney's fee. On
             application of the employer, the court shall allow as a
             first lien against the amount of the judgment for damages or
             settlement proceeds, the amount of the employer's
             expenditure for compensation, less his share of such
             expenses and attorney's fee.

     . . .

             In the event that the parties are unable to agree upon the
             amount of reasonable litigation expenses and the amount of
             attorneys' fees under this section then the same shall be
             fixed by the court.

             After reimbursement for his compensation payments the
             employer shall be relieved from the obligation to make
             further compensation payments to the employee under this
             chapter up to the entire amount of the balance of the
             settlement or the judgment, if satisfied, as the case may
             be, after deducting the cost and expenses, including
             attorneys' fees.

Id. (emphases added).

          The workers' compensation statute must be "construed .
. . liberally" in order to effect its "beneficent purposes."

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Ihara, 141 Hawai#i at 41, 404 P.3d at 307 (quoting Puchert v.
Agsalud, 67 Haw. 25, 36, 677 P.2d 449, 457 (1984)). Moranz
argues that HRS § 386-8 should be interpreted such that, because
the Third-Party Settlement compensated Moranz for general damages
only, which did not correspond to or were not duplicative of
amounts paid by workers' compensation benefits, equitable or
common law principles of subrogation entitle Moranz to retain
those sums in order to allow her to be fully compensated for her
loss. Notwithstanding Moranz's argument, the statute's plain and
unambiguous terms do not provide or allow for the equitable
considerations that Moranz insists must be construed as part of
the statute.
          Under HRS § 386-8, the "entire amount of the settlement
after deduction for attorney's fees and costs" is "subject to the
employer's right of reimbursement for his compensation payments."
Id. (emphasis added). Furthermore, "there shall be applied out
of the amount of the . . . settlement proceeds, the amount of the
employer's expenditure for compensation, less his share of such
expenses and attorney's fee." Id. The amount of the lien is,
likewise, "against the amount of the judgment for damages or
settlement proceeds, the amount of the employer's expenditure for
compensation, less his share of such expenses and attorney's
fee." Id. The provision for DTRIC's reimbursement from the
Third-Party Settlement for its workers' compensation expenditure,
less attorney's fees and costs, is clearly stated in HRS § 386-8.
          We note, moreover, that other statutes involving
insurer subrogation specifically provide limitations for wage
loss or duplication of benefits, e.g., compare HRS § 392-46 (2015
Repl.) (according subrogation rights to insurers of Temporary
Disability Insurance Benefits to the extent damages include wage
loss),6 and HRS § 431:10C-307 (2019 Repl.) (limiting an insurer’s

     6
         HRS § 392-46 provides, in part:

            If any individual who has received benefits under this
            chapter is entitled to recover damages from a third
            person who is responsible for the sickness or accident
                                                             (continued...)

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recovery of no-fault benefits to that which is duplicative of the
benefits paid ).7 However, HRS § 368-8 does not specify any
limitations as to what is subject to the workers' compensation
lien, does not distinguish between general or special damages in
the recovery from a third-party, and does not provide that
consideration be made whether parts of the recovery from a third-
party is duplicative of workers' compensation benefits that were
paid. Instead, the language of HRS §368-8 is unequivocal in
terms of the amount of a third-party settlement that is subject
to the right of reimbursement for workers’ compensation payments.
          Given the plain language in HRS §368-8, Moranz's claim
of error lacks merit and the Circuit Court did not err in
rejecting Moranz's argument that equitable principles should have
been applied to determine the amount of DTRIC's lien.
B.   The Circuit Court did not err in calculating DTRIC's lien

     1.      DTRIC's lien was properly calculated to include
             stipulated further workers' compensation benefits

          In her second point of error Moranz contends the
Circuit Court erred in granting a lien in an amount over the
amount DTRIC had actually paid at the time of the Third-Party

(...continued)
             causing the disability, the employer, the association
             of employers, the insurer, or the trust fund for
             disability benefits, providing disability benefits
             shall be subrogated to, and have a lien upon, the
             rights of the individual against the third party to
             the extent that the damages include wage loss during
             the period of disability for which temporary
             disability benefits were received in the amount of
             such benefits.
             (Emphasis added).
     7
          HRS § 431:10C-307 provides:

             Whenever any person effects a tort liability recovery
             for accidental harm, whether by suit or settlement,
             which duplicates personal injury protection benefits
             already paid under the provisions of this article, the
             motor vehicle insurer shall be reimbursed fifty per
             cent of the personal injury protection benefits paid
             to or on behalf of the person receiving the duplicate
             benefits up to the maximum limit.
             (Emphases added).

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Settlement, in contravention of HRS § 386-8, which does not
authorize compensation for benefits not yet paid. Specifically,
Moranz argues that the Circuit Court used a much higher figure
for paid compensation, when actual paid compensation at the time
of settlement was $63,245.41. At the August 23, 2016 hearing on
Moranz's Motion to Determine Lien and DTRIC's motion to
intervene, DTRIC represented to the Circuit Court that a
settlement between DTRIC and Moranz for additional workers’
compensation benefits of about $125,000 was pending, subject to
approval by the Department of Labor and Industrial Relations
(DLIR). Further, as DTRIC points out, Moranz's submissions to
the Circuit Court show that the settlement for $125,816.72 in
additional workers' compensation benefits, which had been signed
by Moranz on September 1, 2016, was approved by DLIR on September
28, 2016. At this point, DTRIC was obligated to pay the
additional workers' compensation benefits in the specified
amount. The Circuit Court subsequently entered the Lien Order on
December 5, 2016.
          Given the circumstances of this case, where Moranz had
executed a stipulated settlement for the $125,816.72 in
additional workers' compensation benefits, and that settlement
was then approved by DLIR before the Lien Order, we cannot say
that the Circuit Court erred in including the $125,816.72 amount
in calculating DTRIC's lien.8
     2.   The Circuit Court did not erroneously calculate DTRIC's
          lien
          Turning to the calculation of DTRIC's lien, Moranz's
third point of error is that the Circuit Court erroneously
calculated the lien reduction based on the total of paid
compensation and the $125,816.72 settlement amount for additional
workers' compensation benefits. However, it appears that the
Circuit Court properly calculated DTRIC’s lien amount under

      8
         If the $125,816.72 amount was not calculated as part of DTRIC's lien,
Moranz's residual from the settlement would be higher but that residual would
need to be exhausted before DTRIC was required to make additional workers'
compensation payments on her behalf. See Alvarado, 92 Hawai #i at 520 n.5, 993
P.2d at 554 n.5.

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Alvarado.    The formula in Alvarado is stated as follows:
            [U]nder HRS § 386–8, the starting point to determine
            an employer's "share" is to be calculated as (1) the
            fraction equal to the amount of workers' compensation
            expended, plus calculable future benefits, divided by
            the total amount of the settlement. This fraction
            will then be (2) multiplied by the total amount of
            reasonable attorney's fees and costs incurred by the
            employee in the course of pursuing the recovery
            action. This "share" (computed in steps 1 and 2)
            should then be (3) subtracted from the total
            compensation already expended to date, by the
            employer. This results in a first lien that the
            employer may assert against the settlement amount.
            However, prior to the execution of the lien, the
            remainder of the attorney's fees and costs should be
            (4) deducted from the settlement corpus. Then,
            (5) the amount of the employer's first lien (already
            calculated as compensation expended minus share of the
            attorney's fees and costs) may be asserted against the
            settlement. If a portion of the settlement corpus
            remains after the employer's execution of the lien
            (6), the employee is entitled to that remainder,
            subject to the requirement that the employee first
            exhaust all necessary future workers' compensation
            payments from that remainder prior to requesting
            future compensatory payments from the employer or its
            insurance carrier for the compensable injuries arising
            out of the same incident.

92 Hawai#i at 518–19, 993 P.2d at 552–53 (footnotes omitted).
           Applying the Alvarado formula to this case, the results
are as follows:

            Step 1: The fraction equal to the amount of workers'
            compensation expended, plus calculable future
            benefits, divided by the total amount of the
            settlement equals .9453 ($189,062.13 ÷ $200,000). 9
            Step 2: The fraction is multiplied by the total amount
            of reasonable attorney's fees and costs incurred by
            Moranz in the recovery action, which results in
            DTRIC's "share" of $89,140.17 (.9453 x $94,298.29).

      9
         Workers' compensation expended consists of the following added
together:
            $ 30,474.48 medical expenses
            $ 20,276.43 indemnity payments
            $ 12,494.50 vocational rehab
            $125,316.72 DLIR Settlement (permanent partial disability)
            $    500.00 disfigurement
            ___________________________________________________________
            $189,062.13 Paid Compensation

DTRIC erroneously excluded the $500 disfigurement payment in the future
benefit calculation. It is included in this calculation.

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              Step 3: This "share" is subtracted from the total
              compensation already expended to date, by the
              employer, which is the first lien in the amount of
              $99,921.96 ($189,062.13-$89,140.17) that DTRIC may
              assert against the settlement amount.
              Step 4: Prior to the execution of the lien, the
              remainder of the attorney's fees and costs should be
              deducted from the settlement corpus, resulting in
              $194,841.88 ($200,000-$5,158.12). 10
              Step 5: The amount of the employer's first lien may be
              asserted against the settlement, $194,841.88-
              $99,921.96.
              Step 6: If a portion of the settlement corpus remains
              after the employer's execution of the lien, the
              employee is entitled to that remainder, which is
              $94,919.92.

92 Hawai#i at 518–19, 521, 993 P.2d at 552–53, 555. In the Lien
Order, the Circuit Court properly calculated a valid workers'
compensation lien in the amount of $99,921.96, which is the
result in Step 3 above.
                         III. Conclusion
          Based on the foregoing, the "Order Denying
Plaintiff's Motion for Determination of Validity of Claim of Lien
of DTRIC" entered on December 5, 2016, and the Judgment filed on
December 27, 2016, by the Circuit Court of the Fifth Circuit, are
affirmed.
          DATED: Honolulu, Hawai#i, December 15, 2020.

On the briefs:                              /s/ Lisa M. Ginzoa
                                            Chief Judge
Susan L. Marshall,
for Plaintiff-Appellant.                    /s/ Keith K. Hiraoka
                                            Associate Judge
Ronald M. Shigekane,
for Plaintiff-Intervenor/                   /s/ Clyde J. Wadsworth
Appellee.                                   Associate Judge

     10
           $94,298.29 Moranz's attorney's fees and costs
          -$89,140.17 DTRIC's "share"
           _____________________________________________

          $5,158.12 Remainder of attorney's fees and costs

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