Stout v. Board of Trustees of the Employees' Retirement System, State of Hawaii., 398 P.3d 766

Background

Rosemary H. Stout was a tenured, year‑round DOE teacher and ERS member (contributions deducted from her academic‑year pay); she also taught summer school in 1986–1988 and was paid separately for summer work with no ERS deductions.
On June 30, 1988 Stout was shot while teaching summer school at ‘Aiea High School; the ERS Medical Board found the shooting was an accident in the actual performance of duty and that Stout was likely permanently incapacitated for teaching.
Stout applied in 2004 for service‑connected disability retirement under HRS § 88‑79; the ERS Board denied eligibility on the ground that summer‑school service was a non‑membership position (no ERS contributions) and thus not "service" qualifying for § 88‑79.
Administrative hearing officer and ERS Board upheld denial; the circuit court affirmed; Stout appealed to ICA and this court (transfer granted).
The Supreme Court majority held § 88‑79 covers disability caused by an accident occurring while performing "service" for the State (as defined in HRS § 88‑21), not limited to positions that generate membership contributions; because Stout was a contributing ERS member and the shooting occurred while performing State service, she is eligible to apply for service‑connected disability retirement.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether § 88‑79 requires the disabling accident to occur in a position that is an ERS membership position	Stout: § 88‑79 requires only that the accident occur "while in the actual performance of duty" for the State (i.e., "service"); summer school teaching is State service and she was an ERS member when injured	State: service‑connected disability implicitly requires the accident occur during "membership service" (a position for which contributions were paid); otherwise unfair and absurd results follow	Held: § 88‑79 covers accidents occurring while performing State or county "service" as defined in HRS § 88‑21; it is not limited to "membership service"; Stout is eligible to apply for benefits
Effect of HRS §§ 88‑42.5, 88‑43 and HAR § 6‑21‑14 (membership exclusions) on § 88‑79 eligibility	Stout: those provisions limit membership/credit but do not alter § 88‑79’s definition of "service" or deny benefits to existing members injured while performing non‑membership State service	State: those provisions show the statutory scheme ties benefits to contributory, membership positions; they justify denying benefits for non‑membership jobs	Held: Membership‑limiting statutes govern contributions and credit but do not transform otherwise qualifying State "service" into non‑service for § 88‑79; they do not bar benefits to an existing contributing member injured while performing State service
Reliance on Medical Board and DOE certification under § 88‑79(d)	Stout: Medical Board found accident occurred in the actual performance of duty and DOE indicated she was "on duty" at Aiea; ERS could accept those findings as conclusive	State: ERS properly reviewed and rejected the Medical Board conclusion because of its membership interpretation	Held: The Medical Board finding that the accident occurred in the actual performance of duty supports eligibility; ERS’s contrary construction was rejected as inconsistent with statute and legislative history
Whether giving Stout benefits without summer‑pay contributions creates undue unfairness/fiscal burden	State: allowing benefits would let members claim benefits from accidents in non‑contributory jobs and impose unfunded liability	Stout: benefits are confined to existing ERS members injured while performing State service; contributions during the non‑membership service period are not required by § 88‑79	Held: Court rejects the fiscal‑fairness argument as a basis to rewrite § 88‑79; only existing members may obtain service‑connected benefits when injured in State service while contributions are being made to ERS elsewhere

Key Cases Cited

Tradewind Ins. Co. v. Stout, 85 Haw. 177, 938 P.2d 1196 (Haw. App. 1997) (criminal trial facts regarding the 1988 shooting)
Hua v. Board of Trustees of the Employees’ Retirement System, State of Hawai‘i, 112 Hawai‘i 292, 146 P.3d 836 (Haw. App. 2006) (ER S cases borrow workers’ compensation concepts; remedial focus)
Kikuta v. Board of Trustees of the Employees’ Retirement System, State of Hawai‘i, 66 Haw. 111, 657 P.2d 1030 (Haw. 1983) (interpreting ERS disability standards)
Panado v. Bd. of Trs., Emps. Ret. Sys., 134 Hawai‘i 1, 332 P.3d 144 (Haw. 2014) (history and purpose of ERS)
Coon v. City & County of Honolulu, 98 Hawai‘i 233, 47 P.3d 348 (Haw. 2002) (deference to agency interpretations limited where it contravenes legislative intent)
Vail v. Employees’ Retirement System, 75 Haw. 42, 856 P.2d 1227 (Haw. 1993) (agency power to deny membership to classes of part‑time employees)
Morgan v. Planning Dep’t, 104 Hawai‘i 173, 86 P.3d 982 (Haw. 2004) (deference to agency statutory construction unless palpably erroneous)
Kaho‘ohanohano v. State, 114 Hawai‘i 302, 162 P.3d 696 (Haw. 2007) (ERS funding structure and membership principles)