Taylor v. Government Employees Insurance Co.Taylor v. Government Employees Insurance Co.
Lead Opinion
Opinion of the Court by
Thе plaintiffs-appellants Rosalina V. Taylor (Rosalina) and Emilio I. Taylor (collectively, the Taylors) appeal from the first circuit court’s judgment and order denying their motion for summary judgment and granting the cross-motion of the defendant-appellee Government Employees Insurance Company (GEICO) for summary judgment. On appeal, the Taylors contend that (1) the consent:to-settle clause in their underinsured motorist (UIM) policy is void as against public policy and (2) GEICO’s refusal to consent to a settlement in an amount only $2000.00 less than the tortfeasor’s liability coverage limits was unreasonable. Because, on the present record, GEICO’s refusal to consent to the settlement was unreasonable, we va-. cate the judgment appealed from and remаnd this matter to the circuit court for the entry of an order granting the Taylors’ motion for summary judgment.
I. BACKGROUND
At all times relevant to the present matter, the Taylors were insured by an automobile insurance policy, issued by GEICO, which included UIM coverage. On September 26, 1993, Rosalina was injured in a collision with a vehicle driven by Mary McKaig, who was insured at that time by State Farm Mutual Automobile Insurance Company (State Farm).
On January 17, 1996, the Taylors filed a civil action against McKaig. On May 1,1996, the Taylors’ attorney informed GEICO by letter that State Farm had offered to settle the Taylors’ claim. The letter stated in relevant part:
An offer has been made to settle this case for $33,000.00 subject to the approval of my client and your company as UIM carrier. The policy limits are $35,000.00.
... I also need any provisions that GEI-CO intends to rely on to claim UIM coverage would not apply until the BI limits are exhausted.
Finally, many insurance policies require written permission to settle the bodily injury claim as a condition of making a UIM claim. Accordingly, please provide written permission by your own letter or by signing below and faxing this letter back to my office.
GEICO’s claims examiner responded by letter dated May 7, 1996, stating in relevant part:
Please be advised that we will not grant concurrence with regard to the UIM claim and your underlying BI settlement as you have not obtained the bodily injury policy limits of the BI carrier. As you are aware[,] under the terms of the UIM coverage[,] you must obtain all collectible bodily injury coverage before you may present a UIM claim.
(Emphasis added.)
The relevant UIM provisions of GEICO’s auto insurance policy are as follows:
We will pay damages an insured is legally entitled to recover for bodily injury caused by accident and arising out of the ownership, maintenance or use of an un-derinsured motor vehicle. However, we will not pay until the total of all bodily injury liability insurance available has been exhausted by payment of judgments or settlements.
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EXCLUSIONS
1. This coverage does not apply to bodily injury to an insured if the insured or his legal representative has made a settlement or has been awarded a judgment of his claim without our pri- or written consent.
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ARBITRATION
If any insured making claim under this policy and we do not agree that he is' legally entitled to recover damages under this coverage from the owner or operator of an underinsured motor vehicle because of bodily injury to the insured, or do not agree as to the amount payable, either party may request arbitration.
(Emphases in original.) “Underinsured motor vehicle” is defined by the policy as
a motor vehicle with respect to the ownership, maintenance or use of which the sum of the limits of liability under all bodily injury liability insurance coverage applicable at the time of loss to which coverage afforded by such policy or policies applies is less than the liability for damages imposed by law.
(Emphasis added.)
On May 31,1996, although GEICO refused to approve the proposеd settlement, the Tay-lors executed a joint tortfeasor release and indemnity agreement that released McKaig and her insurers from liability for the September 26 accident in exchange for the $33,-000.00. When GEICO subsequently refused the Taylors’ demand for UIM benefits based upon the above-quoted policy provisions, the Taylors filed a complaint for declaratory relief in the circuit court, seeking (1) a declaration that they were entitled to UIM benefits under the policy and (2) an order compelling arbitration in order to determine the amount of UIM benefits due.
On April 7,1997, the Taylors filed a motion for summary judgment alleging that GEICO (1) had been provided notice of the proposed settlement, (2) had unreasonably refused' to consent to it, and, therefore, (3) had waived its right to rely upon the consent-to-settle clause and to be subrogated to the rights of its insured. On April 8, 1997, GEICO filed a cross-motion for summary judgment, contending that (1) the policy provisions in question were enforceable and (2) inasmuch as they had failed to exhaust McKaig’s liability policy, the Taylors were precluded from recovering UIM benefits under the GEICO policy. On May 1, 1997, the circuit court entered an order denying the Taylors’ motion for summary judgment and granting GEI-CO’s cross-motion. On December 10, 1997, judgment was entered in favor of GEICO and against the Taylors. This timely appeal followed.
II. STANDARDS OF REVIEW
A. Motion For Summary Judgment
We review [a] circuit court’s award of summary judgment de novo under the same standard applied by the circuit court. Amfac, Inc. v. Waikiki Beachcomber Inv. Co.,74 Haw. 85 , 104,839 P.2d 10 , 22, reconsideration denied,74 Haw. 650 ,843 P.2d 144 (1992) (citation omitted). As we have often articulated:
[sjummary judgment is appropriate if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and thаt the moving party is entitled to judgment as a matter of law.
Id. (citations and internal quotation marks omitted); see Hawai'i Rules of Civil Procedure (HRCP) Rule 56(e) (1990). “A fact is material if proof of that fact would have the effect of establishing or refuting one of the essential elements of a cause of action or defense asserted by the parties.” Hulsman v. Hemmeter Dev. Corp.,65 Haw. 58 , 61,647 P.2d 713 , 716 (1982) (citations omitted).
Konno v. County of Hawai'i,85 Hawai'i 61 , 70,937 P.2d 397 , 406 (1997) (quoting Dunlea v. Dappen,83 Hawai'i 28 , 36,924 P.2d 196 , 204 (1996)) (brackets in original). “The evidence must be viewed in the light most favorable to the non-moving party.” State ex rel. Bronster v. Yoshina,84 Hawai'i 179 , 186,932 P.2d 316 , 323 (1997) (citing Maguire v. Hilton Hotels Corp.,79 Hawai'i 110 , 112,899 P.2d 393 , 395 (1995)). In other words, “we must view all of the evidence and the inferences drawn therefrom in the light most favorable to [the party opposing the motion].” Maguire,79 Hawai'i at 112 ,899 P.2d at 395 (citation omitted).
B. Interpretation Of A Statute
“[TJhe interpretation of a statute ... is a question of law reviewable de novo.” State v. Arceo,84 Hawai'i 1 , 10,928 P.2d 843 , 852 (1996) (quoting State v. Camara,81 Hawai'i 324 , 329,916 P.2d 1225 , 1230 (1996) (citations omitted)). See also State v. Toyomura,80 Hawai'i 8 , 18,904 P.2d 893 , 903 (1995); State v. Higa,79 Hawai'i 1 , 3,897 P.2d 928 , 930, reconsideration denied,79 Hawai'i 341 ,902 P.2d 976 (1995); State v. Nakata,76 Hawai'i 360 , 365,878 P.2d 699 , 704, reconsideration denied,76 Hawai'i 453 ,879 P.2d 558 (1994), cert. denied,513 U.S. 1147 ,115 S.Ct. 1095 ,130 L.Ed.2d 1063 (1995).
Gray v. Administrative Director of the Court,84 Hawai'i 138 , 144,931 P.2d 580 , 586 (1997) (some brackets added and some in original). See also State v. Soto,84 Hawai'i 229 , 236,933 P.2d 66 , 73 (1997). Furthermore, our statutory construction is guided by established rules:
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. And we must read statutory language in the context of the entire statute and construe it in a manner consistent with its purpose.
When there is doubt, doubleness of meaning, or indistinetiveness or uncertainty of an expression used in a statute, an ambiguity exists....
In construing an ambiguous statute, “[t]he meaning of the ambiguous words may be sought by examining the context, with which the ambiguous words, phrases, and sentences may be compared, in order to ascertain their true meaning.” HRS § 1-15(1) [ (1993) ]. Moreover, the courts may resort to extrinsic aids in determining legislative intent. One avenue is the use of legislative history as an interpretive tool.
Gray,84 Hawai'i at 148 ,931 P.2d at 590 (quoting State v. Toyomura,80 Hawai'i 8 , 18-19,904 P.2d 893 , 903-04 (1995)) (brackets and ellipsis points in original) (footnote omitted). This court may also consider “[t]he reason and spirit of the law, and the cause which induced the legislature to enact it ... to discover its true meaning.” HRS § 1-15(2) (1993). “Laws in pari materia, or upon the same subject matter, shall be construed with reference to each other. What is clear in one statute may be called upon in aid to explain what is doubtful in another.” HRS § 1-16 (1993).
Ho v. Leftwich,
III. DISCUSSION
We begin our analysis with the observation that “ ‘... insurers have the same rights as individuals to limit their liability[] and to impose whatever conditions they please on their obligations, 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).... 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 poliey[.]” ... [ ]HRS[ ] § 431:10-237 [ (1993) ]; 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).
*307 Nevertheless, adherence to the plain language and literal meaning of insurance contract provisions is not without limitation. We have acknowledged that “[because 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] resоlved 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 hereunder[] and become a part of the contract with full binding effect on each party.” AIG Hawaii Ins. Co., Inc. v. Estate of Caraang,74 Haw. 620 , 633,851 P.2d 321 , 328 (1993) (citations and internal quotation marks omitted). 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 [v. AIG Hawaii Ins. Co.],76 Hawai'i 304 ,] 307, 875 P.2d [921,] 924[, reconsideration denied,76 Hawai'i 353 ,877 P.2d 890 (1994) ]; 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); [National Union Fire Ins. Co. v.] Olson,69 Haw. 559 ,] 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).
Estate of Doe,
The current UIM statute, HRS § 431:100-301 (1993 & Supp.1998),
The purpose of this bill is to require insurers to offer coverage for underinsured motor vehicles in motor vehicle insurance policies. Underinsured motorist coverage would then be treated in the same manner that uninsured motorist coverage is presently treated, i.e., to provide protection, through voluntary insurance, for persons who are injured by underinsured motorists whose liability polic[i]es are inadequate to pay for personal injuries caused by motor vehicle accidents....
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Your committee received testimony in favor of this bill, but there were concerns expressed that insureds were not being offered underinsured motorist coverage by certain insurers. To alleviate the problem it was suggested that the bill should provide that, unless the named insured rejects the coverage in writing, the additional un-derinsured motorist coverage will be inсluded in the policy. You committee has, accordingly, amended the bill to provide for the written rejection by the insured in the same manner as is presently required for uninsured motorist coverage.
Hse. Stand. Comm. Rep. No. 1150-88, at 1248. Thus, like the uninsured motorist statutes, HRS § 431:10C-301(b)(4) is a remedial statute that must be liberally construed “in order to accomplish the purpose for which [it] was enacted.... [Remedial] statutes are liberally construed to suppress the [perceived] evil and advance the [enacted] remedy.” See Estate of Doe,
Our review of the language and the legislative history of the UIM statute does not reveal an express legislative intent to permit or prohibit the use of “consent-to-settle” and “exhаustion of benefits” clauses to preclude recovery by insureds who present claims that would otherwise be compensable pursuant to the provisions of their UIM coverage. Furthermore, the question has never before been addressed by a Hawaii appellate court.
The validity of consent-to-settle provisions has been widely litigated outside of Hawaii, and a majority of jurisdictions has upheld such provisions, in the UIM context. See, e.g., Allstate Ins. Co. v. Beavers,
The Taylors argue that upholding consent-to-settle provisions would conflict with the legislative intent underlying HRS § 431:10C-301(b)(4). Indeed, the relatively few jurisdictions that have voided consent-to-settle provisions have done so оn the grounds that, in the UIM context, such provisions “frustrate!] the legitimate purpose of providing maximum and expeditious protection to the innocent victims of financially irresponsible motorists.” Longworth v. Van Houten,
Nevertheless, we are unable to hold that consent-to-settle clauses, per se, contravene the intent of HRS § 431:10C-301(b)(4). The UIM statute does not mandate that coverage be unqualified. Rathеr, HRS § 431:10C-301(b)(4) provides merely that such insurance cover “loss from bodily injury or death.” The legislative history of the UIM statute speaks of the “speedy and adequate protection” of the injured insured “at the least possible cost.” See Sen. Stand. Comm. Rep. No. 689, in 1985 Senate Journal, at 1181; Kaiama v. AIG Hawai'i Ins. Co., Inc.,
A consent-to-settle provision does not, however, give a UIM insurance carrier carte blanche to deny UIM benefits to an insured victim.
[A]s a practical matter, the victim can only settle with the underinsured tortfeasor by giving him a general release. This is so since the tortfeasor’s insurer, which controls settlement negotiations and any litigation against the tortfeasor as well as the pocketbook (up to the policy limits), owes a duty to its own insured, the tortfeasor, to prоvide him with the protection of a general release as a condition of settlement[6 ] But since the giving of a release by the victim extinguishes any further right the victim might have against the tortfeasor, it also extinguishes the UIM carrier’s right of subrogation against the tortfeasor, that right being no greater than the victim’s own remaining right against the tortfeasor. See Montefusco Excavating & Contracting Co. v. Middlesex Cty.,82 N.J. 519 , 523,414 A.2d 961 (1980). Thus, the sole junction of the consent-to-settle clause is the preservation of the subrogation right.
Longworth,
The preservation of a UIM carrier’s subro-gation rights is consistent with the interests of this state’s public policy. HRS § 431-448(b), the immediate precursor to HRS § 431:10C-301(b)(4), mandated that insurers offer UIM coverage at “a relatively modest increase in premium.” Mollena v. Fireman’s Fund Ins. Co. of Hawai'i, Inc.,
designed to protect the insured from the uninsured or underinsured motorist, not to protect the insurance company from its own insured. Sandoval v. Valdez,91 N.M. 705 ,580 P.2d 131 (Ct.App.1978). However, “[cjonstruing an insurance contract ac*311 curately and giving it the effect which its language clearly commands is not ipso fac-to a breach of public policy merely because it disappoints the victim of an uninsured motorist.” Tuthill v. State Farm Insurance Co.,19 Ill.App.3d 491 , 498,311 N.E.2d 770 , 776 (1974) (citation omitted). In response to the insured’s argument in Tuthill that the consent provision in effect gives the insurer the power to control litigation by forcing the insured to proceed to trial when the insurer refuses to consent to a settlement, the court noted that the consent provision is not designed to control the insured’s access to the courts, but rather to protect the insurer’s subrogation rights. Id. at 497,311 N.E.2d at 775 . Moreover, the court pointed out that the insured is protected by the generally-accepted notion that an insurer’s arbitrary and unreasonable withholding of consent would constitute a waiver of the consent requirement.
March v. Mountain States Mut. Cas. Co.,
A UIM carrier may not simply block settlement, however, on the unsupported assertion that it is doing so in order to protect its subrogation interests. We adopt the view, held by many courts, that the legitimate invocation of a consent-to-settle provision “requires the insurer to demonstrate prejudice from the insured’s failure to obtain the insurer’s consent before settling with the tortfeasor.” Greenvall,
One theoretical stumbling block generated by consent-to-settle provisions is a tortfeasor’s liability insurer’s potential hesitation, by virtue of the insurer’s duty of good faith, to accept a settlement that does not generally release the tortfeasor.
Although we affirm the validity of consent-to-settle clauses in UIM policies when employed in good faith to preserve the UIM carrier’s subrogation interests, we hold that exhaustion clauses are void as against public policy. Many jurisdictions have concluded that a UIM insurer cannot require that its insured exhaust the tortfeasor’s insurance prior to applying for UIM benefits. See New Hampshire Ins. Co. v. Knight,
*313 The exhaustion clause requires that the insured settle with or obtain judgment against the tortfeasor in the full amount of the tortfeasor’s own liability coverage before thе UIM carrier has any payment obligations at all under the UIM coverage. The adverse impact of this clause on the legislative purpose in providing for UIM coverage is immediately apparent. It means that the tortfeasor’s carrier, by offering to settle for a sum somewhat less than the policy limits, can force the victim to trial solely in order to protect his UIM claim. In effect then, the victim is denied the perfectly reasonable choice of saving months, if not years, of delay, trial preparation expense, and all the ensuing wear and tear by simply accepting the offer and, as a condition of proceeding with his UIM claim, foregoing the difference between the tortfeasor’s policy limit and the tortfeasor’s insurеr’s offer. This was in fact the situation in Schmidt. In one of the cases there reviewed, the tortfeasor’s carrier offered to settle with the victim for $22,000 out of a $25,000 liability policy. One of the questions was whether the insured could accept the offer without impairing his UIM rights. The court concluded that because the exhaustion clause in this respect was unenforceable, it could not bar the insured’s right to accept the offer. It reasoned as follows:
The purposes of the no-fault act, noted above, include those of easing the burden of litigation and encouraging prompt payment of claims![10 ] Enforcement of policy exhaustion clauses would produce results contrary to those purposes. It could serve to force an insured to litigаte the claim to a final judgment in order to exhaust the policy limits. Litigation expenses would lessen the insured’s net recovery, the time involved in litigation would serve to delay payment to the insured, and the litigation itself would unnecessarily burden our court system. Where the best settlement available is less than the defendant’s liability limits, the insured should not be forced to fore-go settlement and go to trial in order to determine the issue of damages. The insured has the right to accept what he or she considers the best settlement available and proceed to arbitrate the underinsurance claim for a determination of whether the damages do indeed exceed the tortfeasor’s liability limits. [[Schmidt, ]338 N.W.2d at 260-61 .]
We agree completely. We agree as well with Schmidt’s further conclusion that if the victim does accept less than the tortfea-sor’ s policy limits, his recovery against his UIM carrier must nevertheless be based on a deduction of the full policy limits.
We note that, in voiding exhaustion clauses in UIM policies as against public policy, we do not mean to suggest that the injured party may seek UIM benefits before resolving the bodily injury claim with the tortfeasor through settlement or judgment. UIM coverage contemplates that, “[i]f an underinsured tortfeasor is involved, ... his [or her] victim may not pursue his [or her] contractual UIM right against his [or her] own liability insurer until he [or she] has first recovered [from] the tortfeasor[ ] ... by settlement or judgment.” Id. at 416. This rule acts to prevent the inconsistency that might result if insured victims were permitted simultaneously to arbitrate claims with their UIM carriers and proceed to trial with tort-feasors. Of course, while an injured insured’s right to UIM benefits does not vest until he or she has concluded a settlement with or obtained a judgment from the tort-feasor, a UIM carrier remains free to tender UIM benefits at any time.
Based on the foregoing, it is apparent that GEICO did not act reasonably in denying the Taylors’ application for UIM benefits. The Taylors timely notified GEI-CO of their proposed settlement with State Farm. GEICO denied the Taylors’ application solely because the Taylors did not “obtain[] the bodily injury policy limits of [McKaig’s Bodily Injury] carrier.” Thus, GEICO justified its denial solely upon an invalid exhaustion clause. The record does not indicate, nor does GEICO suggest, that GEICO’s denial was premised on any investigation and consequent desire to preserve its subrogation rights. Accordingly, we hold that GEICO’s refusal to consent to the Tay-lors’ settlement with McKaig was unreasonable and may not serve as a legitimate basis for denying the Taylors’ application for UIM benefits.
IV. CONCLUSION
For the reasons set forth above, we vaсate the judgment in favor of GEICO and remand this matter to the circuit court for the entry of an order granting the Taylors’ motion for summary judgment.
Notes
. The record on appeal does not include McKaig’s policy with State Farm.
. HRS § 431:10C-301(b)(4) provides in relevant part that "[a] motor vehicle insurance policy shall include ... [c]overage for loss resulting from bodily injury or death suffered by any person legally entitled to recover damages from owners or operators of underinsured motor vehicles.” The term "underinsured motor vehicle” means “a motor vehicle with respect to the ownership, maintenance, or use for which sum of the limits of all bodily injury liability insurance coverage and self-insurance applicable at the time of loss is less than the liability for damages imposed by law.” HRS § 431:10C-103 (1993 and Supp. 1998) (emphases added).
. HRS § 431-448 provided in relevant part:
Automobile liability; coverage for damage by uninsured or underinsured motor vehicle.
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(b) Each insurer shall offer to each policyholder or applicant for a motor vehicle liability policy optional additional insurance coverage for loss resulting from bodily injuty or death suffered by any person legally entitled to recover damages from owners or operators of un-derinsured motor vehicles.
(c) The term "underinsured motor vehicle," as used in this section, means a motor vehicle with respect to the ownership, maintenance or use of which the sum of the limits of liability of all bodily injury liability insurance coverage applicable at the time of loss to which coverage afforded by such policy or policies applies is less than the liability for damages imposed by law.
. This court has uphеld the validity of a consent-to-sue provision in an uninsured motorist policy. See Moorcroft v. First Ins. Co. of Hawaii, Ltd.,
. We note that consent-to-settle provisions are triggered only if the insured party intends to claim UIM benefits. Moreover, a breach of the provision affects no more than the insured’s entitlement to such benefits. Accordingly, an insured party who does not file a claim under his or her UIM policy is under no obligation to obtain the consent of his or her UIM insurer as a precondition to a settlement with the relevant tortfeasor or tortfeasors.
. But see the discussion infra regarding the prerogative of a tortfeasor’s insurer to provide a limited rеlease.
. The tortfeasor's liability policy, by its terms, usually accords the insurer the prerogative to settle the plaintiffs claims against the tortfeasor in the amount of the liability insurance policy limit, with or without the tortfeasor’s consent. See Robert H. Jerry, II, Understanding Insurance Law 763 (2d ed.1996) (noting that "the typical language reserves to the insurer a privilege to settle, or not to settle, as the insurer in the exercise of its discretion sees fit"); see also 7C Appleman, Insurance Law and Practice § 4711, at 369 (stating that "Pliability insurance contracts have been held to give the insurer absolute authority to settle claims within the policy limits, and the insured has no power either to compel the insurer to make such settlements, or to prevent it from doing so”).
. Of course, the conduct of the attorney retained by the tortfeasor’s liability carrier to represent the tortfeasor should bе guided by the interests of his or her client. See Finley v. Home Ins. Co.,
. We note that once a tortfeasor’s liability insurer has discharged its duly to indemnify through a payment of policy limits, its duty to defend may be implicated. "The insurer’s duty to defend its insured is contractual in nature and this court must look to the language of the particular policy involved to determine the scope of that duty.” Commerce & Industry Ins. Co. v. Bank of Hawaii,
Some insurance policies provide that the insurer will defend any suit, even if groundless, that states claims implicating the coverage afforded by the policy. The majority of jurisdictions hold that, under such a policy, the duty to defend will survive a payment of policy limits. See, e.g., American Cos. Co. of Reading v. Howard,
On the other hand, some insurance policies include provisions to the effect that the insurer's duty to defend is extinguished when the insurer's limit of liability for the coverage has been "paid” or "exhausted.” The jurisdictions are split as to the legal import of such provisions on an insurer’s duty to defend once it has paid policy limits. Some jurisdictions have held that, under such a provision, an insurer's duty to defend terminates upon a good faith payment of policy limits. See Johnson v. Continental Ins. Cos.,
As indicated previously, McKaig's liability policy with State Farm is not included on appeal. In the absence of relevant policy language, we deem it imprudent to take a definitive position at this time regarding an insurer's duty to defend subsequent to a tender of policy limits. Accordingly, we leave the resolution of that question for another day.
. The legislative history of HRS § 431:10C-301(b)(4) is in accord. See Sen. Stand. Comm. Rep. No. 689, in 1985 Senate Journal, at 1181 (emphasizing the goal of “providing speedy and adequate protection to persons injured in motor vehicle accidents at the least possible cost”).
. In fact, we find it difficult to imagine any basis for a UIM carrier to refuse to consent to a settlement apart from its need to protect its sub-rogation interest. See Greenvall,
Concurrence Opinion
Concurring Opinion by
While I fully agree with the reasoning of the majority regarding GEICO’s liability for UIM benefits, I write separately out of concern for the message sent to the primary insurer by the result in this case. As we recently reaffirmed, “ ‘there is a legal duty, implied in a first- and third-party insurance cоntract, that the insurer must act in good faith in dealing with its insured[.]’” Delmonte v. State Farm Fire and Cas. Co.,
In the instant case, there is no allegation that State Farm acted in bad faith in making an offer of settlement less than the policy amount.
. State Farm is not a party in this case.