Young v. Allstate Insurance Co.Young v. Allstate Insurance Co.
Lead Opinion
Plaintiff-Appellant Priscilla Young (“Young”) appeals from the third circuit court’s
On appeal, Young argues the circuit court erred by granting Defendants’ motion to dismiss Young’s complaint for failure to state a claim where Defendants are liable for (1) abuse of process, (2) malicious defense, (3) assumed duty of good faith and fair dealing, and (4) intentional infliction of emotional distress (“IIED”) for making false allegations about her, refusing to settle, and appealing the arbitration award in furtherance of Allstate’s policies. Based upon the following analysis, we (1) affirm the circuit court’s September 17, 2004 judgment in favor of Defendants on Young’s claims for abuse of process, malicious defense, and breach of an assumed duty of good faith and fair dealing, (2) vacate the circuit court’s September 17, 2004 judgment on Young’s IIED claim, and (3) remand the case for further proceedings.
I. BACKGROUND'
A. Factual History
Because the circuit court dismissed Young’s first amended complaint, pursuant to Hawaii Rules of Civil Procedure (“HRCP”) Rule 12(b)(6), on the basis that it failed to state a claim upon which relief could be granted, we take the complaint’s factual allegations as true for purposes of this appeal. See Kahala Royal Corp. v. Goodsill Anderson Quinn & Stifel,
1. Allstate’s “Claim Core Redesign Process”
In the mid-1990s, Allstate devised a plan to redesign the process by which it handled personal injury claims. This plan was referred to in internal implementation training manuals as the “Claims Core Process Redesign” or “CCPR.” Excerpts of those manuals were attached as exhibits to the first amended complaint. The CCPR plan was intended to increase profits by over $200,000,000.00 annually by underpaying claims and denying claimants just and reasonable compensation. According to the CCPR manual, one of the plan’s primary goals was to “manage specific components of severity (average amount paid per claim) to provide greater financial support to the company.”
One such component was the rate at which claimants were represented by legal counsel. Allstate’s CCPR manual directed claim representatives to “realiz[e] that the way we approach claimants and develop relationships will significantly alter representation rates and contribute to lower severities.” The manual explained that “when an attorney represents a claimant, we pay 2-3 times more to settle the claim.” Consequently, Allstate instructed its claim personnel to “do whatever it takes to remove any need for an attorney.”
By dissuading claimants from seeking legal counsel, Allstate was able to prey upon injured and unrepresented claimants’ trust and lack of knowledge and to deny or settle claims for a fraction of their value. In handling minor-impact, soft-tissue or “MIST” claims, Allstate calculated settlement offers through its “Colossus” computer valuation system.
If a settlement offer were not accepted or the claimant hired an attorney, Allstate would fully litigate virtually every claim, irrespective of its insured’s liability or the real physical harm and value of the injuries suffered by the claimant. Allstate thereby sought to subject claimants to unnecessary and oppressive litigation and expenses, or, in other words, “scorched-earth litigation tactics.” Allstate intended to force claimants and their attorneys through arbitration and trial unnecessarily. For example, if a nonbinding arbitration award were anything more than nominal, Allstate’s practice was to appeal the award. The insurer employed these tactics to discourage claimants from pursuing injury claims. Allstate also sought to discourage attorneys from representing claimants by creating so much work and expense that they could not afford to advocate for a client with minor, moderate, or sometimes even serious injuries.
Aside from the rate at which claimants were represented by counsel, another significant severity component was the amount paid for bodily injury claims. According to the CCPR manual: “Of the components that account for paid losses, [bodily injury] is by far the largest. Controlling loss payout is clearly the most effective means of controlling casualty costs.” The manual illustrated that a five percent reduction in the amount paid on bodily injury claims would yield profits of $201,000,000.00 per year. The manual gave specific instructions to representatives handling MIST claims, which typically arose from minor-impact automobile accidents that caused connective tissue, organ, or muscle damage, but not broken bones.
According to the CCPR manual, MIST claims rarely reached trial, “because on a case-by-case basis, a settlement [could] be justified when litigation costs [were] considered.” Consequently, Allstate instructed its claim representatives to meet with the claimants’ attorneys to emphasize those costs— ie., “attorney economics”—through threats, intimidation, and strong-arm tactics. Representatives were directed “[t]o send a message to attorneys of [Allstate’s] proactive defense stance on MIST cases,” which “force[d] the claimant and attorney to think about the obstacles they must overcome to recover a
Allstate carried out its policies through the active participation of its attorneys. The “Litigation Management” section of the CCPR manual segmented, or targeted, certain claims for litigation and trial. One such litigation segment was referred to as “Settle for ‘X’ or less—default to trial.” In outlining the nature of such cases, the manual noted that the “[p]rimary reason [that the] case [wa]s being defended [wa]s that [the] plaintiff ha[d] not accepted Allstate’s offer.” Once a case was targeted for trial under the “Settle for ‘X’ or less” segment, an Allstate attorney was “required” to “appeal [the] non-binding arbitration/mediation award as directed by [the] claim representative].” Likewise, an “intended resolution” by Allstate’s claim representative to “try [a] case” had to be followed by Allstate’s staff counsel. Allstate’s attorneys were required to “increase trial activity in appropriate cases,” such as “where settlement [could not] be reached for [the] evaluated amount.” The reason that Allstate’s attorneys were expected to have “more trials” was to “reduce loss payout.”
Allstate used incentive compensation programs to encourage its attorneys to try more cases, irrespective of whether such litigation was justified by the facts. For Allstate’s staff attorneys, increased trial activity was an objective set forth in the CCPR manual, with compensation and financial reward programs for the attorneys who met CCPR objectives. The more cases they tried, the more they might qualify for awards and salary increases. Allstate’s attorneys’ performance was also measured by whether they achieved results at or below the evaluated claim amount. Allstate’s managing attorneys were expected to monitor their staff counsel aggressively. For example, under the CCPR manual, one corrective action for poorly performing offices was to “put managing attorney bonuses at risk or change [the] managing attorney.”
2. Young’s February U, 1998 automobile accident with Allstate’s insured
On February 4, 1998, Young was stopped in traffic in Hilo, Hawaii, when a ear operated by an Allstate-insured driver, Daryl Fu-jimoto (“insured”), hit the rear of Young’s 1984 Ford. The insured informed Místate that he fell asleep while driving and caused the crash. As a result of the collision, Young’s automobile (worth about $1,795) was destroyed, and Young, who was eighty-four years old at the time of the accident, sustained injuries to her neck, ribs, right knee, and thoracic and lumbar spine. Young had difficulty performing activities of daily living and, consequently, began suffering from depression.
3. Allstate’s pledges to Young
An Allstate claim representative contacted Young on the same day of the collision and informed her that “Allstate would provide ‘quality service’ on her claim, treat her fairly, and [ ] that, because of these promises, she did not need any attorney.” Shortly thereafter, Young received a letter dated February 4, 1998 from Allstate, which stated: “I want to reaffirm Allstate’s policy that we will provide quality service to anyone who has been involved in an accident with one of our policyholders. As your claim representative, my role is to ensure that you receive this quality service, outlined in the enclosed ‘Quality Service Pledge.’ ” Accompanying the letter was a “QUALITY SERVICE PLEDGE,” which stated that “YOU’RE IN GOOD HANDS WITH ALLSTATE” and that:
Because you have been involved in an accident with an Allstate policyholder, we will 'provide you with quality service. In an effort to provide you with this quality service, we promise you the following:
1) We mil fully explain the process, take the time to answer all questions and concerns that you may have, and keep you informed throughout the claim process.
2) We will conduct a quick, fair investigation of the facts in your case.
3) To the extent that our policyholder was at fault in the accident, toe will assist you in providing for the repair of your vehicle and in determining your temporary transportation needs.
Your claim professional is dedicated to carrying out this Quality Service Pledge.
(Emphases in original.)
Thereafter, Allstate sent a second letter to Young requesting that she authorize Allstate to gather her medical and employment information to evaluate her injury claim. The quality service pledge attached to the second letter differed from the pledge attached to the first letter to the extent that the third promise, which concerned transportation and vehicular repair, instead stated: “3) If you qualify, we will make an appropriate offer of compensation for any injuries you may have suffered.” (Emphasis in original.)
Young relied upon Allstate’s oral and written representations, believing that she did not need an attorney and that Allstate would treat her fairly, just as it would be expected to treat one of its own customers. As a result of those representations, Young attempted to resolve her bodily injury claim directly with Allstate without advice or assistance from an attorney. Additionally, Young released her medical information to Allstate.
4. Allstate offered Young $5,000 and then raised its offer to $5,300
On March 15, 1999, when Young had already incurred over $6,000 in medical expenses and was still receiving medical care for her injuries, Allstate offered Young $5,000 to settle her claims and release Allstate and the insured from liability. Allstate represented that it “fairly evaluated [Young’s] injury claim for settlement” and that Young’s no-fault insurance coverage should pay for her accident related treatment.
Young rejected the $5,000 offer, and on April 22, 1999, Allstate raised its offer to $5,300. It presented the offer to Young, who it knew was still unrepresented by counsel, together with a joint tortfeasor release and indemnity agreement for her signature. Allstate was aware that Young was permanently injured, then eighty-five years of age, and in a very vulnerable position. In making the offer, Allstate represented to Young that she had sustained mere minor injuries and that she should accept the offer. Young was deeply distressed because she felt that Allstate was breaking its promises and violating its pledge to fairly evaluate her claim. She therefore sought the assistance of an attorney, who attempted to negotiate a fair settlement with Allstate, but Allstate refused to make any offer beyond $5,300.00.
5. Jury awarded Young $198,971.71 in the underlying case
On April 17, 2000, Young filed suit against the insured, seeking fair compensation for her injuries sustained from the February 1998 car crash. Allstate, through its attorney, Iehiyama, filed an answer on December 18, 2000, alleging, among other things, that Young was injured by her own negligence and that she failed to mitigate her injuries. The defenses caused Young, who, was eighty-seven years old at the time, extreme distress and shame.
After Young’s deposition, Iehiyama indicated that he would recommend that Allstate pay Young its insured’s $25,000 limit of coverage. Still, Allstate refused to increase its offer. The case proceeded to the court annexed arbitration program, but the Defendants never took the arbitration seriously; they entered the arbitration hearing with the intention of appealing any award that exceeded a nuisance value for the claim.
On June 12, 2001, the arbitrator awarded Young medical expenses of $7,689.51 and general damages of $37,000, for a total award of $45,189.15. On June 26, 2001, Iehiyama filed a notice of appeal requesting a trial de novo.
The circuit court ordered the parties to participate in mediation, which was unsuccessful because Allstate refused to improve its nuisance offer of $5,300.00.
Thereafter, on July 19, 2001, Young filed a HRCP Rule 68
On April 8, 2002, at Young’s request and over the opposition of Defendants, the court awarded Young attorney’s fees of $15,000, costs pursuant to Hawaii Revised Statutes (“HRS”) § 607-9 of $3,334.48, and costs pursuant to Hawaii Arbitration Rules (“HAR”) Rule 26(B)(1).
B. Procedural History
On May 15, 2003, Young filed a complaint against Defendants. The following month, she filed her first amended complaint, alleging that she was a victim of Allstate’s plan, “Claim Core Process Redesign,” because Allstate formed a trust-based relationship with her to coerce her into accepting a low settlement offer. Young argued that Defendants refused to make her a reasonable offer and forced the case through arbitration, then appealed the arbitration award and forced her through a jury trial, and finally, contested her motions for attorneys’ fees and costs sanctions and prejudgment interest. Young argued that these tactics “were designed for one purpose: to drive up [her] costs and to coerce, intimidate and punish [Young] for refusing to accept Allstate’s $5,300 offer and getting an attorney.” Young asserted Defendants were liable for, among other things, (1) abuse of process, (2) malicious defense, and (3) IIED, and that Allstate had breached an assumed duty of good faith and fair dealing. For each claim, she requested compensatory and punitive damages.
On June 25, 2003, Defendants filed a motion to dismiss Young’s complaint (“motion to dismiss”) under HRCP Rule 12(b)(6)
On July 28, 2003, Young filed a memorandum in opposition to Defendants’ motion to dismiss. The circuit court heard the motion on August 5, 2003.
Young’s abuse of process claim asserted that the Defendants had used legal process against her for an ulterior purpose not proper in the regular conduct of the proceedings—to send a message to claimants and attorneys and to punish Young and her attorney through excessive litigation expenses, harassment, oppression, and abuse. According
With respect to her “malicious defense” claim, Young alleged that the Defendants took an active part in the initiation, continuation, or procurement of the defense in Young’s ease against Allstate’s insured. She alleged that the Defendants (1) maliciously defended the case and used the courts imprudently by acting without reasonable or probable cause and by acting with knowledge or notice that them positions lacked meiit and (2) acted primarily for a purpose other than that of securing a proper adjudication of the claims and defenses, such as to harass, annoy, or injure or to cause an unnecessary delay or a needless increase in litigation costs. Despite these tactics, the underlying proceedings culminated in Young’s favor. The circuit court declined to recognize the tort of “malicious defense” because it believed that a defendant, who has been haled into court involuntarily, should not be required to elect whether to vigorously defend and suffer the prospect of an additional lawsuit or to defend less vigorously. The circuit court further reasoned that, in cases in which a defendant acts improperly, sanctions could be imposed.
Young’s IIED claim asserted that, at all material times, the Defendants were aware that Young was an elderly woman who was in pain, incapacitated in her ability to care for herself, suffering from depression as a result of the injuries she sustained in the February 4, 1998 collision, and relying upon a fair recovery of the damages that she had sustained. Young alleged that the Defendants anticipated that, because of her age, Young might not survive to recover through the courts, and that when Young came to that realization, she would accept a nominal settlement amount. In short, Young asserted that the Defendants, through their abusive legal processes and malicious defense of Young’s claims for personal injury damages, appealed the arbitration award and forced her to go to trial in order to obtain a fair recovery for her injuries, with the intention of inflicting severe emotional distress upon Young. The circuit court concluded that the Defendants’ acts were not without just cause or excuse or beyond all bounds of decency or outrageous.
With respect to the claim of “assumed” duty of good faith and fair dealing, Young alleged that Allstate had advised her that it would address her claim pursuant to a quality service pledge, in which Allstate promised her that (1) her third-party claim would be handled fairly and in a relationship of trust and (2) it would make a fair and appropriate settlement offer to her. According to Young, by making these representations, Allstate assumed a duty of good faith and fair dealing in handling Young’s claims that arose out of the February 4, 1998 collision and then breached that duty by intentionally engaging in abusive and unfair practices. The circuit court concluded that these allegations failed to state a claim for which relief could be granted, because Allstate’s representations did not result in an assumption by Allstate of a duty of good faith and fair dealing.
The circuit court entered an order dismissing Young’s claims of abuse of process,- malicious defense, IIED, and assumed duty of good faith and fair dealing on July 19, 2004, and entered its final judgment on September 17, 2004. Young filed a timely notice of appeal on October 8, 2004.
II. STANDARD OF REVIEW
We review a circuit court’s ruling on a motion to dismiss de novo. Sierra Club v.
[a] complaint should not be dismissed for failure to state a claim unless it appeal's beyond doubt that the plaintiff can prove no set of facts in support of his or her claim that would entitle him or her to relief. We must therefore view a plaintiffs complaint in a light most favorable to him or her in order to determine whether the allegations contained therein could warrant relief under any alternative theory. For this reason, in reviewing [a] circuit court’s order dismissing [a] complaint ... our consideration is strictly limited to the allegations of the complaint, and we must deem those allegations to be true.
Blair v. Ing,
III. DISCUSSION
On appeal, Young contends that she is entitled to damages based on four claims for relief: abuse of process; malicious defense; assumed duty of good faith; and IIED. Young’s allegations do not support her claims of abuse of process and assumed duty of good faith, and we decline to recognize the tort of “malicious defense.” However, the circuit court erred by concluding that Young failed to state a claim of IIED for which relief could be granted and dismissing this claim. Therefore, we vacate the circuit court’s judgment as to Young’s IIED claim and remand the case for further proceedings.
A. The Circuit Court Did Not Err In Dismissing Young’s Claim For Abuse Of Process.
This court has declared that there are two essential elements in a claim for abuse of process: “(1) an ulterior purpose and (2) a wilful act in the use of the process which is not proper in the regular conduct of the proceeding.” Chung v. McCabe Hamilton & Renny Co., Ltd,.,
Preliminarily, the Defendants argue that the circuit court correctly dismissed Young’s claim of abuse of process because “none of the alleged acts involved the use of judicial process.”
1. “ulterior purpose”
In addressing whether the defendant used process primarily for an “ ‘ulterior purpose,’ ” the circuit court relied on the ICA’s decision in Wong. The plaintiff in that case asserted that the defendants had committed an abuse of process by filing counterclaims and by asking him and his wife abusive questions during oral depositions and through written interrogatories in order to harass him and coerce him into either withdrawing his complaints in other actions or settling those claims for less than he was entitled to recover.
Liability for abuse of process is imposed when the putative tortfeasor uses legal process “primarily” for an ulterior motive.
The significance of [the word “primarily”] is that there is no action for abuse of process when the process is used for the purpose for which it is intended, but there is an incidental motive of spite or an ulterior pmpose of benefit to the defendant
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For abuse of process to occur there must be use of the process for an immediate purpose other than that for which it was designed and intended.
Id. at 420-21,
In the case at bar, the circuit court correctly applied Wong when it essentially concluded that, because settlement is a valid litigation objective and because the first amended complaint alleged that the Defendants employed process in order to settle the underlying case, Young had failed to state an abuse of process claim. We do not, however, agree with the ICA’s analysis in Wong. It rests on the false premise that, if process is used for at least one valid puipose, such as settlement, then any invalid purpose is “incidental” and the valid purpose is “primary.” See id. A purpose may be legitimate and yet, at the same time, incidental. See Levert v. Philadelphia Int’l Records, Civil Action No. 04-1489,
In this case, the first amended complaint alleges that the Defendants used process in order to prevail in the underlying-case through trial or settlement. While that general aim was clearly legitimate in the regular conduct of the underlying case, it also alleged that the Defendants used process to implement the CCPR plan, employing “scorched earth litigation tactics” to punish Young and to “send a message” to claimants and the plaintiffs’ bar nationwide. In our view, that objective is patently illegitimate.
2. “a wilful act in the use of process which is not proper in the regular conduct of the proceeding”
We next reach the second element of the abuse of process claim: whether the defendant committed “ ‘a wilful act in the use of the process which is not proper in the regular conduct of the proceeding.’ ” Chung,
Young appears to allege that, by advancing unreasonably low settlement offers, Allstate engaged in improper willful acts. Offers to settle the claims at issue in a case are “proper,” if not encouraged, in the regular conduct of proceedings. See Wong,
Aside from the settlement offers, the only other willful act alleged in the first amended complaint was the Defendants’ use of process itself. The most recent edition of Professor Prosser’s treatise on torts teaches that “[s]ome definite act or threat not authorized by the process, or aimed at an objective not legitimate in the use of the process, is required; and there is no liability where the defendant has done nothing more than carry out the process to its atithorized conclusion, even though with bad intentions.” Prosser and Keeton on Torts § 121, at 898 (5th ed., W. Page Keeton et al. eds., 1984) (emphases added) (footnotes omitted).
Young urges this court to follow case law of other jurisdictions that have expanded the tort of abuse of process to encompass circumstances in which there was no act apart from the issuance of process. See Nienstedt,
The tort of malicious prosecution, however, differs from the tort of abuse of process, because it requires that the prior proceedings must have terminated in the plaintiffs favor. See Wong,
The risk of negating the dispositional requirement of a malicious prosecution claim by adopting the lack-of-justification standard in an abuse of process claim is not presented by the facts of this case, because Young was the plaintiff in the underlying action and could not file a malicious prosecution claim based on the Defendants’ allegedly improper defenses. Nevertheless, that risk is inherent in the lack-of-justification standard and would surely surface in future claims advanced by parties who are plaintiffs in the predicate action. See Kollodge v. State,
In the present matter, Young’s first amended complaint alleged that the Defendants sought to further an improper purpose when they employed the legal processes of filing an answer, appealing the arbitration award and talcing the dispute to trial, making a HRCP Rule 68 offer of judgment, and opposing Young’s requests for attorneys’ fees, costs, and prejudgment interest. In our view, the Defendants’ use of such processes, without more, did not constitute “willful” acts that were, in themselves, antithetical to the legitimate conduct of the underlying case. See Tellefsen v. Key Sys. Transit Lines,
To summarize, although the first amended complaint sufficiently alleged that the Defendants employed processes and that their primary purpose in utilizing those processes was improper, it did not show that the Defendants committed a willful act not proper in the regular conduct of the underlying case. Accordingly, we hold that the circuit court correctly dismissed Young’s abuse of process claim.
B. The Circuit Court Did Not Err In Dismissing Young’s Claim For Malicious Defense.
In Young’s second point of error, she argues that the circuit court erred by dismissing her malicious defense claim where this tort “is merely the counterpart of the well-established malicious prosecution cause of action.” (Internal quotation marks omitted.) Young asserts that the circuit court should have deemed cognizable the claim of malicious defense “to protect the integrity of the judicial process, to deal with dishonest and unethical behavior, and to discourage misuse and abuse of limited judicial resources.” (Internal quotation marks and citation omitted.)
This jurisdiction has not previously recognized a malicious defense claim, and we decline to do so now. We do not believe that recognizing the tort of malicious defense is necessary where (1) the threat of subsequent litigation will have a chilling effect on a party’s legitimate defenses, and (2) existing rules and tort law compensate plaintiffs for the harm that they suffer when defendants’ litigation tactics are brought in bad faith. Moreover, it is not appropriate to derive the tort of malicious defense from the tort of malicious prosecution where the tort of malicious prosecution remedies harms resulting from the initiation of a lawsuit. Accordingly, we affirm the circuit court’s order dismissing Young’s malicious defense claim.
1. “borrowing” elements from the tori of malicious prosecution
Although the torts of abuse of process and malicious prosecution are well established, the malicious defense tort is “unfamiliar, if known at all.” Jonathan K. Van Patten & Robert E. Willard, The Limits of Advocacy: A Proposal for the Tort of Malicious Defense in Civil Litigation, 35 Hastings L.J. 891, 893 (1984) [“Van Patten & Willard, The Limits of Advocacy ”]. In fact, only one court-the Supreme Court of New Hampshire-has recognized the tort of malicious defense. See Aranson v. Schroeder,
One who takes an active part in the initiation, continuation, or procurement of the defense of a civil proceeding is subject to liability for all harm proximately caused, including reasonable attorneys’ fees, if
(a) he or she acts without probable cause, i.e., without any credible basis in fact and such action is not warranted by existing law7 or established equitable principles or a good faith argument for the extension, modification, or reversal of existing law,
(b) with knowledge or notice of the lack of merit in such actions,
(c) primarily for a purpose other than that of securing the proper adjudication of the claim and defense thereto, such as to harass, annoy or injure, or to cause unnecessary delay or needless increase in the cost of litigation,
(d) the previous proceedings are terminated in favor of the party bringing the malicious defense action, and
(e) injury or damage is sustained.
2. examining the tort of malicious prosecution
Inasmuch as the tort of malicious defense is derived from the tort of malicious prosecution, it is necessary to elaborate on the well-established tort of malicious prosecution. The tort of malicious prosecution permits a plaintiff to recover when the plaintiff shows that the prior proceedings were (1) terminated in the plaintiffs favor, (2) initiated without probable cause, and (3) initiated with malice. Brodie v. Hawai‘i Auto. Retail Gasoline Dealers Ass’n, Inc.,
Because a malicious prosecution claim is triggered when the unsuccessful party initiated the lawsuit, “[t]he defendant is not liable for proceedings unless he has initiated them.” Prosser and Keeton on Torts § 120, at 893; Wilkinson v. Shoney’s, Inc.,
[T]he mere assertion of an affirmative defense is not initiation of a claim, so long as the defendant does not go further and demand damages or other relief. A bad faith defense, however,' may subject the defendant to liability for attorneys’ fees even when no statute so provides and this may serve to accomplish most of the purposes of a malicious prosecution action.
Id. (Footnotes omitted.)
The distinction, between a plaintiff and defendant’s right to claim malicious prosecution appears designed to address the
The tort of malicious prosecution acknowledges the special, particular' harms that a defendant suffers when a lawsuit is maliciously initiated against it. By concluding that a plaintiff and defendant may suffer from the same harms as a result of “groundless claims,” see dissent at 433,
3. Possible consequences from recognizing the tort of malicious defense
As stated above, only one jurisdiction has recognized the tort of malicious defense.
a. chilling effect
In declining to recognize the tort of malicious defense, we note that the malicious defense standard is not parallel to the three-part standard this jurisdiction follows for the tort of malicious prosecution.
To sustain a claim for malicious prosecution, a plaintiff must show that the defendant initiated the prior lawsuit with malice, which this court has defined as “[t]he intent, without justification or excuse, to commit a wrongful act[,]” “reckless disregard of the law or of a person’s legal rights[,]” and “[i]ll will; wickedness of heart.” Awakuni v. Awana, 115 Hawai‘i 126, 141,
As the party “haled into court,” the defendant has the right to vigorously defend itself against the plaintiffs claims. “[V]igorous and zealous advocacy is a necessary component of our judicial system.” Office of Disciplinary Counsel v. Breiner,
In the context of the litigation privilege, we addressed the consequences of the threat of liability in subsequent lawsuits:
[Liability in subsequent proceedings tends to discourage parties from turning to the courts where an irreconcilable conflict exists. In this manner, the chilling effect resulting from the threat of subsequent litigation hinders access to the courts, which undermines the courts’ role in resolving disputes and vindicating rights. Given the importance of access to the courts, the policy of avoiding the chilling-effect resulting from the threat of subsequent litigation generally favors limiting-liability in subsequent proceedings.
Matsuura v. E.I. du Pont de Nemours and Co.,
b. respecting the defendant’s rights
Deriving the tort of malicious defense from the tort of malicious prosecution would plainly ignore a defendant’s legal position and rights. A successful defendant, “involuntarily haled into court” without probable cause and with malice, seeks to recover compensation for defending itself against malicious and meritless claims. On the other hand, a plaintiff that prevailed in the initial lawsuit seeks damages for malicious defenses that were raised “merely to resist the claim of a plaintiff already before the court.” Aranson,
Ritter v. Ritter,
If the plaintiff is successful in the suit, the probability is that the conduct of the defendant causing the suit was wrongful. When a defendant breaches a lease, violates the terms of a contract, commits a tort, misrepresents goods sold, unlawfully retains the personal property of the plaintiff, or remains in possession of real estate after the expiration of his tenancy, necessitating proceedings, his conduct is wrongful and may require a suit against him by the plaintiff.
Id. at 555,
Furthermore, by initiating the lawsuit, the plaintiff must “be held to accept, to some degree, the costs and risks of litigation.” Aranson,
Unfortunately, litigation “has a profound effect upon the quality of one’s life that goes beyond the mere entitlement to counsel fees.” Aranson,
c. other criticisms of the tort of malicious defense
As Justice Thayer also recognized, a tort of malicious defense may threaten the rule that “an attorney at law is absolutely privileged to publish defamatory matter concerning another in communications preliminary to a proposed judicial proceeding, or in the institution of, or during the course and as a part of, a judicial proceeding in which he participates as counsel, if it has some relation to the proceeding.” Aranson,
(1) promoting the candid, objective, and undistorted disclosure of evidence; (2) placing the burden of testing the evidence upon the litigants during trial; (3) avoiding the chilling effect resulting from the threat of subsequent litigation; (4) reinforcing the finality of judgments; (5) limiting collateral attacks upon judgments; (6) promoting zealous advocacy; (7) discouraging abusive litigation practices; and (8) encouraging settlement.
(Quoting Matsuura v. E.I. du Pont de Nemours & Co.,
Additionally, recognizing the tort of malicious defense may result in plaintiffs seeking damages when (1) they are “dissatisfied with an award in the underlying suit” or (2) “the defendant in the underlying action is judgment-proof’ and they attempt to extend “liability to attorneys, their firms, and possibly, third parties.” Id. The California appeals court also expressed concerned that the tort of malicious defense would invite never-ending litigation:
The policy of the rule is obvious. If the wrongful conduct of a defendant causing the plaintiff to sue him would give rise to an independent tort and a separate cause of action, there would be no end to the litigation, for immediately upon the entry of judgment the plaintiff would start another action.... Under our jurisprudence the defendant may present any defense ... that he may have or that he may deem expedient, and in so doing he will not be subjecting himself to a second suit by the plaintiff based on the wrongful conduct of the defendant in causing the plaintiff to sue him or in defending the action. The rule is the same even though the wrongful conduct of the defendant is willful, intentional, malicious or fraudulent.
California Physicians’ Service,
4. Hawai‘i Rules And Statutes Remedy A Defendant’s Practice of Malicious Defenses Within The Initial Lawsuit.
The Supreme Court of California has “cautioned against creating or expanding derivative tort remedies, at least when the underlying litigation provided adequate remedies,” “to avoid ‘an unending roundelay of litigation.’” Brennan v. Tremco, Inc.,
Seeldng to avoid “an unending roundelay of litigation” we have cautioned against creating or expanding derivative tort remedies, at least when the underlying litigation provided adequate remedies. “In the past, we have favored remedying litigation-related misconduct by sanctions imposed within the underlying lawsuit rather than by creating new derivative torts.” For these reasons, we have said that the tort of malicious prosecution “should not be expanded.” [Crowley v. Katleman,8 Cal.4th 666 , 680-81,34 Cal.Rptr.2d 386 , 392-93,881 P.2d 1083 , 1089-90 (1994).] “[T]he most promising remedy for excessive litigation does not lie in an expansion of malicious prosecution liability.... [I]n our view the better means of addressing the problem of unjustified litigation is through the adoption of measures facilitating the speedy resolution of the initial lawsuit and authorizing the imposition of sanctions for frivolous or delaying conduct within that first action itself, rather than through an expansion of the opportunities for initiating one or more additional rounds of malicious prosecution litigation after the first action has been concluded.” [Sheldon Appel Co. v. Albert & Oliker,47 Cal.3d 863 , 873,254 Cal.Rptr. 336 , 341,765 P.2d 498 , 503 (1989)].15
Id. at 314-15,
By rejecting the tort of malicious defense, we are by no means authorizing or
HRCP Rule 11(b),
The Hawaii Rules of Professional Conduct (“HRPC”) also serve to protect parties from malicious conduct by opposing party’s counsel. The HRPC prohibits a lawyer from “defend[ing] a proceeding, or asserting] or controverting] an issue therein, unless there is a basis for doing so that is not frivolous, which includes a good faith argument for an extension, modification, or reversal of existing law.” HRPC Rule 3.1. Although the rules “are not designed to be a basis for civil liability,” an attorney’s “[fjailure to comply with an obligation or prohibition imposed by a rule is a basis for invoking the disciplinary process.” Preamble, Hawai'i Rules of Professional Conduct, [5], [6].
The dissent contends that the foregoing rules and statutes do not “provide a complete remedy for the potential damages that malicious defenses inflict.” Dissenting opinion at 432-33,
5. Seeking Punitive Damages Through An IIED Claim
In certain cases, a plaintiff aggrieved by the defendant’s assertion of malicious defenses is entitled to recover compensatory and punitive damages through an IIED claim. Cf. Lee v. Aiu,
This court has stated that a plaintiff may assert an IIED claim by establishing “(1) that the conduct allegedly causing the harm was intentional or reckless; (2) that the conduct was outrageous; and (3) that the conduct caused (4) extreme emotional distress to another.” Brooks v. Dana Nance & Co.,
Our understanding of this tort is thus guided by the Restatement’s other comments: actors are not liable for “mere insults, indignities, threats, annoyances, petty oppressions, or other trivialities.” Id.; see also Prosser and Keeton on Torts, § 12, at- 59. An actor is also not liable where the conduct is “privileged,”—when “he has done no more than to insist upon his legal rights in a' permissible way, even though he is well aware that such insistence is certain to cause emotional distress.” Restatement § 46 comment g (emphasis added).
A plaintiff may, however, state a claim for IIED because of his or her relationship with the defendant. “The extreme and outrageous character of the conduct may arise from an abuse by the actor of a position, or a relation with the other, which gives him actual or apparent authority over the. other, or power to affect his interests.” Restatement § 46 comment e. “In this sense extreme ‘bullying tactics’ and other ‘high pressure’ methods of insurance adjusters seeking to force compromises or settlements” may satisfy the conduct element. Eckenrode v. Life of America Ins. Co.,
One of the most prominent lines of eases in the evolution of IIED arose from the development of the modern credit and insurance industries. Specifically, the pressure tactics of humiliating debtors into repayment and intimidating claimants into accepting low compensation for insured losses became a fertile source of abusive behavior that had no home in the community of recognized torts. Some collection cases involved conduct readily assignable to established tort categories like defamation and assault, but in others the courts either lacked these options or chose to identify the infliction of emotional distress as the predicate for recovery. It has been suggested that the courts in these cases were especially willing to compensate plaintiffs for purely emotional injuries because the abusive treatment was a deliberate and premeditated element of a commercial strategy. The claims adjustment cases presented courts with the compelling scenario of a powerful insurance company bullying a physically infirm and/or financially vulnerable victim. In recent years, the existence of a special relationship, particularly one of authority or economic dependence, between the plaintiff and defendant often has been an important factor in rendering liability for IIED.
Russell Fraker, Reformulating Outrage: A Critical Analysis of the Problematic Tort of IIED, 61 Vand. L.Rev. 983, 990-91 (2008) (footnotes omitted).
In the same way, a plaintiff may assert a claim for IIED for suffering from the defendant’s conduct during a prior lawsuit. A party is not liable for merely “insisting] upon his legal rights in a permissible way,” Restatement § 46 comment g, but it may be liable for its conduct in the prior litigation that is not justifiable. In other words, the elements of IIED—though narrower and more refined than that of the tort of malicious defense—do not preclude a successful plaintiff from seeking damages for suffering from a third party’s conduct in a previous lawsuit.
To illustrate, in this case, we are concluding that Young stated a claim for IIED based upon, among other things, the Defendants’ conduct during the litigation. See infra. We are holding that “reasonable people could differ as to whether the Defendants acted without just cause or excuse and beyond all bounds of decency in [this case].” See id. As part of Allstate’s litigation tactics, Allstate offered Young merely $5,000 to settle her claims, then raised its offer to $5,300, even though it was aware that its insured was liable for the accident and that her medical expenses from the accident exceeded this offer. Additionally, we “believe that the complaint plainly alleged [the first, third, and fourth element of IIED] by averring that the Defendants’ intentional conduct caused Young to experience severe anxiety, worry, fear, and mental and emotional distress.” See also Fletcher v. W. Nat’l Life Ins. Co.,
We believe it is more appropriate to sanction other, less offensive litigation conduct within the same, underlying lawsuit, or, where it is necessary, to offer relief based on the well-established tort of IIED. See Restatement § 46 comment d (noting that actors are not liable for “mere insults, indignities, threats, annoyances, petty oppressions, or other trivialities”). In our view, Hawaii’s existing rules', statutes, and tort law offer appropriate remedies for the plaintiffs injuries.
In light of the plethora of remedies available to plaintiffs when defendants’ litigation tactics are brought in bad faith, and because we should not chill the defendants’ right “to conduct a vigorous defense,” we decline to adopt the tort of malicious defense.
In Young’s third point of error, she asserts that the circuit court erred by dismissing her claim that Allstate breached its “assumed” duty of good faith and fair dealing. OB at 27-30. Young alleges that she was in a contractual relationship with Allstate based on (1) the pledge promising to make an “appropriate offer of compensation,” (2) Allstate’s claim representative stating that she did not need an attorney because Allstate would provide her quality service on her claim and treat her fairly, and (3) her failure to seek legal assistance because of Allstate’s representations.
We have explained that “every contract contains an implied covenant of good faith and fair dealing that neither party will do anything that will deprive the other of the benefits of the agreement.” Best Place,
One of the preconditions to the creation of a contract is consideration. Douglass v. Pflueger Haw., Inc.,
In the present matter, Young asserts that, “in return for Allstate’s representations in its pledges, [she] agreed to forbear the assistance of counsel for over a year.” Young chooses her words carefully. Her argument implies that Allstate agreed to perform pursuant to the representations in its pledge “in return” for Young’s forbearance from counsel. That is not, however, what she alleged in her first amended complaint. There, she asserted that, in her initial telephone conversation with an Allstate representative, the representative said that Allstate would provide quality service on her claim and treat hear fairly and that, “because of those promises, she did not need an attorney.” Young did not allege that the representative stated that Allstate would provide quality service “in return for,” “in exchange for,” or “conditioned upon” Young’s forbearance from counsel. See Hipsky v. Allstate Ins. Co.,
A substitute for consideration is detrimental reliance. See Hipsky,
In the absence of either detrimental reliance or consideration, it follows that there was no contract between Young and Allstate. See Douglass,
D. The Circuit Court Erred In Dismissing Young’s IIED Claim.
Young’s final point of error on appeal is that the circuit court erred by dismissing her claim of IIED against Defendants where “she was intentionally misled by Allstate, in an attempt to gain and exploit her trust ... [and] take advantage of her by settling her claim for next to nothing.” She alleges that Allstate intentionally misled her and then, after she brought the suit, appealed the arbitration award and refused to settle the case for what it was worth. As a result, Mrs. Young asserts that she suffered “unnecessary physical distress, severe
Allstate counters that its “conduct cannot qualify as ‘outrageous’ or ‘beyond all bounds of decency
As previously stated, the tort of IIED consists of four elements: “1) that the act allegedly causing the harm was intentional or reckless, 2) that the act was outrageous, and 3) that the act caused 4) extreme emotional distress to another.”
Here, the insured informed Allstate that he caused the traffic accident because he fell asleep at the wheel. Although Allstate was aware of its insured’s liability, one of Allstate’ claim representatives immediately contacted Young and assured her that it would treat her fairly and provide “quality service” on her claim. Thereafter, Allstate affirmed its commitment to provide her “quality service” in a letter from her “claim representative.” The letter also included the pledge which promised quality service—promising that it would (1) “fully explain the process, ’take the time to answer all questions and concerns that [she] may have, and keep [her] informed throughout the claim process”; (2) “conduct a quick, fair investigation of the facts in [her] case”; and (3) assist in the repair of her vehicle. A subsequent pledge promised her, “If you qualify, we ivitt make an appropriate offer of compensation for any injuries you. may have suffered.” (Emphasis in original.) This pledge of an “appropriate” offer of compensation served to reinforce Allstate’s earli-. er representation that, because it would provide Young with “quality” service and treat her “fairly,” she did not need an attorney.
Despite Young’s medical expenses in excess of $6,000 and Allstate’s repeated promises to treat her fairly, however, it offered her a mere $5,000 and then, upon Young’s rejection of this offer, raised its offer to $5,300. Young, who was eighty-five years old at the time, and had sustained permanent injuries, rejected this offer. Subsequently, even after the arbitrator awarded Young $7,689.51 in medical damages and $37,000 in general damages, Allstate refused to increase its nominal settlement offer, again offering only $5,300 and rejecting Young’s $25,000 offer of judgment.
In light of Young’s ultimate award of over $250,000, Allstate’s promise “to make an appropriate offer of compensation,” and Allstate’s highest pre-jury offer of $5,300, reasonable people could differ as to whether the Defendants acted without just cause or excuse and beyond all bounds of decency in the underlying case.
The remaining three elements are not in dispute. See Brooks,
IV. CONCLUSION
Based upon the foregoing analysis, we affirm the circuit court’s September 17, 2004 judgment in favor of Defendants on Young’s claims for abuse of process, malicious defense, and breach of an assumed duty of good faith and fair dealing. We further vacate the circuit court’s September 17, 2004 judgment on Young’s IIED claim and remand the case for further proceedings.
Notes
. The Honorable Greg Nakamura presided.
. The system determined the "Base Value” for MIST claims, which was the "minimum level of likely settlement as represented by the historical settlement level for the lowest 10% of claims settled.” The system also calculated the "Median Value,” which was the “settlement level below which 1/2 of all claims settled.” Once a claim’s value was determined, an Allstate evaluation consultant would reduce the value by taking "offsets.”
. See HRCP Rule 68 ("If the judgment finally obtained by the offeree is not more favorable than the offer, the offeree must pay the costs incurred after the making of the offer.’’).
. HAR Rule 26 provides that "the trial court may, in its discretion, impose sanctions, ... against the non-prevailing party whose appeal resulted in the trial de novo." The prevailing party, defined in HAR Rule 25 as the party that "did not appeal and the appealing party failed to improve upon the arbitration award by 30% or more,” may be awarded "[Reasonable costs and fees (other than attorneys’ fees) actually incurred by the party but not otherwise taxable under the law, including, but not limited to, expert witness fees, travel costs, and deposition costs” and attorneys' fees not to exceed $15,000. HAR Rule 26.
. HRCP Rule 12(b)(6) provides in pertinent part:
[T]he following defenses may at the option of the pleader be made by motion: ... (6) failure to state a claim upon which relief can be granted.... If, on a motion asserting the defense numbered (6) to dismiss for failure of the pleading to state a claim upon which relief can be granted, matters outside the pleading are presented to and not excluded by the court, the mol ion shall be treated as one for summary judgment and disposed of as provided in Rule 56, and all parties shall be given reasonable opportunity to present all material made pertinent to such a motion by Rule 56.
. Additionally, the Defendants argue that the tort of abuse of process "requires improper use of judicial process' " and seek to define "process,” as some courts have held, as judicial procedures that compel a party to undertake or forbear from an act. See, e.g., Bd. of Educ. v. Farmingdale Classroom Teachers Ass'n,
. See Barquis v. Merchants Collection Ass’n,
. See also Nienstedt v. Wetzel,
. See Crackel v. Allstate Ins. Co.,
. See Crackel v. Allstate Ins. Co.,
. This court's articulation of the willful act requirement derives from Professor Prosser's treatise on torts. See Chung, 109 Hawai'i al 529,
. To illustrate, let us assume that a plaintiff maliciously files a complaint alleging a groundless claim for the improper purpose of harassing and intimidating the defendant. Such a corn-plaint would clearly not be filed for the justifiable purpose of advancing the plaintiff’s legitimate interests. Cf. Nienstedt,
. The dissent heavily quotes Fergerstrom v. Hawaiian Ocean View Estates,
. The dissent observes that "the New Hampshire Supreme Court has yet to issue a single decision concerning the tort of malicious defense since it first handed down Aranson," and con-eludes that, "the tort does not appear to have spawned a single appeal in the state’s courts, much less led to an inundation of malicious defense claims.” Dissenting opinion at 435,
. In Sheldon Appel Company, the California Supreme Court observed that legal commentators have concluded that expanding the tort of malicious prosecution would not likely curb the problem of increased civil litigation.
. HAR Rule 26 is designed to discourage “incurring further costs and expenses of trial” through "baseless or frivolous appeals from an arbitration decision ... because they prevent prompt and equitable resolutions of actions.” Richardson v. Sport Shinko (Waikiki Corp.),
. As this court set forth in Amfac, Inc. v. Waikiki Beachcomber Inv. Co.,
. We note that, in the underlying case, under HAR Rule 26, Young, the prevailing party who did not appeal the arbitration, was awarded attorneys’ fees of $15,000 and costs of $8,374.89. Young also was awarded $35,090.03 in prejudgment interest under HRS § 636-16.
. HRCP Rule 11 (b) provides:
(b) Representations to court. By presenting to the court (whether by signing, filing, submitting, or later advocating) a pleading, written motion, or other paper, an attorney or unrepresented party is certifying that to the best of the person’s knowledge, information, and belief, formed after an inquiry reasonable under the circumstances:
(1) it is not being presented for any improper purpose, such as to harass or to cause unnecessary delay or needless increase in the cost of litigation;
(2) the claims, defenses, and other legal contentions therein are warranted by existing law or by a nonfrivolous argument for the extension, modification, or reversal of existing law or the establishment of new law;
(3) the allegations and other factual contentions have evidentiary support or, if specifically so identified, are likely to have evidentiary support after a reasonable opportunity for further investigation or discovery; and
(4) the denials of factual contentions are warranted on the evidence or, if specifically so identified, are reasonably based on a lack of information or belief.
. Based on the similarities between HRCP Rule 11 and the tort of malicious defense, we note Rule 1 l's criticisms. "Excessive [HRCP] Rule 11 litigation would likely pose a very real threat to the resources and integrity of a state's judicial system.” Eric K. Yamamoto, Danielle K. Hart, Rule It and State Courts: Panacea or Pandora's Box?, 13 U. Haw. L.Rev. 57, 100 (1991). Furthermore, the rule also creates a chilling effect:
First, the rule, it is argued, inhibits vigorous and creative lawyering, thereby stifling the development of the common law; and second, the rule poses special threats to small plaintiffs' attorneys and to public interest and pro bono attorneys, thereby inhibiting court access for certain social groups, especially those asserting novel legal theories or reordered social understandings in the form of legal rights.
Id. (citing Eric K. Yamamoto, Efficiency's Threat to the Value of Accessible Courts for Minorities, 25 Harv. C.R.-C.L.L.Rev. 341, 351-52, 362 (1990)). We believe that these risks increase when a plaintiff is entitled to pursue a claim for malicious defense in an independent, subsequent lawsuit.
. HRS § 603-21.9 provides in relevant part:
The several circuit courts shall have power:
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(6) To make and award such judgments, decrees, orders, and mandates, issue such executions and other processes, and do such other acts and take such other steps as may be necessary to carry into full effect the powers which are or shall be given to them by law or for the promotion of justice in matters pending before them.
. In Frishett, a plaintiff sought damages for her mental suffering caused by the insurer defendant’s intentional acts.
. Young urges this court to consider the special circumstances of an insurance company as a defendant when ruling on the adoption of a malicious defense claim. Young alleges:
If claimants are uniformly forced to file lawsuits against Allstate, which is statutorily barred bound to provide timely payments, with Allstate intending to then punish claimants with harassing tactics, delay and imposition of legal expenses, it is difficult to conclude that the claimant assumed the ‘risk’ of this behavior. [Young] was forced to file a lawsuit against Allstate because of its refusal to pay a fair amount after promising in writing it would do so. Allstate's defense becomes malicious rather than merely vigorous when the whole approach to litigation is to use it as a club to punish [Young] and other claimants who hire attorneys and dare to present bodily injury claims and request fair payment.
Young also posits that "the law remains relevant and appropriate to the changing realities of modern society. This is especially true when institutional behemoths like Allstate with vast resources are engaged in purposeful predatoiy behavior against which the ordinary litigant is ill-equipped to struggle.” The special circumstances presented in this case, however, shall not dictate the creation of a malicious defense claim that is not otherwise justified. We note that it is more appropriate for the legislature to create measures that prevent specific tactics where necessary or appropriate. See Wilkinson, 4 P.3d at 1158-59 (noting that the legislature should adopt a measure recognizing a malicious defense tort if needed).
. On appeal, Young also asserts that Allstate promised to "make an appropriate offer of compensation for any [of her] injuries,” treat her fairly, and provide quality service on her claim and “told her that because of these promises she did not need an attorney.” Allstate's alleged statement that "she did not need an attorney” may have been inappropriate and even resulted in her forgoing independent legal counsel, but, nevertheless, it did not signify that Allstate was making the promises as contractual consideration for Young's forbearance of legal counsel.
. Young further alleges that under Best Place,
However, Best Place does not extend the duty to parties who had a "relationship" but not a contract; rather, it provided that "the insurance contract and the relationship it creates contain more than the company’s bare promise to pay certain claims when forced to do so; implicit in the contract and the relationship is the insurer's obligation to play fairly with its insured.” Best Place,
. Also, "extreme emotional distress” constitutes, among other things, mental suffering, mental anguish, nervous shock, and other “highly unpleasant mental reactions.” Enoka v. AIG Hawai'i Ins. Co., Inc.,
. See Metayer v. PFL Life Ins. Co., Civ. No. 98-177-P-C,
. See Athridge v. Aetna Cas. & Sur. Co.,
Concurrence Opinion
Concurring and Dissenting Opinion by
with whom ACOBA, J., Joins.
I agree with the majority’s analysis and disposition of the plaintiff-appellant Priscilla Young’s claims of abuse of process, bad faith, and intentional infliction of emotional distress (IIED). Majority opinion at 406, 412-16, 427-30,
One court has. In Aranson v. Schroeder, the New Hampshire Supreme Court recognized the tort of malicious defense, adopting the following standard:
“One who takes an active part in the initiation, continuation, or procurement of the defense of a civil proceeding is subject to liability for all harm proximately[, i.e., legally,] caused, including reasonable attorneys’ fees, if
(a) he or she acts without probable cause, i.e., without any credible basis in fact and such action is not warranted by existing law or established equitable principles or a good faith argument for the extension, modification, or reversal of existing law,
(b) with knowledge or notice of the lack of merit in such actions,
(c) primarily for a purpose other than that of securing the proper adjudication of the claim and defense thereto, such as to harass, annoy or injure, or to cause unnecessary delay or needless increase in the cost of litigation,
(d) the previous proceedings are terminated in favor of the party bringing the malicious defense action, and
(e) injury or damage is sustained.”
There is no question that Young’s first amended complaint, in substance, alleged the foregoing elements. It asserted that the defendants-appellees Allstate Insurance Company (Allstate) and Mark T. Ichiyama (collectively, the Defendants) took an active role in defending the underlying case without probable cause. The Defendants filed an answer that denied liability and asserted that Young had been injured by her own negligence, that she had failed to mitigate her injuries, that she had filed her suit beyond the statute of limitations, that her claims were barred by her own unclean hands, and that she was estopped from bringing suit by her own wrongful conduct. Young’s first amended complaint alleged that the Defendants were, however, well aware that the February 4, 1998 collision was caused solely by the negligence of Allstate’s insured, Daryl Fujimoto, who had already admitted to Allstate that he had fallen asleep at the wheel. The first amended complaint alleged that the Defendants were also aware that the defenses were groundless, that they raised the defenses to harass, annoy, or injure Young by unnecessarily delaying her case and by needlessly increasing the cost of litigation, litigation that ultimately terminated in her favor after she received a jury verdict of $198,971.71. And Young’s first amended complaint alleged that, as a result of the foregoing conduct, she sustained injury and damage in the form of mental and emotional distress, suffering through the time and expense of arbitration and a full-blown trial. Neither the Defendants nor the majority disputes that these allegations would state a claim for malicious defense were we to recognize the claim. See majority opinion at 416-26,
The question is thus whether we should recognize the tort of malicious defense. Young argues that we should because the tort advances the same interests as the tort of malicious prosecution, the origins of which reach back to the early development of our common law, see, e.g., Kerr v. Hyman Bros.,
The majority distinguishes the tort of malicious defense from the tort of malicious prosecution on the ground that the former’s “primary purpose” element, see Aranson,
In addition, the majority draws a distinction between the two torts in light of the position of the parties in the predicate proceedings. It accepts the Defendants’ argument that, unlike a plaintiff, a defendant is involuntarily haled into court and, consequently, although the plaintiff is liable in tort for maliciously asserting baseless and unsuccessful claims, the defendant should not likewise incur liability for advancing defenses cut from the same cloth. See majority opinion at 420-21,
Furthermore, the argument advanced by the majority and the Defendants rests on the false premise that, by initiating the action, the plaintiff somehow assumes the risk that
To be sure, damages for emotional distress caused by maliciously asserted defenses may, • in some eases, be recoverable through an IIED claim. See id. at 425-26,
The majority seems to suggest that, because Young has stated a claim of IIED for which relief can be granted, we should not recognize the tort of malicious defense, in light of the fact that the tort of IIED offers the same remedies for her injuries as the tort of malicious defense. Id. at 426,
The majority next maintains that recognizing the tort of malicious defense would contravene the policies underlying the litigation privilege. Majority opinion at 421,
[T]he interrelated policies associated with the litigation privilege include: (1) promoting the candid, objective, and undistorted disclosure of evidence; (2) placing the burden of testing the evidence upon the litigants during trial; (3) avoiding the chilling effect resulting from the threat of subsequent litigation; (4) reinforcing the finality of judgments; (5) limiting collateral attacks upon judgments; (6) promoting zealous advocacy; (7) discouraging abusive litigation practices; and (8) encouraging settlement.
Id. at 155,
The majority, along with the Defendants, asserts that recognizing the tort of malicious defense will lead to never-ending litigation. See majority opinion at 421-22,
Assuming that it is true, that fact is unpersuasive unless the litigation largely will be spurious and harassing. Undoubtedly, when a court recognizes a new cause of action, there will be many cases based on it. Many will be soundly based and the plaintiffs in those cases will have their rights vindicated. In other cases, plaintiffs will abuse the law for some unworthy end, but the possibility of abuse cannot obscure the need to provide an appropriate remedy.
Id. at 377,
Apart from their attempt to distinguish malicious defenses from malicious prosecutions, the Defendants argue that special considerations arise in the insurance context that require this court to reject the tort of malicious defense. They reason that, because an insurer owes a contractual duty to defend its insured in litigation, it automatically stands in an adversarial relation to a third-party claimant who has filed suit against its insured. The Defendants insist that, just as a third party cannot compel the insured to
This case presents a question of first impression in Hawai'i. It is for that reason that the Defendants’ reliance on the Kansas Supreme Court’s decision in Wilkinson v. Shoney’s, Inc.,
“‘[T]he genius of the common law, upon which our jurisprudence is based, is its capacity for orderly growth.’” Id. at 376,
2. "Brobdingnagian” means "[c]olossal; of extraordinary size; gigantic.” Webster’s New International Dictionary 399 (2d ed.1960). The word derives from "Brobdingnag,” an imaginary country from Jonathan Swift's Gulliver's Travels where "everything is on an enormous scale.” Id.
3. A "false return” is "[a] process server's or other court official’s recorded misrepresentation that process was served, that some other action was taken, or that something is true." Black’s Law Dictionary 636.