What Is The Time for Responding to a Defense Tender?
An insurer has 15 days to respond to all communications from an insured. Haw. Rev. Stat. § 431:13-103(11).
An insurer must affirm or deny coverage within a reasonable time after having completed its investigation, Haw. Rev. Stat. § 431:13-103(11), but there are no regulations, statutes or case law that further defines the term “reasonable time.”
Does Reserving Rights Create a Conflict of Interest?
A genuine conflict of interest arises when an insurer reserves its rights under a policy. Finley v. Home Ins. Co., 975 P.2d 1145, 1150 (Haw. 1998).
Does a Reservation of Rights Create Additional Duties?
None found.
What Must Be Done If A Conflict of Interest Exists?
Where an insurer defends under a reservation of rights, a conflict is created; however, the resolution of the conflict is left to the integrity and professionalism of the retained defense counsel. Finley v. Home Ins. Co., 975 P.2d 1145, 1151-1152 (Haw.1998).
Who Is Responsible for Fees of Independent Counsel?
An insurer that is defending under a reservation of rights has no obligation to pay for independent counsel for the insured. Finley v. Home Ins. Co., 975 P.2d 1145 (Haw. 1998).
An insured does have the right to refuse defense counsel retained by the insurer, in which case, the insured would be responsible for all fees of its own counsel. If the reservation of rights was ultimately wrongful, the insured’s remedy would be a malpractice claim against defense counsel and a bad faith claim against the insurer. Delmonte v. State Farm Fire and Cas. Co., 975 P.2d 1159, 1175 (Haw. 1999).
What Are Independent Counsel’s Obligations?
No cases found.
What Settlement Duties Exist?
No cases found.
What Actions May Result in a Claim for Bad Faith?
An insured has a common law cause of action for bad faith against a first or third party insurer based on the implied covenant of good faith and fair dealing. The Best Place, Inc. v. Penn America Ins. Co., 920 P.2d 334, 341-42 n.1 0 (Haw. 1996).
An insurer is under a duty to pursue a covered defense in good faith and can be found to have acted in bad faith if it mishandles the defense of an insured, even in the absence of coverage. Delmonte v. State Farm Fire & Casualty Company, 975 P.2d 1159 (Haw. 1999).
Are Attorney’s Fees Recoverable in Insurer-Insured Dispute?
An award of attorney’s fees is allowed when cases where the insurer wrongfully refused to make payment to the insured. Haw. Rev. Stat. § 431-455.
Are Punitive Damages Recoverable in Insurer-Insured Dispute?
Yes, but only if the insured establishes by clear and convincing evidence that the insurer “acted wantonly or oppressively or with such malice as implies a spirit of mischief or criminal indifference or where there has been willful misconduct or that entire want of care which would raise the presumption of conscious indifference to consequences.” The Best Place, Inc. v. Penn America Ins. Co., 920 P.2d 334, 348 (Haw. 1996).
Alternative Coverage Options
An insurer may file a declaratory judgment action regarding its duty to defend an insured but must prove that it would be impossible for the claimant to prevail against the insured.
Tri-S Corp. v. Western World Ins. Co., 135 P.2d 82, 97 (Haw. 2006).
Relevant Statutes
Declaratory Judgment – Haw. Rev. Stat. § 632-1.
“In cases of actual controversy, courts of record, within the scope of their respective jurisdictions, shall have power to make binding adjudications of right, whether or not, consequential relief is, or at the time could be, claimed, and no action or proceeding shall be open to objection on the ground that a judgment or order merely declaratory or right is prayed for;
. . .
Relief by declaratory judgment may be granted in civil cases where an actual controversy exists between contending parties, or where the court is satisfied that antagonistic claims are present between the parties involved which indicate imminent and inevitable litigation, or where in any such case the court is satisfied that a party assets a legal relation, status, right or privilege in which the party has a concrete interest and that there is a challenge or denial of the asserted relation, status, right or privilege by an adversary party who also has or asserts a concrete interest therein, and the court is satisfied also that a declaratory judgment will serve to terminate the uncertainty or controversy giving rise to the proceeding.” Haw. Rev. Stat. § 632-1.
Unfair Claims Settlement Statute – Haw. Rev. Stat. § 431:13-103(11) (prohibits various unfair methods of competition and unfair and deceptive acts and practices in the business of insurance).
This statute does notcreate a private right of action against insurer for alleged violations. Hunt v. First Ins. Co. of Hawaii, Ltd., 922 P.2d 976 (Haw. 1996).
Unfair or Deceptive Consumer Practices – Haw. Rev. Stat. § 481A (1985).