A client asked me a question regarding statutes of limitations for first party insurance lawsuits in Hawaii. Although Hawaiian consumer law is similar to California law, Hawaii’s statutes are distinct. In California, two parties may contract out of a statute, but in Hawaii, they cannot. A statute of limitation stands as just that, the time limit for which one can bring a claim, before the claim will be barred.
Under the HRS (Hawaii Revised Statutes), there are two statutes for breach of contract: a two year statute and a six year statute. First Party insurance lawsuits are mainly premised upon breach of contract claims. But when it comes to insurance claims, it may be best to look at the operative two year statute, HRS §657-7.
In the matter of Baird v. State Farm, 11 F.Supp.2d 1204 (1998) the U.S. District Court for the District of Hawaii analyzed the following cases to determine which statutes apply in insurance bad faith matters:
1) In Best Place, Inc. v. Penn America Ins. Co., 82 Haw. 120, 920 P.2d 334, 347 (Haw. 1996), the Court specifically examined the issue of which of three limitations periods is applicable to a cause of action for bad faith (breach of the implied covenant of good faith and fair dealing). If the Hawaiian Court adopted the California line of cases, then any claim for bad faith on a first-party insurance claim would clearly be a claim "on the policy" and governed by the policy’s limitations period. See Prieto v. State Farm Fire and Cas. Co., 225 Cal. App. 3d 1188, 275 Cal. Rptr. 362, 364-65 (Cal.App. 1991). If a claim for bad faith is construed as a tort cause of action, then it is subject to the two year limitations period of H.R.S. § 657-7. Best Place also recognized that if the tort of bad faith sounds in contract, then it is subject to the six year limitations period of § 657-1.
2) In Guillermo v. Hartford Life Ins. & Accident Co., 986 F. Supp. 1334, 1340 (D.Haw. 1997), Judge Ezra of the U.S. District Court for the district of Hawaii examined this precise issue and concluded that "since there is no element in the cause of action for bad faith that requires a plaintiff to suffer personal injury . . . the applicable statute of limitations is six years and is found in the catchall provision of § 657-1."
3) In March 1998, the Hawaii Intermediate Court of Appeals (ICA) reached a contrary result in Christiansen v. First Ins. Co. of Hawaii, Ltd., 967 P.2d 639 (1998). In determining that the tort of bad faith was not subject to a policy imposed limitation period, the ICA stated that the "tort of bad faith is a tort independent of the policy because its origins are not in the contract but in the common law imposition of good faith and fair dealing, the breach of which fiduciary duty may be considered an independent tort." The ICA held that the tort of bad faith is subject to the two year limitations period imposed by H.R.S. 657-7.
The Baird Court decided that the Hawaii Supreme Court is likely to affirm the two year limitations period articulated in Christiansen for three reasons. First, the ICA in Christiansen expressly rejected and distinguished the well settled California rule that an action for bad faith is an action "on the policy." Second, the Hawaii Supreme Court granted certiorari in the Christiansen case. Third, in adopting the tort of bad faith in the insurance context, the Hawaii Supreme Court rejected the argument that the tort of bad faith was duplicative of tortious breach of contract. The Hawaii Supreme Court categorized an "insurer’s duty of good faith and fair dealing as one implied by law that is ‘independent of the performance of [the insured’s] contractual obligations.’" Christiansen, 1998 WL 119434 at *9 (citing Best Place, 82 Haw. at 128).
Since Christiansen, Hawaii Courts have actively used the two year statute in breach of contract insurance cases. Accordingly, a first party insurance lawsuit is best brought two years from the date of loss to protect the rights of the insured. Next week, I will discuss how tolling affects Hawaii’s two year statute of limitations.
