Carvalho v. AIG Hawaii Insurance Company, Inc. ( 2020 )

FOR PUBLICATION IN WEST'S HAWAI#I REPORTS AND PACIFIC REPORTER
Electronically Filed
Intermediate Court of Appeals
CAAP-XX-XXXXXXX
16-NOV-2020
08:08 AM
Dkt. 59 ORD
IN THE INTERMEDIATE COURT OF APPEALS
OF THE STATE OF HAWAI#I
---o0o---
BERNET CARVALHO, Individually, and as
Personal Representative of the Estate of
ROYDEN KALAVI, Deceased, Plaintiffs-Appellants,
v.
AIG HAWAII INSURANCE COMPANY, INC.;
HAWAII INSURANCE CONSULTANTS, LTD.
Defendants-Appellees,
and
JOHN DOES 1-10; JANE DOES 1-10; DOE PARTNERSHIPS 1-10;
DOE CORPORATIONS 1-10; ROE "NON-PROFIT" CORPORATIONS 1-10;
AND ROE GOVERNMENTAL ENTITIES 1-10, Defendants
NO. CAAP-XX-XXXXXXX
APPEAL FROM THE CIRCUIT COURT OF THE THIRD CIRCUIT
(CIVIL NO. 07-1-294K)
NOVEMBER 16, 2020
GINOZA, CHIEF JUDGE, LEONARD AND HIRAOKA, JJ.
OPINION OF THE COURT BY GINOZA, CHIEF JUDGE
Plaintiff-Appellant Bernet Carvalho, individually, and
as personal representative of the Estate of Royden Kalavi,
deceased, (Plaintiff Carvalho), appeals from the Judgment filed
FOR PUBLICATION IN WEST'S HAWAI#I REPORTS AND PACIFIC REPORTER
on February 23, 2016, by the Circuit Court of the Third Circuit
(circuit court)1 in favor of Defendants-Appellees AIG Hawaii
Insurance Company, Inc. and Hawaii Insurance Consultants, Ltd.
(collectively AIG).
In this appeal, Plaintiff Carvalho challenges the
following interlocutory orders by the circuit court: (1) the
"Order Granting Defendants AIG Hawaii Insurance Company, Inc. and
Hawaii Insurance Consultants, Ltd.'s Motion to Preclude Evidence
and Argument re: Failure to Settle" (Order Precluding Evidence);
(2) the "Order Denying Plaintiffs' Motion to Amend Complaint"
(Order Denying Motion to Amend Complaint); (3) the "Order Denying
Plaintiffs' Motion for Reconsideration, and/or Clarification, and
in the Alternative, for Leave to File an Interlocutory Appeal
pursuant to Hawaii Revised Statutes (HRS) § 641-1(b), of the
Order Denying Plaintiffs' Motion to Amend Complaint" (Order
Denying Reconsideration); and (4) the "Order Granting Defendants
AIG Hawaii Insurance Company, Inc. and Hawaii Insurance
Consultants, Ltd.'s Motion for Summary Judgment as to all
Remaining Claims and Causes of Action re: Lack of Causation"
(Order Granting AIG's MSJ).
Plaintiff Carvalho contends the Judgment should be
vacated because the circuit court: (1) abused its discretion in
entering the Order Precluding Evidence where it precluded
Plaintiff Carvalho from seeking or introducing relevant evidence
on her claim for bad faith against AIG; (2) abused its discretion
in entering the Order Denying Motion to Amend Complaint because
Plaintiff Carvalho made a prima facie showing under Hawai#i Rules
of Civil Procedure (HRCP) Rule 15(a) and pertinent case law
warranting leave to amend her complaint; (3) abused its
discretion in entering the Order Denying Reconsideration because
the motion was timely filed, and the circuit court refused
Plaintiff Carvalho's request to provide specific guidance on the
1
The Honorable Ronald Ibarra and Melvin H. Fujino presided over the
relevant proceedings.
2
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admissibility of evidence at trial; and (4) erred in entering the
Order Granting AIG's MSJ in light of the Hawai#i Supreme Court's
disfavor in granting summary judgment in fact-intensive insurance
bad faith claim handling cases.
We conclude it was error for the circuit court to grant
summary judgment and therefore we vacate the Judgment and the
Order Granting AIG's MSJ, and remand the case to the circuit
court. However, we affirm the Order Precluding Evidence, the
Order Denying Motion to Amend Complaint, and the Order Denying
Reconsideration.
I. Background
On September 23, 2005, Plaintiff Carvalho's son, Royden
Kalavi (Royden), was involved in a two-car automobile accident
which resulted in his death. Royden was a passenger in a car
operated by one of his friends. The other car and driver
involved in the accident were uninsured. At the time of the
accident, Royden was covered by an insurance policy purchased by
his maternal grandparents, John and Barbara Carvalho (the
Carvalhos), from AIG. After the accident, Plaintiff Carvalho
made a claim to AIG for uninsured motorist (UM) and underinsured
motorist (UIM) benefits available under the Carvalhos' AIG
policy, asserting that Royden was covered as a "resident
relative" of the Carvalhos. In response, AIG informed Plaintiff
Carvalho that only non-stacked UM and UIM coverages totaling
$70,000 were available to Royden under the Carvalhos' AIG policy.
On December 31, 2007, Plaintiff Carvalho filed the
Complaint initiating the instant action against AIG seeking,
inter alia, a declaratory judgment for increased and stacked UM
and UIM insurance coverage totaling $1.2 million under the
Carvalhos' AIG policy. The Complaint alleges further causes of
action2 premised on Plaintiff Carvalho's contention that AIG had
2
Plaintiff Carvalho's Complaint alleges seven "causes of action"
against AIG: (1) Declaratory Judgment; (2) Negligence; (3) Breach of Contract
and/or Contractual Warranties; (4) HRS Chapter 480, Unfair and/or Deceptive
(continued...)
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refused to acknowledge the stacked UM and UIM coverages totaling
$1.2 million that were available to her, and asserting that AIG
failed to increase UM and UIM limits as instructed by John
Carvalho on September 28, 2004, and failed to offer stacked or
increased UM and UIM coverages given the "material change to an
existing policy" doctrine adopted in Allstate Ins. Co. v.
Kaneshiro, 93 Hawai#i 210, 221, 998 P.2d 490, 501 (2000).
In its February 21, 2008 answer, AIG acknowledged that
prior to the accident, it had not increased the Carvalhos' UM and
UIM coverages. AIG asserted, however, that prior to the filing
of the Complaint, it did increase the Carvalhos' limits to
"maximum available amounts of $300,000/[$300,000] each person,
each accident stacked over two vehicles effective September 28,
2004." The record indicates that, in a letter dated February 19,
2008 (less than two months after the Complaint was filed), AIG
informed Plaintiff Carvalho of its determination that the stacked
maximum UM and UIM coverage limits under the Carvalho's policy
was $1.2 million. This letter further stated: "However, the
issue that remains to be resolved is the value of the wrongful
death claim resulting from Royden's death which is being asserted
against the UM/UIM coverage."
On March 11, 2008, AIG filed a motion requesting that
the circuit court stay the instant case pending the resolution of
a separate declaratory judgment action filed by AIG against,
inter alia, Plaintiff Carvalho, the Carvalhos, and Hesekaia
Kalavi (Kalavi), Royden's father. The declaratory judgment
action was initiated by AIG to determine whether Royden was
2
(...continued)
Trade Practices Violations; (5) Breaches of Covenant of Good Faith and Fair
Dealing; (6) Negligent and/or Intentional Infliction of Emotional Distress;
and (7) Punitive Damages. We note the assertion for punitive damages is not
an independent tort, but is incidental to a separate cause of action. Ross v.
Stouffer Hotel Co. (Hawai#i), 76 Hawai#i 454, 466, 879 P.2d 1037, 1049 (1994)
(citation omitted). Plaintiff Carvalho's prayer for relief seeks declaratory
relief for coverage of $1.2 million under the Carvalhos' AIG policy, special
damages, general damages, treble/punitive/exemplary damages, attorneys' fees
and costs, and prejudgment interest.
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covered under the Carvalhos' AIG policy or Kalavi's AIG policy.3
The circuit court entered an order granting AIG's request to stay
this case on April 15, 2008.
On July 16, 2008, AIG's declaratory judgment action was
resolved via a stipulated judgment, whereby it was determined
that Royden was covered under the Carvalhos' AIG policy but not
under Kalavi's AIG policy. Once the AIG declaratory judgment
action was resolved, the parties submitted to private UM/UIM
Arbitration to resolve the value of the loss sustained by
Royden's estate, Plaintiff Carvalho and Kalavi.4 On September 9,
2008, by stipulation of the parties, the circuit court issued an
order continuing the previously issued stay "until said
arbitration is finally concluded or until otherwise ordered by
the Court."
On April 2, 2009, an arbitration award was issued to
Royden's estate, and his surviving parents Plaintiff Carvalho and
Kalavi, totaling $3 million in damages (with no deductions for
any other insurance).5 In the arbitration award, Royden's estate
was awarded $500,000, Plaintiff Carvalho was awarded $1.25
million, and Kalavi was awarded $1.25 million. On April 29,
2009, AIG transmitted $1.2 million to Plaintiff Carvalho in
payment of the combined UM and UIM policy limits under the
Carvalhos' policy. Pursuant to the circuit court's prior order,
3
In its motion for stay, AIG alleged the basis for the separate
declaratory action was that Royden's estate had initially made a claim for UM
and UIM benefits under Kalavi's AIG policy, that Kalavi had given sworn
testimony that in the six months before the accident Royden stayed with Kalavi
and his family on the weekends, but that a claim was later made under the AIG
policy issued to the Carvalhos with the estate's counsel asserting that Royden
stayed with the Carvalhos on the weekends.
4
The Carvalhos' AIG policy provided for arbitration if the parties did
not agree on "the amount of damages" which the covered persons were entitled
to recover from an uninsured or underinsured motorist.
5
According to correspondence by counsel for Royden's estate dated
February 20, 2008, Royden's estate had previously recovered a total of
$140,000 from the insurer of the car in which Royden was a passenger,
Plaintiff Carvalho's own UM/UIM insurer, and the UM/UIM insurer of Plaintiff
Carvalho's sister, who lived with Plaintiff Carvalho.
5
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the stay of the instant case was presumably lifted on April 2,
2009, the day the arbitration award was issued.
For reasons unclear in the record, this case remained
dormant for a number of years following the arbitration award,
until the circuit court filed a Notice of Status Hearing on
November 1, 2013. On June 25, 2014, Plaintiff Carvalho filed a
Notice of Trial Setting Status Conference, indicating her intent
to set the case for trial. The circuit court then set a trial
date of January 12, 2016, and set all pretrial deadlines,
including a discovery cut-off date of November 13, 2015.
On June 12, 2015, AIG filed "Defendants AIG Hawaii
Insurance Company, Inc. and Hawaii Insurance Consultants, Ltd.'s
Motion to Preclude Evidence and Argument re: Failure to Settle"
(Motion to Preclude Evidence). In its motion, AIG sought an
order from the circuit court "precluding any and all evidence and
argument from being presented to the jury at the time of trial in
furtherance of [Plaintiff Carvalho's] unpled claim that [AIG]
somehow breached a duty to settle the underlying UM and UIM claim
. . . prior to the issuance of the UM/UIM Arbitration Award."
AIG's motion was apparently brought in response to a settlement
conference statement filed by Carvalho on February 6, 2015,6 and
a discovery request on or around June 8, 2015, which made
reference to what AIG characterized as a previously unpled claim
that AIG had acted in bad faith for its failure to tender the
policy limits to Plaintiff Carvalho prior to the UM/UIM
arbitration award.
On August 10, 2015, Plaintiff Carvalho filed a motion
to amend her Complaint. At that point, trial was scheduled to
6
February 6, 2015 is the ex officio filing date. Various documents in
this case were filed ex officio. See HRS § 606-1(b) (2016 Repl.) ("The
respective clerks of the supreme court, intermediate appellate court, circuit
courts, and district courts shall be ex officio clerks of all the courts of
records, and as such may issue process returnable in all such courts."); Rules
of the Circuit Courts of the State of Hawai #i, Rule 2.1. ("The respective
clerks of the circuit courts shall be ex officio clerks of all the courts of
record and as such may accept documents for filing and may issue summons
returnable in all such courts.").
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commence five months later, on January 12, 2016, and the
discovery cut-off was in November 2015. Although Plaintiff
Carvalho's proposed First Amended Complaint did not seek to add
further causes of action, it sought to add extensive factual
allegations, with the proposed First Amended Complaint expanding
to forty-five pages compared to the original Complaint's fifteen
pages, and sought to include assertions that AIG "deliberately,
deceptively, unfairly, and/or in bad faith unreasonably delayed
their payment of $1.2 million in UM and UIM benefits to
[Plaintiff Carvalho] from at least on or about April 16, 2007
until after the April 2, 2009 Arbitration Award was issued[.]"
Two days later, the circuit court orally granted AIG's
Motion to Preclude Evidence. The circuit court granted AIG's
motion "based on the state of the pleadings" at the time of the
hearing, noting specifically that it had not yet considered
Carvalho's motion to amend her Complaint. The circuit court
noted, however, that it may reconsider its holding on AIG's
Motion to Preclude Evidence if it were to subsequently grant
Plaintiff Carvalho's motion to amend her Complaint, assuming the
proposed amended complaint incorporated the previously unpled
assertions.7
On October 15, 2015, the circuit court entered its
Order Denying Motion to Amend Complaint, which states the motion
was denied "as the Court finds undue delay."8 On November 23,
2015, more than thirty days after the circuit court filed its
Order Denying Motion to Amend Complaint, Plaintiff Carvalho filed
"Plaintiff's Motion for Reconsideration, and/or clarification,
and in the alternative, for leave to file an interlocutory appeal
pursuant to HRS § 641-1(b), of the Order Denying Plaintiffs'
Motion to Amend Complaint" (Motion for Reconsideration). On the
7
The Honorable Melvin H. Fujino presided regarding Plaintiff
Carvalho's Motion to Preclude Evidence and entered the corresponding order,
which was filed on September 2, 2015.
8
The Honorable Melvin H. Fujino presided regarding Plaintiff
Carvalho's motion to amend complaint, and entered the corresponding order.
7
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same day, AIG filed "Defendants AIG Hawaii Insurance Company,
Inc. and Hawaii Insurance Consultants, Ltd.'s Motion for Summary
Judgment as to all Remaining Claims and Causes of Action re: Lack
of Causation" (AIG's MSJ).
On January 5, 2016, the circuit court entered its Order
Denying Reconsideration and Order Granting AIG's MSJ.9 The
Judgment was thereafter entered on February 23, 2016.
II. Standards of Review
A. Motion for Summary Judgment
"This court reviews a circuit court's grant or denial
of summary judgment de novo." Enoka v. AIG Hawaii Ins. Co.,
Inc., 109 Hawai#i 537, 543, 128 P.3d 850, 856 (2006). It is well
settled that:
Summary 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 that the
moving party is entitled to judgment as a matter of law. 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. The
evidence must be viewed in the light most favorable to the
non-moving party. 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.
Id. at 543-44, 128 P.3d at 856-57 (brackets and citation marks
omitted).
B. AIG's Motion to Preclude Evidence
As discussed infra, we construe AIG's Motion to
Preclude Evidence as a motion in limine.
The granting or denying of a motion in limine is reviewed
for abuse of discretion. The denial of a motion in limine,
in itself, is not reversible error. The harm, if any,
occurs when the evidence is improperly admitted at trial.
Thus, even if the trial court abused its discretion in
denying a party's motion, the real test is not in the
disposition of the motion but the admission of evidence at
trial.
Kobashigawa v. Silva, 129 Hawai#i 313, 320, 300 P.3d 579, 586
(2013).
9
The Honorable Ronald Ibarra presided regarding Plaintiff Carvalho's
Motion for Reconsideration and AIG's MSJ, and entered the corresponding
orders.
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C. Plaintiff Carvalho's Motion to Amend Complaint
"This court reviews a denial of leave to amend a
complaint under HRCP Rule 15(a) or (b) under the abuse of
discretion standard." Kamaka v. Goodsill Anderson Quinn &
Stifel, 117 Hawai#i 92, 104, 176 P.3d 91, 103 (2008) (citations
omitted). See also Seki ex rel. Louie v. Hawaii Gov't Emps.
Ass'n, AFSCME Local No. 152, AFL-CIO, 133 Hawai#i 385, 400, 328
P.3d 394, 409 (2014).
The trial court abuses its discretion if it bases its ruling
on an erroneous view of the law or on a clearly erroneous
assessment of the evidence. Stated differently, an abuse of
discretion occurs where the trial court has clearly exceeded
the bounds of reason or disregarded rules or principles of
law or practice to the substantial detriment of a party
litigant.
Kamaka, 117 Hawai#i at 104, 176 P.3d at 103 (citation omitted).
D. Motion for Reconsideration
"The trial court's ruling on a motion for
reconsideration is reviewed under the abuse of discretion
standard." Id. (citation omitted). It is also well established
that:
the purpose of a motion for reconsideration is to allow the
parties to present new evidence and/or arguments that could
not have been presented during the earlier adjudicated
motion. Reconsideration is not a device to relitigate old
matters or to raise arguments or evidence that could and
should have been brought during the earlier proceeding.
Id. (citation and internal quotation marks omitted).
III. Discussion
A. The circuit court erred in granting summary
judgment for AIG
We first address Plaintiff Carvalho's contention that
the circuit court erred in its Order Granting AIG's MSJ. On
appeal, Plaintiff Carvalho asserts that the circuit court erred
because: (1) it disregarded all applicable summary judgment case
law; (2) it disregarded the conflicting evidence on causation and
damages; and (3) AIG had known in 2007 of its obligations to
promptly handle Plaintiff Carvalho's UM and UIM claims in good
faith.
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In response, AIG asserts that while there may have been
a genuine issue of material fact as to whether AIG had acted in
bad faith in failing to initially acknowledge the increased
UM/UIM policy limits and as to the amount of damages sustained by
Plaintiff Carvalho, summary judgment was appropriate because
Plaintiff Carvalho could not establish that she incurred any
damages as a result of AIG's conduct. Specifically, AIG asserts
that Plaintiff Carvalho could not establish that she had incurred
any damages as of February 19, 2008, the date that AIG by letter
recognized the increased UM/UIM policy limits, where it was not
until five months later that it was determined that Plaintiff
Carvalho was entitled to recover under the Carvalhos' AIG
insurance policy in AIG's separate declaratory judgment action,
and it was not until April 2, 2009, that the arbitrator
determined the amount of damages that Royden's estate, Plaintiff
Carvalho, and Kalavi sustained because of Royden's death.
It is established Hawai#i law that there is a legal
duty implied in a first-party insurance contract that "the
insurer must act in good faith in dealing with its insured, and a
breach of that duty of good faith gives rise to an independent
tort cause of action." Miller v. Hartford Life Ins. Co., 126
Hawai#i 165, 174, 268 P.3d 418, 427 (2011) (citing Best Place,
Inc. v. Penn America Ins. Co., 82 Hawai#i 120, 132, 920 P.2d 334,
346 (1996)). Such duty is independent of the insurer's
contractual duty to pay claims. Id.
In Enoka, the Hawai#i Supreme Court held that an
insured can maintain a claim against an insurer for bad faith
mishandling of the insured's claim even where the insurer had no
contractual duty to pay any benefits. 109 Hawai#i at 549-52, 128
P.3d at 862-65. The supreme court stated:
Surely an insurer must act in good faith in dealing with its
insured and in handling the insured's claim, even when the
policy clearly and unambiguously excludes coverage.
Inasmuch as Enoka has alleged that AIG handled the denial of
her claim for no-fault benefits in bad faith, we conclude
that she is not precluded from bringing her bad faith claim
even where there is no coverage liability on the underlying
policy. Accordingly, we hold that the trial court erred in
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determining that, because Enoka's breach of contract claim
failed, her bad faith claim must fail.
Id. at 552, 128 P.3d at 865 (emphasis added).
Further, in Miller, the Hawai#i Supreme Court answered
a certified question from the U.S. District Court for the
District of Hawai#i by holding: "If a first-party insurer commits
bad faith, an insured need not prove that the insured suffered
economic or physical loss caused by the bad faith in order to
recover emotional distress damages caused by the bad faith." 126
Hawai#i at 179, 268 P.3d at 432 (emphasis in original). The
supreme court had explained that:
In summary, Best Place and our subsequent case law evidence
an intent to provide the insured with a vehicle for
compensation for all damages incurred as a result of the
insurer's misconduct, including damages for emotional
distress, without imposing a threshold requirement of
economic or physical loss. Best Place, 82 Hawai #i at 132,
920 P.2d at 346.
Id. at 176, 268 P.3d at 429 (emphasis added). The supreme court
further expressed its view that "the basis for an insured's
first-party bad faith claim is the insurer's conduct in breaching
its duty to deal with its insured in good faith, not the
insured's ultimate financial liability." Id. at 178, 268 P.3d at
431. It was noted, however, that "[w]hile economic loss is not
required to recover for emotional distress in this context,
nevertheless the existence of such loss, or lack thereof, could
be relevant to determining the amount of damages recoverable."
Id. at 178 n.17, 268 P.3d at 421 n.17.
Applying these principles here, we conclude the circuit
court erred in granting AIG's MSJ on the basis argued by AIG. As
explained in Enoka, Plaintiff Carvalho could maintain her bad
faith mishandling claim even assuming AIG had no contractual duty
to pay any benefits to her. See Enoka, 109 Hawai#i at 552, 128
P.3d at 865. Further, Plaintiff Carvalho is not required to
prove that she suffered economic loss caused by AIG's alleged bad
faith in order to recover emotional distress damages caused by
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AIG's alleged bad faith, which she sought in her Complaint.10
See Miller, 126 Hawai#i at 179, 268 P.3d at 432. Accordingly,
contrary to AIG's argument, summary judgment was not appropriate
on the basis that AIG's February 19, 2008 letter had acknowledged
the increased UM/UIM policy limits, before it was determined in
the separate declaratory action that Royden was covered under the
Carvalhos' AIG policy, and that it was not until April 2, 2009,
that the arbitrator determined that Royden's estate, Plaintiff
Carvalho, and Kalavi sustained damages totaling $3 million
because of Royden's death. In short, AIG's obligation to act in
good faith is independent from its contractual obligation to
tender benefits to the insured. As the Hawai#i Supreme Court has
stated:
In Best Place, we held that "there is a legal duty,
implied in a first- and third-party insurance contract, that
the insurer must act in good faith in dealing with its
insured, and a breach of that duty of good faith gives rise
to an independent tort cause of action." 82 Hawai #i at 132,
920 P.2d at 346. "The implied covenant is breached, whether
the carrier pays the claim or not, when its conduct damages
the very protection or security which the insured sought to
gain by buying insurance." Id. (quoting Rawlings v.
Apodaca, 151 Ariz. 149, 726 P.2d 565, 573 (1986)). . . .
[F]ailure to pay a claim is not a sine qua non of a
cognizable cause of action for bad faith.
Catron v. Tokio Marine Mgmt., Inc., 90 Hawai#i 407, 410, 978 P.2d
845, 848 (1999).
The Hawai#i Supreme Court has expressed that the
question of whether an insurer has acted in bad faith is
generally a question of fact. Willis v. Swain, 129 Hawai#i 478,
496, 304 P.3d 619, 637 (2013). "[R]easonableness can only
constitute a question of law suitable for summary judgment when
the facts are undisputed and not fairly susceptible of divergent
inferences, because, where, upon all the evidence, but one
inference may reasonably be drawn, there is no issue for the
jury." Id. (citation and internal quotation marks omitted).
10
As previously noted, one cause of action alleged by Plaintiff
Carvalho in her Complaint was negligent and/or intentional infliction of
emotional distress, for which she sought damages.
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Given the applicable standards, we conclude that AIG failed to
establish, as a matter of law, that the only inference to be
reasonably drawn from the record was that AIG had reasonably
handled Plaintiff Carvalho's claim for UM/UIM benefits.
AIG concedes in its answering brief that there were
genuine issues of material fact on the merits of the underlying
claim, which in our view are relevant to the bad faith claim,
i.e., whether AIG acted reasonably in initially declining to
raise and stack the UM/UIM policy limits or to initially
acknowledge the increased limits. Plaintiff Carvalho had
produced in her opposition to AIG's MSJ, inter alia, portions of
AIG's claim diary which indicated that AIG may have internally
recognized that Plaintiff Carvalho could be entitled to the $1.2
million in stacked UM/UIM coverages as early as April 2007.
Accordingly, because Plaintiff Carvalho was entitled to maintain
her bad faith mishandling claim against AIG and, viewing the
facts and inferences therefrom in the light most favorable to
Plaintiff Carvalho, genuine issues of material fact exist as to
whether AIG acted in bad faith in regard to offering and
determining the available UM and UIM coverage and initially
refusing to acknowledge that the Carvalhos' AIG policy should
have provided a total of $1.2 million in stacked UM and UIM
coverage. Accordingly, summary judgment on the bad faith claim
was not appropriate.
We thus conclude that the circuit court erred in
granting AIG's MSJ. For purposes of the remand, we also address
the remaining points of error below.
B. The circuit court did not abuse its discretion in
granting AIG's Motion to Preclude Evidence
We next address Plaintiff Carvalho's contention that
the circuit court abused its discretion in granting AIG's Motion
to Preclude Evidence. On appeal, Plaintiff Carvalho asserts that
AIG's motion was an improper form of a motion in limine that
precluded her from introducing relevant evidence at trial and
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summarily dismissed a portion of her claim. While we agree with
Plaintiff Carvalho to the extent that AIG's Motion to Preclude
Evidence constituted a motion in limine, for the following
reasons we conclude that the circuit court did not abuse its
discretion in entering its Order Precluding Evidence.
AIG's Motion to Preclude Evidence sought an order
"precluding any and all evidence and argument from being
presented to the jury at the time of trial in furtherance of
[Plaintiff Carvalho's] unpled claim that [AIG] somehow breached a
duty to settle the underlying UM and UIM claim . . . prior to the
issuance of the UM/UIM Arbitration Award." We construe AIG's
Motion to Preclude Evidence as a motion in limine, inasmuch as it
was used as "a procedural device which requests a pretrial order
enjoining opposing counsel from using certain prejudicial
evidence in front of a jury at a later trial." See Kobashigawa,
129 Hawai#i at 321, 300 P.3d at 587. However, we conclude that
the circuit court did not abuse its discretion in its Order
Precluding Evidence because it appropriately prohibited Plaintiff
Carvalho from introducing evidence not related to her Complaint.
As previously mentioned, Plaintiff Carvalho's Complaint
was premised on her allegation that AIG had initially failed to
recognize the increased stacked UM/UIM policy limits due under
the Carvalhos' AIG policy. Nowhere in Plaintiff Carvalho's
Complaint does she make a claim that AIG had acted in bad faith
for failing to settle the instant case prior to the issuance of
the arbitration award. Plaintiff Carvalho's motion to amend her
Complaint also was not before the circuit court at the time it
ruled on AIG's Motion to Preclude Evidence. As such, it was well
within the circuit court's discretion to grant AIG's motion to
exclude any evidence pertaining to this unpled claim from being
presented at trial. See id., at 322, 30 P.3d at 588 (noting that
"the granting or denying of a motion in limine is within the
trial court's inherent power to exclude and admit evidence"); cf.
Cresencia v. Kim, 10 Haw. App. 461, 476-77, 878 P.2d 725, 734
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(1994) (discussing without criticism the circuit court's grant of
a motion in limine to exclude evidence related to claims not
properly pled in complaint). Likewise, the circuit court's Order
Precluding Evidence could not have summarily dismissed any claim
that AIG had acted in bad faith for failure to settle because no
such claim was asserted in Plaintiff Carvalho's Complaint.
As noted by the circuit court at the August 12, 2015
hearing on the Motion to Preclude Evidence, the court had granted
the motion "based on the state of the pleadings," specifically
noting that no motion to amend a complaint was before the court
at that time. Accordingly, as there was no assertion in the
Complaint that AIG had acted in bad faith in failing to settle
Plaintiff Carvalho's claim prior to the arbitration award, it
cannot be said that the circuit court abused its discretion in
entering its Order Precluding Evidence.
C. The circuit court did not abuse its discretion in its
Order Denying Motion to Amend Complaint
We next address Plaintiff Carvalho's point of error
asserting the circuit court erred in denying her motion to amend
her Complaint. Plaintiff Carvalho contends that the circuit
court abused its discretion in denying her motion because she had
made a prima facie showing under HRCP Rule 15(a) and pertinent
case law that she was entitled to amend her Complaint.
As noted by the Hawai#i Supreme Court, "unless there is
an apparent reason indicating otherwise, under HRCP Rule 15(a),
leave to amend shall be freely given to a party to amend its
complaint when justice so requires." Dejetley v. Kaho#ohalahala,
122 Hawai#i 251, 269, 226 P.3d 421, 439 (2010) (citation and
internal quotation marks omitted). The Hawai#i Supreme Court has
further explained that
in the absence of any apparent or declared reason-such as
undue delay, bad faith or dilatory motive on the part of the
movant, repeated failure to cure deficiencies by amendments
previously allowed, undue prejudice to the opposing party by
virtue of allowance of the amendment, futility of amendment,
etc.—the leave sought should, as HRCP Rule 15(a) requires,
be freely given.
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Kamaka, 117 Hawai#i at 112, 176 P.3d at 111 (citation, brackets,
and quotation marks omitted) (affirming an order denying a motion
to amend complaint because the trial court had justifiable
reasons for denying the motion); Gonsalves v. Nissan Motor Corp.
in Hawaii, Ltd., 100 Hawai#i 149, 160, 58 P.3d 1196, 1207 (2002);
Hirasa v. Burtner, 68 Haw. 22, 26, 702 P.2d 772, 775 (1985);
Bishop Trust Co., Ltd. v. Kamokila Dev. Corp., 57 Haw. 330, 337,
555 P.2d 1193, 1198 (1976) (quoting Foman v. Davis, 371 U.S. 178,
182 (1962)). Thus, while leave to amend pleadings is to be
freely given, undue delay and prejudice provide justifying
reasons to deny leave to amend under HRCP Rule 15(a).
Upon review of the record and arguments of the parties,
it appears that reasonable minds could differ as to whether
Plaintiff Carvalho was entitled to amend her Complaint pursuant
to HRCP Rule 15(a). On one hand, the motion was filed
approximately three months prior to the discovery cut-off date
and five months prior to trial, which was by no means prompt, but
not as late into the court deadlines as other cases where our
appellate courts have determined undue delay provided justifiable
reason to deny a request to amend a complaint or answer. See
Kamaka, 117 Hawai#i at 111-12, 176 P.3d at 110-111 (affirming
circuit court's denial of leave to amend complaint where hearing
on motion to amend was held two weeks prior to trial, and motion
was filed seven days after discovery deadline and nearly four
years after pre-trial statement referring to unpled claims had
been filed); Bishop Trust Co., 57 Haw. at 336-38, 555 P.2d at
1197-99 (holding undue delay and prejudice provided ample
justifying reasons to deny motion to amend answer that was filed
less than two months before trial, which would likely require
trial to be delayed to complete further discovery on previously
unpled issues); Arthur v. State, Dept. Of Hawaiian Home Lands,
135 Hawai#i 149, 169, 346 P.3d 218, 238 (App. 2015), vacated on
other grounds, 138 Hawai#i 85, 377 P.3d 26 (2016) (reasoning
there was undue delay where plaintiff sought to name new
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defendant in amended complaint more than four years after that
defendant had been named in a third-party complaint, three weeks
before the discovery deadline, and where allowing the amendment
likely would require further discovery for the new claims).
On the other hand, the circuit court had justifiable
reasons to deny Plaintiff Carvalho's motion because she had
waited multiple years to request leave to amend her Complaint,
and her motion was based on information that she had access to
since 2008. See Keawe v. Hawaiian Elec. Co., Inc., 65 Haw. 232,
238-39, 649 P.2d 1149, 1154 (1982) (holding circuit court had not
abused its discretion in denying leave to amend complaint where
moving party chose to wait four years to amend its complaint and
made a conscious choice as to the exclusiveness of its claim
despite being fully cognizant of other grounds for remedy);
Bishop Trust Co., 57 Haw. at 336-38, 555 P.2d at 1197-98 (finding
undue delay and prejudice where motion to amend answer was filed
more than fifteen months after the original answer was filed and
relied on statements and actions taken by deceased declarant that
were known to moving party when the original answer was filed,
thus inhibiting non-moving party's ability to preserve rebuttal
testimony); Yoneji v. Yoneji, 137 Hawai#i 299, 318, 370 P.3d 704,
723 (App. 2016) (holding that the circuit court did not abuse its
discretion in denying leave to amend complaint for undue delay
where moving party did not file its motion until a week before
trial and failed to provide any evidence of when they had
obtained information relevant to amended pleading).
Here, Plaintiff Carvalho's motion to amend was filed
approximately seven and a half years after her Complaint had been
filed, more than six years after the UM/UIM Arbitration award was
issued and the stay in this case had expired, and almost one and
a half years after she had filed her pretrial statement, which
made no reference or mention of the previously unpled
allegations. Also, Plaintiff Carvalho has stated, both to the
circuit court and now on appeal, that the additional factual
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allegations alleged in her proposed First Amended Complaint were
based on the claim handling conduct documented in AIG's claim
file documents that AIG had produced in discovery on May 1, 2008,
and correspondence between her counsel and AIG's counsel. This
indicates that Plaintiff Carvalho was aware of the circumstances
pertaining to her proposed amended complaint as early as 2008,
and yet chose not to request leave to amend her Complaint until
multiple years after the arbitration award was issued and the
stay in this case had expired.
As the record indicates that there were justifiable
reasons for the circuit court to deny Plaintiff Carvalho's motion
to amend her Complaint for undue delay, it cannot be said that
the circuit court clearly exceeded the bounds of reason or
disregarded rules or principles of law or practice to the
substantial detriment of Plaintiff Carvalho in entering its Order
Denying Motion to Amend Complaint. See Kamaka, 117 Hawai#i at
104, 111-12, 176 P.3d at 103, 110-11; Keawe, 65 Haw. at 238-39,
649 P.2d at 1154; Bishop Trust Co., 57 Haw. at 338, 555 P.2d at
1198-99; Yoneji, 137 Hawai#i at 318, 370 P.3d at 723.11
D. The circuit court did not abuse its discretion in its
Order Denying Reconsideration
We finally address Plaintiff Carvalho's point of error
asserting the circuit court erred in denying her Motion for
Reconsideration. In her motion, Plaintiff Carvalho requested
that the circuit court: (1) vacate its Order Denying Motion to
Amend Complaint at least in part to allow the use of certain
11
While both parties present arguments as to whether Plaintiff
Carvalho was time-barred by the statute of limitations prescribed under
HRS § 431:10C-315 to amend her Complaint, the circuit court's Order Denying
Motion to Amend Complaint was explicitly denied solely on the basis of undue
delay. Because Plaintiff Carvalho's motion to amend was not denied on the
basis of statute of limitations, and in light of our holding that the circuit
court did not abuse its discretion for finding undue delay, we need not
address the statute of limitation issue. We further note Plaintiff Carvalho
asserts the circuit court should have allowed her leave to file supplemental
pleadings under HRCP Rule 15(d), but she fails to cite where in the record she
requested such leave from the circuit court. Thus, that contention is deemed
waived. See Lales v. Wholesale Motors Co., 133 Hawai #i 332, 343 n.9, 328 P.3d
341, 352 n.9 (2014).
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evidence referenced in her proposed First Amended Complaint;
and/or (2) explain and clarify the circuit court's intent in
denying her motion to amend with respect to the evidence that she
would be allowed to present at trial; or (3) grant her leave
pursuant to HRS § 641-1(b) (2016), to file an interlocutory
appeal of the Order Denying Motion to Amend Complaint.
The circuit court denied the Motion for Reconsideration
because it found that Plaintiff Carvalho did not introduce any
new matter or evidence that could not have been presented to the
judge presiding over the Order Denying Reconsideration, and as to
the alternative request for leave to file an interlocutory
appeal, the petition was untimely made because it was filed more
than thirty days after the Order Denying Motion to Amend
Complaint was entered. On appeal, Plaintiff Carvalho contends
that the circuit court abused its discretion in denying her
Motion for Reconsideration because: (1) her request for leave to
file an interlocutory appeal of the Order Denying Motion to Amend
Complaint was timely; (2) the circuit court failed to provide
guidance as to what evidence would be allowed at trial; and (3)
she had provided new information not previously available to the
court in its prior rulings.
1. Plaintiff Carvalho's request for leave to file an
interlocutory appeal was untimely
We conclude that Plaintiff Carvalho's request for leave
to file an interlocutory appeal in her Motion for Reconsideration
was untimely. The Supreme Court of Hawai#i interpreted an
earlier version of Hawai#i Rules of Appellate Procedure (HRAP)
Rule 4(a)(1) (1987),12 along with HRS § 641-1(b) (2016),13 as
12
The 1987 version of HRAP Rule 4(a)(1) applicable in King v.
Wholesale Produce Dealers Ass'n of Hawaii, 69 Haw. 334, 335, 741 P.2d 721, 722
(1987) stated:
In a civil case in which an appeal is permitted by law as of
right from a court or agency or by an order of a court
granting an interlocutory appeal or by a Rule 54(b), HRCP or
DCRCP, certificate from the court appealed from, the notice
of appeal required by Rule 3 shall be filed by a party with
(continued...)
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requiring "a party wanting to take an interlocutory appeal to
move for an order allowing the appeal, for the court to enter the
order and for the appellant to file the notice of appeal all
within 30 days from the filing of the order appealed from, unless
the time for appeal is extended[.]" King v. Wholesale Produce
Dealers Ass'n of Hawaii, 69 Haw. 334, 335, 741 P.2d 721, 722
(1987), abrogated on other grounds by Jenkins v. Cades Schutte
Fleming & Wright, 76 Hawai#i 115, 869 P.2d 1334 (1994); see also
Kohala Agriculture v. Deloitte & Touche, 86 Hawai#i 301, 311, 949
P.2d 141, 151 (App. 1997). The version of HRAP Rule 4(a)(1)
applicable in this case is somewhat different than in King, but
still required that "[w]hen a civil appeal is permitted by law,
the notice of appeal shall be filed within 30 days after entry of
the judgment or appealable order." HRAP Rule 4(a)(1)
(2015)(emphasis added). Thus, the holding in King as to
interlocutory appeals remained applicable in this case.14
12
(...continued)
the clerk of the court or agency appealed from within 30
days after the date of entry of the judgment or order
appealed from.
13
The current version of HRS § 641-1(b) remains the same as in 1987.
This provision states:
(b) Upon application made within the time provided by the
rules of court, an appeal in a civil matter may be allowed
by a circuit court in its discretion from an order denying a
motion to dismiss or from any interlocutory judgment, order,
or decree whenever the circuit court may think the same
advisable for the speedy termination of litigation before
it. The refusal of the circuit court to allow an appeal from
an interlocutory judgment, order, or decree shall not be
reviewable by any other court.
14
We note that effective July 1, 2016, after the relevant dates in
this appeal, HRAP Rule 4(a)(1) was amended to add the following language which
specifically addresses motions in circuit court requesting interlocutory
appeal:
A motion for leave to file an interlocutory appeal from an
order of the circuit court must be filed within 30 days of
the court’s entry of the order. If such a motion is filed
and granted, then the notice of appeal shall be filed within
30 days after entry of the circuit court’s order granting
permission for leave to file an interlocutory appeal.
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Here, the Order Denying Motion to Amend Complaint was
filed on October 15, 2015. Plaintiff Carvalho filed her Motion
for Reconsideration on November 23, 2015, which was already
beyond the thirty days, as articulated in King, within which she
was required to have filed her motion for interlocutory appeal,
obtained a court order allowing the interlocutory appeal, and to
have filed an appeal. Accordingly, the circuit court did not
abuse its discretion in denying Plaintiff Carvalho's request for
leave to file an interlocutory appeal from the Order Denying
Motion to Amend Complaint.
2. The circuit court did not abuse its discretion in
not providing guidance on evidentiary issues in
its Order Denying Reconsideration
Plaintiff Carvalho also asserts that the circuit court
abused its discretion in entering its Order Denying
Reconsideration by failing to provide guidance on what evidence
the court would allow at trial. In her Motion for
Reconsideration, Plaintiff Carvalho appeared to seek
clarification as to whether she would be allowed to present
evidence and argument pertaining to AIG's delay in payment of the
UM and UIM benefits in 2008-2009, in light of the circuit court's
Order Precluding Evidence and Order Denying Motion to Amend
Complaint.
As pointed out by the circuit court at the December 16,
2015 hearing on the Motion for Reconsideration, the Order Denying
Motion to Amend Complaint, from which Plaintiff Carvalho sought
reconsideration, did not relate to or resolve any evidentiary
issues. As such, the evidentiary issues which Plaintiff Carvalho
sought to have clarified were not pertinent to the circuit
court's determination on her Motion for Reconsideration.
Instead, those issues were more appropriately resolved at trial,
or in a prior motion in limine as the circuit court indicated at
the hearing. Accordingly, the circuit court did not abuse its
discretion in deciding not to rule on any evidentiary matters in
its Order Denying Reconsideration.
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3. There was no new information or evidence that
could not have been previously presented to the
circuit court
"The purpose of a motion for reconsideration is to
allow the parties to present new evidence and/or arguments that
could not have been presented during the earlier adjudicated
motion." Omerod v. Heirs of Kaheananui, 116 Hawai#i 239, 270,
172 P.3d 983, 1014 (2007) (brackets and citations omitted). The
only new evidence that Plaintiff Carvalho submitted in support of
her Motion For Reconsideration was a report (the Souza Report)
prepared by her insurance bad faith claim handling expert, Bill
Souza (Souza), dated September 12, 2015. Plaintiff Carvalho,
however, fails to explain or address why this report could not
have been produced at the time of her August 10, 2015 motion to
amend her Complaint. Accordingly, because this evidence could
and should have been submitted by Plaintiff Carvalho in support
of her motion to amend her Complaint, it cannot be said that the
circuit court abused its discretion in denying her Motion for
Reconsideration. See Amfac, Inc. v. Waikiki Beachcomber Inv.
Co., 74 Haw. 85, 114-15, 839 P.2d 10, 27 (1992).
IV. Conclusion
For the reasons discussed above, we vacate the: (1)
"Order Granting Defendants AIG Hawaii Insurance Company, Inc. and
Hawaii Insurance Consultants, Ltd.'s Motion for Summary Judgment
as to all Remaining Claims and Causes of Action re: Lack of
Causation," entered on January 5, 2016; and (2) the "Judgment"
entered on February 23, 2016, both entered by the Circuit Court
of the Third Circuit.
The following orders entered by the Circuit Court of
the Third Circuit are affirmed:
(1) The "Order Granting Defendants AIG Hawaii Insurance
Company, Inc. and Hawaii Insurance Consultants, Ltd.'s Motion to
Preclude Evidence and Argument re: Failure to Settle", entered on
September 2, 2015.
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(2) The "Order Denying Plaintiffs' Motion to Amend
Complaint," entered on October 15, 2015.
(3) The "Order Denying Plaintiffs' Motion for
Reconsideration, and/or Clarification, and in the Alternative,
for Leave to File an Interlocutory Appeal pursuant to HRS § 641-
1(b), of the Order Denying Plaintiffs' Motion to Amend
Complaint," entered on January 5, 2016.
We remand this case to the circuit court for
proceedings consistent with this opinion on the claims asserted
in the Complaint.
On the briefs: /s/ Lisa M. Ginoza
Chief Judge
Arthur Y. Park,
Patricia Kim Park, /s/ Katherine G. Leonard
John C. McLaren, Associate Judge
(Park & Park)
for Plaintiffs-Appellants. /s/ Keith K. Hiraoka
Associate Judge
Steven L. Goto,
(Chong, Nishimoto, Sia,
Nakamura & Goya, LLP)
for Defendants-Appellees.
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