Hawaiian Dredging Construction Company, Inc. v. Fujikawa Associates, Inc.

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Electronically Filed
Supreme Court
SCWC-14-0000842
08-JUN-2018
08:30 AM
IN THE SUPREME COURT OF THE STATE OF HAWAI#I
---o0o---
HAWAIIAN DREDGING CONSTRUCTION COMPANY, INC.,
Respondent/Plaintiff-Appellant,
vs.
FUJIKAWA ASSOCIATES, INC.,
dba Continental Mechanical of the Pacific,
Petitioner/Defendant-Appellee.
SCWC-14-0000842
CERTIORARI TO THE INTERMEDIATE COURT OF APPEALS
(CAAP-14-0000842; CIV. NO. 13-1-0900-03)
JUNE 8, 2018
RECKTENWALD, C.J., NAKAYAMA, McKENNA, POLLACK, AND WILSON, JJ.
OPINION OF THE COURT BY RECKTENWALD, C.J.
This case arises from a worksite accident in which an
employee of Hawaiian Dredging Construction Company, Inc. (HDCC)
was injured, allegedly due to the actions of HDCC’s
subcontractor, Fujikawa Associates, Inc., dba Continental
Mechanical of the Pacific (Fujikawa). After paying workers’
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compensation benefits to its injured employee, HDCC sought
reimbursement from Fujikawa based on a breach of contract theory,
claiming that workers’ compensation benefits were within the
scope of their subcontract’s indemnity clause. The circuit court
granted summary judgment in favor of Fujikawa based on its
interpretation of the subcontract’s indemnity clause.
While we affirm the grant of summary judgment, we do so
based on our interpretation of Hawai#i Revised Statutes (HRS)
§ 386-8, which governs a third party’s liability for workers’
compensation. As set forth below, we conclude that this statute
provides the exclusive remedy for an employer to recover workers’
compensation benefits from a third-party tortfeasor. Because
HDCC did not avail itself of that exclusive remedy, summary
judgment for Fujikawa was appropriate.
I. Background
A. The Subcontract and Accident
HDCC hired Fujikawa to perform repairs to Edmonson Hall
at the University of Hawai#i at Mânoa. On May 1, 2012, HDCC and
Fujikawa entered into a subcontract agreement (Subcontract).1
The Subcontract’s indemnity clause provided:
1
The Subcontract was attached as an exhibit to a declaration of
HDCC’s counsel, which was provided in support of HDCC’s motion for partial
summary judgment in the circuit court. The express language of the
Subcontract is undisputed.
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12.4 To the fullest extent permitted by law,
Subcontractor shall indemnify, and save harmless
Contractor and Owner, and their agents and employees,
from and against all Liabilities on account of: . . .
(B) the filing of any claims by persons or entities
furnishing labor, materials, equipment or other
services or facilities in connection with the Work;
(C) any breach or default by Subcontractor of its
obligations under this Agreement; or (D) any and all
damage or injury to person or property arising
directly or indirectly from the performance of the
Work and/or the operations of Subcontractor to the
extent any such damage or injury is attributable in
whole or in part to the acts or omissions of
Subcontractor, anyone directly or indirectly employed
by Subcontractor or anyone for whose acts
Subcontractor may be liable; and, when requested by
Contractor, Subcontractor shall defend any and all
actions and pay all charges of attorneys and other
expenses arising therefrom.
The Subcontract defines “Liabilities” as: “Separately
and collectively, any loss, injury, damage, fine, penalty, cost
and expense (including legal fees and costs) and other liability
whatsoever, and any action, suit, proceeding or claims, relating
to such liability.”
HDCC alleges that, in the course of performing repairs
at the University of Hawai#i, HDCC employee Gabriel Balon was
injured. HDCC sent Fujikawa a “Notice of Claim and Demand for
Indemnification,”2 which asserted the following:
On June 26, 2012,[] one of HDCC’s employees, Mr.
Gabriel Balon, a 55-year old laborer, sustained
injuries at the Project site when he was struck by a
piece of an air duct being installed by [Fujikawa].
As a result of this accident, Mr. Balon suffered a
concussion and contusions of his back and leg, and has
not returned to work. Moreover, he has filed a claim
2
This notice was attached as an exhibit to a declaration of HDCC’s
counsel, which was provided in support of HDCC’s motion for partial summary
judgment in the circuit court. Fujikawa’s receipt of this notice is
undisputed.
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for indemnity and medical/rehabilitation benefits
under Hawaii’s Workers’ Compensation Law, H.R.S.
Chapter 386, and HDCC is currently making payments
thereunder.
HDCC demanded that Fujikawa indemnify it “and its
insurer(s) from and against any and all liability, costs and
expenses . . . incurred in connection with the subject accident
and the resolution thereof.”
B. Circuit Court Proceedings3
HDCC subsequently filed a complaint in the circuit
court. HDCC alleged that Fujikawa breached the Subcontract by
refusing to indemnify HDCC for the amounts it paid “on account of
the bodily injury to Gabriel Balon.”
Fujikawa filed an answer, denying that it caused
Balon’s injury and denying that it breached the Subcontract.
Fujikawa asserted affirmative defenses related to comparative
negligence, estoppel, unclean hands, failure to mitigate damages,
waiver, and failure to join indispensable parties.
HDCC filed a motion for partial summary judgment,
requesting judgment in its favor on the issue of Fujikawa’s
assumption of liability under the Subcontract for Balon’s
accident. HDCC argued that summary judgment was appropriate
because the “Subcontract ‘clearly and unequivocally’ assigns
Fujikawa a responsibility to indemnify HDCC.”
3
The Honorable Rhonda A. Nishimura presided.
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Fujikawa opposed HDCC’s motion, and requested the court
to instead enter summary judgment in its favor. Fujikawa argued
that workers’ compensation benefits were outside the scope of the
Subcontract’s indemnity clause, and that summary judgment for
HDCC would violate Fujikawa’s due process rights and contravene
public policy by “attempt[ing] to use an ambiguous, equivocal
contractual indemnity to shift and evade [HDCC’s] liability for
compensation.” Fujikawa also argued that HDCC’s action
“conflicts with the procedure for reimbursement mandated by the
Legislature” in HRS § 386-8.
The circuit court held a hearing, and granted summary
judgment in favor of Fujikawa based on its interpretation of the
Subcontract. The circuit court found no clear and unequivocal
assumption of liability to pay workers’ compensation benefits for
a work-related injury under the terms of the Subcontract. The
court denied HDCC’s motion for partial summary judgment and
granted summary judgment in favor of Fujikawa. The court
subsequently entered judgment in favor of Fujikawa.
C. ICA Proceedings
HDCC timely appealed, arguing that the circuit court
erred in failing to find Fujikawa liable for workers’
compensation payments under the plain language of the
Subcontract. HDCC contended that Hawai#i law allows “risks of
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liabilities in construction” to be allocated by contract, and
that such an allocation between contractor and subcontractor has
no bearing on an injured worker’s ability to secure workers’
compensation benefits. HDCC argued that Fujikawa’s broad promise
in the Subcontract to indemnify HDCC for “Liabilities”
attributable to Fujikawa should be interpreted to include
workers’ compensation costs, and that partial summary judgment
should have been granted in its favor.
In its answering brief, Fujikawa characterized HDCC’s
appeal as an attempt to pass on its statutory workers’
compensation obligations through a vague contractual term.
Fujikawa argued that the circuit court correctly interpreted the
Subcontract, as “HDCC’s definition of ‘Liabilities’ did not
include any reference to ‘benefits,’ statutory obligations,
‘compensation,’ disability payments or benefits – any term that
would clearly and unequivocally indicate that Fujikawa agreed to
indemnify HDCC for payments made for Gabriel Balon’s workers’
compensation benefits.”
Fujikawa also argued that HDCC’s claim attempted to
avoid the process specified by HRS § 386-84 (1993) (“Liability
4
HRS § 386-8 (1993) provided, in relevant part:
[1] When a work injury for which compensation is
payable under this chapter has been sustained under
circumstances creating in some person other than the
(continued...)
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4
(...continued)
employer or another employee of the employer acting in
the course of employment a legal liability to pay
damages on account thereof, the injured employee or
his dependents (hereinafter referred to collectively
as the employee) may claim compensation under this
chapter and recover damages from such third person.
[2] If the employee commences an action against such
third person he shall without delay give the employer
written notice of the action and the name and location
of the court in which the action is brought by
personal service or registered mail. The employer, at
any time before trial on the facts, may join as party
plaintiff.
[3] If within nine months after the date of the
personal injury the employee has not commenced an
action against such third person, the employer, having
paid or being liable for compensation under this
chapter, shall be subrogated to the rights of the
injured employee. Except as limited by chapter 657,
the employee may at any time commence an action or
join in any action commenced by the employer against
such third person.
[4] No release or settlement of any claim or action
under this section is valid without the written
consent of both employer and employee. The entire
amount of the settlement after deductions for
attorney's fees and costs as hereinafter provided, is
subject to the employer’s right of reimbursement for
his compensation payments under this chapter and his
expenses and costs of action.
[5] If the action is prosecuted by the employer alone,
the employer shall be entitled to be paid from the
proceeds received as a result of any judgment for
damages, or settlement in case the action is
compromised before judgment, the reasonable litigation
expenses incurred in preparation and prosecution of
such action, together with a reasonable attorney's
fee, which shall be based solely upon the services
rendered by the employer's attorney in effecting
recovery both for the benefit of the employer and the
employee. After the payment of the expenses and
attorney's fee, the employer shall apply out of the
amount of the judgment or settlement proceeds an
amount sufficient to reimburse the employer for the
amount of his expenditure for compensation and shall
pay any excess to the injured employee or other person
entitled thereto.
(continued...)
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4
(...continued)
[6] If the action is prosecuted by the employee alone,
the employee shall be entitled to apply out of the
amount of the judgment for damages, or settlement in
case the action is compromised before judgment, the
reasonable litigation expenses incurred in preparation
and prosecution of the action, together with a
reasonable attorney's fee which shall be based solely
upon the services rendered by the employee's attorney
in effecting recovery both for the benefit of the
employee and the employer. After the payment of such
expenses and attorney's fee, there shall be applied
out of the amount of the judgment or settlement
proceeds, the amount of the employer's expenditure for
compensation, less his share of the expenses and
attorney's fee. On application of the employer, the
court shall allow as a first lien against the amount
of the judgment for damages or settlement proceeds,
the amount of the employer's expenditure for
compensation, less his share of such expenses and
attorney's fee.
[7] If the action is prosecuted both by the employee
and the employer, in a single action or in
consolidated actions, and they are represented by the
same agreed attorney or by separate attorneys, there
shall first be paid from any judgment for damages
recovered, or settlement proceeds in case the action
or actions are settled before judgment, the reasonable
litigation expenses incurred in preparation and
prosecution of such action or actions, together with
reasonable attorney's fees based solely on the
services rendered for the benefit of both parties
where they are represented by the same attorney, and
where they are represented by separate attorneys,
based solely upon the service rendered in each
instance by the attorney in effecting recovery for the
benefit of the party represented. After the payment of
the expenses and attorneys' fees there shall be
applied out of the amount of the judgment for damages,
or settlement proceeds an amount sufficient to
reimburse the employer for the amount of his
expenditure for compensation and any excess shall be
paid to the injured employee or other person entitled
thereto.
. . . .
[10] The amount of compensation paid by the employer
or the amount of compensation to which the injured
employee is entitled shall not be admissible in
evidence in any action brought to recover damages.
(continued...)
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of third person”), which establishes the procedure by which an
employer may seek to recover the workers’ compensation payments
that it made to its injured employee when a third party is
allegedly liable for the employee’s work-related injury.
Fujikawa also argued that HDCC’s request for damages conflicted
with HRS § 386-8’s provision that the “amount of [workers’]
compensation paid by the employer . . . shall not be admissible
in evidence in any action brought to recover damages.”
The ICA vacated the circuit court’s judgment,
concluding that the Subcontract’s indemnification clause
encompassed workers’ compensation benefits. The ICA held that
“the Subcontract includes the clear and unequivocal agreement of
Fujikawa to assume all Liabilities arising from its acts or
omissions, including costs and expenses related to Balon’s
workers compensation claim.” The ICA rejected Fujikawa’s
arguments that HDCC was attempting to evade its statutory
workers’ compensation obligations, relying on Iddings v. Mee-Lee,
82 Hawai#i 1, 16, 919 P.2d 263, 278 (1996), which held that
contractual indemnification agreements “are valid in the workers’
compensation context and do not contravene or undermine the
purposes underlying workers’ compensation in general.”
4
(...continued)
. . . .
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II. Standards of Review
A. Statutory Interpretation
“Statutory interpretation is a question of law
reviewable de novo.” State v. Wheeler, 121 Hawai#i 383, 390, 219
P.3d 1170, 1177 (2009) (internal quotation marks omitted). This
court’s construction of statutes is guided by the following
rules:
First, the fundamental starting point for statutory
interpretation is the language of the statute itself.
Second, where the statutory language is plain and
unambiguous, our sole duty is to give effect to its
plain and obvious meaning. Third, implicit in the
task of statutory construction is our foremost
obligation to ascertain and give effect to the
intention of the legislature, which is to be obtained
primarily from the language contained in the statute
itself. Fourth, when there is doubt, doubleness of
meaning, or indistinctiveness or uncertainty of an
expression used in a statute, an ambiguity exists.
Id. (quoting Citizens Against Reckless Dev. v. Zoning Bd. of
Appeals of the City & Cnty. of Honolulu, 114 Hawai#i 184, 193,
159 P.3d 143, 152 (2007)).
B. Summary Judgment
[An appellate court] reviews the circuit court’s grant
of summary judgment de novo. Price v. AIG Hawai#i
Ins. Co., 107 Hawai#i 106, 110, 111 P.3d 1, 5 (2005).
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
a judgment as a matter of law.” HRCP Rule 56(c).
Gillan v. Gov’t Emps. Ins. Co., 119 Hawai#i 109, 114, 194 P.3d
1071, 1076 (2008).
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III. Discussion
A. Introduction
Fujikawa presents several questions challenging the
ICA’s ruling.5 We focus on one question, as we find it
determinative: whether an employer may recover workers’
compensation payments under a contractual indemnification
provision between the employer and the third-party tortfeasor who
causes injury to the employee. We answer that question in the
negative, since HRS § 386-8 provides employers an exclusive
statutory reimbursement remedy under Hawaii’s workers’
compensation law (WCL).
Fujikawa argues that such an indemnity clause violates
the WCL by shifting an employer’s responsibility for workers’
compensation to a subcontractor. In response, HDCC argues that
“HRS § 386-8 neither requires an employer to assert its
subrogation interests nor does it limit an employer to this
statutorily-provided remedy.” HDCC argues that it complied with
Hawaii’s WCL by accepting Balon’s claim and providing Balon
workers’ compensation benefits, and that its claim for indemnity
5
Fujikawa presents four questions to this court. Fujikawa’s first
two questions address whether the ICA misapplied contract law when it
interpreted the Subcontract, and Fujikawa’s remaining two questions address
whether the ICA’s ruling contravenes Hawaii’s workers’ compensation scheme and
public policy encouraging settlement of an injured workers’ claim, which we
construe as a single related question. In light of our disposition of this
case, we need not address Fujikawa’s contractual interpretation questions.
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“is based on an independent duty created by the indemnification
provision in the Subcontract.”
Fujikawa filed a Reply to HDCC’s Response, arguing that
Yukumoto v. Tawarahara, 140 Hawai#i 285, 400 P.3d 486 (2017)
supports its position. In Yukumoto, we held that a health
insurer’s contractual provision granting a right of subrogation
against third-party torteasors was invalid because it conflicted
with statutes that provided a health insurer’s exclusive right of
subrogation. Yukumoto, 140 Hawai#i at 299, 400 P.3d at 500
(citing HRS §§ 663-10 (Supp. 2002) and 431-13:103(a)(10) (Supp.
2002)). Fujikawa asserts that HDCC’s position similarly “would
jeopardize the comprehensive and exclusive workers’ compensation
scheme established by the legislature.”
We conclude that the comprehensive workers’
compensation reimbursement scheme established by HRS § 386-8
provides the exclusive remedy for an employer’s recovery of
workers’ compensation benefits paid for its employee where injury
is allegedly attributable to a third party. Thus, any
contractual provision that conflicts with this statutory remedy
is invalid. HDCC is therefore not entitled to contractual
indemnity for workers’ compensation payments made as a result of
Balon’s injury, and summary judgment in favor of Fujikawa was
proper. Although the circuit court erroneously granted
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Fujikawa’s cross-motion for summary judgment based on its
interpretation of the Subcontract, we affirm the circuit court’s
judgment based on our interpretation of HRS § 386-8. See Reyes
v. Kuboyama, 76 Hawai#i 137, 140, 870 P.2d 1281, 1284 (1994)
(“This court may affirm a grant of summary judgment on any ground
appearing in the record, even if the circuit court did not rely
on it.”).
B. Statutory Interpretation of HRS § 386-8
Whether HRS § 386-8 provides the exclusive remedy for
an employer’s reimbursement of workers’ compensation benefits
paid for its employee due to the fault of a third party is a
question of first impression before this court. When construing
a statute, our foremost obligation is to “give effect to the
intention of the legislature, which is to be obtained primarily
from the language contained in the statute itself. And we must
read statutory language in the context of the entire statute and
construe it in a manner consistent with its purpose.” Morgan v.
Planning Dep’t, Cnty. of Kauai, 104 Hawai#i 173, 179-80, 86 P.3d
982, 988-89 (2004) (citation omitted). As set forth below, the
language, legislative history, and purpose of the statutory
framework governing workers’ compensation lead us to conclude
that the legislature intended to limit an employer’s right of
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recovery for workers’ compensation payments to the manner
prescribed by HRS § 386-8.
1. The Plain Language and Legislative History of HRS
§ 386-8
The plain language and legislative history of HRS
§ 386-8 show that the legislature has created a uniform and
comprehensive procedure for the recovery of workers’ compensation
benefits paid as a result of a third party’s tortious conduct.
The comprehensive nature of this statutory scheme supports the
conclusion that the legislature intended HRS § 386-8 to provide
the employer’s exclusive remedy in these circumstances.
Under the first paragraph of HRS § 386-8, when an
employee has sustained a work-related injury due to a third
party, the injured employee “may claim compensation under this
chapter and recover damages from such third person.” The second
paragraph of HRS § 386-8 provides that “[i]f the employee
commences an action against such third person, the employee shall
without delay give the employer written notice of the action.”
As such, “[u]nder HRS § 386-8, the employee has the first
opportunity to bring suit, which promotes the efficient
resolution of his or her claims.” First Ins. Co. of Hawaii v.
A&B Properties, 126 Hawai#i 406, 418, 271 P.3d 1165, 1177 (2012).
The third paragraph of HRS § 386-8 provides that “[i]f within
nine months after the date of the personal injury the employee
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has not commenced an action against such third person, the
employer, having paid or being liable for compensation under this
chapter, shall be subrogated to the rights of the injured
employee.” (Emphasis added). The fourth paragraph of HRS
§ 386-8 ensures that both the employee and employer have an
opportunity to protect their interests by providing that “[n]o
release or settlement of any claim or action under this section
is valid without the written consent of both employer and
employee.”
Paragraphs five, six, and seven of HRS § 386-8 list the
types of actions that may be brought against a third party,
explain how litigation expenses and attorney’s fees are
apportioned, and specify how an employer may recover its workers’
compensation payments under each action. Whether the action
against the third party is commenced by the employer alone, by
the employee alone, or by both the employee and employer, the
employer shall be reimbursed for the amount of its expenditure
for workers’ compensation from the judgment for damages or from
the amount of settlement. HRS § 386-8.
Accordingly, “HRS § 386–8 establishes a framework for
the employee, employer, and third party to attempt to resolve
their dispute at one time and in a single proceeding.” First
Ins. Co., 126 Hawai#i at 418, 271 P.3d at 1177. The
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comprehensive scope of HRS § 386–8, by detailing specific methods
for compensation reimbursement, suggests that the legislature’s
intent was to provide an exclusive method for recovering workers’
compensation payments from a third party.
Consistent with this plain language interpretation, the
legislative history of HRS § 386–8 supports the conclusion that
an employer’s exclusive right to reimbursement is provided for in
the statute. HRS § 386–8 can be traced to Hawaii’s first
Workers’ Compensation Act, which was enacted in 1915.6 1915 Haw.
Sess. Laws Act 221, § 5 at 324. However, the original version
was quite different from the current provision. Indeed, from the
time of its initial enactment, the statute has been progressively
amended, with each successive amendment providing a more
comprehensive framework. Prior to 1951, an injured employee was
6
In 1915, Act 221, § 5, “Liability of Third Persons,” provided:
When any injury for which compensation is payable
under this Act shall have been sustained under
circumstances creating in some other person than the
employer a legal liability to pay damages in respect
thereto, the injured employee may, at his option,
either claim compensation under this Act or obtain
damages from or proceed at law against such other
person to recover damages; and if compensation is
claimed and awarded under this Act any employer having
paid the compensation or having become liable therefor
shall be subrogated to the rights of the injured
employee to recover against that person, provided, if
the employer shall recover from such other person
damages in excess of the compensation already paid or
awarded to be paid under this Act, then any such
excess shall be paid o the injured employee less the
employer’s expenses and costs of action.
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required to “elect whether to claim compensation [from his
employer] or claim his damages [from the third-party tortfeasor],
and if he claims one, he loses the other.” H. Stand. Comm. Rep.
No. 722, in 1951 House Journal, at 579. In 1951, the legislature
amended the statute to allow the employee to claim workers’
compensation benefits and proceed against a third person without
waiving his rights to either. 1951 Haw. Sess. Laws Act 194, § 1
at 229; S. Stand. Comm. Rep. No. 195, in 1951 Senate Journal, at
589. However, the amendment provided that if the employee
recovered damages from the tort suit, the employer would have the
right to reimbursement out of those damages for the workers’
compensation benefits it paid. 1951 Haw. Sess. Laws Act 194, § 1
at 229–30; S. Stand. Comm. Rep. No. 195, in 1951 Senate Journal,
at 589.
Subsequent legislative amendments provided additional
detail regarding the employer’s rights and remedies, including
procedures for an employer’s recovery of workers’ compensation
benefits, litigation expenses, and attorney’s fees in suits
against third-party tortfeasors. In 1967, the legislature
amended the WCL “to provide a method for fixing and paying
reasonable litigation expenses and attorney’s fees in third party
actions and for the apportionment of such expenses and fees.” S.
Stand. Comm. Rep. No. 163, in 1967 Senate Journal, at 904; 1967
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Haw. Sess. Laws Act 53, § 1 at 39-40. In 1970, the legislature
amended the WCL to provide for litigation costs and attorney’s
fees where a third-party claim results in settlement. 1970 Haw.
Sess. Laws Act 58, § 1 at 106-07; H. Stand. Comm. Rep. No. 638-
70, in 1970 House Journal, at 1111. In 1973, the legislature
amended the WCL to “require an employer or his insurance carrier
to pay a proportionate share of the attorney’s fees and costs on
sums recovered by an injured employee from a third party which
are reimbursable to the employer or his carrier.” H. Stand.
Comm. Rep. No. 375, in 1973 House Journal, at 911; 1973 Haw.
Sess. Laws Act 144, § 1 at 225-26.
In sum, the history of the statute reflects the
legislature’s intent to address an ever-wider range of scenarios,
and to provide a clear set of rules for each to ensure that both
the employer and the employee are treated fairly. It would be
inconsistent with that carefully crafted scheme to allow the
employer to unilaterally vary those rules through agreements with
its subcontractors. By providing a specific reimbursement remedy
and continuing to provide further specificity to the contours of
that remedy, the legislature intended to exclude other forms of
remedy for an employer’s payment of workers’ compensation
benefits. Accordingly, the legislative history suggests that the
comprehensive workers’ compensation scheme is the whole source of
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rights and remedies for third-party tortfeasor actions under the
WCL.
This conclusion is supported by our interpretation of
statutes governing reimbursement and subrogation rights in the
health insurance context. See Yukumoto v. Tawarahara, 140
Hawai#i 285, 400 P.3d 486 (2017). In Yukumoto, the Hawai#i
Medical Service Association (HMSA) argued that it was not limited
to the statutory procedure for reimbursement of the amounts it
paid for medical expenses associated with Yukumoto’s injuries in
an accident, but could recover those amounts through independent
contractual rights. Id. at 288, 400 P.3d at 489. Based on the
plain language and legislative history of the statutes at issue,
we held that the legislature had created a uniform and
comprehensive procedure for lienholders’ reimbursement and
subrogation recovery. Id. at 294-98, 400 P.3d at 495-99.
Accordingly, any contractual provision in conflict with the
statutory procedure was invalid, and HMSA could not recover its
medical expense payments through contract instead of following
the procedure prescribed by the legislature. Id. at 299, 400
P.3d at 500; see also Vinson v. Thomas, 288 F.3d 1145, 1156 (9th
Cir. 2002) (holding that the specificity and comprehensiveness of
the remedies provided by Title II of the Americans with
Disabilities Act suggested that Congress intended that remedial
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scheme to be the exclusive means by which a party could vindicate
his rights, and therefore plaintiff’s § 1983 claims were barred).
Similarly here, HRS § 386-8 sets forth a comprehensive
scheme which reflects an intent to establish uniform and
exclusive remedies. Accordingly, the plain language and
legislative history of HRS § 386–8 support the conclusion that
HDCC’s manner of compensation reimbursement is exclusively
provided for in the statute.
2. The Purpose of Workers’ Compensation Law
Our conclusion that the plain language and legislative
history of HRS § 386-8 provides an employer’s exclusive remedy
for reimbursement is also consistent with the purpose of WCL. In
Estate of Coates v. Pac. Engineering, a Div. of Pac. Lining Co.,
Inc., 71 Haw. 358, 364, 791 P.2d 1257, 1261 (1990), we noted that
WCL is “designed to obtain for the injured workman or his
dependents an assured, certain and prompt compensation to replace
the doubtful right accorded by common law, and to secure for the
employer freedom from vexatious, delaying and uncertain
litigation with its possibilities of heavy penalties in the way
of verdicts and high costs.”
In accord with this purpose, we have said that HRS
§ 386–8 establishes a framework for dispute resolution “at one
time and in a single proceeding,” thereby promoting the efficient
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resolution of an employee’s claims. First Ins. Co., 126 Hawai#i
at 418, 271 P.3d at 1177. In First Ins. Co., we considered the
narrow question of whether an employee can intervene in his or
her employer’s timely lawsuit against a third party after the
two-year limitations period established by HRS § 657-7 (1993) has
passed. Id. at 408, 271 P.3d at 1167. We construed HRS § 386–8
consistent with WCL’s purpose of facilitating a fair and prompt
resolution, noting that HRS § 386–8 requires written consent by
both the employee and employer to a settlement or release of
claims in order to provide an opportunity for each party to
protect their respective interests. Id. at 418, 271 P.3d at
1177. Because it would be inconsistent to allow an injured
employee to object to a proposed settlement of claim but not
intervene in an employer’s suit to resolve that claim, we held
that “the structure of the workers’ compensation statute, which
encourages resolution of the dispute in a single action, suggests
an intent to allow intervention by both the employer and the
employee at any time prior to trial in the other’s timely filed
suit.” Id. Thus, while First Ins. Co. did not directly answer
the question here, it held that HRS § 386–8 should be construed
in order to accomplish the purpose of encouraging resolution of
disputes in a single action. Id.
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Interpreting HRS § 386-8 as providing an exclusive
remedy is consistent with WCL’s purpose because it “encourages
resolution of the dispute in a single action” and discourages
“vexatious, delaying and uncertain litigation” through contract-
based actions to recover workers’ compensation payments. Id.;
Estate of Coates, 71 Haw. at 364, 791 P.2d at 1261. Such actions
conflict with the statute’s goal of efficiently resolving an
injured employee’s claims in a single proceeding and assuring
prompt compensation for the injured employee.7
Accordingly, based on the statute’s plain language,
legislative history, and purpose, we conclude that HRS § 386-8
provides HDCC’s exclusive remedy for reimbursement of workers’
compensation payments.
C. Application to this Case
In light of our conclusion that HRS § 386-8 provides an
employer’s exclusive remedy for reimbursement of workers’
compensation payments, HDCC’s breach of contract claim fails.
Even if the parties intended the Subcontract’s indemnity clause
to encompass workers’ compensation payments, that agreement would
7
Furthermore, permitting an employer to require its subcontractor
to indemnify it for workers’ compensation benefits could raise significant
public policy concerns. For example, allowing this contractual shifting of
responsibilities could discourage an employer from providing a safe work
environment for its employees, because an accident to which a subcontractor is
only marginally attributable could still fall within the scope of the
indemnity clause.
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be invalid. An employer cannot contractually require a third-
party tortfeasor to indemnify it for workers’ compensation
payments. Rather, the employer must follow the procedure
provided by HRS § 386-8. Therefore, summary judgment in favor of
Fujikawa was proper.
Respectfully, we disagree with the ICA’s conclusion
that Iddings, 82 Hawai#i 1, 919 P.2d 263, supports a contrary
result. The ICA determined that contractual indemnification
agreements are valid in the workers’ compensation context and do
not undermine the purposes of WCL, quoting Iddings, 82 Hawai#i at
8, 919 P.2d at 270. The ICA then interpreted the Subcontract,
and concluded that the Subcontract’s indemnity clause encompassed
expenses stemming from workers’ compensation benefits. Iddings,
however, is distinguishable.
In Iddings, the plaintiff nurse was injured while
subduing a violent patient. Id. at 4, 919 P.2d at 266. The
nurse applied for, and received, workers’ compensation benefits
from her employer, the hospital. Id. The nurse brought a
separate action in tort against her supervisory co-employee,
physician Mee-Lee, contending that Mee-Lee, by allowing the
hospital to become overcrowded, acted wilfully and wantonly in
creating an unsafe work environment. Id. The circuit court
granted Mee-Lee’s motion for summary judgment, finding that: (1)
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an actual intent to injure is required for a co-employee’s
conduct to satisfy the “wilful and wanton misconduct” exception
to co-employee immunity; and (2) the nurse’s contention that Mee-
Lee intentionally allowed her to work in an unsafe working
environment did not constitute willful and wanton misconduct.
Id. at 5, 919 P.2d at 267.
We vacated and remanded, holding that an actual intent
to injure is not required in order for the injury-causing conduct
of a co-employee to fall within the scope of the wilful and
wanton misconduct exception, and that there were genuine issues
of material fact as to whether Mee-Lee engaged in willful and
wanton misconduct. Id. at 4, 919 P.2d at 266.
We discussed contractual indemnity agreements only in
the context of responding to the dissent. Id. at 15-17, 919 P.2d
at 277-79. The dissent contended that allowing tort claims
against supervisory co-employees would create an absurd result,
since the employer would provide benefits to the injured employee
through workers’ compensation, and, at the same time, indemnity
coverage to the supervisory employee. Id. at 28 n. 11, 919 P.2d
at 290 n. 11 (Ramil, J., dissenting). The dissent argued that a
typical situation where this absurd result would occur is the
following: (1) the employee would seek workers’ compensation
benefits, and damages from the supervisory employee tortfeasor;
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(2) the supervisor would then seek indemnity from its employer;
(3) and the employer would then seek reimbursement for its
workers’ compensation benefits from the injured employee’s
recovery against the supervisor. Id.; see also id. at 17, 919
P.2d at 279 (Ramil, J., dissenting).
The majority responded that it failed to see the
absurdity of this result. Id. at 17, 919 P.2d at 279. We stated
that it is “well settled that contractual indemnification
agreements and ‘hold harmless’ clauses are valid in the workers’
compensation context and do not contravene or undermine the
purposes underlying workers’ compensation in general.” Id. at
16, 919 P.2d at 278. This statement related to a third-party
tortfeasor’s right to seek indemnity from an employer based on an
indemnity agreement. See id. We relied on previous cases:
Kamali v. Hawaiian Elec. Co., Inc., 54 Haw. 153, 504 P.2d 861
(1972), Messier v. Ass’n of Apartment Owners of Mt. Terrace, 6
Haw. App. 525, 735 P.2d 939 (1987), and Keawe v. Hawaiian Elec.
Co., Inc., 65 Haw. 232, 649 P.2d 1149 (1982), which all held that
a third-party tortfeasor may seek indemnification from an
employer based on a contractual indemnity agreement. Iddings, 82
Hawai#i at 17, 919 P.2d at 279. We stated that just as any other
third-party tortfeasor may seek indemnity from an employer for
the tort damages it paid to the injured employee, a co-employee
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liable in tort to the injured employee may seek indemnification
from his or her employer. Id. Finally, we stated that the
dissent’s third proposition “simply reiterates the employer’s
right of reimbursement for workers’ compensation benefits paid
out by the employer mandated by HRS § 386–8.” Id.
Thus, the reference to indemnity agreements in Iddings
involved only agreements in which a third party seeks
indemnification from the employer for damages the third party has
paid to an injured employee. See id. at 15-17, 919 P.2d at 277-
79. Iddings, and the earlier cases on which it relied, did not
address the wholly separate issue of whether an employer may
circumvent the statutory procedure provided in HRS § 386-8 by
using an indemnity agreement to recover workers’ compensation
benefits from a third-party tortfeasor.8
In fact, Iddings stated that an employer, after
indemnifying a third-party tortfeasor, could seek reimbursement
for workers’ compensation benefits from the employee through the
statutory procedure mandated by HRS § 386-8. Id. at 17, 919 P.2d
at 279. Thus, Iddings did not contemplate an employer using an
8
We also note that, although not at issue here, any agreement in a
construction contract requiring the promisor to indemnify or defend “the
promisee against liability for bodily injury to persons or damage to property
caused by or resulting from the sole negligence or wilful misconduct of the
promisee, the promisee’s agents or employees, or indemnitee, is invalid as
against public policy, and is void and unenforceable.” HRS § 431:10-222;
Arthur v. State, Dept. of Hawaiian Home Lands, 138 Hawai#i 85, 93-95, 377 P.3d
26, 34-36 (2016).
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indemnification agreement to recover workers’ compensation
benefits from a third-party tortfeasor.
An agreement by an employer to indemnify a potential
third-party tortfeasor for tort damages does not implicate the
policies of WCL, because it does not alter the procedure by which
employers provide or receive reimbursement for workers’
compensation benefits. In contrast, the indemnity agreement here
attempted to supplant the procedure mandated by HRS § 386-8.
Accordingly, the ICA erred when it relied on Iddings to
conclude that the Subcontract’s indemnity provision was valid.
IV. Conclusion
For the foregoing reasons, we conclude that HRS § 386-8
provides the exclusive remedy for an employer seeking
reimbursement for workers’ compensation benefits from a third-
party tortfeasor, and accordingly, that summary judgment in favor
of Fujikawa was proper. We therefore vacate the ICA’s March 29,
2017 Judgment on Appeal, and affirm the circuit court’s May 2,
2014 Judgment.
Sheree Kon-Herrera /s/ Mark E. Recktenwald
for petitioner
/s/ Paula A. Nakayama
James Shin (Jodie D.
Roeca on the briefs) /s/ Sabrina S. McKenna
for respondent
/s/ Richard W. Pollack
/s/ Michael D. Wilson
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