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Best Place v. Penn Am. Ins. Co.

Best Place v. Penn Am. Ins. Co.

Supreme Court of Hawaii

June 5, 1996, Decided ; June 5, 1996, FILED

NO. 16065

Opinion

 [*122]  [**336]   OPINION OF THE COURT BY NAKAYAMA, J.

This appeal and cross-appeal arise from a complaint filed by the plaintiff-appellant/cross-appellee The Best Place, Inc. (Best Place) against its insurer, the defendant-appellee/cross-appellant Penn America Insurance Company (Penn). The complaint alleged the following two counts: (1) breach of contract; and (2) tortious breach of the implied covenant of good faith and fair dealing (the tort of bad faith). Prior to trial, both parties filed various motions in limine. Arguing that Hawai'i does not recognize the tort of bad faith in the insurance context, Penn moved to exclude all evidence, testimony, argument, or comment on the issue of tortious bad faith and/or punitive damages. Penn also moved to exclude,  [***2]  inter alia, evidence of a settlement offer. Best Place moved: (1) to exclude certain evidence based on (a) waiver, (b) estoppel, and (c) Hawai'i Rules of Evidence (HRE) 403; and (2) for default and sanctions against Penn.

The circuit court granted Penn's motion to exclude all evidence dealing with the tort of bad faith, as well as Penn's motions to exclude evidence of the settlement offer. The circuit court also granted Best Place's two pretrial motions. Best Place, with leave of court, filed an interlocutory appeal pursuant to Hawai'i Revised Statutes (HRS) § 641-1(b) (1993), 1 and Penn filed a cross-appeal.

 The primary issue in this appeal is whether Hawai'i recognizes the tort of bad faith refusal to pay a valid claim submitted by an insured under a policy of insurance. For the  [*123]   [**337]  reasons set forth below, we vacate the circuit [***3]  court order granting Penn's motion in limine regarding tortious bad faith and hold that Hawai'i recognizes the tort of bad faith in the first-party insurance context.

I. BACKGROUND 

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82 Haw. 120 *; 920 P.2d 334 **; 1996 Haw. LEXIS 59 ***

THE BEST PLACE, INC., a Hawai'i corporation, Plaintiff-Appellant/Cross-Appellee, vs. PENN AMERICA INSURANCE COMPANY, a foreign corporation, Defendant-Appellee/Cross-Appellant, and JOHN DOES 1 THROUGH 10; DOE PARTNERSHIP, CORPORATION AND/OR OTHER ENTITIES 1 through 20, Defendants.

Subsequent History:  [***1]  As Amended June 21, 1996.

Prior History: APPEAL FROM THE FIRST CIRCUIT COURT. CIV. NO. 88-1849.

CORE TERMS

insurer, bad faith, fair dealing, good faith, discovery, witnesses, trial court, punitive damages, circuit court, insurance contract, settlement offer, first-party, obligations, estoppel, cause of action, records, proof of loss, bad faith cause, sanctions, contractual, contends, insurance company, cases, insurance context, third-party, documents, provisions, damages, reasons, implied covenant of good faith

Civil Procedure, Appeals, Standards of Review, De Novo Review, Torts, Business Torts, Bad Faith Breach of Contract, General Overview, Business & Corporate Compliance, Contracts Law, Types of Contracts, Covenants, Contracts Law, Contract Interpretation, Good Faith & Fair Dealing, Insurance Law, Liability & Performance Standards, Good Faith & Fair Dealing, Bad Faith & Extracontractual Liability, Industry Practices, Unfair Business Practices, Motor Vehicle Insurance, Obligations, Defenses, Affirmative Defenses, Statute of Limitations, Governments, Legislation, Statute of Limitations, Coverage, No Fault Coverage, Procedural Matters, Discovery & Disclosure, Healthcare Law, Business Administration & Organization, Settlements, Policy Limits, Peer Review, Organizations, Civil Actions, Remedies, Cease & Desist Orders, Policy Interpretation, Reasonable Expectations, Breach, Elements, Bad Faith & Extracontractual Liability, Payments, Third Party Claimants, Transportation Law, Carrier Duties & Liabilities, Damages, Damages, Consequential Damages, Payment Delays & Denials, Claim, Contract & Practice Issues, Evidence, Burdens of Proof, Clear & Convincing Proof, Intentional Torts, Punitive Damages, Types of Damages, Punitive Damages, Pretrial Matters, Alternative Dispute Resolution, Mediation, Admissibility, Statements as Evidence, Compromise & Settlement Negotiations, Compromise & Settlement Negotiations, Mediation Evidence, Settlement Agreements, Responses, Defenses, Demurrers & Objections, Waiver & Preservation of Defenses, Estoppel & Waiver, Equitable Estoppel, Notice to Insurers, Reasonableness, Relevance, Exclusion of Relevant Evidence, Confusion, Prejudice & Waste of Time, Relevant Evidence, Discovery, Misconduct During Discovery, Motions to Compel