Joshua v. MTL, INC.

656 P.2d 736, 65 Haw. 623, 1982 Haw. LEXIS 263

• Court: Hawaii Supreme Court
• Decided: December 29, 1982
• Docket: NO. 8177
• Status: Published

Opinions

OPINION OF THE COURT BY

PADGETT, J.

This is an appeal from a judgment below granting the motion to dismiss appellant’s complaint for personal injuries arising out of an automobile accident on the ground that the statute of limitations, § 294-36(b), HRS, had expired before the filing of suit. Because we hold that that section and § 294-6(a)(2), HRS, contravene the equal protection clause of Article I, Section 5 of the Constitution of the State of Hawaii, in that those statutes result in an impermissible discrimination against appellant who was not eligible for no-fault benefits, we reverse.

Appellant was injured on August 6, 1976 when his autpmobile, which was stopped, was struck by a MTL bus. According to appellant’s affidavit, filed in opposition to a motion for summary judgment, he had an unexpired no-fault insurance card, but unbeknownst to him, his policy had been cancelled.¹ Notice of cancellation had been sent to his parents’ home but had failed to reach him. Consequently, although he was a public assistance recipient eligible for no-fault insurance upon such cancellation under the provisions of § 294-22(b)(2)(A), HRS, he had not applied for such coverage. Because of the cancellation, he was the owner of an uninsured vehicle involved in the accident. He was, therefore, expressly excluded from assigned risk coverage under § 294-23(b)(2)(A), HRS. More importantly, since his vehicle was uninsured, he was not eligible for the payment of no-fault benefits under §§ 294-3 and 294-5(c), HRS, even though the other vehicle was insured.²

Appellant’s medical expenses resulting from the accident did not total $1,500 until May of 1978, at the earliest. He did not file this suit until March 16, 1979.

Because appellant was not eligible to receive no-fault benefits, the court below ruled that he was required to bring his action within two years of the accident under § 294-36(b)(l), HRS, even though under § 294-36(b)(2), HRS, persons receiving no-fault benefits have until two years after the last payment of such benefits to commence suit.

Central to the disposition of this case is an understanding of the bar to tort actions imposed by § 294-6, HRS. Section 294-6, HRS, provides:

(a) Tort liability of the owner, operator or user of an insured motor vehicle, or the operator or user of an uninsured motor vehicle who operates or uses such vehicle without reason to believe it to be an uninsured motor vehicle, with respect to accidental harm arising from motor vehicle accidents occurring in this State, is abolished, except as to the following persons or their personal representatives, or legal guardians, and in the following circumstances:

(1) Death occurs to such person in such a motor vehicle accident; or injury occurs to such person which consists, in whole or in part, in a significant permanent loss of use of a part or function of the body; or injury occurs to such person which consists of a permanent and serious disfigurement which results in subjection of the injured person to mental or emotional suffering;

(2) Injury occurs to such person in a motor vehicle accident in which the amount paid or accrued exceeds the medical-rehabilitative limit established in section 294-10(b) for expenses provided in section 294-2(10)(A) and (B);

(3) Injury occurs to such person in such an accident and as a result of such injury the aggregate limit of no-fault benefits outlined in section 294-2(10) payable to such person are exhausted.

(b) No provision of this chapter shall be construed to exonerate, or in any manner to limit the liability of any person in the business of manufacturing, retailing, repairing, servicing, or otherwise maintaining motor vehicles, arising from a defect in a motor vehicle caused, or not corrected, by an act or omission in the manufacturing, retailing, repairing, servicing, or other maintenance of a vehicle in the course of his business.

(c) No provision of this section shall be construed to exonerate, or in any manner to limit the criminal or civil liability of any person who, in the maintenance, operation, or use of any motor vehicle:

(1) Intentionally causes injury or damage to a person or property; or

(2) Engages in criminal conduct which causes injury or damage to person or property; or

(3) Engages in conduct resulting in punitive or exemplary damages.

(d) No provision of this section shall be construed to abolish tort liability with respect to property damage arising from motor vehicle accidents.

Section 294-6(a)(2), HRS, thus requires that in order for a tort action to be brought by a person, or on a claim (which does not fall within the provisions of §§ 294-6(a)(l) or (3), HRS):

Injury occurs to such person [i.e. appellant] in a motor vehicle accident in which the amount paid or accrued exceeds the medical-rehabilitative level established.. . .”³

Appellant’s counsel assumed that his client had to incur $ 1,500 in medical bills before he could bring suit even though he was not receiving no-fault benefits, but that thereafter, § 294-6(a)(2), HRS, posed no bar to the suit.

Appellees’ counsel, at oral argument, agreed that there was a bar to the suit without $1,500 in medical expenses but also agreed that once that limit was reached, the statutory bar of that section no longer existed even though there was no no-fault coverage.⁴ Appellees’ counsel’s further position, however, was that appellant must file suit within two years of the accident. Obviously, in the case where the $1,500 is not paid or accrued until more than two years after the accident, appellees’ position creates an anomaly between the two bars to action. (Section 294-6(a)(2), HRS, as construed by counsel for both appellant and appellees and § 294-36(b)(l), HRS.)

Thus, if § 294-6(a)(2), HRS, is construed so as to allow suits by persons barred from receiving no-fault benefits if they have medical and/or rehabilitative expenses of $1,500 or more, then under § 294-36(b)(2) an injured but ineligible person could bring a suit if his or her medical expenses reached the limit on the last day of the second year, provided suit was filed that day, but not if the limit was reached one day later. Appellees’ suggested solution to the obviously illogical result of this anomaly would be for appellant to file suit within two years from the accident and then have the court somehow put the action on hold until the required level of medical expenses had been reached. Needless to say, there is no statutory basis for such a procedure and any such action by the court would directly violate § 294-6, HRS.

In the legislative history of § 294-6(a)(2), HRS, we find the following statement in House Conf. Comm. Rpt. No. 13, 1973 House Journ. 1222:

(15) The bill provides for the partial abolition of tort liability with respect to the ownership, operation, and maintenance or use of a motor vehicle except under specified circumstances. . . . (6) if he is entitled to no-fault benefits and the medical and rehabilitation benefits exceed the limit to be set by the insurance commissioner. . . .

(Emphasis added.)

The statute was amended by Act 168 of the Session Laws of 1974. The $1,500 threshold was established by that amendment. In the legislative history of that amendment, it is stated:

Section 294-6(a)(2). . . . We are confident that $1,500 should account for the vast majority of claims for no-fault benefits.

(Emphasis added.) Senate Stand. Comm. Rpt. No. 467-74, 1974 Senate Journal 940.

We think it clear that the legislature intended that the exception to the abolition of tort liability under § 294-6(a)(2), HRS, should apply (as the exception in § 294-6(a)(3) unambiguously does) only to persons eligible for no-fault benefits. We so construe that provision.

The statutory scheme is complete and rational insofar as it affects persons eligible to receive no-fault benefits. There is no constitutional impediment to its operation with respect to them.⁵

The question is whether the exception created by § 294-6(a)(2), HRS, only as applied to appellant and others who are ineligible for no-fault benefits, impermissibly infringes upon the equal protection of the law commanded by what is now Section 5 of Article I of the Constitution of the State of Hawaii.

Prior to the effective date of Act 203 of the Session Laws of 1973, The Hawaii Motor Vehicle Reparations Act, popularly called the “No-Fault Law”, a person suffering personal injuries and thus incurring medical expenses and other losses, as a result of the negligence of another in an automobile accident, could bring an action to recover those losses from the negligent party (with certain exceptions such as spouses and employers).

This court held in Fujioka v. Kam, 55 Haw. 7, 514 P.2d 568 (1973), that the legislature may change or entirely abrogate a common law rule only where, in so doing, it does not violate a constitutional provision. 55 Haw. at 10, 514 P.2d at 570. We also held in Nachtwey v. Doi, 59 Haw. 430, 583 P.2d 955 (1978) that a classification factually based on poverty is not necessarily a “suspect classification” requiring strict scrutiny when challenged on equal protection grounds. The test, however, where strict scrutiny, because of a suspect classification, is not applicable, is whether there is a rational basis for the challenged discrimination. Nachtwey, supra; State v. Bloss, 62 Haw. 147, 613 P.2d 354 (1980); Nagle v. Bd. of Education, 63 Haw. 389, 629 P.2d 109 (1981); Daoang v. Dept. of Education, 63 Haw. 501, 630 P.2d 629 (1981); Shibuya v. Clark Equipment Co., 65 Haw. 26, 647, P.2d 276 (1982).

We have said that equal protection does not mandate that all laws apply with universality to all persons; the State “cannot function without classifying its citizens for various purposes and treating some differently from others.” Hasegawa v. Maui Pineapple Co., 52 Haw. 327, 329, 475 P.2d 679, 681 (1970), citing Barbier v. Connolly, 113 U.S. 27, 31 (1885); State v. Johnston, 51 Haw. 195, 202-203, 456 P.2d 805, 810 (1969). The legislature may not, however, in exercising this right to classify, do so arbitrarily. The classification must be reasonably related to the purpose of the legislation. 52 Haw. at 329, 475 P.2d at 681.

We set out in Hasegawa a two-step procedure for determining whether the statute passed constitutional muster:

First, we must ascertain the purpose or objective that the State sought to achieve in enacting [the challenged statute]. Second, we must examine the means chosen to accomplish that purpose, to determine whether the means bears a reasonable relationship to the purpose.

52 Haw. at 330, 475 P.2d at 681.

The purpose of Act 203 was stated as follows:

Purpose. The purpose of this chapter is to create a system of reparations for injuries and loss arising from motor vehicle accidents, to compensate these damages without regard to fault, and to limit tort liability for these accidents.

However, despite that expressed purpose or objective of broadening, rather than diminishing reparations, the effect of § 294-6(a)(2), HRS, when combined with the provisions of §§ 294-3, 294-5(c), 294-22(b)(2)(A) and 294-23(b)(2)(A), HRS, is to exclude appellant, and others also ineligible for no-fault benefits, from the recovery of medical expenses either under the statute or by common law tort suit if, but only if, the negligent party’s vehicle is covered by a no-fault insurance policy. This result occurs even though the statute, under § 294-10, HRS, requires that the no-fault policy issued with respect to the vehicle operated by the negligent party also insure against tort liability to others.

We do not know from the record the reason for the cancellation of the policy of insurance on appellant’s vehicle, but common sense tells us that the class of people most likely to find themselves in appellant’s position are those whose poverty causes them to be unable to afford insurance.⁶ The unfortunate consequence of this is that the people most likely to be deprived of any hope of recovering their medical expenses either through a tort suit or insurance are also the people most likely to be unable to otherwise pay for, or even to obtain, the needed medical services for injuries negligently inflicted upon them by insured drivers.⁷ The result of the classification is hence likely to result not only in denying the class discriminated against reimbursement for their medical expenses but, as a practical matter, in actually depriving them of the needed services whenever the negligent party is driving a vehicle insured under a no-fault policy.⁸

Certainly, given the stated purpose and objective of the Act, there is no rational basis, per se, for its discriminatory effects on appellant and others like him. It is argued that the rational basis can be found in a policy, evident in the statute, of penalizing those who drive uninsured vehicles. But that policy is not included in the expressed purpose of the statute. Moreover, the legislature has expressly attempted to effectuate that policy by the stringent criminal penalty laid down in § 294-39, HRS, for operating or permitting to be operated an unlicensed vehicle, as well as by denying such persons any no-fault benefits. Given those sanctions, it seems unlikely, on any rational basis, that the discriminatory deprivation of the chance of any tort recovery by appellant, and others like him, of medical expenses arising from the negligent conduct of insured drivers, while allowing no-fault beneficiaries not only their no-fault benefits but additionally a right of suit after the threshold has been reached, can give any additional aid to the policy of requiring motor vehicles to be insured by discouraging the operation of uninsured vehicles.

The discriminatory classification of appellant and others tike him effected by § 294-6(a)(2), HRS, therefore, is without rational basis. It deprives them of the equal protection of the laws to which our state constitution entitles them.⁹

We turn then to a consideration of the statute under which the court below held this action barred, § 294-36(b), HRS. It reads: Statute of limitations. ...

(b) No suit arising out of a motor vehicle accident shall be brought in tort more than:

(1) Two years after the date of the motor vehicle accident upon which the claim is based; or

(2) Two years after the date of the last payment of no-fault or optional additional benefits; whichever is the later.

Clearly this section, and not § 657-7, HRS, is the applicable statute of limitations with respect to automobile accidents involving an insured vehicle or vehicles.

A statute of limitations which denies equal protection of the laws is unconstitutional and will not be upheld. Fujioka v. Kam, supra; Shibuya v. Clark Equipment Co., supra.

Hayden F. Burgess for appellant. David Waters (Goodsill Anderson £s? Quinn of counsel) for appellees.

The discriminatory feature of § 294-36(b), HRS, is that a person involved in the same accident as appellant and suffering the very same injuries but who was receiving or had received no-fault benefits would not have had his action dismissed as untimely even though he filed suit on the same day as appellant did here. Yet the construction, by the court below, that the language of the section mandated dismissal of appellant’s suit, is clearly correct, if the statute is constitutional.

Given the stated purpose of the act to broaden reparations for injuries arising from motor vehicle accidents while limiting tort liability, there is no logical basis for extending the statute with respect to claims against negligent operators of insured vehicles so that persons receiving no-fault benefits have until two years from the last payment of such benefits to file suit while requiring persons, such as appellant, not eligible for such benefits, who continue to suffer exactly the same losses of medical expenses, to sue within two years of the accident. The discrimination against persons suffering medical expenses, and the like, who are not being reimbursed by no-fault payments in favor of those who are suffering the same losses but receiving such payments denies the former equal protection of the laws in violation of our constitution. We see no constitutional impediment to the continued efficacy and operation of § 294-36(b) with respect to persons who are eligible for no-fault benefits.

Because §§ 294-6(a)(2) and 294-36(b), HRS, deprived appellant of equal protection of the laws, the order dismissing the suit was erroneous and appellant should have been permitted to proceed with his action. Reversed and remanded for further proceedings.

1 Apparently both parties concede that the last paragraph of § 294-9(c), HRS, providing for the method of cancellation, had been complied with.

2 This exclusion is not now disputed by the parties. Apparently, it was not so clear to appellant’s counsel and possibly the appellees’ insurer earlier since appellant’s counsel’s affidavit filed in opposition to the motion for summary judgment states:

6. On May 18, 1978, in a telephone conference between Affiant and co-Defendant MTL, INC.’s agent, J. TERRY MULLEN (hereinafter AGENT), co-Defendant’s AGENT stated that the insurance company would pay medical expenses if they had already exceeded the $1,500 threshold and if they were all related to the accident. Co-Defendant’s AGENT further proposed that he be forwarded authorization to inquire into medical conditions of Plaintiff to be able to settle this claim. On My [sic] 19,1978, Affiant wrote to co-Defendant’s AGENT confirming the telephone conversation (See Exhibit 1 attached). No payments were made as previously agreed, therefore, on June 27, 1978, Affiant sent a second letter asking for payment as agreed to previously. (See Exhibit 2 attached)

7. On July 11, 1978, co-Defendant’s AGENT responded, denying the commitment to honor the medical bills. (See Exhibit 3 attached)

8. Integrated into the foregoing letters are [sic] evidence of both Affiant and co-Defendant’s AGENT attempting to achieve a settlement of Plaintiffs bodily injury claim. Indeed, co-Defendanfs AGENT was actively obtaining medical reports from physicians and institutions which had treated Plaintiff for his injuries. On December 21,1979 [sic], co-Defendanfs AGENT continued to imply an honest attempt at settlement of the claim. (See Exhibit 4 attached)

9. On March 9, 1979, co-Defendanfs AGENT raised the statute of limitation^] argument and said they would be making no payments whatsoever on Plaintiffs claim. (See Exhibit 5 attached [sic]) Affiant immediately responded by letter (See Exhibit 6 attached) and filed the present action.

10. Had co-Defendanfs AGENT denied the claim earlier or had been unwilling to negotiate for a settlement, the Complaint would have been filed immediately.

(Rec. at 76-77.)

3 At the time of the accident, the medical rehabilitative level was fixed under § 294-10(b), HRS, at $1,500. It has since been raised to $3,600.

4 We are aware that in No. 8071, McAulton v. Goldstrin, where suit was filed within the two-year period, the plaintiff was claiming to be still receiving therapy at the time of the trial. The same firm which represents appellees here is contending in that case that because the limit had not been reached by the time of trial, the uninsured plaintiff is absolutely barred from any recovery for personal injuries.

5 Since we have not held § 294-6(a), HRS, invalid except to the extent that subsection (2) denies persons ineligible for no-fault benefits equal protection of the laws, our decision will not affect the continued validity of other sections of the statute under § 294-41(b), HRS.

6 This is so whether they qualify for welfare and are not insured due to circumstances such as those which brought about appellant’s unhappy plight or, though poor, simply do not meet the qualifications for public assistance.

7 The high “threshold” (formerly $1,500, now $3,600) of medical and/or rehabilitative expense makes this unfortunate result even more likely.

8 Peculiarly, if the negligent party is uninsured, the statute is no bar to suit and an injured member of the deprived class has some hope of recovery of such expenses.

9 Chapter 386, HRS, the Workers’ Compensation Law, is often cited by analogy to Chapter 294. The workers’ compensation law abolished tort liability as between an employer and an employee injured in the course and scope of his employment in favor of a system of reparations to the employee without regard to fault. The exception to employee eligibility for such reparations appearing in § 386-3, HRS, is drunkenness. Clearly there is a logical connection between drunkenness on the job and injuries to employees, and, therefore, a reasonable basis for the separate classification of drunken employees, since obviously a drunken employee is more likely to be injured on the job. An uninsured driver, however, is no more likely to be injured in an automobile accident than one who is insured.