Olokele Sugar Co. v. McCabe, Hamilton & Renny Co.

487 P.2d 769, 53 Haw. 69, 1971 Haw. LEXIS 78

• Court: Hawaii Supreme Court
• Decided: August 10, 1971
• Docket: 5016
• Status: Published

Opinions

OPINION OF THE COURT BY

KOBAYASHI, J.

This appeal arises from a suit filed by Olokele Sugar Company, Limited (hereinafter appellant), and Kauai Commercial Co., Ltd. (hereinafter Commercial Co.), against McCabe, Hamilton & Renny Co., Ltd. (hereinafter McCabe), to recover property damages and against First Insurance Company of Hawaii, Ltd. (hereinafter appellee), to recover property damages and for attorney’s fees, interest and punitive damages based upon its refusal to pay the liquidated damages sustained by appellant.

The facts are as follows:

At Nawiliwili Pier, Kauai, Hawaii, McCabe was engaged as contract stevedores in off-loading a Caterpillar tractor belonging to appellant from a vessel. The tractor was to be placed on a semi-lowbed trailer attached to a truck, both owned by Commercial Co. As the tractor was being discharged from the vessel it came out of the slings operated by McCabe and fell on the trailer and truck, damaging itself and the trailer and truck.

After incurring the costs of repairing the tractor, trailer and truck, the appellant and Commercial Co. demanded of McCabe and the appellee (insurer of McCabe) the costs of repair.

Appellant brought suit directly against appellee without first obtaining judgment against McCabe.

Evidence was not adduced showing that the liability insurance policy executed by appellee insuring McCabe authorized appellant to sue appellee directly prior to judgment against McCabe. Nor is a statute available in this jurisdiction empowering appellant to sue appellee as was done in this case.

A motion for summary judgment against McCabe, for the cost of repair, was granted by the trial court. However, on a trial of the claim against the appellee, for cost of attorney’s fees, interest and punitive damage, the trial court granted appellee’s motion to dismiss, after appellant had made its opening statement, for appellant’s failure to state a claim against appellee upon which relief can be granted.

The sole issue before this court is whether, without statutory authorization or specific liability set out in the insurance policy executed by appellee, the. appellee, as an insurer, can be made a party defendant and he held directly liable by a third party for damages suffered and for costs, including attorney’s fees and interest, incurred by the third party in enforcing its claim.

The question presented is an original one for the determination of this court.¹

I. APPELLANT’S APPROACH TO THE ISSUE

The appellant states that the issue is a narrower one. It claims that for appellee’s wilful refusal to pay appellant’s liquidated claim, a claim resulting from McCabe’s indisputable negligence, the appellee must be held directly liable to appellant for attorney’s fees and interest incurred by appellant in enforcing the claim and further, that appellee be held liable for punitive damages.

Appellant argues that it has stated a claim against appellee upon which relief can be granted on either one of two theories: negligence or strict liability.²

II. THE GENERAL LAW

It is generally held that, in the absence of a contractual or statutory provision authorizing a direct action against or the joinder of a liability insurer, an injured person, for the lack of privity between himself and the insurer, has no right of action at law against the insurer and cannot join the insured and the liability insurer as parties, defendant. 8 Appleman Insurance Law And Practice, § 4831, at 212 (1962); 20 Appleman Insurance Law and Practice, § 11416, at 261 (1963); 12 Couch On Insurance 2d, § 45:763, at 663 (1964); Globe Indemnity Company v. Teixeira, supra, at 448; Keeton, Liability Insurance And Responsibility for Settlement, 67 Harv. L. Rev. 1136, at 1175 (1954).

In determining the insured’s liability, joinder of or a direct action against the insurer is generally prohibited unless statutorily or contractually permitted. The reasons ascribed for the rule are varied although a deep-seated reason is simply that the courts feel that it would not be sound public policy to permit the insurer to be joined as a defendant, in deference to what is believed to be a jury’s tendency to find negligence or to augment the damages, if it thinks that an affluent institution such as an insurance company will bear the loss. 8 Appleman Insurance Law And Practice, § 4861, at 294 (1962).

Gary N. Hagerman (Jenks, Kidwell, Goodsill & Anderson of counsel) for plaintiff-appellant.

The appellant acknowledges that cases are not available which hold that an injured third party has a right, without first obtaining an excess judgment against the insured, to maintain a direct action against the insurer for damages based upon the insurer’s failure to pay or settle the claim of the injured third party. However, in its ably presented arguments the appellant, nevertheless, in essence seeks to persuade this court to create a new right of action against the appellee.

III. CONCLUSION

We have carefully researched and weighed the arguments presented by the appellant and have concluded that whether the direct action against the insurer be as a contract Action, a tort action, or otherwise, the better policy in this instance dictates a legislative resolve of appellant’s plea to this court. We are of the opinion that the instant case is not an appropriate one for judicial pioneering.³

In regard to attorney’s fees, it is well established in this jurisdiction that, without specific statutory authorization or agreement to pay, the general rule is that such fees are not recoverable as damages. Jones v. Dieker, 39 Haw. 448, at 455 (1952); Levy v. Kimball, 51 Haw. 540, at 546, 465 P.2d 580, at 584 (1970).

The trial court’s judgment is therefore affirmed.

Hale H. Hitchcock (Cades, Schutte, Fleming & Wright of counsel) for defendant-appellee.

1 See, however, Globe Indemnity Company v. Teixeira, 230 F. Supp. 444 (D.C. Haw. 1963) aff'd, 349 F.2d 502 (1965).

2 Cf. Matthias v. United Pacific Insurance Company, 67 Cal. Rptr. 511 (1968).

3 As an analogy of interest is the following article: “Liabilities Arising from Insurers’ Refusal to Settle Public Liability and Uninsured Motorist Claims” by Robert D. Barbagelata, U. San Francisco L. Rev. 33 (1968).