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Electronically Filed Supreme Court SCRQ-XX-XXXXXXX 05-FEB-2024 08:17 AM Dkt. 46 OP
IN THE SUPREME COURT OF THE STATE OF HAWAIʻI
---o0o---
HYUN JU PARK, Plaintiff,
and
DONGBU INSURANCE CO., LTD., Plaintiff-Intervenor-Appellant,
vs.
CITY AND COUNTY OF HONOLULU, Defendant-Appellee,
STERLING NAKI and JOSHUA OMOSO, Defendants.
SCRQ-XX-XXXXXXX
RESERVED QUESTION FROM THE CIRCUIT COURT OF THE FIRST CIRCUIT, STATE OF HAWAIʻI (CASE NO. 1CC181001374)
FEBRUARY 5, 2024
RECKTENWALD, C.J., McKENNA, EDDINS, JJ., CIRCUIT JUDGE KIM AND CIRCUIT JUDGE WATANABE, ASSIGNED BY REASON OF VACANCIES
OPINION OF THE COURT BY EDDINS, J. *** FOR PUBLICATION IN WEST’S HAWAI‘I REPORTS AND PACIFIC REPORTER ***
I.
This court accepted the Circuit Court of the First
Circuit’s reserved question:
Does a subrogee insurance company, which timely intervened pursuant to HRS § 386-8(b), have an independent right to continue to pursue claims and/or legal theories against a tortfeasor that were not asserted by the subrogor employee, after summary judgment has been granted against the subrogor employee, on the subrogor employee’s claims?
We answer Yes.
There are three main reasons. First, an affirmative answer
protects subrogation, which in turn protects indemnity. Second,
a Yes answer aligns with Hawaiʻi’s workers’ compensation
subrogation law, Hawaiʻi Revised Statutes (HRS) § 386-8 (2015 &
Supp. 2016). Third, a No answer undermines employers’ and
insurers’ intervention rights.
We also address a claim preclusion argument. It does not
alter our answer.
II.
The subrogee insurance company is Plaintiff-Intervenor
Dongbu Insurance Co., Ltd. (Dongbu). The subrogor employee is
Plaintiff Hyun Ju Park (Park). The alleged third-party
tortfeasor is the City and County of Honolulu (the City).
Park sued the City. Dongbu intervened. The City moved to
dismiss all of Park’s claims and some Dongbu claims. The
circuit court granted the motions. Two Dongbu claims remained.
The circuit court’s reserved question asks whether intervenor
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Dongbu may pursue its non-dismissed claims as a subrogee against
the City.
We detail the factual backdrop and procedural history.
Park worked as a bartender at Kings Sports Bar & Grill in
Honolulu. In April 2015, three off-duty Honolulu Police
Department (HPD) officers went to that bar. One officer had
several drinks and unholstered his HPD-authorized firearm. He
tried to load it. But he couldn’t – the gun was already loaded.
The other HPD officers watched but did nothing. While Park
worked, the officer shot her. She nearly died.
Park sued the City and County of Honolulu and the officers
in the United States District Court for the District of Hawaiʻi.
Under 42 United States Code § 1983, Park alleged the City
violated her Fourth and Fourteenth Amendment rights. She also
asserted state tort law claims.
Dongbu was Kings Sports Bar & Grill’s workers’ compensation
insurance carrier. Dongbu successfully moved to intervene in
the federal suit. Later, the City moved to dismiss for failure
to state a claim. In August 2018, the federal district court
agreed. It dismissed Park’s federal claims with prejudice.
Park v. City & Cnty. of Honolulu, No. CV 17-00142 ACK-KSC, 2018
WL 3764084, at *16 (D. Haw. Aug. 8, 2018). Park failed to
allege “intentional governmental action meant to interfere” with
her bodily integrity or that the officers “acted under color of
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state law.” Id. at *9, *10. The court declined to rule on the
state law claims. Id. at *16. Park appealed to the Ninth
Circuit Court of Appeals.
The next month, September 2018, Park filed a complaint in
the Circuit Court of the First Circuit. She alleged two claims,
negligence and negligent infliction of emotional distress. Park
said the City was negligent in two ways: (1) An HPD policy in
her view directed officers to possess guns while drinking
alcohol, and (2) HPD lacked a whistleblowing policy requiring
officers to report misconduct. The circuit court stayed the
proceedings until the court of appeals ruled.
The Ninth Circuit affirmed the district court’s dismissal
of Park’s claims in March 2020. Park v. City & Cnty. of
Honolulu, 952 F.3d 1136 (9th Cir. 2020). Park failed to
plausibly argue that through its policies, “the County’s
inaction reflected deliberate indifference to her Fourteenth
Amendment right to bodily integrity.” Id. at 1141-42. The
court disagreed with Park that HPD policy could reasonably be
interpreted as requiring police officers to carry guns while
intoxicated. Quite the opposite. “[T]he policy’s explicit
purpose was to prohibit officers from carrying firearms while in
an impaired condition.” Id. at 1142. The Ninth Circuit did not
touch Park’s state law claims.
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In March 2021, per HRS § 386-8, Dongbu intervened in the
circuit court proceeding. Dongbu alleged four counts against
the City: (1) negligence, (2) respondeat superior, (3) negligent
supervision, and (4) subrogation. Dongbu repeated Park’s
theories that the City was negligent for its possession-of-
firearms-while-intoxicated policy and not having a mandatory
misconduct reporting policy.
On its own, Dongbu alleged more. First, the City
negligently trained the shooting officer on the safe handling of
firearms. Second, the City negligently failed to supervise the
officer and limit his access to weapons.
Because it paid $1.1 million in workers’ compensation for
Park, Dongbu also claimed subrogation. Dongbu maintained that
it has the right to recover workers’ compensation payments it
made for Park.
In July 2021, the circuit court granted the City’s motion
for summary judgment against Park. It also granted partial
dismissal or partial summary judgment against Dongbu. The court
dismissed Dongbu’s first two claims: negligence and respondeat
superior. But not Dongbu’s other claims, negligent supervision
and negligent training.
In August 2021, the City answered Dongbu’s complaint. The
next month it moved for summary judgment. The City argued that
Dongbu’s negligent supervision claim failed to show the City had
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notice that the officer needed supervision. Also, the City
briefly mentioned that because Park was no longer in the case
and Dongbu’s claims rested on the validity of her claims,
Dongbu’s subrogation claim failed.
The City withdrew its motion in March 2022. About a week
later, the City again moved for summary judgment. The City
revamped its argument. It relied on its subrogation theory.
That is, Dongbu’s claims failed because the court dismissed Park
from the case on the merits.
In August 2022, the court denied the City’s MSJ against
Dongbu.
In September 2022, the City moved per Hawaiʻi Rules of
Appellate Procedure Rule 15(a) to reserve a question to this
court. It also moved to stay the proceedings. Dongbu opposed
the City’s requests. Park filed no response. The circuit court
granted the motion, but denied the stay.
III.
Does a subrogee insurance company [Dongbu], which timely intervened pursuant to HRS § 386-8(b), have an independent right to continue to pursue claims and/or legal theories against a tortfeasor that were not asserted by the subrogor employee [Park], after summary judgment has been granted against [Park], on [Park]’s claims?
Yes. So Dongbu may continue to pursue its non-dismissed
claims.
With subrogation, a subrogee (Dongbu) substitutes for a
subrogor (Park), the original holder of a right. “[S]ubrogation
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involves ‘stepping into’ the shoes of another, when an insurer
brings an action against a tortfeasor based upon its subrogation
rights, the insurer’s rights flow from the insured’s rights.”
State Farm Fire & Cas. Co. v. Pac. Rent-All, Inc., 90 Hawaiʻi
315, 329, 978 P.2d 753, 767 (1999).
The parties disagree on what stepping into another’s shoes
means.
The City believes stepping into Park’s shoes means that the
dismissal of her claims dooms Dongbu’s case. In its view,
Dongbu’s rights flow solely from Park’s lawsuit. Because the
court dismissed Park’s suit, Dongbu cannot pursue its claims as
a subrogee. The City urges a No answer.
We answer Yes. An employer or insurer, standing in an
employee’s shoes, may continue litigating its independent claim
if the employee could have raised that claim.
First, answering Yes better protects subrogation, and by
extension indemnity. Dongbu’s subrogation interest is not only
valid, it’s vital to Hawaiʻi’s workers’ compensation law. “A
substantial part of the legislative purpose and intent of a
[workers’ compensation] statute is to provide for subrogation
and prevent double recovery.” Moranz v. Harbor Mall, LLC, 150
Hawaiʻi 387, 400, 502 P.3d 488, 501 (2022) (citation omitted).
Second, a Yes answer aligns with HRS § 386-8. Under that
law, a subrogee insurance company like Dongbu has the ability to
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intervene to protect its lien interest against the tortfeasor.
See HRS § 386-8(b) (“The employer, at any time before trial on
the facts, may join as party plaintiff.”).
Third, answering No would impair an employer or insurer’s
ability to intervene. Its claims could only be as good as the
employee’s. If an employee failed to survive a motion to
dismiss, a court would have to dismiss an employer’s complaint –
even a strong one. This approach may dissuade employers from
intervening in employees’ lawsuits. That outcome weakens HRS
§ 386-8’s right to intervene and seek reimbursement. And it may
allow wrongdoers to elude liability.
A.
Subrogation aids indemnity. State Farm, 90 Hawaiʻi at 328,
978 P.2d at 766. It allows insurers to recover what they pay
when third parties injure their insureds. Id. It prevents an
insured from getting two recoveries: one from the insurer, one
from the tortfeasor. Moranz, 150 Hawaiʻi at 400, 502 P.3d at
501.
The insurer’s subrogation right balances the insured’s
recovery right. The insurer, “who, in a fault sense, is
neutral, comes out even;” the tortfeasor “pays exactly the
damages it would ordinarily pay;” and the employee “gets a
fuller reimbursement for actual damages sustained than is
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possible under the compensation system alone.” Id. (cleaned
up).
Subrogation is an insurer’s remedy for torts against its
insureds. It is “both a legal right and a legal action.” State
Farm, 90 Hawaiʻi at 328, 978 P.2d at 766 (citation omitted). It
is not automatic. See id. at 333, 978 P.2d at 771. But once
invoked, the subrogee “is put in all respects in the place of
the party to whose rights [it] is subrogated.” Id. at 331, 978
P.2d at 769. Here, Dongbu steps into Park’s shoes. Its rights
flow from her rights. Id. at 329, 978 P.2d at 767.
An intervening insurer slides into comfortable shoes, not
shoddy shoes. It’s not forced to wear a dismissed plaintiff’s
shoes. It may walk within the limits of the employee’s
available rights. And it does so at the outset of the
litigation. A workers’ compensation insurer may raise and
litigate any claim an employee was entitled to raise at the
outset.
Dongbu seeks redress for Park’s injury. Payback for what
it paid out. Dongbu may do more than piggyback on Park’s
claims. It may enforce all rights available to Park.
The City insists that State Farm supports its position. An
insurer may “enforce only such rights as the insured . . . has
against the party whose wrong caused the loss.” State Farm, 90
Hawaiʻi at 329, 978 P.2d at 767 (cleaned up). Those rights, this
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court said, “flow from the insured’s rights” and “are
derivative” because they “rest upon the viability of the
insured’s claim against the tortfeasor.” Id. The City believes
this language means Dongbu’s claims are always tied to Park’s.
Once her claims are dismissed, Dongbu’s are too. The City is
wrong.
State Farm merely stressed that an insurer may only bring
claims the insured could bring. Here, Dongbu’s claims “rest
upon the viability” of Park’s. If Park cannot advance any
winning claims against the City, then neither can Dongbu.
Dongbu’s pursuit of its claims does not harm Park. As a
subrogee, an insurer is entitled to only what will make it
“come[] out even.” Moranz, 150 Hawaiʻi at 400, 502 P.3d at 501.
If Dongbu prevails against the City, it pays Park “any excess”
that it recovers. See HRS § 386-8(e), § 386-8(g) (setting
priority order for distribution of damages).
No matter how the City’s liability gets litigated, the
distribution follows HRS § 386-8’s formula. Park receives any
excess. It doesn’t matter if she wins, Dongbu wins, or they
both win together. See HRS § 386-8(e)-(g). And even if Park
wins without Dongbu’s intervention, Dongbu is still entitled to
recover workers’ compensation payments from Park’s “judgment or
settlement proceeds.” See HRS § 386-8(f).
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B.
HRS § 386-8 also supports a Yes answer. The statute offers
the employer or workers’ compensation insurer the ability to
independently protect its subrogation interest. (HRS § 386-8
uses “employer” to refer to the employer or the employer’s
workers’ compensation insurance carrier, and we follow that
practice).
“HRS § 386-8 provides the exclusive remedy for an employer
seeking reimbursement for workers’ compensation benefits from a
third-party tortfeasor.” Hawaiian Dredging Constr. Co., Inc. v.
Fujikawa Assocs., Inc., 142 Hawaiʻi 429, 439, 420 P.3d 360, 370
(2018). Because Dongbu paid for Park’s injuries through
workers’ compensation benefits, HRS § 386-8 authorizes it to
seek reimbursement.
HRS § 386-8 empowers an employer to sue a third-party
tortfeasor. Once an employee sues, the employer may “join as
[a] party plaintiff.” HRS § 386-8(b). Once joined, HRS § 386-8
does not bind the employer to the confines of the employee’s
complaint. The employer has the same rights as a party. Like
any plaintiff, it may advance claims. Here, Dongbu joined “as
[a] party plaintiff” under HRS § 386-8(b) to protect its
interests in subrogation and reimbursement. It may bring its
own claims.
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HRS § 386-8 also allows an employer to sue without the
employee. If Park had not filed suit “within nine months after
the date of the personal injury,” Dongbu could have sued on its
own. HRS § 386-8(c). Park, as the employee, could join that
suit, file her own action, or sit out the litigation. Id. If
the employee sits out, the employer may go it alone. HRS § 386-
8(e) anticipates actions “prosecuted by the employer alone” and
details how judgments or settlements should be divided between
employer and employee.
Thus, we do not think the legislature intended for an
employer to passively rely on an employee to propel litigation.
The legislature gave employers the right to bring their own
claims. HRS § 386-8(e) says nothing about ending an employer’s
case when an employee’s case ends.
Next, HRS § 386-8 protects employers’ subrogation interest
in settlement negotiations. HRS § 386-8(d) reads: “No release
or settlement of any claim or action under this section is valid
without the written consent of both employer and employee.” It
“ensures that both the employee and employer have an opportunity
to protect their interests.” Hawaiian Dredging, 142 Hawaiʻi at
435, 420 P.3d at 366.
We also believe the legislature did not intend to tie an
employer to an injured employee. Rather, it gave the employer
its own opportunity to shape the outcome. See Shimabuku v.
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Montgomery Elevator Co., 79 Hawaiʻi 352, 358, 903 P.2d 48, 53
(1995) (“[B]ecause the employer’s right to reimbursement is
often dependent on the injured employee’s actions, the
legislature imposed a provision requiring the written consent of
both employer and employee before any release or settlement is
valid”).
Last, HRS § 386-8 understands that employers and employees
can pursue separate legal strategies. They may bring either “a
single action or . . . consolidated actions,” and be
“represented by the same agreed attorney or by separate
attorneys.” HRS § 386-8(g). An employer is not just a
bystander.
Nowhere does HRS § 386-8 indicate that an employer’s claims
must match an employee’s claims, or must be dismissed if an
employee is dismissed. An intervening employer, as “party
plaintiff,” may pursue its own claims.
C.
The policies behind intervention inform our Yes answer. A
No answer undermines intervention, weakens recovery, and
disincentivizes insurers from intervening.
Dismissing Dongbu subverts intervention’s aims. One HRS
§ 386-8 purpose is to facilitate a complete resolution of the
dispute. First Ins. Co. of Hawaii, Ltd. v. A&B Props., Inc.,
126 Hawaiʻi 406, 418, 271 P.3d 1165, 1177 (2012). An insurer’s
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intervention right is necessary to resolve the issue and provide
for subrogation.
Intervention is governed by Hawaiʻi Rules of Civil Procedure
Rule 24. Rule 24(a)(2) allows intervention when an applicant’s
interest is at risk and is not “adequately represented by
existing parties.” Intervention sometimes comes when an insurer
mistrusts a plaintiff’s skill to litigate claims. The insurer
doesn’t want to link its subrogation rights to a rinky-dink
legal strategy. Something like Dongbu bemoans here: potentially
viable claims omitted from the complaint.
Hawaiʻi law allows employers to pursue their subrogation
rights only through HRS § 386-8. Hawaiian Dredging, 142 Hawaiʻi
at 435, 420 P.3d at 366. Once the employee sues, as Park did,
the employer’s only option is to intervene in the employee’s
suit. See HRS § 386-8(b)-(c). That’s why Dongbu’s claims
survive: hitching its fate to Park barricades its only path to
relief. A workers’ compensation insurer has another way –
around the plaintiff – to pursue its subrogation right.
Answering No as the City wants disincentivizes employers
from joining cases where there is risk of dismissal. This may
lead to lower recovery. If an employer thinks that a
plaintiff’s case will get dismissed, it has little reason to
spend money and prepare its own case. Employers lack motivation
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to strengthen a weak case by intervening. The right to
intervene erodes.
Disincentivizing intervention harms injured employees
unable to retain solid legal representation. An employer’s
workers’ compensation lien cuts into the damages available to
pay a plaintiff’s attorney. See HRS § 386-8(f). Because an
employer’s complaint would only be as strong as the under-
represented employee, an employer – usually better funded – is
incentivized not to waste legal expenses by joining weaker
cases.
In contrast, allowing an insurer to pursue its claims
benefits both insurer and insured. See Moranz, 150 Hawaiʻi at
398, 502 P.3d at 499 (the legislature “recognizes that a third-
party action can result in recovery from a third person which
benefits both the employee and the insurer, even when the action
is prosecuted by the insurer or employee alone”) (cleaned up).
HRS § 386-8(e) entitles Park to “any excess” compensation Dongbu
receives, while Dongbu can claim reimbursement from Park’s
recovery. See HRS § 386-8(f). Dongbu’s intervention right
makes it more likely that third-party tortfeasors pay what
“[they] would ordinarily pay.” Moranz, 150 Hawaiʻi at 400, 502
P.3d at 501 (cleaned up).
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D.
Last, the City argues that claim preclusion applies. We
disagree.
The court dismissed Park’s claims and two of Dongbu’s four
claims. Dongbu’s negligent supervision and negligent training
claims remain. The circuit court never decided these claims
because the City withdrew its motion to dismiss. The City
refocused its revamped motion on its claim preclusion theory.
Claim preclusion (res judicata) ensures that parties cannot
relitigate claims that were decided or could’ve been decided in
a final judgment. Bremer v. Weeks, 104 Hawaiʻi 43, 53–54, 85
P.3d 150, 160–61 (2004). Dongbu’s remaining claims though, are
new. They were not litigated to final judgment. The summary
judgment against Park does not glue Dongbu.
The City gives no adequate reason why Park’s dismissal
should apply to Dongbu’s additional claims. Res judicata
applies “where matters have already been tried and decided on
the merits.” Kauhane v. Acutron Co., Inc., 71 Haw. 458, 463,
795 P.2d 276, 278–79 (1990). Here, Dongbu’s negligent training
and supervision claims are not yet decided. Though res judicata
forbids relitigation, it promotes access to justice. It
“permits every litigant to have an opportunity to try [their]
case on the merits.” Id. at 463, 795 P.2d at 279 (cleaned up).
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That’s all Dongbu wants – to litigate the negligent training and
supervision claim for the first time.
The City had a chance to make Dongbu’s remaining claims go
away. It filed a motion to dismiss those claims. But it
withdrew that motion. Then, it filed a new motion, seemingly
trying to leverage an offbeat legal theory to backdoor a
dismissal.
The City acknowledged its unusual tactic. Pitching the
City’s “claim” argument to the circuit court, counsel conceded,
“I understand, Your Honor, that in a normal case, we talk about
claims a little differently.” Ordinarily parties can “move for
partial summary judgment or I’d move for partial judgment on the
pleadings and [the judge] would go claim by claim.” Counsel
voiced the sound approach. Our justice system prefers
adjudication on the merits. JK v. DK, 153 Hawaiʻi 268, 278, 533
P.3d 1215, 1225 (2023). In a case like this, we feel parties
should seek summary judgment for each cause of action, applying
the usual summary judgment standard.
IV.
An intervening workers’ compensation subrogee-insurer may
make any claim that a subrogor-plaintiff may make at the outset
of the case. If the plaintiff’s claims are dismissed, the
insurer’s claims remain.
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We answer Yes to the reserved question.
Saori P. Takahashi /s/ Mark E. Recktenwald (Michele-Lynn E. Luke and /s/ Sabrina S. McKenna Bradford Chun on the briefs) for appellant /s/ Todd W. Eddins /s/ Kathleen N.A. Watanabe Robert M. Kohn (Richard D. Lewallen and /s/ Robert D.S. Kim Kalikolehuaopanaʻewa J. Warrington on the briefs) for appellee