Miller v. Hartford Life Insurance Co.

*** FOR PUBLICATION IN WEST’S HAWAI'I REPORTS AND PACIFIC REPORTER *** IN THE SUPREME COURT OF THE STATE OF HAWAI'I Electronically Filed ---o0o--­ Supreme Court SCCQ-11-0000329 ELIZABETH MILLER and MARTIN KAHAE, as Co-Personal 28-DEC-2011 Representatives of the Estate of Penelope (Penny) 09:32 AM Spiller, Deceased, and as Party-Plaintiffs for Penelope (Penny) Spiller, Plaintiffs, vs. HARTFORD LIFE INSURANCE COMPANY, a Connecticut Domestic For-Profit Corporation and MEDAMERICA INSURANCE COMPANY, a Pennsylvania Domestic For-Profit Corporation, Defendants. NO. SCCQ-11-0000329 CERTIFIED QUESTION FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF HAWAI'I (CIV. NO. 09-00381) DECEMBER 28, 2011 RECKTENWALD, C.J., NAKAYAMA, ACOBA, DUFFY, AND MCKENNA, JJ. OPINION OF THE COURT BY DUFFY, J. The United States District Court for the District of Hawai'i (District Court) certified the following questions of law to this court: 1. If an insurer commits bad faith, must an insured prove she suffered substantial economic or physical loss caused by the bad faith to recover emotional distress damages caused by the bad faith? 2. If an insured must suffer substantial economic or physical loss to qualify for emotional distress damages caused by insurer bad faith, what does Hawai'i law require as to how that loss must be proven? 3. If a plaintiff must prove substantial economic or physical loss, must any emotional distress damages bear a reasonable relationship to that loss? *** FOR PUBLICATION IN WEST’S HAWAI'I REPORTS AND PACIFIC REPORTER *** Upon review of the Certified Questions, this court determined that “the First Question -- and only that question -- is amenable to answer by this court pursuant to Hawai'i Rules of Appellate Procedure (HRAP) Rule 13, which requires that the question be ‘determinative of the cause.’” Order on Certified Questions at 1. We now modify the question presented to (1) limit its applicability to first-party insurance contracts, and (2) delete “substantial” from “substantial economic or physical loss.” The question now reads as follows: If a first-party insurer commits bad faith, must an insured prove the insured suffered economic or physical loss caused by the bad faith in order to recover emotional distress damages caused by the bad faith? Based on the analysis below, we hold that if a first- party insurer commits bad faith, an insured need not prove the insured suffered economic or physical loss caused by the bad faith in order to recover emotional distress damages caused by the bad faith. I. BACKGROUND A. Factual Background This lawsuit arises from an insurance contract between Plaintiff Penelope (Penny) Spiller (“Ms. Spiller”)1 and 1 Ms. Spiller was the original Plaintiff in this action, filed July 9, 2009. She lost her battle with cancer on September 10, 2010. On December 21, 2010, Elizabeth Miller and Martin Kahae were substituted as the “Co-Personal Representatives of the Estate of Penelope (Penny) Spiller, Deceased, and as Party-Plaintiffs for Penelope (Penny) Spiller.” Although two continue... 2 *** FOR PUBLICATION IN WEST’S HAWAI'I REPORTS AND PACIFIC REPORTER *** Defendants Hartford Life Insurance Company (“Hartford”) and MedAmerica Insurance Company (“MedAmerica”). 1. Ms. Spiller’s Long-Term Care Policy and Her Cancer Diagnosis In 2001, Ms. Spiller, a State of Hawai'i employee on the island of Moloka