Civil Justice Reform
Abolishes joint and several liability except in cases of death or devastating bodily injury. Limits recovery for noneconomic damages in tort actions to $350,000. Allows evidence of collateral source payments to be admitted at trial. Limits punitive damages.
TWENTY-FIRST LEGISLATURE, 2001
STATE OF HAWAII
A BILL FOR AN ACT
RELATING TO CIVIL JUSTICE REFORM.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:
SECTION 1. The legislature finds that there is a need to provide meaningful reform of the tort and civil justice system in Hawaii. The present system is not fair because it does not allow businesses or individuals to predict the consequences of their actions, since clear and reasonable standards for assessing liability and damages have not been established and uniformly applied. Fairness and equity, as well as the stability of the State's economy, require broad reform of Hawaii's civil justice system. Specifically, this Act does each of the following:
(1) Part I of this Act repeals all of the exceptions to the abolition of joint and several liability except for the recovery of economic and noneconomic damages against tortfeasors in actions involving death or devastating bodily injury;
(2) Part II limits recovery for noneconomic damages in tort actions to $350,000;
(3) Part III allows evidence of collateral source payments to be admitted at trial and prohibits double recovery; and
(4) Part IV limits punitive damages awards to three times the amount of compensatory damages and requires one hundred per cent of all punitive damages awards to be deposited in the state general fund.
PART I. JOINT AND SEVERAL LIABILITY
SECTION 2. The legislature finds that while the abolition of joint and several liability, which was enacted in 1986, was an important step towards implementing tort reform in Hawaii, the numerous exceptions to that section render that law almost meaningless. Accordingly, the purpose of this part is to provide that the only exception to the abolition of joint and several liability is for the recovery of economic and noneconomic damages against joint tortfeasors in actions involving devastating bodily injury or death. "Devastating bodily injury" is defined as any physical injury that results in paraplegia or quadriplegia, or that the fact finder determines to be as damaging or severe to an individual to the same extent as if the individual was rendered a paraplegic or quadriplegic.
SECTION 3. Section 663-10.9, Hawaii Revised Statutes, is amended to read as follows:
"§663-10.9 Abolition of joint and several liability; [
exceptions.] exception. (a) Joint and several liability for joint tortfeasors as defined in section 663-11 is abolished except [ in the following circumstances: (1) For] for the recovery of economic and noneconomic damages against joint tortfeasors in actions involving devastating bodily injury or death to persons;
(2) For the recovery of economic and noneconomic damages against joint tortfeasors in actions involving: (A) Intentional torts; (B) Torts relating to environmental pollution; (C) Toxic and asbestos-related torts; (D) Torts relating to aircraft accidents; (E) Strict and products liability torts; or (F) Torts relating to motor vehicle accidents except as provided in paragraph (4); (3) For] provided that the recovery of noneconomic damages [ in actions, other than those enumerated in paragraph (2), involving injury or death to persons] shall be limited to actions against those tortfeasors whose individual degree of negligence is found to be twenty-five per cent or more under section 663-31. Where a tortfeasor's degree of negligence is less than twenty-five per cent, then the amount recoverable against that tortfeasor for noneconomic damages shall be in direct proportion to the degree of negligence assigned[ ; and (4) For recovery of noneconomic damages in motor vehicle accidents involving tort actions relating to the maintenance and design of highways including actions involving guardrails, utility poles, street and directional signs, and any other highway-related device upon a showing that the affected joint tortfeasor was given reasonable prior notice of a prior occurrence under similar circumstances to the occurrence upon which the tort claim is based. In actions in which the affected joint tortfeasor has not been shown to have had such reasonable prior notice, the recovery of noneconomic damages shall be as provided in paragraph (3). (5) Provided, however, that joint and several liability for economic and noneconomic damages for claims against design professionals, as defined in chapter 672, and certified public accountants, as defined in chapter 466, is abolished in actions not involving physical injury or death to persons].
(b) As used in this section, "devastating bodily injury" means any physical injury or impairment of physical condition which:
(1) Results in paraplegia or quadriplegia; or
(2) The finder of fact determines to be as damaging or severe to an individual to the same extent as if the individual was rendered a paraplegic or quadriplegic."
PART II. NONECONOMIC DAMAGES
SECTION 4. The purpose of this part is to limit recovery for all noneconomic damages in tort actions to $350,000. Noneconomic damages generally include such claims as pain and suffering, mental anguish, disfigurement, loss of enjoyment of life, loss of consortium, and other nonpecuniary losses. Under current law, the maximum limit on damages recoverable for only one type of noneconomic damage -- pain and suffering -- is $375,000. However, there is no upper limit on maximum damages with respect to other types of noneconomic damages. The legislature finds that placing a realistic cap on all noneconomic damages in tort actions, rather than only for pain and suffering, will help to lower the costs of liability insurance for Hawaii's consumers.
SECTION 5. Section 663-8.7, Hawaii Revised Statutes, is amended to read as follows:
§663-8.7[ ]] Limitation on [ pain and suffering.] noneconomic damages. Damages recoverable for [ pain and suffering] all noneconomic damages as defined in section 663-8.5 shall be limited to a maximum award of [ $375,000; provided that this limitation shall not apply to tort actions enumerated in section 663-10.9(2).] $350,000 with respect to any tort action."
PART III. COLLATERAL SOURCES
SECTION 6. The purpose of this part is to allow evidence of collateral source payments to be admitted at trial. In addition, this part prohibits double recovery by reducing tort damage awards by all collateral sources available to claimants, and establishing the right of a provider of collateral sources to reimbursement from the collateral sources claimant if the claimant recovered from the tortfeasor.
SECTION 7. Chapter 621, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:
"§621- Admissibility of collateral sources. In any action for tort, including a medical tort as defined in section 671-1, evidence shall be admissible for consideration by the court to establish that any such past or future cost or expense was or, with reasonable certainty, will be replaced or indemnified, in whole or in part, from any collateral source such as insurance (except for life insurance), Social Security (except those benefits provided under title XVIII of the Social Security Act), workers' compensation, or employee benefit programs (except such collateral sources entitled by law to liens against any recovery of the plaintiff)."
SECTION 8. Chapter 663, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:
"§663- Reduction of award; collateral indemnity. (a) In any action to which this section applies in which liability is admitted or is determined by the trier of fact and in which damages are awarded to compensate the claimant for losses sustained, the court shall reduce the amount of such award by the total of all amounts which have been paid for the benefit of the claimant, or which are otherwise available to the claimant, from all collateral sources; provided that there shall be no reduction for collateral sources for which a subrogation or reimbursement right exists. The reduction shall be offset to the extent of any amount which has been paid, contributed, or forfeited by, or on behalf of, the claimant or members of the claimant's immediate family to secure the claimant's right to any collateral source benefit which the claimant is receiving as a result of the claimant's injury.
(b) For the purposes of this section:
"Collateral sources" means any payments made to the claimant, or made on the claimant's behalf, by or pursuant to:
(1) The United States Social Security Act, except title XVIII and title XIX; any federal, state, or local income disability act; or any other public programs providing medical expenses, disability payments, or other similar benefits, except those prohibited by federal law and those expressly excluded by law as collateral sources;
(2) Any health, sickness, or income disability insurance; automobile accident insurance that provides health benefits or income disability coverage; and any other similar insurance benefits, except life insurance benefits available to the claimant, whether purchased by the claimant or provided by others;
(3) Any contract or agreement of any group, organization, partnership, or corporation to provide, pay for, or reimburse the costs of hospital, medical, dental, or other health care services; or
(4) Any contractual or voluntary wage continuation plan provided by employers or by any other system intended to provide wages during a period of disability.
Notwithstanding any other provision of this section, benefits received under Medicare, or any other federal program providing for a federal government lien on or right of reimbursement from the plaintiff's recovery, the workers' compensation law, the Medicaid program of title XIX of the Social Security Act or from any medical services program administered by the department of health or department of human services shall not be considered a collateral source.
(c) In the event that the fee for legal services provided to the claimant is based on a percentage of the amount of money awarded to the claimant, the percentage shall be based on the net amount of the award as reduced by the amounts of collateral sources and as increased by insurance premiums paid.
(d) A provider of collateral sources that has a right of subrogation or reimbursement that has complied with this section shall have a right of reimbursement from a claimant to whom it has provided collateral sources if such claimant has recovered all or part of such collateral sources from a tortfeasor. The provider's right of reimbursement shall be limited to the actual amount of collateral sources recovered by the claimant from a tortfeasor, minus its pro rata share of costs and attorney's fees incurred by the claimant in recovering such collateral sources from the tortfeasor. In determining the provider's pro rata share of those costs and attorney's fees, the provider shall have deducted from its recovery a percentage amount equal to the percentage of the judgment or settlement which is for costs and attorney's fees.
(e) Any disputes between the claimant and the provider as to the actual amount of collateral sources recovered by the claimant from a tortfeasor shall be subject to determination by a court of competent jurisdiction. In determining the actual amount of collateral sources recovered, the court shall give consideration to any offset in the amount of settlement or judgment for any comparative negligence of the claimant, limitations in the amount of liability insurance coverage available to the tortfeasor, or any other mitigating factors which the court deems equitable and appropriate under the circumstances.
(f) A claimant shall send the provider of any collateral sources, by certified or registered mail, notification of the claimant's intent to claim damages from the tortfeasor. If the claimant has filed suit against the tortfeasor at the time the notice is sent, a copy of the complaint against the tortfeasor shall be sent along with the notice. The notice shall include a statement that the provider of collateral sources will waive any right to subrogation or reimbursement unless it provides the claimant or claimant's attorney a statement asserting payment of benefits and right of subrogation or reimbursement within thirty days following receipt of the claimant's notification to the collateral source provider.
(g) Within thirty days after receipt of the claimant's notification of intent to claim damages from the tortfeasor, the provider of collateral sources must provide the claimant or claimant's attorney a statement asserting its payment of collateral sources benefits and right of subrogation or reimbursement. Failure of the provider of collateral sources to provide such statement to the claimant or claimant's attorney within the thirty-day period shall result in waiver of any claim to subrogation or reimbursement by the provider with respect to any such collateral sources. No right of subrogation or reimbursement shall exist for a provider of collateral sources that has waived its right of subrogation or reimbursement pursuant to this subsection.
(h) Reimbursement of a collateral source provider pursuant to this section shall satisfy the collateral source provider's right of subrogation or reimbursement. The provider shall have no right of subrogation or reimbursement for collateral sources payments made after the date of waiver, settlement, or judgment.
(i) A collateral source provider claiming a right of subrogation or reimbursement under this section shall cooperate with the claimant by producing such information as is reasonably necessary for the claimant to prove the nature and extent of the value of the collateral sources provided. The failure of the collateral source provider to cooperate may be taken into account by the court in determining the right to or the amount of the reimbursement asserted."
SECTION 9. Section 663-10, Hawaii Revised Statutes, is repealed.
§663-10 Collateral sources; protection for liens and rights of subrogation. In any civil action in tort, the court, before any judgment or stipulation to dismiss the action is approved, shall determine the validity of any claim of a lien against the amount of the judgment or settlement by any person who files timely notice of the claim to the court or to the parties in the action. The judgment entered, or the order subsequent to settlement, shall include a statement of the amounts, if any, due and owing to any person determined by the court to be a holder of a valid lien and to be paid to the lienholder out of the amount of the corresponding special damages recovered by the judgment or settlement. In determining the payment due the lienholder, the court shall deduct from the payment a reasonable sum for the costs and fees incurred by the party who brought the civil action in tort. As used in this section, lien means a lien arising out of a claim for payments made or indemnified from collateral sources, including health insurance or benefits, for costs and expenses arising out of the injury which is the subject of the civil action in tort. If there is a settlement before suit is filed or there is no civil action pending, then any party may petition a court of competent jurisdiction for a determination of the validity and amount of any claim of a lien."]
PART IV. PUNITIVE DAMAGES
SECTION 10. The legislature finds that there is an immediate need to reform Hawaii's laws providing for the award of punitive damages. Punitive damages, also known as exemplary damages, are intended to punish the defendant and deter both the defendant and others from engaging in similar acts of wrongdoing in the future. Punitive damages are distinguishable from compensatory damages, which are the primary form of damages awarded under tort law and are designed to "make the plaintiff whole". Compensatory damages compensate tort victims for damages including payment for out-of-pocket expenses, such as lost wages and medical costs, and awards for pain and suffering. In contrast, punitive damages were developed as an auxiliary to criminal law to impose a public sanction on conduct that might not be pursued by criminal law enforcement.
The legislature finds that in recent years the number of punitive damages claims asserted have increased dramatically. While large punitive damages awards can be reduced on appeal as being excessive, the effect of the assertion of these claims is to raise the cost of litigation, undermine confidence in the civil justice system, handicap Hawaii's businesses in competition with foreign enterprises, and generally increase the costs of doing business in the State.
The purpose of this part is to reform the law relating to punitive damages by:
(1) Limiting punitive damages awards to three times the amount of compensatory damages; and
(2) Requiring that one hundred per cent of all punitive damages awards be deposited into the state general fund, and requiring the administrative director of the courts to provide for the collection of these awards and to submit an annual report to the chief justice of the Hawaii supreme court and the legislature regarding amounts paid into the general fund during the previous fiscal year.
SECTION 11. Chapter 663, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:
"§663- Punitive damages. (a) Except as otherwise provided by law, no award of punitive damages may be made in any court of competent jurisdiction in this State except as provided in this section.
(b) Punitive damages imposed against a defendant in any case shall not exceed three times the amount of compensatory damages.
(c) Notwithstanding any other law, including any statutory or common law, to the contrary, one hundred per cent of all punitive damages awarded in any case, pursuant to the final judgment of any court of competent jurisdiction in this State, and upon the exhaustion of all appeals in that action, shall be deemed to be the property of the State and shall be collected pursuant to section 601-3(b)(9) and deposited with the state director of finance to the credit of the state general fund."
SECTION 12. Section 601-3, Hawaii Revised Statutes, is amended by amending subsection (b) to read as follows:
"(b) The administrative director shall, subject to the direction of the chief justice, perform the following functions:
(1) Examine the administrative methods of the courts and make recommendations to the chief justice for their improvement;
(2) Examine the state of the dockets of the courts, secure information as to their needs of assistance, if any, prepare statistical data and reports of the business of the courts and advise the chief justice to the end that proper action may be taken;
(3) Examine the estimates of the courts for appropriations and present to the chief justice the administrative director's recommendations concerning them;
(4) Examine the statistical systems of the courts and make recommendations to the chief justice for a uniform system of judicial statistics;
(5) Collect, analyze, and report to the chief justice statistical and other data concerning the business of the courts;
(6) Assist the chief justice in the preparation of the budget, the six-year program and financial plan, the variance report and any other reports requested by the legislature;
(7) Carry out all duties and responsibilities that are specified in title 7 as it pertains to employees of the judiciary; [
(8) Attend to such other matters as may be assigned by the chief justice[
(9) Provide for the collection of punitive damages awards as provided in section 663- for deposit into the state general fund, and submit an annual report to the chief justice and the legislature on amounts paid into that fund pursuant to section 663- during the previous fiscal year."
SECTION 13. The chief justice of the supreme court and the administrative director of the courts are requested to adopt rules relating to the collection of punitive damages as required by this part for deposit into the state general fund for the efficient implementation of this part.
PART V. MISCELLANEOUS
SECTION 14. This Act shall apply only to causes of action based upon acts or omissions occurring on or after its effective date.
SECTION 15. This Act does not affect rights and duties that matured, penalties that were incurred, and proceedings that were begun, before its effective date.
SECTION 16. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.
SECTION 17. This Act shall take effect upon its approval.