Yukumoto v. Tawarahara (Hawaii Supreme Court) Brief Case Note

            On May 26, 2017, the Hawaii Supreme Court handed down its decision in Yukumoto v. Tawarahara, No. SCAP-15-0000460 (May 26, 2017). 
            This lawsuit stemmed from a moped accident in which Gregory Yukumoto (“Mr. Yukumoto”) was severely injured by Ruth Tawarahara (“Ms. Tawarahara”).  Id. at *2.  As a result of the accident, Mr. Yukumoto received medical treatment, and his health insurer, Hawaii Medical Service Association (“HMSA”), paid out health insurance benefits on his behalf.  Later, HMSA filed a notice of lien to recover the benefits it paid out on behalf of Mr. Yukumoto, which totaled approximately $330,000.00.
            Mr. Yukumoto’s total damages from the accident were approximately $4,000,000.00.  Id. at *3.  Via multiple automobile insurance policies, Mr. Yukumoto recovered $1,150,000.00 in general damages only, leaving him undercompensated by almost 3 Million Dollars.  Id.
            On appeal to the Hawaii Supreme Court, HMSA argued that it had equitable subrogation rights against the tortfeasor (Ms. Tawarahara) and contractual subrogation rights as to Mr. Yukumoto (via a health insurance contract), which gave HMSA the authority to and priority to recover its medical lien.  Id. at *12.  The Hawaii Supreme Court disagreed.  It held that: "(1)  A health insurer does not have equitable subrogation rights against a third-party tortfeasor in the context of personal insurance; (2) a health insurer’s subrogation and reimbursement rights are limited by HRS §§ 663-10 and 431-13:103(a)(10); and (3) any contractual provision that conflicts with HRS § 663-10 is invalid."  Id. at 34.
            Thus, HMSA was not permitted to go after Ms. Tawarahara (the tortfeasor) to recover the lien amount because HMSA had no equitable subrogation rights against her.  Additionally, HMSA was not permitted to recover from the injured individual, Mr. Yukumoto, via contractual subrogation either.  The Supreme Court found that HMSA’s “sole rights to reimbursement and subrogation are provided for in HRS §§ 663-10 and 431-13:103(a)(10)”.[1]  Id. at 31.   Because the contractual subrogation term provided for in the insurance contract between HMSA and Mr. Yukumoto was in conflict with HRS §§ 663-10 and 431-13:103(a)(10), it was invalid as against public policy.[2]

[1]              HRS § 663-10 places the burden on the medical health insurer to prove that there was duplication between the settlement funds paid by Ms. Tawarahara to Mr. Yukumoto and the medical expenses paid by HMSA on behalf of Mr. Yukumoto, in order for HMSA to obtain reimbursement from Mr. Yukumoto.  Id. at *6.  Only if the health insurer can prove duplication is the health insurer entitled to reimbursement. 
 
[2]              At the trial court level, HMSA acknowledged that it could probably not meet its burden of proof under HRS § 663-10 (that it was entitled to reimbursement for medical expenses paid) because Mr. Yukumoto recovered only a portion of his damages ($1.15 Million out of $4 Million) and settled his claims for general damages only.    Id. at *10-11.

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