Mikelson v. United Services Automobile Ass'n

Opinion of the Court by

Defendant-Appellant United Services Automobile Association (Defendant) appeals from the June 19, 2002 judgment of the circuit court of the first circuit (the court) 1 in favor of Plaintiff-Appellee Mathew S. Mikel-son (Plaintiff) relating to underinsured motorist benefits. By this appeal, Defendant *194 challenges the court’s order denying Defendant’s motion for order or declaration regarding choice of law, filed on April 30, 2001, and the court’s findings of fact, conclusions of law, and order, filed on July 16, 2001.

For the reasons discussed herein, we hold that the court correctly (1) applied Hawaii law on the choice of law question, (2) determined that Plaintiff was a resident of the named insured’s household and, therefore, a covered person under the subject insurance policy for underinsured motorist benefits purposes, and (3) decided that the insurance policy exclusions were inapplicable. Accordingly, the June 19, 2002 judgment is affirmed.

I.

Larry D. Mikelson (Father), father of Plaintiff, entered into an automobile insurance plan (the Policy) in California with Defendant. The Policy was effective from October 23, 1998 to April 23, 1999. Listed as “operators ” under the Policy were Father, Ian A. Mikelson, and Plaintiff. It is not disputed that Father is identified as a named insured under the Policy. Three vehicles are listed in the Policy as being “garaged” in Redondo Beach, California.

On January 17, 1999, Plaintiff was riding a motorcycle on Kamehameha Highway. He was carrying a passenger on the motorcycle and had no license or permit to operate the vehicle at the time of the accident. As Plaintiff was approaching the intersection of Wai-mea Beach Park, a motor vehicle operated by a Ms. Larissa Madison (Madison) made a left turn into the Park, in front of Plaintiff. This caused Plaintiff to collide with Madison’s vehicle and Plaintiff fell onto the roadway, suffering injuries. The motorcycle was not insured under any policy Plaintiff had with Defendant. As a result of the accident, Plaintiff required surgery on his right knee. Within less than thirty days, Plaintiff incurred more than $17,500 in medical and ambulance expenses.

At the time of the accident, Plaintiff was a full-time student at the University of Ha-wai‘i-West Oahu (West Oahu), and lived in the City and County of Honolulu. Plaintiffs first semester at West Oahu commenced in January 1999. The majority of Plaintiffs personal belongings remained at Father’s home in California. The only personal belongings Plaintiff brought with him to Hawaii were clothing and his surfboard. Plaintiff possessed a California driver’s license at the time of the accident. The permanent address listed on the license was his Father’s address in Redondo Beach, California. Plaintiff lived in California during his recovery from his surgery, but he intended to return to Hawaii in order to continue his education in the fall semester of 1999.

Plaintiff was not employed before or at the time of the accident and, as a result, relied completely on Father for financial support. This support included payment of Plaintiffs educational and travel expenses. Plaintiff was named as a dependent on Father’s Internal Revenue Service income tax returns for the years 1998 and 1999.

II.

On April 20, 1999, Plaintiff filed a civil suit against Madison for the injuries he sustained. Plaintiff obtained $20,000 pursuant to a settlement, release, and indemnity agreement that was executed on June 6, 1999. This $20,000 amount was the limit of liability under all applicable liability bonds or policies covering Madison. The $20,000 was not sufficient to cover Plaintiffs medical expenses.

As a result, Father attempted to obtain benefits under Defendant’s Policy. The Policy provides for underinsured motorist coverage for a “covered person” under the “UNINSURED MOTORISTS COVERAGE” section of the Policy. The amount of Bodily Injury Uninsured Motorists Coverage under the Policy is $300,000. A “covered person” is defined as a named insured or a family member of a named insured. A “family member” is defined as a person related to a named insured “by blood, marriage or adoption who is a resident of [the named insured’s] household.” An “underinsured motor vehicle” is defined as a motor vehicle that is insured, but as to which the amount of such insurance “is less than the limit of liability for Bodily Injury Uninsured Motorists Coverage” that is applicable to a covered auto. A “covered *195 auto” is defined in relevant part as any vehicle shown in the Declarations. There is neither a choice of law provision within the Policy 2 nor a clause defining “resident of [the named insured’s] household.”

According to the “GENERAL PROVISIONS” section of the Policy, the “[P]oliey applies only to accidents and losses which occur: (1) [d]uring the policy period as shown in the Declarations; and (2) [w]ithin the policy territory.” The “policy territory” encompasses “[t]he United States of America, its territories or possessions^]”

III.

The underinsured motorist coverage provision states, in relevant part, that “Bodily Injury Uninsured Motorists Coverage shall not apply until the limits of liability under all applicable liability bonds or policies have been exhausted by payment of judgments or settlements, and proof of such is submitted to us.” According to the court’s findings of fact, Plaintiff “exhausted” the limits of liability and has submitted reasonable proof to Defendant showing as much.

The Policy also contains the following contested exclusions:

I. UNINSURED MOTORISTS COVERAGE

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With respect to damages for bodily injury caused by an underinsured motor vehicle, Bodily Injury Uninsured Motorists Coverage shall not apply until the limits of liability under all applicable liability bonds or policies have been exhausted by payment of judgments or settlements, and proof of such is submitted to us.

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EXCLUSIONS

A. We do not provide Uninsured Motorists Coverage for property damage or bodily injury sustained by any person:

1. While occupying, or when struck by, any motor vehicle owned by you or any family member which is not insured for this coverage tmder this policy. This includes a trailer of any type used with that vehicle. As used in this exclusion, “motor vehicle” means any self-propelled vehicle.

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4. While operating any self-propelled vehicle with less than f wheels which is not insured for this coverage under this policy. As used in this exclusion, operating means only the actual physical operation by the driver of a vehicle. This does not include a passenger of that vehicle

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7. Using a vehicle without a reasonable belief that the person is entitled to do so.

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C. We do not provide Uninsured or Un-derinsured Motorists Coverage for punitive or exemplary damages.

(Emphases added.)

On February 4, 1999, Defendant’s representative sent a letter to [Father] denying coverage for Plaintiffs injuries because “the motorcycle does not qualify as a ‘covered auto’ ” in the Policy. On April 2, 1999, Defendant’s Claims Manager confirmed the denial of coverage through a subsequent letter.

On May 7, 1999, Plaintiff filed a complaint for declaratory relief against Defendant seeking compensatory damages under the Policy for Plaintiffs injuries (Civ. No. 99-1856-05). On July 26, 1999, Plaintiff filed a *196 motion for summary judgment which was denied on October 19,1999.

On February 6, 2001, Defendant filed a motion requesting the court to apply California law rather than Hawaii law to the case. On April 12, 2001, a bench trial was held to determine the sole issue of whether Plaintiff was entitled to receive underinsured motorist benefits from Defendant. On April 30, 2001, the court issued a written order declaring it would apply Hawaii law.

On July 16, 2001, the court issued its findings of fact (findings) and conclusions of law (conclusions), and order. The court concluded, inter alia, that: (1) Plaintiff was a “resident” of Father’s household at the time of the accident because (a) the Policy is ambiguous in its definition of the term “resident” and (b) “actual residence under a common roof with the named insured is not an absolute requirement to be considered a ‘resident’ of the household”; and (2) inasmuch as “the Policy purports to create two distinct classes of ‘covered persons’: (a) the named insured and his or her family members; and (b) any other person ‘occupying’ the ‘covered auto[,]’ ” Plaintiff “was not required to be occupying or opex'ating a ‘covered auto’ ” in order to “collect uninsured benefits.”

The court also determined that three of the Policy’s exclusions were inapplicable. First, the court concluded that the “less than four wheels exclusion” was inapplicable because (1) such exclusion was “void as against public policy” to the extent that the exclusion “attempts to limit [Plaintiffs] entitlement to [underinsured motorist] coverage” and is inconsistent with Dines v. Pac. Ins. Co., Ltd., 78 Hawai'i 325, 893 P.2d 176 (1995); and (2) the “exclusion of only [uninsured motorist] coverage, but not [underinsured motorist] coverage in [Defendant’s] less than four wheels exclusion ... is either (a) a clear indication that [the exclusion] applies to [uninsured], but not [underinsured motorist] coverage or (b) creates an ambiguity, which requires that the Policy be construed against [Defendant] and resolved in [Plaintiffs] favor, and therefore applies to [an uninsured motoi'ist], but not [underinsured motorist] coverage.”

Second, the court decided that the “reasonable belief exclusion” was inapplicable because (1) the exclusionary language is “susceptible of at-least three interpretations” and such ambiguity must be “strictly construed against [Defendant]”; (2) Plaintiffs “alleged traffic violations are irrelevant to the determination of eligibility for [underinsured motorist] coverage under the Policy” as “there is no indication that the ... Legislature intended the denial of [underinsured motorist] benefits as punishment for traffic violations”; (3) the exclusion was “unenforceable as against public policy” inasmuch as Defendant “could and should have clearly communicated ... through precise and unambiguous language” its “desire[ ] to exclude coverage for any person who was not legally operating a vehicle under Hawaii law” if Defendant intended this “limitation;” and (4) Defendant’s “exclusion of only [uninsured] coverage but not [underinsured motorist] coverage in [the] reasonable belief exclusion ... is either (a) a clear indication that [the exclusion] applies to [uninsured] but not [underinsured motorist] coverage, or (b) creates an ambiguity, which requires that the Policy be construed against [Defendant] and resolved in [Plaintiffs] favor, and therefore the exclusion applies to [uninsured], but not [underinsured motorist] coverage.”

Third, the court concluded that the “owned vehicle” exclusion was void because (1) such exclusions are “invalidated where an injured individual solely seeks [uninsured] or [under-insured motorist] coverage and not any liability benefits as an insured claimant under a pei’sonal or family member’s policy”; (2) such exclusion is “repugnant to [Hawaii Revised Statutes (HRS) § ] 431:10C-301(b)(4)” 3 inasmuch as Plaintiff “has only *197 sought [underinsured motorist] coverage and not both [uninsured motorist] and liability coverage under the same policy”; and (3) the “exclusion of only [uninsured motorist] coverage, but not [underinsured motorist] coverage in [Defendant’s] owned vehicle exclusion ... is either (a) a clear indication that [the exclusion] applies to [uninsured], but not [un-derinsured motorist] coverage or (b) creates an ambiguity, which requires that the Policy be construed against [Defendant] and resolved in [Plaintiffs] favor; i.e. it must [be] construed as applying to [uninsured motorist], but not [underinsured motorist] coverage.”

Ultimately, the court ordered that “[Plaintiff] is entitled to [underinsured motorists coverage] under the Policy for injuries and damages resulting from the January 17,1999 accident, including but not limited to whatever [underinsured motorist] payments are determined to be due at arbitration pursuant to the Policy.” On June 19, 2002, the court, based on its findings and the above conclusions and order, entered final judgment in favor of Plaintiff and against Defendant. Defendant filed a notice of appeal on July 18, 2002, from this final judgment.

IV.

On appeal, Defendant contends that the court erred in: (1) applying Hawai'i law, rather than California law; (2) ruling that Plaintiff is a resident of the named insured’s household; (3) deciding that Plaintiff was a named insured; 4 and (4) failing to apply the Policy exclusions. Defendant requests that this court reverse the court’s determinations that (1) Hawai'i law applies, (2) Plaintiff was a resident of the named insured’s household, (3)Plaintiff is a named insured, and (4) the Policy exclusions are inapplicable.

V.

The question of the “[c]hoice of law [to be applied in a ease] is a question of law reviewable de novo,” Jenkins v. Whittaker Corp., 785 F.2d 720, 724 (9th Cir.1986)(citing In re McLinn, 739 F.2d 1395, 1398 (9th Cir.1984)). Therefore, a choice of law issue is a question of law we review under the right/wrong standard. See Jenkins, 785 F.2d at 724; Ditto v. McCurdy, 102 Hawai'i 518, 521, 78 P.3d 331, 334 (2003) (“Questions of law are reviewable de novo under the right/ wrong standard of review.” (Internal quotation marks and citation omitted.)).

When reviewing the court’s interpretation of a contract, “the construction and legal effect to be given a contract is a question of law freely reviewable by an appellate court.” Brown v. KFC Nat’l Mgmt. Co., 82 Hawai'i 226, 239, 921 P.2d 146, 159 (1996) (internal quotation marks and citation omitted).

When reviewing a circuit court’s findings of fact and/or conclusions of law, “[t]his court reviews the circuit court’s findings of fact under a clearly erroneous standard and the circuit court’s conclusions of law de novo.” RGIS Inventory Specialist v. Hawai'i Civil Rights Comm’n, 104 Hawai'i 158, 160, 86 P.3d 449, 451 (2004).

VI.

As a preliminary matter, Plaintiff contends that Defendant’s points of error should be disregarded by this court in accordance with Hawai'i Rules of Appellate Procedure (HRAP) Rule 28(b)(4)(C)(2002) because (1) Defendant did not include the contested findings and conclusions in its opening brief, and (2) Defendant failed to “specifically identify” the findings or conclusions that it contested. 5

*198 The record consists of fifteen volumes of court documents. The large number of documents, incorrect citations to the record and/or omissions of the relevant quotations of the contested findings and conclusions place an unnecessary burden upon “both the parties compelled to respond to the brief and the appellate court attempting to render an informed judgment.” Housing Fin. & Dev. Corp. v. Ferguson, 91 Hawai'i 81, 85, 979 P.2d 1107, 1111 (1999). Nevertheless, it is within this court’s discretion to address Defendant’s asserted points of error despite nonconformance with HRAP Rule 28(b)(4)(C). See Sprague v. Cal. Pac. Bankers & Ins., Ltd., 102 Hawai'i 189, 196, 74 P.3d 12, 19 (2003). Even though Defendant incorrectly cited to the court’s order regarding Defendant’s choice of law motion, Defendant’s other errors are harmless insofar as Defendant has primarily referred to the court’s July 16, 2001 findings and conclusions.

VII.

A.

As to the conflict of law issue, Plaintiff relies on Peters v. Peters, 63 Haw. 653, 660, 634 P.2d 586, 591 (1981), and asserts that “there is a presumption that Hawaii law applies unless another state’s law ‘would best serve the interests of the states and persons involved.’ ” This court has “moved away from the traditional and rigid conflict-of-laws rules in favor of the modern trend towards a more flexible approach looking to the state with the most significant relationship to the parties and subject matter.” Lewis v. Lewis, 69 Haw. 497, 499, 748 P.2d 1362, 1365 (1988) (citing Peters, supra). This flexible approach places “[p]rimary emphasis ... on deciding which state would have the strongest interest in seeing its laws applied to the particular case.” Id. Hence, this court has said that the interests of the states and applicable public policy reasons should determine whether Hawaii law or another state’s law should apply. See Peters, 63 Haw. at 667-68, 634 P.2d at 595. “The preferred analysis, [then] in our opinion, would be an assessment of the interests and policy factors involved with a purpose of arriving at a desirable result in each situation.” Id. at 664, 634 P.2d at 593.

In this regard, Plaintiffs reliance on Abramson v. Aetna Cas. & Sur. Co., 76 F.3d 304 (9th Cir.1996), and Lemen v. Allstate Ins. Co., 938 F.Supp. 640, 643 (D.Haw.1995), is persuasive. In Abramson, plaintiff, a New Jersey resident, was riding a bicycle in Hawaii when he was fatally injured by a car driven by an underinsured motorist. 76 F.3d at 305. Plaintiffs estate sought underin-sured motorist benefits from an insurance policy that contained an anti-stacking provision. Id. Applying Hawaii law, the Hawaii federal district court found the anti-stacking provision invalid. Id.

Relying on Peters, the Ninth Circuit Court of Appeals affirmed the district court’s ruling and stated that “Hawaii’s choice-of-law approach creates a presumption that Hawaii law applies unless another state’s law would best serve the interests of the states and persons involved.” Id. (internal quotation marks and citations omitted). In balancing the interests of Hawaii and New Jersey, the Ninth Circuit noted that “Hawaii’s interest in the application of Hawaii law to insurance policies governing automobile accidents-which is especially strong given the number of non-resident drivers in the state- is not outweighed by any other state’s interests.” Id. (emphases added). The Ninth Circuit also approved the district court’s finding that “New Jersey’s interests in the insurance contract did not control the choice-of-law analysis because of the lack of any negotiation over the terms of the contract and the parties’ expectations that the contract would cover the insured as he travelled *199 throughout the United States and Canada.” Id. Applying this same balancing of interests to the instant ease, there is a strong interest in applying Hawai'i law to protect non-resident college students attending institutions within this state buttressed by the adhesion-ary nature of the Policy and the Policy’s applicability throughout the United States.

Insofar as Lemen is factually similar to the ease at bar, it is persuasive. 6 In Lemen, the plaintiff sustained injuries in an automobile accident in Hilo, Hawai'i which led to her claim of underinsured motorist benefits under her father’s policy. 938 F.Supp. at 641. Her father’s policy, issued and delivered in Alaska, insured two of father’s vehicles, both of which were located in Alaska. Id. The pick-up touek that the plaintiff was driving at the time of the accident was registered in her name but was not insured. Id. The plaintiff, a resident and citizen of Alaska, was attending the University of Hawai'i at Hilo at the time of the accident. Id.

Pursuant to Peters, the United States District Court for the District of Hawai'i (“district court”) in Lemen determined that Hawai'i had “a stronger interest in seeing its laws applied” for several reasons. 938 F.Supp. at 643. First, according to the district court, the plaintiffs accident occurred in Hawai'i. Id. Second, notwithstanding the fact that the plaintiff was a resident of Alaska at the time of the accident, she was living in Hawai'i while attending the University of Hawai'i as a full-time student. Id. Third, the fact that the plaintiffs truck was uninsured ’ at the time of the accident was irrelevant because under Hawai'i law underinsured motorist coverage “follows the insured person and not the insured vehicle.” Id. (citing Dawes v. First Ins. Co. of Hawai'i, Ltd., 77 Hawai'i 117, 123-24, 883 P.2d 38, 44-45 (1994); Allstate Ins. Co. v. Morgan, 59 Haw. 44, 47-48, 575 P.2d 477, 479-80 (1978); and Allstate Ins. Co. v. Hirose, 77 Hawai'i 362, 366, 884 P.2d 1138, 1142 (1994) (parentheti-cals omitted)). Fourth, the district court determined that this court “has articulated a strong interest in protecting the rights of persons within the state to recover benefits pursuant to automobile insurance policies.” Id. at 644 (citing Methven-Abreu v. Hawaiian Ins. & Guar. Co., Ltd., 73 Haw. 385, 395-96, 834 P.2d 279, 285 (1992); DeMello v. First Ins. Co. of Hawaii, Ltd., 55 Haw. 519, 523-24 & n. 4, 523 P.2d 304, 306-07 & n. 4 (1974)).

The district court eschewed application of Alaska law because doing so “would frustrate Hawaii’s state policy to protect persons injured within its boundaries.” Id. at 644. The defendant insurer’s assertion that “the law of the state where an insurance contract is made governs,” id., was rejected in. light of insurance policy language stating that “during the premium period, ... [the] policy applies to losses to the auto, accidents and occurrences within the United States of America, its territories or possessions or Canada, or between their ports.” Id. at 644 n. 5. Hence, the district court concluded the defendant’s insurance policy was such that it was “foreseeable that an insured family member might temporarily live out-of-state and suffer a ear accident, thereby subjecting [the defendant] to the law of a foreign state.” *200 Id. at 644. Based on the foregoing, the Lemen court applied Hawaii law.

B.

Similarly in the case at bar, the accident occurred in Hawaii. At the time of the accident, Plaintiff was living in Hawaii and was attending West Oahu as a full-time student. The district court’s determination that Hawaii has á strong interest in protecting those injured within its borders is consistent with this court’s interpretation of Hawaii’s underinsured motorist statutes. Hawaii’s underinsured motorist statute, HRS § 431:10C-301(b)(4) (1993 & Supp. 1998), is intended “to provide protection, through voluntary insurance, for persons who are injured by underinsured motorists whose liability policies are inadequate to pay ,for personal injuries caused by motor vehicle accidents.” Taylor v. Gov’t Employees Ins. Co., 90 Hawai'i 302, 307-08, 978 P.2d 740, 745-46 (1999) (quoting the legislative history of HRS § 431:100-301). Because the purpose of Hawaii’s underinsured motorist statute is to protect persons, this court has held that under Hawaii law, insurance “follows the insured’s person.” Dawes, 77 Hawai'i at 123, 883 P.2d at 44. California’s law, denying coverage when “the vehicle involved in a given accident” is not “as described in the policy for which the claim is made,” Hartford Cas. Ins. Co. v. Cancilla, 28 Cal.App.4th 1305, 34 Cal.Rptr.2d 302, 307 (1994), would thus “frustrate Hawaii’s state policy to protect persons injured within its boundaries.” Lemen, 938 F.Supp. at 644.

Finally, while the Policy lacks a choice of law provision, the Policy does contain a geographical area provision that is substantially similar to the geographical area provision in the defendant’s policy in Lemen. 7 Because the Policy affirmatively acknowledges that the terms and conditions therein apply “to accidents and losses” which occur anywhere within the United States, it is foreseeable “an insured family member ... temporarily liv[ing] out of state [may] ... suffer a car accident,” Lemen, 938 F.Supp. at 644, and thereby may be subjected to the laws of other states-including those of Hawaii.

C.

Defendant contends that this court adopted and, therefore, should apply the conflict of laws test set forth in State v. Bridges, 83 Hawai'i 187, 925 P.2d 357 (1996). Under this test, Defendant contends the appropriate law is determined “by considering the domicile of the parties, the situs of the transactions, and the interest of the forum in applying its own law.” Id. at 195, 925 P.2d at 365 (internal quotation marks and citation omitted).

, In Bridges, the defendants were arrested in California by California police officers in a “sting” operation involving a drug transaction between the defendants and the Honolulu Police Department. 83 Hawai'i at 188-91, 925 P.2d at 358-61. The issue posed in Bridges was “under what circumstances will evidence obtained in [California] (the situs state) be suppressed in a criminal prosecution in [Hawaii] (the forum state)[.]” Id. at 194, 925 P.2d at 364. Noting that the issue was “novel,” this court set forth two methods by which to adjudicate the issue: (1) conflicts of law interest analysis; and (2) exclusionary rule analysis. Id. at 194-95, 925 P.2d at 364-65. This court then adopted and applied the exclusionary rule analysis as “the better approach.” Id. at 195, 925 P.2d at 365. Therefore, Defendant’s reliance on interest analysis is not supported by Bridges.

Defendant also relies on Roxas v. Marcos, 89 Hawai'i 91, 969 P.2d 1209 (1998), Lesser v. Boughey, 88 Hawai'i 260, 965 P.2d 802 (1998), and California Fed. Sav. & Loan Assoc. v. Bell, 6 Haw.App. 597, 735 P.2d 499 (1987). Each one of these cases, however, is also distinguishable. Roxas did not adjudicate a conflict of laws issue. See Roxas, 89 Hawai'i at 117 n. 16, 969 P.2d at 1235 n. 16 (“None of the parties address the issue of choice of law in their briefs.”). Lesser applied the forum *201 non conveniens doctrine which establishes the appropriate forum site, whereas a question involving conflict of laws addresses the appropriate law to be applied. See Lesser, 88 Hawai'i at 262, 965 P.2d at 804 (“This court has previously described the doctrine of forum non conveniens as the discretionary power of a court to decline to exercise a possessed jurisdiction whenever it appears that the cause before it may be more appropriately tried elsewhere.” (Internal quotation marks and citation omitted.)).

Finally, citing Bell, Defendant contends that Restatement (Second) of Conflict of Laws § 188 (1971) is controlling. While the Intermediate Court of Appeals (ICA) made reference to the Restatement in Bell, 6 Haw.App. at 604-05, 735 P.2d at 504-05, the ICA decided the underlying choice of law issue utilizing Professor Leflar’s “choice-influencing considerations” approach referred to in Peters. See id. at 605-07, 735 P.2d at 505-06.

It should be noted, however, that Professor Leflar’s “choice influencing considerations” approach was not adopted by this court in Peters. Peters indicated there are three generally accepted approaches to modern conflict of laws analysis: (1) the “governmental interests” approach advanced by Professor Currie; 8 (2) “the most significant relationship” test embodied in the Restatement (Second) of Conflict of Laws (1971); and (3) the “choice-influencing considerations” approach articulated by Professor Leflar. 9 63 Haw. at 662-63, 634 P.2d at 592-93 (1981). Peters did not expressly adopt one approach over another. Rather, this court concluded as said before that “[t]