Repeals certain exceptions to the abolition of joint and several liability. Limits recovery for all noneconomic damages in tort actions to $500,000. Codifies court rule relating to offers of judgment. Allows evidence of collateral source payments to be admitted at trial. Limits punitive damages awards.

A BILL FOR AN ACT

SECTION 1. The legislature finds that there is a need to provide meaningful reform of the tort and civil justice system in Hawaii. Specifically, this Act does each of the following:

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 serious bodily injury or death. "Serious 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:

(b) As used in this section, "serious bodily injury" means any physical injury or impairment of physical condition that:

SECTION 4. This part shall apply only to causes of action based upon acts or omissions occurring on or after its effective date.

SECTION 5. The purpose of this part is to limit recovery for all noneconomic damages in tort actions to $500,000. 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 6. Section 663-8.7, Hawaii Revised Statutes, is amended to read as follows:

"[[]§663-8.7[]] Limitation on [pain and suffering.] noneconomic damages. (a) 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).] $500,000 with respect to any tort action."

SECTION 7. This part shall apply only to causes of action based upon acts or omissions occurring on or after its effective date.

SECTION 8. The legislature finds that there is a need to codify rule 68 of the Hawaii rules of civil procedure relating to offers of judgment. That rule permits the recovery of costs by either party contingent on that party's having made an offer of settlement that was not accepted and which was at least as favorable to the offeree as the final judgment in the case. In addition to codifying rule 68, this part also requires the payment of reasonable attorneys' fees as well as court costs in order to encourage pre-trial settlements.

SECTION 9. Chapter 607, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

"§607- Offer of judgment. At any time more than ten days before the trial begins, a party defending against a claim may serve upon the adverse party an offer to allow judgment to be taken against the offeror for the money or property or to the effect specified in that offer, with costs then accrued. If within ten days after the service of the offer the adverse party serves written notice that the offer is accepted, either party may then file the offer and notice of acceptance together with proof of service and thereupon the clerk shall enter judgment. An offer not accepted shall be deemed withdrawn and evidence thereof is not admissible except in a proceeding to determine costs. If the judgment finally obtained by the offeree is not more favorable than the offer, the offeree must pay the costs incurred after the making of the offer. The fact that an offer is made but not accepted does not preclude a subsequent offer. When the liability of one party to another has been determined by verdict or order or judgment, but the amount or extent of the liability remains to be determined by further proceedings, the party adjudged liable may make an offer of judgment, which shall have the same effect as an offer made before trial if it is served within a reasonable time not less than ten days prior to the commencement of hearings to determine the amount or extent of liability. As used in this section, "costs" includes both court costs and reasonable attorneys' fees."

SECTION 10. This part shall apply only to civil actions filed on or after the effective date of this part.

SECTION 11. The purpose of this part is to allow evidence of collateral source payments to be admitted at trial. In addition, this part reduces tort damage awards by all collateral sources available to claimants, and establishes the right of a provider of collateral sources to reimbursement from the collateral sources claimant if the claimant recovered from the tortfeasor.

SECTION 12. 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, as defined in chapter 663."

SECTION 13. 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 the 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.

(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:

Notwithstanding any other provision of this section, benefits which the party awarded damages, the person injured or that person's estate is obligated to repay; life insurance or other death benefits; insurance benefits for which the person injured or deceased or members of that person's family paid premiums; retirement and pension plan benefits; 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.

(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. Such 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 14. 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."]

SECTION 15. This part shall apply only to causes of action based upon acts or omissions occurring on or after its effective date.

SECTION 16. 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:

SECTION 17. 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) The dollar amount of any punitive damages awarded in any case shall be determined only by the judge in the judge's discretion, and not the jury.

(c) Punitive damages imposed against a defendant in any case shall not exceed three times the amount of compensatory damages.

(d) Notwithstanding any other law to the contrary, including but not limited to any statutory or common law, 33.3 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(a)(9) and deposited with the state director of finance to the credit of the state general fund."

SECTION 18. 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, shall perform the following functions:

SECTION 19. The chief justice of the supreme court and the administrative director of the courts shall 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.

SECTION 20. This Act does not affect rights and duties that matured, penalties that were incurred, and proceedings that were begun, before its effective date.

SECTION 21. If any provision of this Act, or the application thereof to any person or circumstance is held invalid, the invalidity does not affect other provisions or applications of the Act which can be given effect without the invalid provision or application, and to this end the provisions of this Act are severable.

SECTION 22. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 23. This Act shall take effect upon its approval.