State Farm total-loss settlements in Hawaii: how to negotiate a fair offer

Hawaii regulates first-party automobile total losses through three layered authorities: the Unfair Methods of Competition and Unfair or Deceptive Acts or Practices statute at HRS § 431:13-103, the implementing claim-handling regulation at HAR § 16-23 (Hawaii Administrative Rules), and the common-law tort of first-party bad faith recognized by the Hawaii Supreme Court in Best Place, Inc. v. Penn America Insurance Co., 82 Haw. 120, 920 P.2d 334 (1996). Hawaii does not impose a separate licensing requirement on a policyholder's appraiser invoked under the policy's appraisal clause. HRS § 431:13-103 — Unfair Claim Settlement Practices. The statute defines acts that constitute unfair claim settlement practices when committed in conscious disregard of the policy or with such frequency as to indicate a general business practice, including: misrepresenting pertinent facts or insurance policy provisions; failing to acknowledge and act with reasonable promptness on claim communications; failing to adopt and implement reasonable standards for the prompt investigation of claims; refusing to pay claims without conducting a reasonable investigation; failing to affirm or deny coverage of claims within a reasonable time; not attempting in good faith to effectuate prompt, fair, and equitable settlements when liability is reasonably clear; and compelling insureds to institute litigation to recover amounts due. HRS § 431:10C — Motor Vehicle Insurance. Hawaii's motor vehicle insurance code includes specific provisions governing personal injury protection (PIP) and motor-vehicle coverage; first-party total-loss settlements are governed by the general UCSPA and the implementing regulation rather than by motor-vehicle-specific statutes. HAR § 16-23 — Claim-Handling Regulation. The regulation establishes specific standards for first-party automobile total-loss settlements: (a) Comparable vehicles. The insurer shall determine actual cash value using the cost of two or more comparable automobiles available to the insured in the local market area, of like kind, quality, age, and mileage. Hawaii's island-specific market geography is itself part of the "local market area" analysis. (b) Dealer quotations. The insurer may, in lieu of comparable vehicles, base the settlement on two or more written quotations from licensed dealers in the local market area. (c) Statistically valid valuation source. The insurer may rely on a statistically valid fair-market-value source for the local market area. (d) Adjustments. Adjustments for vehicle condition, mileage, prior damage, or required repair must be measurable, discernible, itemized, and specified in dollar amounts in the claim file. (e) Right of Recourse. If the insured cannot purchase a comparable vehicle in the local market area for the offered amount, the insurer shall reopen the claim and either locate a comparable, pay the difference, offer a replacement, or invoke the policy's appraisal clause. Best Place, Inc. v. Penn America Insurance Co., 82 Haw. 120, 920 P.2d 334 (1996). The Hawaii Supreme Court recognized first-party bad faith as a tort separate from breach of contract, holding that the implied covenant of good faith and fair dealing in every insurance contract supports tort liability when the insurer's conduct is unreasonable. Tran v. State Farm Fire & Casualty Co., 999 P.2d 1066 (Haw. 2000), refined the framework and clarified the standard for "unreasonable" conduct. Both compensatory and, on appropriate factual showings, punitive damages are available. HRS § 286-46 — Salvage Title Threshold. A vehicle for which the cost of repairs to its pre-loss condition equals or exceeds 75% of its fair market value before the loss must be branded as a salvage vehicle. The 75% threshold sets the operational total-loss decision point. Hawaii does not impose a separate licensing requirement on a policyholder's appraiser invoked under the policy's appraisal clause.