Hawaii total-loss appraisal: how the appraisal clause works

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 motor-vehicle-specific total-loss statutes at HRS §§ 431:10C-309, 431:10C-310, and 431:10C-311 (which set the operational valuation framework), 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). HRS § 431:13-103 — Unfair Claim Settlement Practices. The statute defines acts that constitute unfair claim settlement practices when committed or performed with such frequency as to indicate a general business practice, including: misrepresenting pertinent facts or insurance policy provisions; failing to respond with reasonable promptness, and in no case more than fifteen working days, to communications about claims; 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 HRS §§ 431:10C-309 (total-loss motor vehicle claims), 431:10C-310 (total-loss motor vehicle claims: replacement), and 431:10C-311 (total-loss motor vehicle claims: cash settlement), in addition to the general UCSPA at HRS § 431:13-103. HRS § 431:10C-311 in particular contains cash-settlement valuation rules, dealer-quotation requirements, and prohibitions on certain deductions; readers should consult the current statutory text for the operative requirements. HRS § 431:10C-311(b) — Right to Reopen a Cash Settlement. If, within thirty days of receiving the settlement, the insured cannot purchase a comparable vehicle of like kind and quality for the market value the insurer determined (before applicable deductions) and has located, but not purchased, a comparable vehicle that costs more, the insurer must locate a comparable vehicle for that market value, pay the insured the difference on the vehicle the insured located (or negotiate and effect its purchase for the insured), or conclude the loss settlement under the appraisal section of the policy. An appraisal used this way is binding against both parties but does not waive either party's other rights under the policy or at common law. 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, and stated that an unreasonable delay in payment of benefits will warrant recovery for compensatory damages. Salvage titling in Hawaii. Hawaii's salvage certificate process is governed by HRS § 286-48 (Certificates of ownership of salvaged motor vehicles) and HRS § 286-44.5 (Salvage certificate); Hawaii does not appear to codify a specific percentage-of-fair-market-value threshold by statute. The threshold a given insurer applies should be verified against the policy and the insurer's documentation.

Hawaii's first-party bad-faith doctrine is anchored in Best Place, Inc. v. Penn America Insurance Co., 82 Haw. 120, 920 P.2d 334 (1996), which recognized first-party bad faith as a tort separate from breach of contract and grounded the cause of action in the implied covenant of good faith and fair dealing inherent in every insurance contract. Best Place is notable for its theoretical clarity — rather than treating bad faith as a statutory implication, the Hawaii Supreme Court rooted it in the contract itself, and stated that an unreasonable delay in payment of benefits will warrant recovery for compensatory damages.