§386-8  Liability of third person.  Whena work injury for which compensation is payable under this chapter has beensustained under circumstances creating in some person other than the employeror another employee of the employer acting in the course of his employment alegal liability to pay damages on account thereof, the injured employee or hisdependents (hereinafter referred to collectively as the employee) may claimcompensation under this chapter and recover damages from such third person.

If the employee commences an action againstsuch third person he shall without delay give the employer written notice ofthe action and the name and location of the court in which the action isbrought by personal service or registered mail.  The employer may, at any timebefore trial on the facts, join as party plaintiff.

If within nine months after the date of thepersonal injury the employee has not commenced an action against such thirdperson, the employer, having paid or being liable for compensation under thischapter, shall be subrogated to the rights of the injured employee.  Except aslimited by chapter 657, the employee may at any time commence an action or joinin any action commenced by the employer against such third person.

No release or settlement of any claim or actionunder this section is valid without the written consent of both employer andemployee.  The entire amount of the settlement after deductions for attorney'sfees and costs as hereinafter provided, is subject to the employer's right ofreimbursement for his compensation payments under this chapter and his expensesand costs of action.

If the action is prosecuted by the employeralone, the employer shall be entitled to be paid from the proceeds received asa result of any judgment for damages, or settlement in case the action iscompromised before judgment, the reasonable litigation expenses incurred inpreparation and prosecution of such action, together with a reasonable attorney'sfee which shall be based solely upon the services rendered by the employer'sattorney in effecting recovery both for the benefit of the employer and theemployee.  After the payment of such expenses and attorney's fee, the employershall apply out of the amount of the judgment or settlement proceeds an amountsufficient to reimburse the employer for the amount of his expenditure forcompensation and shall pay any excess to the injured employee or other personentitled thereto.

If the action is prosecuted by the employeealone, the employee shall be entitled to apply out of the amount of thejudgment for damages, or settlement in case the action is compromised beforejudgment, the reasonable litigation expenses incurred in preparation andprosecution of such action, together with a reasonable attorney's fee whichshall be based solely upon the services rendered by the employee's attorney ineffecting recovery both for the benefit of the employee and the employer. After the payment of such expenses and attorney's fee there shall be appliedout of the amount of the judgment or settlement proceeds, the amount of theemployer's expenditure for compensation, less his share of such expenses andattorney's fee.  On application of the employer, the court shall allow as afirst lien against the amount of the judgment for damages or settlementproceeds, the amount of the employer's expenditure for compensation, less hisshare of such expenses and attorney's fee.

If the action is prosecuted both by theemployee and the employer, in a single action or in consolidated actions, andthey are represented by the same agreed attorney or by separate attorneys,there shall first be paid from any judgment for damages recovered, orsettlement proceeds in case the action or actions be settled before judgment,the reasonable litigation expenses incurred in preparation and prosecution ofsuch action or actions, together with reasonable attorney's fees based solelyon the services rendered for the benefit of both parties where they arerepresented by the same attorney, and where they are represented by separateattorneys, based solely upon the service rendered in each instance by theattorney in effecting recovery for the benefit of the party represented.  Afterthe payment of such expenses and attorneys' fees there shall be applied out ofthe amount of the judgment for damages, or settlement proceeds an amountsufficient to reimburse the employer for the amount of his expenditure forcompensation and any excess shall be paid to the injured employee or otherperson entitled thereto.

In the event that the parties are unable toagree upon the amount of reasonable litigation expenses and the amount ofattorneys' fees under this section then the same shall be fixed by the court.

After reimbursement for his compensationpayments the employer shall be relieved from the obligation to make furthercompensation payments to the employee under this chapter up to the entireamount of the balance of the settlement or the judgment, if satisfied, as thecase may be, after deducting the cost and expenses, including attorneys' fees.

The amount of compensation paid by the employeror the amount of compensation to which the injured employee is entitled shallnot be admissible in evidence in any action brought to recover damages.

Another employee of the same employer shall notbe relieved of his liability as a third party, if the personal injury is causedby his wilful and wanton misconduct.

If the special compensation fund has paid or isliable for any compensation under this chapter, the fund shall be entitled toall the rights and remedies granted an employer under this section; providedthat the employer's right to reimbursement for compensation payments andexpenses under this chapter shall have priority. [L 1963, c 116, pt of §1;Supp, §97-8; am L 1967, c 53, §1; HRS §386-8; am L 1969, c 13, §1; am L 1970, c58, §1; am L 1973, c 144, §1]

 

Cross References

 

  Mailing of notice, see §1-28.

 

Rules of Court

 

  Consolidation of actions, see HRCP rule 42.

  Intervention, see HRCP rule 24.

 

Law Journals and Reviews

 

  Makaneole v. Gampon:  Site Owners Vicariously Liable forNegligence of Contractors and Their Employees.  12 UH L. Rev. 481.

 

Case Notes

 

  Employer or insurance carrier may be required to pay share ofattorney's fees proportionate to total amount of compensation benefits it wouldhave had to pay but for settlement of third party action.  625 F.2d 314.

  Did not allow claim against defendant individually fornegligent infliction of emotional distress; section may allow claim forintentional infliction of emotional distress.  938 F. Supp. 1503.

  Damages awarded against third party.  23 H. 524.  Election,employer or third party.  32 H. 446.  Suit by next friend appointed solely forthat purpose, not an election.  32 H. 928.

  Section not applicable when person for whose compensation thecarrier is liable is the widow of the decedent whose death was caused by thewrongful act or neglect of a third person.  32 H. 153.

  Negligence suit may be filed by an employee of asubcontractor against the general contractor and general contractor'semployees.  50 H. 293, 439 P.2d 669.

  Employer entitled to attorney's fees out of judgmentrecovered from third party tortfeasor but not out of settlement claim.  51 H.437, 462 P.2d 196.

  Section preserves employee's right of action in common law orunder a statute against a third party; it does not establish an independentclaim.  63 H. 273, 626 P.2d 182.

  Co-employee liable to injured employee or nonemployeethird-party plaintiff for injury caused by co-employee's wilful and wantonmisconduct.  68 H. 22, 702 P.2d 772.

  Notwithstanding the language of this statute, disclosure ofworkers' compensation evidence, including the amount, may be appropriate wheresome relevant purpose for allowing its admission develops in trial.  79 H. 14,897 P.2d 941.

  Employer's reliance on the provisions of this section wasreasonable; employer had no duty to intervene until it knew or reasonablyshould have known that plaintiff would dismiss plaintiff's claims againstdefendant without consent.  79 H. 352, 903 P.2d 48.

  Where plaintiff stipulated to dismiss plaintiff's claimsagainst defendant without the written consent of plaintiff's employer, thestipulation dismissing all claims with prejudice was invalid.  79 H. 352, 903P.2d 48.

  Co-employee liability claims based on "wilful and wantonmisconduct" must be proven by clear and convincing evidence.  82 H. 1, 919P.2d 263.

  "Wilful and wanton misconduct" exception toco-employee immunity under this section includes reckless conduct, wherespecific intent by co-employee to cause injury is not required.  82 H. 1, 919P.2d 263.

  Under §386-73, this section, and Hawaii administrative rule§12-10-31, a settlement or compromise of future workers' compensation benefitscannot be valid or binding without the consent or approval of the director oflabor and industrial relations.  90 H. 152, 977 P.2d 160.

  Under this section, the employer must bear a proportionateshare of the employee's attorney's fees and costs incurred while pursuingrecovery from a third party tortfeasor; the employer, and/or its workers'compensation insurance carrier, must bear its share of the employee's attorney'sfees and costs in proportion to the present and future benefits derived from athird party settlement or judgment.  92 H. 515, 993 P.2d 549.

  Assuming defendants' claims for "unreasonable failure toconsent" and "negligent claims handling" fell within theinterference with contract rights exception of §662-15(4), it could not be saidthat the State improperly interfered with the alleged settlement agreementbecause, pursuant to this section, the State was a necessary party to suchagreement.  114 H. 202, 159 P.3d 814.

  There is nothing in the case law or in the legislativehistory of this section to support the imposition of a duty on employers infavor of tortfeasors regarding consent to a third-party settlement; thus, trialcourt did not err in ruling that the State did not owe defendants an actionableduty and thus, did not err in dismissing defendants' cross-claim against theState.  114 H. 202, 159 P.3d 814.

  Trial court did not abuse its discretion in setting aside thestipulation to dismiss the case with prejudice where, pursuant to this section,neither the settlement nor the stipulation was valid without the State'swritten consent; this section's plain and unambiguous language required theState to consent in writing to validate the settlement between the parties, andthe State's letter did not constitute written consent to the settlement asrequired, but had instead proposed an alternative settlement.  114 H. 202, 159P.3d 814.

  Where an employee pursues a third-party action "alone",this section requires that an employer is only entitled to a first lien in theamount of its workers' compensation expended, less the employer's "share"of attorneys' fees and expenses.  92 H. 524 (App.), 993 P.2d 558.

  Where employer intervened before any trial on the facts,trial court did not abuse discretion by allowing employer to intervene.  92 H.524 (App.), 993 P.2d 558.

  No abuse of discretion in requiring insurance company to payone-half of the employee's court expenses.  2 H. App. 344, 631 P.2d 1209.

  Plaintiff permitted to amend pleading to allege cause ofaction for wilful and wanton misconduct against defendant employees of sameemployer.  9 H. App. 21, 821 P.2d 937.