Ninth Circuit Finds Settlement and Two-Year Limitations Statute Barred “Bad Faith” Workers’ Compensation Suit by Man Struck by Lightning

In Larson v. Liberty Mutual Fire Insurance Co., the Ninth Circuit Court of Appeals affirmed that, under Hawaii law, unambiguous broad settlement release language and the two-year tort statute of limitations barred claims that Liberty Mutual Fire Insurance Co. somehow improperly handled a workers’ compensation claim.

In February 2002, Lonnie Larson filed for workers’ compensation under his Liberty policy, claiming that he was struck by lightning during the course of his employment. The government approved the claim, and Liberty appealed the determination. What followed was a flurry of five lawsuits by Larson against Liberty in which Larson alleged that Liberty handled his workers’ compensation claim in bad faith. The litigation finally ended in May 2015, when Larson and Liberty entered into a settlement agreement.

The agreement settled and released Larson’s claims against Liberty “arising out of [Liberty’s] handling of [Larson’s] claim for Workers Compensation Benefits” relating to the incident. It applied “to all injuries, damages and losses resulting from matters related to the subject accident, even though now unanticipated, unexpected and unknown,” and released Liberty “of and from any and all claims that he may have against [Liberty] for all items of damage ... and/or any other past or future damages claimed or that could be claimed by [Larson] in connection with the Claims Released.”

Almost four years after the execution of the settlement, Larson filed another lawsuit against Liberty for claims resulting from Liberty’s alleged interference with his receipt of workers’ compensation and payment of medical bills. The district court granted summary judgment in favor of Liberty, holding that Larson’s claims were resolved by the settlement and barred by Hawaii’s tort statute of limitations, which Larson appealed to the Ninth Circuit.

On appeal, Larson argued that (i) the settlement “is ambiguous, and that parol evidence must be consulted to determine the parties’ intent”; (ii) he misunderstood the settlement because he was “defrauded” by Liberty’s attorneys; and (iii) Hawaii’s public policy disfavors the release of future claims.

The court found that the settlement was “not ambiguous as to the broad release given.” It also took exception to Larson’s allegations of fraud, public policy, and misunderstanding since Larson had not raised those issues in the court below. Citing El Paso City v. America West Airlines Inc., 217 F.3d 1161 (9th Cir. 2000), the court found that there were no exceptional circumstances in the case that would warrant the consideration of arguments raised for the first instance on appeal.

The Ninth Circuit also affirmed the lower court’s finding that the claims were barred by Hawaii’s two-year statute of limitations for tort claims. In Hawaii, “tort claims accrue when the plaintiff discovers or should have discovered the negligent act, the damage, and the causal connection between the former and the latter.” Since the issues were not raised in the two years before the complaint was filed, and the complaint did not include any allegations of wrongful acts, the two-year statute of limitations was not tolled and accordingly expired before the lawsuit was filed.