8.5 Hawaii Workers' Compensation Law (HRS Chapter 386): Coverage, Exclusive Remedy, Benefits & Insurer Duties

8.5 Hawaii Workers' Compensation Law (HRS Chapter 386): Coverage, Exclusive Remedy, Benefits & Insurer Duties

Section 3.6 explained the standard workers' compensation and employers liability policy. This section covers Hawaii's workers' compensation law, HRS chapter 386, which the adjuster outline lists under Hawaii casualty law (§§ 386-1, 3, 5, 6, 21, 31, 32, 82, 95 and 121-124, 127). Hawaii also licenses workers' compensation adjusters separately (5.3). Their 25-question exam covers this chapter in greater depth, but every Hawaii adjuster needs the core rules. The law is administered by the Department of Labor and Industrial Relations (DLIR), through its Disability Compensation Division and the director of labor and industrial relations.

Who Is Covered (§ 386-1)

• Employer — any person having one or more persons in employment, including the State, the counties and other public entities. The employer's insurer is subject to the employer's liabilities.
• Employee — any individual in the employment of another. A loaned employee becomes the employee of the borrowing employer while control is transferred, unless the borrower fails to secure compensation.
• Wages — all remuneration for employment, including the market value of board and lodging, and customary tips received from others.
• Work injury — a personal injury under the conditions in § 386-3.

Covered Injuries and Exclusions (§ 386-3)

Compensation is payable if an employee suffers personal injury:

• by accident arising out of and in the course of employment; or
• by disease proximately caused by or resulting from the nature of the employment.

An "accident arising out of and in the course of employment" includes the willful act of a third person directed against an employee because of the employee's employment.

No compensation is allowed for an injury caused by:

• the employee's willful intention to injure oneself or another;
• the employee actively engaging in an unprovoked, non-work-related physical altercation, other than in self-defense; or
• the employee's intoxication.

A claim for mental stress resulting solely from good-faith disciplinary action by the employer is not allowed. If a collective bargaining agreement sets a different standard, that standard applies.

Exclusive Remedy (§ 386-5)

The employee's rights under chapter 386 exclude all other liability of the employer to the employee, the employee's legal representative, spouse, dependents, next of kin, or anyone else entitled to recover damages from the employer on account of the injury. The statutory exception: for sexual harassment or sexual assault, and infliction of emotional distress or invasion of privacy related to it, a civil action may also be brought. Third parties, such as a negligent driver or product manufacturer, remain liable to the employee (see 3.6 on third-party-over claims under Part Two employers liability).

Territorial Reach (§ 386-6)

• The chapter applies to all work injuries sustained within Hawaii.
• An employee hired in Hawaii who is injured outside the state is still entitled to Hawaii benefits.
• An employee hired elsewhere and injured in Hawaii while working for that employer may enforce rights under the hiring state's law in Hawaii, if they can reasonably be determined and administered here.

The Statutory Presumptions (§ 386-85)

In any proceeding to enforce a compensation claim, it is presumed, in the absence of substantial evidence to the contrary:

1. that the claim is for a covered work injury;
2. that sufficient notice of the injury was given;
3. that the injury was not caused by the employee's intoxication; and
4. that the injury was not caused by the employee's willful intention to injure oneself or another.

The employer or insurer bears the burden of producing substantial evidence to rebut each presumption. Hawaii courts resolve doubts in favor of the claimant. In practice, an adjuster who wants to contest compensability needs specific, credible evidence — such as medical opinions on causation or witness statements — not speculation.

Medical Benefits (§ 386-21)

• Immediately after a work injury, and as long as reasonably needed, the employer must furnish all medical care, services and supplies the injury requires, subject to the optional employer deductible under § 386-100.
• The employee may select any physician or surgeon practicing on the island where the injury occurred, or a specialist anywhere in the state. The director may authorize an out-of-state specialist when no comparable care exists in Hawaii. The employee may change physicians under the director's rules.
• Charges are limited by the director's fee schedules, generally not exceeding 110% of the Medicare resource-based relative value scale applicable to Hawaii. The same workers' compensation supplemental medical fee schedule caps motor vehicle PIP charges (8.2).

Disability Benefits (§§ 386-31, 386-32)

Partial disability may not be determined until two weeks after the injury (§ 386-32(c)). Vocational rehabilitation is available through DLIR-certified providers; enrollment is voluntary and requires the employee's approval (§ 386-25).

Death Benefits (§§ 386-34, 386-41)

• Funeral and burial — funeral expenses up to 10 times the maximum weekly benefit rate, paid to the mortician, and burial expenses up to five times, paid to the cemetery.
• Dependents' weekly benefits — for example, 50% of the deceased's average weekly wages to a dependent spouse or reciprocal beneficiary with no dependent children, or 66 2/3% if there are dependent children. The total for all dependents may not exceed 66 2/3%.
• If there are no dependents, the employer pays a statutory amount to nondependent parents, or into the special compensation fund.
• If an employee receiving PTD or PPD dies of an unrelated cause, the unpaid balance is paid to dependents in a statutory order (§ 386-34).

Claims, Reports and Reopening

This eight-year reopening window explains why adjusters must keep workers' compensation claim records for eight years after the transaction is completed, compared with five years for other claims (§ 431:9-229; see 5.4).

Security for Compensation and the Insurance Contract

• Securing compensation (§ 386-121) — private employers must either insure with an authorized insurer, deposit approved security, or qualify as a self-insurer by proving solvency to the director. Government employers are excepted.
• Notice of insurance (§ 386-122) — an insured employer files notice of its insurance with the director.
• Penalty for failing to secure (§ 386-123) — a penalty of at least $500, or $100 per employee per day of noncompliance, whichever is greater, paid into the special compensation fund. An employer in default for 14 days may be enjoined from doing business in Hawaii.
• The insurance contract (§ 386-124) — every policy must cover the employer's entire liability to covered employees and offer the deductible option. It must let employees enforce the insurer's liability in their own names, and must be on a standard form designated and approved by the insurance commissioner.
• Cancellation (§ 386-127) — a workers' compensation policy cannot be cancelled before expiration until at least 10 days after a notice of intent to cancel has been filed with the director and served on the employer.

Fraud Jurisdiction

The Insurance Division's fraud branch has no jurisdiction over workers' compensation fraud under chapter 386 (§ 431:2-402). Workers' compensation fraud is handled under chapter 386 and by DLIR. Suspicious workers' compensation claims are therefore referred through the insurer's SIU to the appropriate DLIR and prosecutorial channels.