§431:13-104  Favored producer or insurer; coercion of debtors.  (a)  No person may require as a condition precedent to the lending of money or extension of credit, or any renewal thereof, that the person to whom such money or credit is extended or whose obligation a creditor is to acquire or finance, negotiate any contract of insurance, or renewal thereof, through a particular insurer or group of insurers or producer or group of producers.

     (b)  No person who lends money or extends credit may:

     (1)  Solicit insurance, after a person indicates interest in securing a loan or credit extension, until such person has received a commitment in writing from the lender as to a loan or credit extension.  The requirement for a commitment shall not apply in cases where the premium for the required insurance is to be financed as part of the loan or extension of credit involving personal property transactions;

     (2)  Unreasonably reject a contract of insurance furnished by the borrower where insurance is required by the loan or credit transaction.  A rejection shall not be deemed unreasonable if it is based on reasonable standards, uniformly applied, relating to the extent of coverage required and the financial soundness and the services of an insurer.  Such standards shall not discriminate against any particular type of insurer, nor shall such standards call for rejection of an insurance contract because the contract contains coverage in addition to that required in the loan or credit transaction;

     (3)  Require that any borrower, mortgagor, purchaser, insurer, or producer pay a separate charge, in connection with the handling of any contract of insurance required by the loan or credit transaction, or pay a separate charge to substitute the insurance policy of one insurer for that of another.  This paragraph does not include the interest which may be charged on premium loans or premium advancements in accordance with the terms of the loan or credit document;

     (4)  Use or disclose information relative to a contract of insurance which is required by, or supplied in response to, the loan or credit transaction, for the purpose of replacing the insurance or soliciting insurance;

     (5)  Require any procedures or conditions of duly licensed producers or insurers not customarily required of those producers or insurers affiliated or in any way connected with the person who lends money or extends credit.

     (c)  Every person who lends money or extends credit and who solicits insurance subject to subsection (b) must explain to the borrower in writing that the insurance related to such credit extension may be purchased from an insurer or producer of the borrower's choice, subject only to the lender's right to reject a given insurer or producer as provided in subsection (b)(2).  Compliance with disclosures as to insurance required by truth-in-lending laws or comparable state laws shall be in compliance with this paragraph.

     (d)  The commissioner shall have the power to examine and investigate those insurance related activities of any person whom the commissioner believes may be in violation of this section.  Any affected person may submit to the commissioner a complaint or material pertinent to the enforcement of this section.

     (e)  Nothing in this section shall prevent a person who lends money or extends credit from placing insurance on real or personal property in the event the mortgagor, borrower, or purchaser has failed to provide required insurance in accordance with the terms of the loan or credit document.

     (f)  Nothing contained in this section shall apply to credit life or credit disability insurance.

     (g)  Nothing in this section shall prevent a person who lends money or extends credit from assisting a mortgagor, borrower, or purchaser in obtaining homeowners insurance where the borrower requests such assistance in writing.  Nothing in this section shall prevent a person who lends money or extends credit from referring a mortgagor, borrower, or purchaser to the Hawaii hurricane relief fund.

     (h)  The commissioner shall adopt rules to prevent any bank, or subsidiary or affiliate thereof, which is engaged in insurance activities, from draining assets to the detriment of the insurance operations; and shall also adopt rules to obtain diverted assets from the bank, subsidiary, or affiliate in the case of insolvency of the insurance operation. [L 1987, c 347, pt of §2; am L 1993, c 339, §6; am L 1996, c 225, §4; am L 2001, c 216, §25; am L 2003, c 3, §14]


Cross References


  Hawaii hurricane relief fund, see chapter 431P.