REPORT TITLE: 
Errors and omission insurance.


DESCRIPTION:
Requires real estate brokers and salespersons and registered
condominium hotel operators to maintain liability insurance
coverage against errors or omissions occurring in the conduct of
business.

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                        
THE SENATE                              S.B. NO.           704
TWENTIETH LEGISLATURE, 1999                                
STATE OF HAWAII                                            
                                                             
________________________________________________________________
________________________________________________________________


                     A BILL FOR AN ACT

RELATING TO REAL ESTATE BROKERS AND SALESPERSONS.



BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

 1      SECTION 1.  Chapter 467, Hawaii Revised Statutes, is
 
 2 amended:
 
 3      1.  By adding a new section to be appropriately designated
 
 4 and to read as follows:
 
 5      "467-      Liability insurance coverage for errors and
 
 6 omissions required.  Effective January 1, 2001, all active real
 
 7 estate licensees and condominium hotel operators registered
 
 8 pursuant to section 467-30 shall maintain liability insurance
 
 9 coverage against any errors or omissions occurring in the conduct
 
10 of business under this chapter.  The department of commerce and
 
11 consumer affairs shall establish minimum requirements for the
 
12 terms and conditions of the liability coverage required under
 
13 this section, that shall include but not be limited to the
 
14 minimum limits of coverage, permissible deductibles, and
 
15 permissible exemptions."
 
16      2.  By amending section 467-8 to read as follows:
 
17      "467-8  Prerequisites for licensing.  No license,
 
18 registration, or certificate under this chapter shall be issued
 
19 to:
 

 
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 1      (1)  Any individual applying for a real estate broker or
 
 2           salesperson license who does not satisfy the
 
 3           requirements set forth in section 467-9.5;
 
 4      (2)  Any individual applying for a real estate broker or
 
 5           salesperson license unless the individual has
 
 6           demonstrated by passing with a grade satisfactory to
 
 7           the commission an examination appropriate to the
 
 8           license sought that the individual has a reasonable
 
 9           knowledge of:
 
10           (A)  Estates, interests, and rights in real property;
 
11           (B)  The documents or acts or occurrences by which
 
12                property is transferred or otherwise affected;
 
13           (C)  The rights and duties of an agent;
 
14           (D)  The laws of the State relating to real estate
 
15                brokers and salespersons; and
 
16           (E)  Other subjects that the commission determines to
 
17                be essential for the protection of the general
 
18                public in its real estate transactions;
 
19      (3)  Any person who does not possess a reputation for or
 
20           record of competency, honesty, truthfulness, financial
 
21           integrity, and fair dealing;
 
22      (4)  Any partnership unless the real estate brokerage
 
23           business thereof is under the direct management of a
 

 
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                                     S.B. NO.           704
                                                        
                                                        

 
 1           principal broker who is a general partner or employee
 
 2           thereof and holds a real estate broker's license;
 
 3      (5)  Any corporation unless the real estate brokerage
 
 4           business thereof is under the direct management of a
 
 5           principal broker who is an officer or employee thereof
 
 6           and holds a real estate broker's license;
 
 7      (6)  Any individual applying for a real estate broker's
 
 8           license who does not have a current active or inactive
 
 9           Hawaii real estate salesperson's license; [or] 
 
10      (7)  Any person with a trade name, partnership, or
 
11           corporation that is not currently registered with the
 
12           department of commerce and consumer affairs; provided
 
13           that no real estate salesperson's license shall be
 
14           approved or issued with a trade name[.]; or
 
15      (8)  Any person who is not covered by a liability insurance
 
16           policy as required under section 467-    covering
 
17           errors and omissions by that person in the conduct of
 
18           business under this chapter."
 
19      SECTION 2.  (a)  Within thirty days after the effective date
 
20 of this Act, the department of commerce and consumer affairs, in
 
21 consultation with the real estate commission, shall establish
 
22 minimum requirements for the terms and conditions of the
 
23 liability coverage required by this Act for the purpose of
 

 
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                                     S.B. NO.           704
                                                        
                                                        

 
 1 determining the availability of such coverage in this State at
 
 2 reasonable rates.
 
 3      (b)  Upon the establishment of such minimum requirements,
 
 4 the department of commerce and consumer affairs, in consultation
 
 5 with the insurance commissioner and appropriate representatives
 
 6 from the insurance industry, shall investigate and determine the
 
 7 most feasible methods by which the liability insurance coverage
 
 8 required by this Act can be obtained by real estate brokers and
 
 9 salespersons in this State.  To accomplish this task, the
 
10 department shall consider the following:
 
11      (1)  Licensees should have the option of being self-insured
 
12           or purchasing insurance on an individual or group basis
 
13           including through the Hawaii Association of Realtors;
 
14      (2)  The annual premium of any insurance purchased by
 
15           licensees shall be reasonable and shall not exceed
 
16           $200; and
 
17      (3)  If existing products offered by insurance companies do
 
18           not meet the minimum coverage requirements established
 
19           by the department of commerce and consumer affairs,
 
20           innovative methods of making available affordable
 
21           liability insurance to real estate brokers and
 
22           salespersons and registered hotel operators shall be
 
23           investigated.
 

 
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 1      (c)  By November 1, 1999, the department of commerce and
 
 2 consumer affairs shall notify all persons licensed and registered
 
 3 condominium hotel operators under chapter 467, Hawaii Revised
 
 4 Statutes, and required to maintain liability insurance under this
 
 5 Act of the minimum requirements for the required coverage.  The
 
 6 notice shall also include information as to the methods by which
 
 7 such coverage can be obtained at affordable prices.
 
 8      SECTION 3.  Statutory material to be repealed is bracketed.
 
 9 New statutory material is underscored.
 
10      SECTION 4.  This Act shall take effect upon its approval;
 
11 provided that if, after its investigation, the department of
 
12 commerce and consumer affairs finds that liability coverage
 
13 required under this Act cannot be obtained, by any method, in
 
14 this State at an annual premium rate of not more than $200, the
 
15 liability coverage requirement shall be enforceable until such
 
16 time that affordable coverage is available in this State.
 
17  
 
18                       INTRODUCED BY:_____________________________