Honolulu, Hawaii
                                                   , 1999

                                 RE: S.B. No. 984
                                     S.D. 1
                                     H.D. 1

Honorable Calvin K.Y. Say
Speaker, House of Representatives
Twentieth State Legislature
Regular Session of 1999
State of Hawaii


     Your Committee on Transportation, to which was referred S.B.
No. 984, S.D. 1, entitled: 


begs leave to report as follows:

     The purpose of this bill is to permit certain contracts of
warranty or guaranty to include coverage for towing and funding
substitute transportation

     Your Committee finds that other states allow the extended
service contracts sold by car dealers to include coverage for
towing, rental vehicles, and other services.  Your Committee
further finds that the Insurance Division of the Department of
Commerce and Consumer Protection maintains that by statute,
services such as towing and vehicle rentals would cause the
service contract to be an insurance instrument, requiring the
dealer to be licensed as an insurer, and the sales personnel as
insurance agents.

     Your Committee also finds that under present statutory
provisions, the Insurance Division is not authorized to exempt
motor vehicle service contracts that include towing and rental
vehicle options, but that the Insurance Division is willing to
implement the National Association of Insurance Commissioner's
(NAIC) Service Contract Model Act if a law is enacted.

                                 STAND. COM. REP. NO. 1240
                                 Page 2

     This bill proposes to repeal paragraph (14) of section
431:1-209, Hawaii Revised Statutes, in the Insurance Code, and to
include the NAIC Service Contract Model Act.  Furthermore, the
bill proposes to edit the Model Act so that only motor vehicle
service contracts or extended warranties become eligible.

     To safeguard the integrity of this service, the bill
proposes requirements that must be met before motor vehicle
services or extended warranty contracts can be implemented,
including services such as towing and rental vehicles.  In order
to assure adherence to these contracts, each provider of service
must insure all service contracts under a reimbursement insurance
policy, set up a reserve fund, or meet minimum net worth

     Testimonies by the Retail Merchants of Hawaii, the Hawaii
Automobile Dealers' Association, the Department of Commerce and
Consumer Affairs, and the Office of Consumer Protection oppose
the bill in its present form, and indicate that changes must be
made to make it acceptable.

     Your Committee has amended this bill by deleting its
substance and inserting the substance of H.B. 213, and by
amending its effective date to January 1, 2010.  

     As affirmed by the record of votes of the members of your
Committee on Transportation that is attached to this report, your
Committee is in accord with the intent and purpose of S.B. No.
984, S.D. 1, as amended herein, and recommends that it pass
Second Reading in the form attached hereto as S.B. No. 984, S.D.
1, H.D. 1, and be referred to the Committee on Consumer
Protection and Commerce.

                                   Respectfully submitted on
                                   behalf of the members of the
                                   Committee on Transportation,

                                   KENNETH T. HIRAKI, Chair