REPORT TITLE:
Insurance


DESCRIPTION:
Defines a stock insurer.  Specifies that an appointment is
required from an insurer for whom policies are being solicited or
sold.  Mandates ten-day cancellation notices and thirty-day
nonrenewal notices for insurance policies.  (HB2472 CD1)

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                        2472
HOUSE OF REPRESENTATIVES                H.B. NO.           H.D. 2
TWENTIETH LEGISLATURE, 2000                                S.D. 2
STATE OF HAWAII                                            C.D. 1
                                                             
________________________________________________________________
________________________________________________________________


                   A  BILL  FOR  AN  ACT

RELATING TO INSURANCE.



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

 1      SECTION 1.  Chapter 431, Hawaii Revised Statutes, is amended
 
 2 by adding a new section to part I of article 3 to be
 
 3 appropriately designated and to read as follows:
 
 4      "431:3-    Stock insurer.  A stock insurer is an
 
 5 incorporated insurer with capital stock divided into shares and
 
 6 owned by its stockholders to whom the earnings are distributed as
 
 7 dividends on their shares."
 
 8      SECTION 2.  Chapter 431, Hawaii Revised Statutes, is amended
 
 9 by adding a new section to part II of article 9 to be
 
10 appropriately designated and to read as follows:
 
11      "431:9-    Appointment required.  (a)  No person engaging
 
12 in the business of insurance in this State shall do so without
 
13 holding the required appointment.
 
14      (b)  No general agent, subagent, or solicitor in this State
 
15 shall solicit or take applications for, procure, or place for
 
16 others any insurance policy without having an appointment with
 
17 the insurer.
 
18      (c)  No subagent or solicitor in this State shall solicit or
 
19 take applications for, procure, or place for others any insurance
 

 
Page 2                                                     2472
                                     H.B. NO.           H.D. 2
                                                        S.D. 2
                                                        C.D. 1


 1 policy without having an appointment with a general agent who
 
 2 holds an appointment with the insurer.
 
 3      (d)  Any person violating this section shall be subject to
 
 4 penalties as provided in section 431:9-201."
 
 5      SECTION 3.  Chapter 431, Hawaii Revised Statutes, is amended
 
 6 by adding a new section to part II of article 10 to be
 
 7 appropriately designated and to read as follows:
 
 8      "431:10-    Notice of cancellation or nonrenewal.  In the
 
 9 case of cancellation of a policy, the insurer shall give written
 
10 notice to the insured not fewer than ten days prior to the
 
11 effective date of cancellation.  For nonrenewal of a policy, the
 
12 insurer shall give written notice to the insured not fewer than
 
13 thirty days prior to the effective date of nonrenewal.  If under
 
14 title 24 or a policy, a longer time period is required for a
 
15 notice of cancellation or nonrenewal for the policy, the longer
 
16 period shall be applicable.  Cancellation or nonrenewal shall not
 
17 be deemed valid unless evidence of mailing is provided."
 
18      SECTION 4.  Section 431:2-209, Hawaii Revised Statutes, is
 
19 amended as follows:
 
20      1.  By amending subsection (c) to read:
 
21      "(c)  One year after conclusion of the transactions to which
 
22 they relate, the commissioner may destroy any correspondence,
 
23 void or obsolete filings relating to rates, certificate of
 

 
Page 3                                                     2472
                                     H.B. NO.           H.D. 2
                                                        S.D. 2
                                                        C.D. 1


 1 authority applications, foreign or alien insurers' annual
 
 2 statements and valuation reports, cards, and expired bonds.
 
 3 Three years after the conclusion of the transactions to which
 
 4 they relate, the commissioner may destroy any claim files,
 
 5 working papers of examinations, reports of examination by
 
 6 insurance supervisory officials of other states, void or obsolete
 
 7 filings relating to license applications, records of hearings and
 
 8 investigations, and any similar records, documents, or memoranda
 
 9 now or hereafter in the commissioner's possession."
 
10      2.  By amending subsection (e) to read:
 
11      "(e)  The following records and reports on file with the
 
12 commissioner shall be confidential and protected from discovery,
 
13 production, and disclosure for so long as the commissioner deems
 
14 prudent:
 
15      (1)  Complaints and investigation reports;
 
16      (2)  Working papers of [examination reports;] examinations,
 
17           complaints, and investigation reports;
 
18      (3)  Proprietary information, including trade secrets,
 
19           commercial information, and business plans, which, if
 
20           disclosed may result in competitive harm to the person
 
21           providing [said] the information;
 

 
 
 
 
 
Page 4                                                     2472
                                     H.B. NO.           H.D. 2
                                                        S.D. 2
                                                        C.D. 1


 1      (4)  Any documents or information received from the National
 
 2           Association of Insurance Commissioners, the federal
 
 3           government, or insurance departments of other states,
 
 4           territories, and commonwealths that are confidential in
 
 5           other jurisdictions.  The commissioner shall be
 
 6           authorized to share information, including otherwise
 
 7           confidential information with the National Association
 
 8           of Insurance Commissioners, the federal government, or
 
 9           insurance departments of other states, territories, and
 
10           commonwealths so long as the statutes or regulations of
 
11           the other jurisdictions permit them to maintain the
 
12           same level of confidentiality as required under Hawaii
 
13           law."
 
14      SECTION 5.  Section 431:2-215, Hawaii Revised Statutes, is
 
15 amended by amending subsections (a) and (b) to read as follows:
 
16      "(a)  There is established a special fund to be designated
 
17 as the insurance regulation fund.  All assessments, fees, fines,
 
18 penalties, and reimbursements collected by or on behalf of the
 
19 insurance division under title 24, except for the commissioner's
 
20 education and training fund (section 431:2-214), the patients'
 
21 compensation fund (Act 232, Session Laws of Hawaii 1984), the
 
22 drivers education fund underwriters fee (section 431:10C-115),
 
23 and the captive insurance administrative fund (section 431:19-
 

 
Page 5                                                     2472
                                     H.B. NO.           H.D. 2
                                                        S.D. 2
                                                        C.D. 1


 1 101.8)[,] to the extent provided by section 431:19-101.8(b),
 
 2 shall be deposited into the insurance regulation fund.  All sums
 
 3 transferred into the insurance regulation fund may be expended by
 
 4 the commissioner to carry out the commissioner's duties and
 
 5 obligations under title 24.
 
 6      (b)  The insurance regulation fund shall be used to defray
 
 7 any administrative costs, including personnel costs, associated
 
 8 with the programs of the division, and costs incurred by
 
 9 supporting offices and divisions.  Any law to the contrary
 
10 notwithstanding, the commissioner may use the moneys in the fund
 
11 to employ[,] or retain, by contract or otherwise, without regard
 
12 to chapters 76 and 77, hearings officers, attorneys,
 
13 investigators, accountants, examiners, and other necessary
 
14 professional, technical, and support personnel to implement and
 
15 carry out the purposes of title 24; provided that any position,
 
16 except any attorney position, that is subject to chapter 76 and
 
17 77 prior to July 1, 1999 shall remain subject to chapters 76 and
 
18 77."
 
19      SECTION 6.  Section 431:7-203, Hawaii Revised Statutes, is
 
20 amended by amending subsection (a) to read as follows:
 
21      "(a)  In the event any person has paid to the commissioner
 
22 any tax, fee, or other charge in error or in excess of that which
 
23 the person is lawfully obligated to pay under this code, the
 

 
Page 6                                                     2472
                                     H.B. NO.           H.D. 2
                                                        S.D. 2
                                                        C.D. 1


 1 commissioner, upon written request made by the person to the
 
 2 commissioner within the time set forth in section 431:7-204.6,
 
 3 shall authorize a refund thereof out of the insurance regulation
 
 4 fund [of this State], except that a tax refund shall be payable
 
 5 out of the general fund, by submitting a voucher therefor to the
 
 6 comptroller [of this State] subject to the following limitations:
 
 7      (1)  No recourse may be had except under section 40-35 or by
 
 8           appeal for refunds of taxes paid pursuant to an
 
 9           assessment by the commissioner; provided that if the
 
10           assessment by the commissioner [shall contain] contains
 
11           clerical errors, transposition of figures,
 
12           typographical errors, and errors in calculation or if
 
13           there [shall be] is an illegal or erroneous assessment
 
14           because the assessment is not in accordance with this
 
15           code, the refund procedures in subsection (a) shall
 
16           apply; and
 
17      (2)  No refund or overpayment credit shall be made unless
 
18           the original payment of the tax was due to the law
 
19           having been interpreted or applied [in] with respect to
 
20           the taxpayer concerned differently than [in] with
 
21           respect [of] to taxpayers generally.
 

 
 
 
 
 
Page 7                                                     2472
                                     H.B. NO.           H.D. 2
                                                        S.D. 2
                                                        C.D. 1


 1      As to all tax payments for which a refund or credit is not
 
 2 authorized by this subsection (including, without prejudice to
 
 3 the generality of the foregoing, cases of unconstitutionality),
 
 4 the remedies provided by appeal or under section 40-35 are
 
 5 exclusive."
 
 6      SECTION 7.  Section 431:8-302, Hawaii Revised Statutes, is
 
 7 amended by amending subsection (b) to read as follows:
 
 8      "(b)  Before placing insurance with any unauthorized
 
 9 insurer, the broker shall ascertain the financial condition of
 
10 the insurer and:
 
11      (1)  In the case of a foreign insurer, shall maintain in the
 
12           broker's office a current certificate, in proper form,
 
13           from the regulatory authority in the domicile of the
 
14           unauthorized insurer, to the effect that the insurer
 
15           has capital and surplus, or its equivalent under the
 
16           laws of its domiciliary jurisdiction, which equals the
 
17           minimum capital and surplus requirements of this State
 
18           for that kind of insurer as set out in article 3; or
 
19      (2)  In the case of an alien insurer, shall maintain in the
 
20           broker's office evidence of the financial
 
21           responsibility of the insurer.  Evidence satisfactory
 
22           to the commissioner that the insurer maintains in the
 
23           United States an irrevocable trust fund in either a
 

 
Page 8                                                     2472
                                     H.B. NO.           H.D. 2
                                                        S.D. 2
                                                        C.D. 1


 1           national bank or a member of the federal reserve system
 
 2           in an amount not less than [$2,500,000] $5,400,000 for
 
 3           the protection of all its policyholders in the United
 
 4           States consisting of cash, securities, letters of
 
 5           credit, or of investments of substantially the same
 
 6           character and quality as those which are eligible
 
 7           investments for the capital and statutory reserves of
 
 8           authorized insurers writing like kinds of insurance in
 
 9           this State, shall constitute prima facie evidence of
 
10           responsibility.
 
11 Upon request by the commissioner, the broker shall immediately
 
12 submit to the commissioner the items described in this
 
13 subsection."
 
14      SECTION 8.  Section 431:9-105, Hawaii Revised Statutes, is
 
15 amended by amending subsection (e) to read as follows:
 
16      "(e)  Following a catastrophe in this State, a Hawaii
 
17 license shall not be required of a nonresident independent
 
18 adjuster for the adjustment of losses; provided:
 
19      (1)  The common losses suffered that are to be adjusted are
 
20           a direct result of that catastrophe;
 
21      (2)  The adjuster provides to the licensing branch of the
 
22           insurance division a certified copy of the adjuster's
 
23           current license in another [state's current license.]
 

 
Page 9                                                     2472
                                     H.B. NO.           H.D. 2
                                                        S.D. 2
                                                        C.D. 1


 1           state.  That other state shall have similar licensing
 
 2           requirements to section [431:9-217;] 431:9-222; and
 
 3      (3)  That within three working days of when the nonresident
 
 4           independent adjuster begins work, the insurance
 
 5           company, independent adjusting company, general agent,
 
 6           or subagent that is utilizing the adjuster shall
 
 7           provide on its letterhead to the licensing branch of
 
 8           the insurance division:
 
 9           (A)  The name of the adjuster;
 
10           (B)  The adjuster's Hawaii mailing and business
 
11                addresses and phone numbers; and
 
12           (C)  The adjuster's permanent [nonresident] home and
 
13                business addresses and phone numbers.
 
14      For the purpose of this subsection, a catastrophe exists
 
15 when due to a sudden, specific, and natural or manmade disaster
 
16 or phenomenon, there arises property losses in Hawaii that are
 
17 covered by insurance.  These losses must be so severe that
 
18 resident licensed and independent adjusters will be unable to
 
19 adjust the losses within a reasonable time as determined by the
 
20 division."
 
21      SECTION 9.  Section 431:9-201, Hawaii Revised Statutes, is
 
22 amended to read as follows:
 

 
 
 
Page 10                                                    2472
                                     H.B. NO.           H.D. 2
                                                        S.D. 2
                                                        C.D. 1


 1      "431:9-201  License required.(a)  No person engaging in
 
 2 the business of insurance in this State shall act as, be
 
 3 appointed as, or hold oneself out to be a general agent,
 
 4 subagent, solicitor, or adjuster unless so licensed by this
 
 5 State.
 
 6      (b)  No general agent, subagent, or solicitor in this State
 
 7 shall solicit or take applications for, procure, or place for
 
 8 others any class of insurance for which the general agent,
 
 9 subagent, or solicitor is not licensed and does not hold an
 
10 appointment from the insurer in this State for that class of
 
11 insurance.
 
12      (c)  A regular salaried officer or employee of an authorized
 
13 insurer shall not be required to be licensed by reason of
 
14 rendering assistance to, or on behalf of a licensed general
 
15 agent, subagent, or solicitor, provided that the salaried officer
 
16 or employee devotes substantially all of the officer's or
 
17 employee's time to activities other than the solicitation of
 
18 applications for insurance or annuity contracts and receives no
 
19 commission or other compensation directly dependent upon the
 
20 amount of business obtained.
 
21      (d)  Any person violating this section shall be [fined not
 
22 more than $1,000] assessed a civil penalty not to exceed $5,000
 
23 for each factually different violation.
 

 
Page 11                                                    2472
                                     H.B. NO.           H.D. 2
                                                        S.D. 2
                                                        C.D. 1


 1      (e)  Any person who knowingly violates this section shall be
 
 2 assessed a civil penalty of not less than $1,000 and not more
 
 3 than $10,000 for each violation.
 
 4      (f)  Each repetition of an act that constitutes a violation
 
 5 subject to subsection (d) or (e) shall constitute a separate
 
 6 violation."
 
 7      SECTION 10.  Section 431:10B-108, Hawaii Revised Statutes,
 
 8 is amended by amending subsection (c) to read as follows:
 
 9      "(c)  The benefits provided by the policy form shall not be
 
10 deemed reasonable in relation to the premium charged or to be
 
11 charged if the ratio of losses incurred to premiums earned is not
 
12 at least sixty per cent.  The commissioner may adopt by rules
 
13 prima facie acceptable premium rates that shall reasonably be
 
14 expected to produce a sixty per cent loss ratio.  The prima facie
 
15 rates shall be usable without actuarial or statistical
 
16 justification when filed together with an otherwise acceptable
 
17 policy form[.]; provided that the ratio of losses for the most
 
18 recent three years is at least sixty per cent.  The rules shall
 
19 specify the plans of benefits to which the premium rates shall
 
20 apply."
 
21      SECTION 11.  Section 431:10C-307.7, Hawaii Revised Statutes,
 
22 is amended by amending subsection (b) to read as follows:
 

 
 
 
Page 12                                                    2472
                                     H.B. NO.           H.D. 2
                                                        S.D. 2
                                                        C.D. 1


 1      "(b) Violation of subsection (a) is a criminal offense and
 
 2 shall constitute a:
 
 3      (1)  Class B felony if the value of the benefits, recovery,
 
 4           or compensation obtained or attempted to be obtained is
 
 5           more than $20,000;
 
 6      (2)  Class C felony if the value of the benefits, recovery,
 
 7           or compensation obtained or attempted to be obtained is
 
 8           more than $300; or
 
 9      (3)  Misdemeanor if the value of the benefits, recovery, or
 
10           compensation obtained or attempted to be obtained is
 
11           [less than $300.] $300 or less."
 
12      SECTION 12.  Section 431:11-105, Hawaii Revised Statutes, is
 
13 amended by amending subsection (a) to read as follows:
 
14      "(a)  Every insurer who is authorized to do business in this
 
15 State and who is a member of an insurance holding company system
 
16 shall register with the commissioner, except a foreign insurer
 
17 subject to registration requirements and standards adopted by
 
18 statute or regulation in the jurisdiction of its domicile that
 
19 are substantially similar to those contained in this section and
 
20 section 431:11-106(a)(1), (b), and (d).  [The insurer shall file
 
21 a copy of the registration statement and summary of its
 
22 registration statement as required by subsections (b) and (c)
 
23 with the National Association of Insurance Commissioners.]  The
 

 
Page 13                                                    2472
                                     H.B. NO.           H.D. 2
                                                        S.D. 2
                                                        C.D. 1


 1 insurer [also] shall file a copy of the summary of its
 
 2 registration statement as required by subsection (c) in each
 
 3 state in which that insurer is authorized to do business if
 
 4 requested by the commissioner of that state.  Any insurer who is
 
 5 subject to registration under this section shall register within
 
 6 fifteen days after it becomes subject to registration, and
 
 7 annually thereafter by March 15 of each year for the previous
 
 8 calendar year, unless the commissioner for good cause shown
 
 9 extends the time for registration, and then within the extended
 
10 time.  The commissioner may require any insurer who is a member
 
11 of a holding company system who is not subject to registration
 
12 under this section to furnish a copy of the registration
 
13 statement or other information filed by the insurance company
 
14 with the insurance regulatory authority of domiciliary
 
15 jurisdiction."
 
16      SECTION 13.  Section 431:11-111, Hawaii Revised Statutes, is
 
17 amended as follows:
 
18      1.  By amending subsections (a) and (b) to read:
 
19      "(a)  Any insurer failing[,] without just cause[,] to file
 
20 any registration statement as required in this article, shall be
 
21 [required, after notice and hearing, to pay a penalty of $100 for
 
22 each day's delay,] liable for a fine in an amount of not less
 
23 than $100 and not more than $500 for each day of delinquency, to
 

 
Page 14                                                    2472
                                     H.B. NO.           H.D. 2
                                                        S.D. 2
                                                        C.D. 1


 1 be recovered by the commissioner, and the penalty so recovered
 
 2 shall be paid into the insurance regulation fund [of this State.
 
 3 The maximum penalty under this subsection is $5,000].  The
 
 4 commissioner may reduce the penalty if the insurer demonstrates
 
 5 to the commissioner that the imposition of the penalty would
 
 6 constitute a financial hardship to the insurer.
 
 7      (b)  Every director or officer of an insurance holding
 
 8 company system who knowingly violates, participates in, or
 
 9 assents to, or who knowingly [shall permit] permits any of the
 
10 officers or agents of the insurer to engage in any transactions
 
11 or make investments [which] that have not been properly reported
 
12 or submitted pursuant to sections 431:11-105(a),
 
13 431:11-106(a)(2), or 431:11-106(b), or who violates this article,
 
14 shall [pay, in their individual capacity, a civil forfeiture of
 
15 not more than $5,000 per violation, after notice and hearing
 
16 before the commissioner.] be subject to a fine of not less than
 
17 $100 and not more than $10,000 per violation.  In determining the
 
18 amount of the [civil forfeiture,] fine, the commissioner shall
 
19 take into account the appropriateness of the [forfeiture] fine
 
20 with respect to the gravity of the violation, the history of
 
21 previous violations, and such other matters as justice may
 
22 require."
 
23      2.  By amending subsections (d) and (e) to read:
 

 
Page 15                                                    2472
                                     H.B. NO.           H.D. 2
                                                        S.D. 2
                                                        C.D. 1


 1      "(d)  Whenever it appears to the commissioner that any
 
 2 insurer or any director, officer, employee, or agent thereof has
 
 3 committed a wilful violation of this article, the commissioner
 
 4 may cause criminal proceedings to be instituted against the
 
 5 insurer or the responsible director, officer, employee, or agent
 
 6 thereof.  Any insurer who wilfully violates this article [may be
 
 7 fined not more than $5,000.] shall be subject to a fine of not
 
 8 less than $100 and not more than $10,000 per violation.  Any
 
 9 individual who wilfully violates this article [may be fined in
 
10 the individual's capacity not more than $5,000,] shall be subject
 
11 to a fine in the individual's capacity of not less than $100 and
 
12 not more than $10,000 per violation, or be imprisoned for not
 
13 more than one year.
 
14      (e)  Any officer, director, or employee of an insurance
 
15 holding company system who wilfully and knowingly subscribes to
 
16 or makes, or causes to be made, any false statements [or], false
 
17 reports, or false filings with the intent to deceive the
 
18 commissioner in the performance of the commissioner's duties
 
19 under this article, upon conviction thereof, shall be imprisoned
 
20 for not more than one year, or fined $5,000, or both.  Any fines
 
21 imposed shall be paid by the officer, director, or employee in
 
22 [their] the person's individual capacity."
 

 
 
 
Page 16                                                    2472
                                     H.B. NO.           H.D. 2
                                                        S.D. 2
                                                        C.D. 1


 1      SECTION 14.  Section 431:15-335, Hawaii Revised Statutes, is
 
 2 amended by amending subsection (a) to read as follows:
 
 3      "(a)  All unclaimed funds subject to distribution remaining
 
 4 in the liquidator's hands when the liquidator is ready to apply
 
 5 to the court for discharge, including the amount distributable to
 
 6 any creditor, shareholder, member, or other person who is unknown
 
 7 or cannot be found, shall be deposited with the [insurance
 
 8 regulation fund,] director of finance, and shall be paid without
 
 9 interest except in accordance with section 431:15-332 to the
 
10 person entitled thereto or the person's legal representative upon
 
11 proof satisfactory to the [insurance regulation fund] director of
 
12 finance of the person's right thereto.  Any amount on deposit not
 
13 claimed within six years from the discharge of the liquidator
 
14 shall be deemed to have been abandoned and shall be escheated
 
15 without formal escheat proceedings and be deposited with the
 
16 [insurance regulation fund.] general fund."
 
17      SECTION 15.  Section 432:2-102, Hawaii Revised Statutes, is
 
18 amended by amending subsection (b) to read as follows:
 
19      "(b)  Nothing in this article shall exempt fraternal benefit
 
20 societies from the provisions and requirements of [sections
 
21 416-19 and 416-20.] section 431:2-215."
 
22      SECTION 16.  Statutory material to be repealed is bracketed.
 
23 New statutory material is underscored.
 

 
Page 17                                                    2472
                                     H.B. NO.           H.D. 2
                                                        S.D. 2
                                                        C.D. 1


 1      SECTION 17.  This Act shall take effect upon its approval.