REPORT TITLE:
Insurance Guaranty Association


DESCRIPTION:
Updates the guaranty fund provisions, which are applicable to the
Hawaii Insurance Guaranty Association. (HB2471 HD1)


 
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                                                        2471
HOUSE OF REPRESENTATIVES                H.B. NO.           H.D. 1
TWENTIETH LEGISLATURE, 2000                                
STATE OF HAWAII                                            
                                                             
________________________________________________________________
________________________________________________________________


                   A  BILL  FOR  AN  ACT

RELATING TO THE HAWAII INSURANCE GUARANTY ASSOCIATION.



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

 1      SECTION 1.  Section 431:16-102, Hawaii Revised Statutes, is
 
 2 amended to read as follows:
 
 3      "431:16-102  Purpose.  The purpose of this part is to
 
 4 provide a mechanism for the payment of covered claims under
 
 5 certain insurance policies to avoid excessive delay in payment
 
 6 and, to [avoid] the extent provided in this part, to minimize
 
 7 financial loss to claimants or policyholders because of the
 
 8 insolvency of an insurer[, to assist in the detection and
 
 9 prevention of insurer insolvencies, and to provide an association
 
10 to assess the cost of such protection among insurers]."
 
11      SECTION 2.  Section 431:16-103, Hawaii Revised Statutes, is
 
12 amended to read as follows:
 
13      "431:16-103  Scope.  This part shall apply to all types of
 
14 direct insurance, but shall not [be applicable] apply to the
 
15 following:
 
16      (1)  Life, annuity, health, or disability insurance;
 
17      (2)  Mortgage guaranty, financial guaranty, or any other
 
18           forms of insurance offering protection against
 
19           investment risks;
 

 
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 1      (3)  Fidelity or surety bonds, or any other bonding
 
 2           obligations;
 
 3      (4)  Credit [life or credit disability] insurance[;],
 
 4           vendors' single interest insurance, collateral
 
 5           protection insurance, or any similar insurance
 
 6           protecting the interests of a creditor arising out of a
 
 7           creditor-debtor transaction;
 
 8      (5)  Insurance of warranties or service contracts[;],
 
 9           including insurance that provides for the repair,
 
10           replacement, or service of goods or property, for
 
11           indemnification for the repair, replacement, or service
 
12           for the operational or structural failure of the goods
 
13           or property due to a defect in materials, workmanship,
 
14           or normal wear and tear, or for reimbursement for the
 
15           liability incurred by the issuer of agreements or
 
16           service contracts that provide those benefits;
 
17      (6)  Title insurance;
 
18      (7)  Ocean marine insurance; [and]
 
19      (8)  Any transaction or combination of transactions between
 
20           a person[,] (including affiliates of [such] the
 
21           person[,]) and an insurer[,] (including affiliates of
 
22           [such] the insurer[, which]) that involves the transfer
 
23           of investment or credit risk unaccompanied by transfer
 
24           of insurance risk[.]; or
 

 
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 1      (9)  Any insurance provided by or guaranteed by government."
 
 2      SECTION 3.  Section 431:16-104, Hawaii Revised Statutes, is
 
 3 amended to read as follows:
 
 4      "431:16-104  Construction.  This [code] part shall be
 
 5 [liberally] construed to effect the purpose under section 431:16-
 
 6 102 which will constitute an aid and guide to interpretation."
 
 7      SECTION 4.  Section 431:16-105, Hawaii Revised Statutes, is
 
 8 amended to read as follows:
 
 9      "431:16-105  Definitions.  As used in this [code:] part:
 
10      [(1)  Affiliate] "Affiliate" means a person who, directly or
 
11 indirectly, through one or more intermediaries, controls, is
 
12 controlled by, or is under common control with an insolvent
 
13 insurer on December 31 of the year [next] immediately preceding
 
14 the date the insurer becomes an insolvent insurer.
 
15      [(2)  Association] "Association" means the Hawaii [Insurance
 
16 Guaranty Association] insurance guaranty association created
 
17 under section 431:16-106.
 
18      [(3)  Claimant] "Claimant" means any insured making a first-
 
19 party claim or any person instituting a liability claim; provided
 
20 that no person who is an affiliate of the insolvent insurer may
 
21 be a claimant.
 
22      [(4)  Control] "Control" means the possession, direct or
 
23 indirect, of the power to direct or cause the direction of the
 
24 management and policies of a person, whether through the
 

 
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 1 ownership of voting securities, by contract other than a
 
 2 commercial contract for goods or nonmanagement services, or
 
 3 otherwise, unless the power is the result of an official position
 
 4 with or corporate office held by the person.  Control shall be
 
 5 presumed to exist if any person, directly or indirectly, owns,
 
 6 controls, holds with the power to vote, or holds proxies
 
 7 representing, ten per cent or more of the voting securities of
 
 8 any other person.  This presumption may be rebutted by a showing
 
 9 that control does not exist in fact.
 
10      [(5)  Covered claim] "Covered claim" [means]:
 
11      (1)  Means an unpaid claim, including one for unearned
 
12           premiums, submitted by a claimant, [which] that arises
 
13           out of and is within the coverage and is subject to the
 
14           applicable limits of an insurance policy to which this
 
15           part applies issued by an insurer, if [such] the
 
16           insurer becomes an insolvent insurer after July 1,
 
17           [1988] 2000, and:
 
18           (A)  The claimant or insured is a resident of this
 
19                State at the time of the insured event[,];
 
20                provided that for entities other than an
 
21                individual, the residence of a claimant [or],
 
22                insured, or policyholder is the state in which its
 
23                principal place of business is located at the time
 
24                of the insured event; or
 

 
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 1           [(B) The property from which the claim arises is
 
 2                permanently located in this State.  
 
 3           Covered claim shall not include any any amount awarded
 
 4           as punitive or exemplary damages; sought as a return of
 
 5           premium under any retrospective rating plan; or due any
 
 6           reinsurer, insurer, insurance pool, or underwriting
 
 7           association, as subrogation recoveries or otherwise.]
 
 8           (B)  The claim is a first party claim for damage to
 
 9                property with a permanent location in this State;
 
10           and
 
11      (2)  Shall not include:
 
12           (A)  Any amount awarded as punitive or exemplary
 
13                damages;
 
14           (B)  Any amount sought as a return of premium under any
 
15                retrospective rating plan; 
 
16           (C)  Any amount due any reinsurer, insurer, insurance
 
17                pool, or underwriting association, as subrogation
 
18                recoveries, reinsurance recoveries, contribution,
 
19                indemnification, or otherwise;
 
20           (D)  Any first party claims by an insured whose net
 
21                worth exceeds $25,000,000 on December 31 of the
 
22                year prior to the year in which the insurer
 
23                becomes an insolvent insurer; provided that an
 
24                insured's net worth on that date shall be deemed
 

 
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 1                to include the aggregate net worth of the insured
 
 2                and all of its subsidiaries as calculated on a
 
 3                consolidated basis; or
 
 4           (E)  Any first party claims by an insured who is an
 
 5                affiliate of the insolvent insurer."
 
 6      [(6)  Insolvent insurer] "Insolvent insurer" means an
 
 7 insurer licensed to transact insurance in this State, either at
 
 8 the time the policy was issued or when the insured event
 
 9 occurred, and [determined to be insolvent by a court of competent
 
10 jurisdiction.] against whom a final order of liquidation has been
 
11 entered after the effective date of this Act with a finding of
 
12 insolvency by a court of competent jurisdiction in the insurer's
 
13 state of domicile.
 
14      [(7)  Member insurer]  "Member insurer" means any person
 
15 who:
 
16     [(A)] (1)  Writes any kind of insurance to which this part
 
17           applies under section 431:16-103, including the
 
18           exchange of reciprocal or inter-insurance contracts;
 
19           and
 
20     [(B)] (2)  Is licensed to transact insurance in this State.
 
21 An insurer shall cease to be a member insurer effective on the
 
22 day following the termination or expiration of its certificate of
 
23 authority to transact the kinds of insurance to which this part
 

 
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 1 applies.  However the insurer shall remain liable as a member
 
 2 insurer for any and all obligations, including obligations for
 
 3 assessments levied prior to the termination or expiration of its
 
 4 certificate of authority, although the insurer became an
 
 5 insolvent insurer prior to the termination or expiration of the
 
 6 insurer's certificate of authority.
 
 7      [(8)  Net direct written premiums] "Net direct written
 
 8 premiums" means direct gross premiums written in this State on
 
 9 insurance policies to which this part applies, less return
 
10 premiums thereon and dividends paid or credited to policyholders
 
11 on such direct business.  Net direct written premiums does not
 
12 include premiums on contracts between insurers or reinsurers.
 
13      [(9)  Person] "Person" means any individual, corporation,
 
14 partnership, association, or voluntary organization."
 
15      SECTION 5.  Section 431:16-106, Hawaii Revised Statutes, is
 
16 amended to read as follows:
 
17      "431:16-106  Creation of association.  [[(a)]] There is
 
18 created a nonprofit unincorporated legal entity to be known as
 
19 the Hawaii [Insurance Guaranty Association] insurance guaranty
 
20 association.  All insurers defined as member insurers in section
 
21 [431:16-105(7)] 431:16-105 shall be and remain members of the
 
22 association as a condition of their authority to transact the
 
23 business of insurance in this State.  The association shall
 

 
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 1 perform its function under a plan of operation established and
 
 2 approved under section 431:16-109 and shall exercise its powers
 
 3 through a board of directors established under section 431:16-
 
 4 107.
 
 5      [(b)  All meetings and records of the board of directors
 
 6 shall be open to all member insurers except for those meetings
 
 7 and records pertaining to the solvency, liquidation,
 
 8 rehabilitation, or conservation of any member insurer deemed
 
 9 confidential.  A member insurer shall provide written designation
 
10 of its representative or representatives to the board meetings.]"
 
11      SECTION 6.  Section 431:16-107, Hawaii Revised Statutes, is
 
12 amended by amending subsection (a) to read as follows:
 
13      "(a)  The board of directors of the association shall
 
14 consist of not less than five nor more than nine persons serving
 
15 terms as established in the plan of operation.  The members of
 
16 the board shall be selected by member insurers subject to the
 
17 approval of the commissioner.  Vacancies on the board shall be
 
18 filled for the remaining period of the term by a majority vote of
 
19 the remaining board members subject to the approval of the
 
20 commissioner.  [If no members are selected within sixty days
 
21 after July 1, 1988, the commissioner may appoint the initial
 
22 members of the board of directors.]"
 

 
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 1      SECTION 7.  Section 431:16-108, Hawaii Revised Statutes, is
 
 2 amended by amending subsection (a) to read as follows:
 
 3      "(a) The association shall:
 
 4      (1)  Be obligated to the extent of the covered claims
 
 5           existing prior to the [determination of insolvency,
 
 6           which the insolvent insurer would have been legally
 
 7           obligated to pay but for its insolvency,] order of
 
 8           liquidation and arising within thirty days after the
 
 9           [determination of insolvency,] order of liquidation, or
 
10           before the policy expiration date if less than thirty
 
11           days after the [determination,] order of liquidation,
 
12           or before the insured replaces the policy or causes its
 
13           cancellation, if the [insurer] insured does so within
 
14           thirty days of the [determination, but the obligation
 
15           shall include only that amount of each covered claim
 
16           which is less than $300,000, except that the
 
17           association shall pay the full amount of any covered
 
18           claim arising out of a workers' compensation policy.]
 
19           order of liquidation.  The obligation shall be
 
20           satisfied by paying to the claimant an amount as
 
21           follows:
 
22           (A)  The full amount of a covered claim for benefits
 
23                under a workers' compensation insurance coverage;
 

 
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 1           (B)  An amount not exceeding $10,000 per policy for a
 
 2                covered claim for the return of unearned premium;
 
 3                or
 
 4           (C)  An amount not exceeding $300,000 per claim for all
 
 5                other covered claims.
 
 6           In no event shall the association be obligated to a
 
 7           policyholder or claimant in an amount in excess of the
 
 8           stated policy limit of the insolvent insurer under the
 
 9           policy from which the claim arises[;].  Notwithstanding
 
10           any other provisions of this part, a covered claim
 
11           shall not include a claim filed with the guaranty
 
12           association after the final date set by the court for
 
13           the filing of claims against the liquidator or receiver
 
14           of an insolvent insurer;
 
15           Any obligation of the association to defend an insured
 
16           shall cease upon the association's payment or tender of
 
17           an amount equal to the lesser of the association's
 
18           covered claim obligation limit or the applicable policy
 
19           limit;
 
20      (2)  Be deemed the insurer, but only to the extent of its
 
21           obligation on covered claims and to that extent shall
 
22           have all rights, duties, and obligations of the
 
23           insolvent insurer as if the insurer had not become
 

 
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 1           insolvent[;], including but not limited to the right to
 
 2           pursue and retain salvage and subrogation recoverable
 
 3           on covered claim obligations to the extent paid by the
 
 4           association;
 
 5      (3)  Assess insurers amounts necessary to pay the
 
 6           obligations of the association under subsection (a)(1)
 
 7           subsequent to an insolvency, the expenses of handling
 
 8           covered claims subsequent to an insolvency, and the
 
 9           cost of examinations under section 431:l6-ll3, and
 
10           other expenses authorized by this part.  The
 
11           assessments of each member insurer shall be in the
 
12           proportion that the net direct written premiums of the
 
13           member insurer for the preceding calendar year bears to
 
14           the net direct written premiums of all member insurers
 
15           for the preceding calendar year.  Each member insurer
 
16           shall be notified of the assessment not later than
 
17           thirty days before it is due.  No member insurer may be
 
18           assessed in any year an amount greater than two per
 
19           cent of that member insurer's net direct written
 
20           premiums for the preceding calendar year.  If the
 
21           maximum assessment, together with the other assets of
 
22           the association, does not provide in any one year an
 
23           amount sufficient to make all necessary payments, the
 

 
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 1           funds available shall be prorated and the unpaid
 
 2           portion shall be paid as soon thereafter as funds
 
 3           become available.  The association shall pay claims in
 
 4           any order that it may deem reasonable, including the
 
 5           payment of claims as they are received from the
 
 6           claimants or in groups or categories of claims.  The
 
 7           association may exempt or defer, in whole or in part,
 
 8           the assessment of any member insurer, if the assessment
 
 9           would cause the member insurer's financial statement to
 
10           reflect amounts of capital or surplus less than the
 
11           minimum amounts required for a certificate of authority
 
12           by any jurisdiction in which the member insurer is
 
13           authorized to transact insurance.  However, during the
 
14           period of deferment, no dividends shall be paid to
 
15           shareholders or policyholders.  Deferred assessments
 
16           shall be paid when the payment will not reduce capital
 
17           or surplus below required minimums.  Payments shall be
 
18           refunded to those companies receiving larger
 
19           assessments by virtue of the deferment, or at the
 
20           election of the companies, credited against future
 
21           assessments.  Each member insurer may set off against
 
22           any assessment payments authorized by the administrator
 
23           of the association to be made on covered claims and
 

 
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 1           expenses incurred in the payment of the claims by the
 
 2           member insurer;
 
 3      (4)  Investigate claims brought against the association and
 
 4           adjust, compromise, settle, and pay covered claims to
 
 5           the extent of the association's obligation and deny all
 
 6           other claims and may review settlements, releases, and
 
 7           judgments to which the insolvent insurer or its
 
 8           insureds were parties to determine the extent to which
 
 9           [such] the settlements, releases, and judgments may be
 
10           properly contested[;].  The association shall have the
 
11           right to appoint or substitute and to direct legal
 
12           counsel retained under liability insurance policies for
 
13           the defense of covered claims;
 
14      (5)  Notify the persons as the commissioner directs under
 
15           section 431:16-ll0(b)(l);
 
16      (6)  Handle claims through its employees or through one or
 
17           more insurers or other persons designated as servicing
 
18           facilities.  Designation of a servicing facility is
 
19           subject to the approval of the commissioner, but the
 
20           designation may be declined by a member insurer;
 
21      (7)  Reimburse each servicing facility for obligations of
 
22           the association paid by the facility and for expenses
 
23           incurred by the facility while handling claims on
 

 
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 1           behalf of the association and [shall] pay the other
 
 2           expenses of the association authorized by this [code;]
 
 3           part; and
 
 4      (8)  Have the authority, notwithstanding sections 43l:10C-
 
 5           ll0 and 43l:10C-111, to cancel all policies issued by
 
 6           an insolvent insurer.  [All] Covered claims under these
 
 7           policies shall be [covered] paid by the association in
 
 8           an amount not to exceed the [state] stated policy limit
 
 9           of the insolvent insurer under the policy from which
 
10           the claim arises[.], or as provided under section
 
11           431:16-108(a)(1)(A), whichever is less."
 
12      SECTION 8.  Section 431:16-109, Hawaii Revised Statutes, is
 
13 amended by amending subsection (c) to read as follows:
 
14      "(c) The plan of operation shall:
 
15      (1)  Establish the procedures whereby all the powers and
 
16           duties of the association under section 431:16-108
 
17           [will] shall be performed;
 
18      (2)  Establish procedures for handling assets of the
 
19           association;
 
20      (3)  Establish procedures for the disposition of liquidating
 
21           dividends or other moneys received from the estate of
 
22           the insolvent insurer;
 

 
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 1     [(3)] (4)  Establish the amount and method of reimbursing
 
 2           members of the board of directors under section 431:16-
 
 3           107(c);
 
 4     [(4)] (5)  Establish procedures by which claims may be filed
 
 5           with the association and establish acceptable forms of
 
 6           proof of covered claims.  Notice of claims to the
 
 7           receiver or liquidator of the insolvent insurer shall
 
 8           be deemed notice to the association or its agent and a
 
 9           list of the claims shall be periodically submitted to
 
10           the association or similar organization in another
 
11           state by the receiver or liquidator;
 
12     [(5)] (6)  Establish regular places and times for meetings of
 
13           the board of directors;
 
14     [(6)] (7)  Establish procedures for records to be kept of all
 
15           financial transactions of the association, its agents,
 
16           and the board of directors;
 
17     [(7)] (8)  Provide that any member insurer aggrieved by any
 
18           final action or decision of the association may appeal
 
19           to the commissioner within thirty days after the action
 
20           or decision;
 
21     [(8)] (9)  Establish the procedures whereby selections for
 
22           the board of directors will be submitted to the
 
23           commissioner; and
 

 
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 1     [(9)] (10)  Contain additional provisions necessary or proper
 
 2           for the execution of the powers and duties of the
 
 3           association."
 
 4      SECTION 9.  Section 431:16-110, Hawaii Revised Statutes, is
 
 5 amended as follows:
 
 6      1.   By amending subsection (a) to read:
 
 7      "(a)  The commissioner shall:
 
 8      (l)  Notify the association of the existence of an insolvent
 
 9           insurer not later than three days after the
 
10           commissioner receives notice of the determination of
 
11           the insolvency.  The association shall be entitled to a
 
12           copy of a complaint seeking an order of liquidation
 
13           with a finding of insolvency against a member company
 
14           at the same time that the complaint is filed with a
 
15           court of competent jurisdiction.
 
16      (2)  Upon request of the board of directors, provide the
 
17           association with a statement of the net direct written
 
18           premiums of each member insurer."
 
19      2.   By amending subsection (c) to read:
 
20      "(c)  Any final action or order of the commissioner under
 
21 this [code] part shall be subject to judicial review by the
 
22 circuit court of the first judicial circuit."
 

 
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 1      SECTION 10.  Section 431:16-111, Hawaii Revised Statutes, is
 
 2 amended as follows:
 
 3      1.   By amending subsection (a) to read:
 
 4      "(a)  Any person recovering under this [code] part shall be
 
 5 deemed to have assigned the person's rights under the policy to
 
 6 the association to the extent of the person's recovery from the
 
 7 association.  Every insured or claimant seeking the protection of
 
 8 this part shall cooperate with the association to the same extent
 
 9 as [such] that person would have been required to cooperate with
 
10 the insolvent insurer.  The association shall have no cause of
 
11 action against the insured of the insolvent insurer for any sums
 
12 it has paid out except [such] any causes of action [as] that the
 
13 insolvent insurer would have had if [such] those sums had been
 
14 paid by the insolvent insurer and except as provided in
 
15 subsection (b).  In the case of an insolvent insurer operating as
 
16 an assessable mutual company on a plan with assessment liability,
 
17 payments of claims of the association shall not operate to reduce
 
18 the liability of the insureds to the receiver, liquidator, or
 
19 statutory successor for unpaid assessment."
 
20      2.    By amending subsection (c) to read:
 
21      "(c)  The association and a similar organization in another
 
22 state shall be recognized as claimants in the liquidation of an
 
23 insolvent insurer for any amounts paid by them on covered claims
 

 
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 1 as determined under this part or similar laws in other states and
 
 2 shall receive dividends and any other distributions at the
 
 3 priority set forth in section 431:15-332.  The receiver,
 
 4 liquidator, or statutory successor of an insolvent insurer shall
 
 5 be bound by determinations of covered claim eligibility under
 
 6 this part and by settlements of [covered] claims by the
 
 7 association or a similar organization in another state[.] to the
 
 8 extent the determinations or settlements satisfy obligations of
 
 9 the association.  The receiver shall not be bound in any way by
 
10 the determinations or settlements to the extent there remains a
 
11 claim against the insolvent insurer.  The court having
 
12 jurisdiction shall grant such claims priority equal to that to
 
13 which the claimant would have been entitled in the absence of
 
14 this part against the assets of the insolvent insurer."
 
15      SECTION 11.  Section 431:16-112, Hawaii Revised Statutes, is
 
16 amended to read as follows:
 
17      "431:16-112  [Nonduplication of recovery.]  Exhaustion of
 
18 other coverage.  (a)  Any person having a claim against an
 
19 insurer whether or not the insurer is a member insurer under any
 
20 provision in an insurance policy other than a policy of an
 
21 insolvent insurer which is also a covered claim, shall be
 
22 required to exhaust first the person's rights under [such] the
 
23 policy.  Any amount payable on a covered claim under this part
 

 
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 1 shall be reduced by the amount of any recovery under [such] the
 
 2 insurance policy.  If there are any other policies issued by an
 
 3 insolvent insurer applicable to the covered claim, then all such
 
 4 policies must first be exhausted before any claim can be deemed a
 
 5 covered claim subject to being covered by the association.
 
 6      [(b)  Any person having a claim or legal right of recovery
 
 7 under any governmental insurance or guaranty program which is
 
 8 also a covered claim, shall be required to exhaust first the
 
 9 person's right under such program.  Any amount payable on a
 
10 covered claim under this part shall be reduced by the amount of
 
11 any recovery under such insurance or program.
 
12      (c)] (b)  Any person having a claim [which] that may be
 
13 recovered under more than one insurance guaranty association or
 
14 its equivalent shall seek recovery first from the association of
 
15 the place of residence of the insured, except that if the claim
 
16 is a first-party claim for damage to property with a permanent
 
17 location, the person shall seek recovery first from the
 
18 association of the location of the property[, and if it is].  For
 
19 a workers' compensation claim, the person shall seek recovery
 
20 first from the association of the residence of the claimant.  Any
 
21 recovery under this part shall be reduced by the amount of
 
22 recovery from any other insurance guaranty association or its
 
23 equivalent."
 

 
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 1      SECTION 12.  Section 431:16-113, Hawaii Revised Statutes, is
 
 2 amended to read as follows:
 
 3      "431:16-113  Prevention of insolvencies.  To aid in the
 
 4 detection and prevention of insurer insolvencies:  [(a)  The
 
 5 board of directors may, upon majority vote:
 
 6      (l)  Make recommendations to the commissioner for the
 
 7           detection and prevention of insurer insolvencies; and
 
 8      (2)  Respond to requests by the commissioner to discuss and
 
 9           make recommendations regarding the status of any member
 
10           insurer whose financial condition may be determined by
 
11           the commissioner to be hazardous to policyholders or
 
12           the public.  Such recommendations shall not be
 
13           considered public documents.
 
14      (3)  The board of directors may, upon majority vote, request
 
15           that the commissioner order an examination of any
 
16           member insurer which the board in good faith believes
 
17           may be in a financial condition hazardous to the
 
18           policyholders or the public.  Within thirty days of the
 
19           receipt of such request, the commissioner shall begin
 
20           the examination.  The examination may be conducted as a
 
21           National Association of Insurance Commissioners
 
22           examination or may be conducted by such persons as the
 
23           commissioner designates.  The cost of such examination
 

 
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 1           shall be paid by the association and the examination
 
 2           report shall be treated as are other examination
 
 3           reports.  In no event shall such examination report be
 
 4           released to the board of directors prior to its release
 
 5           to the public, but this shall not preclude the
 
 6           commissioner from reporting to the board of directors
 
 7           when the commissioner has reasonable cause to believe
 
 8           that any member insurer examined or being examined at
 
 9           the request of the board of directors may be insolvent
 
10           or in a financial condition hazardous to the
 
11           policyholders or the public.  The commissioner shall
 
12           notify the board of directors when the examination is
 
13           completed.  The request for an examination shall be
 
14           kept on file by the commissioner but it shall not be
 
15           open to public inspection prior to the release of the
 
16           examination report to the public.
 
17      (b)  The board of directors may, at the conclusion of any
 
18 domestic insurer insolvency in which the association was
 
19 obligated to pay covered claims, prepare a report on the history
 
20 and causes of such insolvency, based on the information available
 
21 to the association and submit such report to the commissioner.] 
 
22      (1)  The board of directors, upon majority vote, may make
 
23           recommendations to the commissioner on matters
 

 
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 1           generally related to improving or enhancing regulation
 
 2           for solvency; and
 
 3      (2)  At the conclusion of any domestic insurer insolvency in
 
 4           which the association was obligated to pay covered
 
 5           claims, the board of directors may prepare a report on
 
 6           the history and causes of the insolvency, based on the
 
 7           information available to the association, and submit
 
 8           the report to the commissioner."
 
 9      SECTION 13.  Section 431:16-116, Hawaii Revised Statutes, is
 
10 amended to read as follows:
 
11      "431:16-116  Immunity.  There shall be no liability on the
 
12 part of and no cause of action of any nature shall arise against
 
13 any member insurer, the association or its agents or employees,
 
14 the board of directors, any person serving as an alternate or
 
15 substitute representative of any director, or the commissioner or
 
16 the commissioner's representatives for any action taken or any
 
17 failure to act by them in the performance of their powers and
 
18 duties under this part."
 
19      SECTION 14.  Section 431:16-117, Hawaii Revised Statutes, is
 
20 amended to read as follows:
 
21      "431:16-117  Stay of proceedings.(a)  All proceedings in
 
22 which the insolvent insurer is a party, or is obligated to defend
 
23 a party in any court in this State, subject to waiver by the
 

 
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 1 association in specific cases involving covered claims, shall be
 
 2 stayed for up to six months, and [such] any additional time
 
 3 thereafter as may be determined by the court, from the date the
 
 4 insolvency is determined or an ancillary proceeding is instituted
 
 5 in the State, whichever is later, to permit proper defense by the
 
 6 association of all pending causes of action.  As to any covered
 
 7 claims arising from a judgment or under any decision, verdict, or
 
 8 finding based on the default of the insolvent insurer or its
 
 9 failure to defend an insured, the association, either on its own
 
10 behalf or on behalf of [such] the insured, may apply to have such
 
11 judgment, order, decision, verdict, or finding set aside by the
 
12 same court, administrator, or other entity that made [such] the
 
13 judgment, order, decision, verdict, or finding and shall be
 
14 permitted to defend [such] the claim on the merits.
 
15      (b)  The liquidator, receiver, or statutory successor of an
 
16 insolvent insurer covered by this part shall permit access by the
 
17 board or its authorized representative to [such of] the insolvent
 
18 insurer's claim records[, and may permit access to such other
 
19 records which] that are necessary for the board in carrying out
 
20 its functions under this part with regard to covered claims.  In
 
21 addition, the liquidator, receiver, or statutory successor shall
 
22 provide the board or its representative with copies of [such]
 
23 those records upon the request by the board and at the expense of
 
24 the board."
 

 
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 1      SECTION 15.  Statutory material to be repealed is bracketed.
 
 2 New statutory material is underscored.
 
 3      SECTION 16.  This Act shall take effect upon its approval.
 

 
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