REPORT TITLE:
Motor Vehicle Insurance


DESCRIPTION:
Requires purchase of basic policy at time of registration of
motor vehicle; establishes bid by insurers for providing
coverages for basic policies.

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                        
THE SENATE                              S.B. NO.           2324
TWENTIETH LEGISLATURE, 2000                                
STATE OF HAWAII                                            
                                                             
________________________________________________________________
________________________________________________________________


                   A  BILL  FOR  AN  ACT

RELATING TO MOTOR VEHICLE INSURANCE. 


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

 1      SECTION 1.  Article 10C of Chapter 431, Hawaii Revised
 
 2 Statutes, is amended by adding a new part to be appropriately
 
 3 designated and to read as follows:
 
 4           "PART  .  PURCHASE OF POLICY AT REGISTRATION
 
 5      431:10C-A Purpose.  The purpose of this part is to
 
 6 establish a system to require the purchase of insurance for the
 
 7 required minimum coverages under this chapter at the time a motor
 
 8 vehicle is registered.  Optional coverages and rates may be
 
 9 provided by individual insurers to individual drivers under
 
10 separate policies or riders to the basic policy.
 
11      431:10C-B Purchase of policy at registration.(a)  A
 
12 motor vehicle insurance policy required under section 431:10C-104
 
13 shall be purchased by the person registering the vehicle under
 
14 section 286-41 as a prerequisite to registration.  The policy
 
15 shall be purchased by check payable to the insurer but shall be
 
16 received by the county.
 
17      (b)  The director of finance for each county that registers
 
18 a motor vehicle shall issue a decal indicating that the motor
 
19 vehicle is insured.  The decal shall be affixed on the inside
 
20 driver's side lower front windshield.
 

 
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 1      431:10C-C Motor vehicle registration insurance special
 
 2 fund.  There is established within the department of budget and
 
 3 finance for administrative purposes, the motor vehicle
 
 4 registration insurance special fund.  Moneys collected by the
 
 5 counties under section 431:10C-B shall be deposited into the fund
 
 6 and shall be used for the processing and payment of claims as
 
 7 provided in 431:10C-H.  The insurance commissioner shall pay
 
 8 insurance claims from the fund at the direction of the insurer.
 
 9 Legislative appropriations shall not be required for this fund.
 
10      431:10C-D Competitive bid by insurers.(a)  Motor vehicle
 
11 insurance for the required minimum coverages under this chapter
 
12 shall be provided on a statewide basis by one insurer which shall
 
13 be selected by the insurance commissioner, in accordance with
 
14 chapter 103D, who shall be deemed the procurement officer for
 
15 purposes of this part.  A bidder may be a single insurer or a
 
16 consortium of insurers operating as a single entity with pooled
 
17 assets.  The commissioner shall consider, among other things, the
 
18 solvency of and record of complaints of each insurer submitting a
 
19 bid.  The insurer selected shall be awarded a three-year
 
20 contract; provided that the insurer operates as the same entity
 
21 throughout the contract period.
 
22      (b)  The motor vehicle registration agency of each county
 
23 shall provide appropriate information to any insurer for the
 

 
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 1 purpose of submitting a bid, and appropriate information to the
 
 2 insurance commissioner for the purpose of awarding the contract.
 
 3      431:10C-E Policies issued to insureds.(a)  An insurer
 
 4 selected under section 431:10C-D shall issue a policy to the
 
 5 person registering the vehicle under section 431:10C-B which
 
 6 shall satisfy all the requirements of section 431:10C-301.  The
 
 7 named and additional insureds shall be deemed to be the
 
 8 registration holder and members of the holder's household who
 
 9 have a driver's license.  The policy period shall coincide with
 
10 the registration period of the vehicle and shall be transferable
 
11 to the new registered owner at the time of sale of the vehicle.
 
12      (b)  The insurer selected under section 431:10C-C shall be
 
13 subject to section 431:10C-302.  All other insurers may offer a
 
14 policy under section 431:10C-302, without regard to the required
 
15 motor vehicle policy coverage provided by the insurer selected
 
16 under section 431:10C-D.
 
17      431:10C-F Rate making exemption.  An insurer submitting a
 
18 bid for the purpose of this part shall be subject to section
 
19 431:10C-202 for policies to be issued under section 431:10C-E.
 
20      431:10C-G Assigned risk drivers and high risk drivers.
 
21 (a)  A driver who is an assigned risk under section
 
22 431:10C-407(b) shall not be eligible to purchase a motor vehicle
 
23 insurance policy under this part, and shall continue with the
 

 
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                                     S.B. NO.           2324
                                                        
                                                        

 
 1 joint underwriting plan.
 
 2      (b)  A driver who is considered a high risk in accordance
 
 3 with the general practice of the motor vehicle insurance industry
 
 4 shall be surcharged in an appropriate amount to purchase a policy
 
 5 under section 431:10C-B.  For purposes of this subsection, a high
 
 6 risk driver includes a driver who has been convicted under
 
 7 section 291-2 or 291-4, or both.
 
 8      431:10C-H Adjusting and payment of claims.(a)  The
 
 9 insurer selected under section 431:10C-D shall adjust every claim
 
10 arising from the policy issued under section 431:10C-E.
 
11      (b)  Payment of claims and claim expenses shall be made from
 
12 the motor vehicle registration insurance special fund established
 
13 under section 431:10C-C, upon settlement or judgment.  Claims
 
14 shall be paid without the approval of the state legislature.
 
15      (c)  If payment of claims exceed the balance in the motor
 
16 vehicle registration insurance special fund at any time, the
 
17 insurer selected under section 431:10C-D shall pay into the
 
18 special fund an appropriate amount to maintain adequate reserves
 
19 for claims that are anticipated for the remainder of the three-
 
20 year policy period.
 
21      431:10C-I Cancellation prohibited.  A policy issued under
 
22 this part shall not be canceled by the insurer.
 
23      431:10C-J State not liable.  The State shall not be
 

 
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 1 financially liable for maintenance of an adequate balance in the
 
 2 motor vehicle registration insurance special fund established
 
 3 under section 431:10C-C."
 
 4      SECTION 2.  Section 431:10C-104, Hawaii Revised Statutes, is
 
 5 amended to read as follows:
 
 6      "431:10C-104  Conditions of operation and registration of
 
 7 motor vehicles.(a)  [Except as provided in section 431:10C-105,
 
 8 no] No person shall operate or use a motor vehicle upon any
 
 9 public street, road, or highway of this State at any time unless
 
10 such motor vehicle is insured at all times under a motor vehicle
 
11 insurance policy.
 
12      (b)  Every owner of a motor vehicle used or operated at any
 
13 time upon any public street, road, or highway of this State shall
 
14 obtain a motor vehicle insurance policy upon such vehicle under
 
15 part    , which provides the coverage required by this article
 
16 [and shall maintain the motor vehicle insurance policy at all
 
17 times for the entire motor vehicle registration period].
 
18      (c)  Any person who violates the provisions of this section
 
19 shall be subject to the provisions of section 431:10C-117(a).
 
20      (d)  The provisions of this article shall not apply to any
 
21 vehicle owned by or registered in the name of any agency of the
 
22 federal government, or to any antique motor vehicle as defined in
 
23 section 249-1."
 

 
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 1      SECTION 3.  Section 431:10C-110, Hawaii Revised Statutes, is
 
 2 amended to read as follows:
 
 3      "431:10C-110  Rejection of application, joint underwriting
 
 4 plan placement.  A general agent, including a branch office of a
 
 5 foreign or alien insurer, subagent, or solicitor upon rejection
 
 6 of an application for [a motor vehicle insurance policy or] an
 
 7 optional additional insurance, shall immediately offer, subject
 
 8 to the guidelines established by rules of the commissioner, to
 
 9 place the requested insurance coverages with the joint
 
10 underwriting plan."
 
11      SECTION 4.  Section 431:10C-111, Hawaii Revised Statutes, is
 
12 amended to read as follows:
 
13      "431:10C-111  Cancellation and nonrenewal of policies:
 
14 when prohibited, when permitted.(a)  An insurer may not cancel
 
15 or refuse to renew a motor vehicle insurance policy[, including]
 
16 that provides required optional additional insurance meeting
 
17 section 431:10C-302, once issued except when:
 
18      (1)  The license of the principal operator to operate the
 
19           type of motor vehicle is suspended or revoked;
 
20      (2)  Premium payments for the policy are not made after
 
21           reasonable demand therefor; or
 
22      (3)  The nonrenewal or conditional renewal is limited in
 
23           accordance with section 431:10C-111.5.
 

 
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 1      (b)  An insurer may refuse to renew optional additional
 
 2 coverage in excess of that which the insurer is required to make
 
 3 available to the insured under section 431:10C-302 where the
 
 4 insured is a member of a class set forth in section
 
 5 431:10C-407(b)(1)(A) or (B) at the time of the refusal to renew.
 
 6      [(c)  No insurer shall refuse to continue a motor vehicle
 
 7 insurance policy based solely upon a person's race, creed, ethnic
 
 8 extraction, age, sex, length of driving experience, marital
 
 9 status, residence, physical handicap, or because an insured has
 
10 elected to obtain any required or optional coverage or deductible
 
11 required by law.  If an insured alleges that the insurer's
 
12 refusal to continue the motor vehicle insurance policy is based
 
13 solely upon the insured's race, creed, ethnic extraction, age,
 
14 sex, length of driving experience, marital status, residence,
 
15 physical handicap, or because the insured has elected to obtain
 
16 any required or optional coverage or deductible provided by law,
 
17 the burden of proof shall rest with the insurer to prove that the
 
18 refusal to continue the policy was not based on noncompliance
 
19 with this subsection.
 
20      (d)  In any case of cancellation or refusal to renew, the
 
21 insurer shall continue all motor vehicle insurance and optional
 
22 additional coverages in force, to the date of expiration or for
 
23 thirty days following notice, whichever date occurs first.
 

 
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                                     S.B. NO.           2324
                                                        
                                                        

 
 1      (e)  An insurer may also refuse to renew motor vehicle
 
 2 insurance policies:
 
 3      (1)  If the commissioner determines that the financial
 
 4           soundness of the insurer would be impaired by the
 
 5           writing of additional policies of insurance; or
 
 6      (2)  The insurer ceases to write any new policies of
 
 7           insurance of any kind in this State.
 
 8      (f)  Within fifteen days of a cancellation and the return of
 
 9 the motor vehicle insurance identification card or a signed
 
10 affidavit stating the card was lost or stolen, the insurer shall
 
11 refund the pro rata unearned portion, if any, of any prepaid
 
12 premiums.  Premiums shall be considered "earned" as provided in
 
13 section 431:10C-109.]"
 
14      SECTION 5.  Section 431:10C-104.5, Hawaii Revised Statutes,
 
15 is repealed.
 
16      ["431:10C-104.5  Amnesty period for uninsured motorists.
 
17 Notwithstanding any other provision of law to the contrary, any
 
18 penalties and any provision for surcharge based on prior failure,
 
19 since January 1, 1996, to maintain no-fault or motor vehicle
 
20 insurance or suspension or revocation of license due solely to
 
21 failure to maintain no-fault or motor vehicle insurance shall not
 
22 apply to any uninsured motorist who obtains the required
 
23 coverages prior to December 31, 1999."]
 

 
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                                     S.B. NO.           2324
                                                        
                                                        

 
 1      SECTION 6.  Section 431:10C-105, Hawaii Revised Statutes, is
 
 2 repealed.
 
 3      ["431:10C-105  Self-insurance.  The motor vehicle insurance
 
 4 required by section 431:10C-104 may be satisfied by any owner of
 
 5 a motor vehicle if:
 
 6      (1)  Such owner provides a surety bond, proof of
 
 7           qualifications as a self-insurer, or other securities
 
 8           affording security substantially equivalent to that
 
 9           afforded under a motor vehicle insurance policy,
 
10           providing coverage at all times for the entire motor
 
11           vehicle registration period, as determined and approved
 
12           by the commissioner under regulations; and
 
13      (2)  The commissioner is satisfied that in case of injury,
 
14           death, or property damage, any claimant would have the
 
15           same rights against such owner as the claimant would
 
16           have had if a motor vehicle insurance policy had been
 
17           applicable to such vehicle."]
 
18      SECTION 7.  Section 431:10C-107, Hawaii Revised Statutes, is
 
19 repealed.
 
20      ["431:10C-107  Verification of insurance:  motor vehicles.
 
21 (a)  Every insurer shall issue to its insureds a motor vehicle
 
22 insurance identification card for each motor vehicle for which
 
23 the basic motor vehicle insurance coverage is written.  The
 

 
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                                     S.B. NO.           2324
                                                        
                                                        

 
 1 identification card shall contain the following:
 
 2      (1)  Name of make and factory or serial number of the motor
 
 3           vehicle; provided that insurers of five or more motor
 
 4           vehicles which are under common registered ownership
 
 5           and used in the regular course of business shall not be
 
 6           required to indicate the name of make and the factory
 
 7           or serial number of each motor vehicle;
 
 8      (2)  Policy number;
 
 9      (3)  Names of the insured and the insurer; and
 
10      (4)  Effective dates of coverage including the expiration
 
11           date.
 
12      (b)  The identification card shall be in the insured motor
 
13 vehicle at all times and shall be exhibited to a law enforcement
 
14 officer upon demand.
 
15      (c)  The identification card shall be resistant to forgery
 
16 by whatever means appropriate.  The commissioner shall approve
 
17 the construction, form, and design of the identification card to
 
18 ensure that the card is forgery resistant.
 
19      (d)  The commissioner shall issue a certificate of self-
 
20 insurance periodically, as necessary, for use in each motor
 
21 vehicle insured under section 431:10C-105."]
 
22      SECTION 8.  Section 431:10C-108, Hawaii Revised Statutes, is
 
23 repealed.
 

 
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                                     S.B. NO.           2324
                                                        
                                                        

 
 1      ["431:10C-108  Unlawful use of motor vehicle insurance
 
 2 identification card.  It shall be a violation of this article:
 
 3      (1)  For any person to make, issue, or knowingly use any
 
 4           fictitious or fraudulently altered motor vehicle
 
 5           insurance identification card; or
 
 6      (2)  For any person to display or cause or permit to be
 
 7           displayed a motor vehicle insurance identification card
 
 8           knowing that the motor vehicle insurance policy was
 
 9           canceled as provided in section 431:10C-111 and section
 
10           431:10C-112."]
 
11      SECTION 9.  Section 431:10C-109, Hawaii Revised Statutes, is
 
12 repealed.
 
13      ["431:10C-109  Motor vehicle insurance identification card
 
14 after cancellation of policy; return to insurer, civil sanctions.
 
15 (a)  When a motor vehicle insurance policy is canceled before the
 
16 end of the policy period, the insured shall within thirty days
 
17 after being notified of the cancellation:
 
18      (1)  Return the motor vehicle insurance identification card
 
19           to the insurer for the policy; or
 
20      (2)  If the card is lost or stolen, submit to the insurer an
 
21           affidavit signed by the insured stating that fact to
 
22           the insurer.
 
23      (b)  The insurer's notice of cancellation shall include:
 

 
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                                     S.B. NO.           2324
                                                        
                                                        

 
 1      (1)  The reason for the cancellation; and
 
 2      (2)  A statement of actions which may be taken under this
 
 3           section if the card is not returned.
 
 4      (c)  If the card or affidavit is not returned within the
 
 5 period specified, the insurer may:
 
 6      (1)  If the premiums for the period shown on the motor
 
 7           vehicle insurance identification card have been
 
 8           prepaid, withhold the unearned portions of the premiums
 
 9           until the identification card or an affidavit signed by
 
10           the insured has been returned.  In addition, all
 
11           premiums shall be considered "earned" until the card is
 
12           returned.
 
13      (2)  If the premiums for the period shown on the
 
14           identification card have not been paid in full, bring a
 
15           civil action for three times the unpaid portion of the
 
16           premiums.  Notwithstanding section 607-14 and section
 
17           607-17, the insurer shall be awarded reasonable
 
18           attorney's fees and court costs.  If the motor vehicle
 
19           insurance identification card is returned after the
 
20           civil action is filed but before the matter is taken to
 
21           trial, the insurer shall be awarded damages of not less
 
22           than $100, but not more than the amount of the unpaid
 
23           premiums together with reasonable attorney's fees and
 

 
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                                     S.B. NO.           2324
                                                        
                                                        

 
 1           costs as provided in this section.
 
 2      (d)  Notwithstanding the provisions of this section, the
 
 3 imposition of criminal sanctions under section 431:10C-117 shall
 
 4 not be precluded."]
 
 5      SECTION 10.  Section 431:10C-111.5, Hawaii Revised Statutes,
 
 6 is repealed.
 
 7      ["431:10C-111.5  Limit on nonrenewals and conditional
 
 8 renewals.(a)  The total number (rounded to the nearest whole
 
 9 number) of notices of intention not to renew a motor vehicle
 
10 insurance policy, and of notices of intention to condition
 
11 renewal upon reduction of limits of any coverage, which an
 
12 insurer may issue, shall be limited for each calendar year to two
 
13 per cent of the total number of covered policies of the insurer
 
14 in force at last year-end in each of the insurer's rating
 
15 territories in use in this State that have completed their
 
16 required policy periods.  However, the insurer may non-renew or
 
17 conditionally renew one policy in any of the insurer's rating
 
18 territories in use in this State if the applicable percentage
 
19 limitation results in less than one policy.  Cancellations,
 
20 notices of intention not to renew, and notice of intention to
 
21 conditionally renew made pursuant to section 431:10C-111(a)(1)
 
22 and (a)(2), and section 431:10C-111(e) shall be independent of
 
23 and in addition to those permitted under this subsection.
 

 
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                                     S.B. NO.           2324
                                                        
                                                        

 
 1      (b)  For every two new motor vehicle insurance policies that
 
 2 the insurer voluntarily writes in each rating territory, the
 
 3 insurer shall be permitted to non-renew or conditionally renew
 
 4 one additional motor vehicle insurance policy in that territory
 
 5 in excess of the two per cent limit established in subsection
 
 6 (a), subject to a fair and nondiscriminatory formula developed by
 
 7 the commissioner that shall consider the number of motor vehicle
 
 8 insurance policies written less cancellations initiated by the
 
 9 insurer within the first sixty days of the policy period."]
 
10      SECTION 11.  Section 431:10C-112, Hawaii Revised Statutes,
 
11 is repealed.
 
12      ["431:10C-112  Notice of cancellation or non-renewal;
 
13 effect on term of coverage.(a)  In any case of cancellation or
 
14 refusal to renew, the insurer shall give written notice to the
 
15 insured not less than thirty days prior to the effective date of
 
16 the cancellation or refusal to renew.  Cancellation or refusal to
 
17 renew shall not be deemed valid unless supported by a certificate
 
18 of mailing properly validated by the United States Postal
 
19 Service.
 
20      (b)  If the insurer has manifested in writing an offer to
 
21 renew to the named insured at least thirty days prior to the end
 
22 of the policy period and the offer is not accepted before the
 
23 expiration of the policy term, the policy shall lapse upon that
 

 
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                                     S.B. NO.           2324
                                                        
                                                        

 
 1 expiration date and section 431:10C-111 shall not apply.
 
 2 Notwithstanding other valid methods of acceptance, an offer shall
 
 3 be deemed accepted as of the date of mailing of the acceptance.
 
 4 The date of mailing may be evidenced by the postmark or a
 
 5 certificate of mailing properly validated by the United States
 
 6 Postal Service."]
 
 7      SECTION 12.  Section 431:10C-113, Hawaii Revised Statutes,
 
 8 is repealed.
 
 9      ["431:10C-113  Violation of rejection, cancellation and
 
10 nonrenewal provisions.(a)  Whoever knowingly violates, or
 
11 conspires to violate, the provisions of section 431:10C-110 and
 
12 section 431:10C-111 shall be assessed a civil penalty in an
 
13 amount not to exceed $1,000 for each separate violation.  Each
 
14 violation of section 431:10C-110 with respect to a policyholder
 
15 or applicant for insurance shall constitute a separate violation.
 
16      (b)  The principles of law and equity regarding fraud and
 
17 misrepresentation of material fact shall apply with respect to
 
18 optional-additional coverages which are in excess of those which
 
19 the insurer is required to make available to insureds under
 
20 section 431:10C-302."]
 
21      SECTION 13.  In codifying the new sections added by section
 
22 1 of this Act, the revisor of statutes shall substitute the
 
23 appropriate section numbers for the letters used in designating
 

 
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                                     S.B. NO.           2324
                                                        
                                                        

 
 1 the new sections in this Act.
 
 2      SECTION 14.  Statutory material to be repealed is bracketed.
 
 3 New statutory material is underscored.
 
 4      SECTION 15.  This Act shall take effect on July 1, 2001.
 
 5 
 
 6                       INTRODUCED BY:  ___________________________