HOUSE OF REPRESENTATIVES

H.B. NO.

1989

TWENTY-EIGHTH LEGISLATURE, 2016

 

STATE OF HAWAII

 

 

 

 

 

 

A BILL FOR AN ACT

 

 

relating to insurance.

 

 

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

 


     SECTION 1.  Section 431:13-103, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows:

     "(a)  The following are defined as unfair methods of competition and unfair or deceptive acts or practices in the business of insurance:

     (1)  Misrepresentations and false advertising of insurance policies.  Making, issuing, circulating, or causing to be made, issued, or circulated, any estimate, illustration, circular, statement, sales presentation, omission, or comparison which:

         (A)  Misrepresents the benefits, advantages, conditions, or terms of any insurance policy;

         (B)  Misrepresents the dividends or share of the surplus to be received on any insurance policy;

         (C)  Makes any false or misleading statement as to the dividends or share of surplus previously paid on any insurance policy;

         (D)  Is misleading or is a misrepresentation as to the financial condition of any insurer, or as to the legal reserve system upon which any life insurer operates;

         (E)  Uses any name or title of any insurance policy or class of insurance policies misrepresenting the true nature thereof;

         (F)  Is a misrepresentation for the purpose of inducing or tending to induce the lapse, forfeiture, exchange, conversion, or surrender of any insurance policy;

         (G)  Is a misrepresentation for the purpose of effecting a pledge or assignment of or effecting a loan against any insurance policy;

         (H)  Misrepresents any insurance policy as being shares of stock;

         (I)  Publishes or advertises the assets of any insurer without publishing or advertising with equal conspicuousness the liabilities of the insurer, both as shown by its last annual statement; or

         (J)  Publishes or advertises the capital of any insurer without stating specifically the amount of paid-in and subscribed capital;

     (2)  False information and advertising generally.  Making, publishing, disseminating, circulating, or placing before the public, or causing, directly or indirectly, to be made, published, disseminated, circulated, or placed before the public, in a newspaper, magazine, or other publication, or in the form of a notice, circular, pamphlet, letter, or poster, or over any radio or television station, or in any other way, an advertisement, announcement, or statement containing any assertion, representation, or statement with respect to the business of insurance or with respect to any person in the conduct of the person's insurance business, which is untrue, deceptive, or misleading;

     (3)  Defamation.  Making, publishing, disseminating, or circulating, directly or indirectly, or aiding, abetting, or encouraging the making, publishing, disseminating, or circulating of any oral or written statement or any pamphlet, circular, article, or literature which is false, or maliciously critical of or derogatory to the financial condition of an insurer, and which is calculated to injure any person engaged in the business of insurance;

     (4)  Boycott, coercion, and intimidation.

         (A)  Entering into any agreement to commit, or by any action committing, any act of boycott, coercion, or intimidation resulting in or tending to result in unreasonable restraint of, or monopoly in, the business of insurance; or

         (B)  Entering into any agreement on the condition, agreement, or understanding that a policy will not be issued or renewed unless the prospective insured contracts for another class or an additional policy of the same class of insurance with the same insurer;

     (5)  False financial statements.

         (A)  Knowingly filing with any supervisory or other public official, or knowingly making, publishing, disseminating, circulating, or delivering to any person, or placing before the public, or knowingly causing, directly or indirectly, to be made, published, disseminated, circulated, delivered to any person, or placed before the public, any false statement of a material fact as to the financial condition of an insurer; or

         (B)  Knowingly making any false entry of a material fact in any book, report, or statement of any insurer with intent to deceive any agent or examiner lawfully appointed to examine into its condition or into any of its affairs, or any public official to whom the insurer is required by law to report, or who has authority by law to examine into its condition or into any of its affairs, or, with like intent, knowingly omitting to make a true entry of any material fact pertaining to the business of the insurer in any book, report, or statement of the insurer;

     (6)  Stock operations and advisory board contracts.  Issuing or delivering or permitting agents, officers, or employees to issue or deliver, agency company stock or other capital stock, or benefit certificates or shares in any common-law corporation, or securities or any special or advisory board contracts or other contracts of any kind promising returns and profits as an inducement to insurance;

     (7)  Unfair discrimination.

         (A)  Making or permitting any unfair discrimination between individuals of the same class and equal expectation of life in the rates charged for any policy of life insurance or annuity contract or in the dividends or other benefits payable thereon, or in any other of the terms and conditions of the contract;

         (B)  Making or permitting any unfair discrimination in favor of particular individuals or persons, or between insureds or subjects of insurance having substantially like insuring, risk, and exposure factors, or expense elements, in the terms or conditions of any insurance contract, or in the rate or amount of premium charge therefor, or in the benefits payable or in any other rights or privilege accruing thereunder;

         (C)  Making or permitting any unfair discrimination between individuals or risks of the same class and of essentially the same hazards by refusing to issue, refusing to renew, canceling, or limiting the amount of insurance coverage on a property or casualty risk because of the geographic location of the risk, unless:

              (i)  The refusal, cancellation, or limitation is for a business purpose which is not a mere pretext for unfair discrimination; or

             (ii)  The refusal, cancellation, or limitation is required by law or regulatory mandate;

         (D)  Making or permitting any unfair discrimination between individuals or risks of the same class and of essentially the same hazards by refusing to issue, refusing to renew, canceling, or limiting the amount of insurance coverage on a residential property risk, or the personal property contained therein, because of the age of the residential property, unless:

              (i)  The refusal, cancellation, or limitation is for a business purpose which is not a mere pretext for unfair discrimination; or

             (ii)  The refusal, cancellation, or limitation is required by law or regulatory mandate;

         (E)  Refusing to insure, refusing to continue to insure, or limiting the amount of coverage available to an individual because of the sex or marital status of the individual; however, nothing in this subsection shall prohibit an insurer from taking marital status into account for the purpose of defining persons eligible for dependent benefits;

         (F)  Terminating or modifying coverage, or refusing to issue or renew any property or casualty policy or contract of insurance solely because the applicant or insured or any employee of either is mentally or physically impaired; provided that this subparagraph shall not apply to accident and health or sickness insurance sold by a casualty insurer; provided further that this subparagraph shall not be interpreted to modify any other provision of law relating to the termination, modification, issuance, or renewal of any insurance policy or contract;

         (G)  Refusing to insure, refusing to continue to insure, or limiting the amount of coverage available to an individual based solely upon the individual's having taken a human immunodeficiency virus (HIV) test prior to applying for insurance; or

         (H)  Refusing to insure, refusing to continue to insure, or limiting the amount of coverage available to an individual because the individual refuses to consent to the release of information which is confidential as provided in section 325-101; provided that nothing in this subparagraph shall prohibit an insurer from obtaining and using the results of a test satisfying the requirements of the commissioner, which was taken with the consent of an applicant for insurance; provided further that any applicant for insurance who is tested for HIV infection shall be afforded the opportunity to obtain the test results, within a reasonable time after being tested, and that the confidentiality of the test results shall be maintained as provided by section 325‑101;

     (8)  Rebates.  Except as otherwise expressly provided by law:

         (A)  Knowingly permitting or offering to make or making any contract of insurance, or agreement as to the contract other than as plainly expressed in the contract, or paying or allowing, or giving or offering to pay, allow, or give, directly or indirectly, as inducement to the insurance, any rebate of premiums payable on the contract, or any special favor or advantage in the dividends or other benefits, or any valuable consideration or inducement not specified in the contract; or

         (B)  Giving, selling, or purchasing, or offering to give, sell, or purchase as inducement to the insurance or in connection therewith, any stocks, bonds, or other securities of any insurance company or other corporation, association, or partnership, or any dividends or profits accrued thereon, or anything of value not specified in the contract;

     (9)  Nothing in paragraph (7) or (8) shall be construed as including within the definition of discrimination or rebates any of the following practices:

         (A)  In the case of any life insurance policy or annuity contract, paying bonuses to policyholders or otherwise abating their premiums in whole or in part out of surplus accumulated from nonparticipating insurance; provided that any bonus or abatement of premiums shall be fair and equitable to policyholders and in the best interests of the insurer and its policyholders;

         (B)  In the case of life insurance policies issued on the industrial debit plan, making allowance to policyholders who have continuously for a specified period made premium payments directly to an office of the insurer in an amount which fairly represents the saving in collection expense;

         (C)  Readjustment of the rate of premium for a group insurance policy based on the loss or expense experience thereunder, at the end of the first or any subsequent policy year of insurance thereunder, which may be made retroactive only for the policy year; and

         (D)  In the case of any contract of insurance, the distribution of savings, earnings, or surplus equitably among a class of policyholders, all in accordance with this article;

    (10)  Refusing to provide or limiting coverage available to an individual because the individual may have a third-party claim for recovery of damages; provided that:

         (A)  Where damages are recovered by judgment or settlement of a third-party claim, reimbursement of past benefits paid shall be allowed pursuant to section 663-10;

         (B)  This paragraph shall not apply to entities licensed under chapter 386 or 431:10C; and

         (C)  For entities licensed under chapter 432 or 432D:

              (i)  It shall not be a violation of this section to refuse to provide or limit coverage available to an individual because the entity determines that the individual reasonably appears to have coverage available under chapter 386 or 431:10C; and

             (ii)  Payment of claims to an individual who may have a third-party claim for recovery of damages may be conditioned upon the individual first signing and submitting to the entity documents to secure the lien and reimbursement rights of the entity and providing information reasonably related to the entity's investigation of its liability for coverage.

              Any individual who knows or reasonably should know that the individual may have a third-party claim for recovery of damages and who fails to provide timely notice of the potential claim to the entity, shall be deemed to have waived the prohibition of this paragraph against refusal or limitation of coverage.  "Third-party claim" for purposes of this paragraph means any tort claim for monetary recovery or damages that the individual has against any person, entity, or insurer, other than the entity licensed under chapter 432 or 432D;

    (11)  Unfair claim settlement practices.  Committing or performing with such frequency as to indicate a general business practice any of the following:

         (A)  Misrepresenting pertinent facts or insurance policy provisions relating to coverages at issue;

         (B)  With respect to claims arising under its policies, failing to respond with reasonable promptness, in no case more than fifteen [working] calendar days, to communications received from:

              (i)  The insurer's policyholder;

             (ii)  Any other persons, including the commissioner; or

            (iii)  The insurer of a person involved in an incident in which the insurer's policyholder is also involved.

              The response shall be more than an acknowledgment that such person's communication has been received, and shall adequately address the concerns stated in the communication;

         (C)  Failing to adopt and implement reasonable standards for the prompt investigation of claims arising under insurance policies;

         (D)  Refusing to pay claims without conducting a reasonable investigation that is initiated within fifteen calendar days of receipt of the notice of claim by and agent, producer, or insurer and is investigated by either the insurer's adjuster or the insurer's independent adjuster and based upon all available information;

         (E)  Failing to affirm or deny coverage of claims within [a reasonable time] thirty calendar days after an insured or claimant's proof of loss [statements have been completed;] submission has been received by the insurer;

         (F)  Failing to [offer] make payment within [thirty] fifteen calendar days of affirmation of liability[, if] of the amount of the claim that has been determined and is not in dispute; provided that the amount of the claim shall be reasonable and the insurer provides a reasonable explanation of the basis for withholding any balance of payment, including the applicable facts and law;

         (G)  Failing to provide the insured, or when applicable the insured's beneficiary, with a reasonable written explanation for any delay, on every claim remaining unresolved for thirty calendar days from the date it was reported;

         (H)  Not attempting in good faith to effectuate [prompt, fair, and equitable] settlements of claims within fifteen calendar days in which liability has become reasonably clear;

         (I)  Compelling insureds to institute litigation to recover amounts due under an insurance policy by offering substantially less than the amounts ultimately recovered in actions brought by the insureds;

         (J)  Attempting to settle a claim for less than the amount to which a reasonable person would have believed the person was entitled by reference to written or printed advertising material accompanying or made part of an application;

         (K)  Attempting to settle claims on the basis of an application which was altered without notice, knowledge, or consent of the insured;

         (L)  Making claims payments to insureds, claimants, or beneficiaries not accompanied by a detailed summary of loss statement setting forth the coverage under which the payments are being made;

         (M)  Making known to insureds or claimants a policy of appealing from arbitration awards in favor of insureds or claimants for the purpose of compelling them to accept settlements or compromises less than the amount awarded in arbitration;

         (N)  Delaying the investigation or payment of claims by requiring an insured, claimant, or the physician or advanced practice registered nurse of either to submit a preliminary claim report and then requiring the subsequent submission of formal proof of loss forms, both of which submissions contain substantially the same information;

         (O)  Failing to [promptly] settle claims, where liability has become reasonably clear, under one portion of the insurance policy coverage to influence settlements under other portions of the insurance policy coverage[;] within fifteen calendar days from the receipt of a payment by the insurer to an insured claimant;

         (P)  Failing to promptly provide a reasonable explanation of the basis in the insurance policy in relation to the facts or applicable law for denial of a claim or for the offer of a compromise settlement; [and]

         (Q)  Indicating to the insured on any payment draft, check, or in any accompanying letter that the payment is "final" or is "a release" of any claim if additional benefits relating to the claim are probable under coverages afforded by the policy; unless the policy limit has been paid or there is a bona fide dispute over either the coverage or the amount payable under the policy;

         (R)  Delaying, obstructing, or denying an insured's appraisal rights under the insuring policy;

         (S)  Manipulating the intent of a policy's appraisal clause in order to subjugate the policyholder's rights under the insuring agreement; and

         (T)  Failing to provide written notice within sixty days prior to the expiration of any statute of limitation or other time period constraint upon which the insurer may rely upon to deny a claim;

    (12)  Failure to maintain complaint handling procedures.  Failure of any insurer to maintain a complete record of all the complaints which it has received since the date of its last examination under section 431:2-302.  This record shall indicate the total number of complaints, their classification by line of insurance, the nature of each complaint, the disposition of these complaints, and the time it took to process each complaint.  For purposes of this section, "complaint" means any written communication primarily expressing a grievance;

    (13)  Misrepresentation in insurance applications.  Making false or fraudulent statements or representations on or relative to an application for an insurance policy, for the purpose of obtaining a fee, commission, money, or other benefit from any insurer, producer, or individual; and

     (14) Failure to obtain information.  Failure of any insurance producer, or an insurer where no producer is involved, to comply with section 431:10D-623(a), (b), or (c) by making reasonable efforts to obtain information about a consumer before making a recommendation to the consumer to purchase or exchange an annuity."

     SECTION 2.  Section 431:10-210, Hawaii Revised Statutes, is repealed.

     ["§431:10-210  Standard form fire insurance policy.  (a)  The standard form fire insurance policy as authorized and in effect in the State of New York on December 31, 1943, or its approved equivalent, is established as the standard form fire insurance policy for this State, and no fire insurance policy shall be delivered or issued for delivery in this State in any other than the standard form or its approved equivalent with such additions or modifications as are allowed or required by this code.  This section is not applicable to inland marine policies or policies written upon motor vehicles or aircraft.  For the purpose of this section, "approved equivalent" means any form of policy which does not correspond to the standard fire insurance policy, provided that the coverage with respect to the peril of fire, when viewed in its entirety, is substantially equivalent to, or more favorable to the insured than that contained in the standard fire insurance policy and approved for use by the commissioner.

     (b)  The commissioner shall at all times keep on file in the commissioner's office a copy of the standard form fire insurance policy certified by the superintendent of insurance of the State of New York, and copies of all forms deemed to be equivalent.

     (c)  Nothing in this section shall affect the validity of any policy otherwise valid or of any claim under the policy against an insurer.

     (d)  No part of the standard form fire insurance policy or its approved equivalent shall be omitted from the policy.

     (e)  Any policy which, in addition to coverage against perils of fire and lightning, includes coverage against other perils need not comply with all of the provisions of the standard form fire insurance policy or its approved equivalent if the policy provisions with respect to the perils of fire and lightning are the exact provisions of the standard form fire insurance policy or its approved equivalent.

     (f)  The following additions to or modifications of the standard form fire insurance policy or its approved equivalent are permitted:

     (1)  An insurer may use in its policies its name, location of its principal office and date of incorporation, the amount of its paid-in capital stock, the amount of subscribed capital if separately stated, the names of its officers and agents, and the number and date of the policy.

     (2)  The pages of the standard policy or its approved equivalent may be renumbered and rearranged for convenience in the preparation of individual contracts and to provide space for the description of the property insured, the listing of rates and premiums for coverages insured under the policy or under endorsements attached or printed thereon, and such other date as may be conveniently included for duplication on daily reports or office records, and there may be substituted for the word company a more accurate descriptive term for the type of insurer.

     (3)  An insurer organized under special charter provisions may so indicate upon its policy and may add a statement of the plan under which it operates in this State.

     (4)  An insurer may use in its policies written, typewritten or printed forms of description and specifications of the property insured.

     (5)  An insurer may use in its policies with the approval of the commissioner, if the same are not already included in the standard policy or its approved equivalent, any provisions which any insurer is required by law to insert in its policies not in conflict with the standard policy.  The provisions shall be printed apart from the other conditions, agreements or provisions of the policy under separate title as follows:  "Provisions required by law to be inserted in this policy."

     (6)  An insurer may affix to or include in the policy a written statement that the policy does not cover loss or damage caused by nuclear reaction or nuclear radiation or radioactive contamination, all whether directly or indirectly resulting from an insured peril under the policy; provided that nothing herein shall be construed to prohibit the attachment to any such policy of an endorsement or endorsements specifically assuming coverage of loss or damage caused by nuclear reaction or nuclear radiation or radioactive contamination.

     (7)  An insurer may affix to or include in the policy a written statement that the policy does not cover loss or damage by fire to sugarcane caused by volcanic activity; provided that nothing herein shall be construed to prohibit the attachment to any such policy of an endorsement or endorsements specifically assuming coverage for loss or damage by fire to sugarcane caused by volcanic activity.

     (8)  An insurer may use appropriate forms of additional contracts, riders or endorsements adding to or modifying the provisions in the standard policy or its approved equivalent, or insuring against any additional perils which may by law be the subject of insurance, or insuring against indirect or consequential loss or damage.  Such other perils may be perils excluded from coverage in the standard policy or its approved equivalent.  Such form of contracts, riders, and endorsements may contain provisions or stipulations inconsistent with the standard policy or its approved equivalent if such provisions and stipulations are applicable only to such additional coverage or other additional peril or perils insured against.

     (g)  A policy issued by a mutual insurer shall contain in the body of the policy the total amount for which the insured may be liable under the charter or articles of the insurer.

     (h)  In the event of any conflict between this section and other provisions of this code, this section shall govern."]

     SECTION 3.  Section 431:10-211, Hawaii Revised Statutes, is repealed.

     ["§431:10-211  Content of policies in general.  (a)  A policy shall specify:

     (1)  The names of the parties to the contract.  The insurer's name shall be clearly shown in the policy;

     (2)  The subject of the insurance;

     (3)  The risks insured against and the amount of insurance;

     (4)  The time at which the insurance under the policy takes effect, and the period during which the insurance is to continue or the method of determining the period;

     (5)  A statement of the premium or premium rate; and

     (6)  The conditions pertaining to the insurance.

     (b)  If under the contract the exact amount of premiums is determinable only at termination of the contract or at periodic intervals of the contract, a statement of the basis and rates upon which the final premium is to be determined and paid shall be furnished any policy examining bureau having jurisdiction or to the insured upon request.

     (c)  This section shall not apply to surety insurance or to group insurance contracts."]

     SECTION 4.  Section 431:10-226, Hawaii Revised Statutes, is repealed.

     ["§431:10-226  Renewal of policy; new policy not required.  At the option of the insurer, any insurance policy terminating at a specified expiration date and not otherwise renewable, may be renewed or extended, upon a currently authorized policy form and at the premium rate then required for a specific additional period or periods by a certificate or by endorsement of the policy.  The issuance of a new policy is not required."]

     SECTION 6.  Statutory material to be repealed is bracketed and stricken.  New statutory material is underscored.
     SECTION 7.  This Act shall take effect upon its approval.

 

INTRODUCED BY:

_____________________________

 

 


 


 

Report Title:

Insurance; Unfair and Deceptive Practices; Contracts

 

Description:

Amends certain provisions relating to unfair or deceptive acts in the business of insurance.  Repeals certain provisions relating to insurance contracts.

 

 

 

The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent.