Note
COMMERCIAL LIABILITY INSURANCE; TORT REFORM
The following provisions on liability insurance are excerpts from L Sp 1986, c 2, some provisions of which were scheduled for repeal on October 1, 1995, by L 1993, c 238, §1. L 1995, c 130 deleted this repeal date thereby making the provisions permanent:
"SECTION 1. Legislative findings and purpose. The legislature finds and declares that a solution to the current crisis in liability insurance has created an overpowering public necessity for a comprehensive combination of reforms to both the tort system and the insurance regulatory system. It is the intent of this Act to alleviate the seriousness of the current insurance crisis and to prevent the reoccurrence of such a crisis. The purpose of this Act is to ensure the widest possible availability of liability insurance at reasonable rates, to ensure a stable market for liability insurers, and to provide for means to adjust insurance premium rates in the context of anticipated cost savings from tort reform legislation affecting the affordability and availability of liability insurance. [L Sp 1986, c 2, §1]
SECTION 2. Definitions. As used in sections 3 to 7 of this Act, unless the context otherwise requires:
1. "Authorized insurer" means insurers licensed to do business in the State.
2. "Commercial liability insurance" means insurance written for businesses providing protection for an insured against loss arising from injuries to other persons or damage to their property. It includes but is not limited to policies providing coverage for errors and omissions, and professional malpractice.
3. "Rebate" means an amount refunded to a policyholder by an insurer to reflect a return of excess premiums with interest.
4. "Surcharge" means an amount assessed by an insurer against a policyholder over and above manual rates. [L Sp 1986, c 2, §§2 and 31; am L 1989, c 300, §2; am L 1991, c 62, §1; am L 1993, c 238, §1; am L 1995, c 130, §1]
SECTION 3. Rate reduction; relief. (a) The insurance commissioner shall effect a moratorium and not approve any rate level increase in commercial liability insurance during the period August 1, 1986, to September 30, 1986. Commencing October 1, 1986, all authorized insurers transacting commercial liability insurance in this State shall implement a ten per cent rate reduction from the rates currently on file with the insurance commissioner for all policies containing commercial liability coverage, except motor vehicle and medical malpractice policies, in effect on September 30, 1986, for each new and renewal policy and provide that the new rates will be in effect and filed during the period October 1, 1986, to September 30, 1987. There shall be no exception to the requirements of this subsection, unless the commissioner, pursuant to an insurer's petition, shall find that the use of the rates required herein by an insurer will be inadequate to the extent that such rates jeopardize the solvency of the insurer required to use such rates.
(b) Commencing on October 1, 1987, all authorized insurers providing commercial liability insurance in this State shall implement a twelve per cent rate reduction for all policies containing commercial liability coverage, except motor vehicle and medical malpractice policies issued by mutual or reciprocal insurers, from the rates in effect on September 30, 1987, for each new and renewal policy, and provide that the new rates will be in effect and filed during the period October 1, 1987, to September 30, 1988.
(c) Commencing on October 1, 1988, all authorized insurers providing commercial liability insurance in this State shall implement a fifteen per cent rate reduction for all policies containing commercial liability coverage, except motor vehicle and medical malpractice policies issued by mutual or reciprocal insurers, from the rates in effect on September 30, 1988, for each new and renewal policy, and provide that the new rates will be in effect and filed during the period October 1, 1988, to September 30, 1989; provided that for purposes of this section, a mutual or reciprocal insurer shall include in any rate filing, information and data regarding the expected impact of the tort reform implemented by sections 11 through 22 of Act 2, First Special Session Laws of Hawaii, 1986.
(d) Except as otherwise provided in this Act, all rates for commercial liability insurance shall comply with the provisions of the casualty rating law contained in chapter 431, Hawaii Revised Statutes. Any insurer which contends that the rate provided for in subsection (b) or (c) is inadequate shall state in its filing the rate it contends is appropriate and shall state with specificity the factors or data which it contends should be considered in order to produce such appropriate rate. The insurer shall be permitted to use all of the generally accepted actuarial techniques in making any filing pursuant to this subsection. It shall be the insurer's or rating organization's burden to actuarially justify any rate increase from the reduced rates provided for in subsection (b) or (c). The insurer or rating organization shall include in the filing the expected impact of the tort reform implemented by Sections 11 to 22 of this Act on losses, expenses and rates. In making this filing as provided for by this subsection, the insurer or rating organization shall comply with the following provisions:
(1) Any rate filing contending that the rates established in subsections (b) or (c) is inadequate shall be filed ninety days prior to October 1, 1987, or October 1, 1988.
(2) The insurance commissioner shall review and approve or disapprove the rate filing thirty days prior to October 1, 1987, or with respect to filings submitted pursuant to subsection (c) thirty days prior to October 1, 1988. A filing shall be deemed to meet the requirements of the casualty rating law unless disapproved by the commissioner within the 60-day waiting period. All filings submitted under this Act shall be deemed public records.
(3) In the event the filing is approved under subsection (d)(2), a contested case hearing in accordance with the provisions of chapter 91, Hawaii Revised Statutes, may be convened. Notwithstanding the provisions of section 431-61, Hawaii Revised Statutes, a petition and demand for hearing shall not stay the implementation of the rate approved by the commissioner or the rates in effect as of September 30, 1986, whichever is higher. A final order of the commissioner may be appealed in accordance with the provisions of section 431-69, Hawaii Revised Statutes.
(4) In the event a filing is disapproved in whole or in part, a petition and demand for a contested case hearing may be filed in accordance with chapter 91, Hawaii Revised Statutes. The insurer or rating organization shall have the burden of proving that the disapproval is not justified. While the action of the commissioner in disapproving the rate filing is being challenged, the aggrieved insurer shall be entitled to charge the rates established as of September 30, 1986 or the filed rates, whichever is lower.
(5) With respect to any approval or disapproval by the commissioner regarding any rate filing focusing upon the October 1, 1988, reduction, the aggrieved insurer shall be entitled to charge the rates established as of September 30, 1988, while the action of the commissioner is being challenged and contested.
(6) Upon final disposition, pursuant to chapter 91, Hawaii Revised Statutes, or by a court of competent jurisdiction of the insurance commissioner's approval or disapproval of the rates, the insurance commissioner shall immediately determine and order that the insurer make the appropriate rebates of premiums to policyholders or allow the insurer to exact a surcharge on premiums.
(e) The insurance commissioner shall publish a notice of every filing submitted by insurers pursuant to this section in a newspaper of general circulation in the State. [L Sp 1986, c 2, §§3 and 31; am L 1987, c 231, §1; am L 1989, c 300, §2; am L 1991, c 62, §1; am L 1993, c 238, §1; am L 1995, c 130, §1]
SECTION 4. Excessive rates; rebate or credit. In reviewing the information gathered from the closed case reports provided for under Section 26 of this Act, and from any other relevant information, if there is reason to believe that the rates are excessive, the insurance commissioner shall request a hearing to determine the adequate rate. If as a result of the hearing it is determined that insurers are charging excessive rates, the insurance commissioner shall issue an order specifying that a new rate or schedule be filed by the insurer or rating organization which responds to the findings made through the hearing. The insurance commissioner shall further order that premiums charged each policyholder constituting the portion of the rate above that which is actuarially justified be returned to such policyholder in the form of a rebate or credit. [L Sp 1986, c 2, §§4 and 31; am L 1989, c 300, §2; am L 1991, c 62, §1; am L 1993, c 238, §1; am L 1995, c 130, §1]
SECTION 5. Cancellation of policy; prohibition. No policies to which the reductions on insurance rate apply shall be canceled by the insurer prior to the expiration of the agreed term or one year from the effective date of the policy or renewal, whichever is less, except under the following grounds:
(1) Failure to pay a premium when due;
(2) Fraud or material misrepresentation;
(3) Risk hazard increases substantially and the insurer could not have reasonably foreseen the change when entering into the contract;
(4) Substantial breaches of contractual duties, conditions, or warranties;
(5) Violation of any local fire, health, or safety statute or ordinance;
(6) Conviction of the named insured for a crime having as one of its necessary elements, an act increasing any hazard that is insured against;
(7) The insurance commissioner determines that the continuation of the policy places the insurer in violation of chapter 431, Hawaii Revised Statutes;
(8) For any good faith reason with the approval of the insurance commissioner. [L Sp 1986, c 2, §§5 and 31; am L 1989, c 300, §2; am L 1991, c 62, §1; am L 1993, c 238, §1; am L 1995, c 130, §1]
SECTION 6. Cancellation of policies; effective date. In the event there is cancellation pursuant to sections 5 and 7 of this Act, such cancellation will be effective thirty days after the insurer delivers written notice of the cancellation to the policyholder. [L Sp 1986, c 2, §§6 and 31; am L 1989, c 300, §2; am L 1991, c 62, §1; am L 1993, c 238, §1; am L 1995, c 130, §1]
SECTION 7. Nonrenewal of policies; notice. An insurer may refuse to renew a commercial liability policy if notice to the policyholder of the reasons for nonrenewal are provided to the insured forty-five days prior to the intended nonrenewal date. A commercial liability insurance policy, once issued shall not be cancelled or refused renewal by an insurer based upon the mandatory rate reductions as required by this Act." [L Sp 1986, c 2, §§7 and 31; am L 1989, c 300, §2; am L 1991, c 62, §1; am L 1993, c 238, §1; am L 1995, c 130, §1]
§431:14-103 Making of rates. (a) Rates shall be made in accordance with the following provisions:
(1) Rates shall not be excessive, inadequate, or unfairly discriminatory.
(2) Due consideration shall be given to:
(A) Past and prospective loss experience within and outside this State; provided that if the claim does not exceed the selected deductible amount pursuant to section 386-100, and the employer reimburses the insurer for the amount, the claims shall not be calculated in the employer's experience rating or risk category;
(B) The conflagration and catastrophe hazards, if any;
(C) A reasonable margin for underwriting profit and contingencies;
(D) Dividends, savings, or unabsorbed premium deposits allowed or returned by insurers to their policyholders, members, or subscribers;
(E) Past and prospective expenses both country-wide and those specially applicable to this State;
(F) Investment income from unearned premium and loss reserve funds; and
(G) All other relevant factors within and outside this State.
(3) In the case of fire insurance rates, consideration shall be given to the experience of the fire insurance business during a period of not less than the most recent five-year period for which that experience is available.
(4) The systems of expense provisions included in the rates for use by any insurer or group of insurers may differ from those of other insurers or groups of insurers to reflect the requirements of the operating methods of any insurer or group with respect to any class of insurance, or with respect to any subdivision or combination thereof for which subdivision or combination separate expense provisions are applicable.
(5) Risks may be grouped by classifications for the establishment of rates and minimum premiums. Classification rates may be modified to produce rates for individual risks in accordance with rating plans that establish standards for measuring variations in hazards or expense provisions, or both. These standards may measure any differences among risks that can be demonstrated to have a probable effect upon losses or expenses. No risk classification may be based upon race, creed, national origin, or the religion of the insured.
(6) Manual, minimum, class rates, rating schedules, or rating plans shall be made and adopted, except in the case of:
(A) Special rates where manual, minimum, class rates, rating schedules, or rating plans are not applicable; and
(B) Specifically rated inland marine risks.
(7) No insurer authorized to do business in this State shall issue any policy that provides or makes available to any risks preferred rates based upon any grouping of persons, firms, or corporations by way of membership, license, franchise, contract, agreement, or any other means, other than common majority ownership of the risks, or except where:
(A) A common stock ownership in and management control of the risks are held by the same person, corporation, or firm;
(B) Permitted or authorized by filings in existence as of January 1, 1988, under the casualty rating law and the fire rating law, as these filings may be amended from time to time;
(C) Health care providers, as defined in section 671-1 that could have joined the patients' compensation fund as it existed in chapter 671, part III, prior to May 31, 1984, joined together with one or more groups of related or unrelated health care providers;
(D) Permitted under article 12; or
(E) Otherwise expressly provided by law.
(b) In cases of workers' compensation insurance, all rates made in accordance with this section shall be given due consideration for good safety records of employers. By premium reductions, dividends, or both, insurance carriers shall recognize good safety performance records of employers in this State.
(c) Upon the issuance of a certificate by a certified safety and health professional to an employer that the employer has an effective safety and health program pursuant to section 396-4.5, the insurer shall provide the employer with a workers' compensation insurance premium discount of at least five per cent; provided that the employer shall maintain the effective safety and health program throughout the policy period. Standards for the issuance of certificates shall be included in rules adopted by the department of labor and industrial relations pursuant to chapter 91.
(d) For the purpose of ratemaking, all insurers shall treat a volunteer firefighter the same as a firefighter employed by a county fire department; provided that the volunteer firefighters are attached to a station where a firefighter or volunteer firefighter who has been trained and certified to drive a commercial motor vehicle by either the state or county government, as appropriate, and who maintains a category (3) license as defined by section 286-102(b)(3) is on duty at all times or at least four firefighters or volunteer firefighters who have been trained and certified to drive a commercial motor vehicle by either the state or county government, as appropriate, and who maintain a category (3) license as defined by section 286-102(b)(3) are members of the volunteer unit.
(e) Except to the extent necessary to meet the provisions of subsection (a)(1), uniformity among insurers in any matters within the scope of this section is neither required nor prohibited. [L 1987, c 347, pt of §2; am L 1990, c 255, §8; am L 1993, c 269, §2; am L 1995, c 234, §18; am L 1997, c 18, §1 and c 72, §1]
Cross References
Limited liability of volunteer firefighters, see §663-1.55.
Section: Previous 431-13-201 431-13-202 431-13-203 431-13-204 431-14-101 431-14-101.5 431-14-102 431-14-103 431-14-103.3 431-14-103.5 431-14-104 431-14-104.5 431-14-105 431-14-105.5 431-14-106 NextLast modified: October 27, 2016