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]
§431:14-104 Rate filings. (a) Every insurer shall file with the commissioner every manual of classifications, rules, and rates, every rating plan, every other rating rule, and every modification of any of the foregoing that it proposes to use; provided that filings with regard to specific inland marine risks, which by general custom of the business are not written according to manual rate or rating plans, and bail bonds, subject to section 804-62, shall not be required pursuant to this subsection.
Every filing shall:
(1) State its proposed effective date;
(2) Indicate the character and extent of the coverage contemplated;
(3) Include a report on investment income; and
(4) Be accompanied by a $50 fee, payable to the commissioner, to be deposited in the commissioner's education and training fund.
(b) For each filing, an insurer shall submit to the commissioner:
(1) An electronic copy of the filing; or
(2) Two printed copies of the filing.
The commissioner may also request a printed version of an electronic filing to be submitted pursuant to paragraph (1).
(c) At the same time as the filing of the rate, every insurer shall file all supplementary rating and supporting information to be used in support of or in conjunction with a rate. The insurer may satisfy its obligation to file supplementary rating and supporting information by reference to material which has been approved by the commissioner. The information furnished in support of a filing may include or consist of a reference to:
(1) The prospective loss cost filing made by a rating organization or an advisory organization and approved by the commissioner;
(2) The experience or judgment of the insurer or information filed by the rating organization or advisory organization on behalf of the insurer as permitted by section 431:14-104.5;
(3) Its interpretation of any statistical data upon which it relies;
(4) The experience of other insurers, rating organizations, or advisory organizations; or
(5) Any other relevant factors.
(d) When a filing is not accompanied by the information upon which the insurer supports the filing, and the commissioner does not have sufficient information to determine whether the filing meets the requirements of this article, the commissioner shall require the insurer to furnish additional information and, in that event, the waiting period shall commence as of the date the information is furnished. Until the requested information is provided, the filing shall not be deemed complete or filed nor available for use by the insurer. If the requested information is not provided within a reasonable time period, the filing may be returned to the insurer as not filed and not available for use.
(e) Except for rates filed in accordance with subsections (k), (l), and (m), a filing and any supporting information shall be open to public inspection upon filing with the commissioner.
(f) Specific inland marine rates on risks specially rated, made by a rating organization or advisory organization, shall be filed with the commissioner.
(g) An insurer may satisfy its obligation to make the filings by becoming a member of, or a subscriber to, a licensed rating organization or advisory organization that makes the filings, except for those lines of insurance for which the commissioner determines individual insurer rate filings shall be made. Nothing contained in this article shall be construed as requiring any insurer to become a member of or a subscriber to any rating organization or advisory organization.
(h) After reviewing an insurer's filing, the commissioner may require that the insurer's rates be based upon the insurer's own loss and expense information. If the insurer's loss or allocated loss adjustment expense information is not actuarially credible, as determined by the commissioner, the insurer may use or supplement its experience with information filed with the commissioner by a rating organization or advisory organization. At the commissioner's request, each insurer utilizing the services of a rating organization or advisory organization must submit with its rate filing, a description of the rationale for that use, including the insurer's own information and method of utilizing the rating or advisory organization's information.
(i) The commissioner shall review filings as soon as reasonably possible after they have been made to determine whether they meet the requirements of this article. The commissioner shall calculate the investment income and accuracy of loss reserves upon which filings are based, and the insurer shall provide the information necessary to make the calculation.
(j) Except as provided herein and in subsections (k) and (l) and section 431:14-120, each filing shall be on file for a waiting period of thirty days before the filing becomes effective. The period may be extended by the commissioner for an additional period not to exceed fifteen days if the commissioner gives written notice within the waiting period to the insurer, rating organization, or advisory organization that made the filing that the commissioner needs the additional time for the consideration of the filing. Upon the written application by the insurer, rating organization, or advisory organization, the commissioner may authorize a filing that the commissioner has reviewed to become effective before the expiration of the waiting period or any extension thereof. A filing shall be deemed to meet the requirements of this article unless disapproved by the commissioner, as provided in section 431:14-106, within the waiting period or any extension thereof.
(k) The following rates shall become effective when filed:
(1) Specific inland marine rates on risks specially rated by a rating organization or advisory organization;
(2) Any special filing with respect to a surety or guaranty bond required by law or by court or executive order or by order or rule of a public body, not covered by a previous filing; and
(3) Any special filing with respect to any class of insurance, subdivision, or combination thereof that is subject to individual risk premium modification and has been agreed to by an insured under a formal or informal bid process.
The rates shall be deemed to meet the requirements of this article until the time the commissioner reviews the filing and so long as the filing remains in effect.
(l) The commissioner, by written order, may suspend or modify the requirement of filing as to any class of insurance, subdivision, or combination thereof, or as to classes of risks, the rates for which cannot practicably be filed before they are used. The orders shall be made known to the affected insurers, rating organizations, and advisory organizations. The commissioner may make examinations as the commissioner may deem advisable to ascertain whether any rates affected by the order meet the standards set forth in section 431:14-103(a)(1).
(m) The commissioner may approve a rate on any specific risk in excess of that set by an applicable rate filing, provided the insured files with the commissioner a written application stating the insured's reasons for consenting to the excess rate. Upon approval by the commissioner, the rate shall be deemed effective retroactive to the date of the insured's application.
(n) No insurer shall make or issue a contract or policy except in accordance with filings which are in effect for the insurer as provided in this article or in accordance with subsections (k), (l), or (m). This subsection shall not apply to contracts or policies for inland marine risks as to which filings are not required. [L 1987, c 347, pt of §2 as superseded by c 348, §19; am L 1990, c 255, §9; am L 1993, c 205, §§31, 32; am L 1995, c 234, §19; am L 1997, c 81, §1; am L 1999, c 5, §2; am L 2004, c 122, §60; am L 2006, c 154, §39; am L 2009, c 77, §10; am L 2012, c 258, §4]
Cross References
Commissioner's education and training fund, see §431:2-214.
Section: Previous 431-13-204 431-14-101 431-14-101.5 431-14-102 431-14-103 431-14-103.3 431-14-103.5 431-14-104 431-14-104.5 431-14-105 431-14-105.5 431-14-106 431-14-107 431-14-107.1 431-14-107.2 NextLast modified: October 27, 2016