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]
§431:14-106 Disapproval of filings. (a) If, within the waiting period or any extension of the waiting period as provided in section 431:14-104(j), the commissioner finds that a filing does not meet the requirements of this article, the commissioner shall send to the insurer, rating organization, or advisory organization that made the filing, written notice of disapproval of the filing specifying in what respects the filing fails to meet the requirements of this article, specifying the actuarial, statutory, factual, and legal bases for the disapproval, including an explanation of the application thereof that resulted in disapproval, and stating that the filing shall not become effective.
(b) If, within thirty days:
(1) After a specific inland marine rate on a risk specially rated by a rating organization or advisory organization subject to section 431:14-104(k) has become effective; or
(2) After a special surety or guaranty filing subject to section 431:14-104(k) has become effective;
the commissioner finds that the filing does not meet the requirements of this article, the commissioner shall send to the insurer, rating organization, or advisory organization that made the filing, written notice of disapproval of the filing specifying in what respects the filing fails to meet the requirements of this article and stating when, within a reasonable period thereafter, the filing shall be deemed no longer effective. The disapproval shall not affect any contract made or issued prior to the expiration of the period set forth in the notice.
(c) If, any time subsequent to the applicable review period provided for in subsections (a) or (b), the commissioner finds that a filing does not comply with the requirements of this article, the commissioner shall order a hearing upon the filing. The hearing shall be held upon not less than ten days' written notice to every insurer, rating organization, or advisory organization that made the filing. The notice shall specify the matters to be considered at the hearing and specify the actuarial, statutory, factual, and legal bases for the commissioner's finding of noncompliance. If, after a hearing, the commissioner finds that a filing does not meet the requirements of this article, the commissioner, within thirty days of the hearing, shall issue an order specifying in what respects the filing fails to meet the requirements, and stating when, within a reasonable period thereafter, the filing shall be deemed no longer effective. Copies of the order shall be sent to every such insurer, rating organization, or advisory organization whose filing is affected by the order. The order shall not affect any contract or policy made or issued prior to the expiration of the period set forth in the order.
(d) If a filing is disapproved, in whole or in part, a written request for a hearing may be filed pursuant to section 431:14-118. The insurer shall bear the burden of proving that the filing meets the requirements of this article.
(e) Any person or organization aggrieved with respect to any filing that is in effect may make written demand to the commissioner for a hearing thereon; provided that:
(1) The insurer, rating organization, or advisory organization that made the filing shall not be authorized to proceed under this subsection;
(2) The demand shall specify the grounds to be relied upon by the aggrieved person or organization, and the demand shall show that the person or organization has a specific economic interest affected by the filing;
(3) If the commissioner finds that the demand is made in good faith, that the applicant would be so aggrieved if the person's or organization's grounds are established, and that the grounds otherwise justify a hearing, the commissioner, within thirty days after receipt of the demand, shall hold a hearing. The hearing shall be held upon not less than ten days' written notice to the aggrieved party and to every insurer, rating organization, or advisory organization that made the filing. The aggrieved party shall bear the burden of proving that the filing fails to meet the standards set forth in section 431:14-103(a)(1); and
(4) If, after the hearing, the commissioner finds that the filing does not meet the requirements of this article, the commissioner shall issue an order specifying in what respects the filing fails to meet the requirements of this article, and stating when, within a reasonable period, the filing shall be deemed no longer effective. Copies of the order shall be sent to the applicant and to every such insurer, rating organization, or advisory organization. The order shall not affect any contract or policy made or issued prior to the expiration of the period set forth in the order.
(f) No manual of classifications, rules, rating plan, or any modification of any of the foregoing that establishes standards for measuring variations in hazards or expense provisions, or both, and that has been filed pursuant to the requirements of section 431:14-104 shall be disapproved if the rates thereby produced meet the requirements of this article.
(g) The notices, hearings, orders, and appeals referred to in this section are in all applicable respects subject to chapter 91, unless expressly provided otherwise. [L 1987, c 347, pt of §2; am L 1990, c 255, §10; am L 2004, c 122, §61; am L 2012, c 258, §5]
Section: Previous 431-14-103 431-14-103.3 431-14-103.5 431-14-104 431-14-104.5 431-14-105 431-14-105.5 431-14-106 431-14-107 431-14-107.1 431-14-107.2 431-14-107.3 431-14-108 431-14-109 431-14-110 NextLast modified: October 27, 2016