REPORT TITLE:
Insurance; Service Contracts


DESCRIPTION:
Regulates sale of service contracts.

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                        2352
HOUSE OF REPRESENTATIVES                H.B. NO.           
TWENTIETH LEGISLATURE, 2000                                
STATE OF HAWAII                                            
                                                             
________________________________________________________________
________________________________________________________________


                   A  BILL  FOR  AN  ACT

RELATING TO SERVICE CONTRACTS.



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

 1      SECTION 1.  The Hawaii Revised Statutes is amended by adding
 
 2 a new chapter to be appropriately designated and to read as
 
 3 follows:
 
 4                             "CHAPTER
 
 5                         SERVICE CONTRACTS
 
 6      § -1 Scope; administration.  (a)  This chapter shall not
 
 7 apply to:
 
 8      (1)  Express or implied warranties;
 
 9      (2)  Maintenance agreements;
 
10      (3)  Warranties, service contracts and maintenance
 
11           agreements offered by public utilities on their
 
12           transmission devices to the extent that they are
 
13           regulated by the public utilities commission.
 
14      (b)  This chapter shall be administered by the insurance
 
15 commissioner.
 
16      § -2 Definitions.  As used in this chapter:
 
17      "Appliances" include electrical or mechanical appliances
 
18 sold separately or included with the sale of residual real
 
19 property such as refrigerators, stoves, ovens, clothes washers
 

 
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 1 and dryers and dishwashers.
 
 2      "Administrator" means any person designated by a provider to
 
 3 be responsible for administration of service contracts, including
 
 4 servicing, claims management and processing, recordkeeping,
 
 5 customer service, and collection of fees.
 
 6      "Incidental damages" has the meaning as set forth in section
 
 7 490:2-715.
 
 8      "Maintenance agreement" means a contract for limited
 
 9 duration that provides for regularly scheduled maintenance only.
 
10      "Non-original manufacturers' parts" means replacement parts
 
11 not made for or by the original manufacturer of the property,
 
12 commonly referred to as "after market parts".
 
13      "Person" means an individual, partnership, corporation,
 
14 incorporated or unincorporated association, joint stock company,
 
15 reciprocal, syndicate, or any similar entity or combination of
 
16 entities acting in concert.
 
17      "Premium" means the consideration paid to an insurer for a
 
18 service contract reimbursement insurance policy.
 
19      "Provider" means a person who issues, provides, markets,
 
20 sells, offers for sale, issues, makes or proposes to make or
 
21 administers a service contract.
 
22      "Provider fee" means the total purchase price or
 
23 consideration paid for a service contract.
 

 
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 1      "Service contract" means a contract or agreement to perform
 
 2 or indemnify for a specific duration the repair, replacement, or
 
 3 maintenance of motor vehicles, consumer products or other goods
 
 4 or fixtures for operational or structural failure due to a defect
 
 5 in materials, workmanship or normal wear and tear, with or
 
 6 without additional provision for incidental payment of indemnity
 
 7 under limited circumstances, including but not limited to rental
 
 8 and emergency road service.  A service contract may also provide
 
 9 for, among other things, the repair, replacement or maintenance
 
10 of property for damage resulting from lightning, power surges or
 
11 accidental damage from handling.  A service contract may also
 
12 include contracts to repair, replace, or maintain residential
 
13 appliances and systems.  Consideration for a service contract
 
14 must be stated separately from the price of the consumer product.
 
15 The term "service contract" does not include insurance policies
 
16 issued by insurers under chapter 431, or maintenance agreements.
 
17      "Systems" means plumbing, electrical, heating, cooling,
 
18 ventilation, and other systems used in residential real property,
 
19 including:
 
20      (1)  Plumbing systems which include gas supply lines and
 
21           fittings, water supply, waste and vent pipes and their
 
22           fittings, septic tanks and their drain fields, water,
 
23           gas, and sewer service piping, and their extensions to
 

 
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 1           the tie-in of a public utility connection, or on-site
 
 2           well and sewage disposal system;
 
 3      (2)  Electrical systems which include all wiring, electrical
 
 4           boxes, switches, outlets, and connections up to the
 
 5           public utility connection; and
 
 6      (3)  Heating, cooling and ventilation systems which include
 
 7           all duct work, steam water and refrigerant lines,
 
 8           registers, convectors, radiation elements and dampers.
 
 9      "Service contract holder" or "contract holder" means a
 
10 person, who is the purchaser or holder of a service contract or
 
11 permitted transferee.
 
12      "Service contract reimbursement insurance policy" means a
 
13 policy of service contract reimbursement insurance that is issued
 
14 to the service contract provider or to pay on behalf of the
 
15 service contract provider all covered contractual obligations
 
16 incurred by the service contract provider under the terms and
 
17 conditions of the insured service contracts issued or sold by the
 
18 service contract provider.
 
19      § -3 Requirements for doing business.  (a)
 
20 Notwithstanding any other provision of this chapter to the
 
21 contrary, the marketing, sale, offering for sale, issuance,
 
22 making, proposing to make and administration of service contracts
 
23 by any provider, administrator or other person, shall be exempt
 

 
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 1 from all other provisions of this insurance code.  A provider may
 
 2 appoint an administrator or other designee to be responsible for
 
 3 any or all of the administration of service contracts and
 
 4 compliance with this chapter.
 
 5      (b)  Service contracts shall not be issued, sold, or offered
 
 6 for sale in this State unless the provider:
 
 7      (1)  Provides a receipt for or other written evidence of,
 
 8           purchase of the service contract and a copy of the
 
 9           terms and conditions of the service contract to the
 
10           service contract holder at the time of purchase.  A
 
11           copy of the service contract in all cases shall be
 
12           provided to the service contract holder within ten days
 
13           from the date of purchase of the service contract; and
 
14      (2)  Otherwise complies with this chapter.
 
15      (c)  In order to assure the faithful performance of a
 
16 provider's obligations to its contract holders, each provider who
 
17 is contractually obligated to provide service under a service
 
18 contract shall insure the performance of all its obligations
 
19 under all service contracts pursuant to a service contract
 
20 reimbursement insurance policy issued by an insurer authorized to
 
21 issue service contract reimbursement insurance in this State.
 
22      § -4 Premium taxes.  (a)  Provider fees shall not be
 
23 subject to premium taxes.
 

 
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 1      (b)  Premiums collected on service contract reimbursement
 
 2 insurance policies shall be subject to applicable premium taxes
 
 3 as required in section 431:7-202.
 
 4      § -5 Holder's right to return.  (a)  Service contracts
 
 5 shall require every provider to permit the service contract
 
 6 holder to return the contract within at least forty- five days of
 
 7 the date of mailing the service contract or within at least
 
 8 thirty business days if the contract is delivered at the time of
 
 9 the sale, or within a longer time period permitted under the
 
10 contract.  If no claim has been made under the contract, the
 
11 contract shall be void and the provider shall refund to the
 
12 contract holder the full purchase price of the contract.
 
13      (b)  A ten per cent penalty per month shall be added to a
 
14 refund that is not made within thirty days of return of the
 
15 contract to the provider.
 
16      (c)  If a contract holder returns the contract after the
 
17 time specified in subsection (a), or after such longer time
 
18 period as permitted under the contract, and no claim has been
 
19 made under the contract the provider shall:
 
20      (1)  Refund to the contract holder the full purchase price
 
21           of the contract and charge a cancellation fee of up to
 
22           $25 but no more than the original purchase price paid
 
23           by the service contract holder; or
 

 
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 1      (2)  Provide a partial refund equal to that as computed by
 
 2           the application of the "Rule of 78" (also called the
 
 3           "sum of the digits" method) and charge no cancellation
 
 4           fee.
 
 5 Where the provider provides a refund pursuant to paragraph (2),
 
 6 the refund shall be computed from the date the contract becomes
 
 7 effective.  For the purposes of computing the refund pursuant to
 
 8 this subsection, the service contract shall be deemed to become
 
 9 effective only after the manufacturer's express warranties have
 
10 expired.
 
11      (d)  If a contract holder returns the contract within the
 
12 time specified in subsection (a), or within such longer time
 
13 period as permitted under the contract, the contract shall be
 
14 void from the beginning and the parties shall be in the same
 
15 position as if no contract had been issued.
 
16      (e)  A refund need not be made where the amount is less than
 
17 $1.
 
18      (f)  If a service contract holder returns the contract in
 
19 accordance with this section, the insurer issuing the
 
20 reimbursement insurance policy covering the contract shall refund
 
21 to the provider the full premium paid by the provider for
 
22 coverage of the contract
 
23      (g)  The provisions of this section only apply to the
 

 
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 1 original service contract holder.
 
 2      § -6 Disclosure to service contract holders--contract
 
 3 provisions.  (a)  A service contract shall not be issued, sold,
 
 4 or offered for sale in Hawaii unless the contract conspicuously
 
 5 states that the obligations of the provider to the service
 
 6 contract holder are guaranteed under the service contract
 
 7 reimbursement policy, and unless the contract conspicuously
 
 8 states the name and address of the issuer of the reimbursement
 
 9 policy.
 
10      (b)  A  service contract shall be written in clear,
 
11 understandable language and the entire contract shall be printed
 
12 or typed in easy-to-read type, at a minimum ten-point type, and
 
13 style, and shall not be issued, sold, or offered for sale in this
 
14 State unless the contract does all of the following:
 
15      (1)  Clearly and conspicuously states that the obligations
 
16           of the provider to the service contract holder are
 
17           guaranteed under a service contract reimbursement
 
18           insurance policy;
 
19      (2)  Clearly and conspicuously states the name and address
 
20           of the issuer of the reimbursement insurance policy;
 
21      (3)  Identifies the contract provider, the seller of the
 
22           motor vehicle or consumer product, and the service
 
23           contract holder;
 

 
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 1      (4)  Sets forth the total purchase price and the terms under
 
 2           which the purchase price is to be paid;
 
 3      (5)  Sets forth the procedure for making a claim including a
 
 4           telephone number;
 
 5      (6)  Clearly and conspicuously states the dates that
 
 6           coverage starts and ends and the existence, terms, and
 
 7           conditions of a deductible amount, if any;
 
 8      (7)  Specifies the merchandise or services, or both, to be
 
 9           provided and clearly and conspicuously states any and
 
10           all limitations, exceptions or exclusions;
 
11      (8)  Sets forth the conditions on which substitution of
 
12           services will be allowed;
 
13      (9)  Clearly and conspicuously states whether the use of
 
14           non-original manufacturer's parts may be allowed when
 
15           the service contract covers motor vehicles.  Conditions
 
16           stated shall comply with applicable state and federal
 
17           laws.
 
18     (10)  Sets forth all of the obligations and duties of the
 
19           service contract holder including but not limited to
 
20           the duty to protect against any further damage to the
 
21           motor vehicle or consumer product and the obligation to
 
22           notify the provider in advance of any repair if any;
 
23     (11)  Sets forth any and all terms, restrictions, or
 

 
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 1           conditions governing transferability of the service
 
 2           contract, if any;
 
 3     (12)  Describes or references any and all applicable
 
 4           provisions of Hawaii State law;
 
 5     (13)  States the name and address of the commissioner; and
 
 6     (14)  Sets forth any and all conditions on which the service
 
 7           contract may be canceled, the terms and conditions for
 
 8           the refund of any portion of the purchase price, the
 
 9           identity of the person primarily liable to provide any
 
10           refund, and the identity of any other person liable to
 
11           provide any portion of the refund.
 
12      (c)  Service contracts marketed, sold, or offered for sale,
 
13 issued, made, proposed to be made or administered in the State
 
14 shall be dated.  The date the service contract is issued is not
 
15 required to be preprinted on the service contract and may be
 
16 added or attached to the service contract at the time of sale.
 
17      (d)  Service contracts insured under a service contract
 
18 reimbursement insurance policy pursuant to section    -3 shall
 
19 contain a statement in substantially the following form:
 
20 "Obligations of the provider under this service contract are
 
21 insured under a service contract reimbursement insurance policy.
 
22 If the provider fails to pay or provide service on a claim within
 
23 sixty days after proof of loss has been filed, the contract
 

 
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 1 holder is entitled to make a claim directly against the insurer
 
 2 under the service contract reimbursement insurance policy."  The
 
 3 service contract shall state the name and address and toll-free
 
 4 telephone number of the insurer under the related service
 
 5 contract reimbursement insurance policy.
 
 6      § -7 Prohibited acts.  (a)  A provider shall not use in
 
 7 its name the words insurance, casualty, guaranty, surety, mutual,
 
 8 or any other words descriptive of the insurance, casualty,
 
 9 guaranty or surety business, or a name deceptively similar to the
 
10 name or description of any insurance or surety corporation or any
 
11 other provider.
 
12      (b)  A service contract provider shall not, without the
 
13 written consent of the purchaser, charge a purchaser for:
 
14      (1)  Duplication of coverage or duties required by state or
 
15           federal law;
 
16      (2)  A warranty expressly issued by a manufacturer or seller
 
17           of a product; or
 
18      (3)  An implied warranty enforceable against the lessor,
 
19           seller, or manufacturer of a product.
 
20      (c)  A service contract provider shall not make, permit, or
 
21 cause a false or misleading statement, either oral or written, in
 
22 connection with the sale, offer to sell, or advertisement of a
 
23 service contract.
 

 
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 1      (d)  A service contract provider shall not permit or cause
 
 2 the omission of a material statement in connection with the sale,
 
 3 offer to sell, or advertisement of a service contract, which
 
 4 under the circumstances should have been made in order to make
 
 5 the statement not misleading.
 
 6      (e)  A service contract provider shall not make, permit, or
 
 7 cause to be made a false or misleading statement, either oral or
 
 8 written, about the benefits or services available under the
 
 9 service contract.
 
10      (f)  A service contract provider shall not make, publish,
 
11 disseminate, circulate, or place before the public, or cause,
 
12 directly or indirectly, to be made, published, disseminated,
 
13 circulated, or placed before the public in a newspaper, magazine,
 
14 or other publication, or in the form of a notice, circular,
 
15 pamphlet, letter, or poster, or over a radio or television
 
16 station, or in any other way, an advertisement, announcement, or
 
17 statement containing an assertion, representation, or statement
 
18 with respect to the service contract industry or with respect to
 
19 the service contract provider which is untrue, deceptive or
 
20 misleading.  To use any combination of words, symbols, or
 
21 physical materials which by their content, phraseology, shape,
 
22 color, or other characteristics are so similar to a combination
 
23 of words, symbols, or physical materials used by a manufacturer
 

 
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 1 or of such a nature that the use would tend to mislead a person
 
 2 into believing that the solicitation is in some manner connected
 
 3 with the manufacturer, unless actually authorized or issued by
 
 4 the manufacturer shall be deemed deceptive or misleading.
 
 5      (g)  A bank, savings and loan association, credit union,
 
 6 insurance company, or other lending institution shall not require
 
 7 the purchase of a service contract as a condition of a loan.
 
 8      § -8 Registration of providers.  (a)  No person shall act
 
 9 as a provider pursuant to this chapter without having first
 
10 obtained an approval of a registration which shall contain the
 
11 following information:
 
12      (1)  The name and address of the principal office of the
 
13           provider;
 
14      (2)  The name and address of the providers' agent for
 
15           service of process in this State, if other than the
 
16           provider;
 
17      (3)  The identities of the provider's executive officer or
 
18           officers directly responsible for such provider's
 
19           service contract business, and if more than fifty per
 
20           cent of the provider's revenue is derived from the sale
 
21           of service contracts, the identities of the provider's
 
22           directors and stockholders having a beneficial
 
23           ownership of five per cent or more of any class of
 

 
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 1           securities registered under the federal securities law;
 
 2      (4)  The name, location and telephone number of any
 
 3           administrators designated by the provider to be
 
 4           responsible for the administration of service contracts
 
 5           in this State, together with an acknowledgment by each
 
 6           such administrator (who is employed by the provider) of
 
 7           the administrator's obligations under this chapter;
 
 8      (5)  A statement indicating that the provider qualifies to
 
 9           do business as a service contract provider in the State
 
10           pursuant to section    -3; and
 
11      (6)  A copy of the form of each service contract the
 
12           provider proposes to use in this State.
 
13      (b)  The registration application shall be accompanied by a
 
14 fee of $250 for each year or fraction of a year in which the
 
15 registration shall be in effect.  All fees collected pursuant to
 
16 this chapter shall be deposited to the insurance regulation fund.
 
17      (c)  A provider shall keep current the information required
 
18 to be disclosed in its registration under this section by
 
19 reporting all material changes or additions within thirty days of
 
20 the change or addition.
 
21      (d)  The commissioner shall render a determination on the
 
22 application for registration within forty-five days of the date
 
23 of filing.  The commissioner may not approve the application for
 

 
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 1 registration if the provider is not trustworthy or has otherwise
 
 2 given cause that the commissioner determines that to approve the
 
 3 registration would not promote the health safety and welfare of
 
 4 the public.  In the event the registration is disapproved, the
 
 5 commissioner shall state the reason or reasons therefor.  In the
 
 6 event the application is incomplete, the applicant may file an
 
 7 amended registration application within thirty days after receipt
 
 8 of notice of the incomplete registration application.  The
 
 9 commissioner shall render a decision on the amended application
 
10 within forty-five days of receipt thereof.  If the commissioner
 
11 fails to render a decision in that time the application shall be
 
12 deemed to be approved.
 
13      (e)  The registration shall continue in force until
 
14 suspended or revoked by the commissioner on the grounds that the
 
15 provider is not trustworthy or has violated any provision of this
 
16 chapter or has given cause for the revocation or suspension of
 
17 such registration or the provider has failed to comply with any
 
18 prerequisite of issuance of the registration approved or
 
19 terminated at the request of the provider, subject, however, to
 
20 the biennial renewal of the registration, by filing a renewal
 
21 application and payment, prior to March first of each odd
 
22 numbered year following that in which its original registration
 
23 application is filed, a fee of $500.
 

 
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 1      (f)  Except for the registration requirement in this
 
 2 chapter, providers and administrators of service contracts are
 
 3 exempt from any licensing requirements.
 
 4      (g)  The biennial renewal application shall contain such
 
 5 information as required by the commissioner including, but not
 
 6 limited to information to demonstrate that the applicant
 
 7 continues to satisfy all requirements of section    -3.
 
 8      § -9 Recordkeeping requirements.  (a)  Books and records.
 
 9      (1)  A provider or its administrator shall keep accurate
 
10           accounts, books and records concerning transactions
 
11           regulated to under this action.
 
12      (2)  A provider's or its administrator's accounts, books and
 
13           records shall include:
 
14           (A)  Copies of each type of service contract issued;
 
15           (B)  The name and address of each service contract
 
16                holder to the extent that the name and address
 
17                have been furnished by the service contract holder
 
18                to the provider;
 
19           (C)  A list of the provider locations where service
 
20                contracts are marketed, sold, offered for sale,
 
21                issued, made or proposed to be made or
 
22                administered; and
 
23           (D)  Written claims filed which shall contain at least
 

 
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 1                the dates and description of all claims related to
 
 2                the service contracts.
 
 3      (3)  Except as provided in subsection (b), a provider or its
 
 4           administrator shall retain all of the service contract
 
 5           records required under paragraph (2) pertaining to each
 
 6           service contract holder for at least three years after
 
 7           the specified period of coverage thereunder has
 
 8           expired.
 
 9      (4)  A provider may keep all records required under this
 
10           chapter on a computer disk or other similar technology.
 
11           If the records are maintained in other than hard copy,
 
12           the records shall be capable of duplication to legible
 
13           hard copy at the request of the commissioner.
 
14      (b)  A provider discontinuing business in this State shall
 
15 maintain its records until it furnishes to the commissioner
 
16 satisfactory proof that it has discharged all obligations to
 
17 service contract holders in this State.
 
18      § -10  Termination of service contract reimbursement
 
19 insurance policy.  (a)  An insurer that issues a service contract
 
20 reimbursement insurance policy shall not terminate the policy
 
21 except if within fifteen days of termination of a service
 
22 contract reimbursement insurance policy the insurer shall provide
 
23 written notification of that termination to the commissioner.
 

 
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 1 Notice of termination shall be on a form prescribed by the
 
 2 commissioner and shall indicate the date of termination and the
 
 3 reason therefor.  Agency appointment shall not terminate until
 
 4 notice of termination has been received by the commissioner.
 
 5      (b)  The termination of a service contract reimbursement
 
 6 insurance policy shall not reduce the issuer's responsibility for
 
 7 service contracts issued in this State by providers prior to the
 
 8 date of termination.
 
 9      § -11  Obligation of reimbursement insurance policy
 
10 insurers.  (a)  Insurers issuing reimbursement insurance to
 
11 providers are deemed to have received the premiums for such
 
12 insurance upon payment of provider fees by consumers for service
 
13 contracts issued by such providers.  In cases where a provider is
 
14 acting as an administrator and enlists other providers, the
 
15 provider acting as the administrator shall notify the insurer of
 
16 the existence and identities of the other providers.
 
17      (b)  This chapter shall not prevent or limit the right of an
 
18 insurer which issued a reimbursement insurance policy to seek
 
19 indemnification or subrogation against a provider if the issuer
 
20 pays or is obligated to pay the service contract holder sums that
 
21 the provider was obligated to pay pursuant to the provisions of
 
22 the service contract or under a contractual agreement.
 
23      § -12  Enforcement provisions.  (a)  The commissioner may
 

 
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 1 conduct investigations or examinations of providers,
 
 2 administrators, insurers, or other persons to enforce the
 
 3 provisions of this article and protect service contract holders
 
 4 in this State.  Upon request of the commissioner, the provider
 
 5 shall make all accounts, books, and records concerning service
 
 6 contracts sold in this State by the provider available to the
 
 7 commissioner to reasonably determine compliance or non-compliance
 
 8 with this chapter.
 
 9      (b)  The commissioner may take action which is necessary or
 
10 appropriate to enforce this chapter and the commissioner's rules
 
11 and orders, and to protect service contract holders in this
 
12 State.
 
13      (c)  If a provider has violated this chapter or the
 
14 commissioner's rules or orders, the commissioner may:
 
15      (1)  Order a service contract provider to cease and desist
 
16           from committing violations of this chapter or the
 
17           commissioner's rules or orders;
 
18      (2)  Issue an order prohibiting a service contract provider
 
19           from selling or offering for sale service contracts;
 
20      (3)  Issue an order imposing a fine of not less than $100
 
21           nor more than $10,000 per violation; or
 
22      (4)  Any combination of these, if the provider has violated
 
23           this chapter or the commissioner's rules or orders.
 

 
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 1 An order issued under this section may be delivered to the
 
 2 provider at its principal office or to the provider's designated
 
 3 agent for the service of process indicated in the provider's
 
 4 registration materials pursuant to section 431:  -108.
 
 5      (d)  The commissioner may bring an action in a court of
 
 6 competent jurisdiction for an injunction or other appropriate
 
 7 relief to enjoin threatened or existing violations of this
 
 8 chapter or of the commissioner's orders or rules.  An action
 
 9 filed under this subsection may also seek restitution on behalf
 
10 of persons aggrieved by a violation of this chapter or orders or
 
11 rules of the commissioner.
 
12      (e)  Any person who violates this chapter shall be deemed to
 
13 have engaged in an unfair method of competition or unfair and
 
14 deceptive act or practice in the conduct of any trade or commerce
 
15 within the meaning of section 480-2.
 
16      § -13  Authority to adopt rules.  The commissioner may
 
17 adopt rules under chapter 91 necessary to effectuate the purpose
 
18 of this chapter."
 
19      SECTION 2.  Section 431:1-209, Hawaii Revised Statutes, is
 
20 amended to read as follows:
 
21      "§431:1-209  General casualty insurance defined.  General
 
22 casualty insurance includes vehicle insurance as defined in
 
23 section 431:1-208, disability insurance defined in section
 

 
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 1 431:1-205 and in addition is insurance:
 
 2      (1)  Against legal liability for the death, injury or
 
 3           disability of any human being, or from damage to
 
 4           property.
 
 5      (2)  Of medical, hospital, surgical, and funeral benefits to
 
 6           persons injured, irrespective of legal liability of the
 
 7           insured, when issued with or supplemental to insurance
 
 8           against legal liability for the death, injury or
 
 9           disability of human beings.
 
10      (3)  Of the obligation accepted by, imposed upon, or assumed
 
11           by employers under law for death, disablement or injury
 
12           to employees.
 
13      (4)  Against loss or damage by burglary, theft, larceny,
 
14           robbery, forgery, fraud, vandalism, malicious mischief,
 
15           confiscation, or wrongful conversion, disposal or
 
16           concealment, or from any attempt of any of the
 
17           foregoing; also insurance against loss or damage to
 
18           moneys, coins, bullion, securities, notes, drafts,
 
19           acceptances, or any other valuable papers or documents,
 
20           resulting from any cause, except while in the mail.
 
21      (5)  Upon personal effects of individuals, by an all-risk
 
22           type of policy commonly known as the personal property
 
23           floater.
 

 
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 1      (6)  Against loss or damage to glass and its appurtenances
 
 2           resulting from any cause.
 
 3      (7)  Against any liability and loss or damage to property
 
 4           resulting from accidents to or explosions of boilers,
 
 5           pipes, pressure containers, machinery, or apparatus.
 
 6      (8)  Against loss of or damage to any property of the
 
 7           insured resulting from the ownership, maintenance or
 
 8           use of elevators, except loss or damage by fire.
 
 9      (9)  Against loss or damage to any property caused by the
 
10           breakage or leakage of sprinklers, water pipes or
 
11           containers, or by water entering through leaks or
 
12           openings in buildings.
 
13     (10)  Against loss or damage resulting from failure of
 
14           debtors to pay their obligations to the insured (credit
 
15           insurance).
 
16     (11)  Against loss of or damage to any domesticated or wild
 
17           animal resulting from any cause (livestock insurance).
 
18     (12)  Against loss of or damage to any property of the
 
19           insured resulting from collision of any other object
 
20           with such property, but not including collision to or
 
21           by vessels, craft, piers, or other instrumentalities of
 
22           ocean or inland navigation (collision insurance).
 
23     (13)  Against legal liability of the insured, and against
 

 
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 1           loss, damage or expense incident to a claim of such
 
 2           liability, and including any obligation of the insured
 
 3           to pay medical, hospital, surgical, and funeral
 
 4           benefits to injured persons, irrespective of legal
 
 5           liability of the insured, arising out of the death or
 
 6           injury of any person, or arising out of injury to the
 
 7           economic interest of any person as the result of
 
 8           negligence in rendering expert, fiduciary or
 
 9           professional service (malpractice insurance).
 
10     (14)  Against any contract of warranty or guaranty which
 
11           promises service maintenance, parts replacement,
 
12           repair, money, or any other indemnity in the event of
 
13           loss of or damage to a motor vehicle or any part
 
14           thereof from any cause, including loss of or damage to
 
15           or loss of use of the motor vehicle by reason of
 
16           depreciation, deterioration, wear and tear, use,
 
17           obsolescence, or breakage if made by a warrantor or
 
18           guarantor who or which as such is doing an insurance
 
19           business[.
 
20                The making of a contract covering only defects in
 
21           material and work in exchange for a separately stated
 
22           charge where it is incidental to the business of
 
23           selling or leasing motor vehicles, shall not be deemed
 

 
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                                     H.B. NO.           
                                                        
                                                        

 
 1           insurance; provided the maker of the contract has an
 
 2           insurance policy, with an insurer as defined in section
 
 3           431:1-202, providing coverage for the making of those
 
 4           contracts.  The policy shall assume the legal liability
 
 5           created by each contract or, alternatively, the
 
 6           ultimate legal liability of all contracts made by the
 
 7           issuer.  If the maker of the contract is unable to
 
 8           perform the duties imposed by the contract, the
 
 9           purchaser of the contract then shall be considered a
 
10           policyholder of the insurer.  The policy shall include
 
11           a loss payee endorsement that provides coverage to any
 
12           lending institution as its interest may appear.  In
 
13           addition, the contract conspicuously shall state the
 
14           name and address of the licensed underwriting insurer
 
15           and contain a statement that the policyholder shall be
 
16           entitled to make a direct claim against the insurer
 
17           upon the failure of the issuer to pay any claim within
 
18           sixty days after proof of loss has been filed with the
 
19           issuer.  The requirement that the maker of the contract
 
20           have an insurance policy with an insurer shall not
 
21           apply if the maker is a manufacturer, distributor or
 
22           importer of automobiles.]; provided that service
 
23           contracts as defined in chapter     and which meet the
 

 
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                                     H.B. NO.           
                                                        
                                                        

 
 1           requirements of chapter    , shall not be subject to
 
 2           chapter 431.
 
 3                The doing or proposing to do any business in
 
 4           substance equivalent to the business described in this
 
 5           section in a manner designed to evade the provisions of
 
 6           this section is the doing of an insurance business.
 
 7     (15)] (14)  Against any other kind of loss, damage or
 
 8           liability properly the subject of insurance and not
 
 9           within any other class or classes of insurance as
 
10           defined in section 431:1-204 to section 431:1-211, if
 
11           such insurance is not contrary to law or public
 
12           policy."
 
13      SECTION 3.  Providers who have submitted an application for
 
14 approval of registration pursuant to section    -8, and have been
 
15 previously engaged in the business of marketing, selling,
 
16 offering for sale, issuing, making, proposing, or administering a
 
17 service contract in the State for not less than two years
 
18 immediately prior to the effective date of this Act, may engage
 
19 in that business in the State until such time as the insurance
 
20 commissioner has issued a determination on that application and
 
21 provided that the application is received by the commissioner
 
22 within sixty days of the effective date of this Act.
 
23      SECTION 4.  Statutory material to be repealed is bracketed.
 

 
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                                     H.B. NO.           
                                                        
                                                        

 
 1 New statutory material is underscored.
 
 2      SECTION 5.  This Act shall take effect upon its approval.
 
 3 
 
 4                           INTRODUCED BY: ________________________