REPORT TITLE:
Insurance


DESCRIPTION:
Creates a pay-at-the-pump system for uninsured motorist insurance
coverage.  Allows only insured motorists to receive uninsured
motorist coverage.

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                            448         
HOUSE OF REPRESENTATIVES                H.B. NO.           
TWENTIETH LEGISLATURE, 1999                                
STATE OF HAWAII                                            
                                                             
________________________________________________________________
________________________________________________________________


                   A  BILL  FOR  AN  ACT
RELATING TO UNINSURED MOTORIST INSURANCE COVERAGE.



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

 1      SECTION 1.  Chapter 287, Hawaii Revised Statutes, is amended
 
 2 by adding a new part to be appropriately designated and to read
 
 3 as follows:
 
 4       "PART  .  UNINSURED MOTORIST INSURANCE SPECIAL AND
 
 5                      REVOLVING FUND PROGRAM
 
 6                      A.  General Provisions
 
 7      §287-A  Uninsured motorist insurance state fund program
 
 8 established; special revolving account.  (a)  There is
 
 9 established within the department of budget and finance the
 
10 uninsured motorist insurance state fund program, hereinafter
 
11 referred to as "the fund".  The fund shall be under the control
 
12 of the director of finance.  The purpose of the fund is to
 
13 collect enough moneys received as uninsured motorist insurance
 
14 taxes, invest and manage them, and make premium payments on the
 
15 exclusive contracts with the uninsured motorist insurers for the
 
16 several counties.
 
17      (b)  Moneys for the operation of the uninsured motorist
 
18 insurance system shall be from the uninsured motorist insurance
 
19 taxes imposed under section 243-4 which shall be deposited into a
 
20 special revolving account in the state treasury to be
 

 
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 1 administered by the director.  Expenditures from the account
 
 2 shall be used for the operation of the uninsured motorist
 
 3 insurance mechanism authorized under this part.
 
 4      (c)  The director may do whatever is necessary to effectuate
 
 5 the purposes of this subpart, including but not limited to:
 
 6      (1)  Acting as the head of the purchasing agency for
 
 7           procurement of an exclusive contract with an insurer to
 
 8           provide uninsured motorist insurance to each county of
 
 9           the State;
 
10      (2)  Gathering actuarially relevant data from other state
 
11           and county agencies to determine a contract price and
 
12           other material items in accepting bids from insurers,
 
13           to develop and maintain adequate amounts of moneys to
 
14           make the premium payments on the contracts, to give
 
15           recommendations to the legislature and governor on the
 
16           amount of motor vehicle taxes to be charged under
 
17           chapter 243;
 
18      (3)  Collecting, receiving, holding, and disbursing all
 
19           moneys payable to or by the fund;
 
20      (4)  Receiving moneys as set forth in sections 243-4 and
 
21           disbursing funds as premium payments to insurers as
 
22           required under this part; and
 
23      (5)  Investing the fund's assets as authorized by law;
 

 
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 1      (6)  Using income on investment reserves or profits to
 
 2           reduce amounts needed from the uninsured motorist
 
 3           insurance taxes imposed under section 243-4 as long as
 
 4           the fund has reserves deemed sufficient in accordance
 
 5           with sound actuarial practices to provide the uninsured
 
 6           motorist insurance benefits required under this part;
 
 7      (7)  Hiring or contracting for the services of attorneys,
 
 8           insurance consultants, actuaries, health consultants,
 
 9           motor vehicle repair consultants, certified public
 
10           accountants, insurance adjusters, investment advisers,
 
11           and other technical services;
 
12      (8)  Hiring an administrator to function as the fund's chief
 
13           executive officer, and other necessary administrative,
 
14           technical, and professional employees who shall be
 
15           exempt from chapters 76 and 77;
 
16      (9)  Conducting claims, studies, and other research
 
17           necessary to ensure the viability of the uninsured
 
18           motorist insurance mechanism created under this part;
 
19           and
 
20     (10)  Proposing recommendations to the governor and the
 
21           legislature on the amount of vehicle insurance taxes
 
22           required to safely maintain the vehicle insurance
 
23           system contemplated under this part.
 

 
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 1      (d)  The uninsured motorist insurance premium payment
 
 2 mechanism created under this part shall provide for the uninsured
 
 3 motorist coverage required under section 431:10C-301(b)(3).
 
 4      (e)  Only persons insured under a motor vehicle insurance
 
 5 policy shall be entitled to receive uninsured motorist benefits
 
 6 through the mechanism created under this part.  No person who is
 
 7 not insured under a motor vehicle insurance policy shall be
 
 8 entitled to receive uninsured motorist benefits under the
 
 9 mechanism created under this part.
 
10                  B.  Exclusive Insurer Contracts
 
11      §287-B  Competitive bids for exclusive uninsured motorist
 
12 insurance coverage.  Uninsured motorist insurance coverage for
 
13 policy terms beginning on September 1, 2001, shall be provided
 
14 exclusively in each county by one insurer that has been awarded
 
15 the contract for providing uninsured motorist insurance policies
 
16 on all vehicles registered in that county.  Contracts shall be
 
17 awarded as contracts for professional services under chapter
 
18 103D.  This section shall not preclude an insurer from being
 
19 awarded the contracts for all four counties.  The contract shall
 
20 be for a term of three years and shall require the insurer to
 
21 provide uninsured motorist insurance coverage at the premium rate
 
22 schedules previously submitted in the bid proposal.  The contract
 
23 shall stipulate that the insurer shall be liable beyond the
 

 
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 1 contract period for the processing and payment of all claims
 
 2 arising from an accident which occurred during the contract
 
 3 period.
 
 4      §287-C  Insureds under the exclusive policies.  The director
 
 5 of finance shall annually provide the names of registered owners,
 
 6 vehicle type, registration numbers, and other relevant
 
 7 information to the contract insurers for persons submitting
 
 8 payment of the state registration fees and the driver's license
 
 9 application and renewal fees.  This information shall be used by
 
10 the contract insurers to determine the number and identity of the
 
11 insureds under the contracts.
 
12      §287-D  Rate adjustments during contract period.
 
13 Notwithstanding the rate-making procedures for motor vehicle
 
14 insurance rates under article 14 of chapter 431, a contract
 
15 insurer shall not make any changes to the rate schedules unless
 
16 the insurer submits evidence to the director of finance that its
 
17 solvency is in imminent danger.  No rate change shall become
 
18 effective without the prior approval of the director of finance.
 
19 The director of finance, in considering the necessity and
 
20 reasonableness of any rate change request, shall request that the
 
21 insurer furnish all financial and claims records and other data
 
22 to justify any rate change.
 
23      §287-E  Monitoring of contract insurer; investigation of
 

 


 

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                                     H.B. NO.           
                                                        
                                                        

 
 1 complaints; examinations.  (a)  The director of finance shall
 
 2 closely monitor the operations of a contract insurer to ensure
 
 3 that the processing of claims is expeditious and that the terms
 
 4 of the contract are being met.  In carrying out its monitoring
 
 5 responsibilities, the director of finance shall conduct annual
 
 6 examinations of a contract insurer's affairs, transactions,
 
 7 accounts, records, documents, and assets.
 
 8      (b)  The director of finance shall investigate any complaint
 
 9 filed against a contract insurer by the public.  If the director
 
10 of finance finds that the contract insurer erred, the director of
 
11 finance shall order the contract insurer to correct the error or
 
12 subject the contract insurer to an appropriate penalty as
 
13 authorized under this subpart.  If, in the opinion of the
 
14 director of finance, a contract insurer's complaints record is
 
15 unacceptable, the insurer may be disqualified from bidding for
 
16 the next contract term.  The director of finance shall adopt
 
17 rules establishing specific criteria and procedures for
 
18 disqualification.
 
19      (c)  After the completion of the annual examination, the
 
20 director of finance shall evaluate a contract insurer's
 
21 performance.  The director of finance shall include in its
 
22 evaluation specific areas that require improvement and
 
23 performance expectations for the ensuing year.
 

 
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                                     H.B. NO.           
                                                        
                                                        

 
 1      (d)  The director of finance shall report annually to the
 
 2 legislature prior to the convening of each legislative session on
 
 3 the status of the uninsured motorist insurance system as operated
 
 4 by the contract insurers.  The report shall be organized by
 
 5 county and include, but not be limited to:  the number of
 
 6 insureds, claims data, complaints filed and their disposition,
 
 7 the director of finance's examination findings, the insurance
 
 8 commissioner's evaluation of the contract insurer, and
 
 9 recommendations for legislative action."
 
10      SECTION 2.  Section 243-4, Hawaii Revised Statutes, is
 
11 amended by amending subsections (a) and (b) to read:
 
12      "(a)  Every distributor [shall], in addition to any other
 
13 taxes provided by law, shall pay a license tax to the department
 
14 of taxation for each gallon of liquid fuel refined, manufactured,
 
15 produced, or compounded by the distributor and sold or used by
 
16 the distributor in the State or imported by the distributor, or
 
17 acquired by the distributor from persons not licensed
 
18 distributors, and sold or used by the distributor in the State.
 
19 Any person who sells or uses any liquid fuel knowing that the
 
20 distributor from whom it was originally purchased has not paid
 
21 and is not paying the tax thereon shall pay such tax as would
 
22 have applied to such sale or use by the distributor.  The rates
 
23 of tax hereby imposed are as follows:
 

 
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                                     H.B. NO.           
                                                        
                                                        

 
 1      (1)  For each gallon of diesel oil, 1 cent[.];
 
 2      (2)  For each gallon of gasoline or other aviation fuel sold
 
 3           for use in or used for airplanes, 1 cent[.];
 
 4      (3)  For each gallon of liquid fuel other than fuel
 
 5           mentioned in paragraphs (1) and (2), sold or used in
 
 6           the city and county of Honolulu, or sold in any county
 
 7           for ultimate use in the city and county of Honolulu, 16
 
 8           cents state tax[,] and a 5 cents uninsured motorist
 
 9           insurance tax, and in addition thereto such amount, to
 
10           be known as the "city and county of Honolulu fuel tax",
 
11           as shall be levied pursuant to section 243-5[.];
 
12      (4)  For each gallon of liquid fuel other than fuel
 
13           mentioned in paragraphs (1) and (2), sold or used in
 
14           the county of Hawaii, or sold in any county for
 
15           ultimate use in the county of Hawaii, 16 cents state
 
16           tax[,] and a 5 cents uninsured motorist insurance tax,
 
17           and in addition thereto such amount, to be known as the
 
18           "county of Hawaii fuel tax", as shall be levied
 
19           pursuant to section 243-5[.];
 
20      (5)  For each gallon of liquid fuel other than fuel
 
21           mentioned in paragraphs (1) and (2), sold or used in
 
22           the county of Maui, or sold in any county for ultimate
 
23           use in the county of Maui, 16 cents state tax[,] and a
 

 
Page 9                                         448         
                                     H.B. NO.           
                                                        
                                                        

 
 1           5 cents uninsured motorist insurance tax, and in
 
 2           addition thereto such amount, to be known as the
 
 3           "county of Maui fuel tax", as shall be levied pursuant
 
 4           to section 243-5[.]; and
 
 5      (6)  For each gallon of liquid fuel other than fuel
 
 6           mentioned in paragraphs (1) and (2), sold or used in
 
 7           the county of Kauai, or sold in any county for ultimate
 
 8           use in the county of Kauai, 16 cents state tax[,] and a
 
 9           5 cents uninsured motorist insurance tax, and in
 
10           addition thereto such amount, to be known as the
 
11           "county of Kauai fuel tax", as shall be levied pursuant
 
12           to section 243-5.
 
13      If it is shown to the satisfaction of the department, based
 
14 upon proper records and from such other evidence as the
 
15 department may require, that liquid fuel other than fuel
 
16 mentioned in paragraphs (1) and (2) is used for agricultural
 
17 equipment that does not operate upon the public highways of the
 
18 State, the user thereof may obtain a refund of all taxes thereon
 
19 imposed by this section in excess of 1 cent per gallon.  The
 
20 department shall prescribe rules to administer such refunds.
 
21      (b)  Every distributor of diesel oil [shall], in addition to
 
22 the tax required by subsection (a), shall pay a license tax to
 
23 the department for each gallon of such diesel oil sold or used by
 

 
Page 10                                        448         
                                     H.B. NO.           
                                                        
                                                        

 
 1 the distributor for operating a motor vehicle or motor vehicles
 
 2 upon public highways of the State.  The rates of the additional
 
 3 tax hereby imposed are as follows:
 
 4      (1)  For each gallon of diesel oil sold or used in the city
 
 5           and county of Honolulu, or sold in any other county for
 
 6           ultimate use in the city and county of Honolulu, 15
 
 7           cents state tax[,] and a 5 cents uninsured motorist
 
 8           insurance tax, and in addition thereto such amount, to
 
 9           be known as the "city and county of Honolulu fuel tax",
 
10           as shall be levied pursuant to section 243-5[.];
 
11      (2)  For each gallon of diesel oil sold or used in the
 
12           county of Hawaii, or sold in any other county for
 
13           ultimate use in the county of Hawaii, 15 cents state
 
14           tax[,] and a 5 cents uninsured motorist insurance tax,
 
15           and in addition thereto such amount, to be known as the
 
16           "county of Hawaii fuel tax", as shall be levied
 
17           pursuant to section 243-5[.];
 
18      (3)  For each gallon of diesel oil sold or used in the
 
19           county of Maui, or sold in any other county for
 
20           ultimate use in the county of Maui, 15 cents state
 
21           tax[,] and a 5 cents uninsured motorist insurance tax,
 
22           and in addition thereto such amount, to be known as the
 
23           "county of Maui fuel tax", as shall be levied pursuant
 

 
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                                     H.B. NO.           
                                                        
                                                        

 
 1           to section 243-5[.]; and
 
 2      (4)  For each gallon of diesel oil sold or used in the
 
 3           county of Kauai, or sold in any other county for
 
 4           ultimate use in the county of Kauai, 15 cents state
 
 5           tax[,] and a 5 cents uninsured motorist insurance tax,
 
 6           and in addition thereto such amount, to be known as the
 
 7           "county of Kauai fuel tax", as shall be levied pursuant
 
 8           to section 243-5.
 
 9      If any user of diesel oil furnishes a certificate, in such
 
10 form as the department shall prescribe, to the distributor, or
 
11 the distributor who uses diesel oil signs such certificate,
 
12 certifying that the diesel oil is for use in operating a motor
 
13 vehicle or motor vehicles in areas other than upon the public
 
14 highways of the State, the tax as provided in paragraphs (1) to
 
15 (4) shall not [be applicable.] apply.  In the event a certificate
 
16 is not or cannot be furnished and the diesel oil is in fact for
 
17 use for operating a motor vehicle or motor vehicles in areas
 
18 other than upon public highways of the State, the user thereof
 
19 may obtain a refund of all taxes thereon imposed by the foregoing
 
20 paragraphs.  The department shall prescribe rules to administer
 
21 the refunding of such taxes."
 
22      SECTION 3.  Section 243-6, Hawaii Revised Statutes, is
 
23 amended to read as follows:
 

 
Page 12                                        448         
                                     H.B. NO.           
                                                        
                                                        

 
 1      "§243-6 Fuel taxes, dispositions.  (a)  All fuel taxes
 
 2 under this chapter, except for the uninsured motorist insurance
 
 3 tax, shall be disposed as follows:
 
 4      (1)  The "city and county of Honolulu fuel tax" shall be
 
 5           paid by the department of taxation into the state
 
 6           treasury, and [shall], by the state director of
 
 7           finance, shall be paid over to the director of finance
 
 8           of the city and county of Honolulu for deposit into the
 
 9           fund known as the "highway fund" created by section
 
10           249-18[.]; 
 
11      (2)  The "county of Kauai fuel tax" shall be paid by the
 
12           department into the state treasury, and [shall], by the
 
13           state director of finance, shall be paid over to the
 
14           director of finance of the county of Kauai for deposit
 
15           into the fund known as the "highway fund" created by
 
16           section 249-18[.];
 
17      (3)  The "county of Hawaii fuel tax" shall be paid by the
 
18           department into the state treasury, and [shall], by the
 
19           state director of finance, shall be paid over to the
 
20           director of finance of the county of Hawaii for deposit
 
21           into the fund known as the "highway fund" created by
 
22           section 249-18[.]; and 
 
23      (4)  The "county of Maui fuel tax" collected on account of
 

 
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                                     H.B. NO.           
                                                        
                                                        

 
 1           liquid fuel sold or used on the island of Lanai or sold
 
 2           elsewhere for ultimate use on the island of Lanai,
 
 3           shall be paid by the department into the state
 
 4           treasury, and [shall], by the state director of
 
 5           finance, shall be paid over to the director of finance
 
 6           of the county of Maui for deposit into the fund known
 
 7           as the "highway fund" created by section 249-18, for
 
 8           expenditure on the island of Lanai.  The "county of
 
 9           Maui fuel tax" collected on account of liquid fuel sold
 
10           or used on the island of Molokai or sold elsewhere for
 
11           ultimate use on the island of Molokai, shall be paid by
 
12           the department into the state treasury, and [shall], by
 
13           the state director of finance, shall be paid over to
 
14           the director of finance of the county of Maui for
 
15           deposit into the fund known as the "highway fund"
 
16           created by section 249-18, for expenditure on the
 
17           island of Molokai.  The remainder of the "county of
 
18           Maui fuel tax" shall be paid by the department into the
 
19           state treasury, and [shall], by the state director of
 
20           finance, shall be paid over to the director of finance
 
21           of the county of Maui for deposit into the fund known
 
22           as the "highway fund" created by section 249-18. 
 
23      (b)  Each of the foregoing taxes shall be expended for the
 

 
Page 14                                        448         
                                     H.B. NO.           
                                                        
                                                        

 
 1 following purposes, for the island for which the tax revenue is
 
 2 specially indicated, or, if none, for the county for which the
 
 3 tax revenue is indicated: 
 
 4      (1)  For payment of interest on and redemption of any bonds
 
 5           duly issued or sold on or after July 1, 1951, under
 
 6           chapter 47 for the financing or aiding in financing the
 
 7           construction of county highway tunnels, approach roads
 
 8           thereto, and highways.  Such payments of interest and
 
 9           principal on the bonds when due, shall be first charges
 
10           on such moneys so deposited in the fund[.];
 
11      (2)  For acquisition, designing, construction,
 
12           reconstruction, improvement, repair, and maintenance of
 
13           county main and general thoroughfares, highways, and
 
14           other streets, street lights, storm drains, and
 
15           bridges, including costs of new land therefor, when
 
16           expenditures for the foregoing purposes cannot be
 
17           financed under state-federal aid projects[.];
 
18      (3)  In the case of the city and county of Honolulu, for
 
19           payment of the city and county's share in an
 
20           improvement district initiated by the city and county
 
21           for an improvement listed in paragraph (2) [above]
 
22           which is permitted to be constructed in the city and
 
23           county[.];
 

 
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                                     H.B. NO.           
                                                        
                                                        

 
 1      (4)  For the construction of county highway tunnels,
 
 2           overpasses, underpasses, and bridges, where such
 
 3           improvement cannot be made under state-federal aid
 
 4           projects[.];
 
 5      (5)  For purposes and functions connected with county
 
 6           traffic control and preservation of safety upon the
 
 7           public highways and streets[.]; 
 
 8      (6)  For purposes and functions in connection with mass
 
 9           transit[.];
 
10      (7)  For acquisition, design, construction, improvement,
 
11           repair, and maintenance of bikeways[.]; and
 
12      (8)  No expenditure shall be made, out of the revenues paid
 
13           into any such fund, [which] that will jeopardize
 
14           federal aid for highway construction.
 
15      (c)  All revenues derived from the uninsured motorist
 
16 insurance tax imposed under section 243-4 shall be paid by the
 
17 department of taxation into the state treasury, and, by the state
 
18 director of finance, shall be deposited into the uninsured
 
19 motorist insurance special revolving account created under
 
20 section 287-A."
 
21      SECTION 4.  The selection of a contract insurer as provided
 
22 in this Act shall be for the policy year beginning September 1,
 
23 2001.  During the interim period from the effective date of this
 

 
Page 16                                        448         
                                     H.B. NO.           
                                                        
                                                        

 
 1 Act until September 1, 2001, all motor vehicle insurance policies
 
 2 issued by insurers authorized to do business in this State shall
 
 3 remain in force and effect under the motor vehicle insurance law
 
 4 in existence as of the day before the effective date of this Act.
 
 5 The uninsured motorist insurance state fund program shall develop
 
 6 an implementation plan which provides for the smooth transition
 
 7 from the current system of insurance to the new system created
 
 8 under this Act and adopt necessary rules for the bidding
 
 9 procedure to commence on a timely basis so that a contract is
 
10 awarded before September 1, 2001.  The director of finance shall
 
11 submit a report to the legislature prior to the convening of the
 
12 2000 regular session on the progress of implementing the new
 
13 system created by this Act and shall make appropriate
 
14 recommendations for further changes to the law.
 
15      SECTION 5.  Upon the effective date of this Act, the
 
16 insurance commissioner shall assist the director of finance in
 
17 developing and implementing a plan to ease the transition between
 
18 the current no-fault insurance system and the state fund program.
 
19 Prior to the convening of the 2000 regular session, the director
 
20 of finance shall submit the transition plan to the legislature
 
21 which shall include recommendations for any further amendments to
 
22 the insurance code and other laws that are necessary to
 
23 effectuate this Act effectively.
 

 
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                                     H.B. NO.           
                                                        
                                                        

 
 1      SECTION 6.  There is appropriated out of the general
 
 2 revenues of the State of Hawaii the sum of $        , or so much
 
 3 thereof as may be necessary for fiscal year 1999-2000, and the
 
 4 same sum, or so much thereof as may be necessary for fiscal year
 
 5 2000-2001, to the uninsured motorist insurance state fund to pay
 
 6 for start-up costs, including the hiring of necessary staff;
 
 7 provided that this appropriation shall be in the form of a loan
 
 8 which shall be repaid to the general fund by June 30, 2004.  The
 
 9 sums appropriated shall be expended by the uninsured motorist
 
10 insurance state fund for the purposes of this Act.
 
11      SECTION 7.  This Act does not affect rights and duties that
 
12 matured, penalties that were incurred, and proceedings that were
 
13 begun, before its effective date.
 
14      SECTION 8.  Statutory material to be repealed is bracketed.
 
15 New statutory material is underscored.
 
16      SECTION 9.  This Act shall take effect on January 1, 2000.
 
17 
 
18                           INTRODUCED BY:  _______________________