REPORT TITLE:
Insurance; Service Contracts


DESCRIPTION:
Provides for regulation as insurance of consumer goods and motor
vehicle service contracts.

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                        
THE SENATE                              S.B. NO.           2729
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 purpose of this Act is to create an
 
 2 insurance regulatory framework within which service contracts may
 
 3 be sold in this State.
 
 4      SECTION 2.  The Hawaii Revised Statutes is amended by adding
 
 5 a new chapter to be appropriately designated and to read as
 
 6 follows:
 
 7                             "CHAPTER
 
 8                         SERVICE CONTRACTS
 
 9      §   -1 Scope.  This chapter shall not apply to:
 
10      (1)  Express or implied warranties;
 
11      (2)  Maintenance agreements;
 
12      (3)  Warranties, service contracts, and maintenance
 
13           agreements offered by public utilities on their
 
14           transmission devices to the extent that are regulated
 
15           by the public utilities commission.
 
16      §   -2 Definitions.  As used in this chapter:
 
17      "Appliances" include, but are not limited to, electrical or
 
18 mechanical appliances sold separately or included with the sale
 
19 of residual real property such as refrigerators, stoves, ovens,
 

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

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

 
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 1           gas, and sewer service piping, and their extensions to
 
 2           the tie-in of a public utility connection, or on-site
 
 3           well and sewage disposal system;
 
 4      (2)  Electrical systems, including all wiring, electrical
 
 5           boxes, switches, outlets, and connections up to the
 
 6           public utility connection; and
 
 7      (3)  Heating, cooling, and ventilation systems, including
 
 8           all duct work, steam water and refrigerant lines,
 
 9           registers, convectors, radiation elements, and dampers.
 
10      "Service contract holder" or contract holder means a person,
 
11 who is the purchaser or holder of a service contract or permitted
 
12 transferee.
 
13      "Service contract reimbursement insurance policy" means a
 
14 policy of service contract reimbursement insurance that is issued
 
15 to the provider or to pay on behalf of the provider all covered
 
16 contractual obligations incurred by the provider under the terms
 
17 and conditions of the insured service contracts issued or sold by
 
18 the 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
 
23 contracts by any provider, administrator, or other person, shall
 

 
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 1 be exempt from the insurance code, chapter 431; provided that all
 
 2 the provisions of this chapter are complied with.  A provider may
 
 3 appoint an administrator or other designee to be responsible for
 
 4 any or all of the administration of service contracts and
 
 5 compliance with this chapter.
 
 6      (b)  Service contracts shall not be issued, sold, or offered
 
 7 for sale in this State unless the provider:
 
 8      (1)  Provides a receipt for or other written evidence of,
 
 9           purchase of the service contract and a copy of the
 
10           terms and conditions of the service contract to the
 
11           service contract holder at the time of purchase;
 
12           provided that a copy of the service contract in all
 
13           cases shall be furnished to the service contract holder
 
14           within ten days from the date of purchase of the
 
15           service contract; and
 
16      (2)  Otherwise complies with this chapter.
 
17      (c)  In order to assure the faithful performance of a
 
18 provider's obligations to its contract holders, each provider who
 
19 is contractually obligated to provide service under a service
 
20 contract shall insure the performance of all its obligations
 
21 under all service contracts pursuant to a service contract
 
22 reimbursement insurance policy issued by an insurer authorized to
 
23 issue service contract reimbursement insurance in this State.
 

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

 
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                                     S.B. NO.           2729
                                                        
                                                        

 
 1           $25 but no more than the original purchase price paid
 
 2           by the service contract holder; or
 
 3      (2)  Provide a partial refund equal to that as computed by
 
 4           the application of the "Rule of 78" (also called the
 
 5           "sum of the digits" method) and charge no cancellation
 
 6           fee; provided that the refund shall be computed from
 
 7           the date the contract becomes effective.
 
 8 For purposes of computing the refund, the service contract shall
 
 9 be deemed to become effective only after the manufacturers'
 
10 express warranties have expired.
 
11      (d)  If a service contract holder returns the contract in
 
12 accordance with this section, the insurer issuing the
 
13 reimbursement insurance policy covering the contract shall refund
 
14 to the provider the unearned premium paid by the provider for
 
15 coverage of the contract.
 
16      (e)  This section only applies to the original service
 
17 contract holder.
 
18      §   -6 Disclosure to service contract holders -contract
 
19 provisions.(a)  A service contract shall not be issued, sold,
 
20 or offered for sale in Hawaii unless the contract conspicuously
 
21 states that the obligations of the provider to the service
 
22 contract holder are guaranteed under the service contract
 
23 reimbursement policy, and unless the contract conspicuously
 

 
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                                     S.B. NO.           2729
                                                        
                                                        

 
 1 states the name and address of the issuer of the service contract
 
 2 reimbursement policy.  Consideration for a service contract must
 
 3 be stated separately from the price of the consumer product. 
 
 4      (b)  A service contract shall be written in clear,
 
 5 understandable language, and the entire contract shall be printed
 
 6 or typed in easy-to-read type, at a minimum ten-point type, and
 
 7 style, and shall not be issued, sold, or offered for sale in this
 
 8 State unless the contract does all of the following:
 
 9      (1)  Clearly and conspicuously states that the obligations
 
10           of the provider to the service contract holder are
 
11           guaranteed under a service contract reimbursement
 
12           insurance policy;
 
13      (2)  Clearly and conspicuously states name and address of
 
14           the issuer of the reimbursement insurance policy;
 
15      (3)  Identifies the contract provider, the seller of the
 
16           motor vehicle or consumer product, and the service
 
17           contract holder;
 
18      (4)  Sets forth the total purchase price and the terms under
 
19           which the purchase price is to be paid;
 
20      (5)  Sets forth the procedure for making a claim including a
 
21           telephone number;
 
22      (6)  Clearly and conspicuously states the dates that
 
23           coverage starts and ends and the existence, terms, and
 

 
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                                     S.B. NO.           2729
                                                        
                                                        

 
 1           conditions of a deductible amount, if any;
 
 2      (7)  Specifies the merchandise or services, or both, to be
 
 3           provided and clearly and conspicuously states any and
 
 4           all limitations, exceptions, or exclusions;
 
 5      (8)  Sets forth the conditions on which substitution of
 
 6           services will be allowed;
 
 7      (9)  Clearly and conspicuously states whether the use of
 
 8           non-original manufacturers parts may be allowed when
 
 9           the service contracts covers motor vehicles; provided
 
10           that conditions stated shall comply with applicable
 
11           state and federal laws.
 
12     (10)  Sets forth all of the obligations and duties of the
 
13           service contract holder, including but not limited to,
 
14           the duty to protect against any further damage to the
 
15           motor vehicle or consumer product and the obligation to
 
16           notify the provider in advance of any repair if any;
 
17     (11)  Sets forth any and all terms, restrictions, or
 
18           conditions governing transferability of the service
 
19           contract, if any;
 
20     (12)  Describes or references any and all applicable
 
21           provisions of state law;
 
22     (13)  States the name and address of the commissioner; and
 
23     (14)  Sets forth any and all conditions on which the service
 

 
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                                     S.B. NO.           2729
                                                        
                                                        

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

 
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 1      §   -7 Prohibited acts.(a)  A provider shall not use in
 
 2 its name the words insurance, casualty, guaranty, surety, mutual,
 
 3 or any other words descriptive of the insurance casualty,
 
 4 guaranty, or surety business, or a name deceptively similar to
 
 5 the name or description of any insurance or surety corporation or
 
 6 any other provider.
 
 7      (b)  A provider shall not, without the written consent of
 
 8 the purchaser, charge a purchaser for:
 
 9      (1)  Duplication of coverage or duties required by state or
 
10           federal law;
 
11      (2)  A warranty expressly issued by a manufacturer or seller
 
12           of a product; or
 
13      (3)  An implied warranty enforceable against the lessor,
 
14           seller, or manufacturer of a product.
 
15      (c)  A provider shall not make, permit, or cause a false or
 
16 misleading statement, either oral or written, in connection with
 
17 the sale, offer to sell, or advertisement of service contract.
 
18      (d)  A provider shall not permit or cause the omission of a
 
19 material statement in connection with the sale, offer to sell, or
 
20 advertisement of a service contract, which under the
 
21 circumstances should have been made in order to make the
 
22 statement not misleading.
 
23      (e)  A provider shall not make, permit, or cause to be made
 

 
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 1 a false or misleading statement, either oral or written, about
 
 2 the benefits or services available under the service contract.
 
 3      (f)  A provider shall not make, publish, disseminate,
 
 4 circulate, or place before the public, or cause, directly or
 
 5 indirectly, to be made, published, disseminated, circulated, or
 
 6 placed before the public in a newspaper, magazine, or other
 
 7 publication, or in the form of a notice, circular, pamphlet,
 
 8 letter, or poster, or over a radio or television station, or in
 
 9 any other way, an advertisement, announcement, or statement
 
10 containing an assertion, representation, or statement with
 
11 respect to the service contract industry or with respect to
 
12 provider which is untrue, deceptive, or misleading.  To use any
 
13 combination of words, symbols, or physical materials which by
 
14 their content, phraseology, shape, color, or other
 
15 characteristics are so similar to a combination of words,
 
16 symbols, or physical materials used by a manufacturer or of such
 
17 a nature that the use would tend to mislead a person into
 
18 believing that the solicitation is in some manner connected with
 
19 the manufacturer, unless actually authorized or issued by the
 
20 manufacturer shall be deemed deceptive or misleading.
 
21      (g)  A bank, savings and loan association, credit union,
 
22 insurance company, or other lending institution shall not require
 
23 the purchase of a service contract as a condition of a loan.
 

 
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                                     S.B. NO.           2729
                                                        
                                                        

 
 1      §   -8 Registration of providers.(a)  No person shall act
 
 2 as a provider pursuant to this chapter without having first
 
 3 obtained an approval of a registration which shall contain the
 
 4 following information;
 
 5      (1)  The name and address of the principal office of the
 
 6           provider;
 
 7      (2)  The name and address of the provider's agent for
 
 8           service of process in this State, if other than the
 
 9           provider;
 
10      (3)  The identities of the provider's executive officer or
 
11           officers directly responsible for the provider's
 
12           service contract business, and if more than fifty per
 
13           cent of the provider's revenue is derived from the sale
 
14           of service contracts, the identities of the provider's
 
15           directors and stockholders having a beneficial
 
16           ownership of five per cent or more of any class of
 
17           securities registered under the federal securities law;
 
18      (4)  The name, location, and telephone number of any
 
19           administrators designated by the provider to be
 
20           responsible for the administration of service contracts
 
21           in this State, together with an acknowledgment by each
 
22           administrator (who is employed by the provider) of the
 
23           administrator's obligations under this chapter;
 

 
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                                     S.B. NO.           2729
                                                        
                                                        

 
 1      (5)  A statement indicating that the provider qualifies to
 
 2           do business as a provider under this section; and
 
 3      (6)  A copy of the form of each service contract the
 
 4           provider proposes to use in this State.
 
 5      (b)  The registration application shall be accompanied by a
 
 6 fee of $250 for each year or fraction of a year in which the
 
 7 registration is in effect.  All fees collected pursuant to this
 
 8 chapter shall be deposited to the insurance regulation fund.
 
 9      (c)  A provider shall keep current the information required
 
10 to be disclosed in its registration under this section by
 
11 reporting all material changes or additions within thirty days of
 
12 such change or addition.
 
13      (d)  The commissioner shall render a determination on the
 
14 application for registration within forty-five days of the date
 
15 of filing.  The commissioner may not approve the application for
 
16 registration if the provider is not trustworthy or has otherwise
 
17 given cause that the commissioner determines that to approve the
 
18 registration would not promote the health safety and welfare of
 
19 the public.  If the registration is disapproved, the commissioner
 
20 shall state the reason or reasons therefor.  If the application
 
21 is incomplete, the applicant may file an amended registration
 
22 application within thirty days after receipt of notice of the
 
23 incomplete registration application.  The commissioner shall
 

 
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                                     S.B. NO.           2729
                                                        
                                                        

 
 1 render a decision on the amended application within forty-five
 
 2 days of receipt thereof.  If the commissioner fails to render a
 
 3 decision in that time the application shall be deemed to be
 
 4 approved.
 
 5      (e)  The registration shall continue in force until
 
 6 suspended or revoked by the commissioner on the grounds that the
 
 7 provider is not trustworthy or has violated any provision of this
 
 8 chapter or has given cause for the revocation or suspension of
 
 9 the registration or the provider has failed to comply with any
 
10 prerequisite of issuance of the registration approved or
 
11 terminated at the request of the provider, subject, however, to
 
12 the biennial renewal of the registration, by filing a renewal
 
13 application and payment, prior to March first of each odd
 
14 numbered year following that in which its original registration
 
15 application is filed, a fee of $500.
 
16      (f)  Except for the registration requirement in this
 
17 chapter, providers and administrators of service contracts are
 
18 exempt from any licensing requirements.
 
19      (g)  The biennial renewal application shall contain
 
20 information required by the commissioner including, but not
 
21 limited to information to demonstrate that the applicant
 
22 continues to satisfy all requirements of section    -3.
 
23      §   -9 Recordkeeping requirements.(a)  Books and records
 

 
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                                     S.B. NO.           2729
                                                        
                                                        

 
 1 shall be kept as follows:
 
 2      (1)  A provider or its administrator shall keep accurate
 
 3           accounts, books, and records concerning transactions
 
 4           regulated to under this chapter.
 
 5      (2)  A providers or its administrators accounts, books, and
 
 6           records shall include:
 
 7           (A)  Copies of each type of service contract issued;
 
 8           (B)  The name and address of each service contract
 
 9                holder to the extent that the name and address
 
10                have been furnished by the service contract holder
 
11                to the provider;
 
12           (C)  A list of the provider locations where service
 
13                contracts are marketed, sold, offered  for sale,
 
14                issued, made, or proposed to be made or
 
15                administered; and
 
16           (D)  Written claims filed which shall contain at least
 
17                the dates and description of all claims related to
 
18                the service contracts;
 
19      (3)  Except as provided in subsection (b), a provider or its
 
20           administrator shall retain all of the service contract
 
21           records required under paragraph (2) pertaining to the
 
22           each service contract holder for at least three years
 
23           after the specified period of coverage has expired; and
 

 
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                                     S.B. NO.           2729
                                                        
                                                        

 
 1      (4)  A provider may keep all records required under this
 
 2           chapter on a computer disk or other similar technology.
 
 3           If the records are maintained in other than hard copy,
 
 4           the records shall be capable of duplication to legible
 
 5           hard copy at the request of the commissioner.
 
 6      (b)  A provider discontinuing business in this state shall
 
 7 maintain its records until it furnishes to the commissioner
 
 8 satisfactory proof that it has discharged all obligations to
 
 9 service contract holders in this State.
 
10      §   -10  Termination of service contract reimbursement
 
11 insurance policy.(a)  An insurer that issues a service contract
 
12 reimbursement insurance policy shall not terminate the policy
 
13 except, if within fifteen days of termination of a service
 
14 contract reimbursement insurance policy, the insurer provides
 
15 written notification of that termination to the commissioner.
 
16 Notice of termination shall be on a form prescribed by the
 
17 commissioner and shall indicate the date of termination and the
 
18 reason therefor.  Agency appointment shall not terminate until
 
19 notice of termination has been received by the commissioner.
 
20      (b)  The termination of a service contract reimbursement
 
21 insurance policy shall not reduce the issuer's responsibility for
 
22 service contracts issued in this State by providers prior to the
 
23 date of termination.
 

 
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                                     S.B. NO.           2729
                                                        
                                                        

 
 1      §   -11  Obligation of reimbursement insurance policy
 
 2 insurers.(a)  Insurers issuing reimbursement insurance to
 
 3 providers are deemed to have received the premiums for the
 
 4 insurance upon payment of provider fees by consumers for service
 
 5 contracts issued by the providers.  If a provider is acting as an
 
 6 administrator and enlists other providers, the provider acting as
 
 7 the administrator shall notify the insurer of the existence and
 
 8 identities of the other providers.
 
 9      (b)  This chapter shall not prevent or limit the right of an
 
10 insurer which issued a reimbursement insurance policy to seek
 
11 indemnification or subrogation against a provider if the issuer
 
12 pays or is obligated to pay the service contract holder sums that
 
13 the provider was obligated to pay pursuant to the provisions of
 
14 the service contract or under a contractual agreement.
 
15      §   -12  Enforcement provisions.  (a)  The commissioner may
 
16 conduct investigations or examinations of providers,
 
17 administrators, insurers or other persons to enforce this chapter
 
18 and protect service contract holders in this State.  Upon request
 
19 of the commissioner, the provider shall make all accounts, books,
 
20 and records concerning service contracts sold in this State by
 
21 the provider available to the commissioner to reasonably
 
22 determine compliance or non-compliance with this chapter.
 
23      (b)  The commissioner may take action which is necessary or
 

 
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                                     S.B. NO.           2729
                                                        
                                                        

 
 1 appropriate to enforce this chapter and the commissioner's
 
 2 regulations and orders, and to protect service contract holders
 
 3 in this State.
 
 4      (c)  If a provider has violated this chapter or the
 
 5 commissioner's regulations or orders, the commissioner may:
 
 6      (1)  Order a provider to cease and desist from committing
 
 7           violations of this chapter or the commissioner's
 
 8           regulations or orders;
 
 9      (2)  Issue an order prohibiting a provider from selling or
 
10           offering for sale service contracts;
 
11      (3)  Issue an order imposing a fine of not less than $100
 
12           nor more than $10,000 per violation; or
 
13      (4)  Any combination of these, if the provider has violated
 
14           this chapter or the commissioner's regulations or
 
15           orders.
 
16 An order issued under this section may be delivered to the
 
17 provider at its principal office or to the provider's designated
 
18 agent for the service of process indicated in the providers
 
19 registration materials pursuant to section    -8.
 
20      (d)  The commissioner may bring an action in a court of
 
21 competent jurisdiction for an injunction or other appropriate
 
22 relief to enjoin threatened or existing violations of this
 
23 chapter or of the commissioner's orders or regulations.  An
 

 
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                                     S.B. NO.           2729
                                                        
                                                        

 
 1 action filed under this subsection may also seek restitution on
 
 2 behalf of persons aggrieved by a violation of this chapter or
 
 3 orders or regulations of the commissioner.
 
 4      (e)  Any person who violates this chapter shall be deemed to
 
 5 have engaged in an unfair method of competition or unfair and
 
 6 deceptive act or practice in the conduct of any trade or commerce
 
 7 within the meaning of section 480-2.
 
 8      §  -13  Applicability to administrator.  This chapter shall
 
 9 apply to an administrator.
 
10      §   -14  Authority to adopt rules.  The commissioner may
 
11 adopt rules necessary to effectuate the purpose of this Act."
 
12      SECTION 3.  Section 431:1-209, Hawaii Revised Statutes, is
 
13 amended to read as follows:
 
14      "§431:1-209  General casualty insurance defined.  General
 
15 casualty insurance includes vehicle insurance as defined in
 
16 section 431:1-208, disability insurance defined in section
 
17 431:1-205 and in addition is insurance:
 
18      (1)  Against legal liability for the death, injury, or
 
19           disability of any human being, or from damage to
 
20           property.
 
21      (2)  Of medical, hospital, surgical, and funeral benefits to
 
22           persons injured, irrespective of legal liability of the
 
23           insured, when issued with or supplemental to insurance
 

 
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                                     S.B. NO.           2729
                                                        
                                                        

 
 1           against legal liability for the death, injury, or
 
 2           disability of human beings.
 
 3      (3)  Of the obligation accepted by, imposed upon, or assumed
 
 4           by employers under law for death, disablement, or
 
 5           injury to employees.
 
 6      (4)  Against loss or damage by burglary, theft, larceny,
 
 7           robbery, forgery, fraud, vandalism, malicious mischief,
 
 8           confiscation, or wrongful conversion, disposal or
 
 9           concealment, or from any attempt of any of the
 
10           foregoing; also insurance against loss or damage to
 
11           moneys, coins, bullion, securities, notes, drafts,
 
12           acceptances, or any other valuable papers or documents,
 
13           resulting from any cause, except while in the mail.
 
14      (5)  Upon personal effects of individuals, by an all-risk
 
15           type of policy commonly known as the personal property
 
16           floater.
 
17      (6)  Against loss or damage to glass and its appurtenances
 
18           resulting from any cause.
 
19      (7)  Against any liability and loss or damage to property
 
20           resulting from accidents to or explosions of boilers,
 
21           pipes, pressure containers, machinery, or apparatus.
 
22      (8)  Against loss of or damage to any property of the
 
23           insured resulting from the ownership, maintenance, or
 

 
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                                     S.B. NO.           2729
                                                        
                                                        

 
 1           use of elevators, except loss or damage by fire.
 
 2      (9)  Against loss or damage to any property caused by the
 
 3           breakage or leakage of sprinklers, water pipes or
 
 4           containers, or by water entering through leaks or
 
 5           openings in buildings.
 
 6     (10)  Against loss or damage resulting from failure of
 
 7           debtors to pay their obligations to the insured (credit
 
 8           insurance).
 
 9     (11)  Against loss of or damage to any domesticated or wild
 
10           animal resulting from any cause (livestock insurance).
 
11     (12)  Against loss of or damage to any property of the
 
12           insured resulting from collision of any other object
 
13           with such property, but not including collision to or
 
14           by vessels, craft, piers, or other instrumentalities of
 
15           ocean or inland navigation (collision insurance).
 
16     (13)  Against legal liability of the insured, and against
 
17           loss, damage or expense incident to a claim of such
 
18           liability, and including any obligation of the insured
 
19           to pay medical, hospital, surgical, and funeral
 
20           benefits to injured persons, irrespective of legal
 
21           liability of the insured, arising out of the death or
 
22           injury of any person, or arising out of injury to the
 
23           economic interest of any person as the result of
 

 
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                                     S.B. NO.           2729
                                                        
                                                        

 
 1           negligence in rendering expert, fiduciary or
 
 2           professional service (malpractice insurance).
 
 3     (14)  Against any contract of warranty or guaranty which
 
 4           promises service maintenance, parts replacement,
 
 5           repair, money, or any other indemnity in the event of
 
 6           loss of or damage to a motor vehicle or any part
 
 7           thereof from any cause, including loss of or damage to
 
 8           or loss of use of the motor vehicle by reason of
 
 9           depreciation, deterioration, wear and tear, use,
 
10           obsolescence, or breakage if made by a warrantor or
 
11           guarantor who or which as such is doing an insurance
 
12           business[.
 
13                The making of a contract covering only defects in
 
14           material and work in exchange for a separately stated
 
15           charge where it is incidental to the business of
 
16           selling or leasing motor vehicles, shall not be deemed
 
17           insurance; provided the maker of the contract has an
 
18           insurance policy, with an insurer as defined in section
 
19           431:1-202, providing coverage for the making of those
 
20           contracts.  The policy shall assume the legal liability
 
21           created by each contract or, alternatively, the
 
22           ultimate legal liability of all contracts made by the
 
23           issuer.  If the maker of the contract is unable to
 

 
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                                     S.B. NO.           2729
                                                        
                                                        

 
 1           perform the duties imposed by the contract, the
 
 2           purchaser of the contract then shall be considered a
 
 3           policyholder of the insurer.  The policy shall include
 
 4           a loss payee endorsement that provides coverage to any
 
 5           lending institution as its interest may appear.  In
 
 6           addition, the contract conspicuously shall state the
 
 7           name and address of the licensed underwriting insurer
 
 8           and contain a statement that the policyholder shall be
 
 9           entitled to make a direct claim against the insurer
 
10           upon the failure of the issuer to pay any claim within
 
11           sixty days after proof of loss has been filed with the
 
12           issuer.  The requirement that the maker of the contract
 
13           have an insurance policy with an insurer shall not
 
14           apply if the maker is a manufacturer, distributor or
 
15           importer of automobiles.]; provided that service
 
16           contracts as defined in section  -2, and which meets
 
17           the requirements of chapter    , shall not be subject
 
18           to regulation under chapter 431.
 
19                The doing or proposing to do any business in
 
20           substance equivalent to the business described in this
 
21           section in a manner designed to evade the provisions of
 
22           this section is the doing of an insurance business.
 
23     (15)  Against any other kind of loss, damage or liability
 

 
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                                     S.B. NO.           2729
                                                        
                                                        

 
 1           properly the subject of insurance and not within any
 
 2           other class or classes of insurance as defined in
 
 3           section 431:1-204 to section 431:1-211, if such
 
 4           insurance is not contrary to law or public policy."
 
 5      SECTION 4.  Providers who have submitted an application for
 
 6 approval of registration pursuant to section    -8, Hawaii
 
 7 Revised Statutes, and have been previously engaged in the
 
 8 business of marketing, selling, offering for sale, issuing,
 
 9 making, proposing, or administering a service contract in the
 
10 State for not less than two years immediately prior to the
 
11 effective date of this Act, may engage in such business in the
 
12 State until such time as the insurance commissioner has issued a
 
13 determination on such application; provided that such application
 
14 is received by the insurance commissioner within sixty days of
 
15 the effective date of this Act.
 
16      SECTION 5.  If any provision of this Act, or the application
 
17 of the provision to any person or circumstances, shall be held
 
18 invalid, the remainder of the Act, and the application of the
 
19 provision to person or circumstances other than those as to which
 
20 it is held invalid, shall not be affected.
 
21      SECTION 6.  Statutory material to be repealed is bracketed.
 
22 New statutory material is underscored.
 
23      SECTION 7.  This Act shall become effective upon approval.
 
24 
 
25                       INTRODUCED BY:_____________________________