REPORT TITLE:
Insurance; Service Contracts


DESCRIPTION:
Regulates service contracts and contractual liability insurance
policies.  (SD1)

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                        2729
THE SENATE                              S.B. NO.           S.D. 1
TWENTIETH LEGISLATURE, 2000                                H.D. 1
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 protect service
 
 2 contract holders in this State by creating a regulatory framework
 
 3 governing the sale, terms, and administration of service
 
 4 contracts sold to consumers.
 
 5      SECTION 2.  The Hawaii Revised Statutes is amended by adding
 
 6 a new chapter to be appropriately designated and to read as
 
 7 follows:
 
 8                           "CHAPTER    
 
 9                         SERVICE CONTRACTS
 
10      §  -1 Application.(a)  This chapter shall not apply to:
 
11      (1)  Express or implied warranties;
 
12      (2)  Maintenance agreements; and 
 
13      (3)  Warranties, service contracts, and maintenance
 
14           agreements offered by public utilities on their
 
15           transmission devices to the extent they are regulated
 
16           by the public utilities commission or the department of
 
17           commerce and consumer affairs.
 
18      (b)  The marketing, sale, offering for sale, issuance,
 
19 making, proposing to make, and administration of service
 
20 contracts by providers and related service contract sellers,
 

 
Page 2                                                     2729
                                     S.B. NO.           S.D. 1
                                                        H.D. 1
                                                        

 
 1 administrators and other persons shall be exempt from regulation
 
 2 under the insurance laws of this State other than laws included
 
 3 in this chapter.
 
 4      §  -2 Definitions.  As used in this chapter:
 
 5      "Administrator" means a person appointed or designated by a
 
 6 provider who administers service contracts and service contract
 
 7 plans on behalf of the provider and subject to the requirements
 
 8 of this chapter.
 
 9      "Commissioner" means the state insurance commissioner.
 
10      "Consumer" means a natural person who buys, other than for
 
11 purposes of resale, any tangible personal property that is
 
12 distributed in commerce and that is normally used for personal,
 
13 family, or household purposes, and not for business or research
 
14 purposes.
 
15      "Contract holder" means a person who is the purchaser or
 
16 holder of a service contract.
 
17      "Contractual liability insurance policy" means a policy of
 
18 insurance that is issued to a provider, insures the provider's
 
19 service contracts, and may provide:
 
20      (1)  Reimbursement to the provider for sums that the
 
21           provider is legally obligated to pay under the insured
 
22           service contract; or
 
23      (2)  The service that the provider is legally obligated to
 

 
Page 3                                                     2729
                                     S.B. NO.           S.D. 1
                                                        H.D. 1
                                                        

 
 1           perform under the insured service contract.
 
 2      "Maintenance agreement" means a contract of limited duration
 
 3 that provides scheduled maintenance only.
 
 4      "Non-original manufacturer's parts" means replacement parts
 
 5 not made for or by the original manufacturer of the property,
 
 6 commonly referred to as "after market parts."
 
 7      "Person" means an individual, partnership, limited liability
 
 8 company, corporation, incorporated or unincorporated association,
 
 9 joint stock company, reciprocal, syndicate, or any similar entity
 
10 or combination of entities acting in concert.
 
11      "Premium" means the consideration paid to an insurer for a
 
12 contractual liability insurance policy.
 
13      "Provider" means a person who is contractually obligated to
 
14 the service contract holder under the terms of the service
 
15 contract, including all sellers of motor vehicle service
 
16 contracts.
 
17      "Provider fee" means the consideration paid for a service
 
18 contract.
 
19      "Service contract" means a contract or agreement for a
 
20 separately stated consideration and a specific duration, to
 
21 perform or indemnify the repair, replacement, or maintenance of
 
22 property for operational or structural failure due either to a
 
23 defect in materials or artisanship, or to normal wear and tear,
 

 
Page 4                                                     2729
                                     S.B. NO.           S.D. 1
                                                        H.D. 1
                                                        

 
 1 with or without additional provision for incidental payment or
 
 2 indemnity under limited circumstances, including but not limited
 
 3 to towing, rental, and emergency road service.  Service contracts
 
 4 may provide for the repair, replacement, or maintenance of
 
 5 property damaged by power surges, or accidentally damaged during
 
 6 handling.
 
 7      "Warranty" means a warranty made without consideration,
 
 8 solely by the manufacturer, importer, or seller of property or
 
 9 services, that is not negotiated or separated from the sale of
 
10 the product and is incidental to the sale of the product, that
 
11 provides repair or replacement for defective parts, mechanical or
 
12 electrical breakdown, labor, or other remedial measures.
 
13      §  -3 Registration.(a)  Before conducting business in
 
14 this State, a provider shall register with the commissioner on a
 
15 form prescribed by the commissioner, and shall pay to the
 
16 commissioner a fee as provided under section 431:7-101.  Except
 
17 for the registration required of providers under this section,
 
18 service contract sellers, administrators, and other persons
 
19 marketing, selling, or offering to sell service contracts shall
 
20 be exempt from any state licensing requirements.
 
21      (b)  Provider registration shall be updated annually and
 
22 shall contain the following information:
 
23      (1)  The address of the principal office of the provider;
 

 
Page 5                                                     2729
                                     S.B. NO.           S.D. 1
                                                        H.D. 1
                                                        

 
 1      (2)  The name and address of the provider's agent for the
 
 2           service of process in this State, if other than the
 
 3           provider;
 
 4      (3)  The identities of the provider's executive officer or
 
 5           officers directly responsible for the provider's
 
 6           service contract business;
 
 7      (4)  The name, address, and telephone number of any
 
 8           administrators designated by the provider to be
 
 9           responsible for the administration of service contracts
 
10           in this State;
 
11      (5)  A copy of each service contract form the provider
 
12           proposes to use in this State; and
 
13      (6)  A statement that the provider is in compliance with the
 
14           financial responsibility requirements of section    -4
 
15           and that details how the provider intends to meet the
 
16           requirements, and proof of compliance with the
 
17           requirements.
 
18      §  -4  Financial responsibility.  A provider shall comply
 
19 with the requirements under any one of the following paragraphs,
 
20 and shall not be subject to any other financial security
 
21 requirements under state law:
 
22      (1)  The provider shall insure all service contracts under a
 
23           contractual liability insurance policy issued by an
 

 
Page 6                                                     2729
                                     S.B. NO.           S.D. 1
                                                        H.D. 1
                                                        

 
 1           insurer authorized to transact insurance in this State
 
 2           or issued pursuant to part III of article 8 of chapter
 
 3           431;
 
 4      (2)  The provider shall:
 
 5           (A)  Maintain a funded reserve account for all
 
 6                obligations under service contracts issued and in
 
 7                force in this State.  The reserves shall not be
 
 8                less than forty per cent of the gross
 
 9                consideration received from the sale of the
 
10                service contract, less claims paid, for all in
 
11                force contracts.  The reserve account shall be
 
12                subject to examination by the commissioner; and
 
13           (B)  Place in trust with the commissioner, for all
 
14                service contracts issued and in force in this
 
15                State, a financial security deposit having a value
 
16                that is not less than $25,000, or five per cent of
 
17                the gross consideration received less claims paid
 
18                for the sale of the service contracts.  The
 
19                financial security deposit shall consist of one of
 
20                the following:
 
21                (i)   A surety bond issued by an authorized
 
22                      surety;
 
23               (ii)   Securities of the type eligible for deposit
 

 
Page 7                                                     2729
                                     S.B. NO.           S.D. 1
                                                        H.D. 1
                                                        

 
 1                      by authorized insurers in this State;
 
 2              (iii)   Cash;
 
 3               (iv)   A letter of credit issued by a qualified
 
 4                      financial institution; or
 
 5                (v)   Another form of security authorized by the
 
 6                      commissioner by rule;
 
 7           or
 
 8      (3)  The provider or its parent company shall:
 
 9           (A)  Maintain a net worth or stockholders' equity of at
 
10                least $100,000,000; and
 
11           (B)  Upon request, provide the commissioner with a copy
 
12                of the provider's or the provider's parent
 
13                company's most recent form 10-K or Form 20-F filed
 
14                with the Securities and Exchange Commission within
 
15                the last calendar year, or if the company does not
 
16                file with the Securities and Exchange Commission,
 
17                a copy of the provider's or the provider's parent
 
18                company's audited financial statements.
 
19           If the financial responsibility requirement under this
 
20           paragraph is to be maintained by the provider's parent
 
21           company, the parent company shall guarantee the
 
22           provider's obligations under service contracts sold by
 
23           the provider in this State.
 

 
Page 8                                                     2729
                                     S.B. NO.           S.D. 1
                                                        H.D. 1
                                                        

 
 1      §    -5  Recordkeeping.(a)  The provider or provider's
 
 2 administrator shall keep accurate accounts, books, and records of
 
 3 all transactions regulated under this chapter.
 
 4      (b)  Accounts, books, and records maintained as required by
 
 5 this section shall include the following:
 
 6      (1)  Copies of each type of service contract sold;
 
 7      (2)  The name and address of each contract holder, to the
 
 8           extent that the name and address have been furnished by
 
 9           the contract holder;
 
10      (3)  A list of the locations where the provider's service
 
11           contracts are marketed, sold, or offered for sale; and
 
12      (4)  Recorded claims files which at a minimum shall contain
 
13           the date and description of each claim under the
 
14           provider's service contracts.
 
15      (c)  The provider for each service contract shall retain
 
16 records required under this section for at least one year after
 
17 coverage under the contract has expired.  A provider
 
18 discontinuing business in this State shall maintain records
 
19 required under this section until it provides the commissioner
 
20 with satisfactory proof that the provider has discharged all
 
21 contractual obligations to contract holders in this State.
 
22      (d)  The records required under this section may be, but are
 
23 not required to be, maintained on a computer disk or other
 

 
Page 9                                                     2729
                                     S.B. NO.           S.D. 1
                                                        H.D. 1
                                                        

 
 1 recordkeeping technology.  If records are maintained in a form
 
 2 other than hard copy, the records shall be in a form allowing
 
 3 duplication as legible hard copy at the request of the
 
 4 commissioner.
 
 5      (e)  Upon request of the commissioner, the provider shall
 
 6 make available to the commissioner all accounts, books, and
 
 7 records concerning service contracts sold by the provider
 
 8 reasonably necessary to enable the commissioner to determine
 
 9 compliance or noncompliance with this chapter.
 
10      §    -6  Service contracts; receipt; disclosures.(a)
 
11 Providers shall provide purchasers of a service contract with:
 
12      (1)  A receipt for or other written evidence of the purchase
 
13           of the service contract that shall be provided to the
 
14           service contract holder; and
 
15      (2)  A copy of the service contract that shall be provided
 
16           within a reasonable period of time from the date of
 
17           purchase.
 
18      (b)  Service contracts shall be written in clear,
 
19 understandable language, and shall be printed or typed in a
 
20 typeface and format that is easy to read.
 
21      (c)  All service contracts shall:
 
22      (1)  State the name and address of:
 
23           (A)   The provider; and
 

 
Page 10                                                    2729
                                     S.B. NO.           S.D. 1
                                                        H.D. 1
                                                        

 
 1           (B)   The administrator of the contract, if different
 
 2                 from the provider;
 
 3      (2)  Identify:
 
 4           (A)   The service contract seller; and
 
 5           (B)   The contract holder, to the extent that the
 
 6                 contract holder has furnished the contract
 
 7                 seller, administrator, or provider with that
 
 8                 information;
 
 9      (3)  The terms of the sale, including the purchase price;
 
10      (4)  The procedure the contract holder must follow to obtain
 
11           service;
 
12      (5)  Any deductible amount that applies;
 
13      (6)  The specific merchandise and services to be provided,
 
14           and any limitations, exceptions, or exclusions;
 
15      (7)  Where the contract covers a motor vehicle, whether the
 
16           use of non-original manufacturer's parts is allowed;
 
17      (8)  Any restrictions governing the transferability of the
 
18           service contract that apply;
 
19      (9)  The terms, restrictions, or conditions governing the
 
20           return or cancellation of the service contract by
 
21           either the provider or contract holder prior to the
 
22           contract's termination or expiration date;
 
23     (10)  The obligations and duties of the contract holder, such
 

 
Page 11                                                    2729
                                     S.B. NO.           S.D. 1
                                                        H.D. 1
                                                        

 
 1           as the duty to protect against any further damage, or
 
 2           to follow owner's manual instructions; and
 
 3     (11)  Any provision for, or exclusion of consequential
 
 4           damages or pre-existing conditions that applies.
 
 5 The information under paragraphs (1) and (2) shall not be
 
 6 required to be preprinted on the service contract and may be
 
 7 added to the service contract at the time of sale.  The purchase
 
 8 price under paragraph (3) shall not be required to be preprinted
 
 9 on the service contract and may be negotiated with the contract
 
10 holder at the time of sale.
 
11      (d)  Service contracts insured under a contractual liability
 
12 insurance policy shall include the name and address of the
 
13 insurer and contain a statement substantially similar to the
 
14 following:
 
15      "Obligations of the provider under this service contract are
 
16      insured under a service contract contractual liability
 
17      insurance policy."
 
18      (e)  Service contracts not insured under a contractual
 
19 liability insurance policy shall contain a statement
 
20 substantially similar to the following:
 
21      "Obligations of the provider under this service contract are
 
22      backed by the full faith and credit of the provider."
 
23      §    -7  Service contract returns and refunds.  (a)  Service
 

 
Page 12                                                    2729
                                     S.B. NO.           S.D. 1
                                                        H.D. 1
                                                        

 
 1 contracts shall state that the contract holder may return the
 
 2 contract within:
 
 3      (1)  Thirty days of the date that the contract was mailed to
 
 4           the contract holder;
 
 5      (2)  Twenty days of the date the contract was delivered to
 
 6           the contract holder, if the contract was delivered at
 
 7           the time of sale; or
 
 8      (3)  A longer time period as specified in the service
 
 9           contract.
 
10      (b)  Upon return of the service contract to the provider
 
11 within the applicable time period, and if no claim has been made
 
12 under the service contract prior to its return to the provider,
 
13 the service contract shall be void and the provider shall refund
 
14 to, or credit the account of, the contract holder with the full
 
15 purchase price of the service contract.  A ten per cent penalty
 
16 per month shall be added to a refund that is not paid or credited
 
17 within forty-five days after the return of the service contract
 
18 to the provider.
 
19      (c)  The right to void a service contract under subsection
 
20 (b) shall not be transferred and shall apply only to the original
 
21 service contract purchaser upon the terms and conditions provided
 
22 in the contract and consistent with this chapter.
 
23      (d)  Upon cancellation of a service contract by the
 

 
Page 13                                                    2729
                                     S.B. NO.           S.D. 1
                                                        H.D. 1
                                                        

 
 1 provider, the provider, at least five days prior to cancellation,
 
 2 shall mail to the contract holder at the contract holder's last
 
 3 known address, a written prior notice of cancellation that states
 
 4 the effective date of the cancellation; provided that prior
 
 5 notice under this subsection shall not be required if
 
 6 cancellation is for:
 
 7      (1)  Nonpayment of the provider's fee for the service
 
 8           provided under the service contract;
 
 9      (2)  A material misrepresentation by the contract holder to
 
10           the provider; or
 
11      (3)  A substantial breach of duties of the contract holder
 
12           under the service contract, relating to a covered
 
13           product or its use.
 
14    §    -8  Contractual liability insurance policies.(a)
 
15 Contractual liability insurance policies in this State shall
 
16 provide that if covered service is not provided by the service
 
17 contract provider or administrator within sixty days of proof of
 
18 loss by the contract holder, the contract holder is entitled to
 
19 apply directly to the contractual liability insurance company for
 
20 services under the service contract that are covered under the
 
21 policy.
 
22      (b)  A contractual liability insurance policy insurer shall
 
23 not terminate the policy until it has issued a notice of
 

 
Page 14                                                    2729
                                     S.B. NO.           S.D. 1
                                                        H.D. 1
                                                        

 
 1 termination required by the commissioner under the insurance laws
 
 2 of this State.  The termination of a contractual liability
 
 3 insurance policy shall not reduce the insurer's responsibility
 
 4 for service contracts issued by providers prior to the date of
 
 5 termination.
 
 6      (c)  A provider covered by a contractual liability insurance
 
 7 policy shall be considered the agent of the contractual liability
 
 8 insurance policy insurer, for purposes of determining duties owed
 
 9 by the insurer to contract holders in accordance with the service
 
10 contract and this chapter.
 
11      (d) Insurers issuing reimbursement insurance to providers
 
12 are deemed to have received the premiums for the insurance upon
 
13 the payment of provider fees by consumers for service contracts
 
14 issued by the insured provider.
 
15      §    -9  Applicability of premium taxes.  Service contract
 
16 provider fees shall not be subject to premium taxes.  Contractual
 
17 liability insurance policies shall be subject to premium taxes.
 
18      §    -10  Prohibited acts.  (a)  No provider shall use in
 
19 its name, the word "insurance", "casualty", "surety", "mutual",
 
20 or any other word descriptive of the insurance, casualty, or
 
21 surety business, or a name deceptively similar to the name or
 
22 description of any insurance or surety corporation, or to the
 
23 name of any other provider; provided that the word "guaranty" or
 

 
Page 15                                                    2729
                                     S.B. NO.           S.D. 1
                                                        H.D. 1
                                                        

 
 1 similar word may be used by a provider.  This section shall not
 
 2 apply to a provider using any language prohibited by this section
 
 3 in its name prior to the effective date of this Act.  
 
 4      (b)  A provider or its representative shall not in its
 
 5 service contracts or literature make, permit, or cause to be
 
 6 made, any false or misleading statement, or deliberately omit any
 
 7 material statement that would be considered misleading if
 
 8 omitted.
 
 9      (c)  No person shall condition a loan or the sale of any
 
10 property on the purchase of a service contract.
 
11      §    -11  Rules.  The commissioner may adopt rules pursuant
 
12 to chapter 91 to implement this chapter.
 
13      §    -12  Enforcement.(a)  The commissioner may take any
 
14 action necessary or appropriate to enforce this chapter, and the
 
15 rules adopted and orders issued hereunder.  The commissioner may
 
16 conduct investigations and examinations of providers,
 
17 administrators, insurers, or other persons.  If a provider has
 
18 violated this chapter or rules or orders under this chapter, the
 
19 commissioner may issue an order:
 
20      (1)  Requiring a person to cease and desist from violating
 
21           this chapter or rules or orders under this chapter;
 
22      (2)  Prohibiting a person from selling or offering for sale
 
23           service contracts in violation of this chapter; or
 

 
Page 16                                                    2729
                                     S.B. NO.           S.D. 1
                                                        H.D. 1
                                                        

 
 1      (3)  Imposing a civil penalty on a person or any combination
 
 2           of the foregoing, as applicable.
 
 3      (b)  A person aggrieved by an order under this section may
 
 4 request a hearing before the commissioner, conducted subject to
 
 5 chapter 91.  The hearing request shall be filed with the
 
 6 commissioner within twenty days of the effective date of the
 
 7 commissioner's order.  Upon filing of a hearing request, the
 
 8 order shall be suspended from its effective date, until
 
 9 completion of the hearing and final decision of the commissioner.
 
10 At the hearing, the commissioner shall have the burden of proof
 
11 to show that the order is justified.
 
12      (c)  The commissioner may bring an action in any court of
 
13 competent jurisdiction, for an injunction or other appropriate
 
14 relief to remedy threatened or existing violations of this
 
15 chapter, rules established pursuant to this chapter, or orders of
 
16 the commissioner.  An action filed under this section may also
 
17 seek restitution on behalf of persons aggrieved by a violation of
 
18 this chapter, rules established pursuant to this chapter, or
 
19 orders of the commissioner.
 
20      (d)  Violations of this chapter, rules established pursuant
 
21 to this chapter, or orders of the commissioner shall be
 
22 considered unfair or deceptive acts or practices in the conduct
 
23 of trade or commerce under section 480-2."
 

 
Page 17                                                    2729
                                     S.B. NO.           S.D. 1
                                                        H.D. 1
                                                        

 
 1      SECTION 3.  Section 431:1-209, Hawaii Revised Statutes, is
 
 2 amended to read as follows:
 
 3      "§431:1-209  General casualty insurance defined.  General
 
 4 casualty insurance includes vehicle insurance as defined in
 
 5 section 431:1-208, disability insurance defined in section
 
 6 431:1-205 and in addition is insurance:
 
 7      (1)  Against legal liability for the death, injury, or
 
 8           disability of any human being, or from damage to
 
 9           property;
 
10      (2)  Of medical, hospital, surgical, and funeral benefits to
 
11           persons injured, irrespective of legal liability of the
 
12           insured, when issued with or supplemental to insurance
 
13           against legal liability for the death, injury or
 
14           disability of human beings.
 
15      (3)  Of the obligation accepted by, imposed upon, or assumed
 
16           by employers under law for death, disablement or injury
 
17           to employees.
 
18      (4)  Against loss or damage by burglary, theft, larceny,
 
19           robbery, forgery, fraud, vandalism, malicious mischief,
 
20           confiscation, or wrongful conversion, disposal or
 
21           concealment, or from any attempt of any of the
 
22           foregoing; also insurance against loss or damage to
 
23           moneys, coins, bullion, securities, notes, drafts,
 

 
Page 18                                                    2729
                                     S.B. NO.           S.D. 1
                                                        H.D. 1
                                                        

 
 1           acceptances, or any other valuable papers or documents,
 
 2           resulting from any cause, except while in the mail.
 
 3      (5)  Upon personal effects of individuals, by an all-risk
 
 4           type of policy commonly known as the personal property
 
 5           floater.
 
 6      (6)  Against loss or damage to glass and its appurtenances
 
 7           resulting from any cause.
 
 8      (7)  Against any liability and loss or damage to property
 
 9           resulting from accidents to or explosions of boilers,
 
10           pipes, pressure containers, machinery, or apparatus.
 
11      (8)  Against loss of or damage to any property of the
 
12           insured resulting from the ownership, maintenance or
 
13           use of elevators, except loss or damage by fire.
 
14      (9)  Against loss or damage to any property caused by the
 
15           breakage or leakage of sprinklers, water pipes or
 
16           containers, or by water entering through leaks or
 
17           openings in buildings.
 
18     (10)  Against loss or damage resulting from failure of
 
19           debtors to pay their obligations to the insured (credit
 
20           insurance).
 
21     (11)  Against loss of or damage to any domesticated or wild
 
22           animal resulting from any cause (livestock insurance).
 
23     (12)  Against loss of or damage to any property of the
 

 
Page 19                                                    2729
                                     S.B. NO.           S.D. 1
                                                        H.D. 1
                                                        

 
 1           insured resulting from collision of any other object
 
 2           with such property, but not including collision to or
 
 3           by vessels, craft, piers, or other instrumentalities of
 
 4           ocean or inland navigation (collision insurance).
 
 5     (13)  Against legal liability of the insured, and against
 
 6           loss, damage, or expense incident to a claim of such
 
 7           liability, and including any obligation of the insured
 
 8           to pay medical, hospital, surgical, and funeral
 
 9           benefits to injured persons, irrespective of legal
 
10           liability of the insured, arising out of the death or
 
11           injury of any person, or arising out of injury to the
 
12           economic interest of any person as the result of
 
13           negligence in rendering expert, fiduciary, or
 
14           professional service (malpractice insurance).
 
15     (14)  Against any contract of warranty or guaranty which
 
16           promises service maintenance, parts replacement,
 
17           repair, money, or any other indemnity in the event of
 
18           loss of or damage to a motor vehicle or any part
 
19           thereof from any cause, including loss of or damage to
 
20           or loss of use of the motor vehicle by reason of
 
21           depreciation, deterioration, wear and tear, use,
 
22           obsolescence, or breakage if made by a warrantor or
 
23           guarantor who or which as such is doing an insurance
 

 
Page 20                                                    2729
                                     S.B. NO.           S.D. 1
                                                        H.D. 1
                                                        

 
 1           business[.
 
 2                The making of a contract covering only defects in
 
 3           material and work in exchange for a separately stated
 
 4           charge where it is incidental to the business of
 
 5           selling or leasing motor vehicles, shall not be deemed
 
 6           insurance; provided the maker of the contract has an
 
 7           insurance policy, with an insurer as defined in section
 
 8           431:1-202, providing coverage for the making of those
 
 9           contracts.  The policy shall assume the legal liability
 
10           created by each contract or, alternatively, the
 
11           ultimate legal liability of all contracts made by the
 
12           issuer.  If the maker of the contract is unable to
 
13           perform the duties imposed by the contract, the
 
14           purchaser of the contract then shall be considered a
 
15           policyholder of the insurer.  The policy shall include
 
16           a loss payee endorsement that provides coverage to any
 
17           lending institution as its interest may appear.  In
 
18           addition, the contract conspicuously shall state the
 
19           name and address of the licensed underwriting insurer
 
20           and contain a statement that the policyholder shall be
 
21           entitled to make a direct claim against the insurer
 
22           upon the failure of the issuer to pay any claim within
 
23           sixty days after proof of loss has been filed with the
 

 
Page 21                                                    2729
                                     S.B. NO.           S.D. 1
                                                        H.D. 1
                                                        

 
 1           issuer.  The requirement that the maker of the contract
 
 2           have an insurance policy with an insurer shall not
 
 3           apply if the maker is a manufacturer, distributor or
 
 4           importer of automobiles.]; provided that service
 
 5           contracts as defined in chapter     and which meet the
 
 6           requirements of chapter    , shall not be subject to
 
 7           chapter 431.
 
 8                The doing or proposing to do any business in
 
 9           substance equivalent to the business described in this
 
10           section in a manner designed to evade the provisions of
 
11           this section is the doing of an insurance business.
 
12     (15)  Against any other kind of loss, damage, or liability
 
13           properly the subject of insurance and not within any
 
14           other class or classes of insurance as defined in
 
15           section 431:1-204 to section 431:1-211, if such
 
16           insurance is not contrary to law or public policy."
 
17      SECTION 4.  Section 431:7-101, Hawaii Revised Statutes, is
 
18 amended by amending subsections (a) and (b) to read as follows:
 
19      "(a)  The commissioner shall collect in advance the
 
20 following fees:
 
21      (1)  Certificate of authority:  Issuance................$900
 
22      (2)  Organization of domestic insurers and affiliated
 
23           corporations:
 

 
Page 22                                                    2729
                                     S.B. NO.           S.D. 1
                                                        H.D. 1
                                                        

 
 1           (A)  Application and all other papers required for
 
 2                issuance of solicitation permit, filing.....$1,500
 
 3           (B)  Issuance of solicitation permit...............$150
 
 4      (3)  General agent's license:
 
 5           (A)  Issuance, regular license......................$75
 
 6           (B)  Issuance, temporary license....................$75
 
 7      (4)  Subagent's license:
 
 8           (A)  Issuance, regular license......................$75
 
 9           (B)  Issuance, temporary license....................$75
 
10      (5)  Nonresident agent's or broker's license:
 
11           Issuance............................................$60
 
12      (6)  Solicitor's license: Issuance.......................$60
 
13      (7)  Independent adjuster's license: Issuance............$60
 
14      (8)  Public adjuster's license: Issuance.................$60
 
15      (9)  Workers' compensation claims adjuster's limited
 
16           license: Issuance...................................$60
 
17     (10)  Limited license issued pursuant to section
 
18           431:9-214(c): Issuance..............................$60
 
19     (11)  Managing general agent's license:
 
20           Issuance............................................$75
 
21     (12)  Reinsurance intermediary's license:
 
22           Issuance............................................$75
 
23     (13)  Surplus line broker's license: Issuance............$150
 

 
Page 23                                                    2729
                                     S.B. NO.           S.D. 1
                                                        H.D. 1
                                                        

 
 1     (14)  Service contract provider's registration:
 
 2           Issuance...........................................$   
 
 3    [(14)] (15) Examination for license:  For each examination, a
 
 4           fee to be established by the commissioner.
 
 5      (b)  The fees for services of the department of commerce and
 
 6 consumer affairs subsequent to the issuance of a certificate of
 
 7 authority or a license are as follows:
 
 8      (1)  $600 per year for all services (including extension of
 
 9           the certificate of authority) for an authorized
 
10           insurer;
 
11      (2)  $75 per year for all services (including extension of
 
12           the license) for a regularly licensed general agent;
 
13      (3)  $75 per year for all services (including extension of
 
14           the license) for a regularly licensed subagent;
 
15      (4)  $45 per year for all services (including extension of
 
16           the license) for a regularly licensed nonresident agent
 
17           or broker;
 
18      (5)  $30 per year for all services (including extension of
 
19           the license) for a regularly licensed solicitor;
 
20      (6)  $45 per year for all services (including extension of
 
21           the license) for a regularly licensed independent
 
22           adjuster;
 
23      (7)  $45 per year for all services (including extension of
 

 
Page 24                                                    2729
                                     S.B. NO.           S.D. 1
                                                        H.D. 1
                                                        

 
 1           the license) for a regularly licensed public adjuster;
 
 2      (8)  $45 per year for all services (including extension of
 
 3           the license) for a regularly limited licensed workers'
 
 4           compensation claims adjuster;
 
 5      (9)  $45 per year for all services (including extension of
 
 6           the license) for a limited license issued pursuant to
 
 7           section 431:9-214(c);
 
 8     (10)  $75 per year for all services (including extension of
 
 9           the license) for a regularly licensed managing general
 
10           agent;
 
11     (11)  $75 per year for all services (including extension of
 
12           the license) for a regularly licensed reinsurance
 
13           intermediary;
 
14     (12)  $45 per year for all services (including extension of
 
15           the license) for a licensed surplus line broker; [and]
 
16     (13)  $    per year for all services (including renewal of
 
17           registration) for a service contract provider; and
 
18    [(13)] (14) The services referred to in paragraphs (1) to
 
19           [(12)] (13) shall not include services in connection
 
20           with examinations, investigations, hearings, appeals,
 
21           and deposits with a depository other than the
 
22           department of commerce and consumer affairs."
 
23      SECTION 5.  If any provision of this Act, or the application
 

 
Page 25                                                    2729
                                     S.B. NO.           S.D. 1
                                                        H.D. 1
                                                        

 
 1 of the provision to any person or circumstances, shall be held
 
 2 invalid, the remainder of the Act, and the application of the
 
 3 provision to person or circumstances other than those as to which
 
 4 it is held invalid, shall not be affected.
 
 5      SECTION 6.  This Act shall not apply to service contracts or
 
 6 contractual liability insurance policies effective prior to
 
 7 January 1, 2001, or to the activities of service contract
 
 8 providers, administrators, sellers, or contractual liability
 
 9 insurance policy insurers prior to January 1, 2001.  The failure
 
10 of a provider or other person to comply with this Act or
 
11 otherwise to administer a service contract plan, in the manner
 
12 required by this Act prior to January 1, 2001, shall not be
 
13 admissible in any court, arbitration, or alternative dispute
 
14 resolution proceeding, or otherwise used to prove that the action
 
15 of any person or the service contract was unlawful or otherwise
 
16 improper.
 
17      SECTION 7.  Statutory material to be repealed is bracketed.
 
18 New statutory material is underscored.
 
19      SECTION 8.  This Act shall take effect on July 1, 2050.