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THE SENATE                              S.B. NO.           
TWENTIETH LEGISLATURE, 2000                                
STATE OF HAWAII                                            
                                                             
________________________________________________________________
________________________________________________________________


                   A  BILL  FOR  AN  ACT

RELATING TO THE HAWAII INSURANCE GUARANTY ASSOCIATION.



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

 1      SECTION 1.  Section 431:16-102, Hawaii Revised Statutes, is
 
 2 amended to read as follows:
 
 3      "§431:16-102  Purpose.  The purpose of this part is to
 
 4 provide a mechanism for the payment of covered claims under
 
 5 certain insurance policies to avoid excessive delay in payment
 
 6 and, to [avoid] the extent provided in this part, to minimize
 
 7 financial loss to claimants or policyholders because of the
 
 8 insolvency of an insurer[, to assist in the detection and
 
 9 prevention of insurer insolvencies, and to provide an association
 
10 to assess the cost of such protection among insurers]."
 
11      SECTION 2.  Section 431:16-103, Hawaii Revised Statutes, is
 
12 amended to read as follows:
 
13      "§431:16-103  Scope.  This part shall apply to all types of
 
14 direct insurance, but shall not be applicable to the following:
 
15      (1)  Life, annuity, health, or disability insurance;
 
16      (2)  Mortgage guaranty, financial guaranty, or any other
 
17           forms of insurance offering protection against
 
18           investment risks;
 
19      (3)  Fidelity or surety bonds, or any other bonding
 

 
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 1           obligations;
 
 2      (4)  Credit [life or credit disability] insurance[;],
 
 3           vendors' single interest insurance, collateral
 
 4           protection insurance, or any similar insurance
 
 5           protecting the interests of a creditor arising out of a
 
 6           creditor-debtor transaction;
 
 7      (5)  Insurance of warranties or service contracts[;],
 
 8           including insurance that provides for the repair,
 
 9           replacement, or service of goods or property, for
 
10           indemnification for the repair, replacement, or service
 
11           for the operational or structural failure of the goods
 
12           or property due to a defect in materials, workmanship,
 
13           or normal wear and tear, or for reimbursement for the
 
14           liability incurred by the issuer of agreements or
 
15           service contracts that provide such benefits;
 
16      (6)  Title insurance;
 
17      (7)  Ocean marine insurance; [and]
 
18      (8)  Any transaction or combination of transactions between
 
19           a person[,] (including affiliates of such person[,])
 
20           and an insurer[,] (including affiliates of such
 
21           insurer[,]) which involves the transfer of investment
 
22           or credit risk unaccompanied by transfer of insurance
 

 
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 1           risk[.]; or
 
 2      (9)  Any insurance provided by or guaranteed by government."
 
 3      SECTION 3.  Section 431:16-104, Hawaii Revised Statutes, is
 
 4 amended to read as follows:
 
 5      "§431:16-104  Construction.  This [code] part shall be
 
 6 [liberally] construed to effect the purpose under section 431:16-
 
 7 102 which will constitute an aid and guide to interpretation."
 
 8      SECTION 4.  Section 431:16-105, Hawaii Revised Statutes, is
 
 9 amended to read as follows:
 
10      "§431:16-105  Definitions.  As used in this [code:] part:
 
11      [(1)  Affiliate] "Affiliate" means a person who, directly or
 
12 indirectly, through one or more intermediaries, controls, is
 
13 controlled by, or is under common control with an insolvent
 
14 insurer on December 31 of the year [next] immediately preceding
 
15 the date the insurer becomes an insolvent insurer.
 
16      [(2)  Association] "Association" means the Hawaii Insurance
 
17 Guaranty Association created under section 431:16-106.
 
18      [(3)  Claimant] "Claimant" means any insured making a first-
 
19 party claim or any person instituting a liability claim; provided
 
20 that no person who is an affiliate of the insolvent insurer may
 
21 be a claimant.
 
22      [(4)  Control] "Control" means the possession, direct or
 

 
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 1 indirect, of the power to direct or cause the direction of the
 
 2 management and policies of a person, whether through the
 
 3 ownership of voting securities, by contract other than a
 
 4 commercial contract for goods or nonmanagement services, or
 
 5 otherwise, unless the power is the result of an official position
 
 6 with or corporate office held by the person.  Control shall be
 
 7 presumed to exist if any person, directly or indirectly, owns,
 
 8 controls, holds with the power to vote, or holds proxies
 
 9 representing, ten per cent or more of the voting securities of
 
10 any other person.  This presumption may be rebutted by a showing
 
11 that control does not exist in fact.
 
12      [(5)  Covered claim] "Covered claim" means:
 
13      (1)  [an] An unpaid claim, including one for unearned
 
14           premiums, submitted by a claimant, which arises out of
 
15           and is within the coverage and is subject to the
 
16           applicable limits of an insurance policy to which this
 
17           part applies issued by an insurer, if such insurer
 
18           becomes an insolvent insurer after July l, [1988] 2000
 
19           and:
 
20           (A)  The claimant or insured is a resident of this
 
21                State at the time of the insured event, provided
 
22                that for entities other than an individual, the
 

 
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 1                residence of a claimant [or], insured, or
 
 2                policyholder is the state in which its principal
 
 3                place of business is located at the time of the
 
 4                insured event; or
 
 5           (B)  [The property from which the claim arises is
 
 6           permanently located in this State
 
 7           Covered claim shall not include any amount awarded as
 
 8           punitive or exemplary damages; sought as a return of
 
 9           premium under any retrospective rating plan; or due any
 
10           reinsurer, insurer, insurance pool, or underwriting
 
11           association, as subrogation recoveries or otherwise;] .
 
12           The claim is a first party claim for damage to property
 
13           with a permanent location in this state.
 
14      (2)  "Covered claim" shall not include:
 
15           (A)  Any amount awarded as punitive or exemplary
 
16                damages;
 
17           (B)  Any amount sought as a return of premium under any
 
18                retrospective rating plan;
 
19           (C)  Any amount due any reinsurer, insurer, insurance
 
20                pool, or underwriting association, as subrogation
 
21                recoveries, reinsurance recoveries, contribution,
 
22                indemnification; or otherwise;
 

 
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 1           (D)  Any first party claims by an insured whose net
 
 2                worth exceeds $25 million on December 31 of the
 
 3                year prior to the year in which the insurer
 
 4                becomes an insolvent insurer; provided that an
 
 5                insured's net worth on that date shall be deemed
 
 6                to include the aggregate net worth of the insured
 
 7                and all of its subsidiaries as calculated on a
 
 8                consolidated basis; or
 
 9           (E)  Any first party claims by an insured which is an
 
10                affiliate of the insolvent insurer.
 
11      [(6)  Insolvent insurer] "Insolvent insurer" means an
 
12 insurer licensed to transact insurance in this State, either at
 
13 the time the policy was issued or when the insured event
 
14 occurred, and [determined to be insolvent by a court of competent
 
15 jurisdiction.] against whom a final order of liquidation has been
 
16 entered after the effective date of this Act with a finding of
 
17 insolvency by a court of competent jurisdiction in the insurer's
 
18 state of domicile.
 
19      [(7)  Member insurer]  "Member insurer" means any person
 
20 who:
 
21     [(A)] (1)  Writes any kind of insurance to which this part
 
22           applies under section 431:16-103, including the
 
23           exchange of reciprocal or inter-insurance contracts;
 

 
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 1           and
 
 2     [(B)] (2)  Is licensed to transact insurance in this State.
 
 3 An insurer shall cease to be a member insurer effective on the
 
 4 day following the termination or expiration of its certificate of
 
 5 authority to transact the kinds of insurance to which this part
 
 6 applies.  However the insurer shall remain liable as a member
 
 7 insurer for any and all obligations, including obligations for
 
 8 assessments levied prior to the termination or expiration of its
 
 9 certificate of authority, although the insurer became an
 
10 insolvent insurer prior to the termination or expiration of such
 
11 insurer's certificate of authority.
 
12      [(8)  Net direct written premiums] "Net direct written
 
13 premiums" means direct gross premiums written in this State on
 
14 insurance policies to which this part applies, less return
 
15 premiums thereon and dividends paid or credited to policyholders
 
16 on such direct business.  Net direct written premiums does not
 
17 include premiums on contracts between insurers or reinsurers.
 
18      [(9)  Person] "Person" means any individual, corporation,
 
19 partnership, association, or voluntary organization."
 
20      SECTION 5.  Section 431:16-106, Hawaii Revised Statutes, is
 
21 amended to read as follows:
 
22      "§431:16-106  Creation of association.  [[(a)]] There is
 

 
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 1 created a nonprofit unincorporated legal entity to be known as
 
 2 the Hawaii Insurance Guaranty Association.  All insurers defined
 
 3 as member insurers in section [431:16-105(7)] 431:16-105 shall be
 
 4 and remain members of the association as a condition of their
 
 5 authority to transact the business of insurance in this State.
 
 6 The association shall perform its function under a plan of
 
 7 operation established and approved under section 431:16-109 and
 
 8 shall exercise its powers through a board of directors
 
 9 established under section 431:16-107.
 
10      [(b)  All meetings and records of the board of directors
 
11 shall be open to all member insurers except for those meetings
 
12 and records pertaining to the solvency, liquidation,
 
13 rehabilitation, or conservation of any member insurer deemed
 
14 confidential.  A member insurer shall provide written designation
 
15 of its representative or representatives to the board meetings.]"
 
16      SECTION 6.  Section 431:16-107, Hawaii Revised Statutes, is
 
17 amended by amending subsection (a) to read as follows:
 
18      "(a)  The board of directors of the association shall
 
19 consist of not less than five nor more than nine persons serving
 
20 terms as established in the plan of operation.  The members of
 
21 the board shall be selected by member insurers subject to the
 
22 approval of the commissioner.  Vacancies on the board shall be
 
23 filled for the remaining period of the term by a majority vote of
 

 
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 1 the remaining board members subject to the approval of the
 
 2 commissioner.  [If no members are selected within sixty days
 
 3 after July 1, 1988, the commissioner may appoint the initial
 
 4 members of the board of directors.]"
 
 5      SECTION 7.  Section 431:16-108, Hawaii Revised Statutes, is
 
 6 amended by amending subsection (a) to read as follows:
 
 7      "(a) The association shall:
 
 8      (1)  Be obligated to the extent of the covered claims
 
 9           existing prior to the [determination of insolvency,
 
10           which the insolvent insurer would have been legally
 
11           obligated to pay but for its insolvency,] order of
 
12           liquidation and arising within thirty days after the
 
13           [determination of insolvency,] order of liquidation, or
 
14           before the policy expiration date if less than thirty
 
15           days after the [determination,] order of liquidation,
 
16           or before the insured replaces the policy or causes its
 
17           cancellation, if the [insurer] insured does so within
 
18           thirty days of the [determination, but the obligation
 
19           shall include only that amount of each covered claim
 
20           which is less than $300,000, except that the
 
21           association shall pay the full amount of any covered
 

 
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 1           claim arising out of a workers' compensation policy.]
 
 2           order of liquidation.  Such obligation shall be
 
 3           satisfied by paying to the claimant an amount as
 
 4           follows:
 
 5           (A)  The full amount of a covered claim for benefits
 
 6                under a workers' compensation insurance coverage;
 
 7           (B)  An amount not exceeding $10,000 per policy for a
 
 8                covered claim for the return of unearned premium;
 
 9           (C)  An amount not exceeding $300,000 per claim for all
 
10                other covered claims.
 
11           In no event shall the association be obligated to a
 
12           policyholder or claimant in an amount in excess of the
 
13           stated policy limit of the insolvent insurer under the
 
14           policy from which the claim arises[;].  Notwithstanding
 
15           any other provisions of this part, a covered claim
 
16           shall not include a claim filed with the guaranty
 
17           association after the final date set by the court for
 
18           the filing of claims against the liquidator or receiver
 
19           of an insolvent insurer;
 
20      Any obligation of the association to defend an insured shall
 
21      cease upon the association's payment or tender of an amount
 
22      equal to the lesser of the association's covered claim
 

 
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 1      obligation limit or the applicable policy limit;
 
 2      (2)  Be deemed the insurer, but only to the extent of its
 
 3           obligation on covered claims and to that extent shall
 
 4           have all rights, duties, and obligations of the
 
 5           insolvent insurer as if the insurer had not become
 
 6           insolvent[;], including but not limited to, the right
 
 7           to pursue and retain salvage and subrogation
 
 8           recoverable on covered claim obligations to the extent
 
 9           paid by the association;
 
10      (3)  Assess insurers amounts necessary to pay the
 
11           obligations of the association under subsection (a)(1)
 
12           subsequent to an insolvency, the expenses of handling
 
13           covered claims subsequent to an insolvency, and the
 
14           cost of examinations under section 431:l6-ll3, and
 
15           other expenses authorized by this part.  The
 
16           assessments of each member insurer shall be in the
 
17           proportion that the net direct written premiums of the
 
18           member insurer for the preceding calendar year bears to
 
19           the net direct written premiums of all member insurers
 
20           for the preceding calendar year.  Each member insurer
 
21           shall be notified of the assessment not later than
 
22           thirty days before it is due.  No member insurer may be
 

 
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 1           assessed in any year an amount greater than two per
 
 2           cent of that member insurer's net direct written
 
 3           premiums for the preceding calendar year.  If the
 
 4           maximum assessment, together with the other assets of
 
 5           the association, does not provide in any one year an
 
 6           amount sufficient to make all necessary payments, the
 
 7           funds available shall be prorated and the unpaid
 
 8           portion shall be paid as soon thereafter as funds
 
 9           become available.  The association shall pay claims in
 
10           any order that it may deem reasonable, including the
 
11           payment of claims as they are received from the
 
12           claimants or in groups or categories of claims.  The
 
13           association may exempt or defer, in whole or in part,
 
14           the assessment of any member insurer, if the assessment
 
15           would cause the member insurer's financial statement to
 
16           reflect amounts of capital or surplus less than the
 
17           minimum amounts required for a certificate of authority
 
18           by any jurisdiction in which the member insurer is
 
19           authorized to transact insurance.  However, during the
 
20           period of deferment no dividends shall be paid to
 
21           shareholders or policyholders.  Deferred assessments
 
22           shall be paid when the payment will not reduce capital
 

 
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 1           or surplus below required minimums.  Payments shall be
 
 2           refunded to those companies receiving larger
 
 3           assessments by virtue of the deferment, or at the
 
 4           election of the companies, credited against future
 
 5           assessments.  Each member insurer may set off against
 
 6           any assessment payments authorized by the administrator
 
 7           of the association to be made on covered claims and
 
 8           expenses incurred in the payment of the claims by the
 
 9           member insurer;
 
10      (4)  Investigate claims brought against the association and
 
11           adjust, compromise, settle, and pay covered claims to
 
12           the extent of the association's obligation and deny all
 
13           other claims and may review settlements, releases, and
 
14           judgments to which the insolvent insurer or its
 
15           insureds were parties to determine the extent to which
 
16           such settlements, releases, and judgments may be
 
17           properly contested[;].  The association shall have the
 
18           right to appoint or substitute and to direct legal
 
19           counsel retained under liability insurance policies for
 
20           the defense of covered claims;
 
21      (5)  Notify the persons as the commissioner directs under
 
22           section 431:16-ll0(b)(l);
 

 
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 1      (6)  Handle claims through its employees or through one or
 
 2           more insurers or other persons designated as servicing
 
 3           facilities.  Designation of a servicing facility is
 
 4           subject to the approval of the commissioner, but the
 
 5           designation may be declined by a member insurer;
 
 6      (7)  Reimburse each servicing facility for obligations of
 
 7           the association paid by the facility and for expenses
 
 8           incurred by the facility while handling claims on
 
 9           behalf of the association and [shall] pay the other
 
10           expenses of the association authorized by this [code;]
 
11           part; and
 
12      (8)  Have the authority, notwithstanding sections 43l:10C-
 
13           ll0 and 43l:10C-111, to cancel all policies issued by
 
14           an insolvent insurer.  [All] Covered claims under these
 
15           policies shall be [covered] paid by the association in
 
16           an amount not to exceed the [state] stated policy limit
 
17           of the insolvent insurer under the policy from which
 
18           the claim arises[.], or as provided under Section
 
19           431:16-108(a)(1)(A), whichever is less."
 
20      SECTION 8.  Section 431:16-109, Hawaii Revised Statutes, is
 
21 amended by amending subsection (c) to read as follows:
 
22      "(c) The plan of operation shall:
 

 
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 1      (1)  Establish the procedures whereby all the powers and
 
 2           duties of the association under section 431:16-108
 
 3           [will] shall be performed;
 
 4      (2)  Establish procedures for handling assets of the
 
 5           association;
 
 6      (3)  Establish procedures for the disposition of liquidating
 
 7           dividends or other monies received from the estate of
 
 8           the insolvent insurer;
 
 9     [(3)] (4)  Establish the amount and method of reimbursing
 
10           members of the board of directors under section 431:16-
 
11           107(c);
 
12     [(4)] (5)  Establish procedures by which claims may be filed
 
13           with the association and establish acceptable forms of
 
14           proof of covered claims.  Notice of claims to the
 
15           receiver or liquidator of the insolvent insurer shall
 
16           be deemed notice to the association or its agent and a
 
17           list of the claims shall be periodically submitted to
 
18           the association or similar organization in another
 
19           state by the receiver or liquidator;
 
20     [(5)] (6)  Establish regular places and times for meetings of
 
21           the board of directors;
 
22     [(6)] (7)  Establish procedures for records to be kept of all
 

 
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 1           financial transactions of the association, its agents,
 
 2           and the board of directors;
 
 3     [(7)] (8)  Provide that any member insurer aggrieved by any
 
 4           final action or decision of the association may appeal
 
 5           to the commissioner within thirty days after the action
 
 6           or decision;
 
 7     [(8)] (9)  Establish the procedures whereby selections for
 
 8           the board of directors will be submitted to the
 
 9           commissioner; and
 
10     [(9)] (10)  Contain additional provisions necessary or proper
 
11           for the execution of the powers and duties of the
 
12           association."
 
13      SECTION 9.  Section 431:16-110, Hawaii Revised Statutes, is
 
14 amended as follows:
 
15      (1)  By amending subsection (a) to read as follows:
 
16      "(a)  The commissioner shall:
 
17      (l)  Notify the association of the existence of an insolvent
 
18           insurer not later than three days after the
 
19           commissioner receives notice of the determination of
 
20           the insolvency.  The association shall be entitled to a
 
21           copy of a complaint seeking an order of liquidation
 
22           with a finding of insolvency against a member company
 

 
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 1           at the same time that the complaint is filed with a
 
 2           court of competent jurisdiction.
 
 3      (2)  Upon request of the board of directors, provide the
 
 4           association with a statement of the net direct written
 
 5           premiums of each member insurer."
 
 6      (2)  By amending subsection (c) to read as follows:
 
 7      "(c)  Any final action or order of the commissioner under
 
 8 this [code] part shall be subject to judicial review by the
 
 9 circuit court of the first judicial circuit."
 
10      SECTION 10.  Section 431:16-111, Hawaii Revised Statutes, is
 
11 amended as follows:
 
12      (1)  By amending subsection (a) to read as follows:
 
13      "(a)  Any person recovering under this [code] part shall be
 
14 deemed to have assigned the person's rights under the policy to
 
15 the association to the extent of the person's recovery from the
 
16 association.  Every insured or claimant seeking the protection of
 
17 this part shall cooperate with the association to the same extent
 
18 as such person would have been required to cooperate with the
 
19 insolvent insurer.  The association shall have no cause of action
 
20 against the insured of the insolvent insurer for any sums it has
 
21 paid out except such causes of action as the insolvent insurer
 
22 would have had if such sums had been paid by the insolvent
 

 
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 1 insurer and except as provided in subsection (b).  In the case of
 
 2 an insolvent insurer operating as an assessable mutual company on
 
 3 a plan with assessment liability, payments of claims of the
 
 4 association shall not operate to reduce the liability of the
 
 5 insureds to the receiver, liquidator, or statutory successor for
 
 6 unpaid assessment."
 
 7      (2)  By amending subsection (c) to read as follows:
 
 8      "(c)  The association and a similar organization in another
 
 9 state shall be recognized as claimants in the liquidation of an
 
10 insolvent insurer for any amounts paid by them on covered claims
 
11 as determined under this part or similar laws in other states and
 
12 shall receive dividends and any other distributions at the
 
13 priority set forth in section 431:15-332.  The receiver,
 
14 liquidator, or statutory successor of an insolvent insurer shall
 
15 be bound by determinations of covered claim eligibility under
 
16 this part and by settlements of [covered] claims by the
 
17 association or a similar organization in another state[.] to the
 
18 extent such determinations or settlements satisfy obligations of
 
19 the association.  The receiver shall not be bound in any way by
 
20 such determinations or settlements to the extent there remains a
 
21 claim against the insolvent insurer.  The court having
 
22 jurisdiction shall grant such claims priority equal to that to
 

 
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 1 which the claimant would have been entitled in the absence of
 
 2 this part against the assets of the insolvent insurer."
 
 3      SECTION 11.  Section 431:16-112, Hawaii Revised Statutes, is
 
 4 amended to read as follows:
 
 5      "§431:16-112  [Nonduplication of recovery.]  Exhaustion of
 
 6 other coverage.  (a)  Any person having a claim against an
 
 7 insurer whether or not such an insurer is a member insurer under
 
 8 any provision in an insurance policy other than a policy of an
 
 9 insolvent insurer which is also a covered claim, shall be
 
10 required to exhaust first the person's rights under such policy.
 
11 Any amount payable on a covered claim under this part shall be
 
12 reduced by the amount of any recovery under such insurance
 
13 policy.  If there are any other policies issued by an insolvent
 
14 insurer applicable to the covered claim, then all such policies
 
15 must first be exhausted before any claim can be deemed a covered
 
16 claim subject to being covered by the association.
 
17      [(b)  Any person having a claim or legal right of recovery
 
18 under any governmental insurance or guaranty program which is
 
19 also a covered claim, shall be required to exhaust first the
 
20 person's right under such program.  Any amount payable on a
 
21 covered claim under this part shall be reduced by the amount of
 
22 any recovery under such insurance or program.]
 

 
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 1      [(c)] (b)  Any person having a claim which may be recovered
 
 2 under more than one insurance guaranty association or its
 
 3 equivalent shall seek recovery first from the association of the
 
 4 place of residence of the insured, except that if the claim is a
 
 5 first-party claim for damage to property with a permanent
 
 6 location, the person shall seek recovery first from the
 
 7 association of the location of the property[, and if it is].  For
 
 8 a workers' compensation claim, the person shall seek recovery
 
 9 first from the association of the residence of the claimant.  Any
 
10 recovery under this part shall be reduced by the amount of
 
11 recovery from any other insurance guaranty association or its
 
12 equivalent."
 
13      SECTION 12.  Section 431:16-113, Hawaii Revised Statutes, is
 
14 amended to read as follows:
 
15      "§431:16-113  Prevention of insolvencies.  To aid in the
 
16 detection and prevention of insurer insolvencies:  [(a)  The
 
17 board of directors may, upon majority vote:
 
18      (l)  Make recommendations to the commissioner for the
 
19           detection and prevention of insurer insolvencies; and
 
20      (2)  Respond to requests by the commissioner to discuss and
 
21           make recommendations regarding the status of any member
 
22           insurer whose financial condition may be determined by
 

 
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 1           the commissioner to be hazardous to policyholders or
 
 2           the public.  Such recommendations shall not be
 
 3           considered public documents.
 
 4      (3)  The board of directors may, upon majority vote, request
 
 5           that the commissioner order an examination of any
 
 6           member insurer which the board in good faith believes
 
 7           may be in a financial condition hazardous to the
 
 8           policyholders or the public.  Within thirty days of the
 
 9           receipt of such request, the commissioner shall begin
 
10           the examination.  The examination may be conducted as a
 
11           National Association of Insurance Commissioners
 
12           examination or may be conducted by such persons as the
 
13           commissioner designates.  The cost of such examination
 
14           shall be paid by the association and the examination
 
15           report shall be treated as are other examination
 
16           reports.  In no event shall such examination report be
 
17           released to the board of directors prior to its release
 
18           to the public, but this shall not preclude the
 
19           commissioner from reporting to the board of directors
 
20           when the commissioner has reasonable cause to believe
 
21           that any member insurer examined or being examined at
 
22           the request of the board of directors may be insolvent
 

 
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 1           or in a financial condition hazardous to the
 
 2           policyholders or the public.  The commissioner shall
 
 3           notify the board of directors when the examination is
 
 4           completed.  The request for an examination shall be
 
 5           kept on file by the commissioner but it shall not be
 
 6           open to public inspection prior to the release of the
 
 7           examination report to the public.
 
 8      (b)  The board of directors may, at the conclusion of any
 
 9 domestic insurer insolvency in which the association was
 
10 obligated to pay covered claims, prepare a report on the history
 
11 and causes of such insolvency, based on the information available
 
12 to the association and submit such report to the commissioner.] 
 
13      (1)  The board of directors may, upon majority vote, make
 
14           recommendations to the commissioner on matters
 
15           generally related to improving or enhancing regulation
 
16           for solvency.
 
17      (2)  At the conclusion of any domestic insurer insolvency in
 
18           which the association was obligated to pay covered
 
19           claims, the board of directors may prepare a report on
 
20           the history and causes of the insolvency, based on the
 
21           information available to the association, and submit
 
22           the report to the commissioner."
 

 
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 1      SECTION 13.  Section 431:16-116, Hawaii Revised Statutes, is
 
 2 amended to read as follows:
 
 3      "§431:16-116  Immunity.  There shall be no liability on the
 
 4 part of and no cause of action of any nature shall arise against
 
 5 any member insurer, the association or its agents or employees,
 
 6 the board of directors, any person serving as an alternate or
 
 7 substitute representative of any director, or the commissioner or
 
 8 the commissioner's representatives for any action taken or any
 
 9 failure to act by them in the performance of their powers and
 
10 duties under this part."
 
11      SECTION 14.  Section 431:16-117, Hawaii Revised Statutes, is
 
12 amended to read as follows:
 
13      "§431:16-117  Stay of proceedings.(a)  All proceedings in
 
14 which the insolvent insurer is a party, or is obligated to defend
 
15 a party in any court in this State, shall, subject to waiver by
 
16 the association in specific cases involving covered claims, be
 
17 stayed for up to six months, and such additional time thereafter
 
18 as may be determined by the court, from the date the insolvency
 
19 is determined or an ancillary proceeding is instituted in the
 
20 State, whichever is later, to permit proper defense by the
 
21 association of all pending causes of action.  As to any covered
 
22 claims arising from a judgment or under any decision, verdict, or
 

 
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 1 finding based on the default of the insolvent insurer or its
 
 2 failure to defend an insured, the association, either on its own
 
 3 behalf or on behalf of such insured, may apply to have such
 
 4 judgment, order, decision, verdict, or finding set aside by the
 
 5 same court, administrator, or other entity that made such
 
 6 judgment, order, decision, verdict, or finding and shall be
 
 7 permitted to defend such claim on the merits.
 
 8      (b)  The liquidator, receiver, or statutory successor of an
 
 9 insolvent insurer covered by this part shall permit access by the
 
10 board or its authorized representative to such of the insolvent
 
11 insurer's claim records[, and may permit access to such other
 
12 records] which are necessary for the board in carrying out its
 
13 functions under this part with regard to covered claims.  In
 
14 addition, the liquidator, receiver, or statutory successor shall
 
15 provide the board or its representative with copies of [such]
 
16 those records upon the request by the board and at the expense of
 
17 the board."
 
18      SECTION 15.  Statutory material to be repealed is bracketed.
 
19 New statutory material is underscored.
 
20      SECTION 16.  This Act shall take effect upon its approval.
 
21 
 
22                           INTRODUCED BY:  _______________________
 

 
a                                                      CCA-9(00)