STAND. COM. REP. NO. 797

                                   Honolulu, Hawaii
                                                     , 1999

                                   RE:  S.B. No. 984
                                        S.D. 1




Honorable Norman Mizuguchi
President of the Senate
Twentieth State Legislature
Regular Session of 1999
State of Hawaii

Sir:

     Your Committee on Commerce and Consumer Protection, to which
was referred S.B. No. 984 entitled: 

     "A BILL FOR AN ACT RELATING TO GENERAL CASUALTY INSURANCE,"

begs leave to report as follows:

     The purpose of this measure is to permit certain contracts
of warranty or guaranty to include coverage for towing and
substitute transportation.

     The Hawaii Automobile Dealers' Association presented
testimony in support of this measure.  One individual, while not
present, submitted testimony in support.  The State Insurance
Commissioner testified in opposition to the measure.

     Your Committee finds that all other states allow the
extended service contracts sold by car dealers to provide towing,
rental car, and other types of services.  In Hawaii, the
Insurance Division of the Department of Commerce and Consumer
Affairs has maintained that by statute, additional services such
as towing and car rental make the service contract an insurance
product.  For an insurance product, the dealer would have to be
licensed as an insurer and only licensed agents may sell the
product.

     Your Committee finds that under current law, the Insurance
Division does not have the power to exempt motor vehicle service
contracts that include other services, and also finds that the
Insurance Division is willing to implement the National

 
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                                   STAND. COM. REP. NO. 797
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Association of Insurance Commissioner's (NAIC) Service Contract
Model Act if it becomes law.

     The NAIC goes through a lengthy process involving numerous
meetings and extensive discussion with all parties that may be
affected by a law before a model act is adopted.  Your Committee
feels confident that the NAIC Service Contract Model Act contains
provisions to adequately protect consumers.

     Your Committee has amended this measure by repealing
paragraph (14) of section 431:1-209, Hawaii Revised Statutes, and
including the NAIC Service Contract Model Act.  The Model Act was
changed so that only motor vehicle service contracts or extended
warranties would fall under this measure.

     As amended, this measure sets forth requirements that must
be met before motor vehicle service or extended warranty
contracts can be sold, including other services such as towing
and car rental.  In order to assure performance on these
contracts, the measure requires that each provider of service
must either insure all service contracts under a reimbursement
insurance policy, set up a reserve fund, or meet minimum net
worth requirements.

     As affirmed by the record of votes of the members of your
Committee on Commerce and Consumer Protection that is attached to
this report, your Committee is in accord with the intent and
purpose of S.B. No. 984, as amended herein, and recommends that
it pass Second Reading in the form attached hereto as S.B.
No. 984, S.D. 1, and be placed on the calendar for Third Reading.

                                   Respectfully submitted on
                                   behalf of the members of the
                                   Committee on Commerce and
                                   Consumer Protection,



                                   ______________________________
                                   BRIAN KANNO, Co-Chair



                                   ______________________________
                                   BRIAN T. TANIGUCHI, Co-Chair

 
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