Honorable Calvin K.Y. Say

Speaker, House of Representatives

Twenty-Second State Legislature

Regular Session of 2004

State of Hawaii

Honorable Robert Bunda

President of the Senate

Twenty-Second State Legislature

Regular Session of 2004

State of Hawaii

Sir:

Your Committee on Conference on the disagreeing vote of the House of Representatives to the amendments proposed by the Senate in H.B. No. 2786, H.D. 1, S.D. 2, entitled:

having met, and after full and free discussion, has agreed to recommend and does recommend to the respective Houses the final passage of this bill in an amended form.

The purpose of this bill is to clarify the application of section 431:10-242, Hawaii Revised Statutes (HRS), to establish the right of a policyholder, beneficiary, or person acquiring the rights of a policyholder or beneficiary under the policy, to collect attorney's fees and costs when an arbitrator, arbitration panel, or the Insurance Commissioner orders the insurer to pay benefits under an insurance policy.

Your Committee on Conference finds that in Labrador v. Liberty Mutual, 103 Haw. 206 (2003), the court ruled that the word "suit" in section 431:10-242, HRS, did not include arbitration and therefore did not allow an award of attorney's fees to a policyholder. Because the purpose of awarding attorney's fees and costs where an insurance company has wrongfully denied benefits is to place the expense of the wrongful denial on the insurance company and not the consumer, it should not matter whether an order is issued by a court, an arbitrator, or an arbitration panel.

Furthermore, awarding fees and expenses only in lawsuits will discourage the use of arbitration when alternative dispute resolution procedures should be encouraged to provide a faster, less expensive alternative and reduce the load on our already overburdened judicial system. This measure is intended to clarify that fees and expenses are to be awarded where an insurance company has wrongfully denied benefits, regardless of whether the matter is handled by lawsuits or by arbitration.

Your Committee on Conference finds that the purpose of this measure is strictly limited to addressing the Labrador decision and is not intended to affect any other issue relating to the award of attorney's fees and expenses. This measure is not meant to have any other effect on the construction or application of section 431:10-242, HRS. Furthermore, this measure is not intended to express any legislative intent, one way or another, regarding the application of section 431:10-242, HRS, to disputes involving the award of damages in arbitration proceedings and does not change existing law on that issue in any way whatsoever.

Your Committee on Conference has amended this bill by:

As affirmed by the record of votes of the managers of your Committee on Conference that is attached to this report, your Committee on Conference is in accord with the intent and purpose of H.B. No. 2786, H.D. 1, S.D. 2, as amended herein, and recommends that it pass Final Reading in the form attached hereto as H.B. No. 2786, H.D. 1, S.D. 2, C.D. 1.