Honorable Robert Bunda

President of the Senate

Twenty-Second State Legislature

Regular Session of 2004

State of Hawaii

Sir:

Your Committee on Judiciary and Hawaiian Affairs, to which was referred H.B. No. 2786, H.D. 1, S.D. 1, entitled:

begs leave to report as follows:

The purpose of this measure is to establish the right for a beneficiary or policyholder to collect attorney's fees and costs if an arbitrator, arbitration panel, or the commissioner enforces coverage under an insurance policy.

Prior to holding a public hearing on this measure, a proposed S.D. 2 was prepared and made available for public review that added a Part II to this measure. The contents of the new part extend the effective date of the Uniform Arbitration Act from June 30, 2004 to June 30, 2005.

Testimony in support of this measure was submitted by the Department of Commerce and Consumer Affairs, Insurance Division; Hawaii Commission on Uniform State Laws; Consumer Lawyers of Hawaii; and the Ad Hoc RUAA Group. Comments were submitted by State Farm.

Your Committee finds that arbitration offers a more efficient and less costly alternative to litigation to resolve liability disputes between policyholders and their insurers, and should be encouraged. Your Committee further finds that current law contains a disincentive to resolve disputes through arbitration because policyholders are entitled to an award of attorney's fees and costs if they succeed in obtaining benefits in a lawsuit, but not if the same determination is made in arbitration. This measure corrects this inequity by allowing the policyholder an award of attorney's fees and costs in arbitration actions.

Your Committee also finds that delaying the effective date of the Uniform Arbitration Act will allow for thoughtful and thorough discussion of the many procedures and provisions included in the Act.

Your Committee adopted the amendments in the proposed S.D. 2, and made technical, nonsubstantive amendments.

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