Honorable Robert Bunda

President of the Senate

Twenty-Third State Legislature

Regular Session of 2005

State of Hawaii

Sir:

Your Committee on Commerce, Consumer Protection, and Housing, to which was referred H.B. No. 644, H.D. 1, entitled:

begs leave to report as follows:

The purpose of this measure is to authorize the placement of pooled insurance on construction projects without regard to total construction costs.

The Department of Commerce and Consumer Affairs testified in support of this measure. The Subcontractors Association of Hawaii opposed the measure.

Currently, insurers may only offer pooled insurance arrangements for construction projects with a minimum cost of $50,000,000. This limitation has precluded the developers of multi-million dollar projects costing under $50,000,000 from utilizing pooled insurance, which may be more economical and financially advantageous than traditional insurance arrangements. This measure repeals the monetary threshold.

Your Committee finds that expanding the authority for the use of pooled insurance may adversely impact subcontractors who may be required by a general contractor to obtain insurance under the pooled arrangement or to pay for a portion of the pooled insurance, notwithstanding that the subcontractor is required to pay for and maintain the subcontractor's own general insurance coverage on an annual basis. Additionally, there are concerns that the requirement to participate in a general contractor's pooled arrangement may weaken the membership of group insurance programs administered by and for subcontractors, resulting in higher premiums for group insurance members.

Your Committee believes that these unresolved issues merit further review and consideration. Accordingly, your Committee has amended this measure by inserting an effective date of July 1, 2050.

As affirmed by the record of votes of the members of your Committee on Commerce, Consumer Protection, and Housing that is attached to this report, your Committee is in accord with the intent and purpose of H.B. No. 644, H.D. 1, as amended herein, and recommends that it pass Second Reading in the form attached hereto as H.B. No. 644, H.D. 1, S.D. 1, and be placed on the calendar for Third Reading.