HB1178

SECTION 1. Chapter 287, Hawaii Revised Statutes, is amended by adding a new part to be appropriately designated and to read as follows:

"PART . UNINSURED MOTORIST INSURANCE SPECIAL

AND REVOLVING FUND PROGRAM

A. General Provisions

§287-A Uninsured motorist insurance state fund program established; special revolving account. (a) There is established within the department of budget and finance the uninsured motorist insurance state fund program, hereinafter referred to as "the fund." The fund shall be under the control of the director of finance. The purpose of the fund is to collect enough moneys received as uninsured motorist insurance taxes, invest and manage them, and make premium payments on the exclusive contracts with the uninsured motorist insurers for the several counties.

(b) Moneys for the operation of the uninsured motorist insurance system shall be from the uninsured motorist insurance taxes imposed under section 243-4 which shall be deposited into a special revolving account in the state treasury to be administered by the director. Expenditures from the account shall be used for the operation of the uninsured motorist insurance mechanism authorized under this part.

(1) Acting as the head of the purchasing agency for procurement of an exclusive contract with an insurer to provide uninsured motorist insurance to each county of the State;

(2) Gathering actuarially relevant data from other state and county agencies to determine a contract price and other material items in accepting bids from insurers, to develop and maintain adequate amounts of motor vehicle taxes to be charged under chapter 243;

(3) Collecting, receiving, holding, and disbursing all moneys payable to or by the fund;

(4) Receiving moneys as set forth in section 243-4 and disbursing funds as premium payments to insurers as required under this part;

(5) Investing the fund's assets as authorized by law;

(6) Using income on investment reserves or profits to reduce amounts needed from the uninsured motorist insurance taxes imposed under section 243-4 as long as the fund has reserves deemed sufficient in accordance with sound actuarial practices to provide the uninsured motorist insurance benefits required under this part;

(7) Hiring or contracting for the services of attorneys, insurance consultants, actuaries, health consultants, motor vehicle repair consultants, certified public accountants, insurance adjusters, investment advisers, and other technical services;

(8) Hiring an administrator to function as the fund's chief executive officer, and other necessary administrative, technical, and professional employees who shall be exempt from chapter 76;

(9) Conducting claims, studies, and other research necessary to ensure the viability of the uninsured motorist insurance mechanism created under this part; and

(10) Proposing recommendations to the governor and the legislature on the amount of vehicle insurance taxes required to safely maintain the vehicle insurance system contemplated under this part.

(d) The uninsured motorist insurance premium payment mechanism created under this part shall provide for the uninsured motorist coverage required under section 431:10C‑301(b)(3).

(e) Only persons insured under a motor vehicle insurance policy shall be entitled to receive uninsured motorist benefits through the mechanism created under this part. No person who is not insured under a motor vehicle insurance policy shall be entitled to receive uninsured motorist benefits under the mechanism created under this part.

B. Exclusive Insurer Contracts

§287-B Competitive bids for exclusive uninsured motorist insurance coverage. Uninsured motorist insurance coverage for policy terms beginning on September 1, 2008, shall be provided exclusively in each county by one insurer that has been awarded the contract for providing uninsured motorist insurance policies on all vehicles registered in that county. Contracts shall be awarded as contracts for professional services under chapter 103D. This section shall not preclude an insurer from being awarded the contracts for all four counties. The contract shall be for a term of three years and shall require the insurer to provide uninsured motorist insurance coverage at the premium rate schedules previously submitted in the bid proposal. The contract shall stipulate that the insurer shall be liable beyond the contract period for the processing and payment of all claims arising from an accident which occurred during the contract period.

§287-C Insureds under the exclusive policies. The director of finance shall annually provide the names of registered owners, vehicle type, registration numbers and other relevant information to the contract insurers for persons submitting payment of the state registration fees and the driver's license application and renewal fees. This information shall be used by the contract insurers to determine the number and identity of the insureds under the contracts.

§287-D Rate adjustments during contract period. Notwithstanding the rate-making procedures for motor vehicle insurance rates under article 14 of chapter 431, a contract insurer shall not make any changes to the rate schedules unless the insurer submits evidence to the director of finance that its solvency is in imminent danger. No rate change shall become effective without the prior approval of the director of finance. The director of finance, in considering the necessity and reasonableness of any rate change request, shall request that the insurer furnish all financial, claims records, and other data to justify any rate change.

§287-E Monitoring of contract insurer; investigation of complaints; examinations. (a) The director of finance shall closely monitor the operations of a contract insurer to ensure that the processing of claims is expeditious and that the terms of the contract are being met. In carrying out its monitoring responsibilities, the director of finance shall conduct annual examinations of a contract insurer's affairs, transactions, accounts, records, documents, and assets.

(b) The director of finance shall investigate any complaint filed against a contract insurer by the public. If the director of finance finds that the contract insurer erred, the director of finance shall order the contract insurer to correct the error or subject the contract insurer to an appropriate penalty as authorized under this subpart. If, in the opinion of the director of finance, a contract insurer's complaints record is unacceptable, the insurer may be disqualified from bidding for the next contract term. The director of finance shall adopt rules establishing specific criteria and procedures for disqualification.

(c) After the completion of the annual examination, the director of finance shall evaluate a contract insurer's performance. The director of finance shall include in its evaluation specific areas that require improvement and performance expectations for the ensuing year.

(d) The director of finance shall report annually to the legislature prior to the convening of each legislative session on the status of the uninsured motorist insurance system as operated by the contract insurers. The report shall be organized by county and include, but not be limited to, the number of insureds, claims data, complaints filed and their disposition, the director of finance's examination findings, the insurance commissioner's evaluation of the contract insurer, and recommendations for legislative action."

SECTION 2. Section 243-4, Hawaii Revised Statutes, is amended by amending subsections (a) and (b) to read as follows:

"(a) Every distributor [~~shall~~], in addition to any other taxes provided by law, shall pay a license tax to the department of taxation for each gallon of liquid fuel refined, manufactured, produced, or compounded by the distributor and sold or used by the distributor in the State or imported by the distributor, or acquired by the distributor from persons who are not licensed distributors, and sold or used by the distributor in the State. Any person who sells or uses any liquid fuel knowing that the distributor from whom it was originally purchased has not paid and is not paying the tax thereon shall pay such tax as would have applied to such sale or use by the distributor. The rates of tax hereby imposed are as follows:

(1) For each gallon of diesel oil, 1 cent;

(2) For each gallon of gasoline or other aviation fuel sold for use in or used for airplanes, 1 cent;

(3) For each gallon of liquid fuel other than fuel mentioned in paragraphs (1) and (2), and other than an alternative fuel, sold or used in the city and county of Honolulu, or sold in any county for ultimate use in the city and county of Honolulu, 16 cents state tax, 9 cents uninsured motorist insurance tax, and in addition thereto such amount, to be known as the "city and county of Honolulu fuel tax", as shall be levied pursuant to section 243-5;

(4) For each gallon of liquid fuel other than fuel mentioned in paragraphs (1) and (2), and other than an alternative fuel, sold or used in the county of Hawaii, or sold in any county for ultimate use in the county of Hawaii, 16 cents state tax, 9 cents uninsured motorist insurance tax, and in addition thereto such amount, to be known as the "county of Hawaii fuel tax", as shall be levied pursuant to section 243-5;

(5) For each gallon of liquid fuel other than fuel mentioned in paragraphs (1) and (2), and other than an alternative fuel, sold or used in the county of Maui, or sold in any county for ultimate use in the county of Maui, 16 cents state tax, 9 cents uninsured motorist insurance tax, and in addition thereto such amount, to be known as the "county of Maui fuel tax", as shall be levied pursuant to section 243-5; and

(6) For each gallon of liquid fuel other than fuel mentioned in paragraphs (1) and (2), and other than an alternative fuel, sold or used in the county of Kauai, or sold in any county for ultimate use in the county of Kauai, 16 cents state tax, 9 cents uninsured motorist insurance tax, and in addition thereto such amount, to be known as the "county of Kauai fuel tax", as shall be levied pursuant to section 243-5.

If it is shown to the satisfaction of the department, based upon proper records and from such other evidence as the department may require, that liquid fuel other than fuel mentioned in paragraphs (1) and (2) is used for agricultural equipment that does not operate upon the public highways of the State, the user thereof may obtain a refund of all taxes thereon imposed by this section in excess of 1 cent per gallon. The department shall adopt rules to administer such refunds.

(b) Every distributor of diesel oil, in addition to the tax required by subsection (a), shall pay a license tax to the department for each gallon of such diesel oil sold or used by the distributor for operating a motor vehicle or motor vehicles upon public highways of the State. The rates of the additional tax hereby imposed are as follows:

(1) For each gallon of diesel oil sold or used in the city and county of Honolulu, or sold in any other county for ultimate use in the city and county of Honolulu, 15 cents state tax, 9 cents uninsured motorist insurance tax, and in addition thereto such amount, to be known as the "city and county of Honolulu fuel tax", as shall be levied pursuant to section 243-5;

(2) For each gallon of diesel oil sold or used in the county of Hawaii, or sold in any other county for ultimate use in the county of Hawaii, 15 cents state tax, 9 cents uninsured motorist insurance tax, and in addition thereto such amount, to be known as the "county of Hawaii fuel tax", as shall be levied pursuant to section 243-5;

(3) For each gallon of diesel oil sold or used in the county of Maui, or sold in any other county for ultimate use in the county of Maui, 15 cents state tax, 9 cents uninsured motorist insurance tax, and in addition thereto such amount, to be known as the "county of Maui fuel tax", as shall be levied pursuant to section 243-5; and

(4) For each gallon of diesel oil sold or used in the county of Kauai, or sold in any other county for ultimate use in the county of Kauai, 15 cents state tax, 9 cents uninsured motorist insurance tax, and in addition thereto such amount, to be known as the "county of Kauai fuel tax", as shall be levied pursuant to section 243-5.

If any user of diesel oil furnishes a certificate, in such form as the department shall prescribe, to the distributor, or the distributor who uses diesel oil signs such certificate, certifying that the diesel oil is for use in operating a motor vehicle or motor vehicles in areas other than upon the public highways of the State, the tax as provided in paragraphs (1) to (4) shall not [~~be applicable.~~] apply. In the event a certificate is not or cannot be furnished and the diesel oil is in fact for use for operating a motor vehicle or motor vehicles in areas other than upon public highways of the State, the user thereof may obtain a refund of all taxes thereon imposed by the foregoing paragraphs. The department shall adopt rules to administer the refunding of such taxes."

SECTION 3. Section 243-6, Hawaii Revised Statutes, is amended to read as follows:

"§243-6 Fuel taxes, dispositions. (a) All fuel taxes under this chapter, except for the uninsured motorist insurance tax, shall be disposed as follows:

(1) The "city and county of Honolulu fuel tax" shall be paid by the department of taxation into the state treasury, and shall, by the state director of finance, be paid over to the director of finance of the city and county of Honolulu for deposit into the fund known as the "highway fund" created by section 249-18[.];

(2) The "county of Kauai fuel tax" shall be paid by the department into the state treasury, and shall, by the state director of finance, be paid over to the director of finance of the county of Kauai for deposit into the fund known as the "highway fund" created by section 249-18[.];

(3) The "county of Hawaii fuel tax" shall be paid by the department into the state treasury, and shall, by the state director of finance, be paid over to the director of finance of the county of Hawaii for deposit into the fund known as the "highway fund" created by section 249-18[.]; and

(4) The "county of Maui fuel tax" collected on account of liquid fuel sold or used on the island of Lanai or sold elsewhere for ultimate use on the island of Lanai, shall be paid by the department into the state treasury, and shall, by the state director of finance, be paid over to the director of finance of the county of Maui for deposit into the fund known as the "highway fund" created by section 249-18, for expenditure on the island of Lanai. The "county of Maui fuel tax" collected on account of liquid fuel sold or used on the island of Molokai or sold elsewhere for ultimate use on the island of Molokai, shall be paid by the department into the state treasury, and shall, by the state director of finance, be paid over to the director of finance of the county of Maui for deposit into the fund known as the "highway fund" created by section 249-18, for expenditure on the island of Molokai. The remainder of the "county of Maui fuel tax" shall be paid by the department into the state treasury, and shall, by the state director of finance, be paid over to the director of finance of the county of Maui for deposit into the fund known as the "highway fund" created by section 249-18.

(b) Each of the foregoing taxes shall be expended for the following purposes, for the island for which the tax revenue is specially indicated, or, if none, for the county for which the tax revenue is indicated:

(1) For payment of interest on and redemption of any bonds duly issued or sold on or after July 1, 1951, under chapter 47 for the financing or aiding in financing the construction of county highway tunnels, approach roads thereto, and highways. Such payments of interest and principal on the bonds when due, shall be first charges on such moneys so deposited in the fund[.];

(2) For acquisition, designing, construction, reconstruction, improvement, repair, and maintenance of county main and general thoroughfares, highways, and other streets, street lights, storm drains, and bridges, including costs of new land therefor, when expenditures for the foregoing purposes cannot be financed under state-federal aid projects[.];

(3) In the case of the city and county of Honolulu, for payment of the city and county's share in an improvement district initiated by the city and county for an improvement listed in paragraph (2) [~~above~~] which is permitted to be constructed in the city and county[.];

(4) For the construction of county highway tunnels, overpasses, underpasses, and bridges, where such improvement cannot be made under state-federal aid projects[.];

(5) For purposes and functions connected with county traffic control and preservation of safety upon the public highways and streets[.];

(6) For purposes and functions in connection with mass transit[.];

(7) For acquisition, design, construction, improvement, repair, and maintenance of bikeways[.]; and

(8) No expenditure shall be made, out of the revenues paid into any such fund, [~~which~~] that will jeopardize federal aid for highway construction.

(c) All revenues derived from the uninsured motorist insurance tax imposed under section 243‑4 shall be paid by the department of taxation into the state treasury, and shall, by the director, be deposited into the uninsured motorist insurance special revolving account created under section 287-A."

SECTION 4. The selection of a contract insurer as provided in this Act shall be for the policy year beginning September 1, 2009. During the interim period from the effective date of this Act until September 1, 2009, all motor vehicle insurance policies issued by insurers authorized to do business in this State shall remain in force and effect under the motor vehicle insurance law in existence as of the day before the effective date of this Act. The uninsured motorist insurance state fund program shall develop an implementation plan which provides for the smooth transition from the current system of insurance to the new system created under this Act and adopt necessary rules for the bidding procedure to commence on a timely basis so that a contract is awarded before September 1, 2009. The director of finance shall submit a report to the legislature prior to the convening of the 2008 regular session on the progress of implementing the new system created by this Act and shall make appropriate recommendations for further changes to the law.

SECTION 5. Upon the effective date of this Act, the insurance commissioner shall assist the director of finance in developing and implementing a plan to ease the transition between the current no‑fault insurance system and the State fund program. Prior to the convening of the 2008 regular session, the director of finance shall submit the transition plan to the legislature which shall include recommendations for any further amendments to the insurance code and other laws that are necessary to effectuate this Act effectively.

SECTION 6. There is appropriated out of the general revenues of the State of Hawai'i, the sum of $ , or so much thereof as may be necessary for fiscal year 2007‑2008, and the same sum, or so much thereof as may be necessary for fiscal year 2008‑2009, to the uninsured motorist insurance state fund to pay for start‑up costs, including the hiring of necessary staff; provided that this appropriation shall be in the form of a loan which shall be repaid to the general fund by June 30, 2012.

The sums appropriated shall be expended by the uninsured motorist insurance state fund for the purpose of this Act.

SECTION 7. This Act does not affect rights and duties that matured, penalties that were incurred, and proceedings that were begun before its effective date.

SECTION 8. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 9. This Act shall take effect on January 1, 2008.

INTRODUCED BY:	_____________________________

HOUSE OF REPRESENTATIVES	H.B. NO.	1178
TWENTY-FOURTH LEGISLATURE, 2007
STATE OF HAWAII