STAND. COM. REP. NO.  691

Honolulu, Hawaii

                , 2011

RE:   H.B. No. 924

      H.D. 2

Honorable Calvin K.Y. Say

Speaker, House of Representatives

Twenty-Sixth State Legislature

Regular Session of 2011

State of Hawaii

Sir:

     Your Committees on Consumer Protection & Commerce and Judiciary, to which was referred H.B. No. 924, H.D. 1, entitled:

"A BILL FOR AN ACT RELATING TO INSURANCE,"

beg leave to report as follows:

     The purpose of this bill is to clarify the interpretation of commercial liability insurance policies affecting construction professionals.

     Wailea MF-9 Associates, LLC; Koga Engineering & Construction, Inc.; the Building Industry Association of Hawaii; Royal Contracting, Co.; the Painting and Decorating Contractors Association of Hawaii; Albert C. Kobayashi, Inc.; Ralph S. Inouye Co., Ltd.; Constructors Hawaii Inc.; Alan Shintani, Inc.; Nan, Inc.; Hawaiian Dredging Construction Company; the General Contractors Association; Pacific Resource Partnership; Lindemann Construction Inc.; Morris Kozai Landscapes, LLC.; Clay Chapman Iwamura Pulice & Nervell; Choice Fence; Air Central Inc.; Kalu Glass Co., Inc.; SteelTech, Inc.; Royal Contracting Co., Ltd.; Rons Construction Corporation; S & M Sakamoto, Inc.; and Robert M. Kaya Builders, Inc., supported this measure.  First Insurance Company, Sand Insurance; Hawaii Insurers Council; and the Property Casualty Insurers Association of America opposed this bill.  The Department of Commerce and Consumer Affairs presented concerns.  A concerned individual presented comments.

     Your Committees amended this bill by:

(1) Clarifying the purpose section to explain the purpose and intent of the measure as amended;

(2) Removing the provisions concerning the duty to defend for construction defect claims;

(3) Inserting definitions of "contractor" and "licensed contractor" and substituting the term "commercial general liability insurance" for "liability insurance policy" and amending its definition;

(4) Amending the new section to avoid possible conflicts with section 431:1-209(1), (13), or (15);

(5) Limiting the new section to licensed contractors only;

(6) Clarifying the interpretation of a liability insurance policy to address the issues in the Group Builders case;

(7) Clarifying that the new section shall not be construed to cover additional contractual obligations;

(8) Clarifying that any provision in a policy that is in violation of this section is void but shall not effect the rest of the coverage in the policy;

(9) Placing the new section in Part II of Article I of the Insurance Code; and

(10) Making technical, nonsubstantive amendments for clarity, consistency, and style.

     As affirmed by the records of votes of the members of your Committees on Consumer Protection & Commerce and Judiciary that are attached to this report, your Committees are in accord with the intent and purpose of H.B. No. 924, H.D. 1, as amended herein, and recommend that it pass Third Reading in the form attached hereto as H.B. No. 924, H.D. 2.

Respectfully submitted on behalf of the members of the Committees on Consumer Protection & Commerce and Judiciary,

____________________________ GILBERT KEITH-AGARAN, Chair

____________________________ ROBERT N. HERKES, Chair