SB3230

PART I

SECTION 1. Chapter 431, Hawaii Revised Statutes, is amended by adding a new part to article 14 to be appropriately designated and to read as follows:

"Part . Wildfire risk models

§431:14-A Applicability. (a) This part shall apply to any insurer that applies or uses a rate that is developed with, determined by, or relies upon, in whole or in part, a rating plan that segments, creates a rate differential, or surcharges the premium based upon a policyholder or applicant's wildfire risk.

(b) If a rate that is developed with, determined by, or relies upon a rating plan that complies with this part is approved, in whole or in part, and thereafter the rating plan is replaced, or modified in any manner, including the inclusion of new factors, or different criteria or algorithms, the insurer, prior to implementing the new or modified rating plan, shall file a new rate application, which shall include the new or modified rating plan. No new or modified rating plan shall be used unless and until the new rate application is approved.

§431:14-B Definitions. As used in this part:

"Building being evaluated" includes decks that are attached to or abutting the structure.

"Class-A fire rated roof" means a roof that has been tested in accordance with Underwriters' Laboratories Inc. standard 790 and achieved a class-A rating.

"Enclosed eaves" are roof eaves that have either boxed-in roof eave soffits with a horizontal underside or an exterior covering applied to the underside of the rafter tails supporting the eaves, which covering is sloped corresponding to the slope of the rafter tails.

"Firewise USA site in good standing" is a community that, at the time the building being evaluated is rated, is recognized as a Firewise USA site in good standing by the National Fire Protection Association.

"Wildfire risk model" means any tool, instrumentality, means, or product, including a map-based tool, a computer-based tool, or a simulation, that is used by an insurer, in whole or in part, to measure or assess the wildfire risk associated with a residential or commercial structure for purposes of:

(1) Classifying individual structures according to their wildfire risk; or

(2) Estimating losses corresponding to such wildfire risk classifications.

§431:14-C Wildfire risk models to be provided to the insurance commissioner; availability for public inspection. (a) Any wildfire risk model that is used, in whole or in part, in an insurer's rating plan shall be provided to the insurance commissioner as part of an insurer's complete rate application.

(b) Any risk model described in subsection (a) and any additional documentation requested by the insurance commissioner during the review of any applicable rate application, including any records, data, algorithms, computer programs, or any other information used in connection with the rating plan or wildfire risk model used by the insurer and provided to the insurance commissioner, shall be made available for public inspection, regardless of the source of the information or whether the insurer or the developer of the rating plan or wildfire risk model claims that the rating plan or wildfire risk model is confidential, proprietary, or a trade secret.

§431:14-D Rating plans; requirements. Any rating plan that is developed using a wildfire risk model, whether in whole or in part, shall reflect, and the rate offered to the applicant or insured shall be based in part on, the reduced wildfire risk:

(1) Associated with a community-level mitigation designation, including a Firewise USA site in good standing and any fire risk reduction communities identified by the insurance commission, that applies to the community in which the building being evaluated is located; and

(2) Resulting from each property-level wildfire risk mitigation effort that is undertaken with respect to an individual property being assessed for risk, including:

(A) Measures addressing the immediate surroundings of the building being evaluated, including:

(i) Clearing of vegetation and debris from under decks;

(ii) Clearing of vegetation, debris, mulch, stored combustible materials, and any movable combustible objects, from the area within five feet of the building being evaluated;

(iii) Incorporation of only noncombustible materials into that portion of any improvements to the property on which the building being evaluated is located, including fences and gates, that is situated within five feet of the building being evaluated;

(iv) Removal or absence of combustible structures, including sheds and other outbuildings, from the area within thirty feet of the building being evaluated or, if the applicant or insured does not control the entirety of the area extending thirty feet from the building being evaluated, removal of combustible structures from as much of the area as is under the control of the applicant or policyholder; and

(v) Whether the property upon which the building being evaluated is situated complies with any applicable state or federal laws or county ordinances governing defensible space; and

(B) Building hardening measures, including the provision of:

(i) A class-A fire rated roof;

(ii) Enclosed eaves;

(iii) Fire-resistant vents;

(iv) Multipane windows, including dual pane windows, or functional shutters, which when closed, cover the entire window and do not have openings; and

(v) At least six inches of noncombustible vertical clearance at the bottom of the exterior surface of the building, measured from the ground up.

§431:14-E Wildfire risk score or other wildfire risk classification. (a) Each insurer utilizing a wildfire risk model, or rating factor, to segment, create a rate differential, or surcharge the premium based upon the policyholder or applicant's wildfire risk shall:

(1) Within one hundred eighty days after the effective date of Act , Session Laws of Hawaii 2024, implement a written procedure to provide, in writing, to each applicable policyholder or applicant for property insurance the wildfire risk score or other wildfire risk classification used by the insurer to segment, create a rate differential, or surcharge the premium based upon the policyholder or applicant's wildfire risk; and

(2) Provide to the policyholder or applicant the wildfire risk score or classification at the following times:

(A) No later than fifteen days following the submission to the insurer of the applicant's completed application;

(B) At least forty-five days prior to each renewal;

(D) If the policyholder or applicant has completed a mitigation measure on the subject property since the time of the last application to or renewal by the insurer, no later than thirty days following the submission to the insurer of the policyholder or applicant's request that the insurer provide a revised wildfire risk score or wildfire risk classification.

(b) The procedure described in subsection (a) shall provide that a policyholder under, or applicant for, a policy of property insurance who disagrees with the assignment of the wildfire risk score, or other wildfire risk classification, provided to the policyholder or applicant pursuant to subsection (a):

(1) If the policyholder or applicant is not represented by a broker, or the insurer is not represented by an insurance agent with respect to the policyholder's policy or the applicant's application, the policyholder or applicant may appeal orally or in writing that assignment directly to the insurer; provided that the insurer shall notify the policyholder or applicant in writing of this right to appeal the wildfire risk score or other wildfire risk classification whenever the wildfire risk score or other wildfire risk classification is provided to the policyholder or applicant as set forth in subsection (a). If the policyholder or applicant appeals the wildfire risk score or other wildfire risk classification in accordance with this paragraph, the insurer shall:

(A) Acknowledge receipt of the appeal in writing within ten calendar days of receipt of the appeal; and

(B) Respond to the appeal in writing with a reconsideration and decision within thirty calendar days after receiving the appeal; or

(2) If the policyholder or applicant is represented by a broker, or the insurer is represented by an insurance agent with respect to the policyholder's policy or the applicant's application, the policyholder or applicant may appeal orally or in writing to the agent or broker the assignment of wildfire risk score or other wildfire risk classification, who shall then forward that appeal to the insurer no later than five calendar days after receiving the appeal from the policyholder or applicant. The insurer shall:

(A) Acknowledge receipt of the appeal in writing to the policyholder or applicant and the agent or broker no later than five calendar days after receipt of the appeal from the broker or agent; and

(B) Respond to the appeal to the policyholder or applicant and the agent or broker with a written reconsideration and decision of the appeal within thirty calendar days after receiving the appeal from the broker or agent.

If the appeal is denied, the insurer, upon request by the insurance division of the department of commerce and consumer affairs, shall forward a copy of the appeal, and the insurer's response, to the insurance division of the department of commerce and consumer affairs; provided that the insurer shall notify the policyholder or applicant in writing that the policyholder or applicant may contact the insurance division of the department of commerce and consumer affairs for assistance if the policyholder or applicant disagrees with the insurer's written reconsideration and decision.

§431:14-F Explanation of wildfire risk score or other wildfire risk classification. (a) If a wildfire risk score, or other wildfire risk classification used by the insurer to segment, create a risk differential, or surcharge the premium for a particular policyholder or applicant, is identified or provided to the policyholder or applicant pursuant to section 431:14-E, the insurer shall also provide in writing:

(1) The range of scores or classifications that may be assigned to any policyholder or applicant;

(2) The relative position of the score or classification assigned to the policyholder or applicant in question within that range of possible scores or classifications, and the impact of the score or classification on the rate or premium;

(3) A detailed written explanation of why the policyholder or applicant received the assigned score or classification; provided that the explanation shall make specific reference to the features of the property in question that influenced the assignment of the score or classification;

(4) Identification of the mitigation measure or measures that may be taken by the policyholder or applicant to lower the wildfire risk score or classification; and

(5) The amount of premium reduction under the insurer's rating plan that is in effect at the time that the policyholder or applicant would realize as a result of performing each mitigation measure identified under paragraph (4)."

PART II

SECTION 2. Section 431:14-101.5, Hawaii Revised Statutes, is amended by amending the definition of "prospective loss costs" to read as follows:

""Prospective loss costs" means that portion of a rate that does not include provisions for expenses (other than loss adjustment expenses) or profit, and are based on [~~historical aggregate losses~~] catastrophe modeling and loss adjustment expenses adjusted through development to their ultimate value and projected through trending to a future point in time."

SECTION 3. Section 431:14-103, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows:

"(a) Rates shall be made in accordance with the following provisions:

(1) Rates shall not be excessive, inadequate, or unfairly discriminatory.

(2) Due consideration shall be given to:

(A) [~~Past and prospective~~] Prospective loss experience within and outside this State; provided that if the claim does not exceed the selected deductible amount pursuant to section 386-100, and the employer reimburses the insurer for the amount, the claims shall not be calculated in the employer's experience rating or risk category;

(B) The conflagration and catastrophe hazards, if any;

(D) Dividends, savings, or unabsorbed premium deposits allowed or returned by insurers to their policyholders, members, or subscribers;

(E) Past and prospective expenses both country-wide and those specially applicable to this State;

(F) Investment income from unearned premium and loss reserve funds; and

(G) All other relevant factors within and outside this State.

(3) In the case of fire insurance rates, consideration shall be given to the experience of the fire insurance business during a period of not less than the most recent five-year period for which that experience is available.

(4) The systems of expense provisions included in the rates for use by any insurer or group of insurers may differ from those of other insurers or groups of insurers to reflect the requirements of the operating methods of any insurer or group with respect to any class of insurance, or with respect to any subdivision or combination thereof for which subdivision or combination separate expense provisions are applicable.

(5) Risks may be grouped by classifications for the establishment of rates and minimum premiums. Classification rates may be modified to produce rates for individual risks in accordance with rating plans that establish standards for measuring variations in hazards or expense provisions, or both. These standards may measure any differences among risks that can be demonstrated to have a probable effect upon losses or expenses. No risk classification may be based upon race, creed, national origin, or the religion of the insured.

(6) Manual, minimum, class rates, rating schedules, or rating plans shall be made and adopted, except in the case of:

(A) Special rates where manual, minimum, class rates, rating schedules, or rating plans are not applicable; and

(B) Specifically rated inland marine risks.

(7) No insurer authorized to do business in this State shall issue any policy that provides or makes available to any risks preferred rates based upon any grouping of persons, firms, or corporations by way of membership, license, franchise, contract, agreement, or any other means, other than common majority ownership of the risks, or except where:

(A) A common stock ownership in and management control of the risks are held by the same person, corporation, or firm;

(B) Permitted or authorized by filings in existence as of January 1, 1988, under the casualty rating law and the fire rating law, as these filings may be amended from time to time;

(C) Health care providers, as defined in section 671‑1 that could have joined the patients' compensation fund as it existed in chapter 671, part III, prior to May 31, 1984, joined together with one or more groups of related or unrelated health care providers;

(D) Permitted under article 12; or

(E) Otherwise expressly provided by law.

(8) No insurer shall base any rates on past loss experience within or outside this State."

PART III

SECTION 4. Chapter 431, Hawaii Revised Statutes, is amended by adding two new sections to article 10E to be appropriately designated and to read as follows:

"§431:10E- Claims for additional living expenses under homeowners insurance policies; states of emergency. (a) In the event of a loss under a homeowners insurance policy issued or renewed on or after January 1, 2025, for which the insured has made a claim for additional living expenses, the insurer shall provide the insured with a list of items that the insurer believes may be covered under the policy as additional living expenses. The list may include a statement that the list is not intended to include all items covered under the policy, but only those that are commonly claimed. Each insurer may use a list developed by the insurance commissioner.

(b) If a covered loss occurs during a state of emergency declared pursuant to section 127A-14, coverage for additional living expenses shall be for a period of not less than twenty‑four months from the inception of the loss; provided that the coverage for additional living expenses shall be subject to other policy provisions. An insurer shall grant an extension of up to twelve additional months, for a total of thirty-six months, if an insured acts in good faith and is reasonably delayed due to a lack of necessary construction materials or available contractors to perform the necessary work. Additional six-month extensions shall be provided to policyholders for good cause.

(c) No policy that provides coverage for additional living expenses shall limit the policyholder's right to recovery if the insured home is rendered uninhabitable by a covered peril. An insurer may, in lieu of making living expense payments, provide a reasonable alternative remedy that addresses the property condition that precludes reasonable habitation of the insured premises. The additional living expense coverage pursuant to this section shall not apply to any utility's public safety power shutdown event involving the deenergization of a portion of the electrical distribution or transmission system to reduce the risk of wildfire ignition.

(d) For a loss that is otherwise not subject to subsections (b) or (c), in the event of a state of emergency declared pursuant to section 127A-14 that is related to a covered peril and accompanied by an order of civil authority restricting access to the applicable home, additional living expenses coverage shall be provided for at least two weeks. Additional two-week extensions shall be provided to a policyholder for good cause; provided that each extension shall be subject to any other applicable policy provision.

§431:l0E- Replacement cost value; homeowners insurance policies. (a) Beginning on January 1, 2025, each newly issued or renewed homeowners insurance policy that covers a property within the State shall provide for the replacement cost value of the insured property.

(b) As used in this section, "replacement cost value" means the full insurable replacement cost of the insured property, including coverage for increased costs of construction due to inflation or building code requirements at the time the policy is issued and at each renewal date, less deductibles."

SECTION 5. Section 431:10E-102, Hawaii Revised Statutes, is amended by amending subsections (a) and (b) to read as follows:

"(a) Over-insurance shall be deemed to exist if property or an insurable interest in the property is insured by one or more insurance contracts against the same hazard in any amount in excess of the [~~actual cash~~] replacement cost value of the property or of such interest, as determined as of the effective date of the insurance or of any renewal thereof.

(b) For the purposes of this section [~~only, the term actual cash value means the cost of replacement less such depreciation as is properly applicable to the subject insured~~], "replacement cost value" means the full insurable replacement cost of the insured property, including coverage for increased costs of construction due to inflation or building code requirements at the time the policy is issued and at each renewal date, less deductibles."

PART IV

SECTION 6. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 7. This Act shall take effect upon its approval.

INTRODUCED BY:	_____________________________

THE SENATE	S.B. NO.	3230
THIRTY-SECOND LEGISLATURE, 2024
STATE OF HAWAII