§386A-4  Number, appointment, term. (a)  The board shall be composed of five directors, whose term of office shallbe five years, and each director shall hold office until the appointment andqualification of the director's successor.

(b)  The terms of the first five directors, whoshall be appointed by the governor, upon the fund becoming operational asprovided in section 386A-12, shall expire as follows:

(1)  One for one year;

(2)  One for two years;

(3)  One for three years;

(4)  One for four years; and

(5)  One for five years.

Thereafter, each director shall be appointed for aterm of five years.

Upon the payment in full of the loan from theState and all interest thereon, the unexpired terms of the appointed directorsshall expire, and the fund's policyholders shall be entitled to elect all ofthe directors.  Any other law to the contrary notwithstanding, the selectionand composition of the board of directors as provided in this section shall bedeemed adequate to qualify the fund as a mutual insurer under chapter 431.

(c)  A vacancy on the board shall be filled byappointment of the governor in the case of vacancies in positions formerlyoccupied by the governor's appointee, or by election by the fund'spolicyholders in the case of positions formerly occupied by a director electedby the fund's policyholders.  The person appointed to fill a vacancy shallserve for the remainder of the term of the person's predecessor.

(d)  Each director shall receive necessarytravelling and board expenses incurred in the performance of duty as a directorand a fee of $100 for each day of actual attendance at board meetings, but notto exceed $500 a month.

(e)  Within one year after appointment, eachdirector shall be a policyholder or an employee of a policyholder of the fundand shall continue in such status during the director's term of office.

No person who has any interest as astockholder, employee, attorney, or contractor of a competing insurance carriershall be a director.

(f)  The board shall determine the content andsale of workers' compensation insurance policies.

(g)  The board shall discharge its duties:

(1)  In accordance with the fund's purpose;

(2)  With the care, skill, prudence, and diligenceunder the circumstances that a prudent director, acting in a like capacity andfamiliar with such matters would use in conducting a similar enterprise andpurpose;

(3)  By diversifying the fund's investments tominimize the risk of losses, unless it is prudent not to do so;

(4)  In accordance with governing legal documents;

(5)  By having an annual audit of the fund by anindependent certified public accountant and by making copies of such auditavailable to the governor and the state legislature;

(6)  By securing fidelity bonds for the directors andin its discretion for other agents dealing with the fund's assets at the fund'sexpense;

(7)  By purchasing liability insurance for errors andomissions for the board, each director, and any other fiduciary employed orcontracted by the fund to cover liability or losses caused by the act oromission of a fiduciary;

(8)  By maintaining proper books of accounts andrecords of the fund's administration;

(9)  By carrying out the reporting and disclosurerequirements required by law; and

(10)  By determining an actuarially responsibleschedule of premium rates with consideration of the fund's investment income orrefunds, or both, to policyholders.

(h)  Except as otherwise provided by law, thefund may:

(1)  Transact workers' compensation insurance policiesrequired or authorized by state law to the same extent as any other insurer.

(A)  The fund may insure Hawaii employersagainst their liability for compensation or damages for injury or death underthe United States Longshoremen's and Harbor Workers' Compensation Act or otherfederal or maritime laws like any other private insurer;

(B)  The fund may insure an out-of-stateemployer against its liability for damages under the State's law for bodilyinjury or death occurring within the State of Hawaii if the fund also soldworkers' compensation insurance to the employer as an in-state employer.

(2)  Allocate fiduciary responsibilities among thedirectors and designate other persons to carry out fiduciary responsibilities.

(3)  Collect, receive, hold, and disburse all moneypayable to or by the fund.

(4)  Deposit the fund's money in banks or depositoriesselected by the board.  Withdrawals from such banks or depositories shall bemade or authorized only upon the signatures of at least two persons approved bythe board.

(5)  Pay money from the fund to effectuate the fund'spurpose and administration, including costs incurred to establish the fund.

(6)  Employ persons to administer the fund, including,but not limited to, legal counsel, accountants, insurance consultants, administrators,actuaries, investment managers, adjustors, and any other expert and clericalemployees and pay compensation and expenses in connection therewith, withoutthe restrictions or requirements affecting public officers and employees undertitle 7.

(7)  By August 1, 1986, appoint an administrator,establish an administration office, and secure real and personal property tomaintain such office to administer the fund.

(8)  Provide for the fund's administration, jointly,with other similar funds or similar purposes, to reduce expenses ofadministration.

(9)  Select the department of budget and finance orother organization to serve as custodial trustee to collect, receive, hold, ordisburse money payable to or by the fund.

(10)  Invest the fund's principal and income withoutdistinction between principal and income and keep the fund's assets invested inreal or personal property or other securities.  The board may retain cashtemporarily awaiting investment or to meet contemplated payments without liabilityfor interest thereon.

The board may manage the fund's assets,except to the extent that such authority to manage the fund's assets isdelegated to other qualified investment managers.

The board may appoint investmentmanagers to manage, acquire, or dispose of any of the fund's assets.  Aninvestment manager may be designated as an "investment agent".

An investment manager is any fiduciary,who has been designated by the board to manage, acquire, or dispose of thefund's assets, a bank as defined by law, or an insurance company qualified toperform services under laws of more than one state.  Such investment managershall acknowledge in writing that it is a fiduciary under the fund.

The board may, but not by way oflimitation:

(A)  Sell the fund's securities.  No purchaserof the fund's securities is bound to see to the application of the purchasemoney or inquire as to the validity of such sale.

(B)  Vote in behalf of any stocks, bonds, orsecurities of any corporation or issuer held in the fund or request any actionto such corporation or issuer.  The board may give general or special proxiesor powers of attorney with or without powers of substitution.

(C)  Participate in reorganizations,recapitalizations, consolidations, mergers, and similar transactions forstocks, bonds, or other securities of any corporation which are held in thefund and may accept and retain any property received thereunder for the fund. The board may exercise any subscription rights and conversion privileges for thefund's stocks or securities.

(D)  Compromise, compound, and settle any debtor obligation due to or from the fund.  The board may reduce the amount ofprincipal and interest, damages, and costs of collection in settling suchdebts.

(E)  Cause securities held by it to beregistered in its own name or in the name of a nominee without indicating thatsuch securities are held in the fiduciary capacity and to hold any securitiesin bearer form.  The fund's records, however, shall show that such investmentsare part of the fund.

(F)  In order to expedite the purchase and saleof securities, the board may delegate their investment powers to investmentmanagers of the fund.  The purchase or sale of any securities by such managersshall be in the name selected by the board.  The authority of such managers topurchase or sell such securities for the fund shall be evidenced by writtenauthority executed by the fund's administrator.  The board shall require suchmanagers to keep them currently informed as to the nature and amount of theinvestments made for the fund by them.  The board may enter into appropriateagreements with such managers setting forth their investment powers andlimitations.  The board may terminate the services of such managers.  Suchmanagers shall be subject to the board's instructions.

(11)  Borrow money from any source and secure repaymentthereof by pledging any of the fund's assets.

(12)  Buy, sell, exchange, lease, convey, and otherwiseacquire or dispose of any real or personal property under proper terms and signand deliver any necessary instrument of conveyances or transfer, or both, inconnection therewith.

(13)  Enter into any agreement to carry out thischapter and to administer the fund.

(14)  Pay taxes or assessments assessed against thefund.

(15)  Require any employer or policyholder or anyemployee to furnish the board with such information necessary for the fund'sadministration.

(16)  Delegate its authority to the administrator orany authorized representative to maintain any legal proceedings necessary toprotect the fund or the directors or to secure payment due to the fund.  Inconnection therewith the board or the administrator or their representative maycompromise, settle, or release claims on behalf of or against the fund or theboard.

(17)  Promote safety programs to employer clients,including, but not limited to, the following activities:

(A)  Analysis of reports of industrialaccidents of employer clients to help determine the cause of these accidents;

(B)  Conduct of studies for the purpose of riskand hazard identification and assessment by safety and medical professionals;

(C)  Conduct of educational programs designedto prevent frequently recurring industrial accidents; and

(D)  Inspection of work sites and investigationof unsafe working conditions to promote job safety and elimination of hazards.

(18)  Provide the terms and conditions of an insurancepolicy.

(19)  Provide that any written instrument be executedfor the fund by the administrator or the administrator's agent.

(20)  Pay for reasonable expenses to educate thedirectors and fund personnel, including but not limited to travelling, room andboard, and tuition expenses. [L 1985, c 296, pt of §11; am L 1989, c 277, §§5,6]