§431:13-104  Favored producer or insurer;coercion of debtors.  (a)  No person may require as a condition precedentto the lending of money or extension of credit, or any renewal thereof, thatthe person to whom such money or credit is extended or whose obligation acreditor is to acquire or finance, negotiate any contract of insurance, orrenewal thereof, through a particular insurer or group of insurers or produceror group of producers.

(b)  No person who lends money or extendscredit may:

(1)  Solicit insurance, after a person indicatesinterest in securing a loan or credit extension, until such person has receiveda commitment in writing from the lender as to a loan or credit extension.  Therequirement for a commitment shall not apply in cases where the premium for therequired insurance is to be financed as part of the loan or extension of creditinvolving personal property transactions;

(2)  Unreasonably reject a contract of insurancefurnished by the borrower where insurance is required by the loan or credittransaction.  A rejection shall not be deemed unreasonable if it is based onreasonable standards, uniformly applied, relating to the extent of coveragerequired and the financial soundness and the services of an insurer.  Suchstandards shall not discriminate against any particular type of insurer, norshall such standards call for rejection of an insurance contract because thecontract contains coverage in addition to that required in the loan or credittransaction;

(3)  Require that any borrower, mortgagor, purchaser,insurer, or producer pay a separate charge, in connection with the handling ofany contract of insurance required by the loan or credit transaction, or pay aseparate charge to substitute the insurance policy of one insurer for that ofanother.  This paragraph does not include the interest which may be charged onpremium loans or premium advancements in accordance with the terms of the loanor credit document;

(4)  Use or disclose information relative to acontract of insurance which is required by, or supplied in response to, theloan or credit transaction, for the purpose of replacing the insurance orsoliciting insurance;

(5)  Require any procedures or conditions of dulylicensed producers or insurers not customarily required of those producers orinsurers affiliated or in any way connected with the person who lends money orextends credit.

(c)  Every person who lends money or extendscredit and who solicits insurance subject to subsection (b) must explain to theborrower in writing that the insurance related to such credit extension may bepurchased from an insurer or producer of the borrower's choice, subject only tothe lender's right to reject a given insurer or producer as provided insubsection (b)(2).  Compliance with disclosures as to insurance required bytruth-in-lending laws or comparable state laws shall be in compliance with thisparagraph.

(d)  The commissioner shall have the power toexamine and investigate those insurance related activities of any person whomthe commissioner believes may be in violation of this section.  Any affectedperson may submit to the commissioner a complaint or material pertinent to theenforcement of this section.

(e)  Nothing in this section shall prevent aperson who lends money or extends credit from placing insurance on real orpersonal property in the event the mortgagor, borrower, or purchaser has failedto provide required insurance in accordance with the terms of the loan orcredit document.

(f)  Nothing contained in this section shallapply to credit life or credit disability insurance.

(g)  Nothing in this section shall prevent aperson who lends money or extends credit from assisting a mortgagor, borrower,or purchaser in obtaining homeowners insurance where the borrower requests suchassistance in writing.  Nothing in this section shall prevent a person wholends money or extends credit from referring a mortgagor, borrower, orpurchaser to the Hawaii hurricane relief fund.

(h)  The commissioner shall adopt rules toprevent any bank, or subsidiary or affiliate thereof, which is engaged ininsurance activities, from draining assets to the detriment of the insuranceoperations; and shall also adopt rules to obtain diverted assets from the bank,subsidiary, or affiliate in the case of insolvency of the insurance operation.[L 1987, c 347, pt of §2; am L 1993, c 339, §6; am L 1996, c 225, §4; am L2001, c 216, §25; am L 2003, c 3, §14]

 

Cross References

 

  Hawaii hurricane relief fund, see chapter 431P.