ARTICLE 14



RATE
REGULATION



 



PART I. 
CASUALTY, SURETY, PROPERTY, MARINE AND



TRANSPORTATION
RATE REGULATION



 



Note



 



COMMERCIAL LIABILITY INSURANCE; TORT REFORM



 



  The following provisions on liability insurance are excerpts
from L Sp 1986, c 2, some provisions of which were scheduled for repeal on
October 1, 1995, by L 1993, c 238, §1.  L 1995, c 130 deleted this repeal date
thereby making the provisions permanent:



  "SECTION 1.  Legislative findings and purpose.  The
legislature finds and declares that a solution to the current crisis in
liability insurance has created an overpowering public necessity for a
comprehensive combination of reforms to both the tort system and the insurance
regulatory system.  It is the intent of this Act to alleviate the seriousness
of the current insurance crisis and to prevent the reoccurrence of such a
crisis.  The purpose of this Act is to ensure the widest possible availability
of liability insurance at reasonable rates, to ensure a stable market for
liability insurers, and to provide for means to adjust insurance premium rates
in the context of anticipated cost savings from tort reform legislation
affecting the affordability and availability of liability insurance. [L Sp
1986, c 2, §1]



  SECTION 2.  Definitions.  As used in sections 3 to 7 of this
Act, unless the context otherwise requires:



  1.  "Authorized
insurer" means insurers licensed to do business in the State.



  2.  "Commercial
liability insurance" means insurance written for businesses providing
protection for an insured against loss arising from injuries to other persons
or damage to their property.  It includes but is not limited to policies
providing coverage for errors and omissions, and professional malpractice.



  3.  "Rebate"
means an amount refunded to a policyholder by an insurer to reflect a return of
excess premiums with interest.



  4.  "Surcharge"
means an amount assessed by an insurer against a policyholder over and above
manual rates. [L Sp 1986, c 2, §§2 and 31; am L 1989, c 300, §2; am L 1991, c
62, §1; am L 1993, c 238, §1; am L 1995, c 130, §1]



  SECTION 3.  Rate reduction; relief.  (a)  The insurance
commissioner shall effect a moratorium and not approve any rate level increase
in commercial liability insurance during the period August 1, 1986, to
September 30, 1986.  Commencing October 1, 1986, all authorized insurers
transacting commercial liability insurance in this State shall implement a ten
per cent rate reduction from the rates currently on file with the insurance
commissioner for all policies containing commercial liability coverage, except
motor vehicle and medical malpractice policies, in effect on September 30,
1986, for each new and renewal policy and provide that the new rates will be in
effect and filed during the period October 1, 1986, to September 30, 1987. 
There shall be no exception to the requirements of this subsection, unless the
commissioner, pursuant to an insurer's petition, shall find that the use of the
rates required herein by an insurer will be inadequate to the extent that such
rates jeopardize the solvency of the insurer required to use such rates.



  (b)  Commencing on October 1, 1987, all authorized insurers
providing commercial liability insurance in this State shall implement a twelve
per cent rate reduction for all policies containing commercial liability
coverage, except motor vehicle and medical malpractice policies issued by
mutual or reciprocal insurers, from the rates in effect on September 30, 1987,
for each new and renewal policy, and provide that the new rates will be in effect
and filed during the period October 1, 1987, to September 30, 1988.



  (c)  Commencing on October 1, 1988, all authorized insurers
providing commercial liability insurance in this State shall implement a
fifteen per cent rate reduction for all policies containing commercial
liability coverage, except motor vehicle and medical malpractice policies
issued by mutual or reciprocal insurers, from the rates in effect on September
30, 1988, for each new and renewal policy, and provide that the new rates will be
in effect and filed during the period October 1, 1988, to September 30, 1989;
provided that for purposes of this section, a mutual or reciprocal insurer
shall include in any rate filing, information and data regarding the expected
impact of the tort reform implemented by sections 11 through 22 of Act 2, First
Special Session Laws of Hawaii, 1986.



  (d)  Except as otherwise provided in this Act, all rates for
commercial liability insurance shall comply with the provisions of the casualty
rating law contained in chapter 431, Hawaii Revised Statutes.  Any insurer
which contends that the rate provided for in subsection (b) or (c) is
inadequate shall state in its filing the rate it contends is appropriate and
shall state with specificity the factors or data which it contends should be
considered in order to produce such appropriate rate.  The insurer shall be
permitted to use all of the generally accepted actuarial techniques in making
any filing pursuant to this subsection.  It shall be the insurer's or rating
organization's burden to actuarially justify any rate increase from the reduced
rates provided for in subsection (b) or (c).  The insurer or rating
organization shall include in the filing the expected impact of the tort reform
implemented by Sections 11 to 22 of this Act on losses, expenses and rates.  In
making this filing as provided for by this subsection, the insurer or rating
organization shall comply with the following provisions:



  (1) Any rate
filing contending that the rates established in subsections (b) or (c) is
inadequate shall be filed ninety days prior to October 1, 1987, or October 1,
1988.



  (2) The
insurance commissioner shall review and approve or disapprove the rate filing
thirty days prior to October 1, 1987, or with respect to filings submitted
pursuant to subsection (c) thirty days prior to October 1, 1988.  A filing
shall be deemed to meet the requirements of the casualty rating law unless
disapproved by the commissioner within the 60-day waiting period.  All filings
submitted under this Act shall be deemed public records.



  (3) In the
event the filing is approved under subsection (d)(2), a contested case hearing
in accordance with the provisions of chapter 91, Hawaii Revised Statutes, may
be convened.  Notwithstanding the provisions of section 431-61, Hawaii Revised
Statutes, a petition and demand for hearing shall not stay the implementation
of the rate approved by the commissioner or the rates in effect as of September
30, 1986, whichever is higher.  A final order of the commissioner may be
appealed in accordance with the provisions of section 431-69, Hawaii Revised
Statutes.



  (4) In the
event a filing is disapproved in whole or in part, a petition and demand for a
contested case hearing may be filed in accordance with chapter 91, Hawaii
Revised Statutes.  The insurer or rating organization shall have the burden of
proving that the disapproval is not justified.  While the action of the
commissioner in disapproving the rate filing is being challenged, the aggrieved
insurer shall be entitled to charge the rates established as of September 30,
1986 or the filed rates, whichever is lower.



  (5) With
respect to any approval or disapproval by the commissioner regarding any rate
filing focusing upon the October 1, 1988, reduction, the aggrieved insurer
shall be entitled to charge the rates established as of September 30, 1988,
while the action of the commissioner is being challenged and contested.



  (6) Upon final
disposition, pursuant to chapter 91, Hawaii Revised Statutes, or by a court of
competent jurisdiction of the insurance commissioner's approval or disapproval
of the rates, the insurance commissioner shall immediately determine and order
that the insurer make the appropriate rebates of premiums to policyholders or
allow the insurer to exact a surcharge on premiums.



  (e)  The insurance commissioner shall publish a notice of
every filing submitted by insurers pursuant to this section in a newspaper of
general circulation in the State. [L Sp 1986, c 2, §§3 and 31; am L 1987, c
231, §1; am L 1989, c 300, §2; am L 1991, c 62, §1; am L 1993, c 238, §1; am L
1995, c 130, §1]



  SECTION 4.  Excessive rates; rebate or credit.  In reviewing
the information gathered from the closed case reports provided for under
Section 26 of this Act, and from any other relevant information, if there is
reason to believe that the rates are excessive, the insurance commissioner
shall request a hearing to determine the adequate rate.  If as a result of the
hearing it is determined that insurers are charging excessive rates, the
insurance commissioner shall issue an order specifying that a new rate or
schedule be filed by the insurer or rating organization which responds to the
findings made through the hearing.  The insurance commissioner shall further
order that premiums charged each policyholder constituting the portion of the
rate above that which is actuarially justified be returned to such policyholder
in the form of a rebate or credit. [L Sp 1986, c 2, §§4 and 31; am L 1989, c
300, §2; am L 1991, c 62, §1; am L 1993, c 238, §1; am L 1995, c 130, §1]



  SECTION 5.  Cancellation of policy; prohibition.  No policies
to which the reductions on insurance rate apply shall be canceled by the
insurer prior to the expiration of the agreed term or one year from the
effective date of the policy or renewal, whichever is less, except under the
following grounds:



  (1) Failure to
pay a premium when due;



  (2) Fraud or
material misrepresentation;



  (3) Risk
hazard increases substantially and the insurer could not have reasonably
foreseen the change when entering into the contract;



  (4) Substantial
breaches of contractual duties, conditions, or warranties;



  (5) Violation
of any local fire, health, or safety statute or ordinance;



  (6) Conviction
of the named insured for a crime having as one of its necessary elements, an
act increasing any hazard that is insured against;



  (7) The
insurance commissioner determines that the continuation of the policy places
the insurer in violation of chapter 431, Hawaii Revised Statutes;



  (8) For any
good faith reason with the approval of the insurance commissioner. [L Sp 1986,
c 2, §§5 and 31; am L 1989, c 300, §2; am L 1991, c 62, §1; am L 1993, c 238,
§1; am L 1995, c 130, §1]



  SECTION 6.  Cancellation of policies; effective date.  In the
event there is cancellation pursuant to sections 5 and 7 of this Act, such
cancellation will be effective thirty days after the insurer delivers written
notice of the cancellation to the policyholder. [L Sp 1986, c 2, §§6 and 31; am
L 1989, c 300, §2; am L 1991, c 62, §1; am L 1993, c 238, §1; am L 1995, c 130,
§1]



  SECTION 7.  Nonrenewal of policies; notice.  An insurer may
refuse to renew a commercial liability policy if notice to the policyholder of
the reasons for nonrenewal are provided to the insured forty-five days prior to
the intended nonrenewal date.  A commercial liability insurance policy, once
issued shall not be cancelled or refused renewal by an insurer based upon the
mandatory rate reductions as required by this Act." [L Sp 1986, c 2, §§7
and 31; am L 1989, c 300, §2; am L 1991, c 62, §1; am L 1993, c 238, §1; am L
1995, c 130, §1]



 



§431:14-101  Purpose.  The purpose of
this article is to promote the public welfare by regulating insurance rates to
the end that they shall not be excessive, inadequate, or unfairly
discriminatory, and to authorize and regulate cooperative action among insurers
in ratemaking and ratemaking related activities and in other matters within the
scope of this article.  Nothing in this part is intended to:



(1)  Prohibit or discourage reasonable competition; or



(2)  Prohibit or encourage except to the extent
necessary to accomplish the aforementioned purposes, uniformity in insurance
rates, rating systems, rating plans, or practices.



This article shall be liberally interpreted to carry
into effect the provisions of this section. [L 1987, c 347, pt of §2; am L
1990, c 255, §6]