ARTICLE 14

RATEREGULATION

 

PART I. CASUALTY, SURETY, PROPERTY, MARINE AND

TRANSPORTATIONRATE REGULATION

 

Note

 

COMMERCIAL LIABILITY INSURANCE; TORT REFORM

 

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

  "SECTION 1.  Legislative findings and purpose.  Thelegislature finds and declares that a solution to the current crisis inliability insurance has created an overpowering public necessity for acomprehensive combination of reforms to both the tort system and the insuranceregulatory system.  It is the intent of this Act to alleviate the seriousnessof the current insurance crisis and to prevent the reoccurrence of such acrisis.  The purpose of this Act is to ensure the widest possible availabilityof liability insurance at reasonable rates, to ensure a stable market forliability insurers, and to provide for means to adjust insurance premium ratesin the context of anticipated cost savings from tort reform legislationaffecting the affordability and availability of liability insurance. [L Sp1986, c 2, §1]

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

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

  2.  "Commercialliability insurance" means insurance written for businesses providingprotection for an insured against loss arising from injuries to other personsor damage to their property.  It includes but is not limited to policiesproviding coverage for errors and omissions, and professional malpractice.

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

  4.  "Surcharge"means an amount assessed by an insurer against a policyholder over and abovemanual rates. [L Sp 1986, c 2, §§2 and 31; am L 1989, c 300, §2; am L 1991, c62, §1; am L 1993, c 238, §1; am L 1995, c 130, §1]

  SECTION 3.  Rate reduction; relief.  (a)  The insurancecommissioner shall effect a moratorium and not approve any rate level increasein commercial liability insurance during the period August 1, 1986, toSeptember 30, 1986.  Commencing October 1, 1986, all authorized insurerstransacting commercial liability insurance in this State shall implement a tenper cent rate reduction from the rates currently on file with the insurancecommissioner for all policies containing commercial liability coverage, exceptmotor 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 ineffect and filed during the period October 1, 1986, to September 30, 1987. There shall be no exception to the requirements of this subsection, unless thecommissioner, pursuant to an insurer's petition, shall find that the use of therates required herein by an insurer will be inadequate to the extent that suchrates jeopardize the solvency of the insurer required to use such rates.

  (b)  Commencing on October 1, 1987, all authorized insurersproviding commercial liability insurance in this State shall implement a twelveper cent rate reduction for all policies containing commercial liabilitycoverage, except motor vehicle and medical malpractice policies issued bymutual 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 effectand filed during the period October 1, 1987, to September 30, 1988.

  (c)  Commencing on October 1, 1988, all authorized insurersproviding commercial liability insurance in this State shall implement afifteen per cent rate reduction for all policies containing commercialliability coverage, except motor vehicle and medical malpractice policiesissued by mutual or reciprocal insurers, from the rates in effect on September30, 1988, for each new and renewal policy, and provide that the new rates will bein effect and filed during the period October 1, 1988, to September 30, 1989;provided that for purposes of this section, a mutual or reciprocal insurershall include in any rate filing, information and data regarding the expectedimpact of the tort reform implemented by sections 11 through 22 of Act 2, FirstSpecial Session Laws of Hawaii, 1986.

  (d)  Except as otherwise provided in this Act, all rates forcommercial liability insurance shall comply with the provisions of the casualtyrating law contained in chapter 431, Hawaii Revised Statutes.  Any insurerwhich contends that the rate provided for in subsection (b) or (c) isinadequate shall state in its filing the rate it contends is appropriate andshall state with specificity the factors or data which it contends should beconsidered in order to produce such appropriate rate.  The insurer shall bepermitted to use all of the generally accepted actuarial techniques in makingany filing pursuant to this subsection.  It shall be the insurer's or ratingorganization's burden to actuarially justify any rate increase from the reducedrates provided for in subsection (b) or (c).  The insurer or ratingorganization shall include in the filing the expected impact of the tort reformimplemented by Sections 11 to 22 of this Act on losses, expenses and rates.  Inmaking this filing as provided for by this subsection, the insurer or ratingorganization shall comply with the following provisions:

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

  (2) Theinsurance commissioner shall review and approve or disapprove the rate filingthirty days prior to October 1, 1987, or with respect to filings submittedpursuant to subsection (c) thirty days prior to October 1, 1988.  A filingshall be deemed to meet the requirements of the casualty rating law unlessdisapproved by the commissioner within the 60-day waiting period.  All filingssubmitted under this Act shall be deemed public records.

  (3) In theevent the filing is approved under subsection (d)(2), a contested case hearingin accordance with the provisions of chapter 91, Hawaii Revised Statutes, maybe convened.  Notwithstanding the provisions of section 431-61, Hawaii RevisedStatutes, a petition and demand for hearing shall not stay the implementationof the rate approved by the commissioner or the rates in effect as of September30, 1986, whichever is higher.  A final order of the commissioner may beappealed in accordance with the provisions of section 431-69, Hawaii RevisedStatutes.

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

  (5) Withrespect to any approval or disapproval by the commissioner regarding any ratefiling focusing upon the October 1, 1988, reduction, the aggrieved insurershall 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 finaldisposition, pursuant to chapter 91, Hawaii Revised Statutes, or by a court ofcompetent jurisdiction of the insurance commissioner's approval or disapprovalof the rates, the insurance commissioner shall immediately determine and orderthat the insurer make the appropriate rebates of premiums to policyholders orallow the insurer to exact a surcharge on premiums.

  (e)  The insurance commissioner shall publish a notice ofevery filing submitted by insurers pursuant to this section in a newspaper ofgeneral circulation in the State. [L Sp 1986, c 2, §§3 and 31; am L 1987, c231, §1; am L 1989, c 300, §2; am L 1991, c 62, §1; am L 1993, c 238, §1; am L1995, c 130, §1]

  SECTION 4.  Excessive rates; rebate or credit.  In reviewingthe information gathered from the closed case reports provided for underSection 26 of this Act, and from any other relevant information, if there isreason to believe that the rates are excessive, the insurance commissionershall request a hearing to determine the adequate rate.  If as a result of thehearing it is determined that insurers are charging excessive rates, theinsurance commissioner shall issue an order specifying that a new rate orschedule be filed by the insurer or rating organization which responds to thefindings made through the hearing.  The insurance commissioner shall furtherorder that premiums charged each policyholder constituting the portion of therate above that which is actuarially justified be returned to such policyholderin the form of a rebate or credit. [L Sp 1986, c 2, §§4 and 31; am L 1989, c300, §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 policiesto which the reductions on insurance rate apply shall be canceled by theinsurer prior to the expiration of the agreed term or one year from theeffective date of the policy or renewal, whichever is less, except under thefollowing grounds:

  (1) Failure topay a premium when due;

  (2) Fraud ormaterial misrepresentation;

  (3) Riskhazard increases substantially and the insurer could not have reasonablyforeseen the change when entering into the contract;

  (4) Substantialbreaches of contractual duties, conditions, or warranties;

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

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

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

  (8) For anygood 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 theevent there is cancellation pursuant to sections 5 and 7 of this Act, suchcancellation will be effective thirty days after the insurer delivers writtennotice of the cancellation to the policyholder. [L Sp 1986, c 2, §§6 and 31; amL 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 mayrefuse to renew a commercial liability policy if notice to the policyholder ofthe reasons for nonrenewal are provided to the insured forty-five days prior tothe intended nonrenewal date.  A commercial liability insurance policy, onceissued shall not be cancelled or refused renewal by an insurer based upon themandatory rate reductions as required by this Act." [L Sp 1986, c 2, §§7and 31; am L 1989, c 300, §2; am L 1991, c 62, §1; am L 1993, c 238, §1; am L1995, c 130, §1]

 

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

(1)  Prohibit or discourage reasonable competition; or

(2)  Prohibit or encourage except to the extentnecessary to accomplish the aforementioned purposes, uniformity in insurancerates, rating systems, rating plans, or practices.

This article shall be liberally interpreted to carryinto effect the provisions of this section. [L 1987, c 347, pt of §2; am L1990, c 255, §6]