SB 1141: RELATING TO INSURANCE PROTECTIONS.

A BILL FOR AN ACT

RELATING TO INSURANCE PROTECTIONS.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

     SECTION 1.  Chapter 431, Hawaii Revised Statutes, is amended by adding a new part to article 10E to be appropriately designated and to read as follows:

"part     .  coverage; CATASTROPHIC disasterS; Minimum Requirements

     §431:10E-    Definitions.  As used in this part:

     "Additional living expense coverage" means coverage of increased living expenses during the time required to repair or replace damage to the policyholder's dwelling unit following an insured loss or, if the policyholder permanently relocates, the time required to move the policyholder's household to a new location.

     "Catastrophic disaster" means a declaration of a state of emergency by the governor pursuant to chapter 127A which, according to the proclamation declaring the emergency, was issued in response to a disaster.

     "Owner-occupied residence" means a residence that is occupied primarily for the use of the owner and owner's designees.  "Owner-occupied residence" includes an owner‑occupied primary residence but does not include any property that is insured under a commercial insurance or agribusiness policy.

     "Recoverable depreciation" means the difference between the cost to replace insured property and the actual cash value of the property.

     §431:10E-    Homeowners insurance policies; applicability of party.  In offering, issuing, or renewing a homeowners insurance policy in the State, an insurer shall comply with the minimum requirements in this part concerning coverage provided under the policy to protect policyholders from damages that occur in the event of a total loss of an owner‑occupied residence, including the contents of the owner‑occupied residence, due to a catastrophic disaster.

     §431:10E-   Notice requirements.  (a)  Prior to discontinuation of insurance coverage, an insurer shall respond to an insured's request for a new or renewal policy within at least sixty days before the end of the insured's policy.

     (b)  Insurers shall automatically issue a loss run report to the policy holder at the end of each policy year.

     §431:10E-     Loss due to catastrophic disaster; minimum requirements.  (a)  A homeowners insurance policy shall not limit or deny a payment of the building code upgrade cost or a payment of any extended replacement cost available under the policy coverage for a policyholder's structure that was a total loss on the basis that the policyholder decided to rebuild in a new location or to purchase an existing structure in a new location if the policy otherwise covers the replacement cost or building code upgrade cost; provided that the measure of indemnity shall not exceed the replacement cost, including the upgrade costs and extended replacement cost for repairing, rebuilding, or replacing the structure at the original location of the loss.

     (b)  If a homeowners insurance policy requires a policyholder to repair, rebuild, or replace damaged or lost property in order to collect the full replacement cost for the property, the insurer, subject to the policy limits, shall:

     (1)  Allow the policyholder at least thirty-six months to submit receipts and invoices for the replacement costs of the insured owner-occupied residence.  For the purposes of this paragraph, the thirty‑six month period shall begin on the date upon which the insurer provides the initial payment toward the actual cash value of the damage or loss; and

     (2)  Provide that, in addition to the period described in paragraph (1), the policyholder has the option to twice extend the period by six months if the policyholder, acting in good faith and with reasonable diligence, encounters unavoidable delays in the approval for, or reconstruction of, the owner-occupied residence that are beyond the control of the policyholder.  Circumstances beyond the control of the policyholder include obtaining a construction permit, lack of necessary construction materials, or lack of available contractors to perform necessary work.  This paragraph shall not be construed to prohibit an insurer from allowing a policyholder additional time to collect the full replacement cost for lost or damaged property or for additional living expenses.

     (c)  The policy shall include additional living expense coverage to apply in the event of a loss due to a catastrophic disaster.  Notwithstanding any other law to the contrary, additional living expense coverage shall be available for a period of at least twenty-four months, and the insurer shall offer the policyholder the opportunity to twice extend the period by six months if the policyholder, acting in good faith and with reasonable diligence, encounters a delay or delays in the approval for, or reconstruction of, the owner-occupied residence that are beyond the control of the policyholder.  Circumstances beyond the control of the policyholder include obtaining the necessary permit approvals for, or reconstruction of, the insured owner-occupied residence, lack of necessary construction materials, or lack of available contractors to perform the necessary work.

     (d)  The policy shall provide that, to replace personal property and receive recoverable depreciation on that property, an insurer shall allow the policyholder the greater of:

     (1)  At least three hundred sixty-five days after the expiration of additional living expense coverage; or

     (2)  Thirty-six months after the insurer provides the policyholder the first payment toward the actual cash value of the loss.

     (e)  The policy shall provide that the insurer shall pay the policyholder for the loss of use of the insured property within twenty days after the insurer receives documentation of the loss.  The documentation may include a signed lease that obligates the policyholder to pay for temporary replacement housing; provided that:

     (1)  If a policyholder provides a signed lease as documentation, the insurer may pay the policyholder in monthly or other increments, in accordance with the terms of the lease; and

     (2)  Alternatively, an insurer may provide advance rent payments for housing for the policyholder, family members, livestock, and pets, as necessary.

     (f)  The policy shall provide that the policyholder may either:

     (1)  Replace the insured owner-occupied residence at the current location or another location; provided that, in either case, the calculation of the replacement cost of the insured owner-occupied residence shall not include consideration of the value of the land upon which the replacement residence is located; or

     (2)  Use the proceeds from the policy to purchase an existing residence at a new location, in which case the calculation of the replacement cost of the insured owner-occupied residence shall not include consideration of the value of the land upon which the existing residence is located.

     (g)  The policy shall allow a policyholder to use claims payments resulting from coverage against the loss of outbuildings, dwelling extensions, and other structures to pay the costs of a replacement residence if the coverage limit that applies to the policyholder's owner-occupied residence is insufficient to pay for rebuilding or replacing the owner‑occupied residence.  Any claims payments for losses pursuant to this subsection for which replacement cost coverage is applicable shall be for the full replacement value of the loss, without requiring actual replacement of the other structures.  Claims payments for other structures that exceed the amount applied toward the necessary cost to rebuild or replace the damaged or destroyed owner-occupied residence shall be paid according to the terms of the policy.

     (h)  Within a reasonable amount of time after receiving a claim under an issued policy, an insurer shall provide to the policyholder:

     (1)  Appropriate contact information that allows for direct contact with either an employee of the insurer or a representative who is capable of elevating complaints or inquiries to an employee of the insurer;

     (2)  At least one means of communication during regular business hours; and

     (3)  A written status report if, within a six-month period, the policyholder is assigned a third or subsequent adjuster to be primarily responsible for a claim.  The written status report shall include a summary of any decisions or actions that are substantially related to the disposition of a claim, including the amount of losses to structures or contents, the retention or consultation of design or construction professionals, the amount of coverage for losses to structures or contents, and all items of dispute.

     §431:10E-    Total loss of furnished owner-occupied residence.  (a)  If a homeowners insurance policyholder experiences a total loss of the contents of an owner-occupied residence that was documented as being furnished at the time of loss because of a catastrophic disaster, the insurer shall:

     (1)  Notwithstanding any other law or provision of the insurance policy to the contrary, offer the policyholder a minimum of sixty-five per cent, or a larger per cent by mutual agreement of the policyholder and insurer, of the limit of the contents coverage indicated in the declaration page of the policy without requiring the policyholder to submit a written inventory of the contents;

     (2)  If a policyholder receives the depreciated value of contents insured under a policy, the insurer shall make available to the insured the methodology used for determining the depreciated value of the insured contents;

     (3)  Notify the policyholder that:

          (A)  Acceptance of the money described in paragraph (1) does not change the benefits available under the policy;

          (B)  Additional money may be available if the policyholder submits an inventory; and

          (C)  The insurer is required, pursuant to paragraph (2) to disclose its methodology for determining the depreciated value of the contents of insured property;

     (4)  Provide payment for covered costs associated with the removal of debris within sixty days after receiving an invoice, receipt, or other documentation indicating the date and cost of the removal of the debris; provided that, in cases where debris removal is conducted by, or in coordination with, governmental entities, payment for covered costs for removal of debris shall be provided within a reasonable amount of time once the amount available for debris has been agreed to by all parties; and

     (5)  Provide payment for any covered loss of trees, shrubs, and landscaping within thirty days after the insurer receives documentation of the loss, such as documentation from a landscaping company showing the number and nature of trees, shrubs, and landscaping features damaged or destroyed.

     (b)  If the policyholder submits an inventory of personal property losses in an amount that exceeds the amount paid to the policyholder pursuant to subsection (a)(1), the insurer shall:

     (1)  Request any additional information concerning the inventory no later than thirty days after receiving the inventory; and

     (2)  Provide payment for any covered and undisputed items within thirty days after receiving the inventory.

     (c)  The commissioner shall adopt rules to establish a simple process for policyholders to submit an inventory for personal property losses and expedite reimbursement for the losses.

     §431:10E-    Rules.  The commissioner may adopt rules pursuant to chapter 91 necessary to implement this part."

     SECTION 2.  There is appropriated out of the general revenues of the State of Hawaii the sum of $           or so much thereof as may be necessary for fiscal year 2025-2026 and the same sum or so much thereof as may be necessary for fiscal year 2026-2027 for the implementation of this Act, including the establishment of one full-time equivalent (1.0 FTE) position.

     The sums appropriated shall be expended by the department of commerce and consumer affairs for the purposes of this Act.

     SECTION 3.  This Act does not affect rights and duties that matured, penalties that were incurred, and proceedings that were begun before its effective date.

     SECTION 4.  This Act shall take effect on July 1, 2050; provided that section 1 shall apply to all homeowners insurance policies issued or renewed after December 31, 2025.

Report Title:

Property Insurance; Insured Losses; Catastrophic Disasters; Mandatory Coverage; Appropriations

Description:

Requires insurers offering homeowners insurance policies to comply with certain minimum requirements in cases of losses of owner-occupied residences due to a catastrophic disaster.  Appropriates funds.  Effective 7/1/2050.  (SD1)

The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent.

A BILL FOR AN ACT

RELATING to insurance protections.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

     SECTION 1.  Chapter 431, Hawaii Revised Statutes, is amended by adding a new part to article 10E to be appropriately designated and to read as follows:

"part   .  coverage; WILDfire disasterS; Minimum Requirements

     §431:10E-     Definitions.  As used in this part:

     "Additional living expense coverage" means coverage of increased living expenses during the time required to repair or replace damage to the policyholder's dwelling unit following an insured loss or, if the policyholder permanently relocates, the time required to move the policyholder's household to a new location.

     "Owner-occupied residence" means a residence that is occupied primarily for the use of the owner and owner's designees.  "Owner-occupied residence" includes an owner‑occupied primary residence but does not include any property that is insured under a commercial insurance or agribusiness policy.

     "Recoverable depreciation" means the difference between the cost to replace insured property and the actual cash value of the property.

     "Wildfire" means a rapidly spreading fire that:

     (1)  Is difficult to bring under control in an area that includes combustible vegetation, such as trees, grass, brush, or bushes; and

     (2)  Causes widespread or severe damage to property, regardless of the original source of ignition of the fire.

     "Wildfire disaster" means a declaration of a state of emergency by the governor pursuant to chapter 127A which, according to the proclamation declaring the emergency, was issued in response to a wildfire.

     §431:10E-     Homeowners insurance policies; applicability of party.  In offering, issuing, or renewing a homeowners insurance policy in this State, an insurer shall comply with the minimum requirements in this part concerning coverage provided under the policy to protect policyholders from damages that occur in the event of a total loss of an owner‑occupied residence, including the contents of the owner‑occupied residence, due to a wildfire disaster.

     §431:10E-     Loss due to wildfire disaster; minimum requirements.  (a)  A homeowners insurance policy shall not limit or deny a payment of the building code upgrade cost or a payment of any extended replacement cost available under the policy coverage for a policyholder's structure that was a total loss on the basis that the policyholder decided to rebuild in a new location or to purchase an existing structure in a new location if the policy otherwise covers the replacement cost or building code upgrade cost; provided that the measure of indemnity shall not exceed the replacement cost, including the upgrade costs and extended replacement cost for repairing, rebuilding, or replacing the structure at the original location of the loss.

     (b)  If a homeowners insurance policy requires a policyholder to repair, rebuild, or replace damaged or lost property in order to collect the full replacement cost for the property, the insurer, subject to the policy limits, shall:

     (1)  Allow the policyholder at least thirty-six months to submit receipts and invoices for the replacement costs of the insured owner-occupied residence.  For the purposes of this paragraph, the thirty‑six month period shall begin on the date upon which the insurer provides the initial payment toward the actual cash value of the damage or loss; and

     (2)  Provide that, in addition to the period described in paragraph (1), the policyholder has the option to twice extend the period by six months if the policyholder, acting in good faith and with reasonable diligence, encounters unavoidable delays in obtaining a construction permit, lacks necessary construction materials, lacks available contractors to perform necessary work, or encounters other circumstances beyond the policyholder's control.  This paragraph shall not be construed to prohibit an insurer from allowing a policyholder additional time to collect the full replacement cost for lost or damaged property or for additional living expenses.

     (c)  The policy shall include additional living expense coverage to apply in the event of a loss due to a wildfire disaster.  Notwithstanding any other law to the contrary, additional living expense coverage shall be available for a period of at least twenty-four months, and the insurer shall offer the policyholder the opportunity to twice extend the period by six months if the policyholder, acting in good faith and with reasonable diligence, encounters a delay or delays in receiving necessary permit approvals for, or reconstruction of, the insured owner-occupied residence; provided that the delays are beyond the control of the policyholder.

     (d)  The policy shall provide that, to replace personal property and receive recoverable depreciation on that property, an insurer shall allow the policyholder the greater of:

     (1)  At least three hundred sixty-five days after the expiration of additional living expense coverage; or

     (2)  Thirty-six months after the insurer provides the policyholder the first payment toward the actual cash value of the loss.

     (e)  The policy shall provide that the insurer shall pay the policyholder for the loss of use of the insured property within twenty days after the insurer receives documentation of the loss.  The documentation may include a signed lease that obligates the policyholder to pay for temporary replacement housing; provided that:

     (1)  If a policyholder provides a signed lease as documentation, the insurer may pay the policyholder in monthly or other increments, in accordance with the terms of the lease; and

     (2)  Alternatively, an insurer may provide advance rent payments for housing for the policyholder, family members, livestock, and pets, as necessary.

     (f)  The policy shall provide that the policyholder may either:

     (1)  Replace the insured owner-occupied residence at the current location or another location; provided that, in either case, the calculation of the replacement cost of the insured owner-occupied residence shall not include consideration of the value of the land upon which the replacement residence is located; or

     (2)  Use the proceeds from the policy to purchase an existing residence at a new location, in which case the calculation of the replacement cost of the insured owner-occupied residence shall not include consideration of the value of the land upon which the existing residence is located.

     (g)  The policy shall allow a policyholder to use claims payments resulting from coverage against the loss of outbuildings, dwelling extensions, and other structures to pay the costs of a replacement residence if the coverage limit that applies to the policyholder's owner-occupied residence is insufficient to pay for rebuilding or replacing the owner‑occupied residence.  Any claims payments for losses pursuant to this subsection for which replacement cost coverage is applicable shall be for the full replacement value of the loss, without requiring actual replacement of the other structures.  Claims payments for other structures that exceed the amount applied toward the necessary cost to rebuild or replace the damaged or destroyed dwelling shall be paid according to the terms of the policy.

     (h)  Within a reasonable amount of time after receiving a claim under an issued policy, an insurer shall provide to the policyholder:

     (1)  Appropriate contact information that allows for direct contact with either an employee of the insurer or a representative who is capable of elevating complaints or inquiries to an employee of the insurer;

     (2)  At least one means of communication during regular business hours; and

     (3)  A written status report if, within a six-month period, the policyholder is assigned a third or subsequent adjuster to be primarily responsible for a claim.  The written status report shall include a summary of any decisions or actions that are substantially related to the disposition of a claim, including the amount of losses to structures or contents, the retention or consultation of design or construction professionals, the amount of coverage for losses to structures or contents, and all items of dispute.

     §431:10E-     Total loss of furnished owner-occupied residence.  (a)  If a homeowners insurance policyholder experiences a total loss of the contents of an owner-occupied residence that was documented as being furnished at the time of loss because of a wildfire disaster, the insurer shall:

     (1)  Notwithstanding any other law or provision of the insurance policy to the contrary, offer the policyholder a minimum of sixty-five percent, or a larger percent by mutual agreement of the policyholder and insurer, of the limit of the contents coverage indicated in the declaration page of the policy without requiring the policyholder to submit a written inventory of the contents;

     (2)  If a policyholder receives the depreciated value of contents insured under a policy, the insurer shall make available to the insured the methodology used for determining the depreciated value of the insured contents;

     (3)  Notify the policyholder that:

          (A)  Acceptance of the money described in paragraph (1) of this section does not change the benefits available under the policy;

          (B)  Additional money may be available if the policyholder submits an inventory; and

          (C)  The insurer is required, pursuant to paragraph (2) of this section, to disclose its methodology for determining the depreciated value of the contents of insured property;

     (4)  Provide payment for covered costs associated with the removal of debris within sixty days after receiving an invoice, receipt, or other documentation indicating the date and cost of the removal of the debris; provided that, in cases where debris removal is conducted by, or in coordination with, governmental entities, payment for covered costs for removal of debris will be provided within a reasonable amount of time; and

     (5)  Provide payment for any covered loss of trees, shrubs, and landscaping within thirty days after the insurer receives documentation of the loss, such as documentation from a landscaping company showing the number and nature of trees, shrubs, and landscaping features damaged or destroyed.

     (b)  If the policyholder submits an inventory of personal property losses in an amount that exceeds the amount paid to the policyholder pursuant to subsection (a)(1), the insurer shall:

     (1)  Request any additional information concerning the inventory no later than thirty days after receiving the inventory; and

     (2)  Provide payment for any covered and undisputed items within thirty days after receiving the inventory.

     (c)  The commissioner shall adopt rules to simplify the process for policyholders to submit an inventory for personal property losses and expedite reimbursement for the losses.

     §431:10E-     Rules.  The commissioner may adopt rules pursuant to chapter 91 necessary to implement this part."

     SECTION 2.  There is appropriated out of the general revenues of the State of Hawaii the sum of $           or so much thereof as may be necessary for fiscal year 2025-2026 and the same sum or so much thereof as may be necessary for fiscal year 2026-2027 for the implementation of this Act, including the hiring of one full-time equivalent (1.0 FTE) position.

     The sums appropriated shall be expended by the department of commerce and consumer affairs for the purposes of this Act.

     SECTION 3.  This Act does not affect rights and duties that matured, penalties that were incurred, and proceedings that were begun before its effective date.

     SECTION 4.  This Act shall take effect on July 1, 2025; provided that section 1 shall apply to all homeowners insurance policies issued or renewed after December 31, 2025.

Report Title:

Property Insurance; Insured Losses; Wildfires; Mandatory Coverage; Appropriation

Description:

Requires insurers offering homeowners insurance policies to comply with certain minimum requirements in cases of losses owner-occupied residences due to wildfire disasters.  Appropriates moneys.

The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent.

STAND. COM. REP. NO. 380

Honolulu, Hawaii

RE:    S.B. No. 1141

       S.D. 1

Honorable Ronald D. Kouchi

President of the Senate

Thirty-Third State Legislature

Regular Session of 2025

State of Hawaii

Sir:

     Your Committee on Commerce and Consumer Protection, to which was referred S.B. No. 1141 entitled:

"A BILL FOR AN ACT RELATING TO INSURANCE PROTECTIONS,"

begs leave to report as follows:

     The purpose and intent of this measure is to require insurers offering homeowners insurance policies to comply with certain minimum requirements in cases of losses of owner-occupied residences due to a wildfire disaster.

     Your Committee received testimony in support of this measure from the Council for Native Hawaiian Advancement, Hoʻōlā iā Mauiakama Disaster Long Term Recovery Group, Hawaii Public Adjusters, Kaibigan ng Lahaina, and eight individuals.

     Your Committee received testimony in opposition to this measure from the American Property Casualty Insurance Association and Hawaii Insurers Council.

     Your Committee received comments on this measure from the Department of Commerce and Consumer Affairs, National Association of Mutual Insurance Companies, and one individual.

     Your Committee finds that Hawaii's unique geographical and environmental conditions make it susceptible to a number of different types of natural disasters.  The 2023 Maui wildfires highlight the need for a robust insurance framework to assist with recovering survivors.  This measure is therefore necessary to help ensure residents of the state have access to the resources and coverage they need in the event of an unforeseen event.

     Your Committee has amended this measure by:

     (1)  Deleting the definitions of "wildfire" and "wildfire disaster";

     (2)  Inserting a definition for "catastrophic disaster";

     (3)  Inserting language to require insurers to respond to proposal requests for new and renewal policies at least sixty days before the policy term ends;

     (4)  Inserting language to require insurers to automatically issue loss run reports at the end of each policy year;

     (5)  Clarifying that a policyholder has the option to twice extend the thirty-six month period by six months to submit receipts and invoices for the replacement costs of the insured owner-occupied residence and for additional living expenses if the policyholder, acting in good faith, encounters unavoidable delays in the approval or reconstruction of the residence due to circumstances beyond the control of the policyholder;

     (6)  Clarifying that, for costs for removal of debris conducted by or in coordination with governmental entities, payment for covered costs shall be provided within a reasonable amount of time once the amount available for debris removal has been agreed to by all parties;

     (7)  Inserting an effective date of July 1, 2050, to encourage further discussion; and

     (8)  Making technical, nonsubstantive amendments for the purposes of clarity and consistency.

     As affirmed by the record of votes of the members of your Committee on Commerce and Consumer Protection that is attached to this report, your Committee is in accord with the intent and purpose of S.B. No. 1141, as amended herein, and recommends that it pass Second Reading in the form attached hereto as S.B. No. 1141, S.D. 1, and be referred to your Committees on Ways and Means and Judiciary.

Respectfully submitted on behalf of the members of the Committee on Commerce and Consumer Protection,