SB 142: Property Insurance; Claims; Payment; Mortgaged Property; Electronic Delivery

A BILL FOR AN ACT

RELATING TO INSURANCE.

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

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

     "§431:10E-    Payment of proceeds involving mortgaged property.  (a)  When a homeowners insurance policy that covers a mortgaged property allows for the payment of proceeds by issuing a check, the insured may authorize the insurer in writing to electronically remit the proceeds to the insured's mortgagee made payable only to the mortgagee.

     (b)  A mortgagee in receipt of electronic delivery of claim proceeds pursuant to subsection (a) shall deliver the proceeds of the claim to the insured in accordance with the mortgage agreement and the insurance policy.

     (c)  For the purposes of this section:

     "Check" has the same meaning as defined in section 490:3‑104.

     "Electronic delivery" means the transfer or delivery of an insured's claim proceeds pursuant to this section by electronic methods which may include but is not limited to a verified email address, an electronic terminal, posting to an electronic site or network, or by other methods as may be defined by an insured's insurance policy.

     "Mortgage agreement" means the note or debt instrument and the mortgage instrument, deed of trust instrument, trust deed, or instrument or instruments creating the mortgage, including any instrument incorporated by reference therein and any instrument or agreement amending or modifying any of the foregoing."

     SECTION 2.  New statutory material is underscored.

     SECTION 3.  This Act shall take effect on July 1, 2050.

Report Title:

Property Insurance; Claims; Payment; Mortgaged Property; Electronic Delivery

Description:

Allows an insured to authorize the insurer to electronically remit claim proceeds to the insured's mortgagee when a homeowners insurance policy that covers a mortgaged property allows for the payment of proceeds by issuing a check.  Requires a mortgagee in receipt of electronic delivery of claim proceeds to deliver the proceeds of the claim to the insured in accordance with the mortgage agreement and the insurance policy.  Effective 7/1/2050.  (SD2)

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.

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

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

     "§431:10E-    Payment of proceeds involving mortgaged property.  (a)  When a homeowners insurance policy that covers a mortgaged property allows for the payment of proceeds by issuing a check, the insured may authorize the insurer to electronically deliver the check to the insured's mortgagee. 

     (b)  A mortgagee in receipt of electronic delivery of a claim check pursuant to subsection (a) shall deliver the proceeds of the claim to the insured in accordance with the mortgage agreement and the insurance policy.

     (c)  For the purposes of this section, "check" has the same meaning as defined in section 490:3-104."

     SECTION 2.  New statutory material is underscored.

     SECTION 3.  This Act shall take effect on July 1, 2050.

Report Title:

Property Insurance; Claims; Payment; Mortgaged Property; Electronic Delivery

Description:

Allows an insured to authorize the insurer to electronically deliver a claim check to the insured's mortgagee when a homeowners insurance policy that covers a mortgaged property allows for the payment of proceeds by issuing a check.  Requires a mortgagee in receipt of electronic delivery of a claim check to deliver the proceeds of the claim to the insured in accordance with the mortgage agreement and the insurance policy.  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.

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

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

     "§431:10-    Payment of proceeds or claims by mail; lost, destroyed, or stolen checks; remedies.  (a)  Whenever a policy allows and the insurer chooses to pay the proceeds of or a claim under the policy by issuing a check, the check shall be delivered by way of United States certified mail, restricted delivery, postage prepaid, return receipt requested, to the last known address of the insured or designated beneficiary.

     (b)  The insurer who chooses to pay the proceeds of or a claim under the policy pursuant to subsection (a) shall not be relieved of its obligation to pay the proceeds or claim until it receives a sworn affidavit from the insured or designated beneficiary confirming receipt of the check.

     (c)  If a check delivered pursuant to subsection (a) is lost, destroyed, or stolen, the insured or designated beneficiary may submit a written request to the insurer to reissue the check; provided that:

     (1)  The insured or designated beneficiary is the payee of the check; and

     (2)  The request contains or is accompanied by a sworn declaration under penalty of perjury that insured or designated beneficiary cannot reasonably obtain possession of the check because the check was destroyed, its whereabouts cannot be determined, or it is in the wrongful possession of an unknown person or a person that cannot be found or is not amenable to service of process.

     (d)  If a request for reissuance of a check is submitted in accordance with subsection (c), the insurer shall reissue and deliver the check pursuant to subsection (a); provided that if the insurer incurred losses as a result of reissuing the check, the insurer may assert a claim to the amount of the check by a communication to the obligated bank pursuant section 490:3-312.

     (e)  For the purposes of this section, "check" means a cashier's check, teller's check, or certified check."

     SECTION 2.  New statutory material is underscored.

     SECTION 3.  This Act shall take effect upon its approval.

Report Title:

Insurance Contracts; Payment of Proceeds and Claims by Mail; Lost, Destroyed, or Stolen Checks; Remedies

Description:

Requires insurers who choose to pay the proceeds of or a claim under an insurance policy by issuing a check to deliver the check by certified mail, restricted delivery, postage prepaid, return receipt requested, to the last known address of the person designated in the policy as being entitled to the insured or designated beneficiary.  Establishes that insurers who choose to pay the proceeds of or a claim under an insurance policy by issuing a check shall not be relieved of their obligation to pay the proceeds or claim until they receive a sworn affidavit from the insured or designated beneficiary confirming receipt of the check.  Establishes remedies for claimants if a check is lost, destroyed, or stolen; and for insurers if they incur losses due to reissuing the check.

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. 1061

Honolulu, Hawaii

RE:    S.B. No. 142

       S.D. 2

Honorable Ronald D. Kouchi

President of the Senate

Thirty-Third State Legislature

Regular Session of 2025

State of Hawaii

Sir:

     Your Committee on Judiciary, to which was referred S.B. No. 142, S.D. 1, entitled:

"A BILL FOR AN ACT RELATING TO INSURANCE,"

begs leave to report as follows:

     The purpose and intent of this measure is to:

     (1)  Allow an insured to authorize the insurer to electronically deliver a claim check to the insured's mortgagee when a homeowners insurance policy that covers a mortgaged property allows for the payment of proceeds by issuing a check; and

     (2)  Require a mortgagee in receipt of electronic delivery of a claim check to deliver the proceeds of the claim to the insured in accordance with the mortgage agreement and the insurance policy.

     Your Committee received testimony in support of this measure from the Mortgage Bankers Association of Hawaii, Hawaii Bankers Association, Hawaii Financial Services Association, and one individual.

     Your Committee received testimony in opposition to this measure from NAMIC.

     Your Committee received comments on this measure from the Insurance Division of the Department of Commerce and Consumer Affairs, Hawaii Insurers Council, and Hawaii Credit Union League.

     Your Committee finds that when insured homeowners who have a mortgage file an insurance claim necessitated after a disaster, it is imperative for the homeowner to receive their insurance payment.  However, many existing insurance policies require a homeowner, before being entitled to their payment, to take possession of their insurance claim check, endorse the check, and then deliver the endorsed check to their mortgage institutions, a process that dramatically increases the risk of fraud and lost checks and slows claim payouts.  By creating a direct process from the insurer to the mortgage lender through an electronic delivery of the claim check, this measure will ensure a faster and safer insurance claim system.

     Your Committee notes that this measure, as written, does not allow for the transfer of insurance proceeds through automated clearing house transfers or wire transfers.  Automated clearing house transfers are secure and regulated, reducing the risk of fraud and errors, and wire transfers provide a higher level of protection than paper checks because they are processed through secure banking systems.  Your Committee believes that this measure should be amended to allow for these methods of fund transfers, to reduce the risk of interception or tampering compared to mailed checks.

     Accordingly, your Committee has amended this measure by:

     (1)  Clarifying that an insured is able to authorize the insurer in writing to electronically remit the claim proceeds to the insured's mortgagee when a homeowners insurance policy that covers a mortgaged property allows for the payment of proceeds by issuing a check;

     (2)  Requiring that claim proceeds be made payable only to the mortgagee;

     (3)  Defining the terms "electronic delivery" and "mortgage agreement"; and

     (4)  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 Judiciary that is attached to this report, your Committee is in accord with the intent and purpose of S.B. No. 142, S.D. 1, as amended herein, and recommends that it pass Third Reading in the form attached hereto as S.B. No. 142, S.D. 2.

Respectfully submitted on behalf of the members of the Committee on Judiciary,

STAND. COM. REP. NO. 664

Honolulu, Hawaii

RE:    S.B. No. 142

       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. 142 entitled:

"A BILL FOR AN ACT RELATING TO INSURANCE,"

begs leave to report as follows:

     The purpose and intent of this measure is to:

     (1)  Require insurers who choose to send payments of a claim by issuing a check to the insured to deliver the checks by certified mail, restricted delivery, postage prepaid, return receipt requested, to the last known address of the insured or the insured's designated beneficiary;

     (2)  Establish that insurers who choose to send payments of a claim by mail are not relieved of their obligation to pay until they receive a sworn affidavit from the insured or the insured's designated beneficiary confirming receipt of the check; and

     (3)  Establishes remedies for an insured or the insured's designated beneficiary whose check is lost, destroyed, or stolen; and for insurers if they incur losses by reissuing the check.

     Your Committee received testimony in opposition to this measure from the American Property Casualty Insurance Association, Hawaii Insurers Council, National Association of Mutual Insurance Companies, and State Farm Mutual Automobile Insurance Company.

     Your Committee received comments on this measure from the Department of Commerce and Consumer Affairs.

     Your Committee finds that the impetus for this measure stems from existing insurance policies that require insured homeowners who have a mortgage and, after experiencing a disaster that causes the homeowner to file an insurance claim, to take possession of their insurance claim check, endorse the check, and rather than deposit the check into their account, are required to deliver the endorsed check to their mortgage institutions before being entitled to payment.  This process creates an unnecessarily risky obligation for the homeowner regarding the custody of an endorsed claim check.  Your Committee finds that electronic delivery of the claim check directly from the insurer to the mortgage lender is a much safer and faster method that would benefit all parties.

     Accordingly, your Committee has amended this measure by:

     (1)  Deleting language that would have:

          (A)  Required insurers to deliver checks by United States certified mail, restricted delivery, postage prepaid, return receipt requested;

          (B)  Provided that an insurer who chooses to pay the proceeds of a claim by check shall not be relieved of its obligation to pay the claim proceeds until it received a sworn affidavit from the insured or designated beneficiary confirming receipt; and

          (C)  Established procedures in the event of a lost, destroyed, or stolen check;

     (2)  Inserting language that:

          (A)  Clarifies that, when a homeowners insurance policy that covers a mortgaged property allows for the payment of proceeds by issuing a check, the insured may authorize the insurer to electronically deliver the check to the insured's mortgagee; and

          (B)  Requires an insured's mortgagee in receipt of electronic delivery of a claim check to deliver the proceeds of the claim to the insured in accordance with the mortgage agreement and the insurance policy;

     (3)  Amending the definition of "check" to have the same meaning as defined in section 490:3-104, Hawaii Revised Statutes;

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

     (5)  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. 142, as amended herein, and recommends that it pass Second Reading in the form attached hereto as S.B. No. 142, S.D. 1, and be referred to your Committee on Judiciary.

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