39–006

105TH CONGRESS REPORT " ! HOUSE OF REPRESENTATIVES 1st Session 105–16

TO CONSENT TO CERTAIN AMENDMENTS ENACTED BY THE

LEGISLATURE OF THE STATE OF HAWAII TO THE HAWAIIAN HOMES COMMISSION ACT, 1920

MARCH 11, 1997.—Committed to the Committee of the Whole House on the State

of the Union and ordered to be printed

Mr. YOUNG of Alaska, from the Committee on Resources,

submitted the following

REPORT

[To accompany H.J. Res. 32]

[Including cost estimate of the Congressional Budget Office]

The Committee on Resources, to whom was referred the joint resolution (H.J. Res. 32), to consent to certain amendments enacted by

the Legislature of the State of Hawaii to the Hawaiian Homes

Commission act, 1920 having considered the same, report favorably

thereon without amendment and recommend that the joint resolution do pass.

PURPOSE OF THE BILL

The purpose of H.J. Res. 32 is to consent to certain amendments

enacted by the Legislature of the State of Hawaii to the Hawaiian

Homes Commission Act, 1920.

BACKGROUND AND NEED FOR LEGISLATION

Congress enacted the Hawaiian Homes Commission Act of 1920

to designate approximately 200,000 acres within the islands of the

then Territory of Hawaii for the exclusive use of native Hawaiians.

The Act defined native Hawaiians as descendants with at least

one-half blood quantum of individuals inhabiting the Hawaiian Islands prior to 1778. The primary purpose of the Act was to provide

rural homesteads for native Hawaiians. However, this was expanded in 1923 to include residential lots and the demand for parcels for that purpose has continued to the present.

The role of the Federal Government in the Hawaiian Homes

Commission became limited at the time of Hawaii Statehood in
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1959. The responsibility for the Hawaiian Homes Commission was

largely devolved to the new State in the admissions act of March

18, 1959, ‘‘An Act to provide for the admission of the State of Hawaii into the Union.’’ However, Section 4 of the admissions act requires Congressional consent to any changes to the Hawaiian

Homes Commission Act. Additionally, the Secretary of the Interior’s function became primarily ministerial, involving the approval

of land exchanges for private or public lands of equal value, as permitted under the Hawaiian Homes Commission Act.

In 1993 the State of Hawaii passed Act 339 to create a Hawaii

hurricane relief fund after the devastation of Hurricane Iniki and

included amendments to the Hawaiian Homes Commission Act for

native Hawaiians affected on Hawaiian Home Lands. This first

amendment will facilitate certain disaster relief insurance and

bonds for homeowners on Hawaiian Home lands. In 1994 the State

of Hawaii enacted Act 37 to permit grandchildren of a Native Hawaiian leaseholder to assume the remainder of a home lease should

that individual die. These proposed changes have not taken effect

as Congress has yet to approve these measures.

Following is a summary of Act 339 of 1993 and Act 37 of 1994

which would change certain provisions of the Hawaiian Homes

Commission Act of 1920 (the full text of both measures appear in

the Appendix):

Act 339 of the Session Laws of Hawaii, 1993: This statute establishes the Hawaiian Hurricane Relief Fund. Section 7 of Act 339

authorizes the Department of Hawaiian Home Lands to issue hurricane insurance coverage for lessees of Hawaiian Home lands and

revenue bonds to establish the necessary reserves for payment of

claims in excess of reserves. Section 15 provides that consent requirement, if any, that applies to the Hawaiian Home Lands provisions of the act shall not be deemed to affect the validity of the

other provision of the act.

Act 37 of the Session Laws of Hawaii, 1994: This statute allows

homestead lessees to designate as a successor to the lease a grandchild who is at least 25 percent native Hawaiian. Under the current law, as adopted by Hawaii in 1982, a lessee may designate his

or her spouse or children as a successor under the lease if they are

25 percent native Hawaiian; the bill would thus allow a similar

designation with respect to grandchildren.

The House of Representatives approved a measure identical to

H.J. Res. 32 as part of H.R. 1332 in the 104th Congress, which was

not acted on by the Senate prior to adjournment.

COMMITTEE ACTION

H.J. Res. 32 was introduced on January 21, 1997, by Congressman Neil Abercrombie (D–HI) and cosponsored by Congressman

Eni F.H. Faleomavaega (D–AS) and Congressman Elton Gallegly

(R–CA). The bill was referred to the Committee on Resources for

consideration. On March 5, 1997, the Full Resources Committee

met to consider H.J. Res. 32. No amendments were offered and the

joint resolution was ordered favorably reported to the House of

Representatives by voice vote.
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COMMITTEE OVERSIGHT FINDINGS AND RECOMMENDATIONS

With respect to the requirements of clause 2(l)(3) of rule XI of

the Rules of the House of Representatives, and clause 2(b)(1) of

rule X of the Rules of the House of Representatives, the Committee

on Resources’ oversight findings and recommendations are reflected

in the body of this report.

CONSTITUTIONAL AUTHORITY STATEMENT

Article I, section 8, and Article IV, section 3 of the Constitution

of the United States grants Congress the authority to enact H.J.

Res. 32.

COST OF THE LEGISLATION

Clause 7(a) of rule XIII of the Rules of the House of Representatives requires an estimate and a comparison by the Committee of

the costs which would be incurred in H.J. Res. 32. However, clause

7(d) of that Rule provides that this requirement does not apply

when the Committee has included in its report a timely submitted

cost estimate of the bill prepared by the Director of the Congressional Budget Office under section 403 of the Congressional Budget

Act of 1974.

COMPLIANCE WITH HOUSE RULE XI

1. With respect to the requirement of clause 2(l)(3)(B) of rule XI

of the Rules of the House of Representatives and section 308(a) of

the Congressional Budget Act of 1974, H.J. Res. 32 does not contain any new budget authority, spending authority, credit authority, or an increase or decrease in revenues or tax expenditures.

2. With respect to the requirement of clause 2(l)(3)(D) of rule XI

of the Rules of the House of Representatives, the Committee has

received no report of oversight findings and recommendations from

the Committee on Government Reform and Oversight on the subject of H.J. Res. 32.

3. With respect to the requirement of clause 2(l)(3)(C) of rule XI

of the Rules of the House of Representatives and section 403 of the

Congressional Budget Act of 1974, the Committee has received the

following cost estimate for H.J. Res. 32 from the Director of the

Congressional Budget Office.

CONGRESSIONAL BUDGET OFFICE COST ESTIMATE

U.S. CONGRESS,

CONGRESSIONAL BUDGET OFFICE,

Washington, DC, March 7, 1997.

Hon. DON YOUNG, Chairman, Committee on Resources,

House of Representatives, Washington, DC.

DEAR MR. CHAIRMAN: The Congressional Budget Office has prepared the enclosed cost estimate for H.J. Res. 32, a joint resolution

to consent to certain amendments enacted by the Legislature of the

State of Hawaii to the Hawaiian Homes Commission Act, 1920.
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If you wish further details on this estimate, we will be pleased

to provide them. The CBO staff contact is Victoria V. Heid.

Sincerely,

JUNE E. O’NEILL, Director.

Enslosure.

H.J. Res. 32—A joint resolution to consent to certain amendments

enacted by the Legislature of the State of Hawaii to the Hawaiian Homes Commission Act, 1920

H.J. Res. 32 would grant the consent of the United States to a

number of amendments to the Hawaiian Homes Commission Act,

1920, already adopted by the state of Hawaii. These amendments

generally concern the administration of the Hawaiian home lands.

CBO estimates that enacting this resolution would have no effect

on the federal budget. Because the resolution would not affect direct spending or receipts, pay-as-you-go procedures would not

apply. H.J. Res. 32 contains no intergovernmental or private-sector

mandates as defined in the Unfunded Mandates Reform Act of

1995 and would impose no costs on state, local, or tribal governments.

The CBO staff contact for this estimate is Victoria V. Heid. This

estimate was approved by Robert A. Sunshine, Deputy Assistant

Director for Budget Analysis.

COMPLIANCE WITH PUBLIC LAW 104–4

H.J. Res. 32 contains no unfunded mandates.

CHANGES IN EXISTING LAW

If enacted, H.J. Res. 32 would make no changes in existing law.
(5)

A P P E N D I X

1. ACT 339 OF THE SESSION LAWS OF HAWAII, 1993

ACT 339.—A Bill For an act relating to laws affecting insurance

Be It Enacted by the Legislature of the State of Hawaii:

Section 1. The legislature finds that new, creative, and flexible

mechanisms are necessary to insure against hurricane losses in

Hawaii in the aftermath of the devastation caused by Hurricane

Iniki and the worldwide insurance crisis. The economic welfare of

this State is dependent on the availability of property insurance including coverage for catastrophic losses in the event of another hurricane.

The legislature finds that without property insurance the orderly

growth and development of the State would be severely impeded;

that adequate insurance upon property is necessary to enable

homeowners and commercial owners to obtain financing for the

purchase and improvement of their property; and that while the

need for such insurance is increasing, the market for such insurance is not adequate and is likely to become less adequate in the

future.

The purpose of this Act is to create the Hawaii hurricane relief

fund. The Hawaii hurricane relief fund will assess the availability

of insurance from all sources and be empowered to take steps to

provide coverage should the private market prove unreliable.

The establishment of the Hawaii hurricane relief fund serves a

public purpose and is an essential government function.

Section 2. The Hawaii Revised Statutes is amended by adding a

new chapter to be appropriately designated and to read as follows:

‘‘CHAPTER —HAWAII HURRICANE RELIEF FUND

‘‘PART I.—GENERAL PROVISIONS

‘‘§ –1. Definitions. As used in this chapter, unless the context

otherwise requires:

‘‘ ‘Board’ means the board of directors of the Hawaii hurricane relief fund.

‘‘ ‘Commissioner’ means the insurance commissioner as defined in

section 431:2–102.

‘‘ ‘Covered event’ means each hurricane that directly causes windstorm damage in the State.

‘‘ ‘Deductible’ or ‘mandatory deductible’ means the amount of loss

assumed by the policyholder that is not included in the coverages

provided by the fund.
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‘‘ ‘Department’ means the department of commerce and consumer

affairs.

‘‘ ‘Director’ means the director of finance.

‘‘ ‘Eligible property’ means:

‘‘(1) Real property of one to four units used for residential

purposes and which is in insurable condition, and tangible personal property located therein or thereon as provided in the

plan of operation or any manual of rules and rates adopted

under the plan of operation; and

‘‘(2) Real property used for business, commercial, or industrial purposes which is in insurable condition located therein

or thereon as provided in the plan of operation or any manual

of rules and rates adopted under the plan of operation.

‘‘ ‘Fund’ means the Hawaii hurricane relief fund established by

this chapter.

‘‘ ‘Hurricane’ means a storm that has been declared and defined

by the Central Pacific Hurricane Center of the National Weather

Service to be a hurricane.

‘‘ ‘Plan of operation’ means the plan for providing hurricane property insurance as adopted by the board of directors of the Hawaii

hurricane relief fund, and any amendments thereto, under section –7.

‘‘ ‘Policy of hurricane property insurance’ means a policy or endorsement of insurance issued by the fund insuring only against

damage or loss to eligible property caused by a covered event in excess of the deductible and up to $750,000 per risk on real property

of one to four units used for residential purposes and up to

$500,000 per risk on real property used for business, commercial

or industrial purposes, subject to the limits defined by the plan of

operation; provided that this policy shall not include coverage for

business interruption.

‘‘ ‘Policy of property insurance’ means a policy providing ‘property

insurance’ as defined in section 431:1–206. For purposes of this

chapter, it includes ‘basic property insurance’ as provided under article 21 of chapter 431.

‘‘ ‘Property insurance’ means policies, riders, or endorsements of

insurance that provide indemnity, in whole or in part, for the loss,

destruction, or damage of eligible property.

‘‘ ‘Servicing facility’ means any insurer engaged in writing direct

property insurance in this State and licensed in this State, and any

other party authorized to act in like capacity on behalf of the fund.

‘‘§ –2. Establishment of Hawaii hurricane relief fund.

There shall be a Hawaii hurricane relief fund to be placed within

the department of commerce and consumer affairs for administrative purposes. The fund shall be a public body and a body corporate

and politic.

‘‘§ –3. Board of directors. (a) The board of directors of the

fund shall consist of the insurance commissioner as an ex officio

voting member and six members appointed by the governor in accordance with section 26–34. The board shall be the policy making

body of the fund. As such, the board shall be responsible for establishing policies for the administration and operation of the fund

and the performance of other duties and functions assigned to the

fund.
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‘‘(b) Two members shall, by and with the advice and consent of

the senate, be appointed by the governor for a term of four years;

provided that of the initial appointees, one shall be appointed for

a two-year term. A vacancy on the authority of a seat subject to

this subsection shall be filled in accordance with Article V, section

6, of the Constitution of the State of Hawaii.

‘‘(c) Two members shall, by and with the advice and consent of

the senate, be appointed by the governor from a list of nominations

submitted by the president of the senate. The members appointed

from a list of nominations of the president of the senate shall serve

for a term of four years; provided that of the initial appointees, one

shall be appointed for a two-year term.

‘‘(d) Two members shall, by and with the advice and consent of

the senate, be appointed by the governor from a list of nominations

submitted by the speaker of the house of representatives. The

members appointed from a list of nominations of the speaker of the

house of representatives shall serve for a term of four years; provided that of the initial appointees, one shall be appointed for a

two-year term.

‘‘(e) The governor shall select a chairperson and vice-chairperson

from among the members.

‘‘(f) The board shall meet as often as necessary to formulate and

implement strategies and plans of operations in furtherance of this

chapter. Upon its appointment, the board shall adopt an interim

plan of operation within ninety days.

‘‘(g) The appointed directors shall receive no compensation for

services, but shall be entitled to reimbursement of necessary expenses, including travel expenses, incurred in the performance of

their duties.

‘‘(h) The board may appoint, not subject to chapters 76 and 77,

and executive director of the fund whose salary shall be set by the

board. The board may employ, not subject to chapters 76 and 77,

technical experts and officers, agents and employees, permanent or

temporary, as required. The board may also contract with persons,

not subject to chapters 76, 77, and 78 when in the determination

of the board, the services to be performed are unique and essential

to the execution of the functions of the fund; provided that no individual contract shall be for a period longer than two years per

term.

‘‘§ –4. Planning and assessment functions of the fund; discretion to provide insurance. (a) The fund shall be responsible

for monitoring the availability of property insurance, including insurance for covered events, in this State. If at any time the board

determines, in its sole discretion, that the private insurance market is not making such insurance reasonably available to consumers in this State, the fund may offer policies of hurricane property

insurance for sale in accordance with this chapter.

‘‘(b) Nothing in subsection (a) shall prohibit the board from exercising its powers to develop plans and procedures for the operation

and management of the fund without regard to the determination

of the board as to the availability of insurance in the private market.

‘‘§ –5. Powers, duties, and functions. (a) The Hawaii hurricane relief fund shall have the following general powers:
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‘‘(1) To sue and be sued;

‘‘(2) To make and alter policies for its organization and internal administration;

‘‘(3) To adopt rules in accordance with chapter 91 to effectuate the purposes of this chapter;

‘‘(4) To borrow moneys; including but not limited to moneys

from state or federal sources and to issue notes or other obligations of the fund for the purposes of providing funds for any

of its purposes as authorized by the legislature from time to

time;

‘‘(5) To pledge or assign all or any part of the moneys, rents,

charges, or other revenue and any proceeds derived by the

fund; and

‘‘(6) Enter into contracts as necessary to effectuate the purposes of this chapter.

‘‘(b) In addition to the general powers under subsection (a), the

fund shall have the specific power to:

‘‘(1) Adopt and administer a plan of operation in accordance

with section –7, and a manual of rules and rates to provide

persons having an insurable interest in eligible property with

insurance coverage provided by the fund;

‘‘(2) Authorize the provision of hurricane coverage by the

fund for tangible personal property located in or on real property used for business, commercial, or industrial purposes and

establish limits of liability for specific coverages within the

range of authorized coverage;

‘‘(3) Adopt actuarially sound rates based on reasonable assumptions relative to expectations of hurricane frequency and

severity for all coverage provided under policies or endorsements issued by the fund. Rates adopted shall be subject to approval by the commissioner pursuant to article 14 of chapter

431. Rates adopted shall provide for classification of risks and

shall include past and prospective losses and expense experience in this State;

‘‘(4) Adopt procedures, guidelines, and surcharges applicable

to hurricane policies issued in connection with an underlying

property policy issued by an unauthorized insurer;

‘‘(5) Adopt any form of insurance policy necessary for providing hurricane property insurance by the fund, with the approval of the commissioner;

‘‘(6) Issue insurance policies and pay claims for coverage over

the mandatory deductible;

‘‘(7) Require every licensed insurer transacting direct property insurance business in this State to act as a servicing facility, and by contract with such insurer authorize such insurer

to inspect eligible properties, service policies and policyholders

of hurricane property insurance, provide claim services, and

perform any other duties as authorized by the fund for applicants to the fund and those insured by it;

‘‘(8)(A) Assess annually all licensed property or casualty insurers the amounts which, together with the other assets of

the fund, are sufficient to meet all necessary obligations of the

fund. The assessment shall be made on the insurer’s gross direct written premiums for property and casualty insurance in
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Hawaii for the preceding calendar year. The rate of assessment

in a year in which a covered event has not occurred shall be

3.75 percent and shall not include the insurer’s gross direct

written premiums for motor vehicle insurance in Hawaii; provided that the rate of assessment may be increased to an

amount not to exceed five percent and may include the insurer’s gross direct written premiums for motor vehicle insurance

in Hawaii following a covered event. An insurer authorized to

provide comparable coverage under section –10(b) shall be assessed an amount that excluded gross direct written premiums

for property insurance in Hawaii.

‘‘(B) In the event of a loss from a covered event the fund, in

addition to the annual assessment in paragraph (A), shall assess those insurers which wrote property insurance coverage

during the year immediately preceding the year of the covered

event in proportion to each insurer’s share of the total property

premium during that year. However, in no event shall the total

assessment exceed $500,000,000 in the aggregate; provided

that a separate assessment shall be made for each covered

event. An insurer authorized to provide comparable coverage

under section –10(b) shall be exempted from this subparagraph.

‘‘(C) Each insurer shall be notified of any assessment not

later than thirty days before it is due. The fund may exempt

or differ, in whole or in part, the assessment of any insurer if

the assessment would cause the insurer’s financial statement

to reflect amounts of capital or surplus less than the minimum

amounts required for a certificate of authority by this jurisdiction;

‘‘(9) Develop a program of incentives to encourage insurers to

provide policies of hurricane property insurance in the event

the commissioner authorizes the provision of comparable insurance pursuant to section –10(b); which may include, but are

not limited to, exemption of the insurer’s gross direct written

premium for property insurance from the annual assessment

pursuant to section –5(b)(8)(A);

‘‘(10) Develop a credit against the annual assessment based

on the difference between premiums written in 1993 and the

premiums written in 1992 by each property insurer;

‘‘(11) Develop procedures regarding policies written by unauthorized insurers comparable to the assessments, and other

contributions made by insurers authorized to do business in

this State;

‘‘(12) Accumulate reserves or funds, including the investment

income thereon, to be used for paying expenses, making loans,

and paying valid claims for covered events insured by the fund;

and

‘‘(13) Collect and maintain statistical and other data as may

be required by the commissioner.

‘‘§ –6. Advisory committee. To assist it in implementing this

chapter the fund may appoint an advisory committee consisting of:

‘‘(1) Not less than one individual who is employed or trained

as a meteorologist and possesses knowledge of the history,

trends, and nature of windstorms in the Pacific Ocean;
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‘‘(2) Not less than one individual who is a member of the

American academy of actuaries; and

‘‘(3) Not less than one individual who is a structural engineer

licensed to practice in the State and is knowledgeable about

local community building codes.

‘‘The fund may establish additional advisory committees as it

may deem necessary in furtherance of this chapter.

‘‘§ –7. Plan of operation. (a) The fund shall adopt a plan of

operation, and a manual of rules and rates necessary or suitable

to ensure both the solvency and the reasonable and equitable administration of the fund.

‘‘(b) If the fund fails to adopt a plan of operation, or the fund fails

to adopt amendments to the plan of operation, the commissioner

shall adopt a plan of operation or make amendments necessary to

carry out the purposes of this chapter. Any plan of operation, or

amendment, adopted by rule of the commissioner, shall continue in

full force and effect until the rule is superseded by a plan of operation, or amendment, adopted by a majority vote of all members of

the fund’s board, and approved by the commissioner.

‘‘(c) The plan of operation shall:

‘‘(1) Establish procedures for performance of all powers and

duties of the fund;

‘‘(2) Establish procedures for providing notice to all persons

with interests insurable by the fund in the Sate of the type of

insurance available from the fund in the event the fund offers

insurance;

‘‘(3) Provide for and adopt all necessary forms, including insurance policies to be used by and on behalf of the fund, for

use by the fund and servicing facilities;

‘‘(4) Adopt actuarially sound rates, based on reasonable assumptions relative to expectations of hurricane frequency and

severity, to be charged for insurance provided by the fund, in

accordance with article 14 of chapter 431;

‘‘(5) Publish manuals of rules, rates, and rating and classification plans, which shall address mandatory deductibles, limits of coverage, and the classification of risks and rate modifications based on the exposure of insureds;

‘‘(6) Establish procedures for receiving and servicing applications to the fund;

‘‘(7) Establish procedures for processing and maintaining

records of the fund relating to its financial transactions, its

agents, its employees, its operations, and all transactions with

any servicing facility;

‘‘(8) Establish procedures for the collection and remittance of

the premiums and return of unearned premiums where applicable;

‘‘(9) Establish procedures for the payment of valid claims;

‘‘(10) Establish procedures for prorating available funds pursuant to section –15;

‘‘(11) Establish procedures for obtaining reinsurance;

‘‘(12) Establish procedures to borrow funds; and

‘‘(13) Develop a plan for the investment of moneys held by

the fund subject to the limitations in article 6 of chapter 431.
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‘‘§ –8. Annual statements. (a) The fund shall submit to the

commissioner each year, not later than one hundred twenty days

after the end of the fund’s fiscal year, a financial report in a form

approved by the commissioner.

(b) The commissioner may require other reports concerning risks

insured by the fund as the commissioner deems appropriate. ‘‘§ –9. Powers of the commissioner. (a) For the purpose of

ascertaining the fund’s condition or compliance with this chapter,

the commissioner shall examine the accounts, records, documents,

and transactions of the fund at least once every three years commencing at the time the fund starts issuing policies of hurricane

property insurance or more often if the commissioner deems advisable. The fund shall pay all reasonable and actually incurred expenses of the examination in accordance with section 431:2–306(b).

‘‘(b) The commissioner may exercise all of the commissioner’s

powers provided by law in the supervision and regulation of the

fund, any servicing facility, and any other person or entity subject

to the jurisdiction of the commissioner. ‘‘§ –10. Coverage available from the fund; deductible. (a)

Policies issued by the fund shall provide a maximum aggregate coverage up to of $750,000 per risk on real property of one to four

units used for residential purposes and $500,000 per risk for real

property used for business, commercial, and industrial purposes

and shall provide for a mandatory deductible. The deductible

amount for residential personal property policies shall be the greater of $1,000 or one per cent of the insured value or the greater of

$2,000 or two per cent of the insured value; provided that the

board may establish higher deductible limits. The deductible

amount for commercial property policies shall be the greater of

$5,000 or five per cent of the insured value or an amount equivalent to the all other perils deductible of the underlying policy of

property insurance; provided that the board may establish higher

deductible limits.

‘‘(b) Upon the authorization of the commissioner, insurers may

provided standard extended coverage endorsements, including coverage of hurricane risks, subject to the fund’s program for incentives and credits; provided that in the absence of such authorization no other policy of property insurance or endorsement to a policy of property insurance on eligible property located in this State

shall be issued to provide insurance for damages or losses caused

by a covered event if such coverage is offered by the fund.

‘‘§ –11. Underlying policy required; hurricane coverage

shall be provided. (a) Any eligible property for which coverage is

sought from the fund shall already be insured by an underlying

policy of property insurance as defined in section 431:1–206 or article 21 of chapter 431 but excluding the covered event. Every underlying policy of property insurance provided by an unauthorized insurer shall be subject to the procedures, guidelines and surcharges

as provided in the plan of operation.

‘‘(b) The fund shall not deny any application for hurricane property insurance on any property eligible under subsection (a).

‘‘(c) The fund shall renew any policy provided payment of the applicable renewal premium is received by the fund on or before the

expiration date stated in the policy. The fund may nonrenew a pol-
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icy on the grounds the property is no longer covered by an underlying policy of property insurance. The policy issued by the fund shall

not provide coverage in the event that there is no underlying policy

of property insurance at the time of loss. In such case, any unearned premiums shall be returned to the policyholder on a pro

rata basis. ‘‘§ –12. Mitigation. The fund shall develop a comprehensive

loss reduction plan for the hurricane peril. The plan shall include

standards for new residential and commercial structures and separate standards for existing residential and commercial structures.

The plan shall provide a timetable for implementation of mandatory loss mitigation measures for both new and existing structures. ‘‘§ –13. Appeals. (a) Any applicant or policyholder adversely affected by a decision of the fund shall have the right to appeal to

the fund’s board within thirty days after the decision. The application for an appeal shall specify how the person making the appeal

was aggrieved and the grounds upon which relief is demanded. The

decision of the board shall be deemed final.

‘‘(b) Any final action, decision, or order of the board under this

chapter shall be subject to judicial review by the circuit court. ‘‘§ –14. Immunity and limitation on liability. There shall be

no liability on the part of, and no cause of action of any nature

shall arise against, any servicing facility; the fund or its agents,

employees, or its board; the State; the commissioner; or the commissioner’s representatives for any action taken by them in the

performance of their powers and duties under this chapter; provided that this section shall not be construed to prohibit any exercise of the commissioner’s power pursuant to this chapter or any

other law or rule adopted pursuant to law, chapters 661 and 662,

and any other law to the contrary notwithstanding. Nothing in this

chapter shall create an obligation, debt, claim, cause of action,

claim for relief, charge, or any other liability of any kind whatsoever in favor of any person or entity without regard to whether

that person or entity received any benefits under this chapter,

against the State, or its officers and employees. The State and its

officers and employees shall not be liable for the results of any application, denial of application, claim, loss, or other benefits provided by the fund pursuant to this chapter. Nothing in this chapter

shall be construed as authorizing any claim against the State

whatsoever, nor shall this chapter be construed as authorizing any

claim against the fund in excess of any note, loan, liability, or other

obligation incurred by the fund.

‘‘§ –15. Exemption from property and liability insurance

guaranty association; insolvency of fund. Notwithstanding any

other provision of law to the contrary, neither the fund nor its policyholders shall be subject to the provisions of or be eligible for, the

benefits provided in sections 431:16–101 to 117 inclusive. If the

total amount available at any time to the fund is insufficient to

make all necessary payments, the moneys available shall be prorated and the unpaid portion shall be paid as soon thereafter as

moneys become available.

‘‘§ –16. Establishment of hurricane reserve trust fund. (a)

There is created in the treasury of the State the hurricane reserve

trust fund to be administered by the Hawaii hurricane relief fund,
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into which shall be deposited the special mortgage recording fee established by this chapter. The special mortgage recording fee shall

be imposed on each mortgage and each amendment to a mortgage

which increases the principal amount of the secured debt which is

recorded in the bureau of conveyances of the State under chapter

502 or filed with the assistance registrar of the land court of the

State under chapter 501.

‘‘The special fee shall be in an amount equal to one-tenth of one

per cent of the stated principal amount of the debt secured by the

mortgage or, in the case of an amendment of a mortgage, an

amount equal to one-tenth of one per cent of the amount of the increase of the stated principal debt.

‘‘The special fee shall be in addition to any applicable fees under

chapter 501 or 502. The special fees shall be collected by escrow depositories licensed under chapter 449, or financial institutions authorized to engage in the escrow business, or persons and companies permitted to engage in limited escrow transactions under section 449–3. The special mortgage recording fees shall be collected

prior to recordation of the mortgage with the bureau of conveyances or the assistant registrar of the land court of the State and

shall be deposited into the hurricane reserve trust fund. The bureau of conveyances and the assistant registrar of the land court

may also collect and transmit any special fees for deposit into the

hurricane reserve trust fund.

‘‘(b) The fund shall implement the annual assessment of all licensed property and casualty insurers as authorized by section

–5(b)(8)(A) and the proceeds from the assessments shall be deposited into the hurricane reserve fund.

‘‘(c) If the fund offers to issue policies of hurricane property insurance, the premiums for such policies shall be deposited into the

hurricane reserve trust fund.

‘‘(d) Should the moneys in the hurricane reserve trust fund be insufficient to pay claims arising out of a covered event, the fund is

authorize to levy a surcharge not to exceed seven and one-half per

cent a year on premiums charged for policies issued by all licensed

property and casualty insurers. These moneys may be used for purposes as directed by the board, including but no limited to the payment of debt service and principal on a contract of financial reinsurance. The formula to calculate the amount and period of the

surcharge and the procedures and methodology for payment of

claims during periods of insufficiency of moneys for such purpose

shall be provided in the plan of operation.

‘‘(e) Any proceeds from loans or other moneys from the federal

government, any proceeds from bonds issued pursuant to this Act

loaned by the director of finance to the Hawaii hurricane relief

fund, and such other moneys as the State may make available from

time to time shall be deposited into the hurricane reserve trust

fund.

‘‘(f) Moneys in the hurricane reserve trust fund shall be expended

by the fund and used solely for the purposes of this chapter.

‘‘(g) Upon dissolution of the fund, the net moneys of the hurricane reserve trust fund shall revert to the state general fund.

‘‘§ –17. Additional notice requirement. Thirteen months

prior to discontinuation of writing property insurance coverage, an
14

insurer shall file an affidavit with the commissioner stating the

reasons for the discontinuation. ‘‘§ –18. Exemption for Hawaiian home lands. Nothing in

this chapter shall prohibit or limit any person from obtaining insurance for property subject to the Hawaiian Homes Commission

Act of 1920, as amended, from any insurer other than the fund if

such insurance is deemed sufficient by the commissioner.’’.

Section 3. Chapter 46, Hawaii Revised Statutes, is amended by

adding a new section to be appropriately designated and to read as

follows: ‘‘§ 46– . Homeowners insurance. (a) Notwithstanding any law

to the contrary, a county, either alone or together with any other

county or counties, may:

‘‘(1) Form an insurance company, association (nonprofit or

otherwise), fund, or trust;

‘‘(2) Acquire an existing insurance company;

‘‘(3) Enter into arrangements with one or more insurance

companies; or

‘‘(4) Any combination of the foregoing; upon such terms and

conditions and for such periods, as the council of the county

shall approve by ordinance or resolution, or both, to provide

homeowner insurance, including hurricane coverage, for residents of the county or counties participating in such undertaking. Such undertaking shall be subject to the provision of chapter , including, but not limited to, section –10(b), and chapter 431.

‘‘(b) Any county participating in an undertaking as authorized

under subsection (a) may:

‘‘(1) Issue general obligation bonds under chapter 47 to establish necessary reserves to provide for the payment of claims

in excess of reserves and for other related purposes;

‘‘(2) Invest funds held in reserve, which are not required for

immediate disbursement, in property or securities in which

savings banks may legally invest funds subject to their control

or as the council of the county may authorize pursuant to ordinance or resolution; and

‘‘(3) Issue general obligation bonds under chapter 47 to pay

any liability incurred that is self-insured or uninsured by that

county, including without limitations, liabilities for damage to

property, comprehensive liability, environmental, or other

losses.

‘‘(c) If no homeowner insurance is provided pursuant to this section within two years of the effective date of this section, this section shall cease to be in effect; provided that any county participating in any undertaking to provide homeowner insurance under this

section wihin that two year period may continue to do so thereafter.’’.

Section 4. Chapter 431, Hawaii Revised Statutes, is amended by

adding to article 19 a new section to be appropriately designated

and to read as follows:

‘‘§ 431:19– . Personal lines insurance. (a) Notwithstanding

the provisions of section 431:19–102(a), a captive insurance company may be licensed to provide personal lines coverage for unrelated risks if the commissioner deems that extraordinary cir-
15

cumstances exist which make the provision of this coverage by a

captive insurance company appropriate and in the best interest of

the public. In determining whether such extraordinary circumstances exist, the commissioner shall consider the following

factors:

‘‘(1) The extent to which the particular coverage is available

in the voluntary market;

‘‘(2) The existence of a relationship between the parent of the

captive insurance company and the proposed policyholders

other than that of insurer to insured;

‘‘(3) Whether the captive insurance company has sufficient

capitalization to insure the proposed risks; and

‘‘(4) Any other factors which the commissioner deems appropriate.

‘‘(b) Any captive insurance company formed pursuant to this section shall be subject to articles 5, 10, 10A, 10B, 10C, 10D, 10E,

10F, 10G, 12, 15, and 17 of chapter 431 in addition to all other applicable law.’’.

Section 5. Section 39–51, Hawaii Revised Statutes, is amended to

read as follows:

1. By adding a new definition to be appropriately inserted and

to read as follows:

‘‘ ‘System’ means an organized plan or arrangement under which

one or more undertakings are operated or implemented as a harmonious whole.’’

2. By amending the definition of ‘‘undertaking’’ to read as follows:

‘‘ ‘Undertaking’ means any public works and properties, improvement, or system, tangible or intangible, owned or operated by the

State or a department thereof, [and from which the State or department may derive revenues, or with respect to which the State

or department may derive user taxes.] and any public activity, policy, or program undertaken by the State or a department thereof,

and from which the State or department may derive revenues, or

with respect to which the State or department may derive user

taxes.’’

Section 6. Section 431:13–104, Hawaii Revised Statutes, is

amended to read as follows:

‘‘§ 431:13–104. Favored agent or insurer; coercion of debtors. (a) No person may require as a condition precedent to the

lending of money or extension of credit, or any renewal thereof,

that the person to whom such money or credit is extended or whose

obligation a creditor is to acquire or finance, negotiate any contract

of insurance, or renewal thereof, through a particular insurer or

group of insurers or agent or broker or group of agents or brokers.

‘‘(b) No person who lends money or extends credit may:

‘‘(1) Solicit insurance for the protection of real property, after

a person indicates interest in securing a first mortgage credit

extension, until such person has received a commitment in

writing from the lender as to a loan or credit extension;

‘‘(2) Unreasonably reject a contract of insurance furnished by

the borrower for the protection of the property securing the

credit or lien. A rejection shall not be deemed unreasonable if

it is based on reasonable standards, uniformly applied, relating

to the extent of coverage required and the financial soundness
16

and the services of an insurer. Such standards shall not discriminate against any particular type of insurer, nor shall such

standards call for rejection of an insurance contract because

the contract contains coverage in addition to that required in

the credit transaction;

‘‘(3) Require that any borrower, mortgagor, purchaser, insurer, broker or agent pay a separate charge, in connection

with the handling of any contract of insurance required as a

security for a loan on real estate, or pay a separate charge to

substitute the insurance policy of one insurer for that of another. This paragraph does not include the interest which may

be charged on premium loans or premium advancements in accordance with the terms of the loan or credit document;

‘‘(4) Use or disclose, without the prior written consent of the

borrower, mortgagor or purchaser taken at a time other than

the making of the loan or extension of credit, information relative to a contract of insurance which is required by the credit

transaction, for the purpose of replacing the insurance;

‘‘(5) Require any procedures or conditions of duly licensed

agents, brokers or insurers not customarily required of those

agents, brokers or insurers affiliated or in any way connected

with the person who lends money or extends credit.

‘‘(c) Every person who lends money or extends credit and

who solicits insurance on real and personal property subject to

subsection (b) must explain to the borrower in writing that the

insurance related to such credit extension may be purchased

from an insurer or agent of the borrower’s choice, subject only

to the lender’s right to reject a given insurer or agent as provided in subsection (b)(2). Compliance with disclosures as to insurance required by Truth-In-Lending laws or comparable

state laws shall be in compliance with this paragraph.

‘‘This requirement for a commitment shall not apply in cases

where the premium for the required insurance is to be financed as

part of the loan or extension of credit involving personal property

transactions.

‘‘(d) The commissioner shall have the power to examine and investigate those insurance related activities of any person whom the

commissioner believes may be in violation of this section. Any affected person may submit to the commissioner a complaint or material pertinent to the enforcement of this section.

‘‘(e) Nothing in this section shall prevent a person who lends

money or extends credit from placing insurance on real or personal

property in the event the mortgagor, borrower or purchaser has

failed to provide required insurance in accordance with the terms

of the loan or credit document.

‘‘(f) Nothing contained in this section shall apply to credit life or

credit disability insurance.

‘‘(g) Nothing in this section shall prevent a person who lends

money or extends credit from assisting a mortgagor, borrower or

purchaser in obtaining homeowners insurance where the borrower

requests such assistance in writing. Nothing in this section shall

prevent a person who lends money or extends credit from referring

a mortgagor, borrower, or purchaser to the Hawaii hurricane relief

fund.’’.
17

Section 7. Section 219.1 of the Hawaii Homes Commission Act of

1920, as amended, is amended to read as follows:

‘‘§ 219.1 General assistance. (a) The department is authorized

to carry on any activities it deems necessary to assist the lessees

in obtaining maximum utilization of the leased lands, including

taking any steps necessary to develop these lands for their highest

and best use commensurate with the purposes for which the land

is being leased as provided for in section 207, and assisting the lessees in all phases of farming, ranching, and aquaculture operations

and the marketing of their agriculture of aquacultural produce and

livestock.

‘‘(b) Notwithstanding any law to the contrary, the department either alone or together with any other governmental agency, may:

‘‘(1) Form an insurance company, association (nonprofit or

otherwise), pool, or trust;

‘‘(2) Acquire an existing insurance company;

‘‘(3) Enter into arrangements with one or more insurance

companies; or

‘‘(4) Undertake any combination of the foregoing; upon such

terms and conditions and for such periods, as the commission

shall approve, to provide homeowner protection, including hurricane coverage, for lessees participating in such undertaking.

Such undertaking shall be subject to the provisions of chapter

, including but not limited to section –10(b), and chapter 431.

‘‘(c) The department, if experiencing any of the power as authorized under subsection (b) may:

‘‘(1) Issue revenue bonds under and pursuant to part III of

chapter 39, Hawaii Revised Statutes, to establish necessary reserves to provide for the payment of claims in excess of reserves

and for other related purposes; or to pay any liability incurred

that is self-insured or uninsured by the commission including

without limitations, liabilities for damage to property, comprehensive liability, environmental, or other losses; and

‘‘(2) Invest funds held in reserve, which are not required for

immediate disbursement, in property or securities in which savings banks may legally invest funds subject to their control or

as the commission may authorize by resolution.’’.

Section 8. Article 17 of chapter 431, Hawaii Revised Statutes, is

repealed.

Section 9. Chapter 479, Hawaii Revised Statutes, is repealed.

Section 10. (a) The director may establish a loan program to assist the Hawaii hurricane relief fund in carrying out the plan of operation, and may make loans to the Hawaii hurricane relief fund.

There is hereby created in the treasury of the State a separate and

special fund to be designated as the hurricane bond loan fund of

this Act.

(b) The department of budget and finance, with the approval of

the governor, is authorized to issue in the name of the department

revenue bonds at such times and in such amount or amounts not

to exceed $200,000,000 in aggregate principal as may be requested

and deemed necessary by the commissioner for the purposes of the

Hawaii hurricane relief fund. All such bonds shall be issued pursuant to part III of chapter 39, except as provided in this section.
18

(c) The resolution or certificate providing for the issuance of the

bonds may provide that all or part of the proceeds may be held and

invested in the hurricane bond loan fund until needed for the purposes of the Hawaii hurricane relief fund. For purposes of providing a source of revenue or security for these bonds, the director

may pledge funds deposited or to be deposited in the hurricane

bond loan fund to the payment or security of the bonds, and the

pledge shall constitute a lien and security interest on the moneys

in the hurricane bond loan fund to the extent and with the priority

set forth in the document establishing the pledge, without the necessity for physical delivery, recording, or other further act. No revenue bonds may be issued pursuant to this section unless the director of finance shall first make a determination based on information provided by the commissioner that there are sufficient revenues and other assets to pay debt service on the revenue bonds.

(d) The director of finance is authorized to issue reimbursable

general obligation bonds in the principal amount of $200,000,000,

or so much thereof as may be requested and deemed necessary by

the commissioner for the purposes of the Hawaii hurricane relief

fund, and the same sum is appropriated for fiscal year 1993–1994

for deposit into the hurricane reserve trust fund. The commissioner, upon the commissioner’s determination that it is advisable

to transfer funds from the hurricane reserve trust fund, shall reimburse the state general fund for payment of debt service on general

obligation bonds authorized and issued under this section.

Section 11. The state supreme court shall have exclusive and

original jurisdiction over any controversy or dispute regarding the

financing of the Hawaii hurricane relief fund and the hurricane reserve trust fund through the issuance of revenue bonds or general

obligation bonds, and the security provisions thereof and the imposition and collection of any rates and charges to repay or provide

security for the bonds; provided that the jurisdiction be limited to

the applicability of Article VII of the Constitution of the State of

Hawaii to these matters.

Section 12. All Acts passed by the legislature during this Regular

Session of 1993, whether enacted before or after the effective date

of this Act, shall be amended to conform to this act unless such

acts specifically provide that this Act is being amended.

Section 13. If any provision of this Act, or the application thereof

to any person or circumstance is held invalid, the invalidity does

not affect other provisions or applications of the Act which can be

given effect without the invalid provision of application, and to this

end the provisions of this Act are severable.

Section 14. There is appropriated out of the general revenues of

the State of Hawaii the sum of $100,000, or so much thereof as

may be necessary for fiscal year 1993–1994, to carry out the purposes of this Act, including the hiring of necessary staff. The sum

appropriated shall be expended by the director of commerce and

consumer affairs.

Section 15. The provisions of the amendments made by this Act

to the Hawaiian Homes Commission Act of 1920, as amended, are

declared to be severable and if any section, clause, or phrase, or the

application thereof to any person or circumstance is held to be invalid or ineffective because there is a requirement of having the
19

consent of the United States to take effect, then that portion only

shall take effect upon the granting of consent by the United States

and the effectiveness of the remainder of these amendments or the

application thereof shall not be affected.

Section 16. Statutory material to be repealed is bracketed. New

statutory material is underscored.

Section 17. This Act shall take effect upon its approval; provided

that section –16(a) of chapter , Hawaii Revised Statutes, and

sections 10 and 14 of this act shall take effect on July 1, 1993.

(Approved June 30, 1993.)

37. ACT OF THE SESSION LAWS OF HAWAII, 1994

ACT 37.—A Bill for an act relating to the Hawaiian Homes Commission Act, 1920,

as amended.

Be It Enacted by the Legislature of the State of Hawaii:

Section 1. Section 209, Hawaiian Homes Commission Act, 1920,

as amended, is amended by amending subsection (a) to read as follows:

‘‘(a) Upon the death of the lessee, the lessee’s interest in the tract

or tracts and the improvements thereon, including growing crops

and aquacultural stock (either on the tract or in any collective contract or program to which the lessee is a party by virtue of the lessee’s interest in the tract or tracts), shall vest in the relatives of

the decedent as provided in this paragraph. From the following relatives of the lessee who are (1) at least one-quarter Hawaiian, husband, wife, [or] children, or grandchildren, or (2) native Hawaiian,

father and mother, widows or widows of the children, [grandchildren,] brothers and sisters, widows or widowers of the brothers

and sisters, or nieces and nephews,—the lessee shall designate the

person or persons to whom the lessee directs the lessee’s interest

in the tract or tracts to vest upon the lessee’s death. The Hawaiian

blood requirements shall not apply to the descendants of those who

are not native Hawaiians but who were entitled to the leased lands

or under section 3 of the Act of May 16, 1934 (48 Stat. 777, 779),

as amended, or under section 3 of the Act of July 9, 1952 (66 Stat.

511, 513). In all cases that person or persons need not be eighteen

years of age. The designation shall be in writing, may be specified

at the time of execution of the lease with a right in the lessee in

manner to change the beneficiary at any time and shall be filed

with the department and approved by the department in order to

be effective to vest the interests in the successor or successors so

named.

‘‘In case of the death of any lessee, except as hereinabove provided, who has failed to specify a successor or successors as approved by the department, the department may select from only

the following qualified relatives of the decedent:

‘‘(1) Husband or wife; or

‘‘(2) If there is no husband and wife, then the children; or

‘‘(3) If there is no husband, wife, or child, then the grandchildren; or

‘‘[(3)] (4) If there is no husband, wife, [or] child, or grandchild, then from the following relatives of the lessee who are

native Hawaiian: father and mother, widows or widowers of
20

the children, [grandchildren,] brothers and sisters, widows or

widowers of the brothers and sisters, or nieces and nephews.

The rights to the use and occupancy of the tract or tracts may be

made effective as of the date of the death of the lessee.

‘‘In the case of the death of a lessee leaving no designated successor or successors, husband, wife, children, grandchildren, or relative qualified to be a lessee of Hawaiian home lands, the land subject to the lease shall resume its status as unleased Hawaiian

home lands and the department if authorized to lease the land to

a native Hawaiian as provided in this Act.

‘‘Upon the death of a lessee who has not designated a successor

and who leaves a spouse not qualified to succeed to the lease or

children of qualified to the lease, or upon the death of a lessee leaving no relative qualified to be a lessee of Hawaii home lands, or the

cancellation of a lease by the department, or the surrender of a

lease by the lessee, the department shall appraise the value of all

the improvements and growing crops or improvements and

aquacultural stock, as the cases may be, and shall pay to the nonqualified spouse or the nonqualified children as the lessee shall

have designated prior to the lessee’s death, or to the legal representative of the deceased lessee, or to the previous lessee, as the

case may be, the value thereof, less any indebtedness to the department, or for taxes, or for any other indebtedness to the department,

or for taxes, or for any other indebtedness the payment of which

has been assured by the department, owed by the deceased lessee

or the previous lessee. These payments shall be made out of the

Hawaiian home loan fund and shall be considered and advance

therefrom and shall be repaid by the successor or successors to the

tract involved. If available cash in the Hawaiian home loan fund

is insufficient to make these payments, payments may be advanced

from the Hawaiian home general loan fund and shall be repaid by

the successor or successors to the tract involved; provided that any

repayment for advances made from the Hawaiian home general

loan fund shall be at the interest rate established by the department for loans made from the Hawaiian home general loan fund.

‘‘The appraisal shall be made by three appraisers, one of whom

shall be named by the department, one by the previous lessee or

the legal representative of the deceased lessee, as the case may be,

and the third shall be selected by the two appraisers aforementioned.’’.

Section 2. Statutory material to be repealed is bracketed. New

statutory material is underscored.

Section 3. This Act shall take effect upon approval by the governor of the State of Hawaii with the consent of the United States

Congress.

(Approved April 28, 1994.)

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