Insurance Law Hawaii

Insurance Policy to Protect Hawaii's Coral Reefs

    The New York Times recently reported on an insurance policy issued to the non-profit Nature Conservancy to protect coral reefs in Hawaii. Cihistopher Flavelle, Catrin Einhorn, In a First, Nonprofit Buys Insurance for Hawaii's Threatened Coral Reefs, N.Y. Times, Nov. 21, 2022. 

    If damaged by a storm, coral reefs need immediate attention if they are going to recover. The Nature Conservancy plans a four step process to save damaged reefs:

•     Purchase a policy for all 400,000 acres of coral reefs surrounding the Hawaii island.
•     If reefs are sufficiently damaged by a storm the policy will pay out within two weeks.
•     The Nature Conservancy will ask the State of Hawaii, owner of the reefs, for a permit to repair the storm damage. 
•     Finally, if the state officials issue the permit, the insurance proceeds will pay teams of divers to repair the damage. Crews will have about six weeks     before coral begins to die.

      The payout of proceeds will not depend upon an inspection of the reefs for damage, which would take too long. Instead, the payment of benefits will depend on the force of the winds measured in real time. Under a scheme known as parametric insurance, a storm with winds of 50 knots, or 57 miles per hour, or more will generate a pay out. Such winds are strong enough to cause damage to the reefs, causing large waves that break off pieces of coral or knock tree limbs or other debris into the water, further damaging the reefs.

    The Times reports that reefs act much like sea wall, slowing down the destructive force of waves crashing toward the shore. 

    The two million dollar policy is the first of its kind in the United States for a natural structure. Insuring reefs has been used in Latin America with mixed success.

    

Rest in Peace, Justice Moon

    The Hawaii legal community lost a legendary member of the judiciary with the passing of retired Chief Justice Ronald T.Y. Moon on July 4, 2022. While serving as Chief Justice, the Supreme Court decided landmark cases including same sex marriage to protecting native Hawaiian rights and the environment. Justice Moon served as Chief Justice of the Hawaii Supreme Court for 17 years before retiring in 2010.

    Justice Moon was also instrumental in developing Hawaii jurisprudence in insurance law. Some of the significant insurance-related cases he authored are as follows:

AIG Hawaii Ins. Co. v. Smith, 78 Haw. 174, 891 P.2d 261 (1995) - insurer is estopped from denying coverage after failing to reserve rights and retaining control of the defense.

Christiansen v. First Ins. Co., 88 Haw. 136, 963 P.2d 345 (1998) - application of equitable tolling in coverage action. 

Enoka v. AIG Hawaii Ins. Co., 109 Haw. 537, 128 P.3d 850 (2006) - insurer may be in bad faith even if there is no coverage under the policy.

Hough v. Pacific Ins. Co., 83 Haw. 457, 927 P.2d 858 (1996) - workers' compensation insurer owes contractual duties to the worker, as an intended beneficiary of the employer's policy; employee may enforce those duties, including the duty to handle and pay claims in good faith. 

Sentinel Ins. Co., Ltd. v. First Ins. Co. of Hawaii, Ltd., 76 Haw. 277, 875 P.2d 894 (1994) - adopted the Legal Ambiguity rule for duty to defend, whereby, if there is no Hawaii decision on a coverage issue and competing decision exist across the country, the interpretation most favorable to the insured is used. Justice Moon also found the injury-in-fact trigger was applicable in CGL policies where progressive bodily injury or property damage continued across many policy periods. Finally, the decision addressed the consequences when an insurer breaches the duty to defend.

    A special session of the Hawaii Supreme Court will convene on August 8, 2022, at 3:30 p.m. to honor Justice Moon. Due to social distancing, the ceremony is by invitation-only, but the session will be live-streamed for public viewing on the Judiciary's YouTube Channel. 

    Rest in Peace, Justice Moon

Hawaii Legislature Passes Two Insurance-Related Bills in 2022 Session

    The 2022 Hawaii legislative session has adjourned with two insurance-related bills passed and and now pending before the governor. The new legislation amends existing statutes that are not within the everyday parlance of coverage lawyers. The bills are as follows:

    HB1980 - The bill modifies Haw. Rev. Stat. 346-59.1 regarding coverage for telehealth. Medicaid, health insurers, mutual benefit societies and health maintenance organizations are permitted, but not required, to cover telephonic behavioral health services under certain circumstances. The legislation further clarifies that telephonic services do not constitute telehealth. 

    HB 2112 - This legislation would amend Haw. Rev. Stat. 431:4A-101, or the National Association of Insurance Commissioners' Credit for Reinsurance Model Law. The Act conforms to the requirements of the bilateral agreements on insurance and reinsurance between the United States and the European Union and the United Kingdom, and ensures the states' regulatory authority remains intact and is not preempted by federal law. 

"Why Can't We Settle" Presentation Today

This afternoon, our panel discussed "Why Can't We Settle? Consequences When Insurer and Insured Disagree not he Value of the Underlying Claim" at the ABA's Insurance Coverage Litigation Committee seminar in Tucson. My co-panelists are Winter Wheeler of Winter Wheeler Mediation and Arbitration in Atlanta and Rina Carmel from Anderson, McParlin & Conners LLP in Los Angeles

 

Blog Heads Into Fifteenth Year

    Insurance Law Hawaii is fourteen years old this month. We began posting in December 2007, 1551 posts ago.

    We strive to keep readers abreast of new developments in insurance-related cases from Hawaii and across the country. Coverage issues in the past year have again been dominated by COVID-19 and business interruption claims. This trend will likely continue over the next year and we will do our best to track developments. 

    Other Damon Key blogs to visit are www.inversecomdemnation.com [here] authored by Robert Thomas, Mark Murakami's  www.oceanlawhawaiil.com [here] and www.hawaiiconstructionlaw.com [here] by Anna Oshiro.

    Thank you for following along as we head into our fifteenth year.

Hawaii Legislature Sends Three Insurance-Related Bills to the Governor

    The 2021 legislative session has adjourned with three insurance-related bills passed and sent to the governor. The bills are as follows:

    SB1096 - The bill makes several additions to the Insurance Code, Chapter 431. It includes various consumer protections with regard to public adjusters. The bill requires contractual terms and disclosures, as well as granting a right to rescind. A standard of conduct is imposed on various entities, including limited line licensees. The bill also touches on motor vehicle rental companies, self-service storage, limited line licenses, and surplus line coverage. 

    SB1098 - This statute would adopt certain provisions of the National Associatio of Insurance Commissioners' Producer Licensing Model Act, the Public Adjuster Licensing Model Act, the Reinsurance Intermediary Model Act, and Independent Adjuster Licensing Model Guidelines to provide consistency and promote efficiency in processing insurance licensing fees, applications, certificates, regulations and renewals. 

    SB1100 - This legislation adopts the National Association of Insurance Commissioners' Insurance Data Security Model Law to establish insurance data security standard for Hawaii insurance licenses. 

Blog is Thirteen Years Old

    Insurance Law Hawaii is thirteen years this week, 1453 posts later. We began in December 2007.

    We strive to keep readers abreast of new developments in cases from Hawaii and across the country. Coverage issues in the past year have been dominated by COVID-19 and business interruption claims. This trend will likely continue over the next year and we will do our best to track developments. 

    Other Damon Key blogs to visit are www.inversecomdemnation.com [here] authored by Robert Thomas, Mark Murakami's  www.oceanlawhawaiil.com [here] and www.hawaiiconstructionlaw.com [here] by Anna Oshiro.

    Thank you for following along as we head into our fourteenth year.

Hawaii Insurance Division Issues New Memorandum on Policy Handling During COVID-19

    The Hawaii Insurance Commissioner issued Memorandum 2020-4A on April 27, 2020, waiving certain requirements for insurers and to give instructions and guidelines. 

    First, the Insurance Division will not regard the following as unfair trade practices or unfair methods of competition under Haw. Rev. Stat, Art. 13:

. Waiving of fees, penalties, or other charges relating to an insured's temporary inability to submit
premium payments or otherwise respond to an insurer's inquiries;

. Extending of grace periods for payment of premiums;

. Granting of additional time to policyholders to pay premiums before non-renewals or cancellations become effective;

. Extending of proof of loss submission deadlines to claimants;

. Allowing of self-auditing and self-reporting in lieu of physical audits to the extent that physical audits
are impracticable;

. Encouraging policyholders to use electronic payment technology on websites, apps, and electronic bank
transfers whenever possible to avoid in person payments.

    The Insurance Division will also support the virtual inspections of property and the increased used of electronic delivery methods for consumer notifications and interactions.

    Finally, the Memorandum states the the Insurance Division will consider specific proposals from insurers to quickly adjust to changes in the insurer's risk exposure. The may include allowing personal vehicles to be covered while delivering food, medicine, or other essential services for commercial and charitable purposes; temporarily reducing premium prospectively; or refunding premiums retroactively. The Division may also waive enforcement of relevant applicable statutes, and may allow insurers to deviate from filed rates or contractual language if the insurer's actions are applied uniformly and without prejudice to all similarly affected insureds. 

    The Memorandum remains in effect for 60 days and may be extended. 

Hawaii Insurance Division Issues Request to Insurers on COVID-19

    The Hawaii Insurance Commissioner has requested that admitted and non-admitted insurers offering policies in Hawaii take special consideration of policyholder impacted by COVID-19. The March 27, 2020 bulletin reads: 

    The impact on individuals and businesses due to COVID-19 nationwide is evident in the daily news coverage. The anticipated negative impact on individuals and businesses in this State due to COVID-19 will be realized in the near future. Business will have substantially reduced revenue, employees will have reduced hours and may lose their jobs, with further reaching repercussions. The Insurance Commissioner is issuing Memorandum 2020-3I to encourage insurers selling insurance coverage in the State for all lines of insurance to be mindful of the difficulties individuals and businesses in the State are experiencing.

    The Insurance Commissioner encourages insurers to work with their insureds to ensure coverage continues during this time, policies do not lapse, and to consider the following:

1. Refrain from cancelling or non-renewing policies due to non-payment during this time of hardship and to grant a grace period for premium payments to be made;
2. Work with insureds on a structured payment plan for late premium payments;
3. Waive late fees and penalties;
4. Extend timeframes to complete property and automobile inspections or undergo medical examinations; and
5. Continue working with insureds for a period of 60 days after this health emergency has passed, or as long as reasonably practical.

    The Insurance Division empathizes with those impacted by the business downturn caused by COVID-19 and encourages insurers and policyholders, particularly those with limited financial resources, to communicate and work on a mutually agreeable solution.

    This Memo is directed to all admitted and non-admitted insurers in this State providing any insurance coverage including life, health, motor vehicle, property, casualty, and other types of insurance of insurance for individuals, groups, and businesses.

    The Division will continue to monitor this situation and issue updates on its website at http://cca.hawaii.gov/ins/ .

    The memo is somewhat less forceful than what some states have requested of insurers. In a prior post [here], we noted that New York's Department of Financial Services instructed insurers to advise policyholders of possible coverage under business interruption provisions. 

Insurance Coverage and Coronavirus

    Individuals and businesses are asking what insurance coverage is available for harm caused by COVID-19 and the coronavirus. Here is a short survey addressing possible coverage under various policies.

    Property Insurance - Typically, damage to tangible property insured by "covered causes of loss" is covered by a commercial property or homeowner's policy. The policy frequently requires a "direct physical loss." Loss caused by fire or hurricane are examples of covered perils. Tangible property that becomes unusable may be covered.Some courts have found that contamination rendering property uninhabitable constitutes a "physical loss." Arguably, these terms do not rule out the possibility of damage caused by the presence of microscopic organisms, nor require that loss or damage be visible. Issues an insured may face, however, include the cause of the loss, whether an exclusion for viral contamination applies, or whether a building was unusable or voluntarily closed.  

    Business Interruption - Commercial property policies may include business interruption coverage for loss of income due to suspension of business operations. The closing of a business must be due to a covered cause of loss. Actions by government or law enforcement forcing the closure of a business may be a covered cause of loss. Restricting access to a business where transmission of an infectious disease is suspected may lead to coverage for income losses. Business interruption claims can be complex and often require the assistance of experts such as accountants. 

    Contingent business interruption coverage applies if a supplier or customer has to suspend operations, thereby impacting the business of the insured. 

    Federal legislation is currently being proposed to create a reinsurance fund for business interruption losses caused by the coronavirus or other pandemics. The legislation would be similar to that created after the 9/11 terrorist attacks. The reinsurance program would mandate that coverage apply to claims relating to a pandemic. Carriers would be required to enlist to be eligible. Insureds would be covered for an additional premium.

    Directors and Officers - If a corporation faces a securities lawsuit due to its failure to disclose the impact of coronavirus on its business, a directors and officers policy may be implicated. With the recent stock market plunge, investors are likely to investigate whether proper precautions were taken to reduce losses in the stock market and elsewhere. 

    Workers Compensation - Employees contracting the coronavirus at the workplace or in the course and scope of their employment may seek coverage under workers compensation. Further, employees traveling from the workplace to an infected area or those stationed in an infected area may seek coverage under workers compensation if they become infected.

    Liability Coverage - Liability policies typically cover bodily injury or property damage caused by an occurrence, or accident. Liability policies protect businesses against third-party claims for bodily injury resulting from exposure to dangerous conditions. Guests of hotels, restaurants, malls, sporting events, or an office who allege they contracted the coronavirus could sue the owners and/or operators of such facilities. Such suits could be based upon the owners and/or operations' failure to exercise reasonable care in guarding against the danger or failing to warn customers. Liability policies may exclude communicable diseases. 

    The availability of coverage under various policies will heavily depend upon the facts surrounding an incident and the policy language. As always, give notice to the carrier as soon as possible after a loss and document the loss as completely as possible

    Be safe and check your coverage.