RELATING TO INSURANCE.

SB1166

THE SENATE

S.B. NO.

1166

THIRTY-THIRD LEGISLATURE, 2025

STATE OF HAWAII

A BILL FOR AN ACT

RELATING
TO INSURANCE
.

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

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SECTION 1.
�
The legislature finds that climate disasters,
extreme weather attributable to climate change, and harms resulting from
long-term changes to the climate system pose a threat to the health, safety,
and security of all residents of, and visitors to, Hawaii.

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For
residents, climate change risks include
an increase in precipitation and
intense tropical storms, hotter temperatures, rising sea level, and intensified
drought.
�
Accordingly, Hawaii has a
compelling state interest in protecting its citizens from climate disasters, extreme
weather attributable to climate change, and harms resulting from long-term
changes to the climate system.
�
This
protection includes affordable access to a functioning insurance market in the State.

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The
legislature further finds there is also a compelling state interest in preserving
public resources for traditional public purposes, which does not include subsidizing
the continued operation of the insurance industry.
�
The insurance industry has been destabilized
and harmed by the deception of people and entities who have engaged in
misleading and deceptive practices about the connection between fossil fuel products
and climate change.
�
The State's
insurance industry, particularly the property and casualty insurance sector,
has been destabilized by large and frequent payouts to policyholders for a
variety of events caused by or attributable to the deception of these responsible
parties.
�
This instability has led to
increased nonrenewal rates and premiums on all islands and for multiple types
of insurance policies.
�
Between 2018 and
2023, insurance nonrenewal rates increased by ninety-one per cent in the county
of Kauai, two hundred ninety-six per cent in the city and county of Honolulu, one
hundred eighty-four per cent in the county of Maui, and seventy per cent in the
county of Hawaii.

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The
legislature further finds that the area burned by wildfires in Hawaii has increased
fourfold.
�
Most recently, climate change
exacerbated the Maui wildfires, which destroyed the town of Lahaina and killed
at least one hundred two people. In the aftermath of this tragic and horrific
event, insurance companies operating in Hawaii have already paid out over $2,300,000,000
across more than ten thousand wildfire claims to fire victims, with another $1,000,000,000
of additional insured losses yet to be paid.
�

The scope and scale of damage has led to difficult settlement
negotiations in which parties have tried to address how to meet the needs of fire
victims, maintain a solvent market for insurance, and keep vital public
utilities and educational institutions operating in our communities.
�
Hawaii has a compelling state interest in
protecting the integrity of these institutions as they seek to provide relief
to harmed and impacted parties.

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Climate
change has also impacted the amount of water available in key watersheds across
the islands.
�
Ongoing drought has created
water security issues that are exacerbated by the growing
water demand,
which may increase up to thirty-six per cent by the end of the century.
�
For example, rainfall in the Nuuanu watershed
is projected to decrease by as much as twenty‑seven per cent, and both the
Heeia and Na Wai Eha watershed are also experiencing decreases in rainfall, threatening
groundwater supplies and drinking water availability.

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At
Hawaii's shorelines,
sea level has risen ten inches on average compared
to 1950, and the mean number of days that cause high tide flooding in Honolulu
has almost doubled from six to eleven days per year since the 1960s.
�
Almost all the shorelines in Hawaii,
approximately ninety-two per cent, are predicted to retreat between one and
twenty-four meters by 2050.
�
Researchers
predict that shoreline retreat rates have doubled from the historical rate due
to sea level rise.

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Climate
change is also causing more extreme temperatures in Hawaii.
�
The average annual temperature in Hawaii in
2016 was about 1.7 degrees Fahrenheit warmer than the one hundred-year mean
from 1917 to 2016.
��
Similarly, global
mean sea surface temperature has increased by about 1.8 degrees Fahrenheit over
the past century and waters around Hawaii have followed this trend.

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The
legislature finds that insurance companies operating in the State need to
redress the harm that responsible parties have caused through climate disasters,
extreme weather attributable to climate change, and harms resulting from long‑term
changes to the climate system.
�
Hawaii
has a compelling state interest in ensuring that the Hawaii hurricane relief fund
and the Hawaii property insurance association, which are both state entities,
exercise their subrogation rights to recover from responsible parties that have
caused damages due to climate disasters, extreme weather attributable to
climate change, and harms resulting from long‑term changes to the climate
system.
�
The courts of this State are the
appropriate venue to provide this relief.
�

The legislature further declares that these harms related or
attributable to climate change should not be deemed acts of God, unforeseeable,
or otherwise classified as a force majeure event eligible for litigation
limitations or defenses, except as otherwise explicitly and unambiguously
provided.

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The
legislature further finds that for decades, certain people and entities have
spread intentional lies, misinformation and disinformation, and
misrepresentations about the connection between climate change and fossil fuel-based
products, as well as how climate change has directly contributed injuries in
this State.
�
Continued lies,
misinformation and disinformation, and misrepresentations by these responsible
parties pose a threat to the health, safety, and security of Hawaii's residents
and visitors.
�
These parties have long known
the dangers of fossil fuel‑based products; however, they have continued
to deny and lie for profit.
�
Hiding,
obfuscating, and denying information to consumers, elected officials, and
regulators alike has harmed and continues to harm Hawaii.
�
Hawaii has a compelling interest in protecting
consumers from these lies and misleading information, while also encouraging factual
and truthful information on how climate disasters and other harms can be
attributed to the responsible parties who have spread those falsehoods.

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The legislature further finds and declares
that:

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(1)
�
Individuals and entities involved in
the production of fossil fuel products have engaged in a decades-long project
to protect their bottom lines with a coordinated effort to deceive the public
about the reality of the climate crisis;

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(2)
�
Documents unveiled by litigation and
investigative journalists demonstrate that those parties were aware of the potentially
catastrophic impact of their products from as early as the 1950s.
�
Even though research conducted by their own
scientists affirmed the impacts of their business, these parties outright
denied that climate change was real, spread disinformation to cast doubt on the
science, and fought regulatory action against fossil fuel and fossil fuel
products;

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(3)
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The 1970s and 1980s saw the development
of a clear scientific consensus that increasing carbon dioxide concentration in
the atmosphere would contribute to global warming, and that the heightened carbon
dioxide emissions were attributable to fossil fuels.
�
These facts were supported by several fossil fuel
industry scientists from different companies such as Exxon and Shell, who
presented these findings to their management with warnings that the "present
trend of fossil fuel consumption will cause dramatic environmental effects before
the year 2050;"

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(4)
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Despite acknowledging that increased carbon
dioxide concentrations due to fossil-fuel combustion posed a considerable
threat, responsible parties decided not to take steps to prevent the risks of
climate change.
�
Instead, they stopped
funding major climate research and launched campaigns to discredit climate
science and delay actions perceived as contrary to their business interests.
�
These corporations carried out these campaigns
by:

���������
(A)
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Developing public relations strategies
that were contradictory to their knowledge and scientific insights;

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(B)
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Engaging in public communications campaigns
to promote doubt and downplay the threats of climate change; and

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(C)
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Funding individuals, organizations, and
research aimed at discrediting the growing body of publicly available climate
science;

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(5)
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From 1970 to 2020, the oil and gas
industry responsible parties made nearly $2,800,000,000 a day and $1,000,000,000,000
dollars a year in profit;

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(6)
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Responsible parties currently advertise
"green" efforts to the public that mask the lack of real investment
in resiliency and energy-source transition and the continued prioritization of
the extraction, refinement, and distribution of fossil fuel products;

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(7)
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A December 2022 report by a
congressional oversight committee revealed internal documents from senior
leaders from the fossil fuel industry that explicitly reject taking
accountability for the greenhouse gas emissions associated with their products;
and

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(8)
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By conduct and impact, these responsible
parties have intentionally obfuscated the truth about climate change and
outright deceived the public to continue dependence on fossil fuel products.

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The
legislature further finds that the intentional lies, misinformation, and disinformation,
and misrepresentations by responsible parties about the connection between the
products they sell is not political speech, but fundamentally commercial
activity with incidental political impact.
�

The legislature finds that these parties must be accountable to those
harmed by climate disasters, extreme weather attribute to climate change, and
long-term changes to the climate system.

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The legislature finds that the Hawaii hurricane
relief fund and the Hawaii property insurance association have not exercised
their right of subrogation against responsible parties who should be held
accountable for substantially contributing to losses associated with climate
change due to their misleading and deceptive practices.

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It
is the intent of this State to provide a judicial forum for the efficient,
just, and equitable resolution of insurers' subrogation claims stemming from
climate disasters, extreme weather attributable to climate change, and harms
resulting from long-term changes to the climate system.

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The
purpose of this Act is to:

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(1)
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R
equire
property and casualty insurance rates that incorporate historical or projected
losses from fire or catastrophe hazards to be conditioned on agreement by the
insurer to file and litigate subrogation claims against responsible parties;
and

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(2)
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Require the Hawaii property insurance
association to file and litigate subrogation claims against certain responsible
parties for claims paid by the insurer for losses that are attributable to
climate change.

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SECTION

2
.
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Section
431:14-103, Hawaii Revised Statutes, is amended by amending subsection (a) to
read as follows:

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"(a)
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Rates shall be made in accordance with the
following provisions:

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(1)
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Rates shall not be excessive,
inadequate, or unfairly discriminatory.

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(2)
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Due consideration shall be given to:

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(A)
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Past and prospective loss experience
within and outside this State; provided that if the claim does not exceed the
selected deductible amount pursuant to section 386-100, and the employer
reimburses the insurer for the amount, the claims shall not be calculated in
the employer's experience rating or risk category;

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(B)
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The conflagration and catastrophe
hazards, if any[
;
]
, with the requirement that rates incorporating
historical or projected losses from conflagration or catastrophe hazards shall
be conditioned upon agreement by the insurer to file and litigate subrogation
claims against responsible parties for claims paid for losses from climate
disasters or extreme weather attributable to climate change;

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(C)
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Any proceeds recovered by the
insurer through subrogation claims;

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[
(C)
]

(D)
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A reasonable margin for underwriting profit and contingencies;

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[
(D)
]

(E)
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Dividends, savings, or unabsorbed
premium deposits allowed or returned by insurers to their policyholders,
members, or subscribers;

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[
(E)
]

(F)
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Past and prospective expenses both
country‑wide and those specially applicable to this State;

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[
(F)
]

(G)
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Investment income from unearned premium and loss reserve funds; and

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[
(G)
]

(H)
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All other relevant factors within and
outside this State.

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(3)
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In the case of fire insurance rates,
consideration shall be given to the experience of the fire insurance business
during a period of not less than the most recent five-year period for which
that experience is available.

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(4)
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The systems of expense provisions
included in the rates for use by any insurer or group of insurers may differ
from those of other insurers or groups of insurers to reflect the requirements
of the operating methods of any insurer or group with respect to any class of
insurance, or with respect to any subdivision or combination thereof for which
subdivision or combination separate expense provisions are applicable.

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(5)
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Risks may be grouped by classifications
for the establishment of rates and minimum premiums.
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Classification rates may be modified to
produce rates for individual risks in accordance with rating plans that
establish standards for measuring variations in hazards or expense provisions,
or both.
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These standards may measure any
differences among risks that can be demonstrated to have a probable effect upon
losses or expenses.
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No risk
classification may be based upon race, creed, national origin, or the religion
of the insured.

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(6)
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Manual, minimum, class rates, rating
schedules, or rating plans shall be made and adopted, except in the case of:

���������
(A)
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Special rates where manual, minimum,
class rates, rating schedules, or rating plans are not applicable; and

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(B)
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Specifically rated inland marine risks.

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(7)
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No insurer authorized to do business in
this State shall issue any policy that provides or makes available to any risks
preferred rates based upon any grouping of persons, firms, or corporations by
way of membership, license, franchise, contract, agreement, or any other means,
other than common majority ownership of the risks, or except where:

���������
(A)
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A common stock ownership in and
management control of the risks are held by the same person, corporation, or
firm;

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(B)
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Permitted or authorized by filings in
existence as of January 1, 1988, under the casualty rating law and the fire
rating law, as these filings may be amended from time to time;

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(C)
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Health care providers, as defined in
section 671‑1 that could have joined the patients' compensation fund
as it existed in chapter 671, part III, prior to May 31, 1984, joined together
with one or more groups of related or unrelated health care providers;

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(D)
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Permitted under article 12; or

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(E)
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Otherwise expressly provided by
law."

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SECTION

3
.
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Section
431:21-106, Hawaii Revised Statutes, is amended by amending subsection (c) to
read as follows:

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"(c)
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The plan of operation shall:

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(1)
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Establish procedures for performance of
all the powers and duties of the association under section 431:21‑105;

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(2)
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Establish maximum limits of liability
to be placed through the association;

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(3)
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Establish reasonable underwriting
standards for determining insurability of a risk which are comparable to the
standards used to determine insurability of a risk located outside the area
designated by the commissioner as eligible for association coverage;

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(4)
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Establish a schedule of deductibles, if
appropriate;

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(5)
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Establish the commission to be paid to
licensed producers;

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(6)
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Establish the rates to be charged for
the insurance coverages, so that the total premium income from all association
policies, when combined with the investment income, shall annually fund the
administration of the association.
�
The
administration of the association shall include the expenses incurred in
processing applications, conducting inspections, issuing and servicing
policies, paying commissions, and paying claims, but shall not include
assessments approved by the commissioner[
;
]
.
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Rates charged shall also account for proceeds
obtained by the association from subrogation claims made by the association;

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(7)
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Establish the manner and scope of the
inspection and the form of the inspection report.
�
The inspection guidelines may include setting
minimum conditions the property must meet before an inspection is required;

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(8)
�
Establish procedures whereby selections
for the board of directors will be submitted to the commissioner for the
commissioner's information;

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(9)
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Establish procedures for records to be
kept of all financial transactions of the association, its producers, and its
board of directors;

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(10)
�
Establish procedures by which
applications will be received and serviced by the association;

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(11)
�
Establish guidelines for the
investigation and payment of claims; [
and
]

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(12)
�
Establish procedures whereby the
association may assume and cede reinsurance on risks written through the
association[
.
]
; and

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(13)
�
Require the association to file and
litigate subrogation claims against responsible parties for claims paid by the
insurer for losses from climate disasters and extreme weather attributable to
climate change.
"

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SECTION 4.
�

Nothing in this Act shall be construed to limit in any way the
enforceability of existing laws concerning insurance, consumer protection,
climate, environment, energy, or natural resources, by either the government or
other private plaintiffs.

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SECTION
5.
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Statutory material to be repealed is
bracketed and stricken.
�
New statutory
material is underscored.

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SECTION
6.
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This Act shall take effect upon its
approval.

INTRODUCED BY:

_____________________________

Report Title:

HPIA; Property
Insurance; Subrogation Claims; Property and Casualty Rate Regulation

Description:

Requires
that property and casualty insurance rates that incorporate historical or
projected losses from fire or catastrophe hazards be conditioned on agreement
by the insurer to file and litigate subrogation claims against responsible
parties.
�
Requires the Hawaii Property
Insurance Association to file and litigate subrogation claims against certain responsible
parties for claims paid by the insurer for losses that are attributable to
climate change.
�
Requires insurance rates
to account for proceeds obtained by the Association through subrogation claims.

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not legislation or evidence of legislative intent.