RELATING TO INSURANCE.

SB2961

THE SENATE

S.B. NO.

2961

THIRTY-THIRD LEGISLATURE, 2026

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.
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The
legislature finds that Hawaii faces unique and extraordinary challenges in responding
to and recovering from catastrophic events due to its geographic isolation,
preexisting housing shortage, high cost of living, and reliance on limited and
fragile supply chains for construction materials.
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These factors have complicated Hawaii's recovery
from recent disasters.
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For example, the
August 2023 Maui wildfires destroyed thousands of homes and displaced families
for extended periods of time.
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Even now,
more than two years later, many survivors of the Maui wildfires remain without
permanent housing.

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The devastation caused by the Maui
wildfires highlighted Hawaii's extreme vulnerability to major disasters and underscored
the need for the State to proactively strengthen disaster recover policies,
improve housing resiliency, and ensure that every island is prepared to respond
to future catastrophes, including wildfires, hurricanes, tsunami, floods, and
volcanic eruptions.

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The legislature further finds that,
although federal and state disaster housing programs may provide temporary
relief following disasters, they are insufficient to meet the long-term needs
of displaced families, especially families facing rebuilding delays due to
supply chain disruptions or workface shortages.
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Further complicating recovery is the fact that many survivors of natural
disasters are underinsured and thus are unable to fully cover the cost to
rebuild their homes.
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These families must
seek additional funds, apply for loans, or rebuild incrementally.

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These financial and logistical challenges result
in long displacement timelines, often stretching five years or longer before
permanent homes are completed.
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During
this period, families must live in expensive, inadequate, or unstable living
arrangements, such as hotels or crowded rentals, or are forced to relocate away
from their communities.

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The legislature finds that it is vital that
families be able to remain in their communities during recovery so they can oversee
rebuilding, protect their land, maintain cultural and community ties, and
ensure that their voices are part of the recovery process.
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However, current insurance policies often
prohibit the use of additional living expenses benefits, which are also
referred to as loss of use benefits, for the purchase of a manufactured home or
similar temporary unit, even when that option is more cost effective and
stabilizing.

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The legislature finds that allowing
homeowners more flexibility in the use of additional living expenses benefits
will provide families with dignity, stability, and a practical path to remain
close to home while supporting the State's long‑term recovery goals.
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Displaced insured persons often incur
significant immediate expenses for lodging, deposits, and relocation after a
total loss.
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Delays in the payment of additional
living expenses can force survivors into debt, unsafe housing, or displacement
from their communities.
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An advance
payment standard would provide stability and ensure timely access to necessary
housing during a critical period.

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The legislature also recognizes that rebuilding
timelines after disasters frequently exceed the standard duration of additional
living expenses benefits due to factors beyond the insured's control.
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Providing a uniform minimum additional living
expenses benefits duration, with mechanisms for extensions, will prevent bankruptcies,
premature displacements, financial hardships, and homelessness.

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Accordingly, the purpose of this Act is to
provide insured persons with greater flexibility in using additional living
expenses benefits by requiring insurers to:

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(1)
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Authorize
the use of additional living expenses benefits for the purchase or lease of a
housing unit to serve as the insured's temporary primary residence;

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(2)
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Issue
an advance payment of a certain amount of additional living expenses benefits
following the determination of a total loss caused by a covered peril that
occurred during a state of emergency; and

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(3)
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Provide
additional living expenses benefits for a minimum of thirty-six months from the
date of a total loss that occurred during a state of emergency.

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SECTION 2.
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Chapter 431, Hawaii Revised Statutes, is amended by adding a new part to
article 10E to be appropriately designated and to read as follows:

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Part
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ADDITIONAL LIVING EXPENSEs BENEFITS;
AUTHORIZED USES; ADVANCE PAYMENTS; DURATION

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�431:10E-A
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Definitions.
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As used in this part, unless the context
otherwise requires:

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"Additional living expenses benefits"
refers to insurance coverage that pays for temporary housing expenses and certain
other expenses resulting from a covered peril.
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"Additional living expenses" includes loss of use benefits.

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"Housing unit" means any housing
used as a temporary primary residence and includes a recreational vehicle,
manufactured home, or tiny home.

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"State of emergency" means a
state of emergency or local state of emergency declared by the governor or a
mayor pursuant to section 127A-14.

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�431:10E-B
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Authorized uses; calculation; payment.
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(a)
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Notwithstanding any other law or policy language to the contrary, an insurer
issuing or renewing a homeowners insurance policy in this State shall permit an
insured who has sustained a total loss to apply additional living expenses
benefits toward the purchase or lease of a housing unit to serve as the insured's
temporary primary residence.

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(b)
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An insurer shall consider the purchase or lease of a housing unit
pursuant to subsection (a) to be a reasonable and necessary expense if:

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(1)
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The
cost of the purchase or lease is less than or comparable to the total estimated
cost of other reasonable temporary housing options for the anticipated
displacement period;

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(2)
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No
comparable long-term rental housing is reasonably available within
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miles
of the insured property; or

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(3)
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The
insured's household has specific needs that are better met by a covered housing
unit, including disability accommodations or the ability to remain on the
premises of the insured property.

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(c)
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The
total amount payable under this section shall not exceed the limit of the
policy's additional living expenses benefits.

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(d)
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An insurer may require an insured to submit documentation of the purchase
price, condition, and intended use of the housing unit purchased or leased under
this section.

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(e)
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Except
as provided in section 431:10E-D, nothing in this section shall be construed to
extend the duration or dollar limit of additional living expenses benefits
beyond the duration or dollar limit provided in the policy.

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�431:10E-C
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Advance payments of additional living expenses
benefits after state of emergency.
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(a)
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Upon determination of a total
loss caused by a peril that:

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(1)
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Is
covered under a homeowners insurance policy; and

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(2)
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Occurred
pursuant to a state of emergency,

an insurer,
within seven calendar days of a request by the insured, shall issue an advance
payment of no less than four months of the insured's additional living expenses
benefits.

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(b)
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An
advance issued under subsection (a) shall not be construed to affect an insured's
right to claim further additional living expenses benefits, subject to the
policy's limits.

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�431:10E-D
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Extended duration for additional living
expenses benefits; states of emergency.
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(a)
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In the event of a total loss
caused by a peril that:

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(1)
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Is
covered under a homeowners insurance policy; and

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(2)
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Occurred
during a state of emergency,

an insurer
issuing or renewing a homeowners insurance policy in this State shall provide
additional living expenses benefits for a minimum of thirty-six months from the
date of the total loss.

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(b)
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An insurer shall grant extensions of additional living expenses benefits
in six-month increments if there are delays to the permanent rebuilding of the primary
residence because of permitting issues, material shortages, labor shortages, or
other factors outside of the control of the insured.

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(c)
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Nothing in this section shall be construed to prohibit an insurer from
allowing an insured additional time to collect:

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(1)
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The
full replacement cost; or

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(2)
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Additional
living expenses benefits beyond what is specified in the policy."

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SECTION 3.
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In codifying the new sections added by section 2 of this Act, the
revisor of statutes shall substitute appropriate section numbers for the letters
used in designating the new sections in this Act.

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SECTION 4.
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This Act does not affect rights and duties that matured, penalties that
were incurred, and proceedings that were begun before its effective date.

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SECTION 5.
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This Act shall take effect on January 1, 2027, and shall apply to all
homeowners insurance policies issued or renewed on or after that date.

INTRODUCED BY:

_____________________________

Report Title:

Homeowners
Insurance; Additional Living Expenses; ALE Benefits; Purchase or Lease of
Temporary Primary Residence; Advance Payments; Extended Coverage

Description:

Requires
homeowners insurance policies to permit an insured who sustains a total loss to
apply additional living expenses benefits toward the purchase or lease of a
housing unit to serve as the insured's temporary primary residence.
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Requires insurers to pay an advance of at
least 4 months of additional living expenses benefits after a total loss to an
insured's primary dwelling caused by a covered peril that occurred pursuant to
a state of emergency.
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Requires
homeowners insurance policies to provide additional living expenses benefits
for a minimum of 36 months in the event of a total loss that occurred during a state
of emergency.
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Provides for extensions of
additional living expenses benefits under certain conditions.

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