RELATING TO INSURANCE.

SB2962

THE SENATE

S.B. NO.

2962

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 the August 2023 Maui wildfires destroyed thousands of
homes and displaced countless families, creating an unprecedented housing
crisis that exposed major vulnerabilities in Hawaii's disaster recovery systems.

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The Maui wildfires also demonstrated the
urgent need to modernize the State's insurance laws to provide the flexibility
required to adequately respond to future disasters such as hurricanes,
wildfires, tsunami, flooding, and volcanic eruptions.

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The legislature further finds that
homeowners who have experienced a catastrophic loss often face extended
recovery timelines of five years or more due to underinsurance, material
shortages, workforce limitations, and delays in securing permits and
funding.
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Hawaii's limited rental housing
inventory is prone to market failure following major disasters, further driving
up costs and leaving families without stable or affordable housing options.

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The legislature also finds that current
insurance policies often restrict homeowners to rebuilding at the original site,
even if rebuilding at the same site is unsafe, impractical, or would result in
significant delays.
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Insurance policies
also do not allow coverage limits to be combined to bridge funding gaps.
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In contrast, other states such as California,
Colorado, and Oregon have enacted reforms that allow homeowners to rebuild or
purchase an existing home at a different location while keeping total insurer
liability capped at existing policy limits.
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The legislature believes Hawaii's laws should be similarly modernized to
provide flexibility to recover from disasters without creating new costs or
obligations for insurers.
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These reforms
will help families remain near their communities, relieve pressure on the
already stressed rental market, speed recovery, and increase resilience to future
disasters.

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Accordingly, the purpose of this Act is to give
insured persons flexibility to use their existing insurance benefits in a more
efficient way to secure safe and stable housing after a disaster.

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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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HOMEOWNERS INSURANCE; REBUILDING OR REPLACING DWELLINGS

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

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"Covered total loss" means a
total loss to an insured's primary dwelling 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.

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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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Right to rebuild or replace at a new location.
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(a)
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Notwithstanding
any other law or policy language to the contrary, and except as provided in
this part, a homeowners insurance policy issued or delivered in this State shall
not contain any provision that limits or denies a payment of replacement cost,
extended replacement cost, or building code upgrade cost for a dwelling that
has sustained a total loss solely because the insured elects to:

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(1)
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Rebuild
the dwelling at a different location; or

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(2)
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Purchase
an already-constructed home at a different location.

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(b)
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The
total payment to an insured under this section shall not exceed the replacement
cost that would have been payable if the dwelling had been rebuilt at its
original location, including any applicable extended replacement cost and
building code upgrade coverage.

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(c)
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The calculation of the replacement cost to:

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(1)
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Rebuild
a dwelling at a different location; or

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(2)
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Purchase
a dwelling at a different location,

shall not
include consideration of the value of the land upon which the replacement
residence is located.

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�431:10E-C
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Combining limits after covered total loss.
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(a)
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If,
upon determination of a covered total loss, the insured's dwelling coverage
limit is insufficient to rebuild or replace the primary residence, the insurer
shall allow the insured to combine dwelling and other structures coverage
limits to fund the rebuilding or replacement of the primary residence; provided
that the combined total does not exceed the sum of those limits as stated in
the policy.

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(b)
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Any claim payments for losses that allow for the combination of the
coverage limits for dwellings and other structures, and for which replacement
cost coverage is applicable, shall be for the full replacement value of the
loss without requiring actual replacement of the other structures.

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�431:10E-D
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Notice to policyholders.
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Following the declaration of a state of
emergency that affects an insured property, that has undergone a covered total
loss, the insurer shall provide clear written notice to the affected
policyholder of the policyholder's rights to:

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(1)
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Rebuild
or replace the dwelling at a different location pursuant to section 431:10E-B;
and

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(2)
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Combine
coverage limits pursuant to section 431:10E‑C."

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SECTION 3.
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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 4.
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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 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; Rebuilding or Purchase at Different Location; Combination of
Coverage Limits; Notice

Description:

Prohibits
homeowners insurance policies from limiting or denying payment of replacement
costs, extended replacement costs, or building code upgrade costs for a
dwelling solely because the insured elects to rebuild the dwelling at a
different location or purchase an already-constructed home at a different
location.
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Allows for the combination of
dwelling and other structures coverage limits to fund the rebuilding or
replacement of the primary residence under certain conditions.
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Requires notice to policyholders.

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