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SB2966
THE SENATE
S.B. NO.
2966
THIRTY-THIRD LEGISLATURE, 2026
STATE OF HAWAII
A BILL FOR AN ACT
relating
to property 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 insurers should be transparent about a policyholder's
coverage and options if the policyholder loses their property in a natural
disaster.
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After catastrophic events like
wildfires, hurricanes, tsunamis, and volcanic eruptions, many homeowners
experience a total loss of their dwellings and other structures.
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Despite these losses, insurers often continue
to collect premiums as though the destroyed property still existed.
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This forces homeowners to pay for coverage on
structures and contents that are no longer there while also bearing the burden
of rebuilding.
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The legislature believes that the current
system for offering property insurance adjustments or refunds following a
natural disaster is confusing and reactive.
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Most states require insurers to refund unearned premiums when a policy
is canceled mid-term.
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However, refunds are
generally only issued if the homeowner actively requests the cancellation or an
adjustment in coverage.
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Homeowners may
be unaware of their right to cancel or adjust coverage, especially during the
chaos following a natural disaster.
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As a
result, insurers may continue to charge full premiums even when there is no
dwelling or contents to insure.
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However, the legislature recognizes that,
even after a home is destroyed, policyholders still need to maintain certain
coverage, including liability coverage for injuries or incidents occurring on
the vacant property and builder's risk coverage once rebuilding begins.
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Insured property owners should not lose
protection while they recover and rebuild simply because their dwelling
coverage is no longer active.
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The legislature believes that a more
proactive approach to offering coverage adjustments and premium refunds, as
well as clearer communication with policyholders, will promote fairness,
transparency, and consumer protection while strengthening Hawaii's resilience
after natural disasters
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Accordingly, the purpose of this Act is to
require insurers to:
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(1)
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Automatically refund any unearned premium after a
policyholder experiences total property loss;
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(2)
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Adjust premiums for subsequent policy terms to
reflect the absence of a dwelling, structure, or contents; and
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(3)
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Provide policyholders with clear notice of the
coverage needed, and where they can obtain that coverage, for vacant property
or reconstruction sites.
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SECTION 2.
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Chapter 431:10E, Hawaii Revised Statutes, is amended by adding a new
part to be appropriately designated and to read as follows:
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Part
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ADJUSTMENTS,
NOTICE, AND REFUNDS AFTER TOTAL LOSS
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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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"Builder's risk coverage" means
insurance that covers the risks associated with the reconstruction or repair of
a dwelling or structure following a total loss.
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"Insurer" has the same meaning as
defined in section
431:1-202.
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"Liability coverage" means
coverage for personal liability risks arising from the ownership or occupancy
of a property, even in the absence of any dwelling or structures on the
property.
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"Total loss" means that the
dwelling or other insured structure on a property has been destroyed to the
extent that the dwelling or structure is no longer habitable or usable and must
be removed and reconstructed.
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"Unearned premium" means the
portion of the policy premium that is:
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(1)
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Attributable
to the unexpired term of the policy; and
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(2)
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Provides
coverage for a dwelling, structure, or other property that has undergone a
total loss.
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431:10E-B
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Total loss; automatic refund of unearned
premium.
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(a)
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Notwithstanding any other law to the
contrary, if a policyholder experiences a total loss, the insurer shall refund any
unearned premium to the policyholder on a pro-rata basis.
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The refund shall be issued within thirty days
of the date of the total loss, or the date the insurer confirms the destruction
of the property, whichever occurs first.
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(b)
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A refund issued pursuant to this section shall be issued automatically
and shall not require the policyholder to request a refund or cancel the policy.
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431:10E-C
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Premium and coverage adjustments for future
policy terms.
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(a)
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When renewing or continuing a policy after the
policyholder experiences a total loss, the insurer shall adjust the policy
premium and coverage to reflect the destruction of any dwelling, structure, or
contents.
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(b)
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The insurer shall make liability coverage available to the policyholder
for the entire period between the date of the total loss and the completion of
the rebuilding process.
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(c)
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Once rebuilding begins, the insurer shall:
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(1)
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Offer
the policyholder builder's risk coverage, if available; or
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(2)
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Inform
the policyholder in writing that they should obtain builder's risk coverage
from another source.
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431:10E-D
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Notice to policyholders.
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(a)
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Within thirty days of a total loss, the insurer shall provide the
policyholder with a clear, written notice explaining:
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(1)
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The
policyholder's right to a refund of any unearned premium and confirmation that
the refund has been, or will be, issued;
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(2)
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The
policyholder's right to premium and coverage adjustments for future policy
terms;
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(3)
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The
availability of liability coverage for the vacant property, or the need to
obtain this coverage from another source; and
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(4)
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The
availability of builder's risk coverage once rebuilding begins, or the need to
obtain this coverage from another source.
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(b)
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The notice shall be written in plain language and delivered to the
policyholder by first-class mail or electronic transmission."
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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 upon its approval, and shall apply to all homeowner's
insurance policies issued or renewed on or after its effective date.
INTRODUCED BY:
_____________________________
Report Title:
Property
Insurance; Total Loss; Notice; Adjustment; Refund
Description:
Requires
insurers, after a policyholder experiences a total loss, to automatically
refund any unearned premium; adjust premiums for subsequent policy terms to
reflect the absence of a dwelling, structure, or contents; and provide
policyholders with clear notice of the coverage needed for vacant property or
while rebuilding.
The summary description
of legislation appearing on this page is for informational purposes only and is
not legislation or evidence of legislative intent.