5.1 Hawaii Insurance Division, Commissioner Powers, Examinations, Hearings & Penalties

5.1 Hawaii Insurance Division, Commissioner Powers, Examinations, Hearings & Penalties

Section IV of the Hawaii adjuster outline (about 12 of the 80 scored questions) begins with the Insurance Commissioner: general powers and duties (HRS §§ 431:2-201 through 216 and 431:3-217), examination of records (§§ 431:2-301 through 306), notice of hearings (§§ 431:2-308 and 431:13-106), and penalties (§§ 431:2-203 and 431:13-201 through 204). These sections tell an adjuster who regulates the license, what records the regulator can demand, and what happens when the code is violated.

The Insurance Division and the Commissioner

• The Insurance Division is established within the Department of Commerce and Consumer Affairs (DCCA) (HRS § 431:2-101).
• The division is supervised by the Insurance Commissioner. The DCCA director appoints the commissioner with the approval of the governor, and the commissioner serves at the director's pleasure (HRS § 431:2-102). Hawaii's commissioner is appointed, not elected.
• The division's branches include Licensing, Compliance and Enforcement, Examination, Health Insurance, Captive Insurance, Rate and policy filings, and the Insurance Fraud Investigations Branch.

General Powers and Duties (HRS § 431:2-201 and Related Sections)

The commissioner has the authority expressly conferred by the insurance code or reasonably implied from it, and must enforce the code. Under § 431:2-201(c), the commissioner may:

1. make reasonable rules to carry out the code, adopted under chapter 91 (rules for the motor vehicle insurance article also require the governor's office approval);
2. conduct examinations and investigations to determine whether anyone has violated the code;
3. require applicants to provide fingerprints and pay a fee for state and FBI criminal history checks;
4. require insurers to report claims information needed to protect the public interest; and
5. waive or modify fees for good cause.

Related powers an adjuster should know:

• Orders and notices must be in writing, signed by the commissioner or a delegate, state their grounds and the code provisions relied on, and give an effective date. They may be delivered or mailed by registered mail, return receipt requested, to the person's last address of record with DCCA (§ 431:2-202).
• Subpoenas and oaths — the commissioner may take depositions, subpoena witnesses and documents, administer oaths, and examine any person under oath. A subpoena has the same force as one issued by a court of record (§ 431:2-204).
• Service of process — every authorized foreign or alien insurer must appoint the commissioner as its attorney to receive legal process in Hawaii (§ 431:2-205).
• Access to records — every person subject to investigation or examination must make its accounts, records, documents and files freely accessible. An insurer or licensee must give a written response within 15 working days to any written inquiry from the commissioner about a claim, consumer complaint, or sales or marketing practice. The response must be more than an acknowledgment and must adequately address the concerns raised (§ 431:2-208(c); the same rule appears in § 431:13-103(f)).
• Confidential records — complaints, investigation reports and examination working papers are confidential for as long as the commissioner deems prudent (§ 431:2-209).

Examinations (HRS §§ 431:2-301 to 306)

For an adjuster, an examination means producing the claim files, fee records and trust account records described in 5.4. Inadequate records can be rewritten by experts at the examined person's expense after written notice and a chance to correct them (§ 431:2-208(b)).

Notice and Hearings

Hawaii's Administrative Procedure Act (HRS chapter 91) governs the rules, notices, hearings, orders and appeals in the insurance code unless the code provides otherwise (§ 431:2-308(a)). Key procedural points:

• An application for a hearing must be in writing and state how the applicant was aggrieved and the grounds for relief (§ 431:2-308(d)).
• When the commissioner suspends an adjuster's license pending a hearing under § 431:9-235, the hearing must be held within 30 days after the commissioner receives the application, unless postponed by mutual consent (§ 431:2-308(d)).
• In an unfair practices proceeding, the commissioner serves a statement of charges and a notice of hearing at least 15 days after service (§ 431:13-106). Chapter 91 likewise requires contested case parties to receive written notice at least 15 days before the hearing.
• At the hearing, the respondent may present evidence and argument, and the procedure follows chapter 91.
• Appeals from the commissioner's decisions follow chapter 91 (§ 431:2-308(e)). Under HRS § 91-14, a person aggrieved by a final decision in a contested case may seek judicial review in circuit court, generally within 30 days after service of the certified copy of the final decision and order.

Penalties

Hawaii's code uses several penalty provisions. Match the provision to the conduct:

A licensee doing business in Hawaii who persistently or substantially violates the code may also be suspended, placed on probation, limited or refused renewal after a hearing (§ 431:2-203(c)). If the commissioner believes a penal provision has been violated, the commissioner proceeds against the person or certifies the facts to the public prosecutor (§ 431:2-203(b)(2)).

Insurance Fraud (HRS §§ 431:2-401 to 409)

The Insurance Fraud Investigations Branch conducts a statewide fraud prevention program and investigates and prosecutes insurance fraud under chapters 431, 432 and 432D. It has no jurisdiction over workers' compensation fraud under chapter 386 (§ 431:2-402). Its investigators have the powers of police officers.

A person commits insurance fraud by intentionally or knowingly misrepresenting or concealing material facts to obtain coverage, benefits or compensation. Examples include false applications, false claim information, multiple claims for the same loss, and fabricated or destroyed documents. Aiding or conspiring in those acts is also fraud (§ 431:2-403(a)).

In addition to criminal penalties, the commissioner may order restitution, a fine of up to $10,000 per violation, and reimbursement of attorneys' fees (§ 431:2-405). Insurers must report credible information of fraud to the branch within 60 days of discovery (§ 431:2-409). Adjusters and others who report suspected fraud to the commissioner, the branch, the NAIC, the National Insurance Crime Bureau, law enforcement or another insurer are immune from civil liability if they act without actual malice (§ 431:2-408). Section 4.4 applies these rules to field investigations.