5.4 Adjuster Records, Trust Funds, License Extension & Discipline (HRS §§ 431:9-228 to 9-240)

5.4 Adjuster Records, Trust Funds, License Extension & Discipline (HRS §§ 431:9-228 to 9-240)

The outline's licensing topics end with records and reporting requirements (HRS §§ 431:9-228 to 230 and 234.5) and denial, suspension, revocation of licenses, reinstatements and fines (§§ 431:9-235, 235.5 and 237 to 240). These are the rules an examiner checks when the Insurance Division audits an adjuster (5.1).

Place of Business (§ 431:9-228)

Every licensed adjuster's place of business is where the licensee principally conducts transactions under the license. The licensee must notify the commissioner of any change of business address within 30 days. The change-of-status rule in § 431:9-203(d) also requires reporting changes in name, trade name, home and mailing addresses, phone numbers, email and website within 30 days.

Records of the Adjuster (§ 431:9-229)

Every adjuster must keep a record of all transactions consummated under the license, organized by class of insurance. For an adjuster, the record must include:

• a record of each investigation or adjustment undertaken or consummated; and
• a statement of any fee, commission or other compensation received or to be received for it;
• plus any additional information that is customary or that the commissioner reasonably requires.

The longer workers' compensation period fits the long tail of those claims. Under HRS § 386-89, the director of labor and industrial relations may review and reopen a case on a change in condition or a mistake in fact, generally within eight years after the last payment of compensation (8.5).

Practical retention tip: count from the completion of the transaction, not the date of loss. A property claim reported in 2024 and closed with a final payment in March 2026 must be kept until at least March 2031.

Funds Received: The Trustee Rule (§ 431:9-230)

Every licensed adjuster has the responsibilities of a trustee for all funds and return funds received or collected. On receiving funds, the licensee must either:

1. remit them to the persons entitled to them; or
2. keep them at all times in a federally insured account with a bank, savings and loan association or financial services loan company in Hawaii, separate from the licensee's own funds or funds held in any other capacity.

Other rules:

• Return funds must be returned within 30 days unless the person entitled directs otherwise in writing.
• One trust account may hold funds for several persons if each person's share is reasonably ascertainable from the books.
• Only additional funds reasonably needed to pay bank charges may be commingled.
• Interest on an interest-bearing trust account may not be kept for the licensee's own benefit without the prior written consent of the person entitled to the funds.
• The account must be designated as a "trustee account established pursuant to section 431:9-230, Hawaii Revised Statutes" or similar words.
• A licensee who, not being entitled to the funds, diverts or appropriates them for personal use is guilty of embezzlement and punished under the criminal statutes.

This rule matters most for public adjusters, who often receive settlement checks payable jointly to the insured and the adjuster (5.5).

Reporting Actions Against the Licensee (§ 431:9-234.5)

A licensee must report in writing to the commissioner:

• any civil or administrative action taken against the licensee in any jurisdiction, or by any U.S. governmental agency, within 30 days of the final disposition; and
• any criminal prosecution of the licensee in any jurisdiction within 30 days of arraignment.

The report must include a copy of the initial complaint or indictment and the other relevant legal documents. An adjuster disciplined in another state, or charged with a crime, cannot wait until renewal to disclose it.

License Extension, Inactivation and Reinstatement (§ 431:9-232)

• Before renewal or extension, each licensee pays the required fee (§ 431:7-101). The division's fee schedule lists $90 for an adjuster renewal. The statutory service fee is $45 per year.
• When issuing or extending a license, the commissioner sets the extension date — not less than one year and not more than three years after issue or last extension — and notifies the licensee in writing. Act 111 (2021) also requires written notice of the renewal date at least 30 days before the license must be extended.
• A license is inactivated if the licensee fails to pay required fees or penalties.
• A license inactivated for nonpayment may be reinstated without a written examination if, within 12 months of inactivation, the licensee pays the fee plus a penalty of double the unpaid fees and is otherwise in compliance. The division's schedule lists $270 to reapply within one year of nonrenewal. After 12 months, the person must apply as a new applicant, which means passing the exam again.

Continuing Education

Article 9 has no continuing education requirement for adjusters; the hour requirements in article 9A apply to producers. Limited-license holders have their own renewal conditions. The workers' compensation adjuster license is extended biennially upon passing a reexamination (§ 431:9-222.5(b)), and the division requires workers' compensation adjusters to retake their exam before renewal. Crop adjusters submit a valid, unexpired CAPP card at renewal.

Denial, Suspension, Revocation and Refusal to Extend (§ 431:9-235)

The commissioner may suspend, revoke, or refuse to extend an adjuster's license for any cause specified in article 9 or for any of these causes:

1. any cause for which the license could have been refused had it existed and been known;
2. willfully violating, or knowingly participating in a violation of, the insurance code;
3. obtaining or attempting to obtain the license through willful misrepresentation or fraud, or failing to pass a required examination;
4. misappropriating, converting, or illegally withholding money held in a fiduciary capacity;
5. materially misrepresenting the terms or effect of an insurance contract with intent to deceive, or engaging (or being about to engage) in a fraudulent transaction;
6. being found to have committed an unfair practice or fraud under article 13;
7. showing oneself to be a source of injury and loss to the public in the conduct of business; or
8. dealing or attempting to deal in insurance outside the scope of the license.

A partnership's or corporation's license may be disciplined for the acts of any individual designated in the license. A revoked or suspended licensee must surrender the license certificate on request.

Procedure

The commissioner may act by an order:

• given at least 15 days before its effective date, subject to the licensee's right to a hearing under § 431:2-308 (the license is suspended pending the hearing, which must be held within 30 days of the hearing application); or
• made after a hearing, effective 10 days after the order is given to the licensee.

The order may be appealed to the circuit court of the first judicial circuit under chapter 91.

Child Support Noncompliance (§ 431:9-235.5)

The commissioner must deny, suspend, or refuse to renew a license on certification from the child support enforcement agency that the licensee is not complying with a support order or a related subpoena or warrant. The license is restored only on authorization from the agency or the family court. The usual hearing provisions do not apply.

Fines, Reinstatement and Fine in Lieu

• Power to fine (§ 431:9-238) — after a hearing, the commissioner may levy a fine of $100 to $10,000 in addition to or instead of suspension, revocation or refusal to extend. The order sets a payment period of 30 to 45 days. If the fine is not paid, the commissioner revokes the license, and the attorney general may sue to collect it.
• Reinstatement or relicensing (§ 431:9-239) — a suspended, revoked or refused licensee is not reinstated until the cause no longer exists, all fines are paid, and the commissioner is satisfied that the cause will not recur.
• Fine in lieu (§ 431:9-240) — on appeal, a court that finds the licensee guilty but considers the commissioner's sanction too severe may impose a fine of up to $10,000 instead. Payment within 10 days reinstates the license. This option is not available if the licensee was previously disciplined for a similar offense.