(a) This part shall provide coverage for the policies and contracts specified in subsection (b) to:

Terms Used In Hawaii Revised Statutes 431:16-203

  • Account: means any of the three accounts created under section 431:16-206(a). See Hawaii Revised Statutes 431:16-205
  • Annuity: A periodic (usually annual) payment of a fixed sum of money for either the life of the recipient or for a fixed number of years. A series of payments under a contract from an insurance company, a trust company, or an individual. Annuity payments are made at regular intervals over a period of more than one full year.
  • Assets: (1) The property comprising the estate of a deceased person, or (2) the property in a trust account.
  • Association: means the Hawaii life and disability insurance guaranty association created under § 431:16-206. See Hawaii Revised Statutes 431:16-205
  • Beneficiary: A person who is entitled to receive the benefits or proceeds of a will, trust, insurance policy, retirement plan, annuity, or other contract. Source: OCC
  • Contract: A legal written agreement that becomes binding when signed.
  • contract owner: means the person who is identified as the legal owner under the terms of the policy or contract or who is otherwise vested with legal title to the policy or contract through a valid assignment completed in accordance with the terms of the policy or contract and properly recorded as the owner on the books of the insurer. See Hawaii Revised Statutes 431:16-205
  • Corporation: A legal entity owned by the holders of shares of stock that have been issued, and that can own, receive, and transfer property, and carry on business in its own name.
  • Covered policy: means any policy or contract or portion of a policy or contract for which coverage is provided under § 431:16-203. See Hawaii Revised Statutes 431:16-205
  • Damages: Money paid by defendants to successful plaintiffs in civil cases to compensate the plaintiffs for their injuries.
  • Extra-contractual claims: shall include , but not be limited to, claims relating to bad faith in the payment of claims, punitive or exemplary damages, or attorneys' fees and costs. See Hawaii Revised Statutes 431:16-205
  • Impaired insurer: means a member insurer that after July 1, 1988, is not an insolvent insurer, and is placed under an order of rehabilitation or conservation by a court of competent jurisdiction. See Hawaii Revised Statutes 431:16-205
  • Insolvent insurer: means a member insurer that after July 1, 1988, is placed under an order of liquidation by a court of competent jurisdiction with a finding of insolvency. See Hawaii Revised Statutes 431:16-205
  • Member insurer: means any insurer licensed or who holds a certificate of authority to transact in this State any kind of insurance for which coverage is provided under § 431:16-203, and includes any insurer whose license or certificate of authority in this State may have been suspended, revoked, not renewed, or voluntarily withdrawn, but does not include:

    (1) A nonprofit hospital or medical service organization;

    (2) A health maintenance organization;

    (3) A fraternal benefit society;

    (4) A mandatory state pooling plan;

    (5) A mutual assessment company or any entity that operates on an assessment basis;

    (6) An insurance exchange;

    (7) An organization that has a certificate or license limited to the issuance of charitable gift annuities; or

    (8) Any entity similar to any of the above. See Hawaii Revised Statutes 431:16-205

  • Obligation: An order placed, contract awarded, service received, or similar transaction during a given period that will require payments during the same or a future period.
  • Person: means any individual, corporation, limited liability company, partnership, association, governmental body or entity, or voluntary organization. See Hawaii Revised Statutes 431:16-205
  • Resident: means a person to whom a contractual obligation is owed and who resides in this State on the date of entry of a court order that determines a member insurer to be an impaired insurer or an insolvent insurer. See Hawaii Revised Statutes 431:16-205
  • Settlement: Parties to a lawsuit resolve their difference without having a trial. Settlements often involve the payment of compensation by one party in satisfaction of the other party's claims.
  • State: means a state, the District of Columbia, Puerto Rico, or a United States possession, territory, or protectorate. See Hawaii Revised Statutes 431:16-205
  • Structured settlement annuity: means an annuity purchased to fund periodic payments for a plaintiff or other claimant in payment for or with respect to personal injury suffered by the plaintiff or other claimant. See Hawaii Revised Statutes 431:16-205
  • Trustee: A person or institution holding and administering property in trust.
  • Unallocated annuity contract: means any annuity contract or group annuity certificate that is not issued to and owned by an individual, except to the extent of any annuity benefits guaranteed to an individual by an insurer under such contract or certificate. See Hawaii Revised Statutes 431:16-205
(1) Persons who, regardless of where they reside, except for nonresident certificate holders under group policies or contracts, are the beneficiaries, assignees, or payees of the persons covered under paragraph (2);
(2) Persons who are owners of or certificate holders under such policies or contracts, except structured settlement annuities, and who:

(A) Are residents of this State; or
(B) Are not residents; provided that:

(i) The insurer that issued the policies or contracts is domiciled in this State;
(ii) The state in which the persons reside has associations similar to the association created by this part; and
(iii) The persons are not eligible for coverage by an association in any other state because the insurer was not licensed in the state at the time specified in the state’s guaranty association law;
(3) For structured settlement annuities specified in subsection (b), paragraphs (1) and (2) of this subsection shall not apply, and this part, except as provided in paragraphs (4) and (5) of this subsection, shall provide coverage to a person who is a payee under a structured settlement annuity, or beneficiary of a payee if the payee is deceased, if the payee:

(A) Is a resident of this State, regardless of where the contract owner resides; or
(B) Is not a resident; provided that:

(i) The contract owner of the structured settlement annuity is a resident and neither the payee, beneficiary, nor contract owner is eligible for coverage by the association in the state in which the payee or contract owner resides; or
(ii) The contract owner of the structured settlement annuity is not a resident, but the insurer that issued the structured settlement annuity is domiciled in this State and the state in which the contract owner resides has an association similar to the association created by this part, and neither the payee, beneficiary, nor the contract owner is eligible for coverage by the association of the state in which the payee or contract owner resides;
(4) This part shall not provide coverage to a person who is a payee or beneficiary of a contract owner resident of this State, if the payee or beneficiary is afforded any coverage by the association of another state; and
(5) This part is intended to provide coverage to a person who is a resident of this State and, in certain circumstances, to a nonresident. To avoid duplicate coverage, if a person who would otherwise receive coverage under this part is provided coverage under the laws of any other state, the person shall not be provided coverage under this part. In determining the application of the provisions of this paragraph in situations where a person could be covered by the association of more than one state, whether as an owner, payee, beneficiary, or assignee, this part shall be construed in conjunction with other state laws to result in coverage by only one association.
(b)

(1) This part shall provide coverage to the persons specified in subsection (a) for direct, nongroup life, accident and health or sickness, or annuity policies or contracts, for certificates under direct group life, accident and health or sickness, or annuity policies or contracts, and for supplemental contracts to any of these, in each case issued by member insurers except as limited by this part. Annuity contracts and certificates under group annuity contracts include allocated funding agreements, structured settlement annuities, and any immediate or deferred annuity contracts.
(2) This part shall not provide coverage for:

(A) Any portion of a policy or contract not guaranteed by the insurer, or under which the risk is borne by the policy or contract owner;
(B) Any policy or contract of reinsurance, unless assumption certificates have been issued pursuant to the reinsurance policy or contract;
(C) Any portion of a policy or contract to the extent that the rate of interest on which it is based:

(i) Averaged over the period of four years prior to the date on which the association becomes obligated with respect to such policy or contract, exceeds a rate of interest determined by subtracting two percentage points from Moody’s Corporate Bond Yield Average averaged for that same four-year period or for such lesser period if the policy or contract was issued less than four years before the association became obligated; and
(ii) On or after the date on which the association becomes obligated with respect to such policy or contract, exceeds the rate of interest determined by subtracting three percentage points from Moody’s Corporate Bond Yield Average as most recently available;
(D) Any portion of a policy or contract issued to a plan or program of an employer, association, or other person to provide life, accident and health or sickness, or annuity benefits to its employees, members, or other persons to the extent that the plan or program is self-funded or uninsured, including but not limited to benefits payable by an employer, association, or other person under:

(i) A Multiple Employer Welfare Arrangement as defined in section 514 of the Employee Retirement Income Security Act of 1974, as amended;
(ii) A minimum premium group insurance plan;
(iii) A stop-loss group insurance plan; or
(iv) An administrative services only contract;
(E) Any portion of a policy or contract to the extent that it provides dividends, experience rating credits, or voting rights, or provides that any fees or allowances be paid to any person, including the policy or contract holder, in connection with the service to or administration of such policy or contract;
(F) Any policy or contract issued in this State by a member insurer at a time when it was not licensed or did not have a certificate of authority to issue such policy or contract in this State;
(G) Any portion of a policy or contract to the extent that the assessments required by this part with respect to the policy or contract are preempted or otherwise not permitted by federal or state law;
(H) Any obligation that does not arise under the express written terms of the policy or contract issued by the insurer to the contract owner or policy owner, including without limitation:

(i) Claims based on marketing materials;
(ii) Claims based on side letters, riders, or other documents that were issued by the insurer without meeting applicable policy form filing or approval requirements;
(iii) Misrepresentations of or regarding policy benefits;
(iv) Extra-contractual claims; or
(v) A claim for penalties or consequential or incidental damages;
(I) Any contractual agreement that establishes the member insurer’s obligations to provide a book value accounting guaranty for defined contribution benefit plan participants by reference to a portfolio of assets that is owned by the benefit plan or its trustee, which in each case is not an affiliate of the member insurer;
(J) Any unallocated annuity contract;
(K) Any portion of a policy or contract to the extent it provides for interest or other changes in value to be determined by the use of an index or other external reference stated in the policy or contract, but that have not been credited to the policy or contract, or as to which the policy or contract owner’s rights are subject to forfeiture, as of the date the member insurer becomes an impaired or insolvent insurer under this part. If a policy’s or contract’s interest or changes in value are credited less frequently than annually, then for purposes of determining the values that have been credited and are not subject to forfeiture under section 431:16-403(b)(2)(L), the interest or change in value determined by using the procedures defined in the policy or contract shall be credited as if the contractual date of crediting interest or changing values was the date of impairment or insolvency and shall not be subject to forfeiture; or
(L) Any policy or contract providing any hospital, medical, prescription drug, or other health care benefits pursuant to part C or part D of subchapter XVIII, chapter 7, title 42 of the United States Code, commonly known as medicare part C and D, or any regulations adopted pursuant thereto.
(c) The benefits for which the association may become liable shall in no event exceed the lesser of:

(1) The contractual obligations for which the insurer is liable or would have been liable if it were not an impaired or insolvent insurer, or
(2) With respect to any one life, regardless of the number of policies or contracts:

(A) $300,000 in life insurance death benefits, but not more than $100,000 in net cash surrender and net cash withdrawal values for life insurance;
(B) In accident and health or sickness insurance benefits:

(i) $100,000 for coverages not defined as disability insurance or basic hospital, medical, and surgical insurance, or major medical insurance or long-term care insurance, including any net cash surrender and net cash withdrawal values;
(ii) $300,000 for disability insurance and $300,000 for long-term care insurance; or
(iii) $500,000 for basic hospital, medical, and surgical insurance or major medical insurance;
(C) $250,000 in the present value of annuity benefits, including net cash surrender and net cash withdrawal values; or
(D) With respect to each payee of a structured settlement annuity, or beneficiary or beneficiaries of the payee if deceased, $250,000 in present value annuity benefits, in the aggregate, including net cash surrender and net cash withdrawal values, if any.
(d) In no event shall the association be obligated to cover more than:

(1) An aggregate of $300,000 in benefits with respect to any one life under subsection (c) except with respect to benefits for basic hospital, medical, and surgical insurance and major medical insurance under subsection (c)(2)(B), in which case the aggregate liability of the association shall not exceed $500,000 with respect to any one individual; or
(2) $5,000,000 in benefits with respect to one owner or multiple non-group policies of life insurance, regardless of:

(A) The number of policies and contracts held by the owner;
(B) Whether the policy owner is an individual, firm, corporation, or other person; and
(C) Whether the persons insured are officers, managers, employees, or other persons.
(e) The limitations set forth in this section are limitations on the benefits for which the association is obligated before taking into account its subrogation and assignment rights or the extent to which those benefits could be provided out of the assets of the impaired or insolvent insurer attributable to covered policies. The costs of the association’s obligations under this part may be met by the use of assets attributable to covered policies or reimbursed to the association pursuant to its subrogation and assignment rights.
(f) In performing its obligations to provide coverage under § 431:16-208, the association shall not be required to guarantee, assume, reinsure, or perform, or cause to be guaranteed, assumed, reinsured, or performed, the contractual obligations of the insolvent or impaired insurer under a covered policy or contract that do not materially affect the economic values or economic benefits of the covered policy or contract.

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