BY BUILDING INDUSTRY ASSOCIATION – On April 15, 2011, Hawaii Reporter published an op-ed by insurance attorney Allen R. Wolff, entitled “Legislation in Hawaii Invades the Separation of Powers, Changes the Meaning of Words in Private Contracts and Hurts Consumers.”
Mr. Wolff’s piece relates to HB 924, and contains numerous misstatements of fact. Fortunately, the Hawaii Legislature was not deterred by these same misleading arguments when insurance companies in opposition to HB924 made them.
The article misleads the reader into thinking that contractors were claiming Commercial General Liability (CGL) policies cover their own shoddy work.
On the contrary, contractors understood all along that fixing the construction defects are not covered by the policies. The coverage purchased were claims of bodily injury and property damage arising out of those construction defects.
For example, if defective fittings on pipes happened to fail and leak in a condominium project, fixing the defective fittings was not covered by the CGL policies. However, resulting damages to drywall, carpet, cabinets, painting, etc. as well of slip and fall bodily injury claims are covered. Insurers assured policyholders of this coverage when selling the policies.
Contrary to Mr. Wolff’s claims, contractors, subcontractors, owners, developers, and others paid for the insurance coverage that a panel of the Hawaii Intermediate Court of Appeals said last year insurance companies do not have to cover. A conservative estimate of the amount of premiums that has been paid by Hawaii contractors in the last ten years for CGL policies is $100 million dollars. Three construction companies alone, Shioi Construction, Ralph S. Inouye Construction, and Hawaiian Dredging, paid more than $15 million dollars.
Contrary to Mr. Wolff’s claims, the proposed legislation would require courts to construe insurance policies, specifically the term “occurrence,” consistent with what the parties intended at the time the insurance policy was entered into. The proposed legislation does not require courts to ignore definitions in the insurance contract, nor would it allow insurance companies to make promises to their insureds about what coverage is provided and then negate those promises in the insurance contract itself.
Contrary to Mr. Wolff’s claims that the bill is unconstitutional, the Hawaii Attorney General has advised that HB924 HD2 SD2 is constitutional and does not impair the obligation of contracts.
Contrary to Mr. Wolff’s claims, the proposed legislation would not have the effect of rewriting an insurance contract. The Hawaii Intermediate Court of Appeals (ICA) did that. The proposed legislation would require insurance companies to honor their promises and representations, and reinstate the insurance coverage that their insureds bought and paid for.
Contrary to Mr. Wolff’s claims, if HB924 passes, the only insurance companies that will no longer issue coverage in Hawaii are the same companies that already refuse to provide the coverage they promised to provide. If as Mr. Wolff suggests, insurance companies raise their rates in response to the passage of HB924, the construction industry respectfully requests that the Hawaii Insurance Commissioner carefully review such requests, and review the information provided to the Department of Commerce and Consumer Affairs in the last ten years by insurance companies to support their requests for rate increases.
That information will confirm that insurance companies were paid millions of dollars in premiums to provide coverage that the Hawaii court says does not have to provided, and a rate increase on that basis would be unfair. In fact, many honorable insurance companies have stepped up to issue prospective endorsements to their CGL policies to reinstate coverage that the ICA may have negated without any additional premiums assessed.
Mr. Wolff, a New York attorney, may have won the ICA decision on behalf of his client, Admiral Insurance, but he has it wrong on many things in his op-ed piece.
More about the Building Industry Association of Hawaii here https://biahawaii.org/