REPORT TITLE:
Insurance


DESCRIPTION:
Defines a stock insurer.  Specifies that an appointment is
required from an insurer for whom policies are being solicited or
sold.  Mandates ten-day cancellation notices and thirty-day
nonrenewal notices for insurance policies.  (HB2472 SD2)

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                        2472
HOUSE OF REPRESENTATIVES                H.B. NO.           H.D. 2
TWENTIETH LEGISLATURE, 2000                                S.D. 2
STATE OF HAWAII                                            
                                                             
________________________________________________________________
________________________________________________________________


                   A  BILL  FOR  AN  ACT

RELATING TO INSURANCE.



BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

 1      SECTION 1.  Chapter 431, Hawaii Revised Statutes, is amended
 
 2 by adding to part I of article 3 a new section to be
 
 3 appropriately designated and to read as follows:
 
 4      "§431:3-    Stock insurer.  A stock insurer means an
 
 5 incorporated insurer with capital stock divided into shares and
 
 6 owned by its stockholders to whom the earnings are distributed as
 
 7 dividends on their shares."
 
 8      SECTION 2.  Chapter 431, Hawaii Revised Statutes, is amended
 
 9 by adding to part II of article 9 a new section to be
 
10 appropriately designated and to read as follows:
 
11      "§431:9-    Appointment required.  (a)  No person engaging
 
12 in the business of insurance in this State shall do so without
 
13 holding the required appointment.
 
14      (1)  No general agent, subagent, or solicitor in this State
 
15           shall solicit or take applications for, procure, or
 
16           place for others any insurance policy without having an
 
17           appointment with the insurer.
 
18      (2)  No subagent or solicitor in this State shall solicit or
 

 
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 1           take applications for, procure, or place for others any
 
 2           insurance policy without having an appointment with a
 
 3           general agent who holds an appointment with the
 
 4           insurer.
 
 5      (b)  Any person violating this section shall be subject to
 
 6 penalties as provided in section 431:9-201."
 
 7      SECTION 3.  Chapter 431, Hawaii Revised Statutes, is amended
 
 8 by adding to part II of article 10 a new section to be
 
 9 appropriately designated and to read as follows:
 
10      "§431:10-    Notice of cancellation or nonrenewal.  In the
 
11 case of cancellation of a policy, the insurer shall give written
 
12 notice to the insured not less than ten days prior to the
 
13 effective date of cancellation.  For nonrenewal of a policy, the
 
14 insurer shall give written notice to the insured not less than
 
15 thirty days prior to the effective date of nonrenewal.  If under
 
16 title 24 or a policy, a longer time period is required for a
 
17 notice of cancellation or nonrenewal for the policy, the longer
 
18 period shall be applicable.  Cancellation or nonrenewal shall not
 
19 be deemed valid unless evidence of mailing is provided."
 
20      SECTION 4.  Section 431:2-209, Hawaii Revised Statutes, is
 
21 amended as follows:
 
22      (1)  By amending subsection (c) to read:
 

 
 
 
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 1      "(c)  One year after conclusion of the transactions to which
 
 2 they relate, the commissioner may destroy any correspondence,
 
 3 void or obsolete filings relating to rates, certificate of
 
 4 authority applications, foreign or alien insurers' annual
 
 5 statements and valuation reports, cards, and expired bonds.
 
 6 Three years after the conclusion of the transactions to which
 
 7 they relate, the commissioner may destroy any claim files,
 
 8 working papers of examinations, reports of examination by
 
 9 insurance supervisory officials of other states, void or obsolete
 
10 filings relating to license applications, records of hearings and
 
11 investigations, and any similar records, documents, or memoranda
 
12 now or hereafter in the commissioner's possession."
 
13      (2)  By amending subsection (e) to read:
 
14      "(e)  The following records and reports on file with the
 
15 commissioner shall be confidential and protected from discovery,
 
16 production, and disclosure for so long as the commissioner deems
 
17 prudent:
 
18      (1)  Complaints and investigation reports;
 
19      (2)  Working papers of an examination [reports;],
 
20           complaints, and investigation reports;
 
21      (3)  Proprietary information, including trade secrets,
 
22           commercial information, and business plans, which, if
 

 
 
 
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 1           disclosed may result in competitive harm to the person
 
 2           providing [said] the information;
 
 3      (4)  Any documents or information received from the National
 
 4           Association of Insurance Commissioners, the federal
 
 5           government, or insurance departments of other states,
 
 6           territories, and commonwealths that are confidential in
 
 7           other jurisdictions.  The commissioner shall be
 
 8           authorized to share information, including otherwise
 
 9           confidential information with the National Association
 
10           of Insurance Commissioners, the federal government, or
 
11           insurance departments of other states, territories, and
 
12           commonwealths so long as the statutes or regulations of
 
13           the other jurisdictions permit them to maintain the
 
14           same level of confidentiality as required under Hawaii
 
15           law."
 
16      SECTION 5.  Section 431:2-215, Hawaii Revised Statutes, is
 
17 amended to read as follows:
 
18      "[[]§431:2-215[]]  Insurance regulation fund.(a)  There is
 
19 established a special fund to be designated as the insurance
 
20 regulation fund.  All assessments, fees, fines, penalties, and
 
21 reimbursements collected by or on behalf of the insurance
 
22 division under title 24, except for the commissioner's education
 

 
 
 
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 1 and training fund (section 431:2-214), the patients' compensation
 
 2 fund (Act 232, Session Laws of Hawaii 1984), the drivers
 
 3 education fund underwriters fee (section 431:10C-115), and the
 
 4 captive insurance administrative fund (section 431:19-101.8)[,]
 
 5 to the extent provided by section 431:19-101.8(b), shall be
 
 6 deposited into the insurance regulation fund.  All sums
 
 7 transferred into the insurance regulation fund may be expended by
 
 8 the commissioner to carry out the commissioner's duties and
 
 9 obligations under title 24.
 
10      (b)  The insurance regulation fund shall be used to defray
 
11 any administrative costs, including personnel costs, associated
 
12 with the programs of the division, and costs incurred by
 
13 supporting offices and divisions.  Any law to the contrary
 
14 notwithstanding, the commissioner may use the moneys in the fund
 
15 to employ, or retain, by contract or otherwise, without regard to
 
16 chapters 76 and 77, hearings officers, attorneys, investigators,
 
17 accountants, examiners, and other necessary professional,
 
18 technical, and support personnel to implement and carry out the
 
19 purposes of title 24; provided that any position, except any
 
20 attorney position, that is subject to chapters 76 and 77 prior to
 
21 July 1, 1999 shall remain subject to chapters 76 and 77.
 
22      (c)  Moneys in the special fund shall not revert to the
 

 
 
 
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 1 general fund.
 
 2      (d)  The commissioner shall determine the amount or amounts
 
 3 to be assessed and the time any moneys from assessments are due
 
 4 for each line or type of insurance or entity regulated under
 
 5 title 24; provided that:
 
 6      (1)  The criteria for making the assessment shall be
 
 7           established by rule; provided further that the
 
 8           commissioner shall have provisional authority to make
 
 9           assessments prior to adoption of the rule but this
 
10           provisional authority shall not extend beyond two years
 
11           from June 28, 1999;
 
12      (2)  The insurers or entities under title 24 shall be
 
13           provided reasonable notice of when their respective
 
14           assessments are due;
 
15      (3)  The assessments by line or type shall bear a reasonable
 
16           relationship to the costs of regulating the line or
 
17           type of insurance, including any administrative costs
 
18           of the division; and
 
19      (4)  The sum total of all assessments made and collected
 
20           shall not exceed the special fund ceiling or ceilings
 
21           related to the fund that are established by the
 
22           legislature.
 

 
 
 
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 1 As used in this subsection, "reasonable notice" means a period of
 
 2 at least sixty days.
 
 3      (e)  The commissioner may suspend an assessment of any
 
 4 insurer if the commissioner determines that an insurer or entity
 
 5 may reach insolvency or other financial difficulty if the
 
 6 assessment is made against that insurer or entity.
 
 7      (f)  The commissioner shall prepare an annual report to the
 
 8 director, governor, and the legislature of the use of the fund.
 
 9 The report shall describe assessments by line or type of
 
10 insurance, and expenditures made from the fund including non-
 
11 payroll operating expenses.  The report shall be submitted to the
 
12 legislature no later than twenty days prior to the convening of
 
13 each regular legislative session."
 
14      SECTION 6.  Section 431:7-203, Hawaii Revised Statutes, is
 
15 amended by amending subsection (a) to read as follows:
 
16      "(a)  In the event any person has paid to the commissioner
 
17 any tax, fee, or other charge in error or in excess of that which
 
18 the person is lawfully obligated to pay under this code, the
 
19 commissioner, upon written request made by the person to the
 
20 commissioner within the time set forth in section 431:7-204.6,
 
21 shall authorize a refund thereof out of the insurance regulation
 
22 fund [of this State], except that a tax refund shall be payable
 

 
 
 
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 1 out of the general fund, by submitting a voucher therefor to the
 
 2 comptroller of this State subject to the following limitations:
 
 3      (1)  No recourse may be had except under section 40-35 or by
 
 4           appeal for refunds of taxes paid pursuant to an
 
 5           assessment by the commissioner; provided that if the
 
 6           assessment by the commissioner [shall contain] contains
 
 7           clerical errors, transposition of figures,
 
 8           typographical errors, and errors in calculation or if
 
 9           there [shall be] is an illegal or erroneous assessment
 
10           because the assessment is not in accordance with this
 
11           code, the refund procedures in subsection (a) shall
 
12           apply; and
 
13      (2)  No refund or overpayment credit shall be made unless
 
14           the original payment of the tax was due to the law
 
15           having been interpreted or applied [in] with respect to
 
16           the taxpayer concerned differently than [in] with
 
17           respect [of] to taxpayers generally.
 
18      As to all tax payments for which a refund or credit is not
 
19 authorized by this subsection (including, without prejudice to
 
20 the generality of the foregoing, cases of unconstitutionality),
 
21 the remedies provided by appeal or under section 40-35 are
 
22 exclusive."
 

 
 
 
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 1      SECTION 7.  Section 431:8-302, Hawaii Revised Statutes, is
 
 2 amended by amending subsection (b) to read as follows:
 
 3      "(b)  Before placing insurance with any unauthorized
 
 4 insurer, the broker shall ascertain the financial condition of
 
 5 the insurer and:
 
 6      (1)  In the case of a foreign insurer, shall maintain in the
 
 7           broker's office a current certificate, in proper form,
 
 8           from the regulatory authority in the domicile of the
 
 9           unauthorized insurer to the effect that the insurer has
 
10           capital and surplus, or its equivalent under the laws
 
11           of its domiciliary jurisdiction, which equals the
 
12           minimum capital and surplus requirements of this State
 
13           for that kind of insurer as set out in article 3; or
 
14      (2)  In the case of an alien insurer, shall maintain in the
 
15           broker's office evidence of the financial
 
16           responsibility of the insurer.  Evidence satisfactory
 
17           to the commissioner that the insurer maintains in the
 
18           United States an irrevocable trust fund in either a
 
19           national bank or a member of the federal reserve system
 
20           in an amount not less than [$2,500,000] $5,400,000 for
 
21           the protection of all its policyholders in the United
 
22           States consisting of cash, securities, letters of
 

 
 
 
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 1           credit, or of investments of substantially the same
 
 2           character and quality as those which are eligible
 
 3           investments for the capital and statutory reserves of
 
 4           authorized insurers writing like kinds of insurance in
 
 5           this State, shall constitute prima facie evidence of
 
 6           responsibility.
 
 7 Upon request by the commissioner, the broker shall immediately
 
 8 submit to the commissioner the items described in this
 
 9 subsection."
 
10      SECTION 8.  Section 431:9-105, Hawaii Revised Statutes, is
 
11 amended by amending subsection (e) to read as follows:
 
12      "(e)  Following a catastrophe in this State, a Hawaii
 
13 license shall not be required of a nonresident independent
 
14 adjuster for the adjustment of losses; provided:
 
15      (1)  The common losses suffered that are to be adjusted are
 
16           a direct result of that catastrophe;
 
17      (2)  The adjuster provides to the licensing branch of the
 
18           insurance division a certified copy of the adjuster's
 
19           current license in another [state's current license.]
 
20           state.  That other state shall have a similar licensing
 
21           requirements to section [431:9-217;] 431:9-222;
 
22      (3)  That within three working days of when the nonresident
 

 
 
 
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 1           independent adjuster begins work, the insurance
 
 2           company, independent adjusting company, general agent,
 
 3           or subagent that is utilizing the adjuster shall
 
 4           provide on its letterhead to the licensing branch of
 
 5           the insurance division:
 
 6           (A)  The name of the adjuster;
 
 7           (B)  The adjuster's Hawaii mailing and business
 
 8                addresses and phone numbers; and
 
 9           (C)  The adjuster's permanent [nonresident] home and
 
10                business addresses and phone numbers.
 
11      For the purpose of this subsection, a catastrophe exists
 
12 when due to a sudden, specific, and natural or manmade disaster
 
13 or phenomenon, there arises property losses in Hawaii that are
 
14 covered by insurance.  These losses must be so severe that
 
15 resident licensed and independent adjusters will be unable to
 
16 adjust the losses within a reasonable time as determined by the
 
17 division."
 
18      SECTION 9.  Section 431:9-201, Hawaii Revised Statutes, is
 
19 amended to read as follows:
 
20      "§431:9-201  License required.(a)  No person engaging in
 
21 the business of insurance in this State shall act as, be
 
22 appointed as, or hold oneself out to be a general agent,
 

 
 
 
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 1 subagent, solicitor, or adjuster unless so licensed by this
 
 2 State.
 
 3      (b)  No general agent, subagent, or solicitor in this State
 
 4 shall solicit or take applications for, procure, or place for
 
 5 others any class of insurance for which the general agent,
 
 6 subagent, or solicitor is not licensed and does not hold an
 
 7 appointment from the insurer in this State for that class of
 
 8 insurance.
 
 9      (c)  A regular salaried officer or employee of an authorized
 
10 insurer shall not be required to be licensed by reason of
 
11 rendering assistance to, or on behalf of a licensed general
 
12 agent, subagent, or solicitor, provided that the salaried officer
 
13 or employee devotes substantially all of the officer's or
 
14 employee's time to activities other than the solicitation of
 
15 applications for insurance or annuity contracts and receives no
 
16 commission or other compensation directly dependent upon the
 
17 amount of business obtained.
 
18      (d)  Any person violating this section shall be [fined not
 
19 more than $1,000] assessed a civil penalty not to exceed $5,000
 
20 for each factually different violation.
 
21      (e)  Any person who knowingly violates this section shall be
 
22 assessed a civil penalty of not less than $3,000 and not more
 

 
 
 
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 1 than $10,000 for each violation.
 
 2      (f)  Each repetition of an act that constitutes a violation
 
 3 subject to subsection (d) or (e) shall constitute a separate
 
 4 violation."
 
 5      SECTION 10.  Section 431:10B-108, Hawaii Revised Statutes,
 
 6 is amended by amending subsection (c) to read as follows:
 
 7      "(c)  The benefits provided by the policy form shall not be
 
 8 deemed reasonable in relation to the premium charged or to be
 
 9 charged if the ratio of losses incurred to premiums earned is not
 
10 at least sixty per cent.  The commissioner may adopt by rules
 
11 prima facie acceptable premium rates that shall reasonably be
 
12 expected to produce a sixty per cent loss ratio.  The prima facie
 
13 rates shall be usable without actuarial or statistical
 
14 justification when filed together with an otherwise acceptable
 
15 policy form[.]; provided that the ratio of losses for the most
 
16 recent three years is at least sixty per cent.  The rules shall
 
17 specify the plans of benefits to which the premium rates shall
 
18 apply."
 
19      SECTION 11.  Section 431:10C-307.7, Hawaii Revised Statutes,
 
20 is amended by amending subsection (b) to read as follows:
 
21      "(b) Violation of subsection (a) is a criminal offense and
 
22 shall constitute a:
 

 
 
 
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 1      (1)  Class B felony if the value of the benefits, recovery,
 
 2           or compensation obtained or attempted to be obtained is
 
 3           more than $20,000;
 
 4      (2)  Class C felony if the value of the benefits, recovery,
 
 5           or compensation obtained or attempted to be obtained is
 
 6           more than $300; or
 
 7      (3)  Misdemeanor if the value of the benefits, recovery, or
 
 8           compensation obtained or attempted to be obtained is
 
 9           [less than $300.] $300 or less."
 
10      SECTION 12.  Section 431:11-105, Hawaii Revised Statutes, is
 
11 amended by amending subsection (a) to read as follows:
 
12      "(a)  Every insurer who is authorized to do business in this
 
13 State and who is a member of an insurance holding company system
 
14 shall register with the commissioner, except a foreign insurer
 
15 subject to registration requirements and standards adopted by
 
16 statute or regulation in the jurisdiction of its domicile that
 
17 are substantially similar to those contained in this section and
 
18 section 431:11-106(a)(1), (b), and (d).  [The insurer shall file
 
19 a copy of the registration statement and summary of its
 
20 registration statement as required by subsections (b) and (c)
 
21 with the National Association of Insurance Commissioners.]  The
 
22 insurer [also] shall file a copy of the summary of its
 

 
 
 
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 1 registration statement as required by subsection (c) in each
 
 2 state in which that insurer is authorized to do business if
 
 3 requested by the commissioner of that state.  Any insurer who is
 
 4 subject to registration under this section shall register within
 
 5 fifteen days after it becomes subject to registration, and
 
 6 annually thereafter by March 15 of each year for the previous
 
 7 calendar year, unless the commissioner for good cause shown
 
 8 extends the time for registration, and then within the extended
 
 9 time.  The commissioner may require any insurer who is a member
 
10 of a holding company system who is not subject to registration
 
11 under this section to furnish a copy of the registration
 
12 statement or other information filed by the insurance company
 
13 with the insurance regulatory authority of domiciliary
 
14 jurisdiction."
 
15      SECTION 13.  Section 431:11-111, Hawaii Revised Statutes, is
 
16 amended to read as follows:
 
17      "§431:11-111  Sanctions.  (a)  Any insurer failing, without
 
18 just cause, to file any registration statement as required in
 
19 this article shall be [required, after notice and hearing, to pay
 
20 a penalty of $100 for each day's delay,] liable for a fine in an
 
21 amount of not less than $100 and not more than $500 for each day
 
22 of delinquency to be recovered by the commissioner and the
 

 
 
 
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 1 penalty so recovered shall be paid into the insurance regulation
 
 2 fund [of this State.  The maximum penalty under this subsection
 
 3 is $5,000].  The commissioner may reduce the penalty if the
 
 4 insurer demonstrates to the commissioner that the imposition of
 
 5 the penalty would constitute a financial hardship to the insurer.
 
 6      (b)  Every director or officer of an insurance holding
 
 7 company system who knowingly violates, participates in, or
 
 8 assents to, or who knowingly [shall permit] permits any of the
 
 9 officers or agents of the insurer to engage in any transactions
 
10 or make investments which have not been properly reported or
 
11 submitted pursuant to sections 431:11-105(a), 431:11-106(a)(2),
 
12 or 431:11-106(b) or who violates this article, shall [pay, in
 
13 their individual capacity, a civil forfeiture of not more than
 
14 $5,000 per violation, after notice and hearing before the
 
15 commissioner.] be subject to a fine of not less than $100 and not
 
16 more than $10,000 per violation.  In determining the amount of
 
17 the [civil forfeiture,] fine, the commissioner shall take into
 
18 account the appropriateness of the [forfeiture] fine with respect
 
19 to the gravity of the violation, the history of previous
 
20 violations, and such other matters as justice may require.
 
21      (c)  Whenever it appears to the commissioner that any
 
22 insurer subject to this article or any director, officer,
 

 
 
 
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 1 employee, or agent thereof has engaged in any transaction or
 
 2 entered into a contract which is subject to section 431:11-106
 
 3 and which would not have been approved had the approval been
 
 4 requested, the commissioner may order the insurer to cease and
 
 5 desist immediately any further activity under that transaction or
 
 6 contract.  After notice and hearing, the commissioner may also
 
 7 order the insurer to void any of the contracts and restore the
 
 8 status quo if that action is in the best interest of the
 
 9 policyholders, creditors, or the public.
 
10      (d)  Whenever it appears to the commissioner that any
 
11 insurer or any director, officer, employee, or agent thereof has
 
12 committed a wilful violation of this article, the commissioner
 
13 may cause criminal proceedings to be instituted against the
 
14 insurer or the responsible director, officer, employee, or agent
 
15 thereof.  Any insurer who wilfully violates this article [may be
 
16 fined not more than $5,000.] shall be subject to a fine of not
 
17 less than $100 and not more than $10,000 per violation.  Any
 
18 individual who wilfully violates this article [may be fined in
 
19 the individual's capacity not more than $5,000,] shall be subject
 
20 to a fine in the individual's capacity of not less than $100 and
 
21 not more than $10,000 per violation, or be imprisoned for not
 
22 more than one year.
 

 
 
 
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 1      (e)  Any officer, director, or employee of an insurance
 
 2 holding company system who wilfully and knowingly subscribes to
 
 3 or makes, or causes to be made, any false statements [or], false
 
 4 reports, or false filings with the intent to deceive the
 
 5 commissioner in the performance of the commissioner's duties
 
 6 under this article, upon conviction thereof, shall be imprisoned
 
 7 for not more than one year, or fined $5,000, or both.  Any fines
 
 8 imposed shall be paid by the officer, director, or employee in
 
 9 [their] the person's individual capacity."
 
10      SECTION 14.  Section 431:15-335, Hawaii Revised Statutes, is
 
11 amended by amending subsection (a) to read as follows:
 
12      "(a)  All unclaimed funds subject to distribution remaining
 
13 in the liquidator's hands when the liquidator is ready to apply
 
14 to the court for discharge, including the amount distributable to
 
15 any creditor, shareholder, member, or other person who is unknown
 
16 or cannot be found, shall be deposited with the [insurance
 
17 regulation fund,] director of finance, and shall be paid without
 
18 interest except in accordance with section 431:15-332 to the
 
19 person entitled thereto or the person's legal representative upon
 
20 proof satisfactory to the [insurance regulation fund] director of
 
21 finance of the person's right thereto.  Any amount on deposit not
 
22 claimed within six years from the discharge of the liquidator
 

 
 
 
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 1 shall be deemed to have been abandoned and shall be escheated
 
 2 without formal escheat proceedings and be deposited with the
 
 3 [insurance regulation fund.] general fund."
 
 4      SECTION 15.  Section 432:2-102, Hawaii Revised Statutes, is
 
 5 amended by amending subsection (b) to read as follows:
 
 6      "(b)  Nothing in this article shall exempt fraternal benefit
 
 7 societies from the provisions and requirements of [sections
 
 8 416-19 and 416-20.] section 431:2-215."
 
 9      SECTION 16.  Statutory material to be repealed is bracketed.
 
10 New statutory material is underscored.
 
11      SECTION 17.  This Act shall take effect upon its approval.