SB2962

SECTION 1. The legislature finds that the August 2023 Maui wildfires destroyed thousands of homes and displaced countless families, creating an unprecedented housing crisis that exposed major vulnerabilities in Hawaii's disaster recovery systems. The Maui wildfires also demonstrated the urgent need to modernize the State's insurance laws to provide the flexibility required to adequately respond to future disasters such as hurricanes, wildfires, tsunami, flooding, and volcanic eruptions.

The legislature further finds that homeowners who have experienced a catastrophic loss often face extended recovery timelines of five years or more due to underinsurance, material shortages, workforce limitations, and delays in securing permits and funding. Hawaii's limited rental housing inventory is prone to market failure following major disasters, further driving up costs and leaving families without stable or affordable housing options.

The legislature also finds that current insurance policies often restrict homeowners to rebuilding at the original site, even if rebuilding at the same site is unsafe, impractical, or would result in significant delays. Insurance policies also do not allow coverage limits to be combined to bridge funding gaps. In contrast, other states such as California, Colorado, and Oregon have enacted reforms that allow homeowners to rebuild or purchase an existing home at a different location while keeping total insurer liability capped at existing policy limits. The legislature believes Hawaii's laws should be similarly modernized to provide flexibility to recover from disasters without creating new costs or obligations for insurers. These reforms will help families remain near their communities, relieve pressure on the already stressed rental market, speed recovery, and increase resilience to future disasters.

Accordingly, the purpose of this Act is to give insured persons flexibility to use their existing insurance benefits in a more efficient way to secure safe and stable housing after a disaster.

SECTION 2. Chapter 431, Hawaii Revised Statutes, is amended by adding a new part to article 10E to be appropriately designated and to read as follows:

"Part . HOMEOWNERS INSURANCE; REBUILDING OR REPLACING DWELLINGS

§431:10E-A Definition. As used in this part, unless the context otherwise requires:

"Covered total loss" means a total loss to an insured's primary dwelling caused by a peril that:

(1) Is covered under a homeowners insurance policy; and

(2) Occurred pursuant to a state of emergency.

"State of emergency" means a state of emergency or local state of emergency declared by the governor or a mayor pursuant to section 127A-14.

§431:10E-B Right to rebuild or replace at a new location. (a) Notwithstanding any other law or policy language to the contrary, and except as provided in this part, a homeowners insurance policy issued or delivered in this State shall not contain any provision that limits or denies a payment of replacement cost, extended replacement cost, or building code upgrade cost for a dwelling that has sustained a total loss solely because the insured elects to:

(1) Rebuild the dwelling at a different location; or

(2) Purchase an already-constructed home at a different location.

(b) The total payment to an insured under this section shall not exceed the replacement cost that would have been payable if the dwelling had been rebuilt at its original location, including any applicable extended replacement cost and building code upgrade coverage.

(1) Rebuild a dwelling at a different location; or

(2) Purchase a dwelling at a different location,

shall not include consideration of the value of the land upon which the replacement residence is located.

§431:10E-C Combining limits after covered total loss. (a) If, upon determination of a covered total loss, the insured's dwelling coverage limit is insufficient to rebuild or replace the primary residence, the insurer shall allow the insured to combine dwelling and other structures coverage limits to fund the rebuilding or replacement of the primary residence; provided that the combined total does not exceed the sum of those limits as stated in the policy.

(b) Any claim payments for losses that allow for the combination of the coverage limits for dwellings and other structures, and for which replacement cost coverage is applicable, shall be for the full replacement value of the loss without requiring actual replacement of the other structures.

§431:10E-D Notice to policyholders. Following the declaration of a state of emergency that affects an insured property, that has undergone a covered total loss, the insurer shall provide clear written notice to the affected policyholder of the policyholder's rights to:

(1) Rebuild or replace the dwelling at a different location pursuant to section 431:10E-B; and

(2) Combine coverage limits pursuant to section 431:10E‑C."

SECTION 3. This Act does not affect rights and duties that matured, penalties that were incurred, and proceedings that were begun before its effective date.

SECTION 4. In codifying the new sections added by section 2 of this Act, the revisor of statutes shall substitute appropriate section numbers for the letters used in designating the new sections in this Act.

SECTION 5. This Act shall take effect on January 1, 2027, and shall apply to all homeowners insurance policies issued or renewed on or after that date.

INTRODUCED BY:	_____________________________

THE SENATE	S.B. NO.	2962
THIRTY-THIRD LEGISLATURE, 2026
STATE OF HAWAII