Security for Compensation; Employment

HRS div. 1, tit. 21, ch. 386, pt. IV

in effect

HRS §386-121 Security for payment of compensation; misdemeanor

386-121. Security for payment of compensation; misdemeanor (a) Employers, except the State, any county or political subdivision of the State, or other public entity within the State, shall secure compensation to their employees in one of the following ways: (1) By insuring and keeping insured the payment of compensation with any stock, mutual, reciprocal, or other insurer authorized to transact the business of workers' compensation insurance in the State; (2) By depositing and maintaining with the state director of finance security satisfactory to the director of labor and industrial relations securing the payment by the employer of compensation according to the terms of this chapter; (3) Upon furnishing satisfactory proof to the director of the employer's solvency and financial ability to pay the compensation and benefits herein provided, no insurance or security shall be required, and the employer shall make payments directly to the employer's employees, as they may become entitled to receive the same under the terms and conditions of this chapter; (4) An employer desiring to maintain security for payment of compensation under this section shall file an application with the director on a form provided for this purpose together with the employer's most current audited annual financial statement; (5) Where an applicant for self-insurance is a subsidiary and the subsidiary cannot submit an independent current audited annual financial statement, an indemnity agreement approved as to form and content by the director shall be executed by the parent corporation of the subsidiary and submitted with its application; (6) Each self-insurance authorization shall be effective from the date of issuance until June 30 of each calendar year; (7) A notice of intention to cancel self-insurance shall be submitted in writing to the director within at least thirty days prior to the effective date of cancellation; (8) A self-insurance authorization may be revoked by the director for good cause shown upon notification in writing to the self-insurer; (9) By membership in a workers' compensation self-insurance group with a valid certificate of approval under section 386-194; or (10) By membership in a workers' compensation group insured by a captive insurer under chapter 431, article 19. Any person who wilfully misrepresents any fact in order to obtain the benefits of paragraph (3) shall be guilty of a misdemeanor. (b) Any decision of the director rendered under paragraphs (2) and (3) of subsection (a) of this section with respect to the amount of security required or refusing to permit no security to be given shall be subject to review on appeal in conformity with sections 386-87 and 386-88. [L 1963, c 116, pt of §1; Supp, §97-120; HRS §386-121; am L 1975, c 41, §1; gen ch 1985; am L 1986, c 304, §3; am L 1991, c 79, §1; am L Sp 2005, c 11, §12]

HRS §386-122 Notice of insurance

386-122. Notice of insurance If the insurance so effected is under section 386-121(a)(1), the employer shall file with the director in a form prescribed by the director a notice of the employer's insurance together with a statement of benefits provided by the policy of insurance. The director may also accept the notice of employer's insurance from approved third party agencies in a manner and form approved by the director. [L 1963, c 116, pt of §1; Supp, §97-121; HRS §386-122; gen ch 1985; am L 1986, c 304, §4; am L 1988, c 35, §1; am L 2012, c 262, §1]

HRS §386-123 Failure to give security for compensation; penalty; injunction

386-123. Failure to give security for compensation; penalty; injunction If an employer fails to comply with section 386-121, the employer shall be liable for a penalty of not less than $500 or of $100 for each employee for every day during which such failure continues, whichever sum is greater, to be recovered in an action brought by the director in the name of the State, and the amount so collected shall be paid into the special compensation fund created by section 386-151. The director may, however, in the director's discretion, for good cause shown, remit all or any part of the penalty in excess of $500; provided that the employer in default complies with section 386-121. With respect to such actions, the attorney general or any county attorney or public prosecutor shall prosecute the same if so requested by the director. In addition, if any employer is in default under section 386-121 for a period of fourteen days, the employer may be enjoined, by the circuit court of the circuit in which the employer's principal place of business is located in the State or where the violation occurred, from carrying on the employer's business anywhere in the State so long as the default continues, such action for injunction to be prosecuted by the attorney general or any county attorney if so requested by the director. [L 1963, c 116, pt of §1; Supp, §97-122; HRS §386-123; gen ch 1985; am L 1988, c 37, §5; am L 2016, c 187, §4; am L 2017, c 135, §1]

HRS §386-124 The insurance contract

386-124. The insurance contract Every policy of insurance issued by an insurer of an employer referred to in section 386-1 which covers the liability of the employer for compensation shall cover the entire liability of the employer to the employer's employees covered by the policy or contract, and provide for the deductible under section 386-100, at the option of the insured. The policy also shall contain a provision setting forth the right of the employees to enforce in their own names either by filing a separate claim or by making the insurance carrier a party to the original claim, the liability of the insurance carrier in whole or in part for the payment of the compensation. Payment in whole or in part of compensation by either the employer or the insurance carrier shall, to the extent thereof, be a bar to the recovery against the other of the amount so paid. All insurance policies shall be of a standard form, the form to be designated and approved by the insurance commissioner. No policy of insurance different in form from the designated and approved form shall be approved by the director. [L 1963, c 116, pt of §1; Supp, §97-123; HRS §386-124; am L 1985, c 296, §19; gen ch 1985]

HRS §386-124.5 Insurer's requirements; failure to maintain claims service office; penalty; injunction

386-124.5. Insurer's requirements; failure to maintain claims service office; penalty; injunction (a) By January 1, 1992, each insurer shall establish and maintain a complete claims service office or engage an independent claims adjusting service as its claims agent in this State with draft authority for the processing and payment of compensation. (b) Failure to comply with subsection (a) shall subject the insurer to a civil penalty of not less than $2,500, or $100 for every day during which the failure continues, whichever sum is greater, to be recovered in an action brought by the director in the name of the State in a court of competent jurisdiction. Any amounts so collected shall be paid into the special compensation fund provided by section 386-151. The director shall have discretion, for good cause shown, to remit all or any part of the penalty in excess of $2,500, if the insurer in default forthwith complies with subsection (a). (c) If any insurer violates subsection (a) for a period of thirty days, the insurer may be enjoined by the circuit court from carrying on the insurer's business in any place in the State so long as the violation continues. (d) The attorney general shall enforce this section if so requested by the director. [L 1991, c 78, §1]

HRS §386-125 Knowledge of employer imputed to insurance carrier

386-125. Knowledge of employer imputed to insurance carrier Every policy and contract shall contain a provision that, as between the employee and the insurance carrier, the notice to or knowledge of the occurrence of the injury on the part of the employer shall be deemed notice or knowledge, as the case may be, on the part of the insurance carrier; that jurisdiction of the employer shall, for the purpose of this chapter, be jurisdiction of the insurance carrier, and that the insurance carrier shall in all respects be bound by and subject to the orders, findings, and decisions rendered against the employer for the payment of compensation under this chapter. [L 1963, c 116, pt of §1; Supp, §97-124; HRS §386-125]

HRS §386-126 Insolvency of employer not to release insurance carrier

386-126. Insolvency of employer not to release insurance carrier Every policy and contract shall contain a provision to the effect that the insolvency or bankruptcy of the employer and the employer's discharge therein shall not relieve the insurance carrier from the payment of compensation for an injury suffered by a covered employee during the life of the policy or contract. [L 1963, c 116, pt of §1; Supp, §97-125; HRS §386-126; gen ch 1985]

HRS §386-127 Cancellation of insurance contracts

386-127. Cancellation of insurance contracts No policy or contract of insurance issued by a stock company or mutual association against liability arising under this chapter shall be canceled within the time limited in the contract for its expiration until at least ten days after notice of intention to cancel such contract, on a date specified in the notice, has been filed with and served on the director of labor and industrial relations and the employer. [L 1963, c 116, pt of §1; Supp, §97-126; HRS §386-127]

HRS §386-128 Insurance by the State, counties, and municipalities

386-128. Insurance by the State, counties, and municipalities The State, any county or other political subdivision of the State, and any other public entity within the State which is liable to its employees for compensation, may insure with any authorized insurance carrier. [L 1963, c 116, pt of §1; Supp, §97-127; HRS §386-128]

HRS §386-129 Employees not to pay for insurance; penalty

386-129. Employees not to pay for insurance; penalty No agreement by an employee to pay any portion of the premium paid by the employee's employer, or to contribute to a benefit fund or department maintained by the employer, or to the cost of mutual or other insurance maintained for or carried for the purpose of securing compensation as herein required, shall be valid; and any employer who makes a deduction for that purpose from the wages or salary of any employee entitled to the benefits of this chapter shall be fined not more than $2,500. [L 1963, c 116, pt of §1; Supp, §97-128; HRS §386-129; gen ch 1985; am L 1988, c 37, §6]

HRS §386-142 Employment rights of injured employees

386-142. Employment rights of injured employees It shall be unlawful for any employer to suspend or discharge any employee solely because the employee suffers any work injury which is compensable under this chapter and which arises out of and in the course of employment with the employer unless it is shown to the satisfaction of the director that the employee will no longer be capable of performing the employee's work as a result of the work injury and that the employer has no other available work which the employee is capable of performing. Any employee who is suspended or discharged because of such work injury shall be given first preference of reemployment by the employer in any position which the employee is capable of performing and which becomes available after the suspension or discharge and during the period thereafter until the employee secures new employment. This section shall not apply to the United States or to employers subject to part III of chapter 378. [L 1978, c 201, §1; gen ch 1985]

HRS §386-151 Special compensation fund established and maintained

386-151. Special compensation fund established and maintained (a) There is hereby created a trust fund to be known as the special compensation fund which shall consist of payments made to it as provided by law. The director of finance of the State shall be custodian of the fund, and all disbursements therefrom shall be paid by the director of finance upon orders by the director of labor and industrial relations. (b) Every employer pursuant to an order made by the director, shall pay into the fund the amounts specified in sections 386-34(5) and 386-41(d) under the conditions prescribed for such payment. Whenever such amount is paid into the fund and it is subsequently determined by the director, the appellate board, or a court having jurisdiction that a dependent is entitled to benefits excluding or diminishing the entitlement of the fund, the director, appellate board, or court shall order the refund of the sum to which the fund is not entitled and the director of finance as custodian shall immediately make such refund upon receipt by the director of finance of a certified copy of this order. In cases where an order of the director ordering payment into the fund is reversed on appeal the employer is relieved of any duty to make payments into the fund. (c) The director shall appoint annually a certified public accountant to examine and audit all the books and records relating to the special compensation fund and shall advise the director as to the fund's solvency, including recommendations as to levies and charges provided for in section 386-152 and the required level of funding. The certified public accountant's fees for this service shall be paid out of the special compensation fund. [L 1963, c 116, pt of §1; Supp, §97-140; HRS §386-151; am L 1973, c 183, §1; gen ch 1985; am L 2013, c 100, §5]

HRS §386-152 Levy and charges to finance special compensation fund

386-152. Levy and charges to finance special compensation fund When the cash balance of the special compensation fund established in section 386-151 falls below, as of December 31 of any year, an amount determined by the director to be insufficient to meet the fund's current and projected obligations, then the levy on the gross premiums of insurers of employers insured under section 386-121(a)(1) provided for in section 386-153, and the charge provided in section 386-154 against each employer not insuring and keeping insured, as provided in section 386-121(a)(1), shall be levied and collected during the succeeding year and each succeeding year thereafter until the cash balance of the fund equals or exceeds as of December 31 of any year an amount determined by the director to be sufficient to meet the fund's current and projected obligations. When the cash balance of the fund equals or exceeds as of December 31 of any year an amount determined by the director to be sufficient to meet the fund's current and projected obligations, then the levy on the gross premiums of insurance companies provided for in section 386-153 and the charge provided in section 386-154 against each employer not insuring and keeping insured as provided in section 386-121(a)(1) shall not be levied and collected during the succeeding year until the cash balance of the fund falls below as of December 31 of any year an amount determined by the director to be insufficient to meet the fund's current and projected obligations. The director shall annually furnish each insurance company provided for in section 386-153 and each employer provided for in section 386-154 with a copy of the certified public accountant's audit report and recommendations. The cost of furnishing such report shall be paid out of the special compensation fund. [L 1963, c 103, pt of §1; Supp, §97-141; HRS §386-152; am L 1973, c 183, §2]

HRS §386-153 Levy on insurers of employers insured under section 386-121(a)(1)

386-153. Levy on insurers of employers insured under section 386-121(a)(1) (a) For the calendar year 1974 and for each calendar year thereafter, insurers of employers, as defined in section 386-1, shall pay a levy determined by the director which shall be based on a percentage on gross premiums, as defined in section 431:7-202(a), derived from workers' compensation insurance issued during the prior year in accordance with chapter 386 and chapter 431, if the levying and collecting of such a levy is required pursuant to section 386-152, which levy shall be collected in the same manner as the tax provided for in section 431:7-202 is collected and shall be deposited in the special compensation fund established in section 386-151. This levy shall be in addition to any tax imposed in chapter 431 on gross premiums derived from workers' compensation insurance. (b) Notwithstanding subsection (a), from its inception through December 31, 2007, the Hawaii Employers' Mutual Insurance Company, Inc., shall be exempt from this levy; provided that this exemption shall apply to the first $25,000,000 of written premiums in each calendar year; and provided further that annual written premiums in excess of $25,000,000 shall be subject to this levy at the same rate as other insurers. Any moneys heretofore paid by Hawaii Employers' Mutual Insurance Company, Inc., to the special compensation fund shall be retained by the special compensation fund to be credited to future levy balances owed by Hawaii Employers' Mutual Insurance Company, Inc. [L 1963, c 103, pt of §1; Supp, §97-142; HRS §386-153; am L 1973, c 183, §3; am L 1975, c 41, §1; am L 1991, c 165, §1; am L 1999, c 163, §22]

HRS §386-154 Charge against employers not insured under section 386-121(a)(1)

386-154. Charge against employers not insured under section 386-121(a)(1) (a) As used in this section: "Employing unit" means an employer who has not secured compensation to the employer's employees under section 386-121(a)(1); except that, for employers who are members of a workers' compensation group under part VI, the term means the group. "Average annual compensation" means the average of annual compensation payments made by an employing unit for a period consisting of two consecutive calendar years immediately preceding the year for which the charge is assessed under this section; provided that if, at the end of a calendar year, an employing unit was subject to this chapter for a period less than twelve consecutive months the total amount of compensation payments made by the employing unit during such period shall constitute the employing unit's average annual compensation. "Employing unit's compensation ratio" means the percentage ratio derived by dividing an employing unit's average annual compensation at the end of a calendar year by the total average annual compensation paid during the same two calendar years by all employers subject to this chapter. "Carrier's compensation ratio" means the quotient derived by dividing the total average annual compensation paid during the two most recent calendar years by all insurance carriers on behalf of employers insured and keeping insured under section 386-121(a)(1) by the total average annual compensation paid during the same two calendar years by all employers subject to this chapter. "Anticipated total assessment" means the amount derived by dividing the total amount of the levy to be paid by insurance carriers in a calendar year as required by section 386-153 by the most recent carrier's compensation ratio. (b) For the calendar year 1974 and for each calendar year thereafter an employing unit shall, except as otherwise provided in section 386-152, pay into the special compensation fund a charge in an amount which is equal to the product derived by multiplying the employing unit's most recent compensation ratio by the most recent anticipated total assessment. For each calendar year the director shall determine the amount of the charge to be paid by each employing unit, and shall give notice of such charge to each employing unit by August 15 of the year for which the charge is assessed. The amount of the charge shall be paid to the director on or before September 30 following notification. The director of finance may withhold the additional charge due from a political subdivision from any moneys due the subdivision from the State if the subdivision has not paid its charge as required by this section and shall deposit the withheld amount in the special compensation fund. [L 1963, c 103, pt of §1; Supp, §97-143; HRS §386-154; am L 1973, c 183, §4; am L 1982, c 51, §2 and c 204, §8; am L 1983, c 124, §17; gen ch 1985; am L 1986, c 304, §5; am L 1993, c 123, §1]

HRS §386-154.5 Special assessments

386-154.5. Special assessments (a) For the calendar year 1972 only, insurers of employers as defined in section 386-121(a)(1) shall pay a special assessment of one and one-quarter per cent on gross premiums as defined in section 431:7-202(a) and in accordance with the provisions of section 386-153. For the calendar year 1973 only, such insurers shall pay a special assessment established by rule of the director not to exceed 1.6 times the 1972 special assessment. (b) For the calendar year 1972 only, employers not insured under section 386-121(a)(1) shall pay a special assessment equal to 1.67 times the special charge as defined and in accordance with the provisions of section 386-154. For the calendar year 1973 only, such employers shall pay a special assessment established by rule of the director not to exceed 1.6 times the 1972 special assessment. (c) The assessments under this section shall be paid within thirty days from the receipt of notification by the department of commerce and consumer affairs. [L 1972, c 42, §5; am L 1973, c 183, §5; am L 1982, c 204, §8; am L 1993, c 6, §15]

HRS §386-155 Expenses

386-155. Expenses All litigation expenses, including but not limited to court costs, attorneys' fees, and witness fees incurred by the director in preparation, prosecution, or defense of any action brought on behalf of or against the special compensation fund shall be paid from the fund. Administrative expenses for the protection and preservation of the special compensation fund shall also be paid from the fund. [L 1969, c 21, §1; am L 2000, c 103, §1]

Source: Hawaii State Legislature (capitol.hawaii.gov), via Internet Archive capturesURL: http://www.capitol.hawaii.gov/hrscurrent/Vol07_Ch0346-0398/HRS0386/HRS_0386-.htmFetched: 11/10/2026