Hawaii Life Insurance Claim Laws: 6% Interest, Bad Faith

Not legal advice. This page summarizes sections of the Hawaii Revised Statutes as posted by the Hawaii State Legislature and one Hawaii Supreme Court opinion. Insurance Division rules and most later case law are not covered.

Hawaii in brief

A 30-day safe harbor, then interest back to death. Pay within 30 days and no interest is due; pay later and interest is owed from the date of death at a 6% minimum (431:10-243).
Delay letters are mandatory. Claims open 30 days after being reported require a written explanation to the insured or beneficiary (431:13-103(a)(11)(G)).
Intent or materiality. Either one lets an insurer rely on a misrepresentation (431:10-209).
A closed list of permitted exclusions, with suicide limited to two years from issue (431:10D-108).

Interest on proceeds: 431:10-243

The section sorts claims into three situations:

No lawsuit. Interest is computed daily at the rate the insurer currently pays on proceeds left under its interest settlement option, but never less than 6% a year, from the date of death to the date of payment (subsection (c)).
Lawsuit ending in judgment. Interest runs from death to the verdict, report or decision, computed the same way (subsection (a)).
Lawsuit settled before verdict. Interest runs from death to the date the settlement is paid (subsection (b)).

Two exceptions matter. No interest is required if the proceeds are paid within thirty days from the date of death (subsection (d)). And no interest is required under this section for any period during which another state or federal law already obliges the insurer to pay interest on funds it has deposited with a court over competing claims (subsection (e)). Policies issued before June 2, 1977 with specific contrary provisions are excluded (subsection (f)).

Misrepresentations: 431:10-209

Statements in an application or in negotiations are representations, not warranties. A misrepresentation does not prevent recovery unless it was made with actual intent to deceive, or it materially affects either the insurer’s acceptance of the risk or the hazard it assumed. The second prong does not require intent, so an honest but material mistake can still matter.

Contest period and suicide: 431:10D-102, -108, -109, -110

Incontestability. A life policy must be incontestable, except for nonpayment, after it has been in force during the insured’s lifetime for two years from its date of issue. Disability and accidental-death benefits may be carved out (431:10D-102(a)(3)).
Entire contract. The application is part of the contract only if a copy is endorsed on or attached to the policy when issued, and statements are representations absent fraud (431:10D-102(a)(2)).
Scope. The contest clause bars only challenges to the policy’s validity. It does not stop the insurer from relying at any time on an exclusion or restriction in the policy (431:10D-109).
Reinstatement. A reinstated policy can be contested for fraud or material misrepresentation in the reinstatement only for the same period that applied after original issue (431:10D-110).
Exclusions. A policy may restrict coverage for death only in listed circumstances: war, aviation under stated conditions, specified hazardous occupations, residence outside the United States and Canada, and suicide, sane or insane, within two years from issue. When one applies, the insurer must still pay at least a statutory reserve amount (431:10D-108(b), (c)).
Grace. Thirty days, during which the policy stays in force; an unpaid premium may be deducted from proceeds (431:10D-102(a)(1)).

Unfair claim settlement practices: 431:13-103(a)(11)

These are violations when done often enough to show a general business practice. Hawaii’s list adds firm deadlines that many states lack:

responding to communications with reasonable promptness, in no case more than fifteen working days, and with more than a bare acknowledgment (B);
offering payment within thirty calendar days after affirming liability when the amount is set and undisputed (F);
giving the insured, or the beneficiary, a reasonable written explanation for any delay on every claim unresolved thirty calendar days after it was reported (G);
refusing to pay without a reasonable investigation (D), and not settling promptly once liability is reasonably clear (H); and
marking a check or letter “final” or “a release” when more benefits are probable, absent a policy-limit payment or bona fide dispute (Q).

The case: Best Place v. Penn America (1996)

In Best Place, Inc. v. Penn America Insurance Co., 82 Hawai’i 120, 920 P.2d 334 (1996), a property claim, the trial court had excluded all bad-faith evidence. The Hawaii Supreme Court vacated that ruling and held that “Hawai’i recognizes the tort of bad faith in the first-party insurance context.” It found that recognition consistent with both its own decisions and the insurance code, and rejected the argument that statutory remedies were enough.

On the standard, the court adopted the general Gruenberg test. The insured need not prove conscious wrongdoing or an evil motive, and an unreasonable delay in payment of benefits can support compensatory damages. A reasonable interpretation of the policy is not bad faith, and an erroneous refusal alone is not enough. Punitive damages require “something more,” proved by clear and convincing evidence, such as wanton, oppressive or malicious conduct.

The plaintiff in Best Place was the policyholder. Whether a life insurance beneficiary can bring the tort is a question for a Hawaii lawyer.

Group coverage

The standard provisions above are written for individual life policies. Employer-sponsored group life is usually governed by federal law; see employer group life.

Time limits

HRS 657-1(1) gives six years for actions on a contract. A life policy may shorten that, but not below three years after the claim accrues (431:10D-108(a)).

Homicide rule: 560:2-803

A person who feloniously and intentionally kills the decedent loses revocable beneficiary designations, which take effect as if the killer had disclaimed them. A final conviction, after appeals are exhausted, is conclusive. Without one, the court decides on petition by a preponderance of the evidence (subsection (g)).

A payor that pays in good faith on proof of death is protected until it receives written notice of a claimed forfeiture, which must go to its main office or home by registered or certified mail, return receipt requested, or be served like a summons. After notice, the payor may deposit the money with the probate court (subsection (h)).

Former spouses and former reciprocal beneficiaries

Hawaii’s 560:2-804 applies the uniform divorce rule and extends it to the end of a reciprocal beneficiary relationship. A divorce, annulment or termination of that relationship revokes a revocable gift to the former spouse or former reciprocal beneficiary in an instrument executed beforehand, together with gifts to that person’s relatives, unless the instrument, a court order or a property contract between the two says otherwise.

An insurer that pays in good faith before it receives written notice of the divorce, annulment, termination or re-registration is not liable for that payment. Plans governed by ERISA follow their own documents; see Egelhoff.

Example

A Hilo insured dies March 1. The insurer requests medical records and the claim is still open on April 15, more than 30 days after it was reported, with no letter explaining why. It pays June 1. Because payment came more than 30 days after death, interest is owed from March 1 at no less than 6% a year. The missing delay letter is a point worth raising with the Insurance Division.

Complaints

The Hawaii Insurance Division takes consumer complaints: Filing a Complaint (Hawaii Insurance Division). A complaint does not pause the time to sue.

Sources

(Hawaii State Legislature):

Read November 3, 2026:

Best Place, Inc. v. Penn America Insurance Co. (Haw. 1996) (CourtListener)
Hawaii Revised Statutes 560:2-804 (Hawaii State Legislature): capitol.hawaii.gov.

Not legal advice. This page summarizes general rules and the specific statutes cited. Your policy's wording, the state whose law applies, and whether the coverage came through an employer can all change the result. See the disclaimer and editorial policy.