Legislature(2003 - 2004)
03/04/2004 01:32 PM Senate L&C
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HB 340-DAMAGES IN CONSTRUCTION CLAIMS
CHAIR CON BUNDE announced HB 340 to be up for consideration.
REPRESENTATIVE KEVIN MEYERS, sponsor, said that HB 340 limits
damages that can be collected due to a construction defect to
four things: the actual cost of the repairs necessary, the
reasonable attorney costs and fees, reasonable costs of
temporary housing and the reduction in market value, if any,
caused by the construction defect.
What this bill doesn't do, it doesn't cap the cost
that can be collected if the construction defect was
done through gross negligence or if there was personal
injury or death involved.
The reason we are bringing this bill forward is that,
as you know, in the State of Alaska general liability
insurance is a requirement for the folks in the
homebuilding and construction industry. Unfortunately,
it is extremely difficult for them to get this
insurance. When they do get it, it is very limited and
very costly. Unfortunately, those costs then get
passed on to our constituents, the consumer, when they
try to buy a new house. In fact, the State of Nevada
has estimated that every time the insurance goes up
$1,000, - 1,400 people then do not qualify for a home
and these folks are first-time homebuyers.
Currently, there are two companies writing insurance
in Alaska. What we're hoping this bill will do is
encourage more insurance companies to write. A
question that is frequently asked is well, if we pass
this bill, will the insurance rates go down and I
can't guarantee that, Mr. Chairman, and I don't think
anybody can. However, what we do know is that if you
have more competition, then theoretically, the rates
should come down.
As we all know, the price of housing is going up
statewide and we certainly can't control labor costs
and we can't control the price of goods that they have
to pay for or even the availability of land. What we
can do is attempt to control the cost of insurance,
which is a requirement that we have put on this
industry.
The other thing I like about this bill, Mr. Chairman,
is that it rewards the good builders and punishes the
bad builders in the sense that this bill does not
pertain to those builders out there who are in gross
negligence, but it will help those who are trying to
do good...and the industry would agree....
MR. DAVID DILLARD, 321 Construction, Inc., said he builds upper-
end custom homes from $150,000 to $600,000 and about 5 - 6 per
year. Jack Randall with State Farm Insurance has been his
representative for 15 years. He has never had any claims. Last
year workers' compensation cost him about $6,500 per million,
but this year the only company that talked to him so far wanted
$20,000 for less coverage. Another company wouldn't even talk to
him for less than $50,000. He didn't know how he could pay
$10,000 per house for insurance. He supported HB 340 although it
isn't a cure-all bill. [Indisc.]
MR. JEFF DESMET, Alaska Homebuilders Association, said he is
considered one of the better builders in the area, but he is
considering getting out of the business next year because it's
more and more difficult to be a small business owner, especially
with increasing insurance premiums. Last year he was able to
acquire insurance for this year, but for double the premium for
less coverage. He supported everything Mr. Dillard said about
the difficulty he faces as a builder. "I just want to go on
record saying I support HB 340...."
MR. RAY HICKEL, Alaska Homebuilders Association, supported HB
340. [His testimony was indisc.].
MR. LARRY PARTUSCH, Partusch Plumbing and Heating and Northern
Sheet Metal Fabricators, said that Representative Meyer did a
great job with this bill. He put some numbers together on new
construction homes and the cost of insurance for a $220,000 home
is 7 percent, which is really ridiculous. "Since 1982, I've
plumbed about 6,000 houses and I've had one claim against my
insurance and I've heated about 4,500. [Indisc.]"
MS. ROBIN WARD, Legislative Chair, Alaska State Homebuilders
Association, said she supported all builders' previous comments
and would answer questions.
CHAIR BUNDE said that her members were doing a good job for her.
"You'd better be careful or they'll ask you for a refund." He
asked Representative Meyer if he had any concluding comments. He
indicated not. The chair said the bill would be held for a
hearing next week.
SENATOR GARY STEVENS asked if any builders avoid carrying
insurance and is that an issue.
REPRESENTATIVE MEYER replied, "That is the concern...."
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