02/28/2012 01:30 PM Senate LABOR & COMMERCE

        SB 157-CANCEL INSUR. ON CERTAIN VACANT PROPERTY                                                                     
                                                                                                                                
2:36:39 PM                                                                                                                    
CHAIR EGAN announced the consideration of SB 157.                                                                               
                                                                                                                                
SENATOR PASKVAN moved  to bring CSSB 157(  ), 27-LS0928\E, before                                                               
the committee.                                                                                                                  
                                                                                                                                
CHAIR EGAN objected for discussion purposes.                                                                                    
                                                                                                                                
2:37:12 PM                                                                                                                    
DANA OWEN,  staff to Senator  Egan and  aide to the  Senate Labor                                                               
and Commerce Standing  Committee, said the last  time they talked                                                               
about  this bill  the committee  found a  problem because  of the                                                               
concept  that  insurance  companies   could  cancel  policies  on                                                               
property  that  appeared  to  be  unoccupied.  Committee  members                                                               
expressed  a   great  deal  of  reluctance   to  grant  insurance                                                               
companies  the ability  to do  that,  because Alaskans  typically                                                               
have  homes which  they  leave  for long  periods  of time,  even                                                               
though they certainly intend to  come back and reoccupy them. So,                                                               
language common to case law was  suggested by industry on page 2,                                                               
lines  6-7  removing  "Un-occupancy  or vacancy  of  the  insured                                                               
property that increases a hazard." and replacing it with:                                                                       
                                                                                                                                
     vacancy  of  the  insured  property  that  increases  a                                                                    
     hazard  insured  against  in this  paragraph.  In  this                                                                    
     paragraph  vacancy  means  entire  abandonment  of  the                                                                    
     property  by  the insured  and  the  property does  not                                                                    
     contain contents with substantial utility.                                                                                 
                                                                                                                                
MR. OWEN said  this goes back to the idea  of vacancy, which from                                                               
testimony  seemed was  something people  understood and  could be                                                               
defined  in  the statute.  The  idea  of unoccupied  homes  being                                                               
available for insurance cancelation was removed.                                                                                
                                                                                                                                
2:41:38 PM                                                                                                                    
SENATOR  MENARD  asked  him  to  flesh  out  what  was  meant  by                                                               
"vacancy."                                                                                                                      
                                                                                                                                
MR.  OWEN  said  Sheldon  Winters   could  explain  it  from  the                                                               
insurance  company's  point  of  view, but  this  terminology  is                                                               
commonly  used  in  the  industry,  so  people  recognize  vacant                                                               
property as  being property that  doesn't have  any substantially                                                               
valuable material left behind.                                                                                                  
                                                                                                                                
CHAIR  EGAN  said there  were  concerns  that the  definition  of                                                               
"vacancy" wasn't in statute. Now it is.                                                                                         
                                                                                                                                
SENATOR GIESSEL asked where it says "primary residence."                                                                        
                                                                                                                                
MR. OWEN  said he understood  that it  didn't apply to  a primary                                                               
residence.                                                                                                                      
                                                                                                                                
SENATOR MENARD said she wrote it in her notes.                                                                                  
                                                                                                                                
MR. OWEN said  it's his understanding that it would  apply to any                                                               
residence.                                                                                                                      
                                                                                                                                
2:44:49 PM                                                                                                                    
SHELDON WINTERS, State Farm Insurance,  Juneau, said the industry                                                               
took the  committee's concerns to  heart; thus the CS.  They took                                                               
out  the  un-occupancy  piece  and looked  for  a  definition  of                                                               
"vacancy" which  was problematic, because no  other state defines                                                               
it. However they found case law  that talked about it and tied it                                                               
into abandonment, which was one  of Senator Paskvan's ideas. Now,                                                               
if  enacted,  the property  must  be  entirely abandoned  by  the                                                               
insured,  devoid of  contents of  substantial utility;  and those                                                               
two things must increase the hazard that was insured against.                                                                   
                                                                                                                                
He  reminded  the  committee that  insurance  companies  want  to                                                               
insure property, and  in all cases they either issue  a brand new                                                               
policy  or renew  a policy  within  12 months.  Remember, if  the                                                               
property  is determined  to be  "vacant"  the owner  must send  a                                                               
cancelation notice  to the insured,  but if the insured  is going                                                               
to  get their  mail and  did not  abandon the  property and  does                                                               
intend to insure  it, he would bring the letter  to his insurance                                                               
agent and  work out the solution.  Finally, he said, this  is all                                                               
subject to the oversight of the Division of Insurance.                                                                          
                                                                                                                                
MR.  SHELDON  said  the  statute  does  not  distinguish  between                                                               
primary residences  and it all  goes back  to the amount  of risk                                                               
insured  against.  A  cabin  would   have  a  different  kind  of                                                               
insurance, but it would still have  to be abandoned and devoid of                                                               
property. His reading of case  law is that "devoid of substantial                                                               
utility"  is designed  to address  a situation  in which  someone                                                               
leaves something like  a chair or a microwave. You  don't want to                                                               
be really specific.                                                                                                             
                                                                                                                                
2:49:20 PM                                                                                                                    
SENATOR  PASKVAN said  these  are  significant improvements.  His                                                               
concern was  if a homeowner  takes a  job in Texas,  for example,                                                               
and  they put  their home  on the  market and  take all  of their                                                               
furniture out,  but they  are still paying  the mortgage  and the                                                               
electric  and fuel  bills. Now  he understands  that the  vacancy                                                               
endorsement for $30 would fix that.                                                                                             
                                                                                                                                
MR. WINTERS agreed that the definition  is so limited now that it                                                               
would be difficult to ever cancel a policy.                                                                                     
                                                                                                                                
2:50:55 PM                                                                                                                    
LINDA HALL,  Director, Division of  Insurance, said she  was fine                                                               
with the changes to SB 157.  She contended that there was another                                                               
step; if  you have a  consumer who  feels that his  insurance has                                                               
been wrongly canceled,  they are welcome to come  to her division                                                               
and  the  Consumer  Protection  Division  would  investigate  the                                                               
circumstances. Seeing how these statutes  are applied in the real                                                               
world is part of their  general oversight authority. The division                                                               
determines whether there is a violation.                                                                                        
                                                                                                                                
2:52:36 PM                                                                                                                    
SENATOR  PASKVAN moved  to report  CSSB 157(  ), version  E, from                                                               
committee  with individual  recommendations  and attached  fiscal                                                               
note. There being no objection, the motion carried.                                                                             
                                                                                                                                
2:52:55 PM                                                                                                                    
At ease from 2:52 to 2:54 p.m.