Legislature(2003 - 2004)

05/08/2003 01:36 PM Senate L&C

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                                                                                                                                
      CSHB 151(JUD)am-DWELLING DESIGN/CONSTRUCTION CLAIMS                                                                   
                                                                                                                                
CHAIR CON  BUNDE called  the Senate  Labor and  Commerce Standing                                                             
Committee meeting  to order  at 1:36  p.m. Present  were SENATORS                                                               
STEVENS and  SEEKINS. The  Chair announced  HB 151  to be  up for                                                               
consideration.                                                                                                                  
                                                                                                                                
REPRESENTATIVE KEVIN MEYER,  sponsor of HB 151,  said it provides                                                               
homeowners  and  construction  professionals with  a  process  to                                                               
solve construction  issues on new  homes or homes that  are being                                                               
remodeled.  He stated,  "HB 151  requires  homeowners to  provide                                                               
written notice  to the construction professionals  of any defects                                                               
at  least 90  days prior  to taking  a civil  action against  the                                                               
builder."                                                                                                                       
                                                                                                                                
He explained that  most of the time, this  action isn't necessary                                                               
because  most owners  have a  relationship with  the builder  and                                                               
could simply  call the  builder with a  concern. However,  if the                                                               
builder is too busy to take  care of those concerns, this process                                                               
is  in  place.  If  the  homeowner's  complaints  have  not  been                                                               
resolved within a  90-day period, the homeowner  can proceed with                                                               
litigation. Under this bill, the  homeowner has one year from the                                                               
time he or she detects the  problem, but it cannot exceed the 10-                                                               
year statute of limitation for  civil suits. Once the process has                                                               
begun, the statute  of limitation is stopped  until the homeowner                                                               
becomes  aware that  a  settlement using  this  process will  not                                                               
succeed.                                                                                                                        
                                                                                                                                
REPRESENTATIVE MEYER  said this litigation is  important for many                                                               
of reasons.  In Alaska,  contractors and builders are required to                                                               
carry general  liability insurance  and many  liability insurance                                                               
providers  have stopped  providing insurance  or will  provide it                                                               
only at  a very expensive  rate. The rise in  insurance coverage,                                                               
sometimes $3,000 to $5,000, is often passed on to the homebuyer.                                                                
                                                                                                                                
He said three  conforming amendments need to be made  as a result                                                               
of  amendments  adopted  on  the   House  floor  and  those  were                                                               
incorporated into a proposed committee substitute.                                                                              
                                                                                                                                
SENATOR FRENCH arrived at 1:40 p.m.                                                                                             
                                                                                                                                
SENATOR STEVENS moved  to adopt SCS CSHB 151(L&C)  as the working                                                               
document. There were no objections and it was so ordered.                                                                       
                                                                                                                                
CHAIR BUNDE asked if there has been any opposition.                                                                             
                                                                                                                                
REPRESENTATIVE  MEYER replied  that  he has  heard no  opposition                                                               
from the public or the construction community.                                                                                  
                                                                                                                                
SENATOR  STEVENS asked  him to  explain the  language on  page 2,                                                               
line 18, about how the written notice takes place.                                                                              
                                                                                                                                
REPRESENTATIVE MEYER indicated that  serving of notice is defined                                                               
on  page  8, line  7,  as  delivery  by  personal service  or  by                                                               
certified mail.                                                                                                                 
                                                                                                                                
MR.  MIKE  MILLIGAN,  Kodiak  resident,  said  he  works  in  the                                                               
construction  industry  and  supports  this  bill.  He  generally                                                               
supports local control and consensus  and favors legislation that                                                               
doesn't require a winner or a loser.                                                                                            
                                                                                                                                
MR.   RICHARD   TILLY,   President,  Interior   Alaska   Building                                                               
Association,  supports  HB 151.  He  thought  it would  show  the                                                               
building  industry  and  insurance  industry  that  builders  are                                                               
trying  to deal  with  a resolution  process  for minor  building                                                               
issues.                                                                                                                         
                                                                                                                                
SENATOR DAVIS arrived at 1:45 p.m.                                                                                              
                                                                                                                                
MS. ROBIN WARD  said she was recently in  Washington D.C. working                                                               
on this  issue with 50  other state representatives in  an effort                                                               
to make the  industry more attractive to  the insurance industry.                                                               
Although Alaska does  not have many of the problems  the Lower 48                                                               
has,  Alaskans have  to pay  the same  premiums because  insurers                                                               
operate  nationwide.  She said  that  insurance  premiums on  her                                                               
homes will go up $2,000 per home next year.                                                                                     
                                                                                                                                
MR.  STEVE  ORR,  Mat-Su  builder, supported  HB  151,  not  only                                                               
because his  insurance went  up 1,500%  this year  (adding $2,000                                                               
per house  for a total of  $3,300), but because a  bill like this                                                               
will end a two-year senseless battle that he has been in.                                                                       
                                                                                                                                
MR.  ALAN  WILSON, Alaska  Home  Builders  Association -  Juneau,                                                               
supported HB 151 and said his comments had been covered.                                                                        
                                                                                                                                
SENATOR FRENCH  said his  concern is that  the two  parties might                                                               
get into  some kind of  a stalling process  and a huge  amount of                                                               
time  could go  by, which  isn't a  good way  to do  business. He                                                               
wanted to know if the 21-day  clock is ticking during the initial                                                               
exchange  while the  construction professional  awaits videos  or                                                               
something like that from the homeowner.                                                                                         
                                                                                                                                
REPRESENTATIVE MEYER  replied that  he thought the  clock stopped                                                               
during talks.                                                                                                                   
                                                                                                                                
MR.   JOHN  BITTNEY,   Alaska  State   Homebuilders  Association,                                                               
referred him to page 2, line 4, to answer that question.                                                                        
                                                                                                                                
SENATOR  FRENCH asked  if  that  means the  21-day  clock is  not                                                               
ticking  or that  the  right to  eventually file  a  suit is  not                                                               
ticking. He  said he has two  clocks in mind. One  is the general                                                               
right to sue in  court. The bill says a person  does not have the                                                               
right to  go to court and  sue until they have  been through this                                                               
process. He pointed out:                                                                                                        
                                                                                                                                
     That's  giving   up  something.  That's  giving   up  a                                                                    
     person's right  to go  to court and  file suit.  If you                                                                    
     only have to  give that up for 21 days,  I think that's                                                                    
     pretty  reasonable. You  can see  the end  of the  time                                                                    
     period coming up pretty quickly,  but what I don't want                                                                    
     to see is  have the builder say, well, you  can't go to                                                                    
     court until  you give me  the evidence to back  up your                                                                    
     claim.  So, then  you  could get  into  a standoff  and                                                                    
     you'd never get anywhere....                                                                                               
                                                                                                                                
CHAIR BUNDE said  he would hold this bill  temporarily until that                                                               
question gets resolved.                                                                                                         
      CSHB 151(JUD)am-DWELLING DESIGN/CONSTRUCTION CLAIMS                                                                   
                                                                                                                                
CHAIR   BUNDE  announced   that  CSHB   151(JUD)am  was   up  for                                                               
consideration again  and that Representative Meyer  would address                                                               
the earlier question.                                                                                                           
                                                                                                                                
REPRESENTATIVE  MEYER said  that Representative  Gara's amendment                                                               
had to do  with the concept of tolling and  didn't pertain to the                                                               
21-day clock, but instead to the 10-year statute of limitations.                                                                
                                                                                                                                
He  said  the concern  about  the  builder requiring  substantial                                                               
evidence  and  how  that  would  impact  the  21-day  time  frame                                                               
wouldn't be  an issue because  the builder knows the  problem has                                                               
to  be  resolved in  21  days.  As  soon  as a  builder  received                                                               
notification, he would make his own inspection.                                                                                 
                                                                                                                                
SENATOR FRENCH  wanted to clarify  that time won't be  tolled and                                                               
the pressure is on the builder to get back to look at the house.                                                                
                                                                                                                                
REPRESENTATIVE MEYER agreed.                                                                                                    
                                                                                                                                
SENATOR FRENCH  expressed concerned that all  houses aren't built                                                               
on the  road network and  if a dispute  came up, a  builder might                                                               
not want to invest the money to  fly back out to a rural area. He                                                               
didn't  want the  homeowner stuck  in  some kind  of a  discovery                                                               
dispute and  be in a standoff  because he can't get  to court and                                                               
can't  get the  builder to  drop his  demand for  photographs and                                                               
video tape documentation, etcetera of the home defect.                                                                          
                                                                                                                                
REPRESENTATIVE  MEYER responded  that he  shares his  concern but                                                               
felt  that all  builders  statewide would  know  the process  and                                                               
understand if they  built in a remote area they  would have to do                                                               
it right.                                                                                                                       
                                                                                                                                
SENATOR STEVENS  asked if builders  will no longer have  to carry                                                               
general liability insurance if this bill passes.                                                                                
                                                                                                                                
REPRESENTATIVE MEYER replied that  builders are required to carry                                                               
general liability  insurance, but  currently insurance  rates are                                                               
extremely high  because so many  cases are either  being resolved                                                               
in  court  or  builders  are resolving  them  outside  of  court.                                                               
Nevertheless, insurance  companies are  having to pay  claims and                                                               
rates are going up as a result.                                                                                                 
                                                                                                                                
CHAIR BUNDE inserted  that he has never known  insurance rates to                                                               
go down, but this bill might slow the rate of increase.                                                                         
                                                                                                                                
REPRESENTATIVE  MEYER  added that  it's  getting  out of  control                                                               
nationwide.                                                                                                                     
                                                                                                                                
MR. CHUCK  SPINELLI, Alaska Home Builders  Association, supported                                                               
HB 151  and said the  problem came from  condominium construction                                                               
in  the  Lower 48  states  where  teams  of attorneys  sue  condo                                                               
associations who in turn sue  builders and do discovery for years                                                               
without ever  fixing anything. The project  then gets traumatized                                                               
because of the  pending litigation and bankrupts  the builder and                                                               
the condo  association. He said  his general  liability insurance                                                               
is increasing from $55,000 last year  to a quote of $435,000 this                                                               
year.  A lot  of people  who  are building  condominiums are  not                                                               
getting insurance. He  thought this bill is a good  first step to                                                               
having a healthy building industry.                                                                                             
                                                                                                                                
CHAIR BUNDE closed public testimony.                                                                                            
                                                                                                                                
SENATOR STEVENS  moved to pass  SCS CSHB 151(L&C)  from committee                                                               
with  individual  recommendations  and   its  zero  fiscal  note.                                                               
SENATORS STEVENS,  DAVIS, FRENCH and  BUNDE voted yea and  it was                                                               
moved from committee.                                                                                                           

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