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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