Legislature(2007 - 2008)BELTZ 211

03/27/2008 01:30 PM LABOR & COMMERCE


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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
*+ SB 286 PHARMACY BENEFITS MANAGERS TELECONFERENCED
Heard & Held
+ HB 357 CLAIMS AGAINST REAL ESTATE LICENSEES TELECONFERENCED
Heard & Held
+ HB 413 EXTENDING THE REAL ESTATE COMMISSION TELECONFERENCED
Heard & Held
Bills Previously Heard/Scheduled
+= SB 113 NURSING MOTHERS IN WORKPLACE TELECONFERENCED
Heard & Held
+= SB 118 PLASTIC BAG FEE; ESTABLISH LITTER FUND TELECONFERENCED
Scheduled But Not Heard
= SJR 18 CHILD PRODUCT SAFETY
Moved SJR 18 Out of Committee
= HB 289 EMPLOYMENT TAX EXEMPTION: SPILL RESPONSE
Moved CSHB 289(FSH) Out of Committee
= SB 305 RECORKING WINE SERVED WITH A MEAL
Moved SB 305 Out of Committee
       CSHB 357(L&C)-CLAIMS AGAINST REAL ESTATE LICENSEES                                                                   
                                                                                                                                
2:15:51 PM                                                                                                                    
ELEANOR WOLFE,  staff for Representative  Kurt Olson,  sponsor of                                                               
HB 357,  said the sponsor introduced  this bill on behalf  of the                                                               
Alaska Association of Realtors that  felt it was necessary due to                                                               
difficulties  with  the Surety  Fund  to  provide that  all  real                                                               
estate  agents have  errors and  omissions  (E&O) insurance.  She                                                               
explained  that   most  large  brokerages  already   provide  E&O                                                               
insurance, but  about 40 percent  of the agents in  Alaska don't.                                                               
This measure  would have  the department  seeking a  group policy                                                               
with a  minimum $100,000 coverage  that all members  could belong                                                               
to at a reasonable rate. This  would allow most of the complaints                                                               
that  go to  the  surety  fund to  be  handled through  insurance                                                               
rather  than have  all of  the complaints  go through  the surety                                                               
fund that has  a maximum of $15,000. A good  number of complaints                                                               
against real estate transactions exceed that.                                                                                   
                                                                                                                                
MS.  WOLFE stated  that  the  surety fund  would  be renamed  the                                                               
recovery fund and it would cover  actions of deceit and breach of                                                               
trust. She  said one  insurance company  handles the  existing 13                                                               
states that  have this  provision and  it is  willing to  make an                                                               
offer once  the parameters  are laid out  by the  department. She                                                               
believes agents could be covered for less than $200 year.                                                                       
                                                                                                                                
CHAIR  ELLIS asked  if she  has had  assurance that  an insurance                                                               
entity is out there that will write insurance in Alaska.                                                                        
                                                                                                                                
MS. WOLFE replied yes.                                                                                                          
                                                                                                                                
2:17:38 PM                                                                                                                    
DAVE FEEKIN, Alaska Association of  Realtors, Kenai, said that HB                                                               
357 is a joint effort by  the Alaska Association of Realtors, the                                                               
Division  of Occupational  Licensing, the  Division of  Insurance                                                               
and  the  Department of  Law.  It  accomplishes two  things.  The                                                               
surety fund expands the claim  coverage by imposing mandatory E&O                                                               
insurance.                                                                                                                      
                                                                                                                                
MR. FEEKIN  explained that  the surety fund  was started  in 1974                                                               
and  covers reimbursement  for  fraud, misrepresentation,  deceit                                                               
and conversion  of trust. By statute  the fund balance has  to be                                                               
$250,000-$500,000.  That money  comes from  the licensees  at the                                                               
amount of  $30 per license period,  every two years. A  few years                                                               
ago  the fund  balance was  at or  above the  $500,000, but  more                                                               
recently it  has been  bouncing around  below the  $250,000 mark.                                                               
Two reasons the funds balance is  dropping is because there are a                                                               
high  number of  frivolous claims  brought against  licenses that                                                               
cost  the  fund  to  hold  the  hearings  even  though  they  are                                                               
meritless. The second is a  reduction in the number of licensees,                                                               
and that moves  with the market. He said the  number of licensees                                                               
doubled from 2000-2005  and the number of  transactions peaked at                                                               
2006 in Alaska and 2005 in the Lower  48. The U.S. as a whole has                                                               
seen a  33 percent drop  in real estate transactions,  but Alaska                                                               
has had  a drop  of 11 percent  from 2006 to  2007; this  year it                                                               
continues the same decline.                                                                                                     
                                                                                                                                
MR.  FEEKIN said  it's  important to  understand  how small  this                                                               
problem really  is in light of  the size of the  market. In 2006,                                                               
15 claims  were filed against  the surety  fund and none  of them                                                               
were successful  in obtaining  a claim. In  2007, 13  claims were                                                               
filed with  two getting  paid.   MLS statistics  for Southcentral                                                               
Alaska  plus Kodiak  indicated an  average of  9,119 real  estate                                                               
transactions  per year  for each  of those  two years,  a lot  of                                                               
successful transactions.  The value of those  transactions was $2                                                               
billion per  year. Imposing mandatory E&O  insurance is supported                                                               
overwhelmingly by the  industry, because it is  a very affordable                                                               
cost  at   $200  or  less.   Colorado,  Idaho,   Iowa,  Kentucky,                                                               
Louisiana,  Mississippi,  Nebraska,  New  Mexico,  North  Dakota,                                                               
Rhode Island, South Dakota, Tennessee  and Wyoming are the states                                                               
involved.  Rice  and  Associates  considers  Alaska  to  be  very                                                               
similar  to Wyoming  as far  as the  number of  licensees. It  is                                                               
considered less  of a risk  because we  don't have the  very high                                                               
second home  values that Wyoming  has. He knew of  no opposition.                                                               
The  state  has never  purchased  a  group policy  for  licensees                                                               
before so the mechanism had to be worked out.                                                                                   
                                                                                                                                
CHAIR ELLIS  thanked him for his  comments and said HB  357 would                                                               
be held.                                                                                                                        
                                                                                                                                

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