Legislature(2003 - 2004)
03/31/2004 08:05 AM Senate JUD
| Audio | Topic |
|---|
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
CSHB 340(JUD)am-DAMAGES IN CONSTRUCTION CLAIMS
REPRESENTATIVE KEVIN MEYER, sponsor of HB 340, gave the
following review of the measure. This bill will place a limit on
the damages that can be collected on a construction defect to
four things: the actual cost of necessary repairs and damages
caused by the construction defect; reasonable attorney fees; the
reduction of the market value of the home caused by the defect;
and reasonable costs of temporary housing. CSHB 340(JUD)am does
not provide any protection from construction defects caused by
gross negligence or willful recklessness nor does it limit
damages due to personal injury or wrongful death.
REPRESENTATIVE MEYER explained that he introduced HB 340 because
the state requires the construction industry to carry general
liability insurance. Unfortunately, only one company is now
writing insurance in Alaska because Alaska is considered to be
high risk and has a low population. Those contractors who can
get insurance often pay high premiums for limited coverage. The
homebuilder passes those costs on to the consumer. Data from the
State of Nevada showed that with every insurance spike, 1400
people could no longer qualify for homes, and most of those
people are first time homebuyers. He said he cannot assure
anyone that insurance rates will go down if CSHB 340(JUD)am
passes. However, if the legislature makes Alaska a better place
in which to write insurance, more companies will do business
here. The legislature cannot control the rising cost of housing
due to labor costs, materials or land but it can try to control
insurance costs. He noted CSHB 340(JUD)am will protect the
homebuilders who are trying to do the right thing.
8:48 a.m.
SENATOR OGAN asked if CSHB 340(JUD)am limits punitive damages
only.
REPRESENTATIVE MEYER said that is correct.
SENATOR FRENCH indicated that CSHB 340(JUD)am will not limit
suits for personal injury.
REPRESENTATIVE MEYER acknowledged that is correct.
CHAIR SEEKINS asked where the notice of the limits will be
posted.
REPRESENTATIVE MEYER explained that the legislature enacted a
law last year that required a form to be included when closing
on a home. The form was to be a different color so that it would
be obvious to the buyer. CSHB 340(JUD)am will add one paragraph
to that form.
CHAIR SEEKINS asked if the bill requires the buyer to
acknowledge receipt of the form.
REPRESENTATIVE MEYER believed so but was not sure.
TAPE 04-29, SIDE B
SENATOR OGAN declared a conflict of interest as he may work as a
homebuilder in the future.
CHAIR SEEKINS objected and asked that he vote.
SENATOR FRENCH stated, for the record, that his wife is a real
estate agent. He then asked if CSHB 340(JUD)am applies to
schools, government buildings, hotels, B&Bs or motels.
MS. ROBIN WARD, Alaska State Homebuilders' Association, said it
would not apply to any of the above except a B&B because that is
also a home.
CHAIR SEEKINS took public testimony.
MR. DAVE DILLARD, 3-2-1 Construction and the vice president of
the Alaska State Homebuilders Association, stated support for
CSHB 340(JUD)am. He told members that he was insured by State
Farm Insurance for 15 years and never filed a claim. Last year
State Farm decided to quit writing general liability policies
altogether in Alaska. He noted he paid $6,500 last year for $1.5
million of coverage but got a recent quote of $50,000 [for the
same coverage]. He was able to get coverage through his
association that is costing him twice as much as he paid last
year. He said that the Alaska Homebuilders want to protect
homebuilders and stop frivolous lawsuits. [The remainder of Mr.
Dillard's testimony was inaudible due to teleconference
problems.]
SENATOR THERRIAULT asked Mr. Dillard his interpretation of the
phrase "cure the defect" used in the bill. He questioned whether
a contractor could remedy a substandard foundation problem by
puttying the cracks it caused in the wall or whether the
contractor would have to fix the foundation.
MR. DILLARD said contractors always have to go back every year
and fix small cracks in the walls from drying and seasonal
shifting. Regarding the foundation problem, he personally would
fix it. However, he does not know where one would draw the line
if an earthquake damaged a foundation.
CHAIR SEEKINS commented that having been involved in the
warranty business and being relatively conversant with the
phrase "cure the defect," his interpretation is that it would go
to the root cause of the problem.
SENATOR THERRIAULT said his district has a large transient
population because of the military influence. He pointed out
that not all contractors are like Mr. Dillard, who works to
maintain his reputation. Other contractors may cut corners and
leave town. He said his concern is that this legislation
protects people from the shoddy builders.
MR. DILLARD noted that CSHB 340(JUD)am does not address that
issue. He said the Alaska State Homebuilders Association is not
trying to dodge any responsibilities, but wants to limit
people's ability to come up with "upper end things or stress or
whatever people can come up with, with their hand out, thinking
there's an easy handout and therefore lawsuits. We're not taking
anything away from the contractor not having to go back, either
by law or he should just do it anyway."
SENATOR OGAN said his reading is that CSHB 340(JUD)am still
requires that the defect be fixed; it only limits punitive
damages.
CHAIR SEEKINS said that is his reading also, which is similar to
what is done in the auto business.
MR. JEFF HALL, a Palmer homebuilder, told committee members that
he hopes CSHB 340(JUD)am will help resolve the insurance
problems experienced by homebuilders. He said the other
Northwest states have experienced similar problems; Alaska is
the last state to change its statutes to help the situation. He
discussed his insurance problems and explained that the
procedure will entail a final walk-through by the buyer, after
which the buyer signs the paperwork and copies of the notice are
kept on file and given to the buyer. He urged passage of the
bill.
SENATOR OGAN expressed concern that the homebuilder who builds a
few homes each year is about to become extinct and asked if that
is an over-dramatization.
MR. HALL said it is not and noted it is difficult to pass on a
500 percent increase in rates to the consumer and that
appraisers set the price of homes, therefore the small home
builder is going to be in a very tough spot in the next few
years if the industry does not change.
SENATOR OGAN moved CSHB 340(JUD)am from committee with
individual recommendations and its zero fiscal note.
| Document Name | Date/Time | Subjects |
|---|