Legislature(2013 - 2014)BELTZ 105 (TSBldg)
04/04/2013 05:00 PM Senate LABOR & COMMERCE
| Audio | Topic |
|---|---|
| Start | |
| Confirmation Hearings | |
| SB93 | |
| SB25 | |
| HB71 | |
| SB58 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
| *+ | SB 93 | TELECONFERENCED | |
| += | SB 25 | TELECONFERENCED | |
| HB 71 | |||
| *+ | SB 58 | TELECONFERENCED | |
| *+ | SB 61 | TELECONFERENCED | |
| += | SB 79 | TELECONFERENCED | |
SB 58-CANCEL INS. ON CERTAIN ABANDONED PROPERTY
VICE-CHAIR MICCICHE reconvened the meeting and announced the
consideration of SB 58. "An Act allowing an insurer to cancel an
insurance policy if property becomes entirely abandoned and the
abandonment increases the hazard insured against."
6:19:30 PM
SENATOR DENNIS EGAN, sponsor of SB 58, introduced SB 58 speaking
to the following sponsor statement:
SB 58 clarifies that insurance can be cancelled when a
property owner abandons the property, thereby
increasing a hazard covered by the insurance.
AS 21.36.210 lists allowable reasons for cancelling
personal insurance, including a grossly negligent act
by the insured that increases a covered hazard and
physical changes in the insured property that result
in the property becoming uninsurable. As this statute
is currently written, it is not clear whether these
reasons would include abandonment of the property by
the insured.
Homeowners insurance is underwritten based on the
property generally being occupied. An abandoned home
greatly increases the risk of damage beyond what was
contemplated in the insurance contract, including
damage caused by vandalism, broken water pipes and
fire. Cancellation of insurance when the property is
abandoned is necessary to manage insurance costs for
all consumers.
SB 58 clarifies that insurance on property that has
been entirely abandoned can be cancelled in Alaska, as
it can in all other states. However, it is important
to note that SB 58 would establish the most
restrictive circumstances in the country. For
instance, thirty days advance written notice must be
given to the insured and any lender on record. In
addition, insurance cannot be cancelled where the
owner demonstrates that the property is being
reasonably maintained and monitored. SB 58 is
responsible legislation that helps manage claims
costs, the risk pool and the cost of insurance
coverage for Alaska homeowners.
SENATOR EGAN said representatives of the insurance and real
estate industries have worked on this version of the bill, and
he believes that the current language protects the interests of
both groups.
SENATOR OLSON asked if property owners had weighed in on the
bill because it appeared to favor the insurance industry.
6:21:16 PM
DANA OWEN, Staff, Senator Dennis Egan, explained that when the
bill was originally introduced last year members of the
community and the real estate industry voiced concern with the
language. Since then the sponsor has worked with real estate
agents to make sure that the interests of property owners are
protected. The current language will allow insurance companies
to exercise the authority to cancel an insurance contract, but
not precipitously. Property owners who leave their homes for
several months won't have their insurance canceled.
SENATOR OLSON posed a hypothetical situation where he left his
boat after it went aground. He asked if his insurance would be
cancelled if the boat looked abandoned and perhaps was
vandalized while he was away.
MR. OWEN explained that it would have to be entirely abandoned
under the new language. That means that nothing of substantial
value is left behind.
SENATOR OLSON questioned how he could protect himself, because
he'd have nothing left if the insurance company could cancel his
insurance after an involuntary circumstance like he described.
MR. OWEN offered his understanding is that the property would be
protected in that scenario.
SENATOR OLSON asked if his insurance could be cancelled even if
his payments were up to date.
MR. OWEN said the intention is that as long as a person intends
to maintain the property the insurance will not be cancelled.
6:25:25 PM
VICE-CHAIR MICCICHE reviewed the notice provision in AS
21.36.220.
6:26:05 PM
MARTIN HESTER, Deputy Director, Division of Insurance,
Department of Commerce, Community and Economic Development
(DCCED), introduced himself.
VICE-CHAIR MICCICHE asked him to discuss what constitutes
abandonment.
MR. HESTER explained that AS 21.36.220 provides 30 day, 20 day,
and 10 day notice requirements for cancellation depending on the
circumstances.
VICE-CHAIR MICCICHE opened public testimony.
6:27:37 PM
SHELDON WINTERS, Lobbyist, State Farm Insurance, Juneau, Alaska,
informed the committee that State Farm is the largest insurer of
homes in both the state and the nation. He explained that the
intent of SB 58 is to clarify that personal insurance on a
property may be cancelled in those limited circumstances when a
property is truly and entirely abandoned. Foreclosure is the
classic example. Although the current statute has five reasons
that insurance may be cancelled, the Division of Insurance has
said that under a technical and strict interpretation those
don't allow for abandoned property. Alaska is unique in this
regard. In no other state has State Farm had problems cancelling
insurance when the property is truly abandoned.
MR. WINTERS said this is important because claims drive rates.
When a property is left in the middle of the winter with no heat
and nobody taking care of it, the exposure is significant. That
increases claims and puts upward pressure on rates for everyone
in the risk pool. The goal with SB 58 is to keep claim costs
down, manage the risk pool, and hopefully have a better product
for everyone. Referencing the hypothetical that Senator Olson
described, he said the bill doesn't apply to that situation.
It's not talking about the insurance company trying to cancel
the policy after an accident or a claim. The bill doesn't
address cancelation after there's been a claim.
MR. WINTERS reviewed the proposed new provision to the statute.
It says the insurer may not cancel a policy of personal
insurance except for the circumstance of entire abandonment of
the property that increases a hazard insured against. Entire
abandonment means the property is no longer occupied by the
insured as defined by the policy and it no longer has contents
of substantial utility. In addition to the current notice of
cancellation provisions in AS 21.36.220, the bill requires the
insurer to give notice to the lender. Another safeguard to the
insured is that the property is not considered entirely
abandoned if the insured or their agent demonstrates that the
property is being reasonably maintained and monitored. Finally,
the Division of Insurance oversees the statute. With the
protections provided, it's difficult to imagine a situation
where property would be cancelled other than the total
abandonment/foreclosure situation. He reviewed the work that has
gone into this legislation, which he believes it is the best
statute in the country.
6:37:36 PM
VICE-CHAIR MICCICHE announced he would hold SB 58 in committee
and keep public testimony open.