Legislature(2019 - 2020)BELTZ 105 (TSBldg)

05/09/2019 01:30 PM Senate LABOR & COMMERCE

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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
Moved CSSB 11(L&C) Out of Committee
Heard & Held
-- Public Testimony --
           SB 106-HOMEOWNER/RENTER INSURANCE RENEWAL                                                                        
1:43:22 PM                                                                                                                    
CHAIR REINBOLD  reconvened the committee. She  announced that the                                                               
final order  of business would  be SENATE  BILL NO. 106,  "An Act                                                               
relating  to renewal  of insurance  coverage  for homeowners  and                                                               
renters; and providing for an effective date."                                                                                  
[Before the committee  was the committee substitute  (CS) SB 106,                                                               
work order 31-LS0476, Version M.]                                                                                               
CHAIR REINBOLD made opening remarks.                                                                                            
1:44:17 PM                                                                                                                    
SENATOR TOM BEGICH, Alaska State  Legislature, Juneau, as sponsor                                                               
of  SB 106,  recapped the  bill. He  said that  SB 106  would not                                                               
allow an  insurance company  to not  renew a  homeowner's policy,                                                               
simply based on  a claim made due to a  break-in robbery, through                                                               
no  fault of  the claimant.  This  bill would  apply whether  the                                                               
policy was for renters insurance  or homeowners insurance. SB 106                                                               
would provide  a time limit  for non-renewal, such that  a person                                                               
could  make  at least  one  claim  without  it  being used  as  a                                                               
condition  of  non-renewal.  He  said  he  has  worked  with  the                                                               
insurance industry. Although the  industry has expressed concerns                                                               
about some  language, he  offered his belief  that this  could be                                                               
resolved comfortably.  He said  he was  unaware of  opposition to                                                               
the bill in its present form,  but some minor changes may need to                                                               
be made. These provisions would  clarify the intent around claims                                                               
arising from criminal acts. He  thanked members for reviewing the                                                               
unintended consequence of the crime wave in Alaska.                                                                             
He  remarked   that  one   person  who   wanted  to   testify  is                                                               
unavailable, but  provided written  comments, which should  be in                                                               
members' packets.                                                                                                               
1:47:39 PM                                                                                                                    
CHAIR REINBOLD, after first determining no one wished to                                                                        
testify, closed public testimony on SB 106.                                                                                     
CHAIR REINBOLD  reviewed the fiscal  note from the  Department of                                                               
Commerce, Community and Economic  Development (DCCED) prepared by                                                               
Lori-Wing Heier,  Director, Division of Insurance,  Department of                                                               
Commerce, Community  and Economic  Development (DCCED).  She read                                                               
the analysis:                                                                                                                   
     The bill  attempts to protect consumers  of homeowner's                                                                    
     or  renter's  insurance   policies  from  having  their                                                                    
     insurance policy non-renewed due  to filing a claim, if                                                                    
     the claim  is the first  or only claim made  within the                                                                    
     three years prior to the policy's anniversary date.                                                                        
     The  Division does  not anticipate  fiscal impact  from                                                                    
     this legislation.                                                                                                          
1:48:29 PM                                                                                                                    
SENATOR COSTELLO moved to adopt Amendment 1, work order 31-                                                                     
LS0476\M.2, Marx, 5/8/19.                                                                                                       
                          AMENDMENT 1                                                                                       
     OFFERED IN THE SENATE                  BY SENATOR COSTELLO                                                                 
     TO:  CSSB 106(   ), Draft Version "M"                                                                                      
     Page 1, line 1, following "Act":                                                                                         
          Insert "relating to cancellation and renewal of                                                                     
     commercial property insurance coverage;"                                                                                 
     Page 1, following line 3:                                                                                                  
     Insert a new bill section to read:                                                                                         
        "* Section  1. AS 21.36.210 is  amended by  adding a                                                                
     new subsection to read:                                                                                                    
          (g)  An insurer may not exercise its right to                                                                         
     cancel  a  policy   of  commercial  property  insurance                                                                    
     solely based on notice, receipt,  or payment of a claim                                                                    
     under the  policy unless the  insurer has paid  a claim                                                                    
     under   the  policy   within   the  three-year   period                                                                    
     immediately   preceding   the   notice,   receipt,   or                                                                    
     Page 1, line 4:                                                                                                            
          Delete "Section 1"                                                                                                  
          Insert "Sec. 2"                                                                                                     
     Renumber the following bill sections accordingly.                                                                          
     Page 2, line 12, following "homeowner's":                                                                                  
          Insert "or commercial property"                                                                                       
     Page 3, following line 13:                                                                                                 
     Insert a new bill section to read:                                                                                         
        "* Sec. 5.  AS 21.36.310 is amended by  adding a new                                                                
     paragraph to read:                                                                                                         
               (6)  "commercial property insurance" means                                                                       
     property  insurance as  described in  AS 21.12.060 that                                                                    
     is  "business or  commercial insurance"  as defined  in                                                                    
     this section."                                                                                                             
     Renumber the following bill sections accordingly.                                                                          
     Page 3, lines 16 - 18:                                                                                                     
          Delete all material and insert:                                                                                       
          "APPLICABILITY. AS 21.36.210(g), enacted by sec.                                                                      
     1 of this Act, AS 21.36.240,  as amended by secs. 2 and                                                                    
     3 of  this Act, AS 21.36.310(4),  as amended by  sec. 4                                                                    
     of this Act, and AS 21.36.310(6),  enacted by sec. 5 of                                                                    
     this  Act, apply  to an  insurance  policy or  contract                                                                    
     entered into or renewed on  or after the effective date                                                                    
     of secs. 1 - 5 of this Act."                                                                                               
     Page 3, line 25:                                                                                                           
          Delete "Section 5"                                                                                                    
          Insert "Section 7"                                                                                                    
     Page 3, line 26:                                                                                                           
          Delete "sec. 6"                                                                                                       
          Insert "sec. 8"                                                                                                       
SENATOR REINBOLD objected for discussion purposes.                                                                              
1:48:40 PM                                                                                                                    
SENATOR  COSTELLO  remarked  that when  the  committee  initially                                                               
heard the  bill, members learned  that it would  allow homeowners                                                               
to file to  claim without it being a reason  for non-renewal. The                                                               
reason the  sponsor brought the  bill before the  legislature was                                                               
due  to the  level of  property crime  experienced in  the state.                                                               
This  amendment   would  expand   that  to   commercial  property                                                               
insurance  since  commercial  businesses  are  also  affected  by                                                               
1:49:40 PM                                                                                                                    
SENATOR  BIRCH  expressed  concern  since it  was  a  significant                                                               
expansion to the bill. He referred to  a letter of May 7, 2019 in                                                               
members'  packets  [from  American  Property  Casualty  Insurance                                                               
Association. He read:                                                                                                           
     Secondly,   the  bill   prohibits   the  insurer   from                                                                    
     considering  the first  claim  within  three years  for                                                                    
     non-renewal purposes. There  are no apparent exceptions                                                                    
     from  this onerous  underwriting and  coverage mandate.                                                                    
     For  example,  what if  the  first  claim is  something                                                                    
     alarming like  an alleged incident  of arson or  if the                                                                    
     insured's pit bulldog attacks a neighbor.                                                                                  
He said he was okay with the  original intent of the bill, but he                                                               
was  unsure  the  committee  should expand  this  to  include  to                                                               
commercial  property insurance.  He said  it was  a much  broader                                                               
1:51:02 PM                                                                                                                    
SENATOR COSTELLO  explained that  she submitted Amendment  1. She                                                               
said the Division of Insurance may wish to speak to the concern.                                                                
1:51:40 PM                                                                                                                    
LORI WING-HEIER,  Director, Division of Insurance,  Department of                                                               
Commerce, Community and  Economic Development (DCCED), Anchorage,                                                               
Alaska, said she understood Senator  Birch's concern. She offered                                                               
her belief  that the insurers  might have a concern.  She offered                                                               
her  belief   that  potential  amendments  that   Senator  Begich                                                               
previously mentioned would narrow the  focus to claims related to                                                               
crimes, so  the examples  would not  likely apply.  She cautioned                                                               
that she did not wish to speak  for the sponsor, but that was her                                                               
understanding of the intent.                                                                                                    
SENATOR BIRCH  identified that the  letter was from  the American                                                               
Property  Casualty Insurance  Association (APCIA).  He understood                                                               
the impetus  for the  bill was related  to criminal  activity and                                                               
someone being denied insurance renewal.  He asked whether she had                                                               
a sense of how much larger the  pool would be if it were expanded                                                               
to include commercial property.                                                                                                 
MS. WING-HEIER answered  that it would expand it  to all property                                                               
insurance,   from  stores   and  small   businesses,  to   Native                                                               
corporations.   She  said   that  commercial   property  is   not                                                               
unrestricted. She stated  that the division has  not received any                                                               
complaints related  to commercial  property. She  recognized that                                                               
commercial properties  have been victims of  crimes. Further, she                                                               
has not heard  from commercial insurers. She  recalled that State                                                               
Farm or APCI had a concern which was addressed in their letters.                                                                
1:54:30 PM                                                                                                                    
CHAIR REINBOLD  related her understanding that  the concerns were                                                               
resolved in the committee substitute.                                                                                           
1:54:48 PM                                                                                                                    
SENATOR  GRAY-JACKSON thanked  Senator Begich  for bringing  this                                                               
forward  because  it  is  really  important  to  our  communities                                                               
because of  crime. She  said she  appreciated Amendment  1, which                                                               
would affect  commercial properties. She recalled  serving on the                                                               
Anchorage Assembly, a  working group of business  owners who were                                                               
alarmed by the level of crime in the community.                                                                                 
1:55:41 PM                                                                                                                    
CHAIR REINBOLD  asked whether this  would have any  fiscal impact                                                               
to the private sector, in terms of increased premiums.                                                                          
MS. WING-HEIER answered that it was  hard to say. This bill would                                                               
not  limit an  insurer from  adding a  surcharge to  a policy  or                                                               
raising the rates  because of crime costs.  However, the insurers                                                               
cannot  triple it  or make  it egregious.  She said  the division                                                               
would  consider  those  actions   as  excessive  rate  increases.                                                               
Consumers  could see  an  increase, but  the  insurers will  have                                                               
insurance, which is the tradeoff.                                                                                               
1:57:13 PM                                                                                                                    
CHAIR REINBOLD asked whether she anticipated any push back.                                                                     
MS. WING-HEIER answered that she  did not anticipate any concerns                                                               
from the  private sector. She  offered her belief  that insurance                                                               
companies could  make an  argument with  Version M.  However, she                                                               
suggested that  if the bill  was narrowed to address  crime, that                                                               
people  could submit  one  claim  due to  a  crime.  She did  not                                                               
imagine that insurers would have a major concern.                                                                               
CHAIR  REINBOLD emphasized  the importance  for the  committee to                                                               
vet the  bill, since it  is the  only committee of  referral. She                                                               
said she like  the concept, but as Chair, wants  the committee to                                                               
do its due diligence and avoid any unintended consequences.                                                                     
1:59:07 PM                                                                                                                    
CHAIR  REINBOLD asked  whether the  administration supported  the                                                               
MS.  WING-HEIER said  she had  not  discussed the  bill with  the                                                               
administration. She  offered her  belief that  the administration                                                               
would be  somewhat torn. The  governor is a staunch  supporter of                                                               
reducing crime but does not support increased regulation.                                                                       
CHAIR REINBOLD asked her to  predict the administration's view on                                                               
Amendment 1.                                                                                                                    
MS. WING-HEIER said she was unsure.                                                                                             
2:00:08 PM                                                                                                                    
SENATOR BIRCH  said he  did not  see anything  in Version  M that                                                               
related solely to damages that resulted from criminal behavior.                                                                 
SENATOR  GRAY-JACKSON  pointed  out Ms.  Wing-Heier  mentioned  a                                                               
future amendment that might address Senator Birch's concerns.                                                                   
2:00:57 PM                                                                                                                    
SENATOR BEGICH said that he  spoke to industry about the original                                                               
bill,  not  Amendment  1.  The   industry  requested  two  slight                                                               
amendments, which are  currently being drafted. He  said that the                                                               
Senate Rules Committee  is the next committee  of referral. Since                                                               
he  serves  on that  committee,  he  met  with staff  to  request                                                               
offering  the  amendments. That  language  would  do two  things.                                                               
First, it would say  [a claim] could not be the  sole basis for a                                                               
non-renewal, which  would give the industry  additional latitude.                                                               
Second,  it  specifically  would  cite crime  as  an  outcome  of                                                               
criminal activity. The industry  provided the language containing                                                               
these  two changes  to  him.  He reviewed  the  language and  the                                                               
Legislature  Legal  Services  drafted  the  amendment,  which  he                                                               
received today. He expressed concern  about delaying the bill. He                                                               
wanted  to  reassure  the  Chair that  staff  indicated  the  two                                                               
tightening amendments would be done.  Although he did not discuss                                                               
Amendment 1  with industry,  he reported  that industry  met this                                                               
morning and  agreed to the  changes. He  offered to read  the two                                                               
lines. He noted Amendment 1 was before the committee.                                                                           
2:03:31 PM                                                                                                                    
CHAIR REINBOLD stated  her intention to take up  Amendment 1. She                                                               
advised members she intends to  hold another committee meeting to                                                               
hear another  bill. She  said she was  not comfortable  moving SB
106 today without that language.                                                                                                
SENATOR BEGICH said he is  neutral on Amendment 1. The director's                                                               
comments about getting  input from the industry  would be useful.                                                               
He related  his understanding informally,  that the  industry was                                                               
less comfortable  expanding it  to commercial  properties, likely                                                               
because  it would  broaden the  scope  of the  bill. He  recalled                                                               
Chair Reinbold  expressed an  interest in  expanding the  bill to                                                               
cover  business and  other business  properties.  He offered  his                                                               
belief that  Amendment 1 would  accomplish that goal. He  was not                                                               
aware of any claims or  interests in that regard. He respectfully                                                               
requested that she consider the  industry's position on Amendment                                                               
CHAIR REINBOLD said  that Senator Birch raised a  good point with                                                               
his  concern.  She asked  for  further  clarification on  whether                                                               
Amendment 1  contains any  language that  identifies it  as crime                                                               
2:06:04 PM                                                                                                                    
SENATOR COSTELLO said  that when the bill was  introduced, it was                                                               
as  a  bill  to  address  crime.  Based  on  the  bill  sponsor's                                                               
comments, that  will be addressed  in forthcoming  amendments, to                                                               
clarify that  these claims were limited  to crime-related losses.                                                               
If Amendment 1  was adopted, it would expand  it to crime-related                                                               
issues for the commercial property insurance.                                                                                   
CHAIR REINBOLD related her understanding  that the answer was no,                                                               
that it would be addressed in an additional amendment.                                                                          
SENATOR COSTELLO said that was correct.                                                                                         
2:06:55 PM                                                                                                                    
CHAIR REINBOLD removed her objection.                                                                                           
SENATOR BIRCH objected.                                                                                                         
2:07:14 PM                                                                                                                    
A roll call vote was  taken. Senators Gray-Jackson, Costello, and                                                               
Reinbold voted  in favor of  Amendment 1 and Senator  Birch voted                                                               
against it. Therefore, Amendment 1 was adopted by a 3:1 vote.                                                                   
2:08:00 PM                                                                                                                    
CHAIR REINBOLD  remarked that she  was interested  in discussions                                                               
being held.  She said she  voted for this because  businesses are                                                               
experiencing  so  much  crime.  She  said  she  would  rather  be                                                               
cautious and know that the legislature is examining this issue.                                                                 
2:08:22 PM                                                                                                                    
2:09:18 PM                                                                                                                    
CHAIR REINBOLD reconvened the committee and reviewed upcoming                                                                   
committee announcements.                                                                                                        
2:09:58 PM                                                                                                                    
SENATOR BEGICH said he has an amendment in final form and will                                                                  
provide to the committee today.                                                                                                 
2:10:15 PM                                                                                                                    
SENATOR BIRCH asked whether the committee could inform the                                                                      
company [the American Property Casualty Insurance Association                                                                   
(APCIA)] that had concerns of changes the committee considered.                                                                 
CHAIR REINBOLD agreed to do so.                                                                                                 
[SB 106 was held in committee.]                                                                                                 

Document Name Date/Time Subjects
SB 106 Amendment M.2.pdf SL&C 5/9/2019 1:30:00 PM
SB 106
SB 106 Sponsor Statement VER. M.pdf SL&C 5/9/2019 1:30:00 PM
SB 106
SB 106 Fiscal Note - DCCED - DOI - 04-17-19.pdf SL&C 5/9/2019 1:30:00 PM
SB 106
SB 106 - Letter of Support.pdf SL&C 5/9/2019 1:30:00 PM
SB 106
SB 106 - Letter of Opposition VER A. - American Property Casualty Insurance Assoc..pdf SL&C 5/9/2019 1:30:00 PM
SB 106
SB 11 Fiscal Note - SB011 - DCCED -CBPL - 03-01-19.pdf SL&C 5/9/2019 1:30:00 PM
SB 11