CSHB 151(JUD)am-DWELLING DESIGN/CONSTRUCTION CLAIMS  CHAIR CON BUNDE called the Senate Labor and Commerce Standing Committee meeting to order at 1:36 p.m. Present were SENATORS STEVENS and SEEKINS. The Chair announced HB 151 to be up for consideration. REPRESENTATIVE KEVIN MEYER, sponsor of HB 151, said it provides homeowners and construction professionals with a process to solve construction issues on new homes or homes that are being remodeled. He stated, "HB 151 requires homeowners to provide written notice to the construction professionals of any defects at least 90 days prior to taking a civil action against the builder." He explained that most of the time, this action isn't necessary because most owners have a relationship with the builder and could simply call the builder with a concern. However, if the builder is too busy to take care of those concerns, this process is in place. If the homeowner's complaints have not been resolved within a 90-day period, the homeowner can proceed with litigation. Under this bill, the homeowner has one year from the time he or she detects the problem, but it cannot exceed the 10- year statute of limitation for civil suits. Once the process has begun, the statute of limitation is stopped until the homeowner becomes aware that a settlement using this process will not succeed. REPRESENTATIVE MEYER said this litigation is important for many of reasons. In Alaska, contractors and builders are required to carry general liability insurance and many liability insurance providers have stopped providing insurance or will provide it only at a very expensive rate. The rise in insurance coverage, sometimes $3,000 to $5,000, is often passed on to the homebuyer. He said three conforming amendments need to be made as a result of amendments adopted on the House floor and those were incorporated into a proposed committee substitute. SENATOR FRENCH arrived at 1:40 p.m. SENATOR STEVENS moved to adopt SCS CSHB 151(L&C) as the working document. There were no objections and it was so ordered. CHAIR BUNDE asked if there has been any opposition. REPRESENTATIVE MEYER replied that he has heard no opposition from the public or the construction community. SENATOR STEVENS asked him to explain the language on page 2, line 18, about how the written notice takes place. REPRESENTATIVE MEYER indicated that serving of notice is defined on page 8, line 7, as delivery by personal service or by certified mail. MR. MIKE MILLIGAN, Kodiak resident, said he works in the construction industry and supports this bill. He generally supports local control and consensus and favors legislation that doesn't require a winner or a loser. MR. RICHARD TILLY, President, Interior Alaska Building Association, supports HB 151. He thought it would show the building industry and insurance industry that builders are trying to deal with a resolution process for minor building issues. SENATOR DAVIS arrived at 1:45 p.m. MS. ROBIN WARD said she was recently in Washington D.C. working on this issue with 50 other state representatives in an effort to make the industry more attractive to the insurance industry. Although Alaska does not have many of the problems the Lower 48 has, Alaskans have to pay the same premiums because insurers operate nationwide. She said that insurance premiums on her homes will go up $2,000 per home next year. MR. STEVE ORR, Mat-Su builder, supported HB 151, not only because his insurance went up 1,500% this year (adding $2,000 per house for a total of $3,300), but because a bill like this will end a two-year senseless battle that he has been in. MR. ALAN WILSON, Alaska Home Builders Association - Juneau, supported HB 151 and said his comments had been covered. SENATOR FRENCH said his concern is that the two parties might get into some kind of a stalling process and a huge amount of time could go by, which isn't a good way to do business. He wanted to know if the 21-day clock is ticking during the initial exchange while the construction professional awaits videos or something like that from the homeowner. REPRESENTATIVE MEYER replied that he thought the clock stopped during talks. MR. JOHN BITTNEY, Alaska State Homebuilders Association, referred him to page 2, line 4, to answer that question. SENATOR FRENCH asked if that means the 21-day clock is not ticking or that the right to eventually file a suit is not ticking. He said he has two clocks in mind. One is the general right to sue in court. The bill says a person does not have the right to go to court and sue until they have been through this process. He pointed out: That's giving up something. That's giving up a person's right to go to court and file suit. If you only have to give that up for 21 days, I think that's pretty reasonable. You can see the end of the time period coming up pretty quickly, but what I don't want to see is have the builder say, well, you can't go to court until you give me the evidence to back up your claim. So, then you could get into a standoff and you'd never get anywhere.... CHAIR BUNDE said he would hold this bill temporarily until that question gets resolved. CSHB 151(JUD)am-DWELLING DESIGN/CONSTRUCTION CLAIMS  CHAIR BUNDE announced that CSHB 151(JUD)am was up for consideration again and that Representative Meyer would address the earlier question. REPRESENTATIVE MEYER said that Representative Gara's amendment had to do with the concept of tolling and didn't pertain to the 21-day clock, but instead to the 10-year statute of limitations. He said the concern about the builder requiring substantial evidence and how that would impact the 21-day time frame wouldn't be an issue because the builder knows the problem has to be resolved in 21 days. As soon as a builder received notification, he would make his own inspection. SENATOR FRENCH wanted to clarify that time won't be tolled and the pressure is on the builder to get back to look at the house. REPRESENTATIVE MEYER agreed. SENATOR FRENCH expressed concerned that all houses aren't built on the road network and if a dispute came up, a builder might not want to invest the money to fly back out to a rural area. He didn't want the homeowner stuck in some kind of a discovery dispute and be in a standoff because he can't get to court and can't get the builder to drop his demand for photographs and video tape documentation, etcetera of the home defect. REPRESENTATIVE MEYER responded that he shares his concern but felt that all builders statewide would know the process and understand if they built in a remote area they would have to do it right. SENATOR STEVENS asked if builders will no longer have to carry general liability insurance if this bill passes. REPRESENTATIVE MEYER replied that builders are required to carry general liability insurance, but currently insurance rates are extremely high because so many cases are either being resolved in court or builders are resolving them outside of court. Nevertheless, insurance companies are having to pay claims and rates are going up as a result. CHAIR BUNDE inserted that he has never known insurance rates to go down, but this bill might slow the rate of increase. REPRESENTATIVE MEYER added that it's getting out of control nationwide. MR. CHUCK SPINELLI, Alaska Home Builders Association, supported HB 151 and said the problem came from condominium construction in the Lower 48 states where teams of attorneys sue condo associations who in turn sue builders and do discovery for years without ever fixing anything. The project then gets traumatized because of the pending litigation and bankrupts the builder and the condo association. He said his general liability insurance is increasing from $55,000 last year to a quote of $435,000 this year. A lot of people who are building condominiums are not getting insurance. He thought this bill is a good first step to having a healthy building industry. CHAIR BUNDE closed public testimony. SENATOR STEVENS moved to pass SCS CSHB 151(L&C) from committee with individual recommendations and its zero fiscal note. SENATORS STEVENS, DAVIS, FRENCH and BUNDE voted yea and it was moved from committee.