SB 58-CANCEL INS. ON CERTAIN ABANDONED PROPERTY  1:51:46 PM CHAIR DUNLEAVY 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." He noted that the bill received one hearing at the end of last session. 1:52:09 PM SENATOR DENNIS EGAN, sponsor of SB 58, read the following sponsor statement into the record: 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. 1:54:19 PM SENATOR OLSON asked how the abandonment provision affects a property that is mortgaged. SHELDON WINTERS, Lobbyist, State Farm Insurance, Juneau, Alaska, explained that the insurance company would provide the required 30-day notice of cancelation to the owner. SB 58 provides an added protection that requires the insurance company to send notice of cancellation to any lender of record that it is aware of. SENATOR OLSON asked how many other states have similar legislation. MR. WINTERS offered his understanding that every state has a cancellation statute. Some statutes are more complex than others, but in no state other than Alaska has State Farm had any concern about the ability to cancel a policy on entirely abandoned property. The issue arose in Alaska when the Division of Insurance said that under a strict interpretation the current statute would not allow cancelation even if the property was entirely abandoned. He highlighted that SB 58 builds protections into the statute to make sure that it only applies to property that is unquestionably abandoned. 1:59:31 PM SENATOR MICCICHE posed a hypothetical scenario similar to what happened in the late 1980s when a lot of rental properties were vacant for long periods. He asked how the bill would affect him as owner of that abandoned rental. MR. WINTERS said his understanding is that this only applies to personal insurance which means fewer than four units. If the rental falls under personal insurance, abandonment is defined as nobody living there as intended in the insurance contract. Vacancy between rentals wouldn't constitute abandonment. Abandonment is when the property is vacant, uncared for, and not maintained. He said it's counterintuitive to think that an insurance company would want to cancel the insurance on a piece of property without a significant reason. 2:01:29 PM CHAIR DUNLEAVY opened public testimony. 2:01:39 PM RUBEN WILLIS, representing himself, State Farm Insurance, Juneau, Alaska, related his experience as an insurance agent in Alaska. He stated support for SB 58 as a means of risk management. If risk changes substantially, it's appropriate that the cost isn't passed on to people who are taking care of their homes and properties. He described the process he would go through to contact the owner if an insured property appeared abandoned. 2:04:00 PM SENATOR OLSON asked how long it would take before an insurance company would consider a vacant property abandoned. MR. WILLIS clarified that State Farm hasn't canceled anyone for abandoned property yet because it hasn't been an option, but the most likely scenario is that he would find out directly from the insured. SENATOR OLSON restated the question about timeframes. MR. WILLIS deferred to Mr. Winters. 2:05:56 PM MR. WINTERS said there was some discussion early on about putting in a timeframe so people would have a guide, but no other state does that because it's too restrictive. He cited the example of an abandoned house in Fairbanks in the winter. However, with realtors' assistance the language in the bill was narrowed to cover only clearly abandoned property. Even after the notice goes out, the owner or their representative can show the agent that the property is being cared for and it's not deemed abandoned. In addition to the safeguards in the bill, oversight by the Division of Insurance provides another layer of protection to property owners. SENATOR OLSON asked how many of his clients are not on the road system. MR. WILLIS estimated less than 25. SENATOR OLSON asked if an insurance company could cancel the insurance if a homeowner went to Acapulco for most of the winter and their vacant house froze up even though a friend was overseeing the property. MR. WINTERS said that property is not entirely abandoned. Moreover, the bill does not allow an insurance company to cancel a policy after a claim is made. The bill addresses a property that no longer fits within the risk pool. SENATOR MICCICHE asked how recreational cabins fit in this category, assuming they're insured. 2:12:07 PM MR. WINTERS said those too would be protected because the insurance is defined by the policy. By definition, a recreational cabin is likely to be vacant for extended periods of time, but that doesn't mean abandoned. He added the caution that an insured home has to be occupied or have somebody taking care of it. CHAIR DUNLEAVY kept public testimony open and held SB 58 in committee.