ALASKA STATE LEGISLATURE
HOUSE LABOR AND COMMERCE STANDING COMMITTEE
March 20, 2009
3:20 p.m.
MEMBERS PRESENT
Representative Kurt Olson, Chair
Representative John Coghill
Representative Bob Lynn
Representative Lindsey Holmes
MEMBERS ABSENT
Representative Mark Neuman, Vice Chair
Representative Mike Chenault
Representative Robert L. "Bob" Buch
COMMITTEE CALENDAR
HOUSE BILL NO. 175
"An Act relating to insurance, including treating as
confidential certain information submitted to the director of
insurance by the National Association of Insurance
Commissioners; clarifying conditions for the release of insurer
deposits; defining travel insurance that may be sold under a
travel insurance limited producer license; establishing criteria
for licensing of nonresident independent adjusters as resident
adjusters; exempting rewards under a wellness program from
treatment as insurance discrimination or rebating; making
certain insurance required of the Comprehensive Health Insurance
Association permissive rather than mandatory; providing for the
administration of loss reimbursement policies and payments to
guaranty associations during insolvency proceedings; making
certain provisions relating to statements on applications and
guaranteed renewability for individual health insurance
applicable to hospital and medical service corporations; making
public certain forms and related documents filed for approval by
a hospital or medical service corporation after the filing
becomes effective; relating to deposits of self-funded multiple
employer welfare arrangements; repealing reasons that the
director of insurance may use to deny or revoke a license; and
providing for an effective date."
- HEARD AND HELD
HOUSE BILL NO. 22
"An Act relating to requiring subcontractors who do not have
employees and who are acting as independent contractors to
secure payment for workers' compensation, and to requiring
subcontractors who fail to secure payment of workers'
compensation to pay additional premiums incurred by contractors
because of that failure."
- HEARD AND HELD
HOUSE CONCURRENT RESOLUTION NO. 1
Encouraging the installation of fire sprinkler systems in
residences.
- MOVED CSHCR 1(L&C) OUT OF COMMITTEE
PREVIOUS COMMITTEE ACTION
BILL: HB 22
SHORT TITLE: WORKERS' COMPENSATION: SUBCONTRACTORS
SPONSOR(s): REPRESENTATIVE(s) CRAWFORD, BUCH
01/20/09 (H) PREFILE RELEASED 1/9/09
01/20/09 (H) READ THE FIRST TIME - REFERRALS
01/20/09 (H) L&C, FIN
02/16/09 (H) L&C AT 3:15 PM BARNES 124
02/16/09 (H) Heard & Held
02/16/09 (H) MINUTE(L&C)
03/20/09 (H) L&C AT 3:15 PM BARNES 124
BILL: HCR 1
SHORT TITLE: RESIDENTIAL FIRE SPRINKLER SYSTEMS
SPONSOR(s): REPRESENTATIVE(s) SEATON
01/20/09 (H) READ THE FIRST TIME - REFERRALS
01/20/09 (H) L&C
03/20/09 (H) L&C AT 3:15 PM BARNES 124
WITNESS REGISTER
LINDA HALL, Director
Division of Insurance, Anchorage Office
Department of Community & Economic Development (DCCED)
Anchorage, Alaska
POSITION STATEMENT: Answered questions during the discussion of
HB 175.
REPRESENTATIVE HARRY CRAWFORD
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Testified as one of the joint prime
sponsors of HB 22.
PAUL GROSSI, Staff
Representative Harry Crawford
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Presented HB 22, on behalf of one of the
joint prime sponsors of HB 22, Representative Harry Crawford.
ALAN WILSON, Owner
Alaska Renovators, Inc.
Juneau, Alaska
POSITION STATEMENT: Testified during the discussion of HB 22.
BRONSON FRYE, Business Representative
Painters & Allied Trades Local 1959 (IUPAT Local 1959)
Anchorage, Alaska
POSITION STATEMENT: Testified in support of HB 22.
CHRIS GREGG
Painters and Allied Trades Local 1959 (IUPAT Local 1959)
Anchorage, Alaska
POSITION STATEMENT: Testified in support of HB 22.
DARRYL KLOEPFER, Vice-President
Pacific Partition Systems
Anchorage, Alaska
POSITION STATEMENT: Testified in support of HB 22.
MICHAEL GALIOTO
Anchorage, Alaska
POSITION STATEMENT: Testified in support of HB 22.
KEITH MONTGOMERY
Carpenters Local 1281,
Anchorage, Alaska
POSITION STATEMENT: Testified during the discussion of HB 22.
REPRESENTATIVE PAUL SEATON
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Testified as prime sponsor of HCR 1.
JEFF TUCKER
Alaska Fire Chiefs Association (AFCA)
Fairbanks, Alaska
POSITION STATEMENT: Testified in support of HCR 1.
JEFF FEID, Loss Mitigation Administrator
State Farm Insurance
Bloomington, IL
POSITION STATEMENT: Testified during the discussion of HCR 1.
PAUL MICHELSOHN
Alaska State Home Builders Association (ASHBA)
Anchorage, Alaska
POSITION STATEMENT: Testified during the discussion of HCR 1.
KELLY NICOLELLO, Assistant Fire Marshal
Division of Fire and Life Safety
Central Office
Department of Public Safety (DPS)
Anchorage, Alaska
POSITION STATEMENT: Testified during the discussion of HCR 1.
GREY MITCHELL, Director
Central Office
Division of Labor Standards & Safety
Department of Labor & Workforce Development (DLWD)
Juneau, Alaska
POSITION STATEMENT: Testified during the discussion of HCR 1.
ACTION NARRATIVE
3:20:29 PM
CHAIR KURT OLSON called the House Labor and Commerce Standing
Committee meeting to order at 3:20 p.m. Representatives Lynn,
Coghill, Holmes, and Olson were present at the call to order.
Representative Berta Gardner was also in attendance.
HB 175-INSURANCE
3:20:37 PM
CHAIR OLSON announced that the first order of business would be
HOUSE BILL NO. 175, "An Act relating to insurance, including
treating as confidential certain information submitted to the
director of insurance by the National Association of Insurance
Commissioners; clarifying conditions for the release of insurer
deposits; defining travel insurance that may be sold under a
travel insurance limited producer license; establishing criteria
for licensing of nonresident independent adjusters as resident
adjusters; exempting rewards under a wellness program from
treatment as insurance discrimination or rebating; making
certain insurance required of the Comprehensive Health Insurance
Association permissive rather than mandatory; providing for the
administration of loss reimbursement policies and payments to
guaranty associations during insolvency proceedings; making
certain provisions relating to statements on applications and
guaranteed renewability for individual health insurance
applicable to hospital and medical service corporations; making
public certain forms and related documents filed for approval by
a hospital or medical service corporation after the filing
becomes effective; relating to deposits of self-funded multiple
employer welfare arrangements; repealing reasons that the
director of insurance may use to deny or revoke a license; and
providing for an effective date."
3:21:11 PM
LINDA HALL, Director, Division of Insurance, Anchorage Office,
Department of Community & Economic Development (DCCED),
introduced herself.
REPRESENTATIVE COGHILL moved to adopt the proposed committee
substitute (CS) for HB 175, Version 26-LS0579\S, Bailey,
3/16/09, as the work draft. There being no objection, Version S
was adopted as the work draft.
3:21:52 PM
MS. HALL explained the only change in Version S is the removal
of Sections 25 and 26, relating to receivership and liquidation
statutes for lost reimbursement policies and early access to
funds from an insolvent insurer. She indicated some concern was
expressed about the language and the division did not believe
the provisions were critical so the language was removed from
the bill. She emphasized the remainder of HB 175 did not have
any changes.
3:22:37 PM
CHAIR OLSON announced that he would hold over HB 175 for further
consideration to allow stakeholders to review the changes.
HB 22-WORKERS' COMPENSATION: SUBCONTRACTORS
3:22:51 PM
CHAIR OLSON announced that the next order of business would be
HOUSE BILL NO. 22, "An Act relating to requiring subcontractors
who do not have employees and who are acting as independent
contractors to secure payment for workers' compensation, and to
requiring subcontractors who fail to secure payment of workers'
compensation to pay additional premiums incurred by contractors
because of that failure."
3:22:56 PM
REPRESENTATIVE HARRY CRAWFORD, Alaska State Legislature, as one
of the joint prime sponsors of HB 22, related his long-standing
passion for this issue. He offered his belief that HB 22 would
"level the playing field." He explained that currently a number
of subcontractors claim to be owner/operators and not employees.
He opined that some subcontractors have a legitimate claim, but
others do not. This bill removes the uncertainty, and requires
everyone who subcontracts to a general contractor to obtain
workers' compensation insurance.
CHAIR OLSON announced that a committee substitute (CS) is
forthcoming. He offered his hope that the CS would pass and
become the nationwide model.
PAUL GROSSI, Staff, Representative Harry Crawford, Alaska State
Legislature, stated that he has reviewed the proposed committee
substitute. He opined that the committee substitute would
"work."
3:26:15 PM
ALAN WILSON, Owner, Alaska Renovators, Inc., stated that he is a
Juneau-based homebuilder. He related that this issue has been
around for some time. He explained that the primary issue is
that in the homebuilding industry, contractors use numerous sole
proprietor subcontractors such as carpet, tile, cabinetmakers,
and other subcontractors. He indicated that when subcontractors
are licensed, they can exempt themselves from workers'
compensation insurance. He further explained that the insurance
industry requires contractors to obtain certificates of
insurance from all subcontractors. He said, "That's the
problem." He highlighted that some subcontractors do not have
the certificates and bill the contractor who must pay based on
the amount of the invoice. He offered that he has not
specifically reviewed the "Tennessee Language" incorporated in
the proposed committee substitute, but believes it will take the
"gray area out of this issue and resolve it once and for all."
3:28:01 PM
BRONSON FRYE, Business Representative, Painters & Allied Trades
Local 1959 (IUPAT Local 1959), speaking on behalf IUPAT Local
1959, offered support for HB 22, which requires workers'
compensation insurance for sole proprietors or owner/operators.
He explained that his organization represents worker in trades
such as painting, drywall taping, and floor covering. He
related that he supports the bill since it has become standard
operating procedure for contractors in painting, drywall
finishing, and floor covering industry to bid large-scale
commercial construction projects and re-subcontract the project
to entire crews comprised of owner/operators. He emphasized
that sole proprietors can waive the right to workers'
compensation. However, when the entire workforce is made up of
owner/operators without workers' compensation, the contractor
has a huge bidding advantage. He opined that the practice is
"killing the industry" by making it almost impossible for
legitimate contractors to compete. He offered his belief that
HB 22 would provides assurance that laborers will be properly
insured. Additionally, contractors bidding work will compete in
a fair and open playing field. Furthermore, he stressed that
the practice of subcontracting to multiple tiers of "so called
contractors" in an effort to avoid workers' compensation
insurance and taxes has become commonplace in construction. He
recalled a Craigslist advertisement on February 12, 2009, that
advertised for independent contractors for commercial work in
Juneau. He said, "Under the requirements, it says experience
not necessary, onsite training is provided. And then, under
compensation it says, hourly range $9-11 per hour. Right
underneath that it says, 'This is a contract job'." He pointed
out that he has worked in the construction field "his whole
life." He opined that he has never encountered a legitimate
subcontractor working under a legitimate subcontract with zero
experience earning $9 per hour. He said, "I think anyone would
agree that someone working in commercial construction with no
experience working for $9 per hour is far more likely to be an
employee of some sort and by no means a true independent
contractor." He offered that he mentioned the Craigslist
advertisement to demonstrate how brazen some contractors have
become in their misclassification of employees in an effort to
avoid workers' compensation insurance as well as any taxes a
contractor would normally match for their employees. He
reiterated his support for HB 22 and applauded Representative
Crawford for introducing the bill.
3:31:05 PM
CHRIS GREGG, Painters and Allied Trades Local 1959 (IUPAT Local
1959), speaking on behalf of IUPAT Local 1959, offered support
for HB 22. He stated he is affiliated with IUPAT, which
represents worker in trades such as painting, drywall taping,
and floor covering in the construction arena. He explained that
in recent years the market has been "ravaged" by contractors who
bid major jobs and then lease out the work to large crews of
independent contractors. He further explained that the
independent contractors are not required to pay workers'
compensation insurance or federal insurance. He emphasized that
this gives the contractor the ability to bid work without
considering the cost of workers' compensation insurance. Thus,
the contractor has a "considerable edge" against any contractor
who pays for insurance for his/her employees as required by
state law. He offered his belief that workers' compensation
insurance is calculated at nearly 30 percent of the payroll
costs, this could mean that an unscrupulous contractor can shave
thousands of dollars, or hundreds of thousands of dollars from
bid proposals by misclassifying his/her workers. He said, "The
misclassification of employees has become standard operating
procedure in the taping, painting, and floor covering markets in
Alaska. And it must come to an end if the law-abiding, honest
contractors are going to have any chance at being competitive."
He applauded Representative Crawford's efforts on this bill. He
stated that the IUPAT fully supports HB 22.
3:33:02 PM
DARRYL KLOEPFER, Vice-President, Pacific Partition Systems,
stated that his business has been in Alaska since 1976. His
business predominantly contracts for metal stud priming gypsum
wallboard, drywall taping, and painting subcontractors. He
stated that he has been out of the taping and painting for
approximately 10 years as a result subcontractors not being
classified as employees. He opined that his business was at a
disadvantage amounting to an approximately 30 percent
disadvantage in bid awards. He thanked the prime sponsor of HB
22. He related that he fully supports HB 22. He pointed out
that he is currently involved in estimating significant amounts
of state and municipal government projects. He indicated that
he is currently being asked by general contractors who support
the "independent subcontractor trade force" to separate out the
bid estimate for metal studs and drywall due to an influx of
subcontractors who install gypsum wall board. He explained that
he must separate out the costs when bidding. He opined that he
is in jeopardy when bidding commercial projects, which is a very
frustrating situation. He thanked the legislature for reviewing
the definition of employee versus independent subcontractor. He
stated he reviewed some of the Internal Revenue Service (IRS)
tax laws. He said, "None of these independent contractors that
we're forced to compete against have a category defined by the
IRS as a profit and loss exposure. There is no loss exposure to
these individuals. They're being paid, basically on an hourly
basis." He concluded by reiterating his support for HB 22.
MICHAEL GALIOTO agreed with his colleagues.
3:36:18 PM
KEITH MONTGOMERY, Carpenters Local 1281, on behalf of the
Carpenters Local 1281, stated that his union is affiliated with
the United Brotherhood of Carpenters. He related that his union
represents carpenters, drywall finishers, metal set framers, and
various trades that fall within the scope of carpentry. He
said, "Quite frankly, it's a misclassification of workers." He
related his experience that tiers of subcontractors are
independent contractors who buy the material, direct the work,
and pay workers, sometimes "cash under the table." He said,
"Basically, it's gaming the system." He opined that when a
worker gets injured on the job and receives hospital care and is
not covered, the costs are often absorbed by the hospital. He
related that not providing workers' compensation insurance is
unfair to legitimate businesses. Further, some workers sign up
as independent contractors and are not paid. He offered that HB
22 is a means to "level the playing field."
3:38:12 PM
CHAIR OLSON announced that HB 22 will be held over for further
consideration. He anticipated that a committee substitute would
be forthcoming.
3:38:37 PM
The committee took an at-ease from 3:38 p.m. to 3:39 p.m.
HCR 1-RESIDENTIAL FIRE SPRINKLER SYSTEMS
3:39:34 PM
CHAIR OLSON announced that the final order of business would be
HOUSE CONCURRENT RESOLUTION NO. 1, Encouraging the installation
of fire sprinkler systems in residences.
3:39:40 PM
REPRESENTATIVE PAUL SEATON, Alaska State Legislature, stated he
has a proposed committee substitute for HCR 1 for the committee
to consider.
3:40:13 PM
REPRESENTATIVE COGHILL moved to adopt the proposed committee
substitute (CS) for HCR 1, Version 26-LS0228\R, Bailey, 3/19/09
as the work draft.
CHAIR OLSON objected for purposes of discussion.
3:40:34 PM
REPRESENTATIVE SEATON explained that concern was expressed that
this resolution might be confused with other legislation that
contains mandatory provisions. Thus, the title and several
places in the resolution specifically address that the program
is voluntary.
3:41:16 PM
CHAIR OLSON removed his objection.
There being no further objection, Version R was before the
committee.
3:41:37 PM
REPRESENTATIVE SEATON related that he participated in a fire
demonstration in Homer. The trailer was blocked by PLEXIGLAS.
He explained that the trailer was equipped with a residential
fire sprinkler system. He indicated that residential fire
sprinklers are activated at a much lower temperature and release
a lower volume of water than commercial sprinkler systems.
Thus, instead of flowing at a rate of 50-100 gallons a minute,
the residential sprinkler emits a mist at a rate of 15 gallons
per minute. He pointed out that the commercial system is
designed to save buildings and property, but the residential
system is designed to put out the fire to save lives. He
explained that he has worked with the state fire marshal to
develop the program in hopes that homeowners could obtain
insurance savings on their homes. He referred to members'
packets to a sheet titled Residential Structure Fires, to
statistics. He offered that the leading causes of fire include
35 percent from cooking, and 39 percent from heating. He
highlighted that in reducing those two items, nearly 75 percent
of all fires would be reduced. This, the HCR 1 encourages
installing residential fire sprinklers.
REPRESENTATIVE SEATON stated he checked prices at a local
business, Harri's Plumbing and Heating, and a sprinkler that
would cover a 10-foot to 12-foot circular area retails for
$8.20. He indicated that would cover a 155 degree angle, which
threads to a pipe in the ceiling or the wall. He surmised that
the system could run off the existing water system and a plumber
or homeowner could install the system for increased safety. He
emphasized that HCR 1 encourages full development of the program
on a voluntary basis to save lives. He remarked that the
biggest loss of life is due to unattended cooking fires and
people die from these fires. He stressed that a residential
sprinkler head could cover the stove and could prevent loss of
life. He recalled several instances in which people lost their
lives due to a fire such as the one in Ketchikan in which four
state workers died. He recapped the purpose of the resolution
is to reduce loss of life. He mentioned that the resolution
also instructs the Division of Insurance, Department of
Commerce, Community, & Economic Development to work with the
insurance industry to develop an incentive program that would
provide homeowners who have installed sprinkler systems to
obtain credit on homeowners insurance or fire insurance.
3:46:24 PM
REPRESENTATIVE SEATON showed a video clip that demonstrates the
sprinkler head and a humorous fire department advertisement that
encourages homeowners to install sprinkler systems in their
homes.
3:48:56 PM
REPRESENTATIVE SEATON emphasized that those involved in the fire
industry are working to educate people that residential
sprinkler systems save lives. In Alaska, discounts on insurance
are not given unless the entire house is covered by a sprinkler
system. He opined that is necessary for smokers, but non-
smokers could install sprinklers in kitchens and in furnace
rooms or have plumbers install them. He indicated that the
Department of Labor & Workforce Development works with plumbers
to verify the sprinkler heads have been installed. He
highlighted the goal is to protect property and life. He
acknowledged that this bill does not target new construction,
since Alaska Housing Finance Corporation (AHFC) or others may
impose a requirement for a sprinkler system throughout the home,
so installing individual sprinklers would not suffice in those
instances. He referred to the packet to the executive summary
of the National Institute of Standards and Technology's
"Benefit-Cost Analysis of Residential Fire Sprinkler Systems."
He read [original punctuation provided]:
Over the 2002 to 2005 study period, houses equipped
with smoke alarms and a fire sprinkler system
experienced 100 % fewer civilian fatalities, 57% fewer
civilian injuries, and 32 % less direct property
losses and indirect costs resulting from fire than
houses equipped only with smoke alarms.
REPRESENTATIVE SEATON related that statement relates the
benefits of having a smoke alarm and a sprinkler system. He
acknowledged the importance of smoke alarms to alert people
about the fire, but the sprinklers "knock down" the fire and
ensure people have time to exit the home. He read [original
punctuation provided]:
In addition, homeowners of dwellings with fire
sprinkler systems received an added bonus of an 8%
reduction in their homeowner insurance premium per
year, according to ISO. This report finds the
monetized value of a residential fire sprinkler
system, over a 30-year analysis period, to yield
homeowners $4994 in present value benefits.
REPRESENTATIVE SEATON recapped the benefits of the system,
stressing that the systems are not mandated, but are voluntary
and the resolution is meant to encourage Alaskans to install
home sprinklers in two sources: the kitchen and furnace room.
He mentioned from his own experience that freezing and thawing
has not been a problem. He also mentioned he installed
sprinkler heads in his 70-foot tender, and the sprinklers have
been subject to freezing and thawing for 15 years without
problems. He highlighted that plastic tubing is a very stable,
very safe method. He mentioned that he has had copper tubing
split. He reiterated that HCR 1's whole purpose is to save
lives by encouraging insurance companies to offer reductions for
those who use the fire marshal's model program for residential
fire sprinkler system coverage. The fire marshal program uses
platinum, gold, and silver stars to recognize various levels of
sprinkler coverage. He acknowledged that currently insurance
companies are not offering reduced insurance rates. He stated
letters of support are in members' packets.
3:55:16 PM
REPRESENTATIVE COGHILL referred to the handout in members'
packets titled "Residential Structure Fires" and inquired as to
whether a breakout of fire causes is available for the 2007
residential fires caused by heating, noting that accounted for
39 percent of residential fires. He expressed interest in
knowing the breakout of types of heating systems such as wood
burning stoves or furnaces.
REPRESENTATIVE SEATON offered to provide the information.
3:56:32 PM
REPRESENTATIVE COGHILL asked whether the fire marshal's program
is based on an existing program other states are using or if
this is a new template.
REPRESENTATIVE SEATON answered that the fire marshal's
residential safety star model was developed by the fire marshal
and specifies silver, bronze, and gold star levels for single
family residences. He explained the concept is being developed
with the insurance industry.
3:58:26 PM
REPRESENTATIVE HOLMES inquired as to how sensitive sprinklers
are and whether accidental discharges could cause water damage.
REPRESENTATIVE SEATON agreed that had been an initial problem
but that the issues have been resolved.
CHAIR OLSON noted that the next person to testify, Jeff Tucker,
has been his fire chief for a number of years.
3:59:26 PM
JEFF TUCKER, Alaska Fire Chiefs Association (AFCA), on behalf of
the AFCA, offered support for HCR 1. He stated that HCR 1
encourages home fire sprinkler systems and seeks to provide
incentives for individuals to install home fire sprinkler
systems in their homes. He offered his belief that the AFCA
understands the benefits of this program and the value of
providing incentives. He opined that coordinating the effort
with the state fire marshal's office and insurance companies is
a good way of accomplishing the program's goal. He reiterated
the AFCA's support for HCR 1.
4:01:08 PM
REPRESENTATIVE COGHILL inquired as to whether the AFCA would
perform inspections and the cost of inspections if the fire
marshal's model program is adopted.
MR. TUCKER explained that his fire department currently performs
home safety inspections for smoke detectors. He further
explained that the current regulation under National Fire
Protection Association (NFPA) code, 13 D [Standard for the
Installation of Sprinkler Systems in One and Two Family
Dwellings and Manufactured Homes] can be performed by plumbers
who are trained to install them. He opined the systems are
fairly simple systems compared to commercial systems. He
further opined that most fire departments have personnel trained
to perform some type of code enforcement. He stated the cost
would depend on the fire department that performed the
inspections. He offered that his fire department currently
performs inspections at no charge to homeowners.
4:02:14 PM
JEFF FEID, Loss Mitigation Administrator, State Farm Insurance,
stressed the value of residential sprinklers. The Home Fire
Sprinkler Coalition is the organization leading the country in
educating consumers, builders, and fire service on the value of
residential sprinklers. He opined that State Farm is the
largest insurer of homes in Alaska and in the U.S. He offered
support for the purpose of the resolution, which is to encourage
installation of fire sprinklers in residences. He said, "The
concept's terrific." He indicated that State Farm Insurance
offers discounts for homes that are installed in accordance with
national recognized standards that are proven to work.
MR. FEID explained that the National Fire Protection Association
(NFPA) codes that are recognized include NFPA 13 [the Standard
for the Installation of Sprinkler Systems]; NFPA 13 D, [the
Standard for the Installation of Sprinkler Systems in One- and
Two-Family Dwellings and Manufactured Homes]; and 13 R, [the
Standard for the Installation of Sprinkler Systems in
Residential Occupancies up to and Including Four Stories in
Height]. He highlighted that State Farm Insurance provides
discounts to homeowners who meet those nationally recognized
standards. He stated that State Farm Insurance is not able to
issue discounts for systems that do not meet the nationally
recognized standards. He said, "In fact, if we were to realize
an increase in fire losses in structures that have hybrid
systems or systems that didn't comply, but had some sort of
sprinkler in there, there might be pressure to raise rates to
adjust to that type of loss."
MR. FEID expressed concern that the proposal sets different
levels of sprinkler protection and designs that are not
consistent with or equivalent to the national standards. He
suggested that if different levels are desired that the lowest
level of silver or bronze be a complete fire system in
accordance with NFPA 13 D for the one and two family dwellings.
Secondly, he suggested false data may be produced in the event
of a fatality, major injury, or structure loss from systems
designed below the national standard. He opined those instances
would indicate that fire sprinklers are not as effective as
believed, which could set back any advocacy for residential
sprinklers. He said, "Lastly, the concept of partial sprinkler
or hybrid sprinklers, just in the kitchen, just over the
furnace; that concept was flatly rejected when considered by
Standards Committee on Fire Sprinklers." He thanked the
committee and stated that he looks forward to working with the
fire marshal and the sponsor of the resolution to fine-tune this
proposal to encourage people to use residential sprinklers.
4:05:21 PM
REPRESENTATIVE HOLMES inquired as to whether problems are
encountered with fire sprinklers accidentally discharging and
causing water damage.
MR. FEID answered that the failure rate of fire sprinklers is 1
to 60 million sprinkler heads in use in the U.S. today. He
stated that the concern of failure rates is not an issue for
State Farm Insurance.
4:06:05 PM
REPRESENTATIVE COGHILL related his own childhood experiences and
asked if the fire sprinklers are safe around children.
MR. FEID answered that it has not been a problem. He related
his company has encountered many issues with plumbing systems.
REPRESENTATIVE COGHILL asked whether Mr. Feid would consider the
fire marshal residential safety star program or if State Farm
Insurance would only consider the NFPA standards.
MR. FEID answered that State Farm Insurance would recognize the
NFPA standards previously mentioned, such as 13, 13 D, and 13 R,
since other standards have not been tested. He expressed
concern that if the homeowner installs one sprinkler in a room
without design consideration for water pressures needed and the
gallons per minute of water to operate the sprinkler, that the
fire sprinkler may not even operate.
4:07:48 PM
REPRESENTATIVE COGHILL inquired as to how his company certifies
that the fire sprinklers were installed using the NFPA
standards.
MR. FEID answered that State Farm Insurance receives an
application and verifies that the home sprinkler system was
installed using the NFPA standards mentioned, and applies the
discount appropriately.
4:08:18 PM
PAUL MICHELSOHN, Alaska State Home Builders Association (ASHBA),
speaking on behalf of the ASHBA, stated that he has worked on
sprinkler issues for ten years, including serving on the
International Code Council (ICC) boards for fire and life
safety, building and energy, and mechanical and plumbing, and
the board of the National Association of Home Builders (NAHB).
He thanked the sponsor of the resolution for including
"voluntarily" in the resolution. He identified three places the
word occurred and since he was participating by teleconference,
asked for verification. He referred to the word "voluntary" in
the following instances: page 1, lines 1 and 9; and on page 2,
lines 12 and 19.
REPRESENTATIVE SEATON agreed that the word "voluntary" appears
in those locations in Version E.
MR. MICHELSOHN offered the ASHBA's support for HCR 1, as
written. He offered his belief that State Farm Insurance did an
excellent good job. He advised members that a process is
currently underway to mandate sprinkler systems in all one and
two family dwellings through the inclusion of a chapter in the
International Residential Code (IRC) IRC 2009 edition. He
explained that matter was voted on in Minneapolis, Minnesota in
September 2008. He emphasized that "voluntary" has always been
in effect in Alaska and in many states nationwide. He stressed
that it is of the utmost importance to keep the process
voluntary. He said, "No one wants to be forced to place
sprinkler systems in their home." He offered that he has a
familiarity with some video clips. He mentioned that the video
shows an arson started fire, with one sprinkler head located
directly over the fire's source, and the sprinkler system put
out the fire. However, he noted that the low-volume sprinkler
systems, when placed on a ceiling will spray 6 to 8 feet, but
will not cover a 14-foot room. Thus, it would only directly
affect a fire started immediately under it. Additionally, he
offered his belief that the low-cost system would not be
adequate. He questioned the cost of $8, that many industry
studies show the cost ranges fro $3 to $8 per square foot.
MR. MICHELSOHN related the added cost affects the available
buyers for a home. He indicated that for every $1 to $2
thousand increase in value that the seller loses 2 to 4 percent
of the available buyers. Thus, he offered support as long as
installation of fire sprinklers remains voluntary. He feared
that fire sprinklers may soon be mandated. He recalled that the
State Farm Insurance only recognizes the NFPA 13, 13 D or 13 R
systems, which is typical in the industry. He stated that when
a fire marshal demands the NFPA standards mentioned, that it
includes more than sprinkler heads, such as spotlighting,
audible sounds, and the actual placement of the sprinkler heads.
He recalled costs to install a system for a State Farm agent
that cost $33,000 system. He acknowledged that the system was
strictly voluntary, but pointed out that it was not a low-cost
system.
4:14:20 PM
MR. MICHELSOHN recalled prior testimony and confirmed that the
tubing does freeze and does break. He agreed that the tubing is
more tolerant to cold than copper, but it can break and freeze.
He recalled someone inquired as to whether the fire sprinklers
will withstand children's tampering. He pointed out that the
fire sprinklers have not been tested in residential homes as to
how much abuse the systems will endure. He opined that in the
past 20 years that fire deaths in new homes has been reduced by
74 percent. He further opined that a fire department's
residential home response represents less than two percent of
their emergency calls. He offered his belief that HCR 1 will
not address these concerns, but he does believe that it is a
great proposal. He offered total support for HCR 1, so long as
the state, the legislature, and the fire marshal understand that
it is voluntary.
4:15:57 PM
REPRESENTATIVE COGHILL inquired as to whether Mr. Michelsohn
could provide reasons for the significant reductions in new
homes fire safety rates.
MR. MICHELSOHN offered his belief that the implementation of
many safety standards such as the ground fault circuit
interrupter (GFI) system, and arc fault interrupter systems that
immediately shut off breakers due to arcing faults that may not
cause a conventional circuit breaker to trip. Additionally,
other safety standards include better drywall techniques,
implementation of fire drafting, better insulation blocking,
installation of better flue piping, and more efficient heat
sources, and better cooking appliances. He opined that most of
the deaths occur in older homes and mobile homes. He further
opined it would be almost impossible to install fire sprinkler
systems that would not freeze in mobile homes.
MR. MICHELSOHN, in response to Representative Coghill, opined
that the heat source in kitchens is of concern since they
usually involve grease. He indicated that putting water on
grease will spread the fire, and the fire creates an
overabundance of smoke. He related that the majority of fires
start on the outside from cooking utensils such as outdoor
grills, or from ashes placed outside the door. He further
opined that fire sprinkler systems will not affect these fires.
4:18:56 PM
REPRESENTATIVE COGHILL inquired as to whether supplies in homes
have enough water supply capacity to allow fire sprinklers to be
plumbed in or if the fire sprinkler would require retrofitting a
main feeder line.
MR. MICHELSON recalled that the State Farm Building serviced
four bathrooms, which required an 8-inch water main from the
curb, which cost over $11,000. He opined that most city water
supplies are adequate. However, over 33 percent of residences
in Alaska are on private systems. Those systems might need
storage systems and pumps to supply primary water. He recalled
the statistic of faulty sprinklers and mentioned that the
Sheraton Hotel had a freeze up several months causing over
$100,000 in damages. He related several other incidents of
issues with fire sprinkler systems.
4:21:00 PM
REPRESENTATIVE COGHILL related that his own home is on a well.
He opined that it might be necessary to create separate
standards for those not on water mains in order to rate them for
the fire marshal's program.
MR. MICHELSOHN offered his belief that another problem with
storage system is the systems must be inspected annually. He
opined that insurance policies contain exclusions that can
result in non-payment of claims for home owners who do adhere to
annual Inspections. In further response to Representative
Coghill, Mr. Michelsohn opined that fire sprinklers can also
create a false sense of security. He answered that if a home
owner sublets his/her home and a fire occurs the plaintiff will
go after the deepest pocket.
4:23:34 PM
KELLY NICOLELLO, Assistant Fire Marshal, Division of Fire
and Life Safety, Central Office, Department of Public
Safety (DPS), read a letter from the State Fire Marshal,
Dave Tyler, as follows:
Thank you for sponsoring HCR 1, residential fire
sprinkler incentive program. I support this
resolution and daily we encounter the ravages of fire
as we are notified of fire events occurring throughout
the State of Alaska. The single family residence is
an area where we have little regulatory authority.
Our data indicates that this is where most of our
structure fires and almost all of Alaska's fire deaths
occur.
The intention of this program is to help reward those
who take this proactive step. Installing residential
sprinklers not only makes for a safer living
environment, it reduces fire suppression costs and the
hazard to fire fighters. It also reduces the risk to
insurance companies. This incentive program is a good
idea in that direction. Individual responsibility is
imperative to home fire safety. No one can take
better care of you or your family than you. When
those efforts fail, nothing will protect you better
than an operational residential sprinkler system.
Even in our urban areas we lose far too many lives in
homes from fire.
The most effective way to save your home from fire is
to prevent it in the first place. When we fail to
prevent the fire a residential fire sprinkler system
is the next best thing. The sprinkler system will
usually extinguish the fire before the fire department
gets to the scene. At the very least it will contain
the fire until help arrives. I firmly believe it is
appropriate to recognize those who do take this
proactive approach to home fire safety and recommend
this incentive program to encourage the installation
of residential fire sprinkler systems.
4:25:39 PM
MR. NICOLELLO, in response to Chair Olson, mentioned that the
letter should be in members' packets.
4:26:01 PM
REPRESENTATIVE COGHILL inquired as to his opinion on whether the
fire marshal's office would permit qualified installers.
MR. NICOLELLO said that he would envision that a plumber who had
the appropriate training from the Department of Labor &
Workforce Development or held an ICC certificate could ascertain
if the home met the requirements. He opined that the fire
marshal would issue the certificate. In further response to
Representative Coghill, Mr. Nicolello explained that the
department would not promulgate regulations for a voluntary
program.
REPRESENTATIVE COGHILL recapped that the fire marshal would use
a formal model that would allow authorized and permitted
installers an authority to determine the safety star program
level such as platinum, gold, silver, or bronze program. He
related his understanding that the program would be voluntary,
but authorized installers would install the fire sprinklers. He
inquired as to whether the legislature would handle this or if
the fire marshal would formalize the requirements.
4:28:21 PM
MR. NICOLELLO pointed out that the proposal is in the form of a
resolution, and not a bill. He stated that until the program is
formalized that the department cannot adopt regulations but
would recognize the recommended practice.
REPRESENTATIVE COGHILL related a scenario in which most people
were on a well system, but some people had sprinkler systems
installed. He related his understanding that insurance would be
based on fire engine coverage. He inquired as to whether the
fire sprinkler systems would affect the insurance area or just
the individual.
4:29:44 PM
MR. NICOLELLO answered that this would not have any effect the
on the ISO rating. The Fire Suppression Rating Schedule (FSRS)
is the manual ISO uses in reviewing the fire-fighting
capabilities of individual communities. The schedule measures
the major elements of a community's fire-suppression system for
the area. He elaborated that the rating is a public capability
rating through the insurance service organization such as class
1, 2, or 3 rating. He related his understanding that the number
or "sprinklered" commercial or residential buildings would not
affect the insurance. In further response to Representative
Coghill, Mr. Nicolello answered that the fire marshal would be
willing to assist an area in developing a workable plan.
4:31:04 PM
CHAIR OLSON, after first determining no one else wished to
testify, closed public testimony on HCR 1.
REPRESENTATIVE COGHILL inquired as to whether any other
insurance companies have responded.
REPRESENTATIVE SEATON stated that he has not had any formal
contact with insurance companies. He opined that this is a
process that requires an interim process to see what the program
is before the companies can comment. He related that HCR 1
encourages the Division of Insurance to hold the conversations
with the insurance companies or the fire marshal. He
acknowledged that ultimately the insurance companies might opt
for the complete home systems. However, the goal is to have
individual fire sprinklers set off, which uses much smaller
water supply, which are generally activated by a small fire. He
explained that the residential fire sprinkler will be active at
a much lower temperature, when a fire initially happens. He
offered his belief that he does not know how the insurance
companies will react, but the director of the Division of
Insurance is willing to initiate the conversation. He further
opined that partial coverage residential fire sprinklers
probably would not help in homes with smokers.
4:35:28 PM
REPRESENTATIVE COGHILL referred to the handout titled "Concept
paper provided to Rep. Paul Seaton on 1/11/06 by DPS". He
referred to the fixed levels of fire protection for single
family dwellings recognized for the Residential Safety Star
Program installers permitted by the SMFO under 13 AAC 50.035.
He asked the sponsor of HCR 1 to elaborate on the concept.
REPRESENTATIVE SEATON answered that many areas are not subject
to building codes. He explained that installers would need to
be certified to install the fire sprinklers. He related that
certified installers can design full coverage home systems.
This resolution would encourage existing homeowners to install
fire sprinklers to save lives.
4:37:23 PM
REPRESENTATIVE COGHILL stated his appreciation that the program
would be voluntary. He inquired as to whether the sponsor has
had any discussions with DLWD to offer training programs to
certify installers.
GREY MITCHELL, Director, Central Office, Division of Labor
Standards & Safety, Department of Labor & Workforce Development
(DLWD), offered his belief that any licensed journeyman plumber
could install fire sprinklers. He said he was not aware of any
developments for workforce plans in this area or for the
certification the insurance companies might require.
REPRESENTATIVE COGHILL opined that the certified sprinkler
system installers are a subset of the plumbers and pipefitters.
He said, "I can see us getting into a little bit of a "brouhaha"
especially if you are going to be tasked with putting together
some kind of a plumber's certification for residential sprinkler
systems." He asked if that has been considered.
MR. MITCHELL opined that it is possible that would develop, but
since the program is voluntary he doubted that the DLWD would
have a mandate to create a specialized license for sprinkler
installations.
4:40:28 PM
REPRESENTATIVE SEATON commented that he recalled similar
conversations about the differences between using the language
verify or certify. He recalled that legislative drafting
informed them from their standpoint, there was not any
difference.
REPRESENTATIVE COGHILL moved to report the proposed committee
substitute (CS) for HCR 1, Version 26-LS0228\R, Bailey, 3/19/09,
out of committee with individual recommendations and the
accompanying fiscal note. There being no objection,
CSHCR 1(L&C) was reported from the House Labor and Commerce
Standing Committee.
4:42:17 PM
ADJOURNMENT
There being no further business before the committee, the House
Labor and Commerce Standing Committee meeting was adjourned at
4:42 p.m.