HOUSE BILL REPORT

HB 310

BYRepresentatives Zellinsky, Winsley, Haugen, Day, Bristow and Lux

Requiring insurers writing comprehensive and collision policies to also offer financing coverage.

House Committe on Financial Institutions & Insurance

Majority Report:     Do pass.  (14)

     Signed by Representatives Lux, Chair; Zellinsky, Vice Chair; Betrozoff, Chandler, Crane, Day, Dellwo, Ferguson, Grimm, Meyers, Niemi, Nutley, Silver and Winsley.

House Staff:John Conniff (786-7119)

AS PASSED HOUSE MARCH 6, 1987

BACKGROUND:

The insurance code prohibits insurers from overinsuring property. Property insurance benefits may not exceed the fair market value of the property which is defined as the replacement cost less depreciation. The insurance code makes an exception for replacement cost coverage which instead of providing a monetary settlement, requires the insured to replace the damaged property with similar property that is paid for by the insurer.

When a new motor vehicle is purchased and financed with a very low down payment, the loan amount may exceed the vehicle's fair market value shortly after delivery and use of the vehicle. Sometimes this lower market value results in a situation where the insurance covering the vehicle is insufficient to fully satisfy the loan, thus leaving the insured with no vehicle and a loan to repay. Replacement cost coverage is not available for standard motor vehicle policies. "Stated value" policies are available for vintage or collector motor vehicles. Such policies provide that in the event of a total loss of the vehicle, the agreed policy limits will be paid to the insured.

SUMMARY:

Motor vehicle liability insurers that sell collision and comprehensive coverage, must provide at the insured's request, coverage that will satisfy any outstanding indebtedness on a new motor vehicle. However, the insurer may deny coverage or benefits if the insured or someone on the insured's behalf attempts to obtain coverage or benefits in a fraudulent manner.

EFFECT OF SENATE AMENDMENT(S):  An effective date of January 1, 1988 is added.

Fiscal Note:    Not Requested.

House Committee ‑ Testified For:     Scott Jarvis, Insurance Commissioner's Office.

House Committee - Testified Against: Foster Cronyn, National Association of Independent Insurers; and Harold Fosso, State Farm Insurance Company.

House Committee - Testimony For:     This required offering of new coverage is a hybrid that combines credit and property insurance.  It may appeal to persons willing to pay for such coverage.

House Committee - Testimony Against: This proposed coverage turns property insurance into debt insurance.  How will companies design and rate this coverage?  It may be difficult and burdensome to comply with this proposal.

VOTE ON FINAL PASSAGE:

     Yeas 97; Nays 0; Absent 0; Excused 1

Excused:   Mr. Speaker