SENATE 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

Senate Committee on Financial Institutions

Senate Hearing Date(s):April 3, 1987

Majority Report:  Do pass as amended.

      Signed by Senators Moore, Chairman; Bender, Vice Chairman; Bottiger, Fleming, McDermott, Metcalf.

Senate Staff:Phil Sorensen (786-7470)

                  April 3, 1987

AS REPORTED BY COMMITTEE ON FINANCIAL INSTITUTIONS, APRIL 3, 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, 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 the agreed policy limits will be paid to the insured in the event the vehicle becomes a total loss.

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.  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.

Fiscal Note:      none requested

SUMMARY OF PROPOSED SENATE AMENDMENT:

The effective date of this act is January 1, 1988.

Senate Committee - Testified: Representative Paul Zellinsky, prime sponsor