HOUSE BILL REPORT
SHB 2481
As Amended by the Senate
Title: An act relating to insuring victims of crimes.
Brief Description: Insuring victims of crimes.
Sponsors: By House Committee on Financial Institutions & Insurance (originally sponsored by Representatives Williams, Blake, Appleton, Moeller, Hasegawa, Chase, Rodne, Eickmeyer, Conway, Roberts, Hunt and Simpson).
Brief History:
Financial Institutions & Insurance: 1/19/06, 1/26/06 [DPS].
Floor Activity:
Passed House: 2/9/06, 71-27.
Senate Amended.
Passed Senate: 2/28/06, 45-3.
Brief Summary of Substitute Bill |
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HOUSE COMMITTEE ON FINANCIAL INSTITUTIONS & INSURANCE
Majority Report: The substitute bill be substituted therefor and the substitute bill do pass. Signed by 10 members: Representatives Kirby, Chair; Ericks, Vice Chair; Roach, Ranking Minority Member; Tom, Assistant Ranking Minority Member; O'Brien, Santos, Serben, Simpson, Strow and Williams.
Minority Report: Do not pass. Signed by 1 member: Representative Newhouse.
Staff: Jon Hedegard (786-7127).
Background:
Regulation of Insurance Underwriting: The Office of the Insurance Commissioner (OIC) is
responsible for the regulation of the insurance industry in Washington. The OIC is
authorized to regulate both the underwriting and rate-setting practices of the companies doing
business in this state. In addition, the OIC is given broad regulatory authority to prevent
insurance practices that are either unfair, deceptive, or discriminatory. Under current law,
there is no explicit regulation of the underwriting practices of insurers with respect to claims
stemming from arson or malicious mischief.
Summary of Substitute Bill:
"Underwriting action" is defined to include when an insurer:
The protections provided by the bill apply to insurance policies owned by:
Insurers are prohibited from taking an underwriting action against the specified insureds as
the result of a property insurance claim stemming from the crime of arson or malicious
mischief. The prohibition applies to insurance claims made within five years of the
underwriting action. An insurer may take an underwriting action due to other factors. The
insured is required to file a report with a law enforcement agency that contains facts
sufficient to put the insurer on notice that the loss was the result of arson or malicious
mischief. The law enforcement agency, in turn, must make a determination that an insured is
the victim of a crime in order for the insured to be subject to the protections afforded by the
bill. The amendment also requires that an insured cooperate with any investigation by law
enforcement authorities and insurance investigators.
An insurer that takes an underwriting action against an insured who has filed a claim related
to arson or malicious mischief during the preceding five-year period must report the action to
the OIC.
EFFECT OF SENATE AMENDMENT(S):
The following are added to the list of persons or entities that receive the bill's protections:
"Independent health clinics";commercial, research, or educational organizations that use animals or plants for food,
fiber production, agriculture, breeding, processing, research or testing; and commercial, research, or educational organizations that use, purchase, or offer for sale a
product that contains animal or plant material.
The definition of robbery in the first degree is modified. No additional evidence is required
that the robbed establishment was a financial institution if the words "bank", "savings and
loan" "trust", "payday" or "credit union" appear in the name of the establishment.
Appropriation: None.
Fiscal Note: Not requested.
Effective Date: The bill takes effect 90 days after adjournment of session in which bill is passed.
Testimony For: This bill is motivated by an incident where a health clinic was burned down
by an act of arson and afterward found it almost impossible to get insurance. The insurance
underwriting ends up unintentionally abetting the aims of the criminals by denying insurance
to the victim. It has happened to clinics and churches, it could happen to victims of
eco-terrorism. No matter who the victim is, the rule of law must be supported and criminal
activity and aims should be thwarted. The bill speaks to those rare occurrences where crimes
are perpetrated that intend to stop a certain activity. The health care clinic that was burned
down in 2005 has been in operation since 1981. It provides all primary health services and
provides Medicaid services. It also provides reproductive services. The clinic was a total
loss. Due to hard work, the clinic was serving clients again in seven days. That hard work
saved the insurer a considerable amount of business interruption expenses. Subsequently, the
clinic's insurance was cancelled. The insurer stated that they didn't know that the clinic
provided reproductive services. That was untrue and the cancellation was not allowed.
Ultimately, the insurer managed to cancel the clinic's insurance. The clinic had to find
another insurer. It took quite some time to find any insurer willing to insure the clinic. It was
only after the clinic agreed not to provide reproductive services that insurance could be found
at a rate the clinic could afford. Even so, the premium is many times the original rate despite
the fact the clinic has significantly upgraded security.
(With concerns) The insurance industry is concerned. The industry is sensitive to the issue
of victims of intentional crimes. Insurers have no interest in limiting or prohibiting clinic
services, insurers only seek to evaluate and classify risk. It seems to industry that the types of
risk faced by clinics and religious organizations are the same as the other organizations on the
list. Almost all of the other entities are not only commercial in nature but often significantly
larger. It is reasonable to expect those other entities to pursue different risk management
strategies. Clinics and religious organizations may not be able to maintain 24-hour security.
These other entities may be expected to do so. The purpose of underwriting is to classify
risk. Not all insurers accept all types of risk. Nonrenewal is a business decision. If an
insurer is not allowed to make that decision, there may be some cost impacts on other
policyholders. The industry believes it can find common ground on the clinics and religious
organizations but not the other organizations. The industry would like to stress that any
insurer action is not intended to aid the goal of any intentional crime. Insurers are not
generally required to insure policyholders that the insurer wants to cancel or nonrenew.
Insurers are also victims of these crimes if the crime is covered by insurance. If there is fraud
involved, Washington law allows for investigation and punishment of that crime. Insurance
classifies and prices risk. If the classification and pricing decisions are restricted, it could
allow for subsidization of risk. Criminal activity can't be predicted which makes it
impossible to price. Industry is sensitive to the issue and is willing to work on this bill.
Testimony Against: None.
Persons Testifying: Nancy Armstrong and Shelly Pacheco, Eastside Women's Health
Clinic.
(With concerns) Mel Sorensen, Allstate and Property and Casualty Insurers; and Jean
Leonard, State Farm and Washington Insurers.