Legislature(2003 - 2004)

04/22/2003 10:06 AM FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                                                                                                                                
     SENATE CS FOR CS FOR HOUSE BILL NO. 9(L&C)                                                                                 
     "An  Act  relating  to  the  registration  of  individuals  who                                                            
     perform   home   inspections;   relating   to   regulation   of                                                            
     contractors;   relating  to registration   fees  for  specialty                                                            
     contractors,  home inspectors,  and associate home inspectors;                                                             
     relating to home inspection  requirements for residential loans                                                            
     purchased   or   approved  by   the  Alaska   Housing   Finance                                                            
     Corporation;  relating  to civil  actions by  and against  home                                                            
     inspectors  and to civil actions arising from  residential unit                                                            
     inspections; repealing  a law that limits liability for damages                                                            
     based  on a  duty  to inspect  a residential  unit  to  damages                                                            
     caused  by  gross negligence  or  intentional  misconduct;  and                                                            
     providing for an effective date."                                                                                          
                                                                                                                                
                                                                                                                                
This was  the second  hearing for  this bill in  the Senate  Finance                                                            
Committee.                                                                                                                      
                                                                                                                                
Co-Chair  Wilken informed  the Committee that,  while Amendments  #1                                                            
and #2 were previously  adopted, a revised committee  substitute has                                                            
not, of yet, been provided.                                                                                                     
                                                                                                                                
TERRY DUSZYNSKI,  International Conference  of Building Officials  -                                                            
Certified  Inspector,  and Existing  Home Inspector,  testified  via                                                            
teleconference from Fairbanks  to voice concern that this bill might                                                            
remove liability  limits that International  Conference of  Building                                                            
Officials (ICBO)  inspectors have regarding damages  caused by gross                                                            
negligence. He  clarified that, currently, Home Inspectors  are only                                                            
liable  for  damages  caused  by  gross  negligence  or intentional                                                             
misconduct.  He informed that State  building codes for residential                                                             
construction are  non-existent and that there is no  rule specifying                                                            
what  should be  inspected or  what inspectors  are  liable for.  He                                                            
stressed  that "this  problem should  be addressed  before we  start                                                            
moving  home   inspectors  into  [the   Division  of]  Occupational                                                             
Licensing  and providing a  whole new set  of rules." He  questioned                                                            
whether   a  fiscal  note   accompanies  the   legislation,   as  he                                                            
understands that the Division  of Occupational Licensing would incur                                                            
expenses  in  developing  a  new set  of  Existing  Home  inspection                                                            
standards.  He  voiced  that  this  bill  should  address  providing                                                            
qualified Home Inspectors  as well as requiring continuing education                                                            
in the field. He contended  that this bill in its current form would                                                            
create more problems than it would solve.                                                                                       
                                                                                                                                
REPRESENTATIVE  NORM ROKEBERG,  the bill's  sponsor, responded  that                                                            
the issue  of repealing the  section of the  Alaska Housing  Finance                                                            
Corporation  (AHFC)   statutes  that  provides  immunity   for  home                                                            
inspectors   of  new  AHFC  financed   homes  has  previously   been                                                            
discussed.  The repeal  language,  he reminded,  is  limited to  new                                                            
homes that  are financed by AHFC and  that other new homes  financed                                                            
by other lenders,  are not granted  immunity under current  statute.                                                            
He specified  that  there is "no  assurance  standard" currently  in                                                            
place for any  new home inspection  at the State or national  level.                                                            
He noted  that  a forthcoming  amendment  would address  this  issue                                                            
further.  He informed that  the Division  of Occupational  Licensing                                                            
fiscal note has been minimized  by including the new provision under                                                            
the existing "Specialty  Contractors" section, and  he reminded that                                                            
"all occupational  boards and licensures have to be  self-supporting                                                            
therefore there is no draw on general fund."                                                                                    
                                                                                                                                
WILLIAM  BRUU,  International   Conference  of  Building   Officials                                                            
Inspector,  New  Home Inspector  and  Energy  Rater,  testified  via                                                            
teleconference  from Mat-Su in opposition  to HB 9 as he  stated his                                                            
occupation  would  be  negatively   impacted  by  a  change  in  the                                                            
provisions  regarding  AHFC  financed new  homes.  He  noted that  a                                                            
forthcoming  amendment would  introduce a  provision to provide  new                                                            
home inspectors  some protection from  nuisance lawsuits.  He argued                                                            
that, were a new home inspector  to improperly perform his job, "the                                                            
market itself  would discipline  him as to  whether or not  he would                                                            
remain  in  business."  He  stated   that  the  AHFC  provision  was                                                            
originally established  in law to recognize the fact  that there was                                                            
no insurance available  to protect home inspectors from lawsuits and                                                            
that no one would venture  into the field of home inspection without                                                            
some  indemnification  from AHFC  or the  State. He  noted that  the                                                            
situation  has not  improved  as there  continues  to be  a lack  of                                                            
available  insurance to  protect an  inspector's  assets. He  stated                                                            
that, "this provision  is the only thing that protects  inspectors."                                                            
He stated that  he has no answer to the insurance  situation, but he                                                            
stressed  that  were HB  9  adopted and  "this  last little  bit  of                                                            
protection"  removed,  then  numerous  inspectors  would  "seriously                                                            
consider going out of business."                                                                                                
                                                                                                                                
Representative  Rokeberg  stated that  during his  nine years  as an                                                            
elected  official,  he  has  attempted  to  be a  "voice  for  small                                                            
business" and  as such, he would not present legislation  that would                                                            
"jeopardize business  activity." He mentioned that  a "HB 9 New Home                                                            
Inspection  Survey" [copy  on file] was recently  conducted  and, of                                                            
the 26 respondents,  seven indicated that they would  not be able to                                                            
remain  in business  because of  HB 9.  He voiced  that while  being                                                            
"sensitive  to  these  opinions,"   he is  somewhat   skeptical.  He                                                            
reiterated  that  the big  issue is  "the  availability  or lack  of                                                            
availability  for adequate  insurance coverage."  He voiced  that it                                                            
should be  recognized that  provisions in the  bill would provide  a                                                            
one-year statute  of limitations for  existing homes and  a two-year                                                            
statute of limitations  for new homes. He stated that  this counters                                                            
Mr. Bruu's  comment that no other  limitations exist. He  reiterated                                                            
that rather  than harming  business, the intent  of the bill  "is to                                                            
regulate an unregulated  industry that is a central  part, and is of                                                            
growing importance, to the housing stock in the State."                                                                         
                                                                                                                                
Senator  Taylor  inquired  as  to  whether  "a  shorter  statute  of                                                            
limitations on a civil action" exists in State statutes.                                                                        
                                                                                                                                
Representative  Rokeberg voiced  that he is  unaware of any,  and he                                                            
deferred to Senator Taylor's knowledge regarding this issue.                                                                    
                                                                                                                                
Senator Taylor  relayed that, other than as specified  in this bill,                                                            
he is  unaware  of any  other one-year  statute  of limitations.  He                                                            
furthered that due to tort  reform and other legalities, liabilities                                                            
for contracts have been  reduced to a three-year period. He asserted                                                            
that the hiring  of a home inspector  by a home purchaser  or seller                                                            
would  qualify  as  a contract  under  State  statute,  as  it is  a                                                            
contract  for services.  He  questioned  the reasoning  behind  this                                                            
action as he  voiced that limiting  the buyer to a one-year  statute                                                            
of limitations protection period is unacceptable.                                                                               
                                                                                                                                
Representative Rokeberg  replied that Senator Taylor's "good points"                                                            
address  the  public   policy  issue  that  is  pertinent   to  this                                                            
legislation.  He informed that a home  inspector conducts  a "visual                                                            
survey" of  a home at a cost of approximately  $300. He stated  that                                                            
one element of  this legislation would provide inspector  experience                                                            
and  competency  qualification  requirements  where  none  currently                                                            
exist. He stated that the  statute of limitations should reflect the                                                            
service  being performed  rather  than providing  "a  chain of  deep                                                            
pockets  for  people to  pick  on."  He stated  that  currently  the                                                            
inspection  addresses  the  condition  of a  house  at the  time  of                                                            
inspection,  and he  attested that  weather conditions  and  natural                                                            
disasters  such  as wind,  hail,  flooding,  and  earthquakes  could                                                            
change  the  condition  of  the  home.  Therefore,  he  argued,  the                                                            
inspector's  report  should  only  be  valid  for 24  hours  as  the                                                            
condition of a  home could be changed in a short period  of time. He                                                            
stated that  in a situation where  latent defects were unidentified                                                             
by a home inspector, a  longer period could be provided; however, he                                                            
specified that  those liabilities  should be the responsibly  of the                                                            
builder,  homeowner,   or  subcontractor   rather  than   being  the                                                            
responsibility  of the  home inspector.  He declared  that the  home                                                            
inspector's  liabilities   should  be  limited   to  what  is  being                                                            
provided.  He noted that  contract language  exists that limits  the                                                            
amount of liability to  the inspector as the amount of the contract,                                                            
which he qualified "is  unenforceable as a matter of law." He stated                                                            
that, while he  agrees with Senator Taylor's sectional  analysis, he                                                            
stated, "there  is a valid  public policy  consideration to  shorten                                                            
this period."                                                                                                                   
                                                                                                                                
Senator  Taylor  opined  that  realtors,  in an  effort  to  protect                                                            
themselves  from lawsuits,  lobbied the  Legislature to incorporate                                                             
the use  of home inspections  into the real  estate transaction.  He                                                            
stated that when realtors  sold a home with defects, "the old adage,                                                            
let  the buyer  beware,  applies."  He continued  that  when  people                                                            
brought  lawsuits for  damages against  the realtors,  the  realtors                                                            
came  to the  Legislature  for  help.  He noted,  that  although  he                                                            
opposed the legislation,  the home inspection program was enacted by                                                            
the Legislature,  and, he furthered,  upon its adoption,  every bank                                                            
began insisting "instantly"  that a home inspection be performed. He                                                            
stated that the home inspection  program increases the cost of every                                                            
house in Alaska  that is bought or sold by whatever  the cost of the                                                            
inspector is. He attested  "that the home inspector provided another                                                            
opportunity  for the realtor to say  this isn't my fault,  blame the                                                            
home inspector and sue him."                                                                                                    
                                                                                                                                
Senator  Taylor continued  that, subsequently,  in order to  provide                                                            
protection to home inspectors,  the legislature "set up a limitation                                                            
on  liability  called the  gross  negligent  policy."  Therefore  he                                                            
asserted, when  the realtor gets sued,  "in court he professes  that                                                            
it was the  home inspector that is  at fault and by the way,  rather                                                            
than  gross negligence  it  was simple  negligence"  therefore  "you                                                            
can't sue  the home inspector."  He stressed  that this legislation                                                             
limits the  liability for  simple negligence  to one year,  and that                                                            
gross negligence must be  proven in order to extend liability to the                                                            
three-year statute of limitations.                                                                                              
                                                                                                                                
Senator Taylor  continued that this  legislation would require  home                                                            
inspectors  to be certified,  registered, and  bonded, and  that any                                                            
lawsuit brought  against a  home inspector  would be required  to be                                                            
brought  within one-year.  He  stated that  were  a lawsuit  brought                                                            
within one year,  other than the home inspector, all  other involved                                                            
parties would  be protected "by saying blame the home  inspector but                                                            
guess what  you can't  sue him so  sorry." He  stated that the  only                                                            
reason  this legislation  is being  presented is  to allow  "certain                                                            
professions  to shield  themselves  from  their own  negligence  and                                                            
liability."                                                                                                                     
                                                                                                                                
Senator   Taylor  asserted   that   while  realtors   support   this                                                            
legislation, home  inspectors do not. He aired that  "it provides no                                                            
service to the  average mom and pop homebuyer and  just adds another                                                            
layer  of bureaucracy  to  the  transaction."  He warned  that  this                                                            
legislation would make  home inspections mandatory as "all financial                                                            
institutions  would  adopt   every  single  thing  included  in  the                                                            
legislation…the  cost of buying and selling every  single home would                                                            
rise based upon what it  would cost the home inspector to be bonded,                                                            
what it costs for him to  be licensed," as those costs are passed on                                                            
to  the  consumer.  He  remarked  that  the  only   person  provided                                                            
protection by this legislation is the realtor.                                                                                  
                                                                                                                                
DAVID  OWENS,  Owner,  Owens  Inspections  Services,  testified  via                                                            
teleconference  from  Mat-Su  that a  new  home inspector  could  be                                                            
likened "to  a third-party inspector  of a construction project"  as                                                            
he stated the  inspection might require ten visits  to a house as it                                                            
progresses. He stated that  even with frequent site visits, the home                                                            
inspector  could not  observe  the entire  process.  He stated  that                                                            
there is a significant  difference between a new home inspection and                                                            
an existing  home  inspection,  as he  explained,  an existing  home                                                            
inspector  views  a  completed  home whose  walls  could  conceal  a                                                            
multitude  of things.  This, he  stated, would  require an  existing                                                            
home inspector  "to make his best guess" based on  what equipment he                                                            
might have and general rules based on national standards.                                                                       
                                                                                                                                
Mr. Owens stated that the  aforementioned survey addresses a variety                                                            
of concerns and  issues with, he contended, the biggest  issue being                                                            
the additional  liability placed upon  the home inspector.  He noted                                                            
that  he  could  support  the  bill  were  amendments   relating  to                                                            
liability adopted.                                                                                                              
                                                                                                                                
STEVE   WISDOM,   Owner,  Wisdom   &   Associates,   testified   via                                                            
teleconference  from Kenai  to voice that  his company conducts  new                                                            
and existing homes  inspections and code compliance  inspections. He                                                            
stated that  confusion arises in the  bill because it addresses  two                                                            
different  types of inspections:  those conducted  on new homes  and                                                            
those  conducted on  existing  homes. He  qualified  that the  gross                                                            
negligence  clause is limited  to new construction  inspections.  He                                                            
continued that  an existing home inspection  is primarily  conducted                                                            
as a component of a real estate transaction.                                                                                    
                                                                                                                                
                                                                                                                                
SFC 03 # 60, Side B 10:55 AM                                                                                                    
                                                                                                                                
                                                                                                                                
Mr. Wisdom  continued that,  "anyone could  purchase a fifty  dollar                                                            
business license  and perform existing  home inspections  legally in                                                            
the  State  of Alaska."  Unfortunately,   he shared  that  this  has                                                            
resulted in  numerous people being  defrauded by unqualified  people                                                            
identifying  themselves  as  home  inspectors.  This  situation,  he                                                            
declared, "was the original focus of HB 9."                                                                                     
                                                                                                                                
Mr. Wisdom  explained  that, currently,  a typical  home  inspection                                                            
should  take  two hours  to  complete  and "the  home  inspector  is                                                            
required by the  American Society of Home Inspectors  [ASHI] code of                                                            
ethics  and  standards  to provide  their  client  with information                                                             
regarding the condition  of the systems and components of the house"                                                            
at the time of  the inspection. He furthered that  items relating to                                                            
structural,  health, and safety issues  are usually noted;  however,                                                            
he shared,  it is uncommon  that an existing  home inspector  "walks                                                            
into  a home and  finds a  major defect."  Rather,  he noted,  "they                                                            
would usually  find small clues that would lead them  down a path to                                                            
discovering a major problem within the house."                                                                                  
                                                                                                                                
Mr.  Wisdom  contended   that  the  majority  of  today's   building                                                            
inspectors  are trained in  current building  code standards  rather                                                            
than receiving  adequate training to inspect an existing  home built                                                            
in 1970 that would  not meet today's building codes.  He avowed that                                                            
an existing  home inspection  is not "a  code compliance  inspection                                                            
and  does not  act as  a warranty  of  quality workmanship,  but  is                                                            
simply a report of the  home's condition at the time of inspection."                                                            
                                                                                                                                
Mr. Wisdom  furthered  that the  ASHI and other  organizations  have                                                            
excellent training programs  and provide testing to gauge competency                                                            
in  understanding  the  principles  required  for an  existing  home                                                            
inspection.  He  stressed  the  importance   of understanding   that                                                            
existing home  inspections and new construction and  code compliance                                                            
inspections  are very  different and  require  different skills.  He                                                            
informed that  code compliance and new construction  inspectors must                                                            
demonstrate   competency  before   earning  their  code   compliance                                                            
inspector  license. He  furthered that  currently  AHFC is the  only                                                            
entity that provides guidance  to code compliance inspectors who are                                                            
referred to as new home inspectors in this legislation.                                                                         
                                                                                                                                
Mr. Wisdom  stated that the home inspection  program was  adopted in                                                            
the early 1990s after prompting,  "from the housing industry itself"                                                            
to address  the substandard  housing built  in the 1980s "due  to no                                                            
minimum standards  being in place." He continued that  the effort to                                                            
assure that the  home inspection program would be  adopted was based                                                            
in "tying the  enforcement to State  funding of the housing  through                                                            
the  AHFC loan  program."  He noted  that some  municipalities  have                                                            
established  building departments  and building  codes; however,  he                                                            
alerted that "most  of the housing was being built  as it is today,"                                                            
outside of a municipality  jurisdiction. He declared  "this left the                                                            
AHFC as the State's  building authority by default."  He stated that                                                            
this  is why  AHFC supports  this  legislation.  He  urged that  new                                                            
construction compliance  codes be included, and he  stated that AHFC                                                            
views this legislation  as a positive way to regulate and police new                                                            
construction code compliance inspectors.                                                                                        
                                                                                                                                
Mr. Wisdom  voiced  that this  legislation  is positive  in that  it                                                            
would regulate and police  new inspectors, however, he attested that                                                            
the  removal  of the  gross  negligence  clause  would  cause  great                                                            
problems in the industry.  He noted that a compliance code inspector                                                            
must  have   an  ICBO  issued  license,   which  would  demonstrate                                                             
competency  in codes relating  to one-and-two-family  dwellings.  He                                                            
stated  that failing  this test  is common  as the  test covers  all                                                            
topics relating  to new construction codes including  such things as                                                            
administrative   duties,  building  plans,  footings,  foundations,                                                             
framing, pouring,  welds, chimneys, energy efficiencies,  mechanical                                                            
systems and components,  plumbing systems and components, electrical                                                            
systems and  components, and swimming  pools. He stated that  a code                                                            
compliance,  or new home inspector,  must examine a home  repeatedly                                                            
throughout   the   construction   process.   He  stated   that   new                                                            
construction/code  compliance  inspectors  must know,  in excess  of                                                            
1700 pages of codes for residential construction.                                                                               
                                                                                                                                
Mr. Wisdom  informed  that while  "municipalities  could be  insured                                                            
through  their  general  liability  policy and  by  favorable  state                                                            
statutes  that provide  protection  to political  entities," HB  9's                                                            
removal  of  the  gross  negligence  clause  would  ensure  that  no                                                            
insurance carrier would  provide Errors and Omission Insurance [E&O]                                                            
insurance to small  firms. He continued that this,  coupled with the                                                            
extended two-year liability  period designated for new construction,                                                            
which he attested is one  year longer than the general contractor is                                                            
held  liable  for his  work,  and  "would  open  the door  for  many                                                            
lawsuits." He stated that  this would place private inspection firms                                                            
at  tremendous risk.  He  exampled some  construction  scenarios  in                                                            
which  a  leak caused  by  a  defective  nail plate  might  show  up                                                            
eighteen months  later; however, he  declared, that, as a  result of                                                            
the two-year  liability clause in  this legislation, the  inspector,                                                            
rather than the  contractor or another entity whose  liability ended                                                            
twelve months  after the home was  completed, might be held  liable.                                                            
He stated that it would  be possible, even after careful inspection,                                                            
that one detail  of the 1700 pages  of code might be overlooked.  He                                                            
stated that  this is why the gross  resilience clause is  important.                                                            
He stated  that, "the original  authors of  the original  inspection                                                            
requirements intended  to require new construction  inspections, but                                                            
not to  place  such liability  on the  inspector  to discourage  the                                                            
inspection  from taking place."  He qualified  that this should  not                                                            
imply that  the industry  does not  require policing,  and he  noted                                                            
that  this legislation  would  allow  the  Department  of Labor  and                                                            
Workforce Development and  the Division of Occupational Licensing in                                                            
the Department of Community  and Economic Development to investigate                                                            
and stop inspectors  who are not adequately  performing their  jobs.                                                            
He alerted  that the  removal of  the gross  negligent clause  would                                                            
accomplish  nothing more than  increase the  cost of housing  to the                                                            
consumer.                                                                                                                       
                                                                                                                                
Mr. Wisdom reminded  that the gross negligence language  in the bill                                                            
is limited  "to new construction  code compliance  not the  existing                                                            
home  inspection which  is  a very  different item."  Therefore,  he                                                            
reiterated  that  the  "great  differences"  in  the  two  types  of                                                            
inspections  requires that  specific certification  requirements  be                                                            
maintained for each type of inspection.                                                                                         
                                                                                                                                
Senator Bunde  voiced that,  "the more I hear  about this bill,  the                                                            
less  I understand."  He  stated that  it  appears that  the  "Buyer                                                            
Beware" component referred  to by Senator Taylor "is being taken out                                                            
of the equation  in lots of situations."  He suggested that  perhaps                                                            
the  new  and  existing  home  controversy   could  be  resolved  by                                                            
implementing a law that  would require every home built outside of a                                                            
municipality  that has  inspectors to  be labeled  with the  warning                                                            
that the home is built  in an area that does not require inspection.                                                            
He stated  that the warning  would alert  the homebuyer that  losses                                                            
might not be recoverable.                                                                                                       
                                                                                                                                
Representative  Rokeberg   agreed  that  compliance  codes  are  not                                                            
required for structures built outside of a municipality.                                                                        
                                                                                                                                
Senator Bunde  attested to  the seriousness  of the situation  as he                                                            
was unaware that a new  home built, for instance in Chugiak which is                                                            
outside of a municipal  building code area, might  not meet building                                                            
codes. He understood  that while private  inspections are  available                                                            
in  those areas,  something  might be  missed  just as  it could  be                                                            
during a  new home construction  inspection  within a municipality.                                                             
However,  he stated  that  at least  those homes  being  build in  a                                                            
municipality  would be build under  the auspice of municipal  codes.                                                            
                                                                                                                                
Senator Bunde  opined that  an existing home  inspection is  "really                                                            
someone else's best guess."  He stated that while there is a fee for                                                            
this service,  ultimately,  he declared,  "it  isn't worth  anything                                                            
more than advice."  He puzzled as  to what would be accomplished  by                                                            
this legislation.                                                                                                               
                                                                                                                                
Representative   Rokeberg   replied   that  the   purpose  of   this                                                            
legislation "is to bring  some level of competency and qualification                                                            
of certification  to these practitioners…and  provide some  resource                                                            
for grievance  through a formal procedure."  He stated that,  in the                                                            
past,  the   Legislature   has  imposed   "a  disclosure   statement                                                            
requirement  on the sale  of all  existing homes  in the State."  He                                                            
stated that  this "has driven the  development of home inspection."                                                             
                                                                                                                                
Representative  Rokeberg referenced the copy of the  home inspection                                                            
disclosure  report  [copy on  file]  that is  required  on all  home                                                            
sales. He stated that this  report is of great benefit to the people                                                            
of the State as the report  recommends, in two sections, that a home                                                            
inspector  be retained. In  response to  Senator Taylor's  assertion                                                            
that this  would increase  the cost of buying  a home, he  countered                                                            
that  the  majority  of  the financial   lending  community  already                                                            
require  a  home  inspection  to  be  conducted  before  a  loan  is                                                            
arranged. He opined  that this legislation "is not  the cost driver"                                                            
in  this  situation,   "but  is  a  remedial  piece  of   regulatory                                                            
legislation."                                                                                                                   
                                                                                                                                
Representative  Rokeberg stressed that this is the  only unregulated                                                            
component in  a real estate transaction.  He stated that  the backup                                                            
material includes  evidence of abuses by bad inspectors  to which he                                                            
attested, the only current  recourse is through the court system. He                                                            
stated that this  bill could be summarized "as a balance  of what we                                                            
want to  do in terms of  limiting liabilities  as a matter  of pubic                                                            
policy over  creating a form for redress  and grievance on  the part                                                            
of those  who  have been  harmed and  damaged by  incompetency."  He                                                            
countered Mr.  Wisdom's statement  that a home inspector's  two-year                                                            
period of liability  is one year longer  than the contractor's  home                                                            
liability,  as in statute,  a three-year  period is specified  under                                                            
Contract law.  In addition, he noted  that a ten-year State  statute                                                            
of repose from  discoverability "would come into play  if there is a                                                            
latent  defect in the  construction  of a new  home." Therefore,  he                                                            
contended  that  the  contractor  is  ultimately  the  first  entity                                                            
responsible.  However, he  continued, this  legislation would  allow                                                            
for action against  a home inspector "by the builder  if the guy did                                                            
not do his job."                                                                                                                
                                                                                                                                
Senator  Bunde asked  for confirmation  that  new home construction                                                             
inspectors, outside  of a municipality, are currently  regulated and                                                            
must comply with some national organization standards.                                                                          
                                                                                                                                
Representative Rokeberg  clarified that an ICBO inspection of a home                                                            
that is constructed  outside of a  municipality is only required  if                                                            
the home is  being financed by AHFC  or as specified by a  financial                                                            
institution.  He noted that the ICBO  has recently been renamed  the                                                            
International Code Council (ICC).                                                                                               
                                                                                                                                
Senator  Bunde surmised  that  a person  could  claim to  be a  code                                                            
inspector just by purchasing a business license.                                                                                
                                                                                                                                
Representative  Rokeberg  clarified that  in order  to inspect  AHFC                                                            
homes an inspector must pass certification requirements.                                                                        
                                                                                                                                
Senator  Bunde expressed  that someone without  certification  could                                                            
conduct non-Alaska Housing home inspections.                                                                                    
                                                                                                                                
Representative Rokeberg concurred.                                                                                              
                                                                                                                                
Senator Hoffman  agreed that further  regulation of home  inspectors                                                            
would  address some  of the problems  that home  buyers experience.                                                             
However,  he questioned  the  benefit  of  lowering the  statute  of                                                            
limitations  from three-years  to one-year  and repealing the  gross                                                            
negligence  language. He  stated that  it could  be argued that  one                                                            
reason  for   lowering  the  statute   of  limitations  is   natural                                                            
disasters;  however, he stated  that this could  be resolved  by the                                                            
specifying  that  an  inspector  would  not be  liable  for  damages                                                            
incurred by those elements  as, he stated, prospective homebuyers do                                                            
not assume  that those damages would  be warranted anyway.  He asked                                                            
what benefits this bill would provide.                                                                                          
                                                                                                                                
Senator Hoffman  continued that the  bonding language in  Section 15                                                            
of the  bill implies  that people  would be  protected; however,  he                                                            
observed  that the  back-up  material  counters that  assumption  by                                                            
referencing  a scenario wherein  a home purchased  for $117,000  was                                                            
subsequently determined  to be "worthless," and the  homebuyer award                                                            
was  limited to  the  $5,000  bonding requirement.  He  stated  that                                                            
unless the legislation  "required a bond that meant  something," the                                                            
benefit  of  this  legislation  would  be  minimal.   Therefore,  he                                                            
asserted  that the coverage  and the  protections  provided by  HB 9                                                            
include  a bond  that is  too low, and  the limitation  of  one-year                                                            
rather than three-years is inappropriate.                                                                                       
                                                                                                                                
Representative  Rokeberg   responded  that  were  an  individual  to                                                            
purchase an  existing home and not  determine within the  first year                                                            
that "it is broken," then  the individual has the problem. He stated                                                            
that were an earthquake  to occur, the question would be whether the                                                            
foundation  was cracked  before the  earthquake  when the  inspector                                                            
inspected  it or  was it  the  result of  the earthquake  after  the                                                            
inspection.  He stated that  this is the  premise "of narrowing  the                                                            
scope of the limitation  down to a shorter period." He asserted that                                                            
defects should  become apparent  during the  first year, and  were a                                                            
homeowner not  to take action within that period of  time, it should                                                            
not be expected  that action  could be brought  at a later  date. He                                                            
stated there should  be a common sense limitation.  He agreed that a                                                            
person should  be able to bring action against the  seller and other                                                            
involved    persons    including    the    home    inspector    were                                                            
misrepresentation  of the  quality of  the condition  of the  home a                                                            
factor. He  asserted that this is  the reason that one component  of                                                            
the bill is  the elimination of immunity.  He furthered that  were a                                                            
pattern  of  bad  behavior  on  the  part   of the   home  inspector                                                            
determined,  then   the  State  would  be  allowed   to  revoke  the                                                            
individual's license.  He clarified that, currently,  this is not an                                                            
option.                                                                                                                         
                                                                                                                                
Senator Taylor  asked the bill's sponsor  to list other contractors                                                             
such as car  mechanics, boat builders,  or roof repair contractors,                                                             
in the State who are limited to a one-year liability.                                                                           
                                                                                                                                
Representative  Rokeberg declined  as he expressed that "the  nature                                                            
and scope of  work" of a home inspector  is a non-intrusive,  visual                                                            
home inspection as opposed  to an engineering inspection which would                                                            
be undertaken by engineers or other such qualified individuals.                                                                 
                                                                                                                                
Senator Taylor surmised,  therefore, that a person would be required                                                            
to hire both a home inspector  and an engineer in order to receive a                                                            
thorough report.                                                                                                                
                                                                                                                                
Representative  Rokeberg suggested  that, "in order to do  it right,                                                            
yes." He  stated that  it would  be unreasonable  for a $300  visual                                                            
scope of work  inspection to be liable  for thousands of  dollars in                                                            
damages  unless  the  inspector  was  grossly   rather  than  simply                                                            
negligent. He stated that this is the issue.                                                                                    
                                                                                                                                
Senator Taylor  commented that currently,  State statute  limits the                                                            
responsibility  to  the cost  of the  contract. This,  he  declared,                                                            
would limit the amount  awarded to the cost of the inspection or the                                                            
amount  of the bond  rather than  actual damages.  He declared  that                                                            
this is "a sham  created by the realtors some years  ago" who sought                                                            
for the creation of "a  middle person" who would be sued rather than                                                            
the realtor."  He stated that home  inspectors are the "middlemen".                                                             
                                                                                                                                
Senator Taylor  stated that,  it is being  asserted by the  sponsor,                                                            
who is a realtor,  that hiring a home inspector is  insufficient and                                                            
that  an engineer  should  be  hired  to properly  inspect  a  home.                                                            
Senator  Taylor  stated  that  this  legislation   would  require  a                                                            
licensed,  bonded, and  certified inspector  to be  hired for  every                                                            
home transaction  and  subsequently,  it would  require a  certified                                                            
State engineer  to be hired to ensure  that both the home  inspector                                                            
and engineer  would be sued instead  of the realtor. He ascertained                                                             
that furthermore,  in order  to avoid other  lawsuits, the  realtors                                                            
association created  the inspection report that specifies  what must                                                            
be  inspected.  He expressed  that  "this  is  appalling"  as it  is                                                            
increasing the  cost of buying a home for everyone  in the State. He                                                            
asserted  that the largest  expenses of a  home sale would  be those                                                            
associated  with bank requirements,  the realtor, title reports  and                                                            
home inspectors.  He stated that,  at least, this bill would  remove                                                            
the  gross  negligence  clause  for  home  inspectors;  however,  he                                                            
expressed that the one-year  statute of limitations is unreasonable.                                                            
                                                                                                                                
Representative Rokeberg  expressed that this situation is not unique                                                            
to the State  but is rather  "a national phenomena"  and it  is good                                                            
public policy to protect homebuyers in the State.                                                                               
                                                                                                                                
Senator Taylor  countered that narrowing the statute  of limitations                                                            
from three-years to one-year would not protect the buyer.                                                                       
                                                                                                                                
Co-Chair  Green asked  the location  of the  statute of limitations                                                             
language in the bill.                                                                                                           
                                                                                                                                
Senator  Taylor   informed  that  it  is  referenced   in  Sec.  17,                                                            
subsections (1) and (2) on page ten, lines five through nine.                                                                   
                                                                                                                                
Representative  Rokeberg responded  to Senator Taylor's comments  by                                                            
stating that  this legislation would  protect the buyer by  removing                                                            
home inspector  immunity  in certain instances  while granting  them                                                            
limitations on immunity  in others, in order to reflect the scope of                                                            
the job  they are  performing. He  stated that  the inspection  is a                                                            
fairly  limited affair  and  should  be appropriately  reflected  in                                                            
context.  He stated that  this is a component  of commerce,  and the                                                            
desire is to have it "move  smoothly" while protecting the consumer.                                                            
                                                                                                                                
Senator Taylor again asked how the consumer would be protected.                                                                 
                                                                                                                                
Representative  Rokeberg  responded  that lowered  inspection  costs                                                            
would result.                                                                                                                   
                                                                                                                                
Senator  Taylor  questioned  how  lowered  fees  would  protect  the                                                            
consumer,  as at the  same time, the  consumer must  give up  two of                                                            
three years to file a lawsuit.                                                                                                  
                                                                                                                                
Representative Rokeberg  commented that another consideration is the                                                            
availability and price of E&O insurance to the practitioners.                                                                   
                                                                                                                                
Amendment #3:  This amendment changes  the bill's title by  deleting                                                            
language  on page  1, lines  6-8 that  reads "repealing  a law  that                                                            
limits  liability  for  damages   based  on  a  duty  to  inspect  a                                                            
residential   unit  to  damages  caused   by  gross  negligence   or                                                            
intentional misconduct;"                                                                                                        
                                                                                                                                
Additionally,  the amendment deletes  all material in Sec.  41, Sec.                                                            
42, on  page 22,  lines 21 -25;  as well as  accompanying  technical                                                            
language  in Sec. 47  on page 24,  line 17. This  language reads  as                                                            
follows.                                                                                                                        
                                                                                                                                
          Sec. 41. AS 18.56.300(c) is repealed.                                                                                 
                                                                                                                                
          Sec. 42. The uncodified law of the State of Alaska is                                                                 
     amended by adding a new section to read:                                                                                   
          APPLICABILITY. The change made by sec. 42 of this Act                                                                 
     applies to causes of action that accrue on or after July 1,                                                                
     2005.                                                                                                                      
                                                                                                                                
          Sec. 47. Sections 41 and 42 of this Act take effect July                                                              
     1, 2005.                                                                                                                   
                                                                                                                                
Co-Chair Green moved for the adoption of Amendment #3.                                                                          
                                                                                                                                
Senator Bunde objected.                                                                                                         
                                                                                                                                
Co-Chair  Green  explained  that this  amendment  would  change  the                                                            
bill's title  by removing language  pertaining to damages  caused by                                                            
gross  negligence  or  intentional  misconduct.   Additionally,  she                                                            
stated that the amendment  addresses concerns voiced by Mr. Owens in                                                            
his testimony.                                                                                                                  
                                                                                                                                
Representative   Rokeberg  stated  that  arguments  supporting   the                                                            
amendment  would be  that  it would  grant private  home  inspectors                                                            
immunity from lawsuits,  as are municipal code inspectors currently.                                                            
He voiced concern regarding  the lack of available E&O insurance for                                                            
new home construction  inspectors; which, he noted  is available for                                                            
existing  home  inspections.  In opposition   to the  amendment,  he                                                            
shared  that the amendment  would  allow for  simple negligence.  He                                                            
reiterated  that  the  intention  of  the bill  is  to  remove  some                                                            
immunity while imposing other regulations.                                                                                      
                                                                                                                                
Senator Taylor  stated that  this amendment  would "make a  bad bill                                                            
atrocious."  He  stated  that  it would  not  protect  the  consumer                                                            
because the  one-year statute  of limitations  would continue  to be                                                            
included in  the bill. In addition,  the amendment would  repeal the                                                            
language that  would allow for simple negligence while  allowing the                                                            
continuance of  a gross negligence standard comparable  to that of a                                                            
public building  official. He stated that this does  not benefit the                                                            
consumer  but does benefit  someone in the  inspection business.  He                                                            
stated that were  he in the home inspection business,  he too, would                                                            
"probably  advocate for no  liability to be  placed on the  business                                                            
that I am practicing."  However, he declared, as a  matter of public                                                            
policy, this is not in the best interest of Alaskans.                                                                           
                                                                                                                                
A roll call was taken on the motion.                                                                                            
                                                                                                                                
IN FAVOR: Senator Olson and Co-chair Green                                                                                      
                                                                                                                                
OPPOSED: Senator Taylor, Senator Bunde, Senator Stevens, and Co-                                                                
chair Wilken.                                                                                                                   
                                                                                                                                
ABSENT: Senator Hoffman                                                                                                         
                                                                                                                                
The motion FAILED (2-4-1)                                                                                                       
                                                                                                                                
Amendment #3 FAILED to be adopted.                                                                                              
                                                                                                                                
Amendment #4: This amendment changes language in Sec.17, on page                                                                
10, as follows.                                                                                                                 
                                                                                                                                
On page 10, line 5, the words "one year." are inserted following                                                                
the word "within". The amended language reads as follows.                                                                       
                                                                                                                                
          Sec. 08.18.085. Legal actions against home inspector. (a)                                                             
     Notwithstanding  contrary  provisions  of  AS 08.18.081  or  AS                                                            
     09.10, a  person may not bring an action against  an individual                                                            
     registered  under  this  chapter  based  on a  home  inspection                                                            
      report unless the action is commenced within one year.                                                                    
                                                                                                                                
Furthermore, the following language on page 10, lines 6 - 9, is                                                                 
deleted.                                                                                                                        
                                                                                                                                
                (1) two years after the date of the home inspection                                                             
     report if the report related to a new home; and                                                                            
                (2) one year after the date of the home inspection                                                              
     report if the report related to an existing home.                                                                          
                                                                                                                                
In  addition, on  page  10, line  10, the  words  "limitations"  and                                                            
"apply" are  deleted and replaced  with "limitation" and  "applies,"                                                            
and on  page 10, line 14,  the word "limitations"  is replaced  with                                                            
"limitation". The amended language reads as follows.                                                                            
                                                                                                                                
          (b) The limitation in (a) of this section applies to all                                                              
     actions  based  on  a home  inspection  report,  regardless  of                                                            
     whether  the action is  based on breach  of contract,  personal                                                            
     injury  or  death,  property   damage,  or  another  source  of                                                            
     liability except that  (a) of this section is not applicable to                                                            
     an action  based on gross negligence or intentional  misconduct                                                            
     by  the home inspector.  The  limitation may  not be waived  by                                                            
     contract.                                                                                                                  
                                                                                                                                
Co-Chair Green moved for the adoption of Amendment #4.                                                                          
                                                                                                                                
Co-Chair Wilken objected for explanation.                                                                                       
                                                                                                                                
Co-Chair Green explained  that the amendment would reduce the length                                                            
of time  that action could  be brought against  a home inspector  to                                                            
one-year after the date  of the new home inspection rather than two-                                                            
years  as specified  in  the proposed  bill.  She stated  that  this                                                            
change  would align  that new home  inspection time  frame with  the                                                            
limitations for  existing home inspections as well  as aligning with                                                            
the standard builder's warranty.                                                                                                
                                                                                                                                
Co-Chair  Wilken summarized  that the amendment  would require  that                                                            
all action must  be brought within a one-year timeframe,  regardless                                                            
of whether it involves a new or existing home.                                                                                  
                                                                                                                                
Representative  Rokeberg  agreed.  He stated  that  the question  is                                                            
whether a  new home should  require a longer  liability period  than                                                            
required  for an existing  home. He  stated that  while he  supports                                                            
Senator Taylor's  stated position  on this, it would not  negate his                                                            
support of the legislation.                                                                                                     
                                                                                                                                
Senator Taylor  voiced opposition to the amendment  as he questioned                                                            
why one group of contractor's  liability period should be limited to                                                            
one-year  while other contractor  groups would  retain a  three-year                                                            
liability timeframe. He  opined that the home inspector job does not                                                            
require this level of protection.  However, he stated that were this                                                            
amendment  rejected, the bill  would provide  a one-year statute  of                                                            
limitations on  existing home inspections and a two-year  limitation                                                            
on new homes, which he voiced, "is backwards."                                                                                  
                                                                                                                                
A roll call was taken on the motion.                                                                                            
                                                                                                                                
IN  FAVOR:  Co-chair Green,  Senator  Stevens,  Senator  Bunde,  and                                                            
Senator Olson                                                                                                                   
                                                                                                                                
OPPOSED: Senator Taylor and Co-chair Wilken                                                                                     
                                                                                                                                
ABSENT: Senator Hoffman                                                                                                         
                                                                                                                                
The motion PASSED (4-2-1)                                                                                                       
                                                                                                                                
Amendment #4 was ADOPTED.                                                                                                       
                                                                                                                                
In response to  a question from Senator B. Stevens,  Co-chair Wilken                                                            
specified  that Amendments  #1 and #2 were  adopted in the  previous                                                            
meeting.                                                                                                                        
                                                                                                                                
Co-Chair  Wilken asked  the  sponsor to  explain  the Department  of                                                            
Community and  Economic Development's fiscal note  #4, dated January                                                            
29, 2003, which  indicates that the  State would expend $66,100  and                                                            
collect  $66,100 from  receipt-supported  services.  He asked  why a                                                            
change in revenue  of $126,200 is  projected when these items  would                                                            
negate each other.                                                                                                              
                                                                                                                                
Representative  Rokeberg  explained  that  start-up costs  would  be                                                            
incurred during the first year of implementation.                                                                               
                                                                                                                                
Senator  B. Stevens  referred  the Committee  to  the fiscal  note's                                                            
analysis,  which specifies  that revenue  would  be collected  every                                                            
other year.                                                                                                                     
                                                                                                                                
Co-chair Wilken  stated that the State  would collect for  two years                                                            
and expend  annually;  therefore he  stated that  the fiscal  impact                                                            
would be net zero at the end of FY 05.                                                                                          
                                                                                                                                
Representative  Rokeberg   reminded  that  the  initial  year  would                                                            
include start-up expenses.                                                                                                      
                                                                                                                                
REGINA MANTEUFEL  testified  via teleconference  from Anchorage  and                                                            
urged the State  to develop an Internet website that  would identify                                                            
contractors  and  subcontractors  along  with bond  information  and                                                            
complaints about those  entities. She voiced support for the statute                                                            
of limitations  to remain at three-years.  Additionally she  opined,                                                            
that to protect the consumer,  the State should require a contractor                                                            
to provide  a homeowner  with a  listing of  the subcontractors  who                                                            
worked on the project.                                                                                                          
                                                                                                                                
Co-Chair Wilken ordered the bill HELD in Committee.                                                                             
                                                                                                                                

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