FIRE INSURANCE WITHHOLDING - H.B. 5224 (H-1): FLOOR ANALYSIS

House Bill 5224 (Substitute H-1 as reported without amendment)

Sponsor: Representative Vera Rison

House Committee: Insurance

Senate Committee: Financial Services

CONTENT

The bill would amend Section 2845 of the Insurance Code, which allows cities, villages, and townships to escrow 15% of fire insurance proceeds until there is evidence that the damaged property has been or will be repaired or replaced, and to use the money to perform the work if certain requirements are met. The bill would do the following:

-- Increase the percentage that may be escrowed to 25%.

-- Limit the escrowed amount to $6,000 for residential property.

-- Require the city, village, or township to notify the insured that he or she could object to the retention of the money. (Currently, the city, village, or township may seek a declaratory judgment of its right to the proceeds.)

-- Allow a municipality to use escrowed funds after 120 (rather than 445) days.

-- Specify that Section 2845 would apply only to insured real property located in a city, village, or township in a county with a population under 425,000, unless the city, village, or township had a population of 50,000 or more.

The bill would take effect on January 1, 1999, and would apply to losses that occurred on or after that date.

MCL 500.2845 - Legislative Analyst: S. Lowe

FISCAL IMPACT

The bill would have no fiscal impact on State government.

The bill would allow local units to increase from 15% to 25% the insurance withholding to remove blighted property. The 25% insurance withholding would be limited to $6,000 for residential property, which would be adjusted annually for inflation.

Date Completed: 5-29-98 - Fiscal Analyst: R. Ross

floor\hb5224 - Analysis available @ http://www.michiganlegislature.org

This analysis was prepared by nonpartisan Senate staff for use by the Senate in its deliberations and does not constitute an official statement of legislative intent.