Nov. 8, 2008
Council Work Session Foretells Tough Issues Monday Night
By Tony Rutherford
Huntingtonnews.net Reporter
Huntington, WV (HNN) – The number of ordinances/resolutions on Huntington City Council’s agenda totaled seven, but the discussion on two of them --- the withholding of insurance money from the insured until demolition costs and municipal fees are squared with the city, along with a storm water runoff ordinance with a penalty --- dominated the nearly 90 minute work session.
Trial attorney Paul Ferrell Jr. in a matter of fact manner told council after hearing a litany of insurance company objections that this is not the first time a challenge to insurance proceeds have been made, referring to some wins and some loses in his private practice.
Essentially, the insurance industry complains that having to conform to a municipal ordinance would be a burden on the insurers that operate in West Virginia, since they would have to develop a specific contract provision applicable only to Huntington.
Russ Rucker, from Rucker Phillips and Fowler within the city, told council that the ordinance to eliminate dilapidated burned out eyesores “well intentioned,” but runs counter to state “valued policy law” where the face amount of the policy (on a total loss) must be rendered to the insured.
Rucker explained that Ohio’s similar requirement is a statewide statute allowing municipalities to opt in, thus, potentially setting up a court challenge to the West Virginia legislature’s granting of this specific home rule authority that conflicts with state insurance law.
“You’re dealing with hundreds or thousands of insurance entities [that] have to come up with something different for Huntington, W.Va.”
TWO LEGISLATORS PLAN TO WORK FOR A STATE FIRE INSURANCE WITHHOLDING STATUTE
During a meeting Thursday, Nov. 6 , two state legislators --- Jim Morgan (D ) and Kevin Craig ( D) --- expressed their intent to champion a similar bill for statewide application. Last year, some components of the proposal were raised in the legislature, but it did not win passage.
Attempting to balance the burden, councilman Dr. Calvin Kent has proposed that the effective date of the city ordinance be enacted so that it would allow the state legislature time to pass a bill. Due to the re-election year for governor, the legislature begins their 60 day session about one month later than normal i.e. February 11- April 11.
[Editor’s Note: To read a pdf copy of the insurance company advantages/disadvantages, click here. To read, a draft copy of the proposed ordinance as written prior to work session discussed changes, click here.]
“You do not want Huntington to look insurance unfriendly,” Rucker told council. When councilman James Insco suggested a simple “rider” to Huntington policies, Rucker explained it was “not impossible,” but would make it “more difficult for insurance companies to do business in Huntington.”
Essentially, the proposed ordinance would require that insurers hold back 13% of the fire insurance pay out for fully destroyed property until the city issues a certificate of good standing which requires that demolition costs have been paid and that all municipal fees on the property have been paid.
During the work session, Dr. Kent indicated that on Monday night, Nov. 10, he would propose that the city be allowed 90 days, not 30, to issue the certificate, that the withholding relates only to so-called “Coverage A” (structure damage), NOT any portion of the fire insurance contract providing rent, living expenses or personal property. Amendments would also remove the insurance company from liability for issuing the impounded funds to the city and provides the city with a right to sue the property owner.
Among the troubling scenarios discussed during the session were potential delays by the city in issuing the certificate, the distinctions for properties that incur greater demolition costs (i.e. hazardous waste, former meth lab, asbestos abatement, etc.) , and UNINSURED properties.
The potential contamination scenarios were raised by Fire Chief Greg Fuller who countered discussion of potentially “capping” the withholding based on square footage.
ANALOGY: You owe parking fines, you can’t withdraw your money from a bank
Frank Norton, an insurer, provided council with a thought provoking analogy. Since insurance companies and banks are both heavily regulated by both federal and state government, under Huntington home rule proposal could (by analogy) a bank be compelled to withhold withdrawals of funds from depositors until all parking tickets are paid?
Arguing on behalf of the ordinance, Paul Farrell Jr. stated that after a fire the city wants to “ensure the property owner cleans up their mess. If you don’t have a plan (i.e. demolition contract with amount), then we’ll keep the money until you have a [demolition] plan. “
Taking the uninsured and underinsured aspects one step further, Farrell Jr. stated that the property owner “not the taxpayers” should be responsible for removing debris.
He stated with the assistant city attorney in agreement that the Home Rule Authority granted by the legislature trumps individual insurance company challenges based on the state statute. Based on the pilot program guidelines, “If after five years [it does not work], we abolish it, or it becomes a model for the rest of the state.”
INSURANCE COMMISSIONER’S NON COMMITTAL ATTITUDE
Part of the ordinance would place the enforcement upon the WV Insurance Commissioner; however, as of Friday, Nov. 7, the commission appeared non-supportive of acting as the enforcement arm. “There’s more than one way to effectuate change,” Farrell Junior argued. “It’s not her choice, we would file for a Writ of Mandamus “ to compel the action of the commission and commissioner.
As it stand following the work session, the effective date will be moved to July 1, 2009, which allows the legislature time to implement a statewide solution.
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