Report - 2022 01 27 A29586 D239181 Bill Report 5527 Sbr Bfst Ta 22

Summary

A Senate Bill Report on SB 5527, an act relating to adding sublimits of coverage to an insurance policy's declaration page, prepared as of January 13, 2022 by staff of the Senate Committee on Business, Financial Services & Trade. The bill is sponsored by Senators Wellman, Kuderer, Frockt and Wilson, C. The report gives background on insurance contracts, declarations pages, and limits and sublimits of coverage. It summarizes the bill as requiring the declarations page of residential policies to list all sublimits of coverage, including endorsements, and to be delivered to the insured at every renewal. The report also summarizes pro and con public testimony, notes no appropriation and an available fiscal note, and lists the persons testifying.

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                            SENATE BILL REPORT
                                  SB 5527

                                      As of January 13, 2022

Title: An act relating to adding sublimits of coverage to an insurance policy's declaration page.

Brief Description: Adding sublimits of coverage to an insurance policy's declaration page.

Sponsors: Senators Wellman, Kuderer, Frockt and Wilson, C..

Brief History:
     Committee Activity: Business, Financial Services & Trade: 1/13/22.


                                     Brief Summary of Bill
           • Requires all sublimits of coverage to be included on the declarations
             page of residential insurance policies.


SENATE COMMITTEE ON BUSINESS, FINANCIAL SERVICES & TRADE

     Staff: Kellee Gunn (786-7429)

     Background: The Insurance Contract. An insurance policy is a contract between the
     insured and the insurance company and establishes what the company agrees to do in
     exchange for the premium paid by the insured. The contract also describes the insured's
     responsibilities and general terms of coverage. The contract is divided into a declarations
     page and the policy itself.

     The Declarations Page. The declarations page, commonly referred to as a "dec sheet,"
     includes basic details of the insurance contract and typically includes the policy number, the
     effective dates, the address of the insured property, the mortgage holder, the coverages,
     coverage limits, the premium, and any discounts.

     The Insurance Policy and Limits of Coverage. The insurance policy is the entire insurance
     contract, and includes the insuring agreements, definitions, and conditions. For a



     This analysis was prepared by non-partisan legislative staff for the use of legislative
     members in their deliberations. This analysis is not part of the legislation nor does it
     constitute a statement of legislative intent.

Senate Bill Report                              -1-                                             SB 5527
     homeowner's insurance policy, a description of the property coverage and the loss it covers,
     as well as liability coverage, will be provided. There may be an exclusions section of the
     policy, which outlines specific coverages or perils not covered by the policy. Typically
     flood and earthquake coverage are excluded from homeowners and renter's policies unless
     purchased as an endorsement or rider. An endorsement or rider addresses issues or items
     not in the original contract and can be added to a homeowner or renter's policy, life
     insurance policy, or auto insurance policy.

     Insurance policies may also have limits of coverage providing the insured the largest dollar
     amount covered for different types of losses, and sublimits which further limit that
     coverage. For example, a policy may have a dollar limit for personal property, with an
     additional limit within that amount for certain items, such as computers.

     Summary of Bill: The declarations page on residential policies must include a listing of all
     sublimits of coverage within the insurance policy, including any endorsements, and show
     either the amount of coverage, the percentage of coverage, or both, that is being limited
     below the overall policy coverage limits. The entire declarations page must be delivered to
     the insured at every policy renewal.

     Residential policies include homeowners, renters, condominium, mobile home, and
     manufactured home noncommercial insurance policies.

     Appropriation: None.

     Fiscal Note: Available.

     Creates Committee/Commission/Task Force that includes Legislative members: No.

     Effective Date: Ninety days after adjournment of session in which bill is passed.

     Staff Summary of Public Testimony: PRO: This is contract law, which is not easy for
     the average person to understand. I had a loss, a landslide, and I was not covered. I could
     afford to cover my loss, but many insureds would not be able to. And many insureds would
     not be able afford to sue to get covered. Only a lawyer could understand these contracts.
     Sublimits in insurance policies are different between policies. Many consumers are not
     informed that there are lower limits for different circumstances and items. Including
     sublimits on the declarations page will provide transparency to consumers. This would
     especially help when consumers purchase insurance online. The OIC suggests making a
     couple of changes, including a later enactment date, allowing OIC to do rule making, and
     excluding surplus lines.

     CON: Our organization provides information to consumers about understanding their
     insurance policies. We believe this bill will add costs to insurers which would then be
     passed on to consumers. The declarations page will become a mini version of the policy


Senate Bill Report                            -2-                                        SB 5527
     itself. This is the wrong approach. The declarations sheet is supposed to be a summary.
     The sublimits portion in my own homeowners policy is much longer than the declarations
     sheet itself. If all those items were listed in the declarations sheet, it would only add
     confusion to the policy holder. The purpose of the declarations sheet is to be a summary of
     what the policy provides. It is very broad and intended to be readable to a policy holder.
     Just like a bill report provides a summary of a bill, a declarations sheet provides a summary
     of an insurance policy.

     Persons Testifying: PRO: Senator Lisa Wellman, Prime Sponsor; Mark Dietzler, Office of
     the Insurance Commissioner.

     CON: Kenton Brine, NW Insurance Council; Jean Leonard, WA Insurers,
     NAMIC, Nationwide Insurance, and State Farm Insurance; Mel Sorensen, American
     Property Casualty Insurance Assoc.

     Persons Signed In To Testify But Not Testifying: No one.




Senate Bill Report                             -3-                                        SB 5527


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