House committee hears bill to allow lien on insurance proceeds for debris removal after total loss

The House Industry, Business and Labor Committee took testimony on House Bill 1187, which would create a debris‑removal lien tied to insurance proceeds after a total loss, in an attempt to give local governments an additional tool to abate blighted properties.

Representative Scott Lausser, R‑Minot, introduced the bill and said it was modeled on West Virginia law. He described cases in which insurance payouts for a total loss were paid to property owners who then abandoned structures, leaving communities with hazardous, blighted properties. "It becomes a blighted property in the community," Lausser said, explaining the bill would allow a portion of a claim to be held back in a lien until remediation is completed.

Kelly Kronschnabel, fire chief for Minot, testified in favor and described the local problems that prompted the proposal: boarded and uninsured buildings, vagrancy and the difficulty of working with out‑of‑state owners. "It does deter that a little bit and allow us to have...that tool in our toolbox to be able to clean up these properties," Kronschnabel said, adding that the proposal also aims to deter arson for insurance payouts.

The bill would require an insurer, within 10 days after determining a covered claim is a total loss, to notify the insured and the local auditor and would authorize a lien in the amount of $5,000 or 10 percent of the policy limit (language in the draft). Several committee members pressed for details: whether the withheld amount aligns with actual cleanup bids, who would record liens and who would bear the cost of recording and pursuing collection, and why the draft said leftover withheld funds would be returned to the insurer rather than the insured.

Johnny (Deputy Commissioner) Arnold of the North Dakota Insurance Department described the department's neutral position and outlined three options a carrier could take under the bill: pay the city, withhold the lien amount from the insured until there is proof of debris removal, or pay the insured in full and face a subsequent lien claim from a local government. Arnold also raised a practical issue: the draft bill does not include an explicit statutory collection process for the political subdivision to enforce the lien, so a city likely would need to seek recovery through litigation in many cases.

John Ward, representing the Association of North Dakota Insurers, opposed the bill. He said the draft effectively inserts a third party into a private contract and would shift burdens onto policyholders, noting North Dakota policyholders are at risk of being underinsured. "I think this is a pretty anti citizen bill," Ward said. He added that many flood losses are covered under federal programs and would not be addressed by this state measure.

Committee members asked whether the requirement would delay claim payments to insureds and whether the lien amount would actually motivate bad actors to remediate. Several committee members suggested alternatives, including placing responsibility on carriers to withhold and disburse debris removal funds as a retainage or requiring the insurer to take remedial action when an insured fails to address debris removal.

No vote was taken. The committee closed the hearing after hearing pro, neutral and opposing testimony and asked staff to collect additional information on lien enforcement mechanisms and how the proposal interacts with contract law and federal programs; committee members signaled interest in possible language changes.