Legislature(1995 - 1996)
05/03/1995 01:43 PM Senate JUD
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HB 120 INDEMNIFICATION OF PUBLIC EMPLOYEES
DANIELLA LOPER, staff to Representative Porter, sponsor of the
measure, gave the following testimony. HB 120 requires the state
or a municipality to provide legal defense for their employees in
actions that occur during the scope of their employment. Employers
would not be responsible for indemnifying acts of gross negligence
or intentional or willful misconduct. Additionally, the employer
would also be excused from indemnification when the case involves
disciplinary, administrative or criminal matters brought against
the employee. The implementation of HB 120 is already common
practice, and most municipalities now indemnify their employees.
Teachers are indemnified under AS 14.12.090. HB 120 is supported
by the Department of Law, and many other organizations. A similar
house bill died in the Senate Rules Committee last year.
TAPE 95-30, SIDE A
GAIL VOIGTLANDER, assistant attorney general, testified from
Anchorage. She stated HB 120 is clear, and details scenarios when
employees would be covered.
SENATOR TAYLOR asked if HB 120 sets up a new civil cause of action
on behalf of employees against employers. MS. LOPER noted that
section was removed last year. She explained page 3, line 3
outlines how the employee would seek legal defense, and page 4,
line 8, describes how an employee would handle denial of
indemnification.
SENATOR TAYLOR asked for clarification. MS. LOPER replied the
employee would file for declaratory relief. There are no
guidelines at this time, which is costing the state money.
Number 065
SENATOR TAYLOR asked how HB 120 will save the state money since
there is a letter agreement in place now. MS. LOPER stated that is
common practice in most cases, but several witnesses testifying
before the House Judiciary Committee commented the state is
spending a lot of money because nothing is outlined.
SENATOR TAYLOR asked whether the state is being charged money to
defend employees it should not defend, or if the state is being
charged for litigation when employees sue for failure to defend.
MS. LOPER was unsure, but repeated if nothing is outlined, there
could be claims made against the employer by the employee.
MS. VOIGTLANDER commented the bill does not create a new cause of
action, it merely sets forth, in statute, the public
employers'/public employees' responsibilities.
SENATOR TAYLOR questioned the need to put in statute, what has been
common practice for years. He stated various labor unions have
negotiated various deals with the state, and there is now a hold
harmless provision in the bill that says if the labor negotiators
negotiated a better deal, that would supersede the requirements in
the bill.
Number 203
STEPHANIE GALBRAITH, assistant attorney general, testified in
support of HB 120. It clarifies the obligations between public
employers and public employees. As litigation increases, more
employees are being individually named in lawsuits.
SENATOR TAYLOR asked Ms. Galbraith if she has an indemnification
letter from her employer. MS. GALBRAITH answered no. [The
remainder of Ms. Galbraith's testimony was indiscernible.]
BRAD THOMPSON, director of the Division of Risk Management,
explained the Division funds a self-insurance program for defending
and indemnifying state employees, both those in the collective
bargaining unit, and others without such contractual protections.
Among those in the collective bargaining unit, there are several
contracts with differing provisions. HB 120 codifies existing
policies and procedures that the state does, and has provided, and
is more explicit in employee participation. He described the
state's policy regarding the scope of responsibility toward
employees.
Number 272
SENATOR TAYLOR asked how HB 120 will save the state money if it
only codifies current practice. MR. THOMPSON did not believe there
would be a significant savings, however it might help avoid the
expense of a second counsel to resolve legal conflicts between the
defense and counsel.
SENATOR GREEN asked if this would be similar to errors and
omissions coverage in other settings. MR. THOMPSON stated a
professional practitioner may purchase a commercial E&O policy that
contains similar terms and conditions.
SENATOR GREEN asked if private employees would be likely to have
such coverage. MR. THOMPSON replied the private employer, to
protect his/her interests, most likely has procured a form of
liability insurance.
SENATOR GREEN asked about self-insurance. MR. THOMPSON noted the
state self insures for the first $5 million. In prior years the
state self-insured for differing amounts.
SENATOR TAYLOR asked Mr. Thompson how long he has been with the
Division of Risk Management. Mr. Thompson replied since January of
1981. SENATOR TAYLOR asked why the state is self-insured. Mr.
Thompson stated it is more cost effective to do so. SENATOR TAYLOR
commented that anyone who has the money runs away from that
industry as quickly as possible and self insures. MR. THOMPSON
added the state procures significant catastrophe insurance.
Number 336
SENATOR GREEN asked if this bill was driven by labor negotiations.
MR. THOMPSON believed the bill was conceived to address those
employees named individually in civil litigation, as public
employees, especially those without a labor agreement that
addresses the defense practices provided to them.
SENATOR GREEN asked if the original practice of an employer
covering an employee resulted from a labor agreement. MR. THOMPSON
replied it is normal for the employer to be liable for the act of
the employee.
SENATOR TAYLOR stated that his main concern is categorizing, and
attempting to guess, all of the different ramifications that may
occur in the employee/employer relationship. He repeated his
concern that codifying something that has been in practice, with no
benefit to each side, or cost saving, could create unforeseen
problems.
MR. THOMPSON explained the vast majority of states have specific
legislation providing similar protections to their employees. Many
states extend those protections down to the municipal government
structure. He did not believe HB 120 would increase the exposure
for public employers; it provides security for the employee. The
state has operated a sophisticated self insurance program for
years, however municipalities have not. A civil action against a
municipal employee is rare, and is alarming when it occurs.
SENATOR TAYLOR discussed three lawsuits against employees of his
community in the past year. In each case, the insurance carriers
had written letters of reservation against each of those employees
and the city, reserving the right to make a claim against them.
The insurance company then selected the attorney and decided when
and if the cases would be settled. He did not see how HB 120 would
be beneficial to his community.
KEVIN RITCHIE, representing the Alaska Municipal League, testified
in favor of HB 120. The bill reinforces the concept that if an
employee was not involved in any wrongdoing, the employer will
defend him/her. The way it can save time and money is by
reassuring peace officers, and other people who have to make very
important decisions, that they will be defended. In the case of
insurance in small communities, the employee who does not have the
assurance of coverage may hire his/her own attorney. That creates
an additional legal expense for the employee, and in some cases
pits the employee against the employer. He added the Alaska
Municipal League provides an insurance pool for small communities.
SENATOR GREEN asked about the University of Alaska. MR. THOMPSON
noted it is self insured to a lesser level than the state.
Number 430
SENATOR MILLER moved HB 120 out of committee with individual
recommendations. SENATOR TAYLOR objected. The motion failed with
Senators Adams, Taylor, and Green voting "nay," and Senator Miller
voting "yea."
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