Legislature(1995 - 1996)
03/18/1995 10:10 AM House FIN
| Audio | Topic |
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HOUSE BILL 158
"An Act relating to civil actions; amending Alaska
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Rules of Civil Procedure 49, 68, and 95; amending
Alaska Rule of Evidence 702; and providing for an
effective date."
JEFF FELDMAN, ATTORNEY, ALASKA TRIAL LAWYERS, ANCHORAGE,
testified in opposition to HB 158 noting that he most often
represents defendants. He decisively stated that HB 158 was
a "fundamental attack on the system of justice in Alaska".
He explained that the purpose of his testimony to Committee
members would be to delineate the differences between the
"myth" and the "reality" of the proposed legislation.
1. There is not a litigation explosion. The rate of
lawsuits has not increased for decades, declining
since 1990.
2. There are not "runaway verdicts". That claim is
exaggerated. The average personal injury award is
$48 thousand dollars.
3. There are not outrageous punitive damage awards.
From 1965 through 1990, there were only 353 cases
nationally. He added that punitive damage awards
in the medical malpractice cases are rare.
4. There is not a medical malpractice crisis. He
noted that there have been fewer than a dozen
verdicts since statehood. Unjustified medical
malpractice awards are uncommon.
5. The proposed tort reform will not cure the current
ills.
Mr. Feldman maintained that HB 158 is a piece of special
interest legislation which affects and benefits wrongdoers,
whose conduct could injure or kill Alaskans. He stressed
that insurers and outside corporations would be the ones to
benefit from the proposed legislation.
Mr. Feldman outlined the purposes of the civil justice
system:
1. That fair and just compensation for injuries
sustained by innocent victims should be provided.
2. The system ought to deter negligence and conduct
that causes unreasonable risk and harm to others.
3. The legal system should punish and deter those who
act outrageously and cause injury or death.
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To date, these decisions are being made by juries after
considering all of the evidence and facts, rather than being
determined by the Legislature, whose information is based on
generalities, not specific information. He voiced his
confidence in the Alaskan jury system.
Mr. Feldman added that HB 158 would affect catastrophically
injured Alaskans, with no action toward nuisance or
frivolous law suits. The legislation would strip injured
Alaskans of a right to compensation and would usurp the
power of citizen justice, thus providing a handful of
windfalls to wrongdoers. The legislation will lessen the
accountability and response for negligent and reckless
conduct, while making Alaska an anti-victim state.
Mr. Feldman continued, the proposed legislation would lock
the courthouse doors to victims through an eight year
Statute of Repose. HB 158 would strip juries of their right
to decide cases on evidence and would place caps and limits
on damages resulting from economic, non-economic and
punitive damages. Mr. Feldman added, not only would HB 158
cap and limit damages, it would also make them more
difficult to obtain. He continually emphasized that the
windfall protection would be advantageous to the wrongdoer.
Mr. Feldman summarized how the Statute of Limitation could
affect victims. If victims were not able to obtain
compensation from wrongdoers, the State will have that
obligation through Medicare and/or Medicaid requirements to
financially support those who cannot obtain adequate
compensation. Mr. Feldman criticized that the proposed
legislation is not a reform, it is an immunity for special
interests and will benefit the wrongdoers, the insurers, the
large outside interests and manufacturers, and professionals
who commit malpractice. The legislation would lessen
responsibility of exposure to liability and would benefit
the strong over the weak.
REPRESENTATIVE BRIAN PORTER redefined the philosophical
differences found in the legislation. He pointed out that
the vast majority of the HB 158 defendants were small
business people. Representative Porter provided the
Committee with a list of businesses and associations who
support the legislation. [Attachment #1].
(Tape Change, HFC 95-50, Side 2).
MIKE LESSMEIER, ATTORNEY, STATE FARM INSURANCE COMPANY,
ANCHORAGE, testified in support of the legislation. He
ascertained that the bill would not put "money into the
hands of insurance companies". He added that the insurance
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companies would reflect rates based on a determination of
the State laws and the lost experience. He pointed out that
the vast majority of cases do not proceed to trial. Mr.
Lessmeier surmised that there are windfalls in the system
which need to be rectified and that there are areas of
disputes which need to be eliminated. He proposed that HB
158 would address those concerns.
Mr. Lessmeier pointed out that the "author of judgement"
portion of the legislation would encourage a quicker
settlement and would help to make the system more
predictable.
In response to Representative Martin's comments, Mr. Feldman
acknowledged that the legislation would affect Alaskans who
were injured in the future.
Representative Porter spoke in support of Amendment #1.
[Copy on file]. Representative Mulder MOVED to adopt
Amendment #1. Representative Brown OBJECTED.
Representative Porter remarked that Amendment #1 would
correct a drafting error on Page 10, thus clarifying that
Workmens' Compensation would not be affected by the
legislation.
Mr. Feldman explained the "collateral benefits" and the
impact that amendment would make on the definition. A
collateral benefit would provide relief to the collateral
party from being required to pay that portion of damages
covered by another source of recovery. The proposed
amendment would not allow for that amount to be recovered by
the patient. The bill states that the amount the "wrong
doer" would pay, would be reduced by the collateral benefit.
Mr. Lessmeier responded that the provision was identical to
a provision already contained in the medical malpractice
law. He added, the provision would remove the litigation
over collateral benefits.
Mr. Feldman explained to Committee members the reimbursement
system currently being used. Under the proposed law, the
jury would hear evidence of the collateral benefit and would
therefore return a verdict for a determined amount of money
which then the plaintiff would receive. The plaintiff would
continue to be contractually obligated to reimburse the
insurance company. That scenario would create the contract
obligation which the client would be part of. Mr. Feldman
emphasized that the amendment would create an adverse
economic effect on the plaintiffs.
Mr. Lessmeier disagreed, stating that if the plaintiff does
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not recover funds, they would not have an obligation to
reimburse them. That obligation to reimburse exists only if
the funds are "recovered". The amendment would change the
law providing that there was no subrogation right. The only
article recovered would be established in the last sentence
of Subsection (b), Page 10.
Mr. Feldman criticized Mr. Lessmeier stating that his
information was incomplete and that he represented only the
insurance companies of Alaska's interest. Mr. Feldman
provided an example, in a typical situation where an injured
party settled a claim for its value, the lawyer would
surmise that the injured party's medical claim could not be
collected resulting from medical sources no longer could be
collected. Because of a provision within the policy, the
insurance company would request a cut of damages. Mr.
Lessmeier replied that issue had not yet surfaced in the
medical malpractice collateral source provision that
currently exists. There is no way in which an insurer could
enforce a subrogation against an insured.
Representative Grussendorf asked if an overly insured person
could be held responsible. Mr. Feldman responded that the
provision of the bill would exclude from the non-recoverable
portion of collateral sources, benefits paid under life
insurance. Co-Chair Hanley summarized the amendment's
intent in excluding Worker's Compensation.
Representative Brown asked which other payments would not be
reimbursed under the collateral payments section.
Representative Porter indicated that Medicaid was a
collateral source under federal law. Representative Brown
WITHDREW THE OBJECTION. There being NO FURTHER OBJECTIONS,
Amendment #1 was adopted.
Representative Brown MOVED to adopt Amendment #2. [Copy on
file]. Representative Mulder OBJECTED. Representative
Brown stated that Amendment #2 would delete the "findings"
portion of the legislation. Representative Porter agreed to
deletion of that portion, although requested that the
"purposes" section remain.
Representative Mulder MOVED to AMEND Amendment #2, deleting
Page 1, Lines 5 through Page 3, Line 7, which would leave
the material on Page 3, Lines 8 through Page 4, Line 14.
There being NO OBJECTIONS to amending Amendment #2, was
amended. Representative Mulder WITHDREW the OBJECTION to
adopting Amendment #2. There being NO OBJECTIONS to the
amended Amendment #2, it was adopted.
Representative Brown MOVED to DELETE a portion of Amendment
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(Tape Change, HFC 95-51, Side 1).
Representative Brown MOVED to adopt Amendment #3. [Copy on
file]. Representative Mulder OBJECTED. Representative
Brown noted that Amendment #3 would delete the Statute of
Repose portion of the legislation. She noted her concern on
how that section would affect minors.
Mr. Feldman stated that last year the Legislature enacted a
Statute of Repose with a 15 year limit. He pointed out that
the current proposal would decrease the amount of time by
50%. He thought that would save the building industry
probably no more than one or two cases per decade. The
existing statute affords some flexibility for the occasional
case, although, he pointed out that it would only take one
case of a poorly designed building to injure many people,
before that statute change would be questioned. He
concluded that the provision would not save the building
industry a lot of money.
Representative Porter advised that companies need to be able
to insure for the amount of time specified. The section on
Statute of Repose appears in the legislation resulting from
a compromise made with the building industry. Although, he
added that medical suits would not be covered under the
Statute of Repose nor would exposure to hazardous waste,
intentional acts or fraud.
Mr. Lessmeier spoke regarding the constitutionality of the
Statute of Repose. He noted that it would be difficult to
predict how a court would address this piece of legislation.
The Legislature has the power to enact a Statute of
Limitation, to determine when those statutes are upheld and
also has the power to enact a Statute of Recourse.
Representative Kelly recommended separating the malpractice
and design portions of the Statute of Repose.
Representative Therriault asked the time limit established
by the Statute of Repose as created by the House of
Representatives last year. Representative Porter replied
that last year's legislation addressed only construction
criteria and was established at 10 years by the House,
although, raised to 15 years on the Senate side. Both
Representative Kelly and Representative Therriault noted
their hesitation in changing the time limit as established
by the Statute of Repose last year. Representative
Therriault commented that he would be comfortable in
supporting ten years.
Representative Porter then discussed the frustration in
trying to prosecute a law suit which had not surfaced in a
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reasonable amount of time. He pointed out that the Statute
of Repose had resulted from the Turner Case and the Supreme
Court's exception.
Representative Porter explained that at this time, a medical
situation arising from a birth injury could be brought to
court 20 years later. The recommended Statute of Repose
would provide a six year "window" with a two year ability
from the time of 6 years through 8 years old. Most experts
agree that a problem arising from negligence at birth should
appear by that time. Representative Porter discussed the
difference between "gross" and "simple" negligence.
Representative Porter urged the Committee to adopt the
Statute of Repose and agreed to support the change from
eight years to the recommendation of 10 years.
Representative Mulder MOVED to delete Amendment #3 and then
to incorporate the change reflecting the recommendations by
Representative Porter. Representative Brown asked if the
Discovery Rule would be affected by Section #2.
Mr. Feldman explained that the Discovery Rule clarifies when
the existing Statute of Limitations claim begins which
occurs at the time when notice is given for basis of the
claim. The "Discovery Rule" occurs when the facts are
discovered. In the Statute of Repose, the clock moves
forward regardless of the evidence. Under the Statute of
Repose, the function would not need to be discovered.
Representative Brown commented that Section #2 would affect
both the construction and the personal injury liability.
She pointed out that the Discovery Rule would be eliminated
without the addition of Amendment #3.
Representative Navarre voiced his concern on the OB&GYN
aspect of the legislation and how it would affect the
deliveries in rural areas. Representative Porter suggested
that the problem originates because doctors in those areas
must insure for the "eventuality".
Mr. Feldman responded that the problem is the bill does not
address the Statute of Limitations for birth related
injuries, but does creates a Statute of Repose. Current
legislation ascertains that if you are less than 6 years
old, you have until 8 years old to sue. If the condition is
not diagnosable until after that time, this legislation will
inflict harm on innocent children. Mr. Feldman thought the
solution would be to create a reasonable period of time in
which a child could sue. Although, he agreed that doctors
should not have to be exposed for two decades for those
birth related injuries.
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Representative Brown urged that the legislation be placed in
Subcommittee for further consideration. She stated that
this legislation addresses many major policies.
Representative Martin disagreed noting that every amendment
offered in Subcommittee would again be brought forward in
the full House Finance Committee.
The Committee recessed at 12:05 P.M.
(Tape Change, HFC 95-51, Side 2).
The House Finance Committee reconvened at 1:47 P.M.
A roll call was taken on the MOTION to adopt Amendment #3.
IN FAVOR: Navarre, Brown
OPPOSED: Parnell, Therriault, Kelly, Martin,
Mulder, Hanley
Representatives Grussendorf, Kohring and Foster were not
present for the vote.
The MOTION FAILED (2-6).
Representative Mulder MOVED a verbal amendment (Amendment
the Statute of Repose from 8 years to 10 years. There being
NO OBJECTION, it was adopted.
Representative Brown MOVED to adopt Amendment #4 which would
limit the Statute of Repose to property damages, removing
the personal injury and death. [Copy on file].
Representative Mulder OBJECTED for purposes of discussion.
Mr. Lessmeier stated that extending to ten years would
create a longer Statute of Repose than most other states
currently have. Mr. Feldman reiterated that without the
amendment, those persons sustaining injuries ten years after
a built structure was completed, would have no claim.
Representative Martin and Mr. Feldman discussed the time
limit of the Statute of Repose. Mr. Feldman reiterated that
last year the House of Representatives enacted a fifteen
year Statute of Repose, whereas this year agreed to cut it
to ten years.
A roll call was taken on the MOTION to adopt Amendment #4.
IN FAVOR: Brown, Grussendorf, Navarre, Foster
OPPOSED: Parnell, Therriault, Kelly, Martin,
Mulder, Hanley
Representative Kohring was not present for the vote.
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The MOTION FAILED (4-6).
Representative Brown MOVED to adopt Amendment #5. [Copy on
file]. Representative Mulder OBJECTED. Representative
Brown explained that Amendment #5 would delete hazardous
"waste" and insert "substance". Representative Porter
stated that he did not object to the language change.
Representative Mulder WITHDREW the OBJECTION.
Representative Martin OBJECTED to the language change of the
Amendment. Representative Mulder and Representative Porter
recommended including a definition in order to establish a
parameter for the court system. Representative Porter
suggested leaving the current language and then providing a
more inclusive definition on the House floor including
substances not defined in "hazardous waste". Representative
Brown WITHDREW Amendment #5. There being NO FURTHER
OBJECTIONS, it was withdrawn.
Representative Brown MOVED to adopt Amendment #6. [Copy on
file]. Representative Therriault OBJECTED.
Mr. Feldman voiced concern regarding cases where a juvenile
would be involved resulting from birth related injuries.
Mr. Lessmeier pointed out that the intention of the
legislation was to create a time limit and he felt that ten
years was a sufficient length.
Representative Brown commented that the minor's rights would
be removed before the minor was old enough to realize that
there was a problem. She pointed out currently a "blanket"
law exists in order to protect those rights. Those rights
would be dramatically changed in the proposed legislation.
Representative Parnell asked if the minor child would have
the "right of action" against the parents for negligence.
Mr. Feldman replied that in Alaska to date, that claim has
not been used. Mr. Feldman added, the problem referenced by
Representative Brown was a problem which exists most often
in rural Alaska.
Representative Porter pointed out that the requirements to
provide insurance for expensive coverage has had an adverse
impact on physicians who operate in areas which have small
populations. Representative Navarre countered, there would
not be a reduction in the cost of insurance resulting from
this legislation. Representative Porter replied that
according to testimony received from the insurance industry,
with the passage of the legislation, the rates would
decrease.
Representative Martin understood that rural Alaskans were
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medically covered under the U.S. Public Health Service and
the Native Corporations. Mr. Lessmeier commented that there
would be a different Statute of Limitation with respect to
those claims made against the federal health care providers,
and that HB 158 would not change that situation.
Heated discussion followed between Mr. Lessmeier and
Representative Navarre regarding the possibility of the
proposed legislation lowering insurance premiums. Mr.
Lessmeier commented that the insurance companies which
provide a vast majority of that business in Alaska are
physician owned companies, owned and managed by doctors.
Mr. Feldman stated that Section #3 would keep some of the
claims out of the system. The solution he recommended,
would explain that claims for malpractice for juveniles
expire after the incident. That would create a new Statute
of Limitation, thus providing an appropriate amount of time
to evaluate if the concern was valid. He also suggested
that insurance companies prorate their premiums in
accordance with the number of deliveries that the OB&GYN
perform per year (i.e. the number of risks taken each year).
Representative Porter emphasized that HB 158 was not
intended to be an insurance reform bill and that it was a
tort reform bill. Representative Navarre stated that tort
reform would not address the problems resulting from the
OB&GYN crisis now existing in Alaska and more specifically
the rural areas.
(Tape Change, HFC 95-52, Side 1).
Representative Porter thought that any birth related problem
would be detectable within a six year time limit. If a
child had a required treatment or examination by a doctor
between the ages of 0-6 years, the two year Statute of
Limitation from the date of accrual, that time would be
extended to age six and then for an additional two years.
He added, otherwise, the standard two year accrual would be
the existing law.
Mr. Feldman pointed out that the referenced statute requires
that any injury that is sustained prior to age six would
have to be brought forward by age eight.
Representative Mulder voiced a potential conflict of
interest as his wife is a lobbyist for an insurance company.
Representative Mulder MOVED to amend Amendment #6 to include
a provision which would amend Section #2, Lines #16 and #18,
changing it to 8 years of age. Representative Brown
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OBJECTED. Representative Navarre explained that the
appropriate way to address Representative Mulder's concern
would be to rescind the previous action. Representative
Brown stated that birth related injuries should not be
subject to the two year accrual time.
Representative Porter stated that the two year Statute of
Limitation based on accrual as it relates to injuries, would
be different than a two year Statute of Limitations, which
would specify that from the date of the incident, two years
after and at that time would be barred from filing a case.
Representative Porter noted that he would not object to
returning to eight years of age, providing that in all cases
a bar exists from 0-8 years of age.
Representative Mulder MOVED TO RESCIND action on Amendment
amendment. There being NO OBJECTION, it was so ordered.
Representative Brown WITHDREW Amendment #6. There being NO
OBJECTION, it was withdrawn.
Representative Mulder MOVED TO RESCIND action in adopting
the previous Amendment #3a. There being NO OBJECTION, it
was rescinded. Representative Brown MOVED to adopt
Amendment #6. There being NO OBJECTION, it was adopted.
Representative Brown MOVED to adopt Amendment #7. [Copy on
file]. Representative Porter stated that if there was a
specific minor disability, Section AS 09.10.140(a) would
provide an exception to the Statute of Limitation for
minors, mentally incapacitated or disabled, and cases of
sexual assault. Without that limitation, the rule would
return to the twenty year period of time in order for a
minor to bring that case to fruition.
Mr. Feldman recommended adding language at the end of
Section AS 09.10.140(a): "unless the action was two years or
a period provided by AS 09.10.055, which is the Statute of
Repose, whichever is longer". That language would provide
for eight years for the juvenile claims to be brought
forward and would then reserve two years for everything else
to be addressed. Representative Porter did not agree that
the two year Statute of Limitation should be accrual time.
He thought there should be a limit to detectable problems,
and that the Statute of Limitation based on accrual would
address that concern.
Co-Chair Hanley asked the difference between "accrual" and
"occurrence". Mr. Feldman responded that the law clarifies
that when you acknowledge the fact, that you then give rise
to a claim. Mr. Lessmeier suggested that the Statute of
Limitation could be waived, and then the doctor must be
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notified within two years in order to be given the
opportunity to defend himself. A maximum time limit then
would be in place. Mr. Lessmeier added that under the
change proposed, the Discovery Rule would work for eight
years. He thought that was a reasonable length of time.
Mr. Feldman disagreed. The doctor would have no motivation
to waive the Statute of Limitations. The damages could not
be proved after that period of time nor could the scope of
harm. He added that this would be particularly difficult
when projecting the long range harm to a juvenile. He
concluded that the current language will create a clear
conflict in statute.
Representative Mulder questioned if the language change
recommended in the amendment would return the statute to the
definition used twenty years ago. Mr. Feldman acknowledged
that there are currently three statutes at issue and that
there is conflict among those three statutes.
A roll call was taken on the MOTION to adopt Amendment #7.
IN FAVOR: Brown, Grussendorf, Kelly, Navarre,
Foster
OPPOSED: Martin, Mulder, Parnell, Therriault,
Hanley
Representative Kohring was not present for the vote.
The MOTION FAILED (5-5).
Representative Navarre MOVED to adopt Amendment #8. Co-
Chair Hanley OBJECTED for discussion purposes.
Representative Navarre stated that Amendment #8 would remove
the non economic damages. Representative Porter noted that
current law provides a rate of $500 thousand dollars for non
economic damages which would not include disfigurement or
serious physical injury. He noted that the intention of
capping was to bring certainty and yet still be fair.
(Tape Change, HFC 95-52, Side 2).
Representative Mulder pointed out that the provision and the
workmen's compensation would establish a certainty, thus,
creating a downward pressure on premiums. Representative
Navarre stated that within the workers' compensation laws,
retraining is provided, although it is not in statute. He
stressed that the caps serve to discriminate against larger
families.
Mr. Feldman reiterated the need to trust in jury decisions.
He pointed out that Alaskan juries make decisions
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reasonably. Representative Kelly asked if the cost of non
economic damages would compensate for pain, suffering and
medical costs. Mr. Lessmeier replied that the medical costs
would originate from the economic damages and that they
would be allocated through various categories. The base
amount allocated would be for the non economic damages
resulting from the "pain and suffering" of the loss.
Representative Kelly noted concern with that concept.
Representative Porter commented that the portion referenced
for amending was an integral section of the legislation. He
pointed out that many states have established lower caps
than in Alaska. Representative Brown cited many problems
with the referenced section. She asked how many cases have
occurred since 1986. She stated that the language of the
legislation would limit the recovery of the most severely
injured people and that the money they received would make a
difference in the quality of their life.
Mr. Lessmeier thought that the issue was in regard to cap/no
cap. He explained that a "lottery" system currently exists
and that the proposed system would make available a lesser
amount of coverage to more people. Mr. Lessmeier added, the
cases in which the most time is spent in litigation are
those cases with unlimited exposure.
Representative Parnell questioned the problem with the
current cap. Mr. Lessmeier directed attention to the
ineffective limit. Mr. Feldman strongly disagreed. He
pointed out that the language states "severe physical
impairment or disfigurement" and that it would not allow
recoveries greater than $500 thousand dollars. He added,
the language would not make compensation more widely
available, whereas, the language would fix compensation for
the most severely injured.
Representative Porter restated that exposure was the
problem. He added, the legislation would provide
compensation for subjective attempts for closure and
predictability in compensation. Representative Navarre
argued against the proposed cap limits.
Representative Parnell asked what non economic damage awards
for disfigurement have exceeded $500 thousand dollars. Mr.
Feldman was not aware of any cases although assumed that
there have been some. Mr. Lessmeier rebutted that there
have been cases in Anchorage which have exceeded the $500
thousand dollar cap.
Representative Navarre reiterated that Amendment #8 would
remove the new language and would leave the cap as
established in the 1986 legislation. That language would
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allow for the juries to determine the reasonable monetary
settlement granted. Representative Martin voiced in support
of the defense noting the public demands the concern of
settlement of costs be resolved.
Representative Kelly requested assurance that persons
seriously injured would be adequately compensated at the
$500 thousand dollar limit. Mr. Lessmeier advised that the
punitive damages would not be part of the compensation. The
economic damages would provide compensation for the economic
loss including the medical expenses past and future and the
vocational rehabilitation. The maximum for pain and
suffering non economic damages would be $500 thousand
dollars. The economic damages would be left to the juries
discretion which would then be dependant upon the proof.
A roll call was taken on the MOTION to adopt Amendment #8.
IN FAVOR: Grussendorf, Navarre, Brown, Foster
OPPOSED: Kelly, Martin, Mulder, Parnell,
Therriault, Hanley
Representative Kohring was not present for the vote.
The MOTION FAILED (4-6).
Representative Navarre WITHDREW Amendment #9. [Copy on
file]. There being NO OBJECTION, it was withdrawn.
(Tape Change, HFC 95-53, Side 1).
Representative Navarre MOVED to adopt Amendment #10. [Copy
on file]. Co-Chair Hanley OBJECTED for purposes of
discussion. Representative Porter argued against the
proposed amendment indicating that the caps would apply to
an incident and not an injury. Representative Brown
countered that adopting the amendment would create a more
fair situation, thus allowing the jury the opportunity to
determine the severity of the person's injury.
A roll call was taken on the MOTION to adopt Amendment #10.
IN FAVOR: Navarre, Brown, Grussendorf, Foster
OPPOSED: Kelly, Martin, Mulder, Parnell,
Therriault, Hanley
Representative Kohring was not present for the vote.
The MOTION FAILED (4-6).
Representative Brown referenced Amendment #11. [Copy on
file]. She MOVED to amend Amendment #11, changing Line 4 to
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"Page 7, line 27, through page 8, line 8:", there being NO
OBJECTION, it was incorporated. Representative Brown MOVED
to adopt the amended Amendment #11. Representative Mulder
OBJECTED. Representative Brown informed Committee members
that the amendment would address the punitive damages and
would establish the amount of those damages at three times
the amount compensatory or $300 thousand dollars, whichever
is greater. She thought that with the additional language
of the proposed amendment, would force large companies to
make appropriate adjustments while not sacrificing safety.
Representative Brown summarized that the changes in the
legislation would undermine that attempt and did not agree
with the intent to place the cost of those damages into the
general fund.
Mr. Feldman noted that there would be a change in the
standard of proof in Section A. The language would require
that the intent be clearly defined. From a lawyers
perspective, it would be impossible to prove that someone
intended to create harm. By leaving that standard of proof
in place, there would not be punitive damages in Alaska
which would be bad public policy.
Representative Mulder asked if the language would be raising
the standard. Mr. Lessmeier understood that the standard
would not be raised. He added that the language originated
from a recent supreme court case decision, suggesting that
whenever a person is subject to punitive damages, they are
also subject to criminal penalties and would be required to
be compensated fully for the harm. Representative Porter
replied that the standard malice and conscious deliberate
acts would be reflected in the supreme court case. He
explained that the problem results in that it would not be
reflected in statute. The statute states that punitive
damages may be established by clear and convincing evidence.
Mr. Feldman did not agree with Representative Porter's
definition of clear and convincing evidence. He advised
that the current law in Alaska allows for punitive damages.
The language states: "Outrageous, such as acts done with
malice or bad motives or a reckless indifference to the best
interest of another". Punitive damages are available under
existing law when the conduct is "outrageous". The statute
establishes the example but not the category of conduct.
Representative Brown urged Committee members to adopt
Amendment #11 to remove the limit. Representative Porter
read AS 917.92.020, the statute on punitive damages, AS
917.92.020.
"Punitive damages may not be awarded in an action
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whether in tort, contract or otherwise, supported
by clear and convincing evidence."
Representative Porter advised that he wanted to place the
case decision into statute, in order to establish it. He
summarized that the settlements were not reflected.
Representative Navarre stated that the language was
discriminating against small business.
A roll call was taken on the MOTION to adopt Amendment #11.
IN FAVOR: Navarre, Brown, Grussendorf, Foster
OPPOSED: Martin, Mulder, Parnell, Therriault,
Kelly, Hanley
Representative Kohring was not present for the vote.
The MOTION FAILED (4-6).
Representative Brown MOVED TO AMEND Amendment #12 by
inserting "such as" on Page 7, Line 25, following the
current language "outrageous conduct". [Copy on file].
There being NO OBJECTION, it was adopted.
Representative Porter commented that the language in the
bill was intended to replicate the standards set and then to
define them. He added that the case law definition is the
"conscious act of delivery on another person".
Representative Navarre asked if the language established in
the 1986 law was higher then existed before that law. Mr.
Feldman replied that punitive damages currently are awarded
frequently. He added, that to be able to prove by clear and
convincing evidence would be more difficult and abstract.
Representative Brown pointed out that current language in
the bill would allow drunk drivers not to be prosecuted.
Mr. Lessmeier replied that the supreme court has
specifically ruled that when a person has voluntarily
consumed alcohol, they would be held at the same standard of
one who had not.
(Tape Change, HFC 95-53, Side 2).
Representative Brown MOVED TO AMEND Amendment #12 by
deleting "of" before the word "malice". There being NO
OBJECTION, it was deleted. Representative Porter noted that
being under the influence of alcohol would not relieve a
person from a specific intent. Representative Brown asked
if enough alcohol had been consumed would the person then be
considered incapable of performing a conscious act. Mr.
Lessmeier explained that jury instruction regarding alcohol,
16
would be that voluntary consumption of alcohol would not
relieve a person of the consequences of their action.
A roll call was taken on the MOTION to adopt Amendment #12.
IN FAVOR: Martin, Mulder, Navarre, Parnell,
Therriault, Brown, Grussendorf, Kelly,
Foster
OPPOSED: Hanley
Representative Kohring was not present for the vote.
The MOTION PASSED (9-1).
Representative Brown WITHDREW Amendment #13. [Copy on
file]. There being NO OBJECTION, it was withdrawn.
Representative Navarre MOVED to adopt Amendment #14. [Copy
on file]. Co-Chair Hanley OBJECTED for purposes of
discussion. Representative Navarre interjected that the
amendment would provide for the windfall to go to the
injured party. Representative Mulder asked if an award
given to an injured party was subject to income tax.
Representative Navarre stated it was not.
Mr. Feldman advised that the U.S. Congress decided that
those persons suffering from injury deserved a tax break.
Personal injury recoveries are not taxed. The legislation
would shift the benefit from the injured party or the wrong
doer. Mr. Lessmeier replied that in a federal court
decision, federal awards have been reduced. He suggested
that the legislative intent could make the cost of the
system less for all involved. Representative Porter added
that Lines 22-23 would cover the contingency that federal
government could change the law addressing those awards.
Representative Mulder asked if an award had been
established, and payment was provided for over a twenty year
time span, and then the federal government changed the tax
law, would the original decision be adjusted.
Representative Porter explained that it would be.
Discussion followed among Committee members regarding the
change possibilities which would result from that decision.
Mr. Feldman noted that currently that mechanism does not
exist. Mr. Lessmeier voiced doubt that Congress would have
the authority to make a retroactive change.
Mr. Lessmeier stated that language within the bill had
resulted from past wage loss awards which were reduced.
Those awards were reduced by the amount that person would
have had to pay for federal income taxes. He felt that it
should be the same for future awards. Representative Porter
17
stated that awards for future wage loss in the federal
system would be reduced by the amount the person would have
to pay for income tax. Representative Brown asked if
current federal law would take into consideration the future
earnings. Mr. Lessmeier stated they would.
Representative Brown argued that if Congress instigated a
tax break, the injured party would be taxed in the future.
Mr. Lessmeier reassured Representative Brown that decisions
made by the U.S. Supreme Court are reasonably predictable.
Representative Navarre noted that if the taxed amount was
received in a lump sum, there would be no future threat to
being taxed. The federal government historically has
retroactively taxed income. He stressed that there would be
a risk involved. Mr. Lessmeier was not aware of the federal
intent. He suggested that the law indicates that the status
quo be maintained.
Mr. Lessmeier advised that the language of the amendment
would identify the current windfall in the system and would
then remove it. Representative Navarre countered that the
legislation would further reduce the potential limits of
settlements.
A roll call was taken on the MOTION to adopt Amendment #14.
IN FAVOR: Navarre, Therriault, Brown, Grussendorf,
Foster
OPPOSED: Mulder, Parnell, Kelly, Martin, Hanley
Representative Kohring was not present for the vote.
The MOTION FAILED (5-5).
Representative Brown MOVED to adopt Amendment #15.
[Attachment #15]. She stated that the amendment would
delete a portion of the legislation which would allow either
party to request or require that the award be made in
periodic payments. She advised that could create difficulty
for the injured person and would force the injured to be in
contact with the person who injured them for the rest of
their life. This would create a risk for the injured
person. Representative Brown requested removing that
portion of the bill.
Representative Parnell voiced concern that the current
wording of the legislation would remove the injured party's
ability to decide how to use their settlement.
Representative Porter responded that some people make poor
decision when windfalls are received. He stated that the
first $100 thousand dollars would be a lump sum received
regardless. Within the remainder of the funds due, the time
18
distributed would then become a public policy decision. He
added, the vast majority of cases are "medium sized"
resulting from small business' making inadvertent errors and
then finding themselves subject to liability. He felt that
the current language would allow appropriate security by the
business' being able to spread out the payment.
Mr. Feldman stressed that people who have received awards
deserve to receive the amount of that award. With an
authorized insurer, a security would not be required to be
posted. The injured plaintiff should not bear the risk that
the insurer could go bankrupt. He emphasized that real
people suffer consequences and that the transitions are not
easy and often require special expenses.
A roll call was taken on the MOTION to adopt Amendment #15.
IN FAVOR: Navarre, Parnell, Therriault, Brown,
Grussendorf, Kelly, Martin, Mulder,
Hanley, Foster
OPPOSED:
Representative Kohring was not present for the vote.
The MOTION PASSED (10-0).
Representative Navarre MOVED to adopt Amendment #16. [Copy
of file]. Representative Navarre noted that the amendment
would guarantee through the courts that the funds were
available. Representative Porter stated that he did not
object to the amendment although the it would further limit
the flexibility of the plaintiff. There being NO OBJECTION,
it was adopted.
Representative Brown MOVED to adopt Amendment #17. [Copy on
file]. Mr. Feldman questioned whose insurance benefits
would be protected from "final benefits". He emphasized the
collateral insurance benefits program should benefit the
injured. Representative Porter thought that the provision
included on Line 14, would address that concern. Mr.
Feldman asked how the measure could be considered for
medical insurance. Representative Porter responded that the
amount would be determined by the amount contributed to
secure the claimant's right which would be the amount paid.
He added, if a claimant had paid insurance for a certain
number of years, they should be eligible to collect on those
costs which in turn should then reduce the claim.
Representative Brown expressed confusion on the current
language and how it would affect a persons compensation.
(Tape Change, HFC 95-54, Side 2).
19
Mr. Feldman advised under current law, the portion of
medical expenses covered are collectable from the wrong
doer. Mr. Lessmeier pointed out that Subsection (c) on Page
10, would address Representative Brown's concern. That
section clarifies that a person would not have to pay the
money back. Representative Brown asked if that would
override the contract which is currently in existence. Mr.
Lessmeier pointed out that the amendment would change the
current law. Representative Brown stressed that regardless
of the intent, contracts would continue. She did not think
that the language of the legislation would invalidate
existing contracts. Mr. Lessmeier responded that an
insurance carrier can not subjugate or recover something
from you which you have not recovered from the third party.
The legislation would provide language clearly guaranteeing
"no risk". He added, the decision would be a policy issue.
A roll call was taken on the MOTION to adopt Amendment #17.
IN FAVOR: Brown, Navarre, Foster
OPPOSED: Parnell, Therriault, Kelly, Martin,
Mulder, Hanley
Representatives Grussendorf and Kohring were not present for
the vote.
The MOTION FAILED (3-6).
Representative Navarre MOVED to adopt Amendment #18. [Copy
on file]. Representative Mulder OBJECTED. Representative
Navarre noted that Amendment #18 would provide evidence of
liability insurance. Representative Porter commented that
the amendment would establish the outer limits of an award.
He did not support the amendment. Mr. Lessmeier added, the
amendment would address collateral sources which could be
readily quantifiable and would reflect what has been paid;
he added, the other issue would be the admissable liability
insurance intended for the purpose of valuing the injury.
Mr. Lessmeier pointed out the basic tenant of the law is
that the amount of the injury would not be determined by a
person's ability to pay.
Representative Navarre thought that when giving information
to the jury, that all information should be revealed. He
explained that evidence of other collateral sources could
serve to prejudice a jury in terms of what the court should
do. Representative Brown agreed that the concern was an
issue of fairness.
Mr. Feldman acknowledged that the amendment would "even" the
playing field. Mr. Lessmeier stated that a distinction
20
should be made as in some instances it could be relevant
information; collateral benefits should be introduced,
whereas, when a liability policy was introduced, it would
not be relevant. Mr. Lessmeier thought that the amendment
would lead to making each person's financial standing
"discoverable".
Mr. Feldman disagreed, stating that the plaintiffs insurance
should not be exposed at the time of the jury trial. He
suggested that no one's insurance should be used as an item
of evidence in the case.
A roll call was taken on the MOTION to adopt Amendment #18.
IN FAVOR: Brown, Grussendorf, Navarre, Foster
OPPOSED: Therriault, Kelly, Martin, Mulder,
Parnell, Hanley
Representative Kohring was not present for the vote.
The MOTION FAILED (4-6).
Representative Navarre MOVED to adopt Amendment #19. [Copy
on file]. Representative Mulder OBJECTED. Representative
Navarre stated that Amendment #19 would allow the defendant
to bring evidence into the case in order to allocate the
faults to defend themselves. He stated that this could
reduce the liability of the defendant.
Representative Porter commented that amendment would put
back into law what the voters thought they had accomplished
in 1988 by eliminating joint liability on an initiative
vote.
Representative Navarre argued that was not the intent of the
1988 Ballot Initiative. He emphasized that the change would
allow insurance companies or large companies who can afford
attorneys to drive small companies out of business or make
them incur legal fees which are prohibitive. The entire
effort would be mounted by the defense to deflect potential
liability away from themselves. He added, without the
amendment, additional burden or proof would be on the
plaintiff.
Mr. Feldman stated that in existing law, we are not living
in a world to be tagged for more than the proportionate
share of fault. The reasonable behavior would be to file a
case if someone was at fault. He added, the existing
formulation of rules would avoid inconsistent verdicts, save
multiple trials and avoid defenses. Representative
Therriault questioned why all involved should be named. Mr.
Feldman stated that filing suit on everyone who is liable
21
based on information and should be identified.
Representative Parnell inquired if an "empty chair" scenario
would happen. Mr. Feldman argued that it was absolutely
possible. Representative Parnell asked if everyone who
could possibly be at fault could then be sued. Mr. Feldman
stated that everyone at fault would be sued. Representative
Porter pointed out that in a criminal case, there exists a
presumption of the innocence; the plaintiffs must bring the
charges forward and establish the proof that the claim is
valid. The amendment would allow that authority to shift.
The defendant is required to bring in someone to defend
themselves.
Mr. Lessmeier stated that the original initiative clarifies
that each party is responsible for damages only equal to
his/her share of the fault. Voters understood that this
would repeal the law regarding reimbursement from other
parties. The voters intended that a party be responsible
for his or her percentage of the fault. Mr. Lessmeier
concluded that the amendment would create a second tier of
litigation. The intent of the initiative would specify that
any party should be held responsible for his/her percentage
of fault and not for anyone else's.
Representative Navarre disagreed, pointing out that Page 11,
Section 15 would remove that understanding. He added, that
language remaining would place a double burden of proof on
the plaintiff.
(Tape Change, HFC 95-55, Side 1--Tape malfunction)
Representative Navarre discussed the true allocation of
fault. Mr. Lessmeier clarified that other parties when
liable could be joined at the outset of the case.
Representative Navarre questioned the reasoning of the
importance of who submits other defendants. He thought that
it would be important that potential liable parties not be
excluded. Representative Navarre stressed that it would be
difficult for the plaintiff to know who the defendant would
implicate.
Representative Brown questioned if employers would be immune
under the workers' compensation laws. Mr. Lessmeier
explained that under current law the third party is
responsible.
Mr. Feldman asserted that provisions in HB 158 would result
in multiple cases with inconsistent results. He stated that
whichever party that allocates the blame would then bring
the other party into that case.
22
Representative Therriault questioned who would bare the
expense of joining parties. He noted that some defendants
may try to bring in a party even if their liability is not
justified. He stressed that it is easy to make allegations.
A roll call vote was taken on the MOTION to adopt Amendment
IN FAVOR: Navarre, Brown, Grussendorf, Foster
OPPOSED: Kelly, Martin, Mulder, Therriault,
Hanley
Representatives Kohring and Parnell were absent from the
vote.
The MOTION FAILED (4-5).
Representative Brown MOVED to adopt Amendment #20. [Copy on
file]. Representative Mulder OBJECTED. Representative
Brown spoke in support of the amendment. She asserted that
the plaintiffs would be penalized if they were not able to
guess the outcome of a case. She maintained that HB 158
would provide defendants with "a lot of clubs."
Representative Brown WITHDREW Amendment #20.
HB 158 was HELD in Committee for further consideration.
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