Legislature(1997 - 1998)
02/27/1998 01:06 PM House JUD
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* first hearing in first committee of referral
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+ teleconferenced
= bill was previously heard/scheduled
HB 430 - AUTOMOBILE CIVIL LIABILITY [Contains discussion of HB 95.] CHAIRMAN GREEN announced the final item of business would be HB 430, "An Act relating to noneconomic damages resulting from an automobile accident." Number 1990 JAMES HORNADAY, Legislative Assistant to Representative Pete Kott, Alaska State Legislature, presented HB 430 on behalf of the sponsor. He first read from the sponsor statement: "This bill denies recovery for noneconomic damages (such as pain and suffering) to drunk drivers, if they are subsequently convicted, and to uninsured motorists who were injured while operating a vehicle. The bill provides one exception: when an uninsured motorist is injured by a subsequently convicted drunk driver. With this one exception, an insurer is not liable for noneconomic damages. "This bill would limit the liability of certain people to recover losses suffered in accidents. It prohibits the recovery of noneconomic losses in certain car accidents. Specifically, an uninsured driver or a driver subsequently convicted of driving while intoxicated at the time of an accident could not sue someone at fault for the accident for noneconomic losses. These drivers could still sue for economic losses. However, an uninsured motorist injured by a drunk driver in an accident could still sue to recover noneconomic losses from the drunk driver. "... The legislation should reduce the number of lawsuits handled by the courts, reducing court-related costs. The legislation should also result in fewer lawsuits filed against state and local governments, with savings as a result of avoiding these lawsuits. ... And it could result in a lower cost or premiums for auto insurance." MR. HORNADAY informed members that a sectional analysis had been provided. The bill would become effective to a cause of action occurring on or after the effective date of the Act. It is the sponsor's intent to encourage people to become insured; to discourage drunk drivers; to reduce costs and legal fees; to save state and local governments, as well as businesses, money; and to reduce premiums for auto insurance. He noted that Mr. George and others were present to answer specific questions. CHAIRMAN GREEN asked whether there were any questions for the sponsor's representative. He then called upon John George. Number 2193 JOHN GEORGE, National Association of Independent Insurers (NAII), came forward in support of HB 430, specifying that the NAII is a trade association of property casualty insurance companies that is responsible for slightly less than half of the automobile insurance written in Alaska. He and his clients support this legislation. They believe it is a matter of fairness, and that people who obey the law and buy the insurance will feel much better when this law is passed. California did something similar by initiative; a year following its passage, a survey found that almost 80 percent of the people with insurance thought it was a great idea and working well. In addition, almost the same percentage of uninsured drivers thought it was fair and the right thing to do. "Very few issues can you find where 80 percent of the people on both sides of the issue think that it was the appropriate action to take," Mr. George commented. MR. GEORGE stated his belief that HB 430 will encourage motorists to obtain the required mandatory automobile insurance, which the legislature has previously determined to be a laudable goal. If there are more insured drivers, by definition there will be fewer uninsured drivers; therefore, premiums for uninsured motorist insurance coverage should go down. In addition, there should be less disputes with uninsured drivers "going after each other." Number 2311 MR. GEORGE told members this is self-enforcing; it will not require hiring more state troopers or judges. One either has insurance or doesn't. If not, the adjuster for the insurance company on the other side will determine that the person is not eligible for those, and that portion of the claim will "go away." Although it could go to court in case of a dispute, Mr. George believes such cases would be easily resolved and there should be fewer of them. MR. GEORGE said those who pay for insurance get more out of the system than those who don't pay. However, this is not a cutting off of people without insurance. It is relatively easy to determine economic damages, such as for fixing a car or paying medical bills or lost wages. What they are saying is that a person cannot claim noneconomic damages such as for pain suffering, disfigurement and the things that are generally argued over in court. Number 2432 MR. GEORGE informed members that HB 430 will not affect someone who is not the owner or operator of the car. Passengers will have the same rights as before, as will bicyclists and pedestrians. They are only talking about the person required to have insurance. The person at the steering wheel is required to drive cars that are insured, by having his or her own insurance or by driving a car that is insured. People that own the vehicles are also required to have insurance. TAPE 98-27, SIDE A Number 0006 MR. GEORGE told members a co-owner of the vehicle who is a passenger would still be responsible to have that vehicle insured; in his opinion, that person would be excluded. MR. GEORGE indicated Ms. Hensley had posed a question to him before the hearing that day, which he would try to answer; he asked Ms. Hensley to correct him if he misstated her concern. She had stated what he believes is a legitimate concern. She has an obligation to suspend someone's license if that person was at fault and had failed to pay damages. If a person was allegedly drunk, stopped at a stoplight, and someone plowed into the car and hurt him, the police report would say this guy sitting at the light was drunk. The police would issue a citation for drunk driving, file the report, and then the insurance company would come along to settle the case and say, "Well, we aren't paying your noneconomic damages because you were drunk." However, he hasn't been convicted. MR. GEORGE said the question is whether Ms. Hensley has to suspend the license of the person that hit him, because his insurance company had not paid the noneconomic damages, "and/or, if they said, 'We're not going to pay anything until you give us a full release,' and the guy says, 'I'm not going to give you a release for my noneconomic damages, because I wasn't drunk, they haven't proven I'm drunk.'" Mr. George asked how that works. MR. GEORGE continued, "And if, indeed, she is required to suspend the license, I think maybe that's the flaw in the law. In my opinion, a person that buys insurance, whether their insurance company ever pays or not, has met the requirements of mandatory auto insurance, and that should meet the requirements of financial responsibility. Now, if they've got a flaky insurance company that didn't pay when they're required to pay, then I think the Division of Insurance has an obligation to go and take some action, and they can take severe action. But I'm not sure that it should be [the Division of] Motor Vehicles' responsibility to suspend someone's insurance if their insurance company fails to pay, when they bought the insurance." Mr. George asked whether he had represented that fairly; Ms. Hensley said she would talk about it later. Number 0280 MR. GEORGE continued, "And certainly if ... it's not a disputed amount, the guy says, 'Yeah, I was drunk, pay for my car, pay for my medical bills,' then it's not a problem. It only becomes a problem when he says, 'I will not sign a release for the physical damage and my medical bills until you pay my noneconomic damages.' And I think there are ways that that can be dealt with, the insurance company making an offer. And it happens all the time now where there's a disputed amount, where someone says, 'I think my noneconomic damages are half a million,' and the insurance company says, 'No, they're $2.98.' The way you resolve that is to file a civil case." Number 0335 REPRESENTATIVE BERKOWITZ asked how many cases in Alaska annually would invoke this statute. MR. GEORGE said he doesn't have statistics on that. According to the Division of Motor Vehicles, in discussions out in the hall, 13 percent of the drivers in Alaska do not meet the financial responsibility law. Of those, he believes 7 percent are failing to buy insurance. Mr. George noted that there are small, rural communities in this state without mandatory insurance requirements, having to do with how many vehicles pass a certain point daily, for example. He said he believes Ms. Hensley's statement was that 7 percent of those people who they recognize as really having to have insurance do not. "How many of those are involved in these accidents, I can't tell you," he added. Number 0435 REPRESENTATIVE BERKOWITZ asked if they have any idea whether the magnitude of cases per year is in the tens, hundreds or thousands. MR. GEORGE replied that he didn't have a specific number, but any case is too many because people are required to have mandatory automobile insurance. Number 0450 REPRESENTATIVE BERKOWITZ asked how many uninsured drivers got insurance on account of this provision in California. MR. GEORGE said he didn't have any statistics on that. REPRESENTATIVE BERKOWITZ asked how much the insurance rates in California went down. MR. GEORGE indicated the belief that statements he has seen from the insurance commissioner in California said it was 5 percent. He himself has clients who write in California as well as Alaska, and who say they have seen a dramatic drop in uninsured motorist claims being filed. Mr. George recalled hearing about something like a 20 percent reduction, which he thinks is a lot; he can't verify that. REPRESENTATIVE BERKOWITZ said he would appreciate seeing those numbers. MR. GEORGE offered to see what he could develop. Number 0541 REPRESENTATIVE BUNDE indicated he has concerns about that also. REPRESENTATIVE JAMES commented that rates never go down, but they may not go up so much if costs go down. She referred to the example of the drunk driver sitting at the intersection, with somebody else hitting that person. Representative James said she didn't understand in this bill that drunk drivers don't get noneconomic damages. She asked whether in that scenario, the other person had insurance. Number 0594 MR. GEORGE at first said there are two times that drunk driving comes into it. If the person who came up to the intersection and ran into the stopped car was drunk, then regardless of whether the person in the stopped car had insurance, that person could collect noneconomic damages because the driver at fault was drunk. "If you had no insurance, it wouldn't apply it any event," he then said. "If you had no insurance, you could not collect for pain and suffering, whether you were drunk or not. True. Now I see why it was confusing." REPRESENTATIVE JAMES said Jim Sourant had just reminded her that State Farm Insurance had reduced rates 2.7 percent in Alaska. They had sent her a check, which she had forgotten. Number 0677 REPRESENTATIVE CROFT referred to Mr. George's example. If a drunk driver was stopped legally at the stoplight and was hit, that person could not recover noneconomic damages under this bill. MR. GEORGE asked, "An insured drunk driver or an insured?" REPRESENTATIVE CROFT said either one. MR. GEORGE said he believes that is correct; it is the driver and/or the owner of the vehicle, and so, an owner in the passenger seat would be precluded, as well. If they were drunk, even if they had insurance, the driver couldn't collect. If they were uninsured, neither could collect. CHAIRMAN GREEN asked why the passenger could not. MR. GEORGE answered that it is because he is an owner with no insurance. It becomes convoluted, because if he is a passenger in a car that he doesn't own, and he's drunk, it doesn't matter; he can still collect for pain and suffering because he is an innocent rider in the car. But if he is an owner of the vehicle, the owner is required to have insurance. CHAIRMAN GREEN said, "And if he does, then he can collect, even though he's drunk. But if he doesn't have insurance, and he's drunk, he can't." MR. GEORGE said he thinks that is right. CHAIRMAN GREEN asked, "If he's uninsured and sober, can he?" MR. GEORGE said no. CHAIRMAN GREEN suggested if a person is uninsured, it doesn't matter what the state of inebriation is. REPRESENTATIVE CROFT replied, "Right, so we can leave that out. And if he's drunk, it doesn't matter what his state of insurance is, so we can leave that out. We can just say, 'If you're drunk and operating the vehicle, or you're uninsured, you're not going to get these noneconomic damages." Number 0785 REPRESENTATIVE CROFT further explored the example. He asked, "It doesn't matter, the culpability of the drunk driver, if the person was proved negligent who hit me, proved it wasn't my fault? If it was proved the other person was trying to killing me, ... a mad constituent, intentional torts, it doesn't matter, I don't get any noneconomic damage?" MR. GEORGE replied, "If you were driving in violation of the law, without automobile insurance, as this is written, I believe ... that you're correct." Number 0831 REPRESENTATIVE CROFT described an example: He is driving his wife home, and they are co-owners of the car; he has had too much to drink, either slightly or totally, but over the legal limit. They are hit, either negligently, recklessly or intentionally. Both suffer damages. MR. GEORGE asked whether this car has no insurance. REPRESENTATIVE CROFT replied, "The car has no insurance, let's say that, or I'm drunk." MR. GEORGE said he thinks there would be different answers. If the car has no insurance, his wife as an owner has failed to buy insurance and therefore would not recover damages. If she had bought insurance but was not the driver, he believes she would be entitled, although the driver would not. REPRESENTATIVE CROFT said he hadn't understood that distinction before. MR. GEORGE asked whether that makes sense. REPRESENTATIVE CROFT replied that it doesn't make any sense, but it is consistent. He stated his understanding that if he and his wife are driving as uninsured motorists and are catastrophically injured, and she is working as a housewife but he is working outside the home, he would get economic loss. Neither would get noneconomic loss, no matter how great the pain and suffering they could prove to a jury and regardless of loss of consortium, loss of enjoyment of life and so forth. Number 0923 MR. GEORGE affirmed that, saying that is the incentive for obeying the law and buying the mandatory auto insurance. Number 0952 REPRESENTATIVE BUNDE noted that HB 430 denies recovery of noneconomic damages to a drunk driver or to an uninsured motorist. However, it says that an uninsured motorist who gets hit by a drunk driver gets noneconomic damages; that seems inconsistent. He suggested that to be consistent, noneconomic damages should be denied to all uninsured motorists. "It's sort of like we're trying to get rid of drunk drivers, but maybe you'll get lucky and get hit by one," he commented. REPRESENTATIVE JAMES agreed. Number 1010 REPRESENTATIVE ROKEBERG referred to Representative James' comments and told members that as the chairman of the House Labor and Commerce Standing Committee, he had other examples of insurance rates going down over a period of years. He also expressed concern about the numbers and experiences in California, agreeing that having that information would be helpful. Representative Rokeberg noted that there seems to be some confusion about the intent, then expressed hope that they could take testimony and move this along. He expressed the belief that anything they can do to encourage Alaskans to get insurance should be looked upon favorably. Number 1071 REPRESENTATIVE BERKOWITZ posed a situation where an unlicensed and therefore uninsured mother has an emergency at home and jumps in the family car with her child. Stopped properly at a stoplight, the car gets rear-ended. Under this bill, it would seem that she couldn't collect noneconomic damages. MR. GEORGE questioned whether being uninsured and having no license necessarily go hand in hand, adding that he isn't sure an unlicensed person driving an insured car would be excluded. Mr. George pointed out that he is not an insurance agent, nor does he underwrite insurance policies. He then suggested the woman in that situation should have called an ambulance or a taxicab, or contacted a neighbor. The goal is to have people acting responsibly, and to him, it is not responsible for an unlicensed, uninsured person to drive a child to the hospital. Number 1225 JUANITA HENSLEY, Chief, Driver Services, Division of Motor Vehicles (DMV), Department of Administration, came forward to testify, saying as she sees it, HB 430 has some flaws. For example, if a drunk driver is at fault in an accident, under last year's tort reform that person could not recover noneconomic losses. She doesn't condone drunk driving, about which she has gone on record for years; however, if a victim stopped at a light is hit by an at- fault driver, that victim cannot recover damages for noneconomic losses under this bill. MS. HENSLEY posed another scenario: The person who hit the not-at- fault drunk driver has insurance for property damage and injuries, which are legitimate economic losses. Ms. Hensley asked, "Would the insurance industry not pay him for his economic losses pending the criminal case on the drunk driving, which can take up to a year, possibly even more in some cases, ... to convict a person of drunk driving, especially if there is injuries involved or felony assault-type charges or something else against the other party, too? What if you've got two drunk drivers hitting each other ...?" Number 1346 MS. HENSLEY continued, "In this circumstance, I view Chapter 28.20 of Alaska Statutes as being I would have to take suspension action on the insured driver - the at-fault driver - until the insurance company or until they pay the injuries, the legitimate cost of the drunk driver's claim." Ms. Hensley said she doesn't know what happens in that scenario; she had posed that question to Mr. George, to State Farm's representative and to the bill sponsor, and now she was posing it to this body. Would she come back and suspend the at-fault driver, who is insured, because that insured's insurance company fails to pay the damages to the individual pending a conviction for drunk driving on the person? MS. HENSLEY noted that HB 430 does not address the differential treatment given to persons under the influence of illegal drugs, who are not covered under the bill. That is still under the drunk driving provisions of law. But if the other party is under the influence of drugs, how do they handle that? Number 1409 REPRESENTATIVE BERKOWITZ suggested it would be best to choose one's use of intoxicants carefully. Number 1420 MS. HENSLEY next pointed out that if a single mother, for example, must choose between buying groceries that month or buying insurance, she will buy groceries for her family. If something happened that she had to drive that car and was involved in a motor vehicle accident, she would not be covered for noneconomic losses. The state would have to step in with welfare, if the woman was too injured to work. Ms. Hensley said these are just questions that she poses. She commented, "And we thought we had this covered last year in the tort reform bill. And we wanted to give time enough for everything to settle down and look and see what kind of premiums were going to be reduced, and things of that nature." Number 1465 CHAIRMAN GREEN posed his own example. If he were a 20-year-old college student driving an old but safe car, he would have liability insurance but no collision insurance. If someone who is insured hits him, how would he be covered? MS. HENSLEY explained that under Alaska law, only liability insurance is required, not comprehensive collision. The other party's insurance would be required to pay for his damages under that scenario. If an uninsured motorist hit him, the DMV would suspend that person's driver's license until they paid it. She specified that by having liability only, that is insurance coverage under the bill. "Under the collision coverage, it would be your loss," she added. MS. HENSLEY referred to the 13 percent uninsured motorist rate mentioned by Mr. George. She stated, "That is true, but in 1984 or 1982, we had a 25 percent uninsured motorist rate. After we had the mandatory insurance law that went into effect in 1986, that dropped down to approximately 7.7 percent and has kind of fluctuated between 7.7, 11.9 and 13 percent of uninsured motorists. Now, that does not mean that it's all motorists that are financially responsible. These are some people that are not responsible for the accidents. This is just a total number of uninsured motorists, based on the collisions that we have in this state." Number 1564 MS. HENSLEY brought up HB 95, which is in the House Finance Standing Committee and which this committee had heard last year. Noting that it creates an insurance data base, she suggested that HB 95 would essentially fix Section 2, subsection (2) of HB 430, in that it would allow the DMV to verify insurance before registering a car. That would cut the uninsured motorist rate even further. MS. HENSLEY told members that the financial responsibility law requires that anyone who is at fault in a motor vehicle accident be able to pay for the damages of the victim. There are sections of the state that are exempt from the mandatory insurance law; these are villages and communities with fewer than "499 average daily traffic," based on the Department of Transportation and Public Facilities (DOT/PF) traffic studies. However, those people are not exempt from meeting their financial responsibility, if they are at fault in an accident. That 13 percent includes those who are not insured but who are financially responsible. Number 1633 REPRESENTATIVE JAMES asked whether Ms. Hensley had said the tort reform the previous year provided that drunk drivers do not get noneconomic damages. She asked for confirmation that it is already in law. MS. HENSLEY said that is correct; a drunk driver involved in a crash does not get noneconomic losses. REPRESENTATIVE JAMES said this bill doesn't change that at all. She referred to the law that requires the DMV to suspend the license of someone without insurance. She noted that Oregon also has a financial responsibility law; people can lose their licenses if they cannot prove financial responsibility by either posting a bond or providing proof of insurance. She suggested there is a flaw in the law, if the DMV must suspend a person's license for not having paid but it is simply a case of waiting on the insurance company for payment. She said it seems that by buying the insurance, the person has protected himself or herself. "If that's not the case, we need to fix it," she concluded. Number 1705 MS. HENSLEY replied that Alaska has basically the same financial responsibility law that Oregon has. She explained, "You have an option: You either have to have insurance, you can post security, or you can get a release of the party ... that was the victim. In the cases where the security is posted, the only way that the victim then can come back and get that security is with a civil judgment against the at-fault party. ... That has been law since 1959; the financial responsibility has been in place, so that we do have that same mechanism here, that it does require me to suspend the driver's license unless they post security or they have paid damages or they have shown insurance. And in most cases, if they're insured and the insurance company is not paying the damages off like they should, then the person could come back and request suspension of the driver's license of the insured party, until they either posted security or have some means of (indisc.--simult. speech) financial responsibility." REPRESENTATIVE JAMES said that is a flaw in the law, and that it can't be right. Number 1762 REPRESENTATIVE ROKEBERG suggested that contradicted earlier testimony that if a person has insurance, the DMV doesn't have to make the suspension. He further suggested that whether the insurance company is paying the claim is a different issue. MS. HENSLEY replied that in most cases, the insurance companies pay up. She is thinking of a hypothetical situation. If there is someone whose insurance company refuses to pay a legitimate economic loss claim pending a conviction for drunk driving, she doesn't know whether she will required to invoke Chapter 20 of Title 38, which says "you have to file security, or you have to have your insurance company pay, or you have to pay the damages yourself, or you're going to get your license suspended." REPRESENTATIVE ROKEBERG asked whether the statute says that if a person has insurance coverage, as required under financial responsibility, then he or she should be okay. MS. HENSLEY explained that there are two different chapters they are dealing with here: Chapter 22, the mandatory insurance law that says everybody must have insurance, and Chapter 20, the financial responsibility law that says a victim in an accident is entitled to have injuries and property damage covered. REPRESENTATIVE ROKEBERG agreed with Representative James that something is flawed and that they should look into it. Number 1851 REPRESENTATIVE CROFT clarified that what tort reform did was say that when a person is drunk, or under the influence of a controlled substance, and if that is the cause of the action, that person gets neither economic nor noneconomic recovery. He noted, "But the key there is some link between the behavior we're trying to punish and the harm. Because we already have that, we're essentially only in this bill dealing with the innocent, if you will, drunk driver: the drunk driver who is not at fault for the accident. We've already covered the ones where it's linked to the accident. Now, we're just saying, 'those sitting at the stoplight or at .011.' ... And where the alcohol had nothing to do with the accident, we've taken away a major element of their damage." Number 1891 REPRESENTATIVE BERKOWITZ mentioned the owner/operator under the insurance provision. He said it seems there is a pretty strong equal protection argument. It denies someone the right to recover if that person is uninsured and is a victim, as opposed to someone who is insured and is a victim. "And it doesn't seem that there's a compelling state interest involved in making that distinction which would justify that constitutional distinction," he added. CHAIRMAN GREEN asked whether, by encouraging insurance coverage, they were thereby protecting other people, which would be a benefit to the state. REPRESENTATIVE BERKOWITZ replied that he himself isn't an expert in this area of law. However, if seems that if that is the objective, there are more direct means of reaching that objective. He stated that HB 95 seems like a more direct means, whereas this is a little arbitrary and haphazard. Number 1935 REPRESENTATIVE JAMES explained that her objection to HB 95 had been because of the massive amount of reporting that the insurance companies had to do, which would result in increased costs to consumers, including herself, to cover it. "I liked the idea, but the implementation was too expensive, and I didn't support it for that reason," she concluded. Number 1954 MS. HENSLEY reported that Utah uses a third-party vendor to do that data-base program. She told members, "Their bill sunsetted this year, and they had to go back to the legislature to reenact it. It was reenacted overwhelmingly by both bodies. ... It is working, and it has not cost their insureds any money." REPRESENTATIVE JAMES pointed out that there are a lot more people in Utah to cover it. She restated that she liked the idea of the law [HB 95]. CHAIRMAN GREEN asked whether there were further questions, then announced that HB 430 would be held over.
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