Legislature(1999 - 2000)

03/15/1999 01:32 PM House JUD

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
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HB 57 - STATE & MUNI IMMUNITY FOR Y2K                                                                                           
                                                                                                                                
Number 1260                                                                                                                     
                                                                                                                                
CHAIRMAN KOTT announced the next order of business is HB 57, "An                                                                
Act relating to immunity for certain claims against the state, a                                                                
municipality, or agents, officers, or employees of either, arising                                                              
out of or in connection with the year 2000 date change; and                                                                     
providing for an effective date."                                                                                               
                                                                                                                                
CHAIRMAN KOTT opened the meeting up to the teleconference network.                                                              
                                                                                                                                
Number 1285                                                                                                                     
                                                                                                                                
GAIL VOIGTLANDER, Assistant Attorney General, Special Litigation                                                                
Section, Civil Division, Department of Law, testified via                                                                       
teleconference from Anchorage.  She stated the department is                                                                    
proposing an amendment to clarify the definition of "state" in the                                                              
bill.  There is some concern because the organizations that fall                                                                
within the state are not automatically thought of as the "state".                                                               
The amendment flushes that out and ensures that public authorities                                                              
such as the Alaska Industrial Development and Export Authority                                                                  
(AIDEA) are clearly within the ambit of the bill.  The amendment                                                                
reads as follows:                                                                                                               
                                                                                                                                
     Page 3, following line 19:                                                                                                 
                                                                                                                                
          Insert a new paragraph to read:                                                                                       
                                                                                                                                
          "(3) "state" includes a department, institution, board,                                                               
          commission, division authority, public corporation,                                                                   
          council, committee, or other instrumentality of the state                                                             
          including the University of Alaska;"                                                                                  
                                                                                                                                
     Page 3, line 20:                                                                                                           
                                                                                                                                
          Delete "(3)"                                                                                                          
                                                                                                                                
          Insert "(4)"                                                                                                          
                                                                                                                                
Number 1385                                                                                                                     
                                                                                                                                
REPRESENTATIVE GREEN made a motion to adopt Amendment 1.  There                                                                 
being no objection, it was so adopted.                                                                                          
                                                                                                                                
Number 1478                                                                                                                     
                                                                                                                                
BOB POE, Commissioner-designee, Department of Administration,                                                                   
stated HB 57 intends to address a big problem of potential                                                                      
litigation related to the year 2000 (Y2K).  There are three                                                                     
alarming statistics involved:  the national cost to clean up Y2K is                                                             
expected to be about $300 billion to $400 billion, the cost of                                                                  
litigation is expected to be about $1 trillion, and 300 national                                                                
law firms have already opened up Y2K practices.  In addition, the                                                               
state doesn't have a cap on what it can be sued for.  He further                                                                
stated that the bill intends to try to mitigate the liability                                                                   
issues.  There are lawsuits now in the courts where somebody has                                                                
tried to do the right thing, but were sued because they were a deep                                                             
pocket.  The state is a likely candidate for those types of suits.                                                              
He deferred to Brad Thompson from the department.                                                                               
                                                                                                                                
Number 1585                                                                                                                     
                                                                                                                                
BRAD THOMPSON, Director, Division of Risk Management, Department of                                                             
Administration, stated the division offers the state's property                                                                 
casualty insurance protection.  The division anticipates a                                                                      
significant cost to be realized should the state not be provided                                                                
the protection afforded in HB 57 as proposed.  Twenty states, at                                                                
the moment, are actively considering similar legislation to protect                                                             
both the state and local municipal governments.  Five state have                                                                
already enacted a law.  Thirty-two states have already limited the                                                              
type or value of claim that can be brought against them and/or the                                                              
local municipalities.  The state of Alaska has no such protection.                                                              
He reiterated the bill provides for limited protection just for the                                                             
Y2K exposure.  It does nothing to remove or vacate the state's                                                                  
responsibility for people to provide a benefit or perform a duty to                                                             
the public.                                                                                                                     
                                                                                                                                
Number 1668                                                                                                                     
                                                                                                                                
REPRESENTATIVE CROFT asked whether the bill requires due diligence                                                              
from the state in protecting people from the effects of the Y2K                                                                 
change.                                                                                                                         
                                                                                                                                
MR. THOMPSON replied the state is performing exhaustive efforts                                                                 
with the available funding, personnel and time.  He doesn't believe                                                             
that there is a condition preceding the protection provided by                                                                  
this.                                                                                                                           
                                                                                                                                
Number 1714                                                                                                                     
                                                                                                                                
MS. VOIGTLANDER stated the bill does not have due diligence as a                                                                
requirement for immunity.  The state has been undertaking quite an                                                              
effort on Y2K remediations.  Each agency has had to access mission                                                              
critical programs and come up with remediation and contingency                                                                  
plans.  The bill really accompanies the efforts that                                                                            
Commissioner-designee Poe has been leading.                                                                                     
                                                                                                                                
Number 1759                                                                                                                     
                                                                                                                                
REPRESENTATIVE CROFT asked Ms. Voigtlander whether there is                                                                     
anything in the bill that requires an effort to get this immunity.                                                              
In other words, if one state agency does absolutely nothing and                                                                 
another state agency makes substantial efforts, are both immune?                                                                
                                                                                                                                
MS. VOIGTLANDER replied yes.  The bill in its present form does not                                                             
have a standard of performance attached for immunity.  It does                                                                  
address the efforts being made for remediation.                                                                                 
                                                                                                                                
Number 1821                                                                                                                     
                                                                                                                                
REPRESENTATIVE ROKEBERG stated that he is concerned about the                                                                   
definition of "year 2000 date change" in the bill.  Does it mean                                                                
January 1, 2000 or does it mean January 1, 2001?  It is debatable.                                                              
He announced he has an amendment to specify the years.                                                                          
                                                                                                                                
Number 1860                                                                                                                     
                                                                                                                                
COMMISSIONER-DESIGNEE POE stated the definition in the bill is a                                                                
similar definition that has been used in lots of other things that                                                              
describe Y2K.  He understands Representative Rokeberg's point, that                                                             
being when does the actual millennium occur - 2000 or 2001.  In                                                                 
testing systems, there is a range of dates that fall under the Y2K                                                              
moniker, such as a date projected four months in advance.                                                                       
                                                                                                                                
Number 1895                                                                                                                     
                                                                                                                                
REPRESENTATIVE ROKEBERG announced he has an amendment that provides                                                             
for an 18-month window at which time the millennium bug will have                                                               
come out of its cocoon.                                                                                                         
                                                                                                                                
Number 1922                                                                                                                     
                                                                                                                                
REPRESENTATIVE GREEN asked whether there would be any other                                                                     
immunity drawn into this alleviating the obligation of the state.                                                               
                                                                                                                                
MS. VOIGTLANDER stated the bill intends to cover only acts or                                                                   
omissions for damages caused directly or indirectly by the failure                                                              
of an electronic computing device.  She said, "If I understand the                                                              
question which I presume is in the nature of what if there's just                                                               
some very tangential link to a year 2K issue, would this--is this                                                               
intended to immunize for that?  I don't see the bill as doing that                                                              
because what it--the act or omission is immunized through this bill                                                             
for damages that are caused by a failure of an electronic computing                                                             
device.  So I think that if--it would have to circle back to that                                                               
for it to fall within the gambit of (indisc.--coughing)."                                                                       
                                                                                                                                
Number 2038                                                                                                                     
                                                                                                                                
REPRESENTATIVE MURKOWSKI referred to the definition of "physical                                                                
apparatus that is not primarily used as a computer".  She noted it                                                              
includes medical equipment and asked whether the state would still                                                              
have immunity if that equipment failed to work and killed somebody,                                                             
especially if there hadn't been an upgrade and it was not Y2K                                                                   
compliant.                                                                                                                      
                                                                                                                                
COMMISSIONER-DESIGNEE POE stated medical devices are in mission                                                                 
critical areas.  They have been checked out.  In addition, they                                                                 
have to be covered with a contingency plan.  It is covered under                                                                
the state's due diligence effort.                                                                                               
                                                                                                                                
MR. THOMPSON stated he is not so sure that the state or its                                                                     
agencies are directly involved with that type of medical care.                                                                  
There may be some, but as Ms. Voigtlander said it would have to be                                                              
directly or indirectly caused by the Y2K date change.  He said,                                                                 
"But, I don't think there's a disincentive that members may be                                                                  
concerned about of the state's efforts to be prepared and to do                                                                 
what it can to prevent any fallout for Y2K.  We are doing the best                                                              
we can.  I don't think this bill would have any effect to that                                                                  
effort."                                                                                                                        
                                                                                                                                
Number 2165                                                                                                                     
                                                                                                                                
REPRESENTATIVE MURKOWSKI asked whether the Administration looked at                                                             
a carve-out in the event of death caused by a medical malfunction.                                                              
                                                                                                                                
COMMISSIONER-DESIGNEE POE stated he didn't look at it specifically.                                                             
                                                                                                                                
MS. VOIGTLANDER stated she doesn't recall it as being an issue                                                                  
probably because that is not the type of medical care the state                                                                 
renders.  She said, "Usually, if you're going to be rendering                                                                   
medical care with that type of equipment, then people have been                                                                 
moved out of the state system, so to speak, and are receiving                                                                   
medical care through private medical sources.  Either they've been                                                              
transferred to an emergency room or another hospital, or there are                                                              
physicians that are not state employees who are brought in to see                                                               
people and to use the particular equipment.  But, I don't recall                                                                
seeing something specifically other than some--I have a somewhat                                                                
vague recollection that one of the Eastern states maybe had a bill                                                              
that had to do with medical devices.  Unfortunately, I can't put my                                                             
hands right on that right away."                                                                                                
                                                                                                                                
Number 2252                                                                                                                     
                                                                                                                                
REPRESENTATIVE MURKOWSKI explained she was referring to legislation                                                             
from the state of Montana which says, "...the state's immunity does                                                             
not apply to a health care facility if death or bodily injury                                                                   
results from failure or malfunction..."                                                                                         
                                                                                                                                
Number 2277                                                                                                                     
                                                                                                                                
REPRESENTATIVE KERTTULA asked whether a situation like Juneau where                                                             
the municipality owns the hospital is the concern.                                                                              
                                                                                                                                
COMMISSIONER-DESIGNEE POE stated that sounds right.  There is also                                                              
the Alaska Psychiatric Institute (API) and the pioneers' homes.  So                                                             
far, it hasn't been found that biomedical devices are causing a                                                                 
problem.  On the same token, Providence Alaska Medical Center in                                                                
Anchorage and Fairbanks Memorial Hospital are finding devices that                                                              
have Y2K problems.  He referred to Senator Bob Bennet's Year 2000                                                               
report addressing health care issues and stated that a lot of the                                                               
issues focus on doctor's offices.  But, they aren't paying that                                                                 
much attention to this because they don't have that much in their                                                               
offices that really affect life and death situations on a Y2K                                                                   
basis, whereas hospitals do.                                                                                                    
                                                                                                                                
Number 2344                                                                                                                     
                                                                                                                                
REPRESENTATIVE CROFT asked Commissioner-designee Poe how the state                                                              
has been paying for the Y2K efforts.                                                                                            
                                                                                                                                
COMMISSIONER-DESIGNEE POE replied the state has been paying for it                                                              
out of the Risk Management Fund.  The state has used about $2.1                                                                 
million to $2.2 million to date.                                                                                                
                                                                                                                                
REPRESENTATIVE CROFT asked Commissioner-designee Poe whether using                                                              
money from the Risk Management Fund was appropriate because of the                                                              
potential liability risk.                                                                                                       
                                                                                                                                
COMMISSIONER-DESIGNEE POE replied right.  The state would be                                                                    
exposed to more suits without taking a due diligent effort.  The                                                                
Risk Management Fund is used to settle suits and it also made sense                                                             
to use it to avoid suits.                                                                                                       
                                                                                                                                
CHAIRMAN KOTT stated it was a good business decision.                                                                           
                                                                                                                                
CHAIRMAN KOTT indicated that the bill would be held over for                                                                    
further consideration.                                                                                                          

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