Legislature(2001 - 2002)
04/24/2002 01:12 PM House JUD
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HB 271 - CAP ON AVIATION ACCIDENT PUNITIVE DAMAGES Number 2279 CHAIR ROKEBERG announced that the next order of business would be HOUSE BILL NO. 271, "An Act relating to recovery of punitive damages resulting from an aviation accident; and providing for an effective date." [Before the committee was the proposed committee substitute (CS) for HB 271, version 22-LS0741\L, Ford, 4/19/02, which was adopted as a work draft on 4/19/02.] CHAIR ROKEBERG noted that although he had considered making alterations to Version L, he had instead come to the conclusion that it would be better to create a separate bill encompassing his ideas. Number 2321 REPRESENTATIVE JAMES moved to report the proposed committee substitute (CS) for HB 271, version 22-LS0741\L, Ford, 4/19/02, out of committee with individual recommendations and the accompanying fiscal notes. Number 2331 REPRESENTATIVE BERKOWITZ objected. He said: It just seems to me that we're tightening some the nuts, when there are some bigger problems and we could be fixing some of the bigger problems. I have not had the chance to study this in the same detail you have or ... [Representative Halcro has], but I do have a letter from the Division of Insurance to Representative Halcro dated February 2, 2001, which ... made me aware of a number of options that we're not using here.... We're trying to drive down the cost of insurance for air carriers solely through one mechanism, and there's other mechanisms available, and I am really frustrated by the lack of responsiveness from the insurance ... [industry] when it comes time (indisc.) you're asking for a quantifiable effect of what we're doing here.... It seems to me that an actuary could take the variables we're changing and come up with the impact on rates, and I didn't receive those responses. Now, I'm not averse to doing something with punitive damage awards; I don't think what we're doing here is much more than placating people who aren't really threatened by these punitive damages, but I look at options currently available but not used in Alaska - things like risk purchase groups, state-based joint underwriting, reciprocal insurers, risk retention groups - things that might require some ... CHAIR ROKEBERG interjected, noting that those alternatives would cost money. REPRESENTATIVE BERKOWITZ remarked that although that might be true, one should think of the cost to the people of Alaska if the state winds up without any air carriers. TAPE 02-54, SIDE B Number 2389 REPRESENTATIVE BERKOWITZ warned that the cost would be huge; the costs of goods and services and the cost of traveling around the state would all be driven up. He continued: The government ... ought to be helping people do what they can't do individually, and this is one of the instances where we can step in and help out. There's no market assistance plan, [no] ... joint insurance arrangement; we didn't have any of this kind of response. And ... I keep coming back to, nobody told me how what we're doing is measurably going to affect the problem. Number 2355 CHRISTOPHER KNIGHT, Staff to Representative Andrew Halcro, Alaska State Legislature, spoke on behalf of Representative Halcro, chair of the subcommittee on aviation insurance and vice chair of the House Labor and Commerce Standing Committee, which sponsored HB 271. He said that the subcommittee had looked at many different options. He stated: Many of those options require some appropriations of [$10 million to $20 million to $35 million] just to get started - seed money as we say - and in some cases, larger airliners were against those options, almost as if we were going to subsidize the smaller air carriers. This is only one option. I think what you're bringing up are some of the other options concerning "safety-related." ... This is one option that we'd like to push forward. There's a number of options.... A couple of other areas are the [Five Star] Medallion Program, implementing that somehow under the statutes, ... trying to figure out ... how to get ... death-, [accident-], and safety-related issues into the statutes somehow, to drive insurance rates down.... Another option would be to somehow get a fix on what your actual coverage is as far as liabilities - seat coverage. And I think we just worked up ... potentially another bill that may have to come forward next year, but would kind of try to clarify, within statute, what those seat limits would be. MR. KNIGHT continued: So, there's a number of different options we've been working on. I wish I could say I was here with this huge omnibus piece of legislation that addressed safety, addressed policy limits, addressed tort reform, but I don't have that piece of legislation here today. I've just got a small portion of it.... And to answer your other question about empirical ... evidence ..., Bob Lohr [Director, Division of Insurance] testified specifically ... that this legislation will attract more insurance companies into the state of Alaska. And it's going to have a direct benefit to the state of Alaska air carriers; it's going to allow people to stay in business. And I think that's pretty strong evidence, when you have the division director basically supporting a piece of legislation that deals with torts, saying that this is going to help the process. I wish I had the numbers, the actuarial numbers, [that] say this is going to lower it by 10 percent or it's going to maintain it at such and such - 5 percent - but I don't have those numbers. Number 2277 REPRESENTATIVE BERKOWITZ responded: It just frankly is not credible to me that an actuary can't tell you the difference in rates based on this change in variables.... What this is, is a change in the level of risk that the ... carriers have, and I don't know if there's any actuaries out in the audience - I think there's one that I know of who's got training - ... [but] it would seem to me that this is a variable you plug into a formula and you get an answer. And ... the reluctance to provide the answer suggests to me that ... it doesn't have a very big effect for the air carriers but might somehow lead to a windfall profit for the insurance companies. And ... that's my suspicion - I don't have any evidence for it - but that'd be my guess.... And I'd like to hear why I'm wrong; I don't want to cast aspersions unnecessarily, but I'm being told to just swallow whole hog the fact that just trimming down the amount of punitive damages is going to lead to this great savings in the state of Alaska, and nobody's shown me any numbers. I mean, I don't even know how we arrived at these numbers that are here as opposed to the numbers that were already there as opposed to another set of numbers; it's just numbers randomly chosen, or magically going to impact the ability of air carriers to exist in the state. So prove it to me - I got ... Missouri people in my background - just show me. MR. KNIGHT replied that he would take Representative Berkowitz's request for actuarial documentation to some of the major insurance companies, and provide any forthcoming responses to Representative Berkowitz. He noted that he has posed [similar] questions to a couple of insurance companies already, one of them being American International Group, Inc. (AIG), and he was hoping to get a response soon. He mentioned that although HB 271 was introduced last year, work on this legislation only started up again a couple of weeks ago and, thus, he doesn't yet have as much information for the committee as he would like. He added: "I think you've heard overwhelming testimony from every air carrier - almost - in the state that says, 'Hey, look it, this is going to help.'" Number 2179 REPRESENTATIVE BERKOWITZ responded: What I hear from those air carriers is a note of desperation, like, "Hey, do something now, and this is the only thing that's in front of us, and [so] do this." And, like I said, I'm not ... averse to doing this, but it just seems to me that we're not doing everything we can do, we're not addressing this thing comprehensively, and I'm getting a lot of stall from the insurance companies instead of some real help for the air carriers. REPRESENTATIVE KOOKESH commented that although he'd appreciate the additional information that Representative Berkowitz is seeking, he views HB 271 as just one of the small steps that can be taken at this time. He remarked that he is comfortable taking this small step, but acknowledged that there is more to be done, perhaps along the lines of Representative Berkowitz's suggestions. MR. KNIGHT indicated that Representative Halcro would be working on this issue further, and mentioned the [Five Star] Medallion Program as being a good program that will reduce the number of accidents. He noted that further revisions to the insurance statutes would also help the situation. CHAIR ROKEBERG mentioned he would like to have some mechanism in place that will further the efforts of the [Five Star] Medallion Program. He remarked, however, that, "We're having difficulty marrying the program for maintenance, safety training, and so forth into an actuarially acceptable type of insurance underwriting situation; it's very difficult to mandate to the underwriters exactly what ... [is needed]." Chair Rokeberg noted that Representative Andrew Halcro was present. Number 2018 REPRESENTATIVE JAMES restated her motion to report the proposed committee substitute (CS) for HB 271, version 22-LS0741\L, Ford, 4/19/02, out of committee with individual recommendations and the accompanying fiscal notes. There being no objection, CSHB 271(JUD) was reported from the House Judiciary Standing Committee.
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