Legislature(2003 - 2004)
04/06/2004 01:50 PM JUD
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
HB 336 - CIVIL DAMAGES FOR UNINSURED DRIVERS Number 2137 CHAIR McGUIRE announced that the next order of business would be HOUSE BILL NO. 336, "An Act limiting recovery of civil damages by an uninsured driver; and providing for an effective date." Number 2128 REPRESENTATIVE KEVIN MEYER, Alaska State Legislature, sponsor of HB 336, explained that the bill has three provisions. It provides that persons who do not comply with existing motor vehicle laws may not recover for damages for noneconomic loss suffered while operating their cars. Second, it provides that punitive damages are not required to be of the mandated offers of uninsured/underinsured motorist coverage. Third, it clarifies that insurance companies are not required to offer uninsured/underinsured motorist coverage on insurance policies that provide coverage for auto liability on an excess or umbrella basis. REPRESENTATIVE MEYER mentioned that the first section was brought to his attention by a constituent who asked why his [car insurance] payments had to be made every six months when his neighbor did not even have insurance and yet could drive. Representative Meyer agreed it was not fair, and noted that other states had passed legislation similar to HB 336 called "no pay, no play." Driving is a privilege, and unless you pay and abide by the laws of the state, then you shouldn't be able to drive," he said. He pointed out that recently California passed Proposition 213, by a 77 percent vote, even though it was estimated that 35 percent of the people did not have insurance. In Alaska it is estimated that between 16-20 percent of drivers do not have car insurance. He said it is a matter of fairness to require that everyone have auto insurance in order to be able to drive in Alaska, and those who opt to break the law should not have the right to sue for damages. The uninsured motorist will still be able to recover for economic damages, just not the punitive - the pain and suffering - damages, he explained. Number 2006 REPRESENTATIVE MEYER explained that the second part of the bill has to do with clarifying what insurance companies are required to offer and what Alaskans are required to obtain as far as car insurance goes. He added: The Alaska Supreme Court handed down a decision in 2001 that said that uninsured/underinsured motorist coverage must mirror a policyholder's liability coverage. It was interpreted that if there is coverage for punitive damages under a person's liability policy, then a person's uninsured/underinsured motorist coverage must also have coverage for punitive damages. However, in the statute there is nothing requiring this. State statute only requires that financial limits on an uninsured/underinsured policy match the financial limits on a liability policy. There's also no requirement that a regular automobile liability insurance policy has punitive damage recovery. As you know, punitive damages are intended to punish or deter, and it's hard for me to see how an uninsured motorist is punished when they are seeking compensation from an insured person who's actually funding the right for recovery. So, in other words, you're paying that person to sue you for damages. REPRESENTATIVE MEYER related that the last part of the bill clarifies that uninsured/underinsured motorist coverage only has to be offered on automobile liability policies and not on insurance policies that provide coverage for automobile liability under an umbrella basis. The intent is to avoid repetitive offers; insurance companies don't have to offer that and people don't have to pay for repetitive offers, he explained. REPRESENTATIVE GARA said that Section 3 is a concern because he has umbrella insurance which allows him to buy up to $1,000,000 of uninsured/underinsured coverage. The insurance company does not offer that large amount of coverage unless an umbrella policy is purchased, he related. He noted that his liability insurance does not provide that coverage, but his umbrella coverage does. He asked if Section 3 interferes with this type of umbrella coverage. REPRESENTATIVE MEYER deferred to the insurance industry speakers for the answer, but said he thinks it is optional and not a requirement. REPRESENTATIVE GARA said it is mandated under current law that insurance companies have to offer the right to buy up to $1,000,000 worth of uninsured/underinsured coverage. He said he is worried that [HB 336] might roll that back. REPRESENTATIVE MEYER replied that all the bill is trying to do is avoid repetitive policies. Number 1849 JOHN L. GEORGE, Lobbyist for Property Casualty Insurers Association of America - which, he explained, consists of companies that write about 50 percent of all the automobile insurance in Alaska - answered Representative Gara's question by saying that the mandatory offer is under the primary auto insurance policy and low limits or up to $1,000,000 coverage can be bought. It is not reduced by not having it under an umbrella policy, unless it is a policy in excess of $1,000,000, he added. Number 1797 REPRESENTATIVE SAMUELS moved to adopt the proposed committee substitute (CS) for HB 336, labeled 23-LS1254\D, Bullock, 2/23/04. There being no objection, Version D was before the committee. REPRESENTATIVE GARA repeated that his insurance company told him he could not buy $1,000,000 worth of insurance unless he bought the umbrella policy. He said he does not want to interfere with the right to buy that policy. MR. GEORGE replied that he is certain that the mandatory offer is by the primary carrier and has nothing to do with the excess policy and suggested that Representative Gara may have been misinformed or may have misunderstood his options. He offered to follow up on it. REPRESENTATIVE GARA said he has been misinformed by his insurance company before. MR. GEORGE continued to explain his extensive background with insurance and said that as director and deputy director of the insurance division he frequently got calls from consumers who were upset because other people did not have insurance, causing their insurance rates to go up if there was an accident. He noted that there have been many attempts to get people to buy insurance by mandating it, but it remains a problem with 16-18 percent uninsured drivers. He said there are test questions on the driver's license exam regarding the requirement to have insurance, and there are vehicle registration requirements certifying that the owner has liability insurance, and yet, a significant portion of drivers lack insurance. As a result there was a mandated offer of uninsured/underinsured motorist coverage so people could protect themselves from people who did not have insurance. He mentioned that there have been a number of attempts to make people aware that automobile insurance is a requirement. This bill would restrict a person's ability to collect the noneconomic damages and would serve as a reminder and as a penalty for driving without insurance, he concluded. Number 1583 MR. GEORGE gave an example of some of the problems related to umbrella policies. Many companies have stopped writing umbrella policies or have sought other companies that would write umbrella policies over their own company's policies. He stated that there are advantages for having the same carrier for primary and excess policies. It is more efficient and practical, but, at this point, not possible with some insurance companies today, he said. REPRESENTATIVE OGG read on page 2, [lines 10-12], "coverage for punitive damages that might otherwise be recoverable from an uninsured or underinsured person is not required under this paragraph", and asked if someone who is uninsured drove recklessly and "ran into you, but you had [uninsured]/underinsured insurance on your policy, basically, does this paragraph say that you won't be able to collect punitive damages under that policy?" MR. GEORGE replied, "You would not collect punitive damages under your own - your self-procured - uninsured/underinsured motorist coverage. Yes, that's correct." He explained that the logic behind that idea is that punitive damages are designed as a punishment and are extra damages, not for medical or vehicle or pain and suffering. He asked, "If you're the uninsured person and I collect punitive damages from my insurance carrier, and that means I have to pay more for my insurance to cover that, what punishment is it to you?" REPRESENTATIVE ANDERSON offered another example. If someone drives drunk on the wrong side of the road down Egan Drive, "they're itching for a punitive claim against them, because that's punishment," if they hit someone who has no insurance. He asked if the person who was hit could sue for punitive damages. MR. GEORGE said a person can always sue. Just because a person does not have insurance does not mean they don't have assets, and a judgment and collection may be obtained. But insurance is the issue, he said, and he maintained that "my insurance shouldn't have to pay punitive damages for his negligent act, but they will pay for my car, my medical bills, my pain and suffering ...." Number 1323 REPRESENTATIVE GRUENBERG asked if the justification for Section 1 is purely punitive. MR. GEORGE said no. REPRESENTATIVE GRUENBERG asked if there is another justification. He said he thought that the logic is to punish those who are uninsured by not allowing them to get recompense for pain and suffering. MR. GEORGE replied that is correct. REPRESENTATIVE GRUENBERG asked, "Can you think of any other logic to support that section? Any other policy basis?" MR. GEORGE replied that the legislature, in its wisdom, determined that everyone should have insurance and no one should drive without insurance. This is a punitive deterrent for the misbehavior of failing to provide coverage, he said. "I'm reminded of the Golden Rule - do unto others as you would have them do unto you. You are required to buy insurance to protect the other person from your actions. You failed to do that. Should the other person have to protect you from their actions?" The other logic is that an invoice can be produced to show the cost of damage to a car or medical bills or lost wages, but pain and suffering has no hard number, he concluded. REPRESENTATIVE GRUENBERG surmised that the real policy behind this is to eliminate pain and suffering [damage claims]. MR. GEORGE disagreed. He said the real reason for [the bill] is for it to be a deterrent, to encourage people to buy insurance so that this would never take effect. REPRESENTATIVE GRUENBERG said these are really two very different issues. He repeated that he believes the real policy driving this bill is the desire to limit pain and suffering as damages. He said if that is true, "We should talk in frank terms about the fairness or unfairness of pain and suffering. The only justification I've heard hear is that it is difficult to measure in dollars and cents. That's a far cry from saying it's not fair." He implied that if pain and suffering is eliminated entirely, it would save clients in the insurance industry millions of dollars annually. He called it a terrific windfall for the insurance industry. MR. GEORGE replied that 20 percent [of drivers] are not paying insurance premiums. REPRESENTATIVE GRUENBERG asked about the other 80 percent. MR. GEORGE said the bill is not designed by the insurance industry to get out of paying noneconomic awards. He said the industry supports the bill, but it really is to encourage people to comply with the law. Number 1010 REPRESENTATIVE GARA called the bill oddly incongruent and said it does not seem to address the policy concerns that seem to be the basis of the bill. The first part of the bill benefits a bad actor. It says that if a person drinks, drives, and has an accident with an uninsured motorist, that person does not have to pay the noneconomic damages. He said he is not sympathetic to that idea. He asked if he is missing something. MR. GEORGE replied that the bill is directed at people who are violating the law by not having insurance. "Had they complied with the law, under that scenario that you gave, they would be entitled to collect noneconomic damages," he said. REPRESENTATIVE GARA said he is being asked to benefit the person who injured other people and he is not willing to do that, so he is not supportive of the first part of the bill. The second part of the bill seems to be just as illogical, he opined. He asked if Mr. George would agree to say that all insurers would have to offer uninsured/underinsured coverage. He said he wants to have the opportunity as a consumer to buy a large amount of coverage. MR. GEORGE said it could be called something other than a punitive damage award. He suggested "compensatory damages or windfall profit," because it really is not punitive to anyone else but the person who has to pay for it. REPRESENTATIVE GARA said one of the recognized purposes of punitive damages is punishment, but another is the implicit recognition that compensatory damages never really end up fully compensating anyone after taxes and attorney's fees, and there is that aspect in the wording "punitive damages." REPRESENTATIVE ANDERSON asked if those are Representative Gara's thoughts or legal standards. REPRESENTATIVE GARA replied, "In legal discussions." He said it is really just about what a consumer gets to buy, so he said he agrees with Mr. George that maybe it shouldn't be mandated. MR. GEORGE said he believes that [compensatory awards] are not taxed. REPRESENTATIVE GARA replied that compensatory and punitive damages are taxable in a personal injury case. He said there may be certain classes of cases where they are not taxed. MR. GEORGE repeated that he believes that they are not taxed. Number 0656 REPRESENTATIVE ANDERSON said that Representative Gruenberg made a good point that someone in the Office of the Attorney General said that the "50 percent rule to the state" applied on punitive [damages]. He said he would like to hear an opinion of the bill from the Office of the Attorney General. MR. GEORGE said, "That is an interesting concept where you're buying insurance to pay yourself for punitive damages, but half of it goes to the state." REPRESENTATIVE HOLM said he understood Mr. George to say: The qualifications for insurance were not necessarily in the best interest of all of us, and by us having mandatory insurance you have to provide it at whatever cost you can provide it for. But, in general, it seems to me that it somehow raises the bar, then, because your exposure is increased as the level of inexperience or bad driving ... enters into the equation. REPRESENTATIVE HOLM said the problem is that just because a person passes the driver's license test, it does not give him/her the right to drive. He asked Mr. George for his thoughts on the matter. MR. GEORGE replied that the legislative branch has to balance what's good for the insurance company with what's good for the public. He said he thinks that the decision of everyone being insured is good public policy. "The insurance companies would prefer not to have to offer it," he said. "But, because it is mandated, there is an assigned risk plan. If no insurance company wants to write it, then they're assigned and an insurance company will write it and it's more expensive, but it's certainly not a money maker." REPRESENTATIVE OGG asked why "punitive damages" is left out of Section 1. MR. GEORGE replied it is not his bill and that he can take some responsibly for the uninsured motorist additions to the CS, but Representative Ogg may have to ask the sponsor his intent on that section. Number 0395 CHAIR McGUIRE said, "There are noneconomic damages which are loss of consortium, loss of your ability to hold your child ...." REPRESENTATIVE GARA said that noneconomic damages are intended to compensate the person, to make the person whole. They are not punitive but compensatory, he explained. Punitive damages are deterrents and punishments, he added. CHAIR McGUIRE said generally that is true, but "some people would argue that 'noneconomics' go beyond compensatory." REPRESENTATIVE OGG said the point of the bill is if someone is a bad actor, and they have "dirty hands", they are not going to get the benefits. He asked why an uninsured person does not lose both noneconomic and punitive damages. MR. GEORGE deferred to Mr. Lessmeier and to the bill sponsor to answer that question. CHAIR McGUIRE stated her intent to finish with the public testimony and then set the bill aside. Number 0158 DONNA J. McCREADY, Attorney at Law, Ashburn and Mason, said she thinks it is great public policy to create incentives for people to be insured when driving, and that there already exists a penalty for driving without insurance in that a person could lose his or her license. However, this bill does not actually do anything to meet the goal of getting people to drive with insurance, she opined. She mentioned the Portage Glacier Road Case where a drunk driver drove his truck into a lake, was able to get the truck out of the lake, and then hit a vehicle containing two teenagers and their grandparents head-on. The grandparents did not have insurance, she noted. TAPE 04-60, SIDE A Number 0001 MS. McCREADY continued to say that the two teenagers died and the grandparents were seriously injured. Under this bill these people would not be able to recover noneconomic damages for pain, suffering and loss. The mother of the teens who were killed could not seek recompense from the drunk driver. She emphasized that these cases do happen and the bill would affect these people. She said the bill instead should target the people who cause accidents who do not have insurance. REPRESENTATIVE OGG said it appears from the way [HB 336] is written that the person who is driving without insurance is not protected, but everyone else in the car is protected. MS. McCREADY said that is a question she still has. She pointed out that for children under 18, economic damages are not very high. She asked for clarification on the issue that Representative Ogg raised. Number 0291 MICHAEL J. SCHNEIDER, Attorney at Law, Law Offices of Michael J. Schneider, PC, said that these issues are extremely complex. The first part of the bill is a blatant gift to the insurance industry that cannot accomplish its stated goal, he opined. He noted that Alaska has a mandatory requirement to have insurance before one can get a driver's license and if one drives without insurance and has an accident one will lose that license. He also said that in the face of those disincentives, one out of five people is still driving without a [insurance]. He maintained that this bill will pose no incentive to [uninsured] drivers who are just "trying to stay even with life" to worry about damages they might incur. He emphasized that the insurance company will benefit by this bill. MR. SCHNEIDER termed the second part of the bill "solutions in search of a problem." The Alaska Supreme Court has adopted the mirror image approach in analyzing some insurance questions, so if an insurance company, an uninsured/underinsured carrier, does not want to be on the hook for punitive damage exposure, all they've got to do is carefully write their policy, he stated. MR. SCHNEIDER addressed the third provision of the bill regarding umbrella coverage. The insurance industry, in spite of legislative demands that it offer uninsured limits up to certain levels, and without regard to the elected liability level, for years has refused to comply with the law, he related. He said it is possible that Representative Gara did get the wrong advice from his carrier because many people do not get the insurance that they are entitled to. He noted that uninsured coverage can be waived in writing and said there is nothing wrong with the Alaska Supreme Court's determination that uninsured coverage can be attached to an umbrella policy. He said it is not a problem and there is no need to address it legislatively. Number 0818 MICHAEL L. LESSMEIER, Attorney at Law, Lessmeier & Winters, Lobbyist for State Farm Insurance Company ("State Farm"), said that when he started doing legislative work in 1983, one of the most controversial issues was the issue of mandatory automobile insurance. He relayed that he has worked on every bill related to the "mandatory automobile insurance scheme" that is in effect in this state, and he also worked on the connected system set up for mandated offers of uninsured/underinsured motorist coverage, which was an idea by the insurance industry in recognition of the fact that there are going to be people that drive without insurance. [State Farm] has about 26 percent of the market, he reported, or 123,511 policies in force. "In spite of what my colleague Mr. Schneider told you, we think we do a good job of selling uninsured motorist coverage, [because] 96 percent of our policyholders have uninsured motorist coverage," he said. MR. LESSMEIER related that in 1983, there was a bill introduced by then-Speaker of the House, Joe Hayes, and the concern at that time was the uninsured motorist population. In the last 20 years there have been numerous changes in legislation and still 16-18 percent of drivers are uninsured, and so one out of every five or six accidents is going to be uninsured, which is a significant problem for policyholders. He said that many other states have addressed this issue. The rationale for the "no pay, no play" was recently before the New Jersey Supreme Court in February of 2004. In a couple of sentences the policy is explained. He read: The law advances a policy of cost containment by ensuring that an injured uninsured driver does not draw on the pool of accident victim insurance funds to which he did not contribute. The legislation thus gives the uninsured driver a very powerful incentive to comply with the compulsory insurance laws, obtain automobile insurance coverage, or lose the right to maintain a suit for both economic and noneconomic injuries. MR. LESSMEIER continued to say that in New Jersey, if somebody drives without insurance, they don't get to collect either economic or noneconomic damages. Referring to Representative Gruenberg's question whether this bill is purely punitive or not, Mr. Lessmeier replied that it is not. It is intended to ensure responsibility and fairness to the 82-84 percent of the driving public that does pay for [insurance], he concluded. Number 1098 MR. LESSMEIER said that there were a number of questions raised about "benefiting a bad actor" and hurting somebody that is totally innocent. He maintained that somebody that drives without insurance is not totally innocent. They have a choice in advance; if they want the protection of the system they need to contribute to the funding of the system, he said. "That is a matter of fairness and that is a matter of responsibility," he added. MR. LESSMEIER opined that there is nothing in Alaska law that says the purpose of punitive damages is compensatory. "Punitive" by its very definition is punishment, and when that issue goes to the jury, the jury has already decided the issue of compensatory damages, he explained. He urged the committee to not get sidetracked by that issue. CHAIR McGUIRE asked Mr. Lessmeier about the line between compensatory and punitive damages, such as noneconomic damages. MR. LESSMEIER replied that he would categorize punitive damages as noneconomic damages in the context of this bill because they are not quantifiable. CHAIR McGUIRE responded, "You're saying that noneconomic damages, in your opinion, are the same as punitive?" MR. LESSMEIER replied, "No, what I would say is when we created the limits for noneconomic damages in the tort reform, clearly those limits did not include punitive damages. There's no question about that." He said it depends on how the committee defines the term noneconomic. "If the committee is concerned about letting go the person who is the supposed wrong-doer that commits a bad act, then perhaps you wouldn't want to include punitive damages within the definition of noneconomic," he suggested. CHAIR McGUIRE said it probably relates to the 1997 tort reform legislation and the way that [insurance companies] write their policies. She asked if it is the case that noneconomic damages and punitive damages are lumped together. Number 1307 MR. LESSMEIER said they are not really covered that way in the policies. The way the policies are written and the discussion of concern regarding punitive damages has to do with Section 2 of the bill, he explained. The Alaska Supreme Court adopted the mirror rule in [State Farm Mutual Automobile Insurance Co. v. Lawrence]. "If we sell coverage for punitive damages under the liability portion of the policy, ... it means that we now have to sell that coverage and include that coverage in the uninsured/underinsured motorist coverage. And it makes absolutely no sense for our policyholders to pay a premium so that they can recover punitive damages. They're not punishing someone else, because that someone else is not paying those punitive damages," he said. Furthermore, 50 percent of the damages must go to the state, he added. CHAIR McGUIRE asked Mr. Lessmeier if it is his belief that because of the mirror image rule, without a statutory change there is no way for State Farm to do what has been suggested about offering various choices to the consumer. MR. LESSMEIER replied, "We can't." He pointed out that he has a choice with two consequences because of what the Alaska Supreme Court did. The first consequence is "we change our liability policy, ... we take away the coverage where people may really need it and they really want to pay for it, just because it makes another coverage more expensive, where it makes no sense to have that coverage. So we'd have to take it away from the liability policy in order to do what Mr. Schneider talked about. It makes no sense for us to do that." CHAIR McGUIRE added, "Just to get around it." MR. LESSMEIER continued, "The problem is ... that people don't have that choice; they could have the choice by going and purchasing a policy that doesn't provide it on the liability side, so it doesn't provide it on the uninsured/underinsured motorist side, also." CHAIR McGUIRE summarized her understanding by saying it's unfair to allow somebody who is breaking the law to avail themselves of higher privileges. Number 1505 MR. LESSMEIER responded by saying that for somebody who has not contributed to the system that everyone else pays for, it's unfair to allow him/her full participation in that system. He repeated it is an issue of fairness and responsibility. He responded to Mr. Schneider's comment that the only people who would benefit by this are the insurance companies, by saying that the challenge to the insurance industry has been to make its products affordable. He continued: If we look back at our 20-year history - we go back to 1894 - we have decreased rates six times. We have increased rates a number of time, too, but we do what we're able to do in terms of the market. We look at this particular coverage over the last four years; we have paid out in terms of our expenses and our claim payments, about $1.70-something for every dollar that we've take in. We go back over the last 20 years and we look at what the premium structure has been with respect to uninsured/underinsured motorist coverage versus what it's been for bodily injury and property damage coverage. Now uninsured/underinsured has increased much more rapidly and, of course, we've made many, many significant changes to the law during that period of time. But, there's a cost. We don't believe it is in the interest of our policyholders to be funding punitive damage claims against ourselves. We do not believe it is necessary to make these mandated offers on pure excess policies when they are made on the underlying automobile policy at the time the person purchases the vehicle and at every single time of renewal, and they're made in writing. And if they're not made, there are significant ... consequences. CHAIR McGUIRE asked if insurance rates will be decreasing. MR. LESSMEIER replied that there is no way to answer that question. He referred to the tort reform legislation of 1997 and said there is not a clear answer as to whether it is constitutional or not. He said HB 336 will work in two different ways if it is passed. It will be a deterrent and there will be fewer people on the roads without insurance. He also predicted that claims will be reduced by people without insurance, and he said he hopes that will reduce the cost of premiums. CHAIR McGUIRE said she doesn't think it will act as a deterrent. Number 1663 REPRESENTATIVE HOLM presented a hypothetical situation of a wealthy person who chooses not to purchase insurance. This action says that the person is electing not to be able to collect damages because he or she makes plenty of money and is "self-insured," he said. He asked what is wrong with that picture. MR. LESSMEIER said that is a debate that was held back in 1983- 4, and there is a way for a self-insured person to avoid the mandatory insurance laws. CHAIR McGUIRE asked how that is done. MR. LESSMEIER replied that he would have to go back and look at the statutory scheme to be able to do that. CHAIR McGUIRE asked Mr. Lessmeier to bring that information tomorrow. MR. LESSMEIER related that the policy made back then required all people who drove to have at least a minimum limit of liability, "50/100/25." He said that that coverage for most people has remained relatively affordable. He said a system cannot be created in Alaska that would allow for the policing of the self-insured. People are mandated to buy insurance at a certain level and the insurance companies are mandated to make the offers summarized on page 2 of the proposed CS. He said it is not a perfect system, but it is the best system currently available. Number 1784 REPRESENTATIVE HOLM said he objected to several things that Mr. Lessmeier said, such as the implication that people are "guilty" if they didn't benefit the general public when they choose to self-insure. He maintained that the public is not hurt by a wealthy person not carrying insurance. He questioned whether the legislature should be passing laws to benefit insurance companies. MR. LESSMEIER said he did not mean to offend Representative Holm. He said he didn't think that this bill will benefit the insurance companies, but the benefit will be passed along. He said: I think that if we're going to go back and debate the issue of mandatory insurance at the very beginning and try to create a system that would exempt those that are in your situation, that you described, then we have to talk about a different system. I applaud those people who are able to be financially responsible. Most people can't. I don't know that we've figured out a way to enforce a system like that. REPRESENTATIVE HOLM recalled that his father was self-insured for fire insurance for years because he didn't borrow money from the bank. CHAIR McGUIRE said it is a tough debate whether to have mandatory insurance or not. Number 1893 REPRESENTATIVE GARA, responding to the earlier discussion of noneconomic damages such as pain, suffering, loss of enjoyment of life, stated that those are compensatory, not punitive damages according to statutory definition. MR. LESSMEIER replied that the noneconomic damage caps that were passed were not intended to limit punitive damages. There is a separate section of that legislation that addresses punitive damages, he added. REPRESENTATIVE OGG referred to Section 1 and the New Jersey Supreme Court saying that no damages are awarded [to uninsured drivers]. He said he wondered about the justification of awarding economic damages in Alaska. MR. LESSMEIER opined that the Alaska Supreme Court would uphold this section of the bill because it is a legislative policy choice about where to draw the line. He said he also believes that it is in the legislature's power to go further with this legislation in the hope that it might achieve more. He said he suspects this [bill] comes from what was passed in California. There are six or seven states that have also done some variation of this, he added. REPRESENTATIVE OGG said he does not buy the "deterrent" argument that much and may be interested in adding a sunset clause of five or seven years; then, if it doesn't show a measurable deterrent, maybe that portion is not needed. He said he still has questions about the section that deals with punitive damages. MR. LESSMEIER explained that what the bill basically says is that "we don't have to." Simply because it is sold in the liability portion of the policy, does not mean it has to be included in the uninsured/underinsured portion of the policy. He opined that there won't be much of a demand for that product because people won't want to fund the ability to recover punitive damages against somebody else. Number 2119 CHAIR McGUIRE asked whether, if one of these cases went to court, would the fact that somebody is uninsured or underinsured go toward contributory negligence. MR. LESSMEIER replied that the only possible way that that could come into evidence would be on a punitive damage claim. If part of what they're covered for on the liability portion of the policy is punitive damages, then there's a pretty good argument that evidence of amount of insurance would go to the jury, he opined. REPRESENTATIVE GARA pointed out that the 1997 tort reform legislation did go to the Alaska Supreme Court where it was upheld. MR. LESSMEIER explained that whenever a piece of legislation like this is passed, there is a period of time where the legislation will be challenged, and different interpretations made. A good example of that is the [State Farm Mutual Automobile Insurance Co. v. Lawrence] decision. He relayed: Our product was never priced to cover punitive damages on uninsured/underinsured motorist coverage. ... Many of the umbrella policies were not priced to cover uninsured/underinsured. So we don't know what the court's going to do, and the example that I gave you is a valid one because, right now, as you know, the court upheld the constitutionality of tort reform, but it did so on a 2-2 decision, and a 2-2 decision is not precedent. MR. LESSMEIER noted that it took 10 years for California to litigate the constitutionality of the MICRA [Medical Injury Compensation Reform Act] that was passed. It's taken seven years in Alaska and there is not a definitive answer yet, he said. He opined that in looking back at the history of insurance in Alaska, the rates reflect the experience. He said he would like to think that [Alaska] is a competitive market. REPRESENTATIVE GARA replied, "I suspect that when you argue about the Alaska Supreme Court ruling that upheld our 1997 tort reform [legislation] ... in court, and you're on the defense side, I suspect that you tell the court that that is a definitive ruling." CHAIR McGUIRE relayed that HB 336 [Version D] would be set aside.