Legislature(1999 - 2000)
02/21/2000 03:23 PM House L&C
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HB 284-UNINSURED MOTOR VEHICLE INSURANCE CHAIRMAN ROKEBERG announced the first order of business would be HOUSE BILL NO. 284, "An Act relating to uninsured and underinsured motor vehicle insurance." Number 0095 PAT HARMAN, Legislative Aide to Representative Pete Kott, came forward to testify on behalf of Representative Kott, sponsor of HB 284. He stated that all of the committee members should have received a letter over the interim from Michael Cohn, attorney. He indicated Mr. Cohn might be online to testify. He said there is an apparent situation where there is a loophole in the law. There are situations where an uninsured "phantom" vehicle leaves the scene of an accident and may not have made direct physical contact with the victim. An example of this is the victim of an accident who is at a stoplight and is struck by a second vehicle, which strikes the victim as a result of a third vehicle striking the second vehicle, and then the third vehicle leaves the scene of the accident. Since the current law requires direct physical contact, the victim is not able to collect under their uninsured motorists insurance because the "phantom" vehicle did not make direct physical contact with the victim's vehicle. The intent of HB 284 is to correct this situation. There is also a proposed amendment to HB 284 which reads as follows: Section 1. AS 28.20.455(f) is amended to read: (f) If both the owner and operator of the uninsured vehicle are unknown, payment under the uninsured and underinsured motorists coverage shall be made only where direct physical contact between the insured and uninsured or underinsured motor vehicles has occurred, or where the accident is witnessed by a disinterested person, not occupying the insured vehicle, who will attest to the facts of the accident and the involvement of a motor vehicle that left the accident scene without being identified. A vehicle that has left the scene of the accident with an insured vehicle is presumed to be uninsured if the person insured reports the accident to the appropriate authorities within 24 hours. Insert twice the underlined portion above to the underlined section of bill: Section 1, page 1, lines 7-8. Section 2, page 1, line 15 through page 2, line 2. There have been discussions with people in the industry, and they are coming forward with a compromise that may satisfy industry and some of the consumer aspects of the bill. When the laws were drafted this loophole was an unintended oversight and HB 284 is a fairly simple concept attempting to correct the situation. CHAIRMAN ROKEBERG asked if the amendment pertains only to Section 1, subsection (f). MR. HARMAN clarified the amendment pertains to both Sections 1 and 2 in HB 284. The intent of the amendment is in situations where direct physical contact does not occur to have a disinterested witness, other than the insured, attest that a "phantom" vehicle was involved. Number 0392 CHAIRMAN ROKEBERG wondered: You say you're at a stoplight and you're car A, there's somebody behind you that's car B. And car C comes down the pike and hits car B in the back which hits car A...Is that kind of what happened in that back pattern there? MR. HARMAN clarified that is not the case that Mr. Cohn will testify to, but it is a more simple example of the situation he was trying to describe. CHAIRMAN ROKEBERG wondered whether, if nobody else was around, the driver of car B could be considered a disinterested party. MR. HARMAN said he believes the driver of car B would be considered disinterested with respect to the amendment. CHAIRMAN ROKEBERG said it is important to make sure this is not an undue burden on the industry and in no way would affect consumers negatively. He also commented that it is important to make sure the insurance companies pay when there is damage. Number 0582 MICHAEL COHN, Attorney, testified via teleconference from Anchorage. He noted that he had a situation come up regarding the impacts of AS 28.20.445(f). This is the reason he had written a letter to all of the Alaska state legislators regarding this statute. He explained: I was working for a law office and representing a woman that had been struck by another vehicle on O'Malley Road in Anchorage. The other vehicle had crossed the center line and struck her. That vehicle was uninsured, and I felt that we had some clear fault involved, so we sought uninsured coverage from the injured party's insurance company. However, their defense was that the individual that crossed the line and hit her was faced with a sudden emergency when another vehicle came out from a side street blocking his line of traffic causing a sudden emergency which resulted in him losing control of his vehicle. And, at the time, I was unaware of this provision and I said, well, even if that other vehicle that left the scene would be the equivalent of an uninsured vehicle and so it wouldn't matter which one had actually hit her, there would still be liability and then I was informed of this provision. And when I looked it up, since the first person was claiming that the vehicle that left the scene was the cause of the accident and it did not directly strike my client, they were then claiming that there was no liability under the uninsured motorist coverage. And, in this case, there happened to be other witnesses who had seen the other vehicle which left the scene. So, I assume that the reason for the provision in the first place was so that someone couldn't leave the road due to their own negligence or carelessness, strike a tree, and then claim that they swerved to avoid another car that they couldn't locate. In this case, we have other witnesses. It was clearly witnesses that were not with just the injured individual that would attest to the other vehicle that actually caused the accident. CHAIRMAN ROKEBERG asked if his client swerved and hit something. MR. COHN clarified that his client actually got hit by another car. The person driving the car that hit his client claimed he was not negligent because he was avoiding another car. CHAIRMAN ROKEBERG wondered if the person who hit Mr. Cohn's client had insurance. MR. COHN stated that he was uninsured. Some money was recovered from him because his own reactions to avoid an accident were in dispute. In certain circumstances, the person who hit his client might be found to not be involved even though he hit her because of a third vehicle. He thought this circumstance was the type that could affect every person in Alaska because most people have uninsured motorist coverage. CHAIRMAN ROKEBERG wondered if this situation deals with proximate cause. He said it is a classic tort case. MR. COHN said the problem with this case is with the way the statute is worded. There would not be any recoveries for the fault of the car that did not strike the injured person. His client thought she could not recover under an uninsured motorist coverage against the person that came out of the side street. Number 0899 CHAIRMAN ROKEBERG asked if there are any cases in court law that give direction about whether or not they should refer back to the proximate cause. MR. COHN said the big problem is the way the statute is worded. He explained that under proximate cause a person can cause an accident and not be the person that directly strikes the other vehicle. Direct physical contact means that a person might be the negligent party that causes the accident, but not be the one that directly, physically impacts the other vehicle. As the statute is worded, that person might be the proximate cause of the accident, but then be absolved of liability. CHAIRMAN ROKEBERG asked, "For the statute then you'd have a causative action against that person pulling out onto the roadway then, you think under tort law?" MR. COHN replied a person could have had a claim under uninsured motorists coverage. The woman involved in the accident he described earlier would have recovered for full damages. CHAIRMAN ROKEBERG wondered if a person could claim under the uninsured motorists coverage if the responsible party drove off. MR. COHN responded yes. Number 0991 REPRESENTATIVE MURKOWSKI described a scene in which a dog darts out into the road and is responsible for causing an accident. She wondered if it would be correct that this situation would not be covered because it is not a motor vehicle that left the scene. MR. COHN has not analyzed that before. Because this pertains to uninsured and underinsured motor vehicle insurance, the accident would have to involve an uninsured or underinsured motor vehicle for that particular coverage to take affect. He is not sure what the affect would be if a dog or something else was responsible. REPRESENTATIVE MURKOWSKI is trying to think this through. From what she has read in statute, it appears it has to be an uninsured vehicle which is unknown. MR. COHN said that is correct. REPRESENTATIVE MURKOWSKI reiterated that it has to be an uninsured vehicle which precipitates the event. MR. COHN added that if it is an unknown vehicle he believes under the law that vehicle would be considered an uninsured vehicle. He noted that the statute states, "the vehicle that has left the scene of the accident when an insured vehicle is presumed to be uninsured, if the person insured reports the accident to the appropriate authorities within 24 hours". He said under the statute as it is presently worded, that vehicle would be presumed to be uninsured. He has a question regarding the language and stated: I see this language as sort of a compromise in that, if there's a concern about a person that there's no other witness to that can then make a claim that they were struck when they swerved on the road on their and there's no other witness to the accident. I don't know if there's that concern which is why this bill as written would protect the client that I had if that similar situation happened in the future, but might not protect every individual that is in an accident with an uninsured vehicle that leaves the scene. So, that's one question. The second one I had where it says "a person other than the insured"; So, you can have a situation where somebody's driving in a car and, even if they have passengers with them, in certain situations, those other passengers could be considered covered under the insurance. So, would these passengers in the car be insured and whether their testimony would be sufficient to support recovery, is the question I have under this bill. Number 1243 CHAIRMAN ROKEBERG said that is a good point. He wondered if Mr. Cohn is referring to the suggested amendment and whether or not he has a copy of it. MR. COHN wondered if Chairman Rokeberg is referring to the language which states "or where a person other than the insured attests that a motor vehicle involved in the accident left the scene without being identified". CHAIRMAN ROKEBERG responded no. The language he is referring to states "or where the accident is witnessed by a disinterested person not occupying the insured vehicle who will attest to the facts of the accident or the involvement of a motor vehicle that left the accident scene without being identified". MR. COHN wondered if the version, as it's worded now, means that the person could not rely on other witnesses that were in their own car. CHAIRMAN ROKEBERG stated that is correct. MR. COHN said, if he understood earlier testimony, they could perhaps rely on the testimony of the individual in the other vehicle who claims to have swerved to avoid an accident. CHAIRMAN ROKEBERG said that is correct and added that it could also be anyone else who may have been a witness to the accident such as a person standing on the sidewalk. He stated, "I guess the desire here is to not allow somebody to have a single car accident and then rely on trumped up testimony from a passenger to try and make a claim under uninsured motorists." MR. COHN replied that it seems to be a situation that can apply in all cases where people would be able testify. He wondered if it should be under the general rules of tort law or for an arbitrator to determine if someone is telling the truth because all of the uninsured motor vehicle provisions would probably have an arbitration clause in the contract. CHAIRMAN ROKEBERG stated that is a good question. He thanked Mr. Cohn for bringing this issue to the attention of the Legislature. MR. COHN said he is gratified by the number of responses he received by legislators. Number 1402 BOB LOHR, Director, Division of Insurance, Department of Community and Economic Development, testified via teleconference from Anchorage. CHAIRMAN ROKEBERG asked Mr. Lohr if he is in receipt of the bill and its amendment, and wondered if the Department of Community and Economic Development (DCED) has any comments on it. MR. LOHR stated he has seen the bill and Mr. Cohn's letter. He noted that the Division did respond to the letter. He asked if a copy of that response is available to the committee members. CHAIRMAN ROKEBERG indicated they are not in receipt of that response. Number 1430 MR. LOHR said: If I may I would just (indisc.) one example, a scenario that was set out in that letter which is the basis for the Division's support for the concept of the bill...Car 1 through no fault of Car 1's driver is hit by Car 2 only because Car 3, whose driver was acting negligently, struck Car 2 forcing it to hit Car 1. Car 3 flees the scene. In this scenario, Car 1 will not be able to recover damages from Car 2 because Car 2 will not be allocated fault under Alaska's comparative faults laws and, therefore, will not be legally liable for the damages to Car 1. Without legal liability, Car 2's insurer will not have an obligation to pay out under its policy. Car 1 will not be able to recover from Car 3 since Car 3 left the scene and the owner and operator are unknown. Car 1 also cannot recover under its uninsured/underinsured motorists coverage because it did not have direct physical contact with Car 3 as required by [AS 28.20].445(f). Car 1, therefore, is left without coverage for the damage arising out of the accident. This result is contrary to the intent of the motor vehicle safety responsibility and mandatory insurance laws where there's a single provision which is to ensure compensation for innocent victims involved in automobile accidents. Therefore, the Division supports HB 284 and could live with the direction that the amendment seems to be going. Number 1524 CHAIRMAN ROKEBERG asked if Mr. Lohr has seen the amendment. MR. LOHR stated he has not seen the actual text of the amendment, but has heard it described. CHAIRMAN ROKEBERG pointed out that the amendment would prohibit a witness in the car from being the disinterested party. He wondered if Mr. Lohr has a comment on that. MR. LOHR replied that he reserves the opportunity to follow-up. He observed that the Regulatory Commission of Alaska (RCA), in situations like this, gives the witnesses the weight they are due. He said the fact that a witness is in the car of an insured person would certainly be a factor the arbitrator would take into account, but would do so in an able manner. Number 1582 CHAIRMAN ROKEBERG wondered if there would have to either be an administrative hearing or litigation unless there is mandatory arbitration clause. MR. LOHR said that is correct. Number 1650 MICHAEL LESSMEIER, State Farm Insurance, came forward to testify on HB 284. He commented: I think that to view this in context you almost need to go back to 1983, which is when this state adopted mandatory insurance. And I would just briefly tell you that the current scheme that we have was a mandatory offer of uninsured and underinsured motorists coverage to be coupled with residents being required to also buy liability insurance to basically give people an ability to protect themselves from drivers that we know will drive uninsured no matter how much, or what the penalties are for driving without insurance. And so, what the legislature did is they struck a balance and it created a scheme for uninsured and underinsured motorists coverage because before in "1993" some companies were offering underinsured motorists coverage, but there weren't many. And we didn't have a comprehensive scheme, and so the legislature created a comprehensive scheme that had some balance. And the balance was to provide protection from uninsured and underinsured motorists in certain situations with the idea being that that coverage would then be affordable for people. And this provision was a provision that is commonly in statutes requiring uninsured and underinsured motorists simply to prevent fraud. What we have done is we have met with the sponsor in an effort to work out some language that would deal with the situation Mr. Cohn refers to, but also provide some reasonable protection from claims that are difficult to fight and claims that experience has shown we need to be protected from because ultimately the cost of uninsured and underinsured motorists is important for a number of reasons. That cost is ultimately borne by the people who purchase it and to the extent that this coverage gets too expensive, people won't purchase it. And so you want to keep the coverage at somewhat of an affordable level and that's why this balance was drawn. We tried to strike another balance in the proposed amendment that is before you and that balance would basically say that if there's is not physical contact. In other words, there is no objective way of tying this uninsured or underinsured vehicle to the accident. Then we at least need a disinterested witness who is not occupying the vehicle. And I think that balance is acceptable to the sponsor and I would hope that it would be acceptable to this committee. Number 1783 REPRESENTATIVE MURKOWSKI wondered how a disinterested party would be defined. She asked if it is something that needs to be defined as a person who, for example, is not related by blood or the individual in the car. MR. LESSMEIER stated that he believes "disinterested" would be defined as someone who is not in the car and somebody that is simply unbiased. He said it is a commonly defined term, and he does not think it needs to be defined. REPRESENTATIVE MURKOWSKI said it goes back to what somebody stated earlier regarding the weighting given to credibility of the witness. She commented: If, in fact, your only witness happens to be somebody that you have gone out and had a few beers with on several occasions; does that automatically disqualify him from giving any kind of credible testimony? I wouldn't think so, but I think that that should perhaps be taken into account when we look at his or her testimony. So, I would hate to think that you're automatically going to discard and say because you are a disinterested person, you knew this person from whatever relationship, therefore we can't take it into account. So, I would like to think that if we're going to say, if we're not going to define exactly what "disinterested" is, and I think that that is difficult to do, there does need to be some weighting that goes into the testimony that's being given by those individuals. CHAIRMAN ROKEBERG said he thinks Mr. Lessmeier's points are important. He said: The public policy issue here is a balancing of whether, perhaps, there may be a very rare injustice done to somebody that thinks they had insurance coverage when they get hit, by not paying that person off versus the larger citizenry of the State who may be, because of any relative increase cost, may be dissuaded from buying insurance which is mandated. And to not have some parameter here, like the disinterested or occupier, you would open yourself up to what I would consider; the insurance industry would open themselves up to any constant strain of claims that were bogus if not to say fraudulent. MR. LESSMEIER said that is basically it. CHAIRMAN ROKEBERG stated, "So, there's a matrix here of judgement that goes beyond just the view of this and it makes it a little more difficult." Number 1943 MR. LESSMEIER explained: There have been a number of changes made back since we originally adopted these mandated offers of uninsured and underinsured motorists coverage and I don't know if you folks have looked at the premiums that you pay, but the premiums for UM and UI, ... I know my own have gotten to the point where it's almost equivalent to what I pay for liability coverage. And part of that is because we have made change after change after change to these coverages over the years. We have increased the mandated offers to the point where I think the mandated offers now are something like a million, two million of coverage. It really is a good thing because that's really the only control we sometimes have is the ability to go out and purchase our own coverage. We can't control what other people do, but every time we make a change like, there also is a cost and whenever there's a cost and you raise the costs of a product then there are a certain number of people that, for whatever reason, will choose not to pay that cost. So, there always is a balance. CHAIRMAN ROKEBERG asked Mr. Lessmeier to provide the House Labor and Commerce Standing Committee and the House Judiciary Standing Committee with a brief description of what the costs have been historically and what the trend line is. MR. LESSMEIER said he would certainly try to do that. Number 2064 REPRESENTATIVE MURKOWSKI referred back to the issue of a disinterested person. She is concerned that they are not able to define it more. She realizes the issue can be delved into further in the Judiciary Committee. She feels comfortable moving the bill out of committee. REPRESENTATIVE HARRIS made a motion to adopt Amendment 1. REPRESENTATIVE BRICE objected. He concurs with Representative Murkowski's statements with respect to defining a disinterested person. He believes it muddies the waters a little more than he's comfortable with. He thinks there is a process by which the people who will have the final decision weigh the factors of whose presenting what. For this reason, he is more comfortable with this than just excluding somebody from being able to be a witness. A roll call vote was taken. Representatives Rokeberg, Murkowski, Sanders and Harris voted in favor of Amendment 1. Representatives Cissna and Brice voted against it. Therefore, Amendment 1 was adopted by the House Labor and Commerce Standing Committee by a vote of 4-2. REPRESENTATIVE BRICE made a motion to move HB 284, as amended, out of committee with individual recommendations and attached fiscal note. There be no objection, CSHB 284(L&C) moved from the House Labor and Commerce Standing Committee.
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