Legislature(2001 - 2002)
05/11/2002 09:47 AM House RLS
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* first hearing in first committee of referral
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+ teleconferenced
= bill was previously heard/scheduled
SB 191-INSURANCE POOLING BY AIR CARRIERS CHAIR KOTT announced that the next order of business would be CS FOR SENATE BILL NO. 191(JUD), "An Act relating to insurance pooling by air carriers." Number 1836 REPRESENTATIVE McGUIRE moved to adopt Version 22-LS0590\S, Ford, 5/9/02, as the working document. REPRESENTATIVE BERKOWITZ objected. He pointed out that tort reform is [available] and the punitive caps are in place for the most part. Therefore, he objected to incorporating punitive caps with regard to aviation. Secondarily, Representative Berkowitz said that it seems to be a stretch to shoehorn commercial recreational activities that aren't aircraft related. CHAIR KOTT related his understanding that those who testified on insurance pooling with aircraft carriers testified that SB 191 was hollow since there was no funding mechanism. A roll call vote was taken. Representatives Morgan, McGuire, Joule, Porter, and Kott voted to adopt Version S. Representatives Kohring and Berkowitz voted against the adoption of Version S. Therefore, Version S was adopted by a vote of 4:2. The committee took an at-ease from 10:30 a.m. to 10:34 a.m. Number 1974 REPRESENTATIVE ANDREW HALCRO, Alaska State Legislature, testified as the sponsor of HB 271, which is incorporated in SB 191. Representative Halcro explained that Version S is a comprehensive approach to a number a growing industries in the state. He characterized it as improving the exposure risk of these industries, and their ability to calculate that exposure risk while being able to obtain affordable insurance coverage. Representative Halcro recalled the testimony heard in the House Labor and Commerce Standing Committee on this issue. Most of that testimony was from small Alaskan business owners, many of which are in the tourism industry. The testimony highlighted the threat of punitive damages, which drives up the cost of business and creates an uncertain insurance market. Alaska is a very geographically challenging and diverse state. For example, in some communities one can only arrive by air. However, due to the crippling cost of insurance, carriers have been [leaving]. He pointed out that two portions of Version S passed nearly unanimously in the House. Furthermore, there has been widespread support from the industry. Representative Halcro explained that [Version S] puts in place a pooling structure. Therefore, if the funds are obtained, rules and procedures of the pool can be established to govern it. And, hopefully, such actions would provide a stable insurance market for [the air carriers] and those in the relevant tourism market. REPRESENTATIVE BERKOWITZ inquired as to how the recreational activity provisions assist in the goal of protecting air carriers. REPRESENTATIVE HALCRO said the two industries, air carriers and tourism, go hand-in-hand. Many of the recreational activities are provided after the people are flown into an area. These two particular industries are both incredibly important to the growth of Alaska and its economy, he said. Number 2128 LINDA SYLVESTER, Staff to Representative Kott, Alaska State Legislature, announced that she would address Section 2 of HCS CSSB 191. She explained that Section 2 establishes the doctrine of inherent risk for participants in commercial recreational activities. Participation in a commercial recreational activity constitutes an acceptance of inherent risk. Therefore, the participant is contributively negligent to the extent that injuries result from the inherent risk, which is separate from an operator's negligence. This isn't an absolute shield against negligence and thus the parties can always go to court when a risk falls in a gray area. This is based on the stipulation that the parties have responsibilities that they must uphold, and in certain situations some of the recreational operators will have to increase the standards of notification to the participants. Stipulating the responsibilities for both the operators and the participants reduces the uncertainties regarding the legal responsibility for resulting injuries. Ms. Sylvester said, "This legislation is very important to encourage the continued availability of the outdoor recreational opportunities that are synonymous with Alaska." MS. SYLVESTER read the following statement from an operator who has been requesting this legislation for the last six or so years. She read the statement as follows: You probably don't notice many businesses going away from specific injury suits; that's generally not how this happens. What happens is the cost and time of defending yourself from these claims as well as drastically increasing insurance rates starts to outweigh the advantages of owning your own business. The bottom line gets eaten away enough so that the risk is no longer worth it. At that point, the business either tries to sell or they just go away. REPRESENTATIVE BERKOWITZ asked if any of these companies have approached the insurance companies and inquired as to how their rates would change if this legislation were to pass. MS. SYLVESTER pointed out that such information is proprietary information that isn't available. She recalled that the sponsor's staff suggested that it would take $1.5-$5 million to capitalize the insurance pool for aircraft liability. However, Representative Halcro's research revealed figures of between $30-$50 million because one [incident] will potentially cost $10 million. Ms. Sylvester mentioned the hush money paid to avoid suits, and noted that it does have an impact on insurance rates. REPRESENTATIVE BERKOWITZ surmised that the answer to his question is no. He then turned his focus to the commercial recreational activity. He posed a situation in which there is a bus accident and the bus is involved in a commercial recreational activity such as rafting. The accident is the result of negligence. Therefore, he interpreted this provision to mean that the employee of the raft company would be entitled to damages, whereas the client wouldn't be. MS. SYLVESTER said that this provision of statute doesn't negate anyone's ability to take their claim to court. REPRESENTATIVE BERKOWITZ indicated agreement with that, but pointed out that the provision says that a client is in a different position than someone who is paid to engage in a recreational activity. Therefore, he suspected that it invites the specter of equal protection problems because there could be one accident with two victims and two different avenues of recourse. TAPE 02-12, SIDE B Number 2357 REPRESENTATIVE PORTER commented that the purpose of this legislation is to recognize the inherent risk not other acts of negligence. Other acts of negligence are just that, and anyone can file suit on anyone's negligence. For example, if one was white water rafting and didn't hold onto the rope, that individual should recognize that he/she may [fall into the water]. Therefore, this individual shouldn't be able to [bring a suit] because of the individual's own negligence. However, if the rope broke because of improper maintenance that would be due to negligence and the individual would be able to bring suit. REPRESENTATIVE BERKOWITZ continued with Representative Porter's example of the rope breaking and specified that the guide and the client are hanging on. Under the definitions of this bill, the guide hasn't accepted the inherent risks because the only person who accepts it are those engaged in the commercial recreational activity. To engage in commercial recreational activity means that the individual has paid compensation to engage in the activity. However, the guide hasn't paid to engage in the commercial recreation activity but rather the guide is paid to engage in the commercial recreation activity. Therefore, there could be one accident impacting two people but they would have to pursue two different aspects of justice. Representative Berkowitz said such a situation seems to raise equal protection questions. REPRESENTATIVE BERKOWITZ said that Representative Berkowitz's example presumes that the guide [of a commercial recreation activity] will sue his/her employer. The committee took a brief at-ease from 10:46 a.m. to 10:50 a.m. CHAIR KOTT closed public testimony. The committee took a brief at-ease. Number 2241 REPRESENTATIVE BERKOWITZ moved a conceptual amendment to strike the portions of Version S dealing [with the doctrine of inherent risk related to commercial recreation activities]. CHAIR KOTT objected. REPRESENTATIVE BERKOWITZ expressed the need maintain focus on air carriers [since that is the subject of this bill]. Furthermore, the definition of recreational activity is very broad. CHAIR KOTT informed the committee that there has been testimony that the air carriers support all components of this legislation. REPRESENTATIVE KOHRING expressed concern that modification of the bill could result in its death. Number 2170 REPRESENTATIVE HALCRO agreed with Chair Kott that the House Labor and Commerce Standing Committee heard testimony that SB 191 in and of itself, without the funding mechanism, is useless. He noted that the pooling can occur now. Representative Halcro stressed that the air carriers are looking for real solutions. Currently, the industry has attempted to create its own pool, but has found that the risks and payments are no different than current market conditions. In order to capitalize as a pool, at least $30 million is necessary. Representative Halcro informed the committee that the air carriers did support SB 191 and HB 271. Representative Halcro, in response to Representative Joule, confirmed that the air carriers supported HB 319, which is the other component of the bill [relating to the inherent risk of commercial recreational activities]. All three components of [Version S] are supported by the Alaska Air Carrier's Association because they feel it's a comprehensive approach, although, in response to Representative Kohring, he specified that all three components have never been before the association in one bill. Number 2035 REPRESENTATIVE CON BUNDE, Alaska State Legislature, informed the committee that the director of the association has asked if the three bills could be consolidated. Therefore, he said he felt comfortable [in their support of Version S]. REPRESENTATIVE PORTER pointed out that one of the differences between [the coverage for] employees and clients is that employees are covered by workers' compensation and clients are not. Representative Porter related his belief that there is an appropriate balance of coverage. REPRESENTATIVE BERKOWITZ reminded the committee that there is an amendment before the committee. A roll call vote was taken. Representatives Berkowitz, Joule, and Kohring voted for the adoption of the amendment. Representatives Morgan, McGuire, Porter, and Kott voted against adoption of the amendment. Therefore, the adoption of the amendment failed by a vote of 3:4. Number 1959 REPRESENTATIVE BERKOWITZ moved that the committee "delete the sections of [Chair Kott's] bill [included in Version S of SB 191] that are not directly related to aircraft." He offered the amendment conceptually. REPRESENTATIVE PORTER said that this amendment is tantamount to the previous amendment. CHAIR KOTT objected to the amendment. REPRESENTATIVE BERKOWITZ reiterated that the intent of this amendment is to focus the bill solely on aircraft and air carriers and thus would remove references to other recreational activities. A roll call vote was taken. Representatives Berkowitz, Joule, and Kohring voted for the adoption of the amendment. Representatives McGuire, Porter, Morgan, and Kott voted against the adoption of the amendment. Therefore, the adoption of the amendment failed by a vote of 3:4. Number 1887 REPRESENTATIVE PORTER moved to report HCS CSSB 191, Version 22- LS0590\S, Ford, 5/9/02, out of committee with individual recommendations and the accompanying fiscal notes. There being no objection, HCS CSSB 191(RLS) was reported from the House Rules Standing Committee.
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