Legislature(2003 - 2004)

05/04/2004 09:07 AM FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                                                                                                                                
     SENATE CS FOR CS FOR HOUSE BILL NO. 336(JUD)                                                                               
     "An Act relating to motor vehicle insurance; limiting recovery                                                             
     of civil damages by an uninsured driver; and providing for an                                                              
     effective date."                                                                                                           
                                                                                                                                
                                                                                                                                
This  was the first  hearing  for this  bill in  the Senate  Finance                                                            
Committee.                                                                                                                      
                                                                                                                                
Co-Chair  Wilken commented  that this legislation  would prohibit  a                                                            
person operating  an uninsured  motor vehicle  from recovering  non-                                                            
economic losses in situations  in which injury or death might occur.                                                            
He noted  that  SCS CS  HB 336(JUD),  Version 23-LS1254\I,  and  two                                                            
accompanying fiscal notes are before the Committee.                                                                             
                                                                                                                                
REPRESENTATIVE  KEVIN MEYER,  the bill's sponsor,  pointed  out that                                                            
the two accompanying  fiscal notes  indicate that no expenses  would                                                            
be incurred were this bill  implemented. He explained that this bill                                                            
would decree  that, "if  you are  knowingly going  to operate  a car                                                            
without State  required car  insurance, then  you simply cannot  sue                                                            
for non-economic  damages such as  pain and suffering;" however,  he                                                            
clarified that a person  could sue for punitive and economic damages                                                            
such as wages,  medical expenses, and car repair expenses.  He noted                                                            
that the  word "knowingly"  was incorporated  into  the bill  by the                                                            
Senate Judiciary  (JUD) Committee.  Other language added  by the JUD                                                            
Committee  he explained, stated  that a person  who knowingly  drove                                                            
without the  required vehicle insurance  could sue for non-economic                                                             
damages in situations  in which the other driver:  was driving while                                                            
intoxicated or was on drugs;  intentionally caused the accident; was                                                            
fleeing  from the  scene of the  crime; or  was at  the time of  the                                                            
accident  committing "a felony,  or was driving  recklessly  or with                                                            
gross  negligence."  He  voiced  his  support   for  the  amendments                                                            
incorporated into the JUD committee substitute.                                                                                 
                                                                                                                                
                                                                                                                                
SFC 04 # 106, Side B 4:11 PM                                                                                                    
                                                                                                                                
                                                                                                                                
Representative  Meyer stated that this legislation  was developed as                                                            
a result of a  constituent who is a single woman with  "a low-paying                                                            
job" and who struggled  to pay $1,500 a year for her  car insurance,                                                            
contacted him after discovering  that her neighbor, admittingly, did                                                            
not have  vehicle insurance.  This woman,  he shared, thinking  this                                                            
was  unfair,  began  to  research  the  situation,  and  found  that                                                            
numerous  states,  such  as  California,  have  adopted legislation                                                             
prohibiting uninsured motorist  from collecting non-economic awards,                                                            
and  that other  states also  prohibit  the furthering  of  economic                                                            
awards.  He shared  that the  JUD  committee substitute  before  the                                                            
Committee  resembles  law  currently  in  effect  in  Louisiana.  In                                                            
addition,  he disclosed  that insurance  agencies pass non-economic                                                             
lawsuits award  expenses on to the 82-percent of vehicle  owners who                                                            
pay insurance  premiums. Therefore,  he stressed  that those  who do                                                            
pay  are essentially  subsidizing  the  costs  incurred  by the  18-                                                            
percent that do not.                                                                                                            
                                                                                                                                
Representative  Meyers disclosed that a member of  his family, while                                                            
driving, has  experienced two instances  in which she was  hit by an                                                            
uninsured motorist,  and at the time, he thought,  "no problem, this                                                            
is why I have  insurance coverage."  However, he has since  realized                                                            
that as a result  of these types of  accidents, his insurance  rates                                                            
rise. Therefore,  he stated that as a matter of fairness,  "a person                                                            
who is not paying  into the system should not be able  to collect as                                                            
much out  of the system."  He also proclaimed  that individuals  who                                                            
comply  with  the   law  and  pay  liability  insurance   should  be                                                            
classified   as  "victims"  of  an   uninsured  motorist.   He  also                                                            
acknowledged  that an uninsured  person might  be unable to  acquire                                                            
insurance due to having  had multiple accidents or speeding tickets.                                                            
He stressed that  these people should not be on the  road. He stated                                                            
that the goal of this legislation  would be to encourage everyone to                                                            
comply with the law as  greater protection and fairness for everyone                                                            
would result.  He reminded  that driving  is a  privilege and  not a                                                            
right.                                                                                                                          
                                                                                                                                
Representative  Meyers  noted  that the  committee  substitute  also                                                            
contains  "minor  technical  changes"   that  pertain  to  insurance                                                            
statutes.                                                                                                                       
                                                                                                                                
MICHAEL  LESSMIER,  Attorney,  State Farm  Insurance,  informed  the                                                            
Committee that  State Farm has 26-percent of the State's  automobile                                                            
insurance  market "with  approximately 123,000  policies in  force."                                                            
Continuing,  he stated  that  every  State Farm  policyholder  would                                                            
"positively benefit" were this legislation adopted.                                                                             
                                                                                                                                
Mr. Lessmier addressed  the two technical changes  incorporated into                                                            
the JUD committee substitute  in Sections 2 through 5: one being the                                                            
"mirror rule"  which resulted from a federal Supreme  Court decision                                                            
that mandated  the each "uninsured/underinsured  motorists  coverage                                                            
must  mirror  the  coverage  in your  liability  policy."  This,  he                                                            
explained,  means that were  one's liability  policy to provide  for                                                            
punitive  damages, one's  "uninsured/underinsured  motorists  policy                                                            
must also provide  for punitive damages.  He stated that,  "there is                                                            
no good reason  to require a victim of an uninsured  motorist to pay                                                            
for that kind of coverage"  in that, he expressed, "punitive damages                                                            
don't  punish the  uninsured  driver at  all, they  just punish  the                                                            
victim."  Therefore,  he stated  that  the bill  addresses  punitive                                                            
damage coverage  by specifying that it would "not  be required to be                                                            
part of the uninsured/underinsured motorist coverage."                                                                          
                                                                                                                                
Mr. Lessmier  stated  that the other  technical  change in the  bill                                                            
addresses the system that  has been established in the State through                                                            
which insurance companies  provide policyholders the option to elect                                                            
one  of  a  variety  of  monetary  levels  of  the  mandated  offers                                                            
uninsured/underinsured  coverage. He noted that while a person could                                                            
decline to purchase uninsured/underinsured  motorist coverage at the                                                            
onset of purchasing  a new policy, insurance companies  are required                                                            
to provide these  options to each policyholder every  six months. He                                                            
continued  that, in  addition, State  Courts have  ruled that  these                                                            
coverage offers  must be provided for "umbrella policies  as well as                                                            
on  the  underlying   primary  policy   covering  the  automobile."                                                             
Therefore,  he stated,  the multitude  of different  offerings  on a                                                            
multitude  of  different policies  is  difficult  to manage  and  to                                                            
understand, and  furthermore, he disclosed that one  major insurance                                                            
carrier in the State has  halted its issuance of umbrella and access                                                            
policies as a  result of this requirement. In summary,  he explained                                                            
that the  technical change  in this regard  is that the requirement                                                             
for the mandatory  uninsured/underinsured  offers be limited  to the                                                            
primary policy covering the automobile.                                                                                         
                                                                                                                                
Mr. Lessmier  stated  that neither  of these  technical changes  are                                                            
controversial,   both  would  be  beneficial,  and   that  both  are                                                            
supported by the Division of Insurance.                                                                                         
                                                                                                                                
Mr. Lessmier commented  that the language in Section 1 would benefit                                                            
policyholders  and  every  single   person  who  complies  with  the                                                            
insurance requirements.  He stated that the New Jersey Supreme Court                                                            
recently  ruled that this  type of  law "advances  a policy  of cost                                                            
containment  by insuring that an injured  uninsured driver  does not                                                            
draw from 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  or non-economic  injuries."  He                                                            
noted  that while  this proposed  law is  not as strict  as the  New                                                            
Jersey law,  it makes  good sense for  Alaska and  is a step  in the                                                            
right direction.                                                                                                                
                                                                                                                                
LINDA  HALL,   Director,  Division   of  Insurance,  Department   of                                                            
Community and Economic  Development, informed the Committee that the                                                            
Department supports the technical language changes.                                                                             
                                                                                                                                
Co-Chair  Green announced a  conflict of interest  as her family  is                                                            
involved in the insurance industry.                                                                                             
                                                                                                                                
Senator  Bunde  moved  to  report  the  bill   from  Committee  with                                                            
individual recommendations and accompanying fiscal notes.                                                                       
                                                                                                                                
There  being no  objection SCS  CS HB  336 (JUD)  was REPORTED  from                                                            
Committee with  zero fiscal note #1,  dated March 29, 2004  from the                                                            
Alaska Court  System and zero fiscal  note #2, dated March  30, 2004                                                            
from the Department of Law.                                                                                                     
                                                                                                                                

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