Legislature(1995 - 1996)
08/21/1995 01:00 PM Senate JUD
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* first hearing in first committee of referral
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= bill was previously heard/scheduled
CSHB 158(FIN) am (CIVIL LIABILITY)
CHAIRMAN ROBIN TAYLOR called the Senate Judiciary Committee meeting
to order in the Sitka Centennial Hall at 1:00 p.m. He stated the
only action the committee would be taking on CSHB 158(FIN) am would
be the taking of public testimony for the record.
Number 010
JOHN HOLST, Superintendent of Schools, Sitka School District,
stated his strong support for tort reform and then related the
story of an accident his son, who was a fisherman, had in 1991.
In the accident his son suffered a back injury and in the process
of trying to get his back taken care of, Mr. Holst's son was
assured by the company responsible for the accident that the
related medical costs would be taken care of. However, within a
month after back surgery was completed, he was informed by the
company and their insurance carrier that they had not authorized
payment and they would not be paying his expenses. They did say
that if he wanted to settle his claim and sign off on it, they
would pay the hospital bill and the doctor bill.
In the meantime, Mr. Holst's son attempted unsuccessfully to go
back to work as a fisherman and eventually had to sell his fishing
boat because he was unable to meet the payments on it.
Because he had been unsuccessful in reaching a settlement with the
negligent company and its insurance carrier, and because the two-
year statute of limitations was about to expire, the son hired an
attorney. In January 1995, there was jury trial in Ketchikan, and
the insurance company and their representative did everything in
their power to force his son into settling for something less than
he should have settled for; simply paying for the old bills and no
compensation to take care of any kind of future costs. After the
trial, jurors said they could not understand how this case ever
gone to trial because the negligence was absolutely clear and the
responsibility was absolutely clear.
When the trial was over, the son had received a fairly sizeable
judgment and he will be involved in a settlement hearing with the
judge in Ketchikan this week. However, Mr. Holst said he does not
anticipate any kind of settlement and that the case will go to the
Supreme Court. He added that during this whole process that has
gone on for over two years, his son has been harassed by the
insurance company.
Speaking to CSHB 158(FIN) am, Mr. Holst said he applauds the
concept of trying to do something in a positive way to correct
errors and problems in the system, but the bill is attempting to
correct too many different problems. He said it is important to
realize the rules of the game are already set up in favor of the
defense attorneys and the companies and he thinks the bill will
tilt the slant even more in favor of the insurance companies.
Number 225
REED REYNOLDS, President, Sitka Community Hospital, said when
analyzing the increase in health care costs since 1955, which is
the year he got involved in the health care field, inflation
explains a big piece of it, labor costs explains a big piece of it,
but malpractice also explains a piece of it. He said the
legislation affords the opportunity to take a progressive step and
support a reduction in the malpractice cost, hopefully without
distorting the appropriate benefits to people that are injured.
Mr. Reynolds pointed out that their current hospital board has not
had an opportunity to review the legislation and take action on it
formally, but in the past, previous boards have examined the tort
reform issue and have supported it.
Mr. Reynolds said the legislation is a step in the direction of
reducing health care costs and it is something that needs to be
done without unduly damaging those who properly should have claims.
Number 335
KAY HAWKES, Administrator, Sitka Community Hospital, said
noneconomic damages, no matter what they are, should be paid. He
has been an hospital administrator for approximately 30 years and
in all cases where, in fact, they think a mistake has been made,
they believe those cases should be settled immediately and there
shouldn't even be a law suit. However, they believe noneconomic
damages should be limited and there should be some kind of statute
of limitation on how long people come back and say that the
hospital made a mistake. Mr. Hawkes noted that almost every case
that he has been involved in for 30 years were not from mistakes or
accidents, but they were because someone didn't get the results
they wanted.
Mr. Hawkes also believes there should be some kind of a structured
payment so that the individual who was injured has a real chance of
benefiting from any settlement that was made.
MR. Hawkes said that although CSHB 158(FIN) am is not perfect, it
does correct some of the bad problems in liability insurance. It
is going in the right direction, but it needs some modification.
Number 402
SENATOR TAYLOR asked Mr. Hawkes if the problem in liability
insurance he was referring to was the cost of medical malpractice
insurance. MR. HAWKES responded that over the last 30 years
liability insurance has increased astronomically, but he also
pointed out that insurance rates over the last three years have
come down since MICA went out of business.
Number 515
PETE HALLGREN, a Sitka attorney, directed attention to the section
of the legislation relating to noneconomic damages. He does not
believe the current statute on noneconomic damages, which went into
effect in 1988, is very useful. However, he said CSHB 158(FIN) am
goes into a great deal of detail and he feels it makes the limit
more reasonable and sets some sort of semi-objective standard for
noneconomic damages. He urged the committee to give consideration
to instituting the limits on noneconomic damages as set out in the
bill.
Number 635
SENATOR ADAMS asked Mr. Hallgren if was comfortable with the limits
in that section of the bill. PETE HALLGREN acknowledged that he
thought the limits were reasonable. He also pointed out that a
provision in the bill provides that those will be adjusted annually
for the consumer price index so they will go up based on the
inflation rate. He said he finds that a good way to handle things
because a number of statutes become outdated, particularly if
inflation goes up.
TAPE 95-37, SIDE B
Number 025
HARLAN KNUDSON, President, Alaska State Hospital & Nursing Home
Association, voiced support for CSHB 158(FIN) am. He applauded the
debate that went on in the House of Representatives on the
legislation, but he said his keen disappointment was the failure,
particularly from the health care side, to explain to the
legislature and the public what the problem is and why these laws
have to be changed.
Mr. Knudson said the problem is not the availability of liability
insurance and it is not the cost of insurance, except for the cost
of liability insurance to that small rural physician who would like
to deliver babies. He believes there is the need for tort reform
for two reasons. The first reason is that the legal system itself
costs too much money; it is very expensive to retain lawyers and
litigate. That expense impacts directly on the cost to health
care. The second reason is that the legal system is unfair. There
are a lot of small liability problems, $100,000 and less, that are
never brought to court because there isn't enough money in the
legal system to make it pay, so there is a segment of the community
being shut out of the legal system.
Mr. Knudson said during the seventies, eighties and early nineties,
there was a very affluent health care system, but if the caps on
the Medicaid program that are being considered by Congress go
through, it will remove, over the next seven years, approximately
$560 million out of the federal contribution in the state of
Alaska. He emphasized the need to look at all of the drivers of
health care costs.
Mr. Knudson said the only model legislation on tort reform is
California's and the California components for tort reform are
contained in this legislation. Data from California shows that by
having a cap on noneconomic damages controls the cost of care about
23 percent. If you open collateral sources, there is an impact of
about of 11 to 18 percent on controlling liability costs. Also,
there is a about an 8 percent savings if there is a statute of
limitations. There haven't been any tests on structured
settlement, but it makes sense to have a large settlement
structured out over a period of time so that the individual will
have the economic resources that will be needed, he said.
Mr. Knudson briefly discussed the demise of MICA. The federal
government, through a tax reform law, restructured the way the IRS
looked at the reserves of nonprofit insurance companies such as
MICA. Also, a huge change went on in the commercial and nonprofit
physician-owned liability company, by moving from occurrence
coverage to claims-made coverage.
Mr. Knudson expressed appreciation for the continued dialogue on
tort reform in the state and his willingness to continue working
with the committee during the interim on the problem.
Number 205
SENATOR TAYLOR said the reason MICA was created by the Alaska
Legislature was because nobody would sell insurance at a decent
rate to doctors and hospitals. He said we also required every
single licensed doctor and hospital in the state to buy insurance
through that agency, however, the first thing the medical
profession did to help us out after helping them was to sue us to
break MICA because another carrier came in through the back door
and was now offering premiums lower than MICA. So all of the good
doctors who could get cheap insurance from somebody else bailed out
of MICA, which left us with every hospital and doctor in the state
that couldn't get cheap insurance. At the end of 13 years, MICA
had a reserve of over $7 million, but the reason it went out of
business was because these doctors were going to have to pay
personal income tax on that amount of money that they made off of
malpractice coverage.
Number 265
SENATOR TAYLOR said everybody he knows that has got claims made
coverage buys a tail, so it is exactly the same coverage as
occurrence coverage. HARLAN KNUDSON agreed, and he said he thinks
every thinking person buys a tail, but because the insurance
premiums have leveled, you will gradually see, as claims made
matures, that that tail is going to get more expense.
[BETWEEN TAPE NO. 315 & NO. 415 THERE WAS NO RECORDED TESTIMONY.
IT STARTS AGAIN IN THE MIDDLE OF THE FOLLOWING PERSON'S TESTIMONY]
Number 415
DONNA ROBLINS, testifying in Sitka in support of tort reform, said
without tort reform, there will be even greater disenchantment with
our judicial system. Each branch of government, the legislative,
the executive and the judicial must represent the people with
justice and equity or we have no effective government. She said
tort reform is an idea whose time has come, and she urged that it
be supported by the committee.
Number 500
RICHARD ROGERS, a resident of Sitka, stated his support for tort
reform and for the legislation, although some areas of it are
unclear to him. He said he wasn't sure if he necessarily agreed
with the amounts for noneconomic damages, but he does support
limitations. He also suggested it would be far better if there
were a limitation on the size of the settlement before the
structured settlement was put into place. He urged that the
legislation be passed in some positive form.
Number 632
PAULA SCOTT, a Sitka insurance broker, urged support of the
legislation. She said she is not an expert on tort reform but she
believes it should include: a limit on noneconomic damages such as
pain and suffering; evidence of collateral benefits received by the
claimant should be presented to the jury; and punitive damages
should be awarded only for punishment of a malicious and
intentional act, and they should be awarded by a preset multiple of
the actual system. She believes Alaskans have the right to recover
costs and damages of civil suits, as well as the right to be
protected from unreasonable court settlements.
TAPE 95-38, SIDE A
Number 090
NANCY DAVIS, a 35-year resident of Sitka currently serving on Board
of Directors for the Alaska State Chamber of Commerce, referred to
resolution adopted by the Alaska State Chamber of Commerce on
December 9, 1994, relating to tort reform standard for punitive
damages. They believe the state of Alaska is jeopardized by its
present tort law, particularly in the area of punitive damages.
Reform is needed to ensure that fair and equal treatment is
available for all involved.
Ms. Davis said people want an equitable system for businesses,
insurance companies and individuals alike. She pointed out that
some of the wrongful cases are a concern to the small businessman
that is trying to make it.
Number 125
JIM MCGOWEN, a Sitka resident, addressed a section of the
legislation relating to the statute of repose. He said a few years
ago banks in Sitka were squeamish about lending money on houses
that were built on muskeg and were experiencing problems because of
posts that were put down into the muskeg and were rotting. No bank
would lend money on a house that was built on muskeg, which meant
that if a person had their life savings invested in their property
and they wanted to sell that property they couldn't do it.
Mr. McGowen said it appears that this particular piece of
legislation would put them back in the same situation as before,
where people, through no fault of their own, find themselves beset
by a problem that they cannot cure. He suggested that enacting a
statute of repose on construction claims is not of service to the
people of Alaska and it will result in many innocent people being
damaged.
Number 250
DARLENE MORGAN, testifying from Ketchikan, spoke to working to see
that she, along with two million other women affected by silicone
or saline implants, be treated in a fair and equitable manner. She
has been working with a local attorney and is frustrated by the
system and its inaction on this issue.
Ms. Morgan noted that after 10 years of medical problems and pain
related to her implants she had them removed. Looking back over
those 10 years, she realizes that those implants have caused
significant damage to her career, and have greatly affected her
emotionally and financially. She still suffers pain and she said
she has never met a woman who has said that upon removal of the
implants she made a prefect recovery.
Ms. Morgan said a lot of money has been made by two industries at
the expense of women who had silicone or saline implants. But the
original mistake was that of the physician by placing something in
their bodies that has never been approved by the FDA.
Number 375
DENNIS MCCARTY, a Ketchikan attorney, said he has served eight
years on the borough assembly and has been closely involved with
the community concerns about getting insurance, as well as
protecting the citizens.
Mr. McCarty believes that in the professional area, the crisis is
more in the policing problems of the various professions. He said
there a lot of good and dedicated people in these professions, but
it is the bad apples that create the problems over and over. He
suggested that if there is going to be reform, to look at the
policing problems and try to figure out how to get rid of the ones
that aren't doing the job.
Mr. McCarty spoke to various sections of the bill, but concluded
that it is a very bad bill and questioned its benefit. He said
there seems to be little if any evidence that the premiums go down
if these changes occur. He suggested the legislation should be
directed toward helping the professions police themselves, which
will take care of many of these problems of malpractice crisis.
TAPE 95-38, SIDE B
Number 005
ROBERT COWAN, a Kenai attorney testifying from Kenai, stated he was
speaking on behalf of the numerous fishermen that his firm
represented after the Exxon Valdez incident, as well as other
fishermen that could be affected by this legislation.
He directed attention to the punitive damages section of the
legislation and the language "or reckless indifference to the
interest of another person." He voiced his concern of what might
have happened if that language had been in statute at the time of
the Exxon Valdez incident. He suggested changing "another person"
to "other people."
Mr. Cowan is also concerned with the language that would limit the
amount of punitive damages awarded by a court to three times the
amount of compensatory damages awarded or $300,000, whichever
amount is greater. Using rough figures from Exxon, he said he
could indicate that instead of $5 billion in punitive damages,
which a jury found and the judge approved, the maximum amount of
recovery would probably have been somewhere in excess of $800,000.
That concerns many fishermen as being unfair relief for any future
oil spills. There is also concern with the requirement that one-
half of the award be deposited into the general fund of the state.
He said many people are concerned that the state is intervening in
the civil system without playing any function or role in taking
money away from individuals that a jury Alaskans have seen fit to
award to them.
Number 065
JOHN SIVLEY, a 20-year member of Cement Masons Local 867 in Kenai
testifying in Kenai, said over the years he has unfortunately
witnessed death and injury at the workplace. This has happened as
a result of negligence by individuals and as a result of unsafe
company practices. He said the purpose section of the bill speaks
to reforms that would reduce the risk of injury, but reading
through the bill he found nothing that would reduce the risk of
injury. The purpose section also speaks to reducing costs, while
ensuring adequate and appropriate compensation, but he found
nothing in the bill that would provide for adequate compensation.
He questioned how the bill ensures that he would be adequately
compensated and how it reduces the risk of injury.
There being no further witnesses wishing to testify on CSHB
158(FIN) am, Senator Taylor thanked all the participants and
adjourned the meeting at approximately 3:30 p.m.
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