Legislature(2003 - 2004)
04/23/2003 01:07 PM Senate JUD
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* first hearing in first committee of referral
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= bill was previously heard/scheduled
SB 98-LIABILITY: PLANE AND BOAT PASSENGERS
CHAIR SEEKINS announced that Version H of SB 98 was before the
committee.
SENATOR CON BUNDE, sponsor of SB 98, provided the following
background information on the measure, which he referred to as
the "good neighbor bill."
Thousands of Alaskans own airplanes and boats and
magnify their enjoyment of Alaska's out of doors by
showing access to our outdoors with friends,
relatives, neighbors. That's the good news. Perhaps
the equally important news, but not always so good, is
that there are certain inherent risks in accessing
Alaska's wilderness and out of doors. Traveling off
the highways and byways does have some inherent risk.
SB 98 is designed to clarify that people who accept an
invitation to a plane or boat trip also accept some of
these inherent risks. I call it the 'good neighbor
bill,' Mr. Chairman and committee members, because as
Representative Ogan probably has experienced and
others that may have had a boat or airplane at one
time in their lives that a neighbor will say, gee,
that's really a nice boat you got there and I'd sure
like to go for a ride sometime, I'd be happy to help
you pay for the gas.' And, unfortunately in today's
society, by being a good neighbor and taking a friend,
a neighbor out, the boat owner or airplane owner are
putting themselves and their families' assets at great
risk - great risk because at this point if there's any
unforeseen and truly accidental occurrence, they are
liable for suit.
Common law recognizes that certain activities do carry
inherent risk and participants take some
responsibility for injuries they may sustain while
participating in those activities. Currently in state
statute there's laws about private runways, zoos,
unimproved land, the ski safety act. Unfortunately in
today's society, people often sue without
consideration for their own responsibility for
participating in these activities. This has made
insurance almost unaffordable for most Alaskan plane
and boat owners and, in some cases, forcing them to
forego insurance at all and/or refuse to take guests
along or simply just get out of the business. When I
say business I mean the activity, not a commercial....
Certainly both flying and boating have these inherent
risks that I discussed earlier. This bill would
suggest that if you participate in an activity like
that and the owner - the operator - are not guilty of
gross negligence or intentional misconduct, then the
passenger should indeed accept some of the inherent
risk.
SB 98 does not - let me emphasize not - absolve owners
from all responsibility to maintain and operate their
equipment in a safe and prudent manner. SB 98 only
applies to private owners; it doesn't apply to
commercial planes or boats. SB 98 will discourage
expensive, frivolous lawsuits and help contain rising
insurance costs. I'd like to point out that it doesn't
discourage a person from getting insurance and some
people do because there's a liability to folks outside
of the plane or the boat as well and wise people would
carry some liability coverage there if they can afford
it. What it does exempt the owner/operator from is a
suit in excess of the insurance coverage that they
have or, in the event that they simply are not able to
even at any cost or any reasonable cost get insurance,
it says, if you notify your passenger that there is an
inherent risk, that you are without insurance, that
they are assuming some of the risk if they join you,
then you are not liable or subject to a suit at all.
So, two things could happen. One, you have insurance;
you're not sued beyond the coverage. The other is you
don't have insurance, you notify the passenger of
this, and then you're not subject to suit at all,
assuming you're not grossly negligent, you're not
involved in any intentional misconduct - criminal
activity. With that, Mr. Chairman, I'll make myself
available for questions.
CHAIR SEEKINS referred to the language on page 2, line 7 that
reads "if not being used for commercial purposes" and asked
what the definition of "commercial" is.
SENATOR BUNDE said the FAA has very clear and strict aircraft
regulations: a passenger can reimburse for his or her share of
the gas, oil and operating expenses. Any costs beyond one's
share of the operating expenses, if one is operating under the
FAA rules for commercial operation, are considered to be
commercial. The FAA does not have a clear definition of
"commercial" for boating but, obviously, the intent is that it
applies to anyone who is operating for a profit or for hire.
CHAIR SEEKINS asked whether a boat owned by a company that is
used to entertain would be covered under SB 98.
SENATOR BUNDE said it would. An amendment in the Senate
Transportation Committee addressed that scenario. If a common
carrier, for example an aircraft company, owns a boat for its
employees' recreational use, it would fall under this bill if
that boat is not used commercially at all. If the company uses
the boat for profit, it would fall outside of the bill.
SENATOR OGAN pointed out the Coast Guard has regulations that
require an operator to have a six-pack license for commercial
use of a boat. He asked how guides would be affected by this
legislation if they fly under Part 91. He indicated that a guide
might use an airplane to fly people around but the plane would
not be used commercially for hire. He suggested clarifying that
matter in the legislation.
SENATOR BUNDE said the guide scenario would be a for-profit
venture. He said the FAA has been tightening up on Part 91
operations for guiding and is urging people to become single
pilot 135 operations.
SENATOR OGAN said he does not believe the FAA has required that
at this point in time so he questioned whether Senator Bunde
intends to exempt guides from liability under SB 98. He then
suggested changing the phrase to "not being used for lawful
commercial purposes" so that drug smugglers are not covered.
SENATOR BUNDE said any boat or aircraft that is used in a
business venture, such as guiding, would not be covered under SB
98. This bill is aimed at private recreational activities only,
not for any commercial venture in any shape or form. Regarding
unlawful businesses, SB 98 contains language that exempts only
recreational activities that that do not involve any illegal
activities.
CHAIR SEEKINS asked whether he would be covered if he flew a
friend around in his company-owned airplane.
SENATOR BUNDE said he would as long as he does not own an air
taxi company.
SENATOR OGAN said that an illegal activity like bootlegging
might apply in Alaska. A person could offer to fly someone
around with the intent of delivering liquor to a dry village.
SENATOR BUNDE said SB 98 would not cover anyone who is involved
in gross negligence, intentional misconduct, or an illegal
activity.
SENATOR FRENCH asked Senator Bunde if he could provide examples
of outrageous lawsuits that have been filed and successfully
prosecuted under the existing laws.
SENATOR BUNDE replied:
I would, I guess, try to answer by indicating that any
commercial air taxi that I'm familiar with felt that
they had to insure for at least $1 million per seat to
feel that they were adequately covered because of
potential lawsuits and often that meant Lloyds of
London to find that kind of coverage. So, specific
lawsuits, you know, I just know there's a lot of
anxiety out there so - what's a relative loss?
Somebody who instead of a lot of other hobbies they do
a lot of sweat equity to have a boat or an airplane
but they're of middle class but modest means - you
know a $100,000 loss could mean their home and with
court costs and things it doesn't take very long to
get to $100,000.
SENATOR OGAN referred to the language on page 3, lines 3 through
7, and asked if that language is included in case a child takes
a parent's boat without his or her knowledge.
SENATOR BUNDE said that's correct. In addition, if a stranger or
someone without direct permission took your boat, that person
would not be exempt.
SENATOR ELLIS asked Senator Bunde what facts he could provide
related to [liability suits for] boating and private plane
operations. He also asked if Senator Bunde has a commitment from
insurance companies to reduce or maintain insurance rates if
this legislation passes.
SENATOR BUNDE said he has no commitment from insurance companies
and, if he did, he would be suspicious of it. He said insurance
companies base rates on actuarial data so that the loss they are
likely to sustain does not increase. However, the likelihood of
an increase to rates may be reduced. In addition, the number of
competitive companies should increase. He said the best we can
hope for is a decrease in the rate of increase. He repeated that
it is very challenging to get coverage in the amount of $1
million per seat and it involves reinsuring through Lloyds of
London.
SENATOR ELLIS maintained that rate increases are based on
factors other than actuarial information, such as what the
market will bear. He said he thought insurance companies might
have promised Senator Bunde something if this legislation
passes.
SENATOR BUNDE said he has received no promise from the insurance
companies and he has been generous in his opinion that the
insurance business operates on the principle of insuring for the
highest rate for the lowest risk and, if there's a loss, they
delay payment to make money on the float. That is their
responsibility to their stockholders.
SENATOR ELLIS commented that Senator Bunde has a more realistic
view than many policy makers.
SENATOR FRENCH commented that the letters of support for the
legislation contain two main factors: high insurance rates and
fear of frivolous lawsuits. He said he couldn't speak to
insurance rates because he does not own a boat or plane, but
frivolous lawsuits are penalized under our justice system.
People who bring frivolous lawsuits must pay for the opposing
party's attorneys. He said he believes the fear of frivolous
lawsuits may be exaggerated.
SENATOR BUNDE said he does not know that he would use the word
"frivolous" but he is more concerned about a sympathetic jury
that might think a boat owner has deep pockets.
SENATOR OGAN said as a life long boater he has spent thousands
of hours on the water and, as pilot he has spent hundreds of
hours in the air. He said one of the joys of owning a plane and
a boat is sharing them with friends and family. He noted with
the inherent risks in traveling in Alaska, this bill would let
people who do share get a better sleep so it is worthwhile.
2:45 p.m.
TAPE 03-27, SIDE A
SENATOR BUNDE said everyone who has lived in Alaska for a while
tends to become complacent about the scenery. He finds it
refreshing to take someone to see Mt. McKinley for the first
time because doing so reinvigorates his appreciation for where
he lives.
CHAIR SEEKINS said he knows from firsthand experience that
insuring boats and airplanes is costly. On top of the cost of
insurance, there is the Rule 82 charge. He thanked Senator Bunde
and announced he would hold SB 98 in committee.
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