Legislature(1995 - 1996)

05/03/1995 01:43 PM JUD

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
          HB 120 INDEMNIFICATION OF PUBLIC EMPLOYEES                          
 DANIELLA LOPER, staff to Representative Porter, sponsor of the                
 measure, gave the following testimony.  HB 120 requires the state             
 or a municipality to provide legal defense for their employees in             
 actions that occur during the scope of their employment.  Employers           
 would not be responsible for indemnifying acts of gross negligence            
 or intentional or willful misconduct.  Additionally, the employer             
 would also be excused from indemnification when the case involves             
 disciplinary, administrative or criminal matters brought against              
 the employee.  The implementation of HB 120 is already common                 
 practice, and most municipalities now indemnify their employees.              
 Teachers are indemnified under AS 14.12.090.  HB 120 is supported             
 by the Department of Law, and many other organizations.  A similar            
 house bill died in the Senate Rules Committee last year.                      
 TAPE 95-30, SIDE A                                                            
 GAIL VOIGTLANDER, assistant attorney general, testified from                  
 Anchorage.  She stated HB 120 is clear, and details scenarios when            
 employees would be covered.                                                   
 SENATOR TAYLOR asked if HB 120 sets up a new civil cause of action            
 on behalf of employees against employers.  MS. LOPER noted that               
 section was removed last year.  She explained page 3, line 3                  
 outlines how the employee would seek legal defense, and page 4,               
 line 8, describes how an employee would handle denial of                      
 SENATOR TAYLOR asked for clarification.  MS. LOPER replied the                
 employee would file for declaratory relief.  There are no                     
 guidelines at this time, which is costing the state money.                    
 Number 065                                                                    
 SENATOR TAYLOR asked how HB 120 will save the state money since               
 there is a letter agreement in place now.  MS. LOPER stated that is           
 common practice in most cases, but several witnesses testifying               
 before the House Judiciary Committee commented the state is                   
 spending a lot of money because nothing is outlined.                          
 SENATOR TAYLOR asked whether the state is being charged money to              
 defend employees it should not defend, or if the state is being               
 charged for litigation when employees sue for failure to defend.              
 MS. LOPER was unsure, but repeated if nothing is outlined, there              
 could be claims made against the employer by the employee.                    
 MS. VOIGTLANDER commented the bill does not create a new cause of             
 action, it merely sets forth, in statute, the public                          
 employers'/public employees' responsibilities.                                
 SENATOR TAYLOR questioned the need to put in statute, what has been           
 common practice for years.  He stated various labor unions have               
 negotiated various deals with the state, and there is now a hold              
 harmless provision in the bill that says if the labor negotiators             
 negotiated a better deal, that would supersede the requirements in            
 the bill.                                                                     
 Number 203                                                                    
 STEPHANIE GALBRAITH, assistant attorney general, testified in                 
 support of HB 120.  It clarifies the obligations between public               
 employers and public employees.  As litigation increases,  more               
 employees are being individually named in lawsuits.                           
 SENATOR TAYLOR asked Ms. Galbraith if she has an indemnification              
 letter from her employer.  MS. GALBRAITH answered no.  [The                   
 remainder of Ms. Galbraith's testimony was indiscernible.]                    
 BRAD THOMPSON, director of the Division of Risk Management,                   
 explained the Division funds a self-insurance program for defending           
 and indemnifying state employees, both those in the collective                
 bargaining unit, and others without such contractual protections.             
 Among those in the collective bargaining unit, there are several              
 contracts with differing provisions.  HB 120 codifies existing                
 policies and procedures that the state does, and has provided, and            
 is more explicit in employee participation.  He described the                 
 state's policy regarding the scope of responsibility toward                   
 Number 272                                                                    
 SENATOR TAYLOR asked how HB 120 will save the state money if it               
 only codifies current practice.  MR. THOMPSON did not believe there           
 would be a significant savings, however it might help avoid the               
 expense of a second counsel to resolve legal conflicts between the            
 defense and counsel.                                                          
 SENATOR GREEN asked if this would be similar to errors and                    
 omissions coverage in other settings.  MR. THOMPSON stated a                  
 professional practitioner may purchase a commercial E&O policy that           
 contains similar terms and conditions.                                        
 SENATOR GREEN asked if private employees would be likely to have              
 such coverage.  MR. THOMPSON replied the private employer, to                 
 protect his/her interests, most likely has procured a form of                 
 liability insurance.                                                          
 SENATOR GREEN asked about self-insurance.  MR. THOMPSON noted the             
 state self insures for the first $5 million.  In prior years the              
 state self-insured for differing amounts.                                     
 SENATOR TAYLOR asked Mr. Thompson how long he has been with the               
 Division of Risk Management.  Mr. Thompson replied since January of           
 1981.  SENATOR TAYLOR asked why the state is self-insured.  Mr.               
 Thompson stated it is more cost effective to do so.  SENATOR TAYLOR           
 commented that anyone who has the money runs away from that                   
 industry as quickly as possible and self insures.  MR. THOMPSON               
 added the state procures significant catastrophe insurance.                   
 Number 336                                                                    
 SENATOR GREEN asked if this bill was driven by labor negotiations.            
 MR. THOMPSON believed the bill was conceived to address those                 
 employees named individually in civil litigation, as public                   
 employees, especially those without a labor agreement that                    
 addresses the defense practices provided to them.                             
 SENATOR GREEN asked if the original practice of an employer                   
 covering an employee resulted from a labor agreement.  MR. THOMPSON           
 replied it is normal for the employer to be liable for the act of             
 the employee.                                                                 
 SENATOR TAYLOR stated that his main concern is categorizing, and              
 attempting to guess, all of the different ramifications that may              
 occur in the employee/employer relationship.  He repeated his                 
 concern that codifying something that has been in practice, with no           
 benefit to each side, or cost saving, could create unforeseen                 
 MR. THOMPSON explained the vast majority of states have specific              
 legislation providing similar protections to their employees.  Many           
 states extend those protections down to the municipal government              
 structure.  He did not believe HB 120 would increase the exposure             
 for public employers; it provides security for the employee.  The             
 state has operated a sophisticated self insurance program for                 
 years, however municipalities have not.  A civil action against a             
 municipal employee is rare, and is alarming when it occurs.                   
 SENATOR TAYLOR discussed three lawsuits against employees of his              
 community in the past year.  In each case, the insurance carriers             
 had written letters of reservation against each of those employees            
 and the city, reserving the right to make a claim against them.               
 The insurance company then selected the attorney and decided when             
 and if the cases would be settled.  He did not see how HB 120 would           
 be beneficial to his community.                                               
 KEVIN RITCHIE, representing the Alaska Municipal League, testified            
 in favor of HB 120.  The bill reinforces the concept that if an               
 employee was not involved in any wrongdoing, the employer will                
 defend him/her.  The way it can save time and money is by                     
 reassuring peace officers, and other people who have to make very             
 important decisions, that they will be defended.  In the case of              
 insurance in small communities, the employee who does not have the            
 assurance of coverage may hire his/her own attorney.  That creates            
 an additional legal expense for the employee, and in some cases               
 pits the employee against the employer.  He added the Alaska                  
 Municipal League provides an insurance pool for small communities.            
 SENATOR GREEN asked about the University of Alaska.  MR. THOMPSON             
 noted it is self insured to a lesser level than the state.                    
 Number 430                                                                    
 SENATOR MILLER moved HB 120 out of committee with individual                  
 recommendations.  SENATOR TAYLOR objected.  The motion failed with            
 Senators Adams, Taylor, and Green voting "nay," and Senator Miller            
 voting "yea."                                                                 

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