Legislature(2003 - 2004)
05/02/2004 03:50 PM JUD
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
CSHB 336(JUD)am-MOTOR VEHICLE INS./ UNINSURED DRIVERS REPRESENTATIVE KEVIN MEYER, sponsor of HB 336, introduced staff member Suzanne Cunningham, and told members that this legislation states that if a person knowingly breaks the law by driving without mandated vehicle insurance, that person cannot sue for the same amount in damages as a person with the required insurance. He pointed out the key word is "knowingly." If an accident occurred, the uninsured driver could sue for non- economic and compensatory damages but not for pain and suffering. He noted that damages for pain and suffering are most costly to the 82 percent of people who do have insurance coverage. This issue was brought to his attention by a constituent who said she pays $1500 per year in insurance and must listen to a neighbor brag that he has no insurance, yet both would collect the same damage award if either were in an accident. The California Legislature enacted similar legislation because 35 percent of drivers there had no insurance. He said although he carries insurance coverage in case an uninsured motorist hits his vehicle, if that happened, his rates would increase. REPRESENTATIVE MEYER said this bill is a matter of fairness. Although there are probably many reasons that 18 percent of drivers have no insurance in Alaska, one reason may be that they are unsafe drivers with multiple DUI offenses or reckless driving offenses so the 82 percent of insured drivers become the true victims. He said the bottom line is whether the legislature wants to protect the people who comply with the laws. He noted that theoretically, reducing the number of pain and suffering lawsuits should lower rates. CHAIR SEEKINS questioned how "knowingly" is defined. REPRESENTATIVE MEYER said the language on page 1, line 10, says the person must know that he or she was not in compliance. CHAIR SEEKINS said the only argument he could imagine that would hold water is that the person might not know his policy was cancelled or lapsed because of an unanticipated oversight. REPRESENTATIVE MEYER said it would be the insurance company's responsibility to prove the driver knew he didn't have insurance, which is a high hurdle. SENATOR OGAN asked how that would affect an uninsured driver who was in an accident in which someone else was at fault. REPRESENTATIVE MEYER clarified that the driver could sue for all damages except pain and suffering. The logic is that the driver broke the law by driving without insurance. SENATOR OGAN felt that is too limiting because the driver who caused the accident could be very drunk, eluding police, or involved in criminal activity and driving dangerously and be let off the hook. CHAIR SEEKINS said the uninsured driver should not have been on the road in the first place. This legislation says if a person chooses to drive without insurance, that person is assuming the risk of not being able to recover economic damages, no matter the cause of the accident. SENATOR OGAN agreed that driving without insurance is irresponsible and said he does not condone it but he knows of seniors who live on very limited fixed incomes who drive without insurance because of the financial hardship. Those people have no other options and he does not believe it is right to let someone with criminal culpability off on a tort claim in such a case. REPRESENTATIVE MEYER said Senator Ogan raised a good point but he believes that many of the 18 percent of drivers without insurance should not be driving. So, the question becomes, is it fair for one of those drivers to be on the road and hit an insured motorist. He noted the uninsured motorist could have been drunk. He reminded members that driving is a privilege, not a right, and that part of the responsibility is mandated insurance coverage. He repeated that rates are increasing because the 18 percent are not paying into the system. SENATOR OGAN disagreed that is the only reason rates are increasing. SENATOR THERRIAULT asked what would happen if he, as a father, knowingly let his insurance policy lapse and his teenage son and friends took the car and got into an accident. He questioned whether they would be covered because they did not know the car was uninsured. REPRESENTATIVE MEYER deferred to a representative from an insurance company to answer but said he believes the father would probably be responsible. MS. SUZANNE CUNNINGHAM, staff to Representative Meyer, said the bill is written to apply to the person who is operating the motor vehicle so if the son did not know, it would not apply. CHAIR SEEKINS thought if the son caused the accident, the friend and son's only recourse would be against the father. If another driver caused the accident, a claim for non-economic damages would be available against that driver by the passengers and son, who did not know. SENATOR THERRIAULT asked how that would apply to an uninsured parked vehicle in which a person was injured. CHAIR SEEKINS noted the key word is "operating" a motor vehicle. He then said, in response to Senator Ogan's earlier comment, people who make the choice to drive without insurance knowingly are giving up their rights to recover non-economic damages. MR. MIKE LESSMEIER, a Juneau attorney representing State Farm Insurance, stated support for CSHB 336(JUD)am. State Farm did not ask Representative Meyer to introduce Section 1 but it did ask him to introduce some of the other sections, which he would explain. Those sections have not been controversial. Sections 2, 4 and 5 deal with what is called the "mirror rule." That rule says if the liability portion of a policy provides coverage for punitive damages, then the uninsured and underinsured motorist coverage must also include coverage for punitive damages. Therefore, in effect, the policyholder is funding his ability to recover punitive damages. Those damages are designed to punish the person without coverage but, in effect, the insured driver is paying for that coverage himself. He said that makes no sense and has caused that coverage to increase in price. To address that situation, State Farm proposed an amendment, which was adopted, that says regardless of what the liability provision of a driver's policy says, the uninsured/underinsured motorist provision need not provide coverage for punitive damages. SENATOR THERRIAULT asked, "...right now the law requires that if it is in one, it must be in the other, so you're alleging that you're paying for double?" MR. LESSMEIER responded that it forces people to pay for something most would choose not to purchase, if they had the choice. A person might want that coverage in the liability portion of a policy because often when a person is sued for reckless driving, for example, there is an allegation of punitive damages in that claim. However, when one turns around and looks at an uninsured/underinsured motorist claim, most policyholders would not want to pay for damages that are essentially punitive damages, designed to punish another person. The policyholder is essentially punishing himself because it does not affect the uninsured motorist that ran into him as he is recovering punitive damages under his own policy. HB 336 says the coverage in the uninsured/underinsured portion of one's policy does not have to mirror the liability coverage with respect to punitive damages. MR. LESSMEIER said the other change is in Section 3. He explained: When we ... go all the way back to the history of uninsured/underinsured motorist coverage in the state, in 1983 and 1984 we passed a system that mandated offers of uninsured and underinsured motorists and that system has evolved. Now what happens, when you buy an insurance policy, it contains coverage for uninsured/underinsured motorists unless you decline it in writing. And then what happens is every six months, if you're a State Farm insured, you get a written offer of uninsured/underinsured motorist coverage all the way up to $1 million. What the Supreme Court said in a case called [Indisc.] vs. State Farm, is that in umbrella policies, there has to be these offers as well and the difficulty with that is if we make these offers on each vehicle, and people make the selection on each vehicle and then we're required to make them in the umbrella policy as well, it leads to conflicting offers. We don't know what the price - and as a result of that it's just created a mess in terms of the umbrella policies and one major carrier in this state has actually stopped writing because of that decision. Our point is that we have a wonderful system for making this coverage available through these mandated offers already and that it ought to be on the primary policy and this would just mean that we don't have to make those offers on excess or umbrella policies. We'd still make them on the primary policies and I think those changes make eminent good sense. If we go back to the first provision, we look at this provision really as an issue of fairness. The issue of fairness is this issue: if a person is unwilling to provide liability coverage for someone else, provide protection for someone else, it's not unfair for them to not expect to receive the same level of benefit. Now with respect to Senator Ogan's concern, the person that is the violator, the bad actor that is intoxicated, that person is subject to all of the criminal penalties, is subject to an award for economic damages, and is also subject to an award of punitive damages. This does not affect the ability of an injured person to recover punitive damages so they have a pretty big hammer to get whatever that person would have in terms of assets. They're not left unprotected and I think that's important. We look at this, and one of our judges across the street, he talks about what he calls the goose/gander rule, and this is really the goose/gander rule. We think that people that make this choice - and the way this bill was changed in the House, it was changed to be knowing - so we don't - the situation that you were talking about Senator Therriault, we don't want to cover anyone with this bill that does not knowingly violate the law. One of the amendments that had originally been proposed was with knew or should have known, and it became knowing. That's a pretty high standard to meet and we would hope that as a result of this, what would happen is that we would have less people that make that choice to drive without insurance. The less people that sign the registration certification that says I certify that I have and will maintain automobile insurance on this car and then turn around and don't. We would hope that there would be more financially responsible drivers on the road so we don't end up with a situation where what we have now is probably 16 to 18 percent and it truly is a situation where every person that drives and doesn't buy insurance is being subsidized by those that do - everyone of us. Ninety- six percent of our policyholders do buy uninsured/underinsured motorist coverage and that coverage has been a coverage that certainly has changed over the years. It's increased in terms of its benefit but it's also increased in its price. It's gotten way away from what it originally was intended to be and so we think this bill is a good idea and I'd be willing to answer any questions that anybody might have of me. 4:30 p.m. SENATOR THERRIAULT asked for the definition of "operating a motor vehicle." MR. LESSMEIER said he wished he had a good answer but thinks it depends on where the vehicle was parked. He thought, for example, if a person drove to downtown Juneau, stopped and was waiting to get out of the vehicle and was hit, that would fall under operating a motor vehicle. However, if a vehicle was off the roadway, it would not. SENATOR OGAN asked what percentage of non-economic damage claims involves clear criminal activity. MR. LESSMEIER was unable to provide a percentage but said there are always scenarios in which the application of a law is not perfect. He suggested that using the remaining tools of the criminal law and the ability to collect punitive damages in egregious cases, he suspects there will be very few cases where every single penny that the bad actor has available is not paid. He said in looking at this, he keeps coming back to the fact that people make the choice not to provide protection for others and, at the same time, to give up some compensation for them. The consequence of that choice is fair under this bill. CHAIR SEEKINS announced a 3-minute recess. CHAIR SEEKINS asked if he chose not to buy insurance on his family's vehicles without the knowledge of the other family members, whether those family members would have the right to recover non-economic damages. He then questioned whether a person could not recover non-economic damages under this bill but could recover punitive damages if the act was egregious. MR. LESSMEIER said that is correct. CHAIR SEEKINS noted that 50 percent of punitive damages must be shared with the State of Alaska. He then asked, "So it would mean if it was truly an egregious act on the part of the non- insured or the other person, then you still can go after those punitive damages under the law but not what we would classify as non-economic - pain and suffering." MR. LESSMEIER agreed. CHAIR SEEKINS then expressed concern that an uninsured driver could hit a pedestrian. He thought this bill might not provide an incentive for those people without insurance to get it, but it will limit some of the exposure for the legal drivers. With no further participation, he closed public testimony. TAPE 04-58, SIDE B SENATOR OGAN asked Representative Meyer if he would oppose an amendment to address a situation where: ...if someone is driving with criminal culpability - either a reckless driver, a DUI, felony looting - and run into somebody, I think they should get hammered with as many tools as the guy that gets hurt regardless of whether or not they had insurance. I support what the bill does if it's just a simple violation but I think - I haven't talked to the MADD folks about it among others about drunk driving, I don't know how they'd feel about it, but I mean I think this goes a little too far in that area.... REPRESENTATIVE MEYER expressed concern about the late date in the session and noted this bill has a referral to the Senate Finance Committee. CHAIR SEEKINS offered to hear the bill again on Wednesday. The committee then took a brief at-ease. SENATOR OGAN moved to adopt a conceptual amendment , which read: The limitation of recovery does not apply, however, if the driver of the other vehicle (1) is cited for a violation of the state's operating a motor vehicle while intoxicated as a result of the accident and is convicted of the offense, (2) intentionally causes the accident, (3) flees from the scene of the accident, (4) at the time of the accident is in furtherance of an offense that is a felony. He noted that language is from a Louisiana statute. CHAIR SEEKINS announced that without objection, Amendment 1 was adopted. SENATOR THERRIAULT indicated that he would work with the prime sponsor on a definition of what constitutes operating a motor vehicle. SENATOR THERRIAULT then moved SCS CSHB 336(JUD) from committee with individual recommendations and its zero fiscal note. The motion carried with Senators Ogan, Therriault and Seekins in favor.