Legislature(2003 - 2004)
04/07/2003 01:25 PM House JUD
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
ALASKA STATE LEGISLATURE
HOUSE JUDICIARY STANDING COMMITTEE
April 7, 2003
1:25 p.m.
MEMBERS PRESENT
Representative Lesil McGuire, Chair
Representative Tom Anderson, Vice Chair
Representative Jim Holm
Representative Dan Ogg
Representative Ralph Samuels
Representative Les Gara
Representative Max Gruenberg
MEMBERS ABSENT
All members present
COMMITTEE CALENDAR
HOUSE BILL NO. 164
"An Act relating to the state's sovereign immunity for certain
actions regarding injury, illness, or death of state-employed
seamen and to workers' compensation coverage for those seamen;
and providing for an effective date."
- HEARD AND HELD
HOUSE BILL NO. 92
"An Act relating to reports by members of the clergy and
custodians of clerical records who have reasonable cause to
suspect that a child has suffered harm as a result of child
abuse or neglect."
- BILL HEARING POSTPONED TO 4/9/03
SENATE JOINT RESOLUTION NO. 10
Relating to the Pledge of Allegiance.
- BILL HEARING POSTPONED
CS FOR SENATE BILL NO. 45(JUD)
"An Act relating to the Legislative Budget and Audit Committee."
- BILL HEARING POSTPONED
PREVIOUS ACTION
BILL: HB 164
SHORT TITLE:CLAIMS BY STATE-EMPLOYED SEAMEN
SPONSOR(S): RLS BY REQUEST OF THE GOVERNOR
Jrn-Date Jrn-Page Action
03/05/03 0435 (H) READ THE FIRST TIME -
REFERRALS
03/05/03 0435 (H) L&C, JUD, FIN
03/05/03 0435 (H) FN1: ZERO(ADM)
03/05/03 0435 (H) GOVERNOR'S TRANSMITTAL LETTER
03/14/03 (H) L&C AT 3:15 PM CAPITOL 17
03/14/03 (H) <Bill Hearing Postponed>
03/31/03 (H) L&C AT 3:15 PM CAPITOL 17
03/31/03 (H) Moved Out of Committee
MINUTE(L&C)
04/02/03 0732 (H) L&C RPT 1DP 5NR
04/02/03 0732 (H) DP: ROKEBERG; NR: LYNN,
GATTO,
04/02/03 0732 (H) CRAWFORD, GUTTENBERG,
ANDERSON
04/02/03 0733 (H) FN1: ZERO(ADM)
04/02/03 0733 (H) FN2: (LWF)
04/02/03 (H) JUD AT 1:00 PM CAPITOL 120
04/02/03 (H) Scheduled But Not Heard
04/07/03 (H) JUD AT 1:00 PM CAPITOL 120
WITNESS REGISTER
SUSAN COX, Chief Assistant Attorney General
Civil Division (Juneau)
Department of Law (DOL)
Juneau, Alaska
POSITION STATEMENT: Presented HB 164 on behalf of the
administration.
BRAD THOMPSON, Director
Division of Risk Management
Department of Administration
Juneau, Alaska
POSITION STATEMENT: Assisted with the presentation of HB 164.
DAVID MORRIS, Inlandboatmen's Union of the Pacific (IBU)
Juneau, Alaska
POSITION STATEMENT: Responded to questions during discussion of
HB 164.
PAUL GROSSI, Director
Division of Workers' Compensation
Department of Labor & Workforce Development
Juneau, Alaska
POSITION STATEMENT: Responded to questions during discussion of
HB 164.
JAMES P. JACOBSEN, Attorney at Law,
Beard Stacey Trueb & Jacobsen, LLP
Seattle, Washington
POSITION STATEMENT: Provided comments during discussion of HB
164.
ACTION NARRATIVE
TAPE 03-32, SIDE A
Number 0001
CHAIR LESIL McGUIRE called the House Judiciary Standing
Committee meeting to order at [1:25 p.m., stated as 2:25 p.m.].
Representatives McGuire, Holm, Ogg, Samuels, Gara, and Gruenberg
were present at the call to order. Representative Anderson
arrived as the meeting was in progress.
HB 164 - CLAIMS BY STATE-EMPLOYED SEAMEN
Number 0049
CHAIR McGUIRE announced that the only order of business would be
HOUSE BILL NO. 164, "An Act relating to the state's sovereign
immunity for certain actions regarding injury, illness, or death
of state-employed seamen and to workers' compensation coverage
for those seamen; and providing for an effective date."
Number 0076
SUSAN COX, Chief Assistant Attorney General, Civil Division
(Juneau), Department of Law (DOL), explained that HB 164 will
amend AS 09.50.250 to provide that the state assert its
sovereign immunity on claims regarding injury, illness, or death
of state-employed seaman, and to provide workers' compensation
coverage for those injuries, illnesses, and deaths. The genesis
for HB 164 comes from the 1990 Alaska Supreme Court case, State
of Alaska, Department of Public Safety v. Robert Brown, which
held that workers' compensation was not the exclusive remedy for
a seaman who was employed by the state, and that if the state
wished to provide workers' compensation in lieu of allowing for
suits under the Jones Act - "the traditional maritime Act of un-
seaworthiness" - it could do so by amending AS 09.50.250. In
other words, she added, the state would be asserting its
immunity, withdrawing its consent to be sued for claims brought
under the Jones Act or under traditional maritime remedies such
as un-seaworthiness, maintenance and cure, or unearned wages.
MS. COX pointed out that HB 164 will not impose state law over
federal law for seamen who are not state employees; thus it will
not affect the remedies available to private-sector seaman. She
mentioned that in the Robert Brown case, the court referred to a
1963 attorney general's opinion, which was written approximately
one year after AS 09.50.250 was enacted. She mentioned that
other jurisdictions have followed "the same approach." She also
mentioned that there were other cases cited in the Robert Brown
case, and that these cases are listed in a DOL memo in members'
packets. She relayed that both Texas and New York have reached
similar conclusions regarding sovereign immunity; Texas provides
workers' compensation for state employees. She also relayed
that a 2002 case in North Carolina reached the same conclusion
as the "Robert Brown case" approach provided for in HB 164.
Number 0372
MS. COX noted that Alaska had provided workers' compensation for
seaman as a result of collective bargaining agreements reached
in 1983 with "ferry worker unions," adding, "We had an eight-
year history of actually providing workers' compensation in lieu
of traditional maritime remedies such as the ability to sue
under the Jones Act, recover maintenance and cure, et cetera."
In 1991, there was an adverse ruling by the Alaska Supreme Court
case, Dale Brown v. State & Div. of Marine Highway Systems,
which held that unions could not, as a matter of collective
bargaining, prospectively contract away their members' right
under federal law. As a result of the Dale Brown case, the
state returned to the system of providing unearned wages, and
maintenance and cure as no-fault remedies for injuries or
illness that occur to state-employed seaman working aboard a
vessel. She noted that under this system, the state can also be
sued by state-employed seaman under a claim of un-seaworthiness
or under the Jones Act for negligence.
MS. COX said that since 1991, the DOL has had a fairly extensive
history of litigating "these matters," adding that HB 164 would
"take us out of that litigation realm and get us into the
workers' compensation realm, to provide a uniform scheme of
recovery for state employees injured on the job, whether they're
seaman or otherwise." She anticipated that HB 164 would save
the state money: it would save the costs of litigation, which
are substantial; and it would also save money because sick leave
would be used in most cases of illness rather than workers'
compensation, which provides for a daily stipend of $45 until
recovery. She mentioned that there are advantages and
disadvantages to both workers' compensation and traditional
remedies, and that the details of those differences are listed
to some extent in the Dale Brown case.
MS. COX said that under workers' compensation, "we won't have
awards for pain and suffering, the extensive litigation costs,
[Alaska Rules of Civil Procedure] Rule 82 fees, and those kinds
of things." She opined that the approach taken in HB 164 is
legally defensible, and noted that Legislative Legal and
Research Services agrees.
REPRESENTATIVE GARA asked whether, for their maritime workers,
other states have tried to get rid of the Jones Act rules and
impose workers' compensation rules but have been told by the
courts that they could not.
MS. COX said not that she was aware of any such instances. In
response to a further question she said that in Texas, workers'
compensation is the exclusive remedy for state-employed seamen.
She made mention of a 1977 Texas Court of Appeals case, Lyons v.
Texas A & M University, adding that there was also a U.S.
Supreme Court case that spoke to the inability to sue the state
under federal law. In response to further questions, she said
that under HB 164, a state-employed seaman would have to file a
workers' compensation claim for injuries on the job, as do all
other state employees. Seamen not employed by the state would
not have that same remedy; they would have no-fault remedies
under the doctrines of maintenance and cure, which is a daily
stipend paid until they are recovered from their injuries; they
would get unearned wages until the end of the voyage; they would
get any other benefits their employer provides; and they could
also elect to sue their employer, under the Jones Act, for
negligence, or the sue the vessel owner under the theory that
the vessel was un-seaworthy.
Number 0930
REPRESENTATIVE GARA noted that under the Jones Act, a seaman
could recover full compensation, but under workers'
compensation, there are limits to how much compensation can be
recovered.
MS. COX pointed out, however, that under HB 164, state-employed
seamen would be entitled to the same remedies as all other state
employees and all other shore-based employees of any employer in
Alaska including the Alaska Railroad, even though private-sector
railroad employees would normally be covered under the Federal
Employers' Liability Act (FELA). She acknowledged that awards
under the Jones Act could potentially be larger because they
could include items not normally compensated under workers'
compensation claims, such as non-economic losses. Workers'
compensation, on the other hand, is a no-fault remedy that does
not ordinarily require litigation.
REPRESENTATIVE GRUENBERG asked whether state-employed seamen
have the option of filing workers' compensation claims instead
of seeking Jones Act remedies.
MS. COX said that since the Dale Brown decision invalidated the
collective bargaining agreements, employees have pursued the no-
fault remedies previously mentioned; in addition, employees
could litigate and prove fault or un-seaworthiness of the
vessel. In response to a further question, she explained that
workers' compensation is not the equivalent of maintenance and
cure. Maintenance and cure is a daily stipend and is
theoretically meant to replace the value of food and lodging
normally provided had the seaman been able to stay aboard the
vessel. She also explained that there is not a federal workers'
compensation Act that applies to seaman, adding that states and
political subdivisions are exempt from the Longshore and Harbor
Workers' Compensation Act and cannot opt to be included under
it.
Number 1112
BRAD THOMPSON, Director, Division of Risk Management, Department
of Administration, noted that in members' packets is a
comparison of the costs and frequency of claims between Alaska
Marine Highway System (AMHS) employees and other state
employees. He noted that this comparison encompasses five
fiscal years, is by vessel, and shows the frequency of claims on
a per 100 full time equivalent (FTE) basis. The AMHS has
frequency of claims of 41 per 100 FTEs; the state, overall, has
a frequency of claims of 8 per 100 FTEs; and the top five high-
risk departments including the Department of Public Safety
(DPS), the rest of the Department of Transportation and Public
Facilities (DOT&PF), and the Department of Corrections (DOC)
have a frequency of claims of about 10 per 100 FTEs. On a cost
per 100 FTE basis, the AMHS shows an average cost of $197,000;
the other top five departments averaged $64,145. He noted that
the AMHS claims include illnesses that manifest aboard the
vessel, such as the flu or a toothache, and these would not
typically be seen in a "workers' compensation frequency." The
average amount of $197,000 reflects both compensation paid to
the individual and litigation costs.
MR. THOMPSON noted that the difference is roughly $132,000, and
predicted that if this same average is projected forward and
multiplied by 6.5, HB 164 would create a savings of roughly
$850,000. He explained that the reason his division does not
have a fiscal note showing this possible savings is because it
self ensures all programs and is funded on a cash-flow basis for
claims that are expected to be paid in the next fiscal year. He
said that the savings will be reflected in the division's
premium assessment - cost of risk allocation. He elaborated:
"When the Division of Risk Management obtains its funding, it's
not directly from the general fund; it's from the agencies that
we bill, based on their frequency and severity of [claims], and
their exposures." The division's method of cost calculation
reflects the actual claims experienced.
CHAIR McGUIRE asked whether the cost of claims is going up,
whether more claims are being filed, and whether more claims are
being settled.
MR. THOMPSON suggested that the data on the second page of the
comparison reflects an increase from 1998.
CHAIR McGUIRE noted that there is a slight decrease in 2002 as
compared to 2001. She asked him to estimate what they would be
looking at for 2003.
MR. THOMPSON estimated that it would be "closer to 50" per 100
FTEs for 2003.
Number 1406
REPRESENTATIVE GARA asked whether the statistics presented by
the division reflect the AMHS employees that are "desk job
people as opposed to people who do physical labor."
MR. THOMPSON said that the AMHS statistics reflect only ship-
based people; thus there could be some pursers included in the
statistics.
REPRESENTATIVE GARA asked whether the statistics reflect the
percentage of people who do physical work but are not employed
by the AMHS.
MR. THOMPSON said that the fourth page of the comparison
reflects AMHS employees and the employees from the other top
five departments, which do not have the "desk component" that
other departments do.
REPRESENTATIVE GARA noted that employees doing physical labor
are more likely to be hurt. He surmised that the "AMHS pool of
people you're measuring seem to be almost all people who do
physical work, whereas the people you're comparing them to with
the lower claims rate seem to be proportionally a mix between
people who desk work and physical work." He said that if that
is correct, he is wondering what the relevance of the comparison
is.
MR. THOMPSON said that on a total unit basis, by department, the
comparison tries to be fair and thus compares the AMHS with the
DPS and DOC, which have higher injury rates "than the standard."
He noted that the third page of the comparison shows all
departments.
REPRESENTATIVE GARA pointed out, however, that one pool in the
comparison consists of people who do physical labor, but it is
not clear what the proportion of people doing physical labor is
in the other pool. He asked whether the division's statistics
regarding the number of claims filed under the Jones Act
reflects both injury claims and maintenance and cure claims.
MR. THOMPSON said that the statistics reflect both illness and
injury claims. He pointed out that the illness component is a
unique remedy owed to seaman that is not available to other
state employees. Thus the statistics reflect what he called
"life illness" as opposed to "occupational illness"; under
workers' compensation, "we would only be comparing the
occupational illness and the injury arising from their ... scope
of duty."
Number 1584
REPRESENTATIVE GARA asked whether a maintenance and cure claim
and an injury claim arising out of the same incident would be
counted as two separate claims by the division. In an attempt
to clarify, he asked:
"Are all the claims that [an AMHS] person files for
one injury - maintenance, cure, everything - is that
all counted as one claim by these statistics? Or is
that counted as more than one claim?
MR. THOMPSON said, "For these statistics, it's one claim."
REPRESENTATIVE OGG asked if the illnesses have been broken down
into type.
MR. THOMPSON said he only has a manual count of the claims in
2003: "roughly half of those are the illness type - ...
bronchitis, the flu-like symptoms, ... a broken and/or infected
tooth ... - as compared to the 'twisted right knee stepping
through' ... injury."
REPRESENTATIVE OGG noted that in the first two years listed in
the comparison, the average was in the low 30s, whereas in the
latter two years, the average was in the low 50s. He asked
whether there was a reason for such a dramatic jump.
MR. THOMPSON indicated that there did not appear to be any one
thing responsible for such an increase in the number of claims.
REPRESENTATIVE ANDERSON posited that it is just such an increase
in claims which has prompted the introduction of HB 164.
MR. THOMPSON agreed. In response to a question, he reiterated
that the statistics presented reflect both injury and illness
claims by AMHS employees, and although they are not listed
separately, his estimate is that about half of the claims are
illnesses such as colds, flu, toothaches, and the like.
REPRESENTATIVE GARA surmised, then, that if only half of the
numbers shown are for injury, then the number of claims by AMHS
is similar to claims by other departments.
MR. THOMPSON argued that the number of AMHS claims would still
be double the claims from the other top five departments.
REPRESENTATIVE GARA asked whether Mr. Thompson could "back out
the people who have desk jobs" in order to get a more accurate
comparison with regard to job type.
MR. THOMPSON indicated that he would not be able to do that. He
noted, however, that in 2002, the remainder of DOT&PF had [2629]
employees with 251 claims, whereas the AMHS had [655] employees
with 342 claims.
Number 2002
DAVID MORRIS, Inlandboatmen's Union of the Pacific (IBU), said
that although there are lot of injuries, it's important to
remember that AMHS employees are working on moving vessels;
thus, there is a greater likelihood that during high seas/high
winds, employees can get thrown around into equipment and metal
bulkheads. Because of the working environment, AMHS employees
are at greater risk for injury than state employees who are desk
bound.
MR. MORRIS, in response to questions, explained that in the
contained environment of a vessel, if crew or passengers come
aboard with an illness - the flu, a cold, et cetera - that
illness will quickly circulate amongst all crewmembers. With
regard to Representative Ogg's comments about an increase in
claims over the last couple of years, he posited that perhaps
this increase in claims is due to the fact that some AMHS
employees are older and getting ready to retire. He also noted
that some vessels have had fires and other mishaps, all of which
contribute to the number of injury claims.
MR. MORRIS opined that the number of claims due to safety issues
are dropping as those issues become resolved. He also noted
that the AMHS has a new ship, and surmised that during its five-
year shakedown period, there may be an increase in injuries
until crewmembers get used to that new working environment. He
also surmised that some of the increase in injuries over the
last couple of years could be due to the influx of new
employees, adding that a lot of AMHS employees have been working
onboard ship less than five years.
MR. MORRIS, in response to further questions, acknowledged that
state employees receive better benefits than do similarly
employed people in the private sector; they receive better
health care and better retirement, and it is harder to get fired
because of the processes that must be followed.
CHAIR McGUIRE mentioned that the governor is trying to look at
ways in which agencies can reduce the cost of government.
Therefore it becomes a policy choice regarding whether the state
can afford to continue dealing with the illness/injury claims of
state-employed seamen in the current manner.
TAPE 03-32, SIDE B
Number 2383
CHAIR McGUIRE said she is of the opinion that life is a risk.
Therefore, people who chose to work for the state, and thus
receive better benefits, may also have to live with the fact
that their right to sue the state, as their employer, is
limited. She asked Mr. Morris whether he thinks passage of HB
164 will "make or break" a seaman's decision to work for the
state instead of in the private sector.
MR. MORRIS surmised that the remaining state benefits would
still outweigh the benefits of working in the private sector.
Turing back to the statistics provided by the Division of Risk
Management, he noted that if a state employee from another
department becomes sick, he/she can simply take one or two days
off, whereas if an AMHS employee gets sick, because he/she works
one and sometimes two weeks at a time, he/she will have to take
the entire week or two weeks off. Thus the numbers in the
comparison reflect that fact.
REPRESENTATIVE GARA asked for the IBU's position on HB 164.
MR. MORRIS said that there are good and bad points [to both
types of remedy]. He elaborated:
As it is now, we're in maintenance and cure. That
gives you $45 a day while you're sick or injured, and
that doesn't come close to what my wages are. So we
compensate by using our sick leave. And our sick
leave also comes out of the general fund because it's
an unfunded liability. And if we're in the [workers'
compensation] role, it would all come out of the
[workers' compensation] and the insurance that you
already pay.
And the only thing, the drawback that I see, that
would be, is some cases where a rope will break, and
one in the past years, and it took both the guy's legs
off, and - not completely off, they were able to fix
them so he could -- ... and he also was flipped up and
he lost his sense of smell and other things. And
those are the large lawsuits that reflect into these
things. And normally that's like less than 1 percent.
Number 2216
But if there is no recourse for people like that that
get injured that severely, that are unable to do most
things that they want to do for the rest of their
lives - and in [workers' compensation there isn't
recourse] because there's a cap on the dollar amount -
that's ... one instance [when] litigation for things
like that would be better. But it's less than 1
percent. So the [workers' compensation], for the
majority of the people, would be better.
MR. MORRIS, in response to Representative Gara, indicated that
the IBU is still undecided on whether it likes the provisions of
HB 164. He again opined that for the majority of the people,
those provisions would be better.
REPRESENTATIVE GARA relayed that his main concern is that under
the workers' compensation system, an injured person gets partial
compensation: the law puts a dollar figure on a person's lost
leg of approximately $60,000. He offered his belief that this
is not acceptable. He said that initially his thoughts on HB
164 were that he did not want to balance the budget by giving
somebody partial compensation for his/her life. On the other
hand, he said, the views of the people that are going to
impacted by HB 164 are also important to him. He asked to be
informed of the IBU's position when it is arrived at, and he
suggested that the IBU should weigh in quickly if it is to do so
at all.
MR. MORRIS, in response to further questions, reiterated that
the IBU's membership is still undecided on issue of HB 164,
though he anticipates that they will have a position soon. He
indicated that the IBU needs to hear from the 1 percent that
would wind up having no recourse should HB 164 pass.
REPRESENTATIVE HOLM asked for information on the aforementioned
workers' compensation cap.
Number 2071
PAUL GROSSI, Director, Division of Workers' Compensation,
Department of Labor & Workforce Development, noted that workers'
compensation is a formula-driven system. It pays for all
medical costs involved in an injury or occupational illness; for
"temporary total disability benefits," it pays for 80 percent of
one's spendable weekly wage, or 80 percent of net income. He
added that various formulas are used to determine one's
compensation rate. Once one has reached "medical stability,"
then he/she can be rated for a "permanent partial impairment."
Depending on the type of injury or affliction, he explained,
it's rated on the whole body and whatever percentage that comes
up under the "AMA guides" [American Medical Association Guides
to the Evaluation of Permanent Impairment, Fifth Edition]; then
that's multiplied by $177,000. However, if someone is seriously
injured and unable to return to gainful employment, he/she can
receive "permanent total disability," which is unlimited and can
be paid for life. The person who loses both legs, for example,
would be entitled to payment for life.
REPRESENTATIVE HOLM asked what that amount would be. He used
the example of someone earning $50,000 a year and getting both
legs cut off.
MR. GROSSI indicated that for the rest of that individual's
life, he/she would receive 80 percent of his/her spendable
weekly wage. In response to a further question, he said that
there is no cap on that.
REPRESENTATIVE HOLM relayed, however, that a constituent of his
has told him that there is a cap.
MR. GROSSI ventured that that individual was perhaps referring
to a "permanent partial impairment rating." He noted that
although the amount of a benefit is formula driven, there is an
appeal process available. For example, if the adjuster decides
to "controvert" - or deny - a claim, the employee can take
his/her case before the workers' compensation board.
REPRESENTATIVE GARA mentioned that there are two components to a
workers' compensation claim: there is the portion that relates
to a percentage of the wages one is entitled to until he/she can
go back to work; and there is the portion, when one becomes
medically stable, in which one's permanent disability is
measured. For example, the loss of a leg has a value placed on
it via a formula.
Number 1834
MR. GROSSI said that there are a number of different benefits.
He elaborated:
If you're injured, you're entitled to full coverage on
your medical benefits. Then, if you're ... unable to
return to work and you're disabled for more than three
days, ... then you'll be entitled to temporary total
disability, which is 80 percent of your spendable
weekly wage. You'll receive that up until the time
you're able to return or you become medically stable,
... at which time, if you're unable to return to your
job at the time of injury, or some other job, you may
be entitled to reemployment benefits - or [a]
retraining type of a benefit.
Or, ... if you're able to return to work ... you may
be entitled to a permanent partial impairment benefit,
which is a rating. You get a rating under the AMA
guides, which ... gives a certain percentage of the
whole body. ... Say it's ... an arm injury, and your
rate would be 10 percent; well, then you take that 10
percent and you multiply it by $177,000, which is just
an arbitrary number that's been used ..., and ... the
amount you [would] receive would be $17,700.
REPRESENTATIVE GARA asked whether $177,000 is the maximum one
could receive were he/she to "lose everything" and not be able
to do any kind of work.
MR. GROSSI said that if a person becomes permanently and totally
disabled, he/she is entitled to compensation for life or at
least until the time when he/she is no longer permanently and
totally disabled. He confirmed that the maximum one can receive
for "the disability rating" is $177,000, and that that would be
a one-time payment unless the person is eligible to receive
reemployment/retraining benefits.
Number 1708
JAMES P. JACOBSEN, Attorney at Law, Beard Stacey Trueb &
Jacobsen, LLP, offered the following testimony:
Let me give you a little bit of my background just so
you know who you're speaking to. I spent five years
as a Jones Act seaman, sailing in the waters of
Alaska. My family's been involved and going to sea
for many years; many members of my family are still
there. My nephew, at the current time, is on a tanker
full of jet fuel headed for Kuwait - it's a civilian
ship - he's a Jones Act seaman. I have served as [an]
admiralty lawyer for the United States Department of
Justice, and I've been in private practice
representing seamen for many years. I'm a former
member of the [IBU] and the Alaska Fishermen's Union
(AFU). So I come at this from a perspective of having
represented vessel owners, having sued vessel owners,
and having spent a number of years at sea myself, and
having my family there.
I think there's two questions that the committee's
trying to address, which are both difficult. The
first is the legal issue; the second is the practical
issue. With regard to the legal issue, I think that
the main problem with the bill so far is that the
state's waiver of sovereign immunity is not in the
statute. It's actually in the constitution. And the
[proposed] statute merely permissively may state
whether or not the court, or whether or not the
legislature can set up a court of claims and whether
or not these suits can be pursued in the [Alaska]
Superior Court. And the only way for the state to
revoke its waiver of sovereign immunity is through a
constitutional amendment.
MR. JACOBSEN went on to say:
I've provided a legal brief to [Chair McGuire] that
actually [has] attached to it the debate from the
constitutional convention, and when you compare ...
what was said about the meaning of the waiver of
sovereign immunity and the way in ended up in the
constitution, it's clear that the legislature, under
the current constitution, may not revoke sovereign
immunity by statute, but may only say what court that
the claims can be filed in. And therefore, if the
state is interested in trying to revoke sovereign
immunity for (indisc.) court, it has to do so through
a constitutional amendment.
Number 1599
The second major problem from a legal standpoint is,
the United States Supreme Court has held that not even
Congress, which typically has hegemony over maritime
matters, can apply state workers' [compensation] laws
to merchant seamen. And that case was cited in ...
our firm's legal brief to [Chair McGuire], and I've
never seen the attorney general's office address that
specific case and say why a state legislature can
apply workers' [compensation to seamen] when nobody
else can, including the federal legislature. The
second problem with it is ... that the Alaska Supreme
Court, in a 1981 case that's already ... been cited in
the legal brief, has held that, constitutionally,
Alaska's state workers' [compensation] law cannot be
applied to Jones Act seamen.
These issues have never been addressed, that I'm aware
of, by the attorney general's office as to why this is
an exception or how this is going to work. Obviously,
all the other cases that ... were cited by the
attorney general's office in the letter to the Senate
committee that looked at this [SB 120], none of those
cases address that issue either. So, as far as I
know, those issues have never been addressed in any
court opinion, when it came to state seamen. And I'm
not sure why that is, but they just haven't. I think
those are the main ... legal problems that are
represented by the bill.
Number 1520
MR. JACOBSEN continued:
I think I do have some insight into a lot of the
questions that the committee had for Mr. Thompson and
on the workers' [compensation] issue. I'd like to
address a few of those that have come up. There was a
question as to why there's been an increase in claims
over the last few years. I think that I do have some
insight into that because I have represented many of
the seamen who have pursued claims either for
maintenance and cure, which is a no-fault illness
related issue, and/or for Jones Act claims for
compensation, which are more serious.
My experience with these claims started in 1995, and I
know that I spent a lot of time in say '95 to about
... 2000 dealing with the particular adjusting firm
that the state had hired to adjust these claims for
it. And a lot the work that I did at that point was
trying to get that particular adjusting firm to pay
maintenance and cure on valid claims which they had
denied. And it's hard for me to say how many claims
that they didn't pay because they denied them and the
seamen didn't know what to do after they denied them.
I do know that recently, about the time that these
claims increased, the state changed adjusting firms.
And from my perspective, they hired a much more
professional adjusting firm, a firm that was actually
paying, 99 percent of the time, the valid claims. And
my need to intervene, and trying to get valid
maintenance and cure claims paid, on a pro bono basis,
has vastly diminished with the [administration] of
Pacific Claims [Inc.]. So I would suggest to the
committee that the change in the claims has been that
previous there was an adjusting firm that was
wrongfully denying claims and, therefore, these claims
were never being paid and, subsequently, when they
changed adjusting firms, that the valid claims were
being paid in due course.
Number 1410
MR. JACOBSEN also said:
I think the other major distinction that needs to be
kept in mind between a workers' [compensation] system
and the federal maritime system is that the federal
maritime system has a three-year statute of
limitations, whereas if you don't bring a claim for an
injury related to your work on the vessels in three
years, you're forever time-barred from bringing that
claim. On the other hand, I'm not a workers'
[compensation] expert, but my understanding is ...
that workers' [compensation] basically has no statute
of limitations, and if you're injured on the ship in
1990 and you're disabled by 1993, you can still bring
your claim.
The practical effect of this is that Jones Act
liability is front-end loaded; in other words, it's
paid on the front end. Your claim is either made -
and either settled or litigated, and you're paid
everything you're owed within that time period that is
reflected within the statute of limitations - and/or
if you don't bother to bring your claim, then you lose
your claim. But all the Jones Act liability is paid
at one time, either through a judgment or a
settlement; there's no future liability like there is
in workers' [compensation] cases.
For example, the committee just had before it an
example of somebody with permanent total disability
where they could be paid for life. And if you take a
man or woman working at sea, make them about 35 years
old, have them doing an engine room job where they're
making $25 or $30 an hour, and render them permanently
totally disabled, if you pay them out to their
projected life expectancy, which is about 76 for men
and about 77 or 78 for women, you're going to end up
paying that individual between, say, $1.7 [million]
and $2 million over the time period that you're going
to [be] paying that person, and you're going to be
paying that person for 40-45 years. So this money's
going to be spread out over a much longer time period.
Number 1323
MR. JACOBSEN added:
Another issue that this committee raised was the same
issue that was raised in the Senate hearing that I'd
attended over the Internet, and that was trying to
know about the claims experienced between merchant
seamen and people who work ashore. And in the Senate
committee hearing, ... the representatives from the
state were asked to actually give some statistics on
comparing logging and construction claims versus the
[AMHS] claims, because at least some of those
committee members thought that that was perhaps the
better analysis, was in the high-danger jobs, which
seamanship falls into, is to compare these against the
experience in logging [and] the experience in
construction.
For example, our law firm has about five employees and
we've never had a workers' [compensation] claim, ever.
And we're office workers and it's pretty safe, but it
is common knowledge that the occupations like logging
and construction have extremely high insurance rates
for workers' [compensation] premiums because there are
so many injuries. And that's really the people to be
comparing these seamen against, is people doing
dangerous work ashore and what is their workers'
[compensation]. And we've never seen that.
With the legal brief that we gave to [Chair McGuire],
we gave the only, quote, "scientific," [end quote],
analysis comparing Jones Act liability to workers'
[compensation]. That was done by a trade group - the
American Waterways [Operators (AWO)] - who operates
the tugboats, basically, throughout the river system
of the United States and through the Gulf of Mexico.
They did a comparison between Longshore and Harbor
Workers' Compensation Act and Jones Act; they compared
371 files, and they determined that it was actually
cheaper, overall, for the employers to compensate
people under the Jones Act than it was under the
workers' [compensation]. And that did have something
to do, I think, with the statute of limitations.
Number 1219
MR. JACOBSEN continued:
Another point that came up, on the practical aspects
of this, was trying to perhaps close the budget gap.
The way the legislation is written, it's only going to
apply to cases which arise after July 1, 2003, and
there'll be a three-year retroactive, basically,
statute of limitations still out there. So probably
three years after this in enacted, the state will be
in the business of having dual systems going, where
they'll have to be defending and paying Jones Act
lawsuits and maintenance and cure issues, while also
running a workers' compensation system. So, for at
least the first three years, there's going to be a
dual system with the associated burden and expense.
Also, on the idea of burden and expense, before I
became involved in representing a lot of these injured
seamen, there were other lawyers doing it, and a lot
of those lawyers were Seattle-based and they would
file lawsuits against the State of Alaska in Whatcom
County because there's a ferry terminal there. The
state was in the business of having to hire private
counsel at a very fine maritime law firm in Seattle by
the name of Bauer Moynihan & Johnson [LLP], and paying
hourly legal fees to those lawyers to defend the state
because, obviously, the state didn't have attorney
generals down here. Occasionally, the state was
successful in getting those cases dismissed and
transferred to Alaska, but more recently, the last two
I was aware of, they were not dismissed and
transferred to Alaska.
There is a possibility, however this all shakes out,
that the Alaska Supreme Court could hold that if the
legislature, either through statute or constitution,
can close the doors of the Alaska courts to their own
seamen. But, nevertheless, they can't close the
Washington state court doors. And then the state
would be back in the business of hiring ... private
legal counsel to defend it in the Whatcom County
courts, which they have done in the past and I'm sure
that somebody could probably speak as to how expensive
it is to defend a substantial lawsuit that way. But
certainly it's a lot more expensive to defend it with
outside counsel than it is with experienced employees
like Ms. Cox who know this area of law, or basically
have become expert in it, and can do it while probably
doing the work of two other people in addition to
defending in these cases.
Number 1079
REPRESENTATIVE ANDERSON said he would have cut Mr. Jacobsen off
a long time ago, though he acknowledged that Mr. Jacobsen's
testimony is important and critical. He asked Mr. Jacobsen
whether he is suggesting that they leave the system as is. He
also asked Mr. Jacobsen how, if were he in the governor's
position, he would go about resolving the issue regarding "these
high level of claims" and the cost to the state.
MR. JACOBSEN said he would definitely leave the system the way
it is. It's been the system throughout the United States for 83
years, and it applies to every other seaman who goes to sea and
faces the aforementioned risks of working in high sea/high wind
conditions. For those who are seriously injured, The Jones Act
compensates at a better level than does workers' compensation.
Therefore, he said, for those citizens of the state who risk
their lives to go out and provide a marine highway for Alaska,
if they're seriously injured at sea he thinks it should be the
state's policy to fully compensate them, the same as is done for
the people who are working for private ship owners. He noted
that private ship owners find a way to economically and
successfully operate within the environment; thus he did not see
any reason why the government couldn't do the same.
MR. JACOBSEN suggested that the committee read the cases he has
cited in his legal brief, adding that as long ago as 1885 Oliver
Wendell Holmes was railing on the issue of sovereign immunity,
saying that it did not make a lot of sense, was unfair to those
people who were injured by the wrongs of the government, and had
no basis for treating American citizens like vassals of a ward.
Sovereign immunity, he surmised, is based on a system that grew
up in Britain but which the United States has rejected with
regard to how the government relates to its citizenry. "So for
those policy reasons, I'd say yes, you should leave it the way
it is," he concluded.
CHAIR McGUIRE asked Mr. Jacobsen what percentage, on average, he
receives in contingency fees for the aforementioned 1 percent of
people who get seriously injured.
Number 0873
MR. JACOBSEN replied that his firm's fees range between 25
percent and 33 1/3 percent. He added that he never charged
anything for all of the maintenance and cure work that he'd done
for seamen working on the AMHS. To further clarify, he said
that the maintenance and cure work was done pro bono publico.
In response to further questions, he said that those who are
seriously injured would do better under a Jones Act regime than
they would under a workers' compensation regime, and although
only a small number of the population would have the type of
career-ending injuries offered as examples, those are the people
that the legislature should be considering because those are the
people that will experience the most devastating economic
consequences of having served, as a public servant to the state,
in a dangerous environment.
CHAIR McGUIRE said she did not disagree that the Jones Act would
provide better compensation for serious injuries; however, when
considering the testimony offered by the IBU representative,
workers' compensation would provide a better remedy for a larger
percentage of state-employed seamen. She indicated that because
of the budget deficit the state is facing, it becomes a policy
question of whether the state should curb some of its expenses
by offering the majority of state-employed seamen a better
remedy via workers' compensation.
MR. JACOBSEN opined that the percentage of seamen experiencing
serious or career-ending injuries is much higher than the 1-
percent figure proffered by Mr. Morris. He suggested that the
percentage is probably closer to 30 percent; or, he added, going
by Mr. Thompson's statistics, about eight claims a year. In
response to the comment that the IBU representative said only
about 1 percent of claims are for serious injuries, he noted
that he's spoken with Mr. Tseu, Regional Director, Alaska
Region, Inlandboatmen's Union of the Pacific (IBU), and surmised
that had Mr. Tseu been present, he would have given testimony
quite a bit different than what was offered by Mr. Morris. Mr.
Jacobsen also suggested that Mr. Thompson would not agree with
the 1-percent figure either, were he to further investigate the
details of the claims used in the statistics he provided.
MR. JACOBSEN, in conclusion, observed that the case has still
not been made, from a statistical standpoint, that HB 164 will
really save the state money, reasoning that the wrong statistics
have been given to the committee. "These people have not been
compared to the injury rate of construction workers or loggers,
which I think is more appropriate," he remarked, reiterating
that passage of HB 164 will create a dual system for three
years.
Number 0562
REPRESENTATIVE GRUENBERG turned to the governor's transmittal
letter, and asked whether the committee is perhaps looking at
the wrong issue. He suggested that rather than simply doing
away with Jones Act remedies for state-employed seamen, perhaps
instead the law should be amended to allow the state, via
collective bargaining agreements, to offer seamen a choice of
either Jones Act remedies or workers' compensation remedies. He
asked whether there is anything precluding such an option.
MS. COX reiterated that in the Dale Brown case, the Alaska
Supreme Court said that the unions could not, as a matter of
collective bargaining, contract away members prospective rights
to sue for federal remedy. Therefore, she surmised, statute
could not be changed in order to affect the collective
bargaining climate such that those federal rights could be
bargained away. In response to a question, she noted that that
decision has not yet been challenged.
REPRESENTATIVE GRUENBERG noted that the Dale Brown decision was
arrived at before either the 1996 U.S. Supreme Court case,
Seminole Tribe of Florida v. Florida, or the 1999 U.S. Supreme
Court case, Alden v. Maine. He asked whether Alden applied. He
also asked whether the state has jurisdiction, or whether it is
still trumped by federal law.
MR. JACOBSEN said that the cases cited in his firm's legal brief
talk about the fact that state law may not be applied to Jones
Act seamen. He noted that there is also an Alaska Supreme Court
case "holding the same." He remarked that the question is
whether Alden changes that.
REPRESENTATIVE GRUENBERG interjected to say that he is not aware
of any cases that address Alden.
Number 0162
MR. JACOBSEN noted, however, that on page 8 of his firm's March
25 legal brief, there is a discussion of Alden, which in turn
refers to the 1979 U.S. Supreme Court case, Nevada v. Hall. He
said:
And it does talk about the fact that the
constitutional immunity ... a [state] may assert for
loss against lawsuits in their own court does not
apply to courts of sister jurisdictions, for instance,
Washington state. And there's a quote on page 8 that
talks about the fact that states are still obligated
by their good faith and their participation in the
federal system to obey and to abide by federal law -
applicable federal law.
REPRESENTATIVE GRUENBERG surmised, then, that Alden would
prevent somebody from litigating in an Alaska court, and, thus,
"they would have to give the business to Washington lawyers in
the Washington courts.
MR. JACOBSEN said that that was one possibility. He added that
another possibility is the fundamental issue that, with an
Alaskan Supreme Court case saying that, constitutionally, "you
cannot [provide] workers' [compensation] to seamen, the question
is: 'Well, what do you do in those circumstances? How do you
analyze that?'" It's a very difficult question, he opined,
noting that perhaps because workers' compensation can't be
applied, constitutionally, to seamen, then "we'd have to apply
this, because it would offend the privileges and immunities
clauses of the Alaska [State] Constitution not to make this law
applicable to the state employees." There's another
constitutional issue being raised there, he said, but added that
there is no ready answer.
TAPE 03-33, SIDE A
Number 0001
REPRESENTATIVE GRUENBERG asked Ms. Cox whether she agrees with
the comments on page 8 of Mr. Jacobsen's legal brief, that
comity would allow "these kinds of cases" to go forward in the
state of [Washington].
MS. COX replied that under limited circumstances, it is
certainly possible for someone to raise a suit in Washington.
She opined, however, that both comity and Washington's personal
jurisdiction rules would encourage the Washington courts to not
keep those cases, particularly if the person bringing the suit
is neither a resident of, nor injured in, Washington.
REPRESENTATIVE GRUENBERG asked whether it would be possible to
have a case, even if it meets all of Washington's requirements
and could be tried there, moved to an Alaskan court.
MS. COX opined that if HB 164 were to pass and if a state-
employed seaman would prefer a Jones Act remedy instead of a
workers' compensation remedy, he/she could hire an attorney such
as Mr. Jacobsen to challenge this law in an Alaskan court, thus
allowing the courts to ultimately decide the issues of
constitutionality and state versus federal jurisdiction. She
also opined that the vast majority of state-employed seamen will
be satisfied with workers' compensation remedies. She said she
did not anticipate that there would be many cases filed in
Washington courts.
REPRESENTATIVE GRUENBERG predicted that passage of this proposed
law will ultimately result in it being challenged in the U.S.
Supreme Court. Therefore, he asked whether there should be a
DOL fiscal note attached to HB 164 to cover the cost of such an
eventuality.
MS. COX said she did not foresee that there would be any
additional expenses for such a challenge, since handling suits
against the state for one reason or another falls under the
normal scope of her office's duties. She did acknowledge that
Mr. Jacobsen is correct in that there would be three-year phase-
out period if this bill passes.
REPRESENTATIVE GRUENBERG asked Ms. Cox whether the DOL would be
hiring outside counsel if the proposed law were challenged in
the U.S. Supreme Court.
Number 0582
MS. COX said it would depend on who won at the Alaska Supreme
Court level, and thus she could not predict whether the DOL
would hire outside counsel. She noted, however, that there are
three other jurisdictions that already do as HB 164 is
proposing, and those jurisdictions have not faced the U.S.
Supreme Court because of it.
REPRESENTATIVE GRUENBERG asked whether those jurisdictions have
gone to their highest court because of it. Would there be a
potential split among the jurisdictions?
MS. COX said she does not know of any split, and has not run
across contrary authority on the point of the state asserting
its sovereign immunity with regard to Jones Act cases.
REPRESENTATIVE GARA asked whether it would be possible to create
a system that made workers' compensation available for minor
claims and the Jones Act available for serious injuries.
MS. COX indicated that she would give that concept some thought.
She noted that with Jones Act cases, the claimant has the burden
of proof and must hire a lawyer, so while it may seem as though
the benefits are greater under the Jones Act, that system does
have it's downsides as well. With regard to career-ending
injuries, she said it is important to remember that in addition
to the workers' compensation benefits listed by Mr. Grossi,
occupational disability benefits are available to most state
employees through the Public Employees' Retirement System
(PERS). Those additional benefits include 40 percent of prior
wages and continued accrual of service credit until a person's
regular retirement age.
REPRESENTATIVE GARA pointed out, however, that those benefits
are not available to all state employees. He said he knew of a
corrections officer who was told by his insurance company that
his heart condition did not entitle him to any disability
benefits because he could still work as a janitor.
MS. COX clarified that there is a difference between the
occupational disability benefits available under PERS and the
disability insurance that employees can purchase under the
Supplemental Benefits System (SBS). She said that an
occupational disability has to be caused by one's work. She did
acknowledge, however, that the Marine Engineers' Beneficial
Association (MEBA) has opted out of PERS, and so occupational
disability benefits available under PERS do not apply to those
employees.
Number 0973
REPRESENTATIVE GARA said he would like to know whether the
administration would be willing to compromise, either by
adopting a bifurcated system such as he proposed earlier, or by
offering a statutory change that would allow the state and
unions to "negotiate in" a workers' compensation system.
MR. JACOBSEN, at the request of Representative Samuels, further
reviewed the statistics provided by the Division of Risk
Management, and clarified that his earlier estimate of how many
claims were for career-ending injuries was too high.
MS. COX agreed that 30 percent was too high an estimate. She
mentioned that in any given year, there are only 15-20 lawsuits
filed under the Jones Act.
[HB 164 was held over.]
ADJOURNMENT
Number 1101
There being no further business before the committee, the House
Judiciary Standing Committee meeting was adjourned at 3:18 p.m.
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