Legislature(1997 - 1998)
05/01/1997 04:12 PM House L&C
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* first hearing in first committee of referral
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+ teleconferenced
= bill was previously heard/scheduled
HOUSE LABOR AND COMMERCE STANDING COMMITTEE
May 1, 1997
4:12 p.m.
MEMBERS PRESENT
Representative Norman Rokeberg, Chairman
Representative John Cowdery, Vice Chairman
Representative Bill Hudson
Representative Jerry Sanders
Representative Joe Ryan
Representative Tom Brice
MEMBERS ABSENT
Representative Gene Kubina
COMMITTEE CALENDAR
HOUSE BILL NO. 218
"An Act relating to regulation and examination of insurers and
insurance agents; relating to kinds of insurance; relating to
payment of insurance taxes and to required insurance reserves;
relating to insurance policies; relating to regulation of capital,
surplus, and investments by insurers; relating to hospital and
medical service corporations; and providing for an effective date."
- HEARD AND HELD
HOUSE BILL NO. 266
"An Act relating to limited liability companies and limited
partnerships; and providing for an effective date."
- MOVED HB 266 OUT OF COMMITTEE
(* First public hearing)
PREVIOUS ACTION
BILL: HB 218
SHORT TITLE: OMNIBUS INSURANCE REFORM
SPONSOR(S): LABOR & COMMERCE BY REQUEST
JRN-DATE JRN-PG ACTION
03/27/97 872 (H) READ THE FIRST TIME - REFERRAL(S)
03/27/97 872 (H) LABOR & COMMERCE
04/04/97 (H) L&C AT 3:15 PM CAPITOL 17
04/04/97 (H) MINUTE(L&C)
04/07/97 (H) MINUTE(L&C)
04/18/97 (H) L&C AT 3:15 PM CAPITOL 17
04/18/97 (H) MINUTE(L&C)
04/23/97 (H) L&C AT 3:15 PM CAPITOL 17
04/23/97 (H) MINUTE(L&C)
04/25/97 (H) L&C AT 3:15 PM CAPITOL 17
04/25/97 (h) MINUTE(L&C)
04/28/97 (H) L&C AT 3:15 PM CAPITOL 17
04/28/97 (H) MINUTE(L&C)
04/30/97 (H) L&C AT 3:30 PM CAPITOL 17
04/30/97 (H) MINUTE(L&C)
05/01/97 (H) L&C AT 4:00 PM CAPITOL 17
BILL: HB 266
SHORT TITLE: LIMITED LIABILITY COMPANIES
SPONSOR(S): REPRESENTATIVE(S) RYAN, Therriault
JRN-DATE JRN-PG ACTION
04/30/97 (H) L&C AT 3:30 PM CAPITOL 17
04/30/97 (H) MINUTE(L&C)
04/30/97 1408 (H) READ THE FIRST TIME - REFERRAL(S)
04/30/97 1408 (H) LABOR & COMMERCE
05/01/97 (H) L&C AT 4:00 PM CAPITOL 17
WITNESS REGISTER
SENATOR DAVE DONLEY
Alaska State Legislature
Capitol Building, Room 508
Juneau, Alaska 99801
Telephone: (907) 465-3892
POSITION STATEMENT: Testified on HB 218.
MARIANNE BURKE, Director
Division of Insurance
Department of Commerce and
Economic Development
P.O. Box 110805
Juneau, Alaska 99811-0805
Telephone: (907) 465-2515
POSITION STATEMENT: Answered questions on HB 218.
MICHAEL LESSMEIER, Attorney
Lessmeier and Winters
One Sealaska Plaza, Suite 303
Juneau, Alaska 99801
Telephone: (907) 586-5912
POSITION STATEMENT: Testified on HB 218.
ACTION NARRATIVE
TAPE 97-55, SIDE A
Number 001
CHAIRMAN NORMAN ROKEBERG called the House Labor and Commerce
Standing Committee back to order at 4:12 p.m. Members present at
the call to order were Representatives Rokeberg, Cowdery, Sanders,
Brice, Ryan and Hudson.
HB 218 - OMNIBUS INSURANCE REFORM
Number 148
CHAIRMAN ROKEBERG announced the first order of business would be HB
218, "An Act relating to regulation and examination of insurers and
insurance agents; relating to kinds of insurance; relating to
payment of insurance taxes and to required insurance reserves;
relating to insurance policies; relating to regulation of capital,
surplus, and investments by insurers; relating to hospital and
medical service corporations; and providing for an effective date."
He said he would like a brief presentation on the amendments that
have been given to the committee members and noted Amendment R2
replaces Amendment 2. Amendment R2 reads as follows:
Page 1, line 8, following "provisions;":
Insert "requiring that uninsured and underinsured motor
vehicle insurance apply to claims of an insured even if other
policy limits are not exhausted;"
Page 74, following line 1:
Insert a new bill section to read:
"*Sec. 112. AS 28.40.100(a)(22) is amended to read:
"(22) "underinsured motor vehicle" means a motor
vehicle licensed for highway use with respect to ownership,
operation, maintenance, or use for which there is a bodily
injury or property damage insurance policy or a bond
applicable at the time of an accident and the amount of
insurance or bond
[(A)] is less than the amount the covered person
is legally entitled to recover for bodily injury or
property damage from an uninsured or underinsured
motorist [LIMIT FOR UNINSURED AND UNDERINSURED COVERAGE
OF THE INSURED'S POLICY; OR
(B) HAS BEEN REDUCED BY PAYMENTS TO PERSONS
OTHER THAN AN INSURED, INJURED IN AN ACCIDENT, TO LESS
THAN THE LIMIT FOR UNINSURED AND UNDERINSURED COVERAGE
OF THE INSURED'S POLICY];"
Renumber the following bill sections accordingly.
Page 74, line 3:
Delete "and AS 21.81"
Insert "AS 21.81; AS 28.20.445(h); and AS 28.22.211"
Page 74, line 9:
Delete "secs. 116, 117, and 119"
Insert "secs. 117, 118, and 120"
Page 74, line 11:
Delete "Section 113"
Insert "Section 114"
SENATOR DAVE DONLEY came before the committee to address Amendment
R2. He said, "Since yesterday's meeting, Mr. Ford and Mr.
Lessmeier and myself met and went over the language and reached the
agreement on language in number 2, not totally from a policy point
of view. If you want to get to the problem of stacking that we did
agree this was the correct way to do it. The most narrowly focused
way that wouldn't have any other ramifications in auto insurance
other than exactly what was intended by this. And I would support
and recommend to the committee, I guess it's labeled your R2
Amendment."
CHAIRMAN ROKEBERG pointed out it is labeled Ford, B.5, dated
5/1/97.
REPRESENTATIVE BILL HUDSON moved the amendment.
CHAIRMAN ROKEBERG said the amendments would be taken up as
recommendations to the Finance Committee to integrate into Senate
Bill 104, rather than moving the House bill.
REPRESENTATIVE HUDSON then withdrew his motion.
Number 328
CHAIRMAN ROKEBERG said the committee would take up Amendment R3
which follows:
Page 2, line 4:
Delete "and 110 - 116"
Insert "110, 111, 114 - 118, and 121"
Page 74, following line 1:
Insert new bill sections to read:
"*Sec. 112. AS 28.20.440 is amended by adding a new subsection
to read:
(1) Notwithstanding any other provisions of law, a person
who resides in the same household as the person named as insured or
a person who is a relative of a person named as insured shall be
excluded from coverage under a motor vehicle liability policy if a
person named as insured requests that that person be excluded from
coverage.
*Sec. 113. AS 28.22.101 is amended by adding a new subsection
to read:
(g) Notwithstanding any other provisions of law, a person
who resides in the same household as the person named as insured or
a person who is a relative of a person named as insured shall be
excluded from coverage under a motor vehicle liability policy if a
person named as insured requests that that person be excluded from
coverage."
Renumber the following bill sections accordingly.
Page 74, line 9:
Delete "secs. 116, 117, and 119"
Insert "secs. 118, 119, and 121"
Page 74, line 11:
Delete "Section 113"
Insert Section 115"
Number 328
CHAIRMAN ROKEBERG explained Amendment R3 relates to exclusion of an
insured in the family. He called for a brief at ease at 4:20 p.m.
The meeting was called back to order at 4:21 p.m.
REPRESENTATIVE JOE RYAN asked Chairman Rokeberg if he wants the
amendments to be included in the bill and then forward the bill to
the Finance Committee.
CHAIRMAN ROKEBERG said, "Well I have my own personal concern is I
have some questions about this and we have taken some testimony.
I guess my (indisc.) right now unless anybody has a strong feeling
about it that we could recommend it to -- I would send it up with
no recommendation for their consideration unless anybody else has
a comment on this."
REPRESENTATIVE HUDSON said he would like to know what the bill
actually does. He said without the amendment, under current law,
if he has someone under age, unemancipated, his insurance premiums
would have to cover that minor. With the amendment, his insurance
premium would not have to carry a minor son who may be off to
college or totally emancipated on their own.
Number 529
MARIANNE BURKE, Director, Division of Insurance, Department of
Commerce and Economic Development, came before the committee. She
said the amendment, in the division's opinion, is not good public
policy, but noted it is a choice matter. Potentially, what could
happen in this kind of a situation is a parent could go to an
insurance company and ask that a child be taken off of their
policy. However, there is still quite a bit of debate on whether
or not if this is a minor child are the parents still liable. If
a child went to college, she would think everyone would agree that
it would be hard to be absolutely sure that they would not be
driving a vehicle. They would be driving their parents vehicle
when they came home. She said some parents would notify their
insurance company to put that individual back on their policy and
some wouldn't.
MS. BURKE said if an accident did occur, it would be reasonable to
assume that the parent would look to their auto policy for
coverage. If they have elected to have that child taken off that
policy, then the insurance company would say, "I'm sorry, you have
no coverage." The parent could be potentially liable. Ms. Burke
stated she is not an attorney and she would not want to mislead the
committee into thinking that she can say, with any degree of
certainty, that the courts wouldn't say the parents were liable.
That is an undecided question based on the research the division
has done. Ms. Burke said, "I did check with the Division of Motor
Vehicles, it does not -- this amendment would not trigger an SL22
situation, the mandatory insurance. So that is not an issue with
this amendment."
Number 695
REPRESENTATIVE COWDERY said, "It is my understanding under current
law that the responsibility of your sibling has a cap on it of
$2,000 or $2,500. Is that true?"
SENATOR DONLEY responded that Representative Cowdery is thinking of
the vandalism law. He said that is specifically to vandalism of
public property, there is a cap on the responsibility for parents.
Senator Donley said he thinks that what Ms. Burke is referencing is
if somebody is in an auto accident and they asserted that the
control of the vehicle was given by the parent to the child and
then the child got in an accident, there would be several different
legal theories of potential liability that would come back to the
parent.
REPRESENTATIVE RYAN said, "If the parent drops this coverage,
courts have funny ways of reaching conclusions. Would it be
possible they could reach a conclusion that the carrier was still
liable even though the parent had dropped the coverage on a child
and the carrier would have to pay?"
MS. BURKE said she couldn't speculate on that.
SENATOR DONLEY said there are several legal theories. There is a
family purpose doctrine if the child was doing something for the
benefit of the family, then the parents could be responsible. If
you could show that the parents were somehow negligent in giving
the child the keys or access to the keys when they knew that there
was some question about their driving ability or if they're a
minor, they might be held responsible from parental authority. He
said there multiple theories that may make the parents responsible.
If the child has been excluded from a policy, then the parents
arguably wouldn't have any coverage.
Number 909
REPRESENTATIVE HUDSON asked what the age is of emancipation where
a sibling would no longer be the responsibility of the parent for
insurance purposes.
MS. BURKE responded in the state of Alaska, 18 is majority.
REPRESENTATIVE HUDSON asked if that means 18 or under.
MS. BURKE stated under 18. She indicated she doesn't know whether
that applies to liability.
MICHAEL LESSMEIER, Attorney, Lessmeier and Winters, came before the
committee. He noted he is in attendance on behalf of State Farm.
He said "There are a lot of theories of liability that you could
come after the parents that don't really depend upon the age of the
child, negligent entrustment, family purpose doctrine - those sorts
of things. And so those theories don't matter what the age of a
child is. I think that there is a theory that age does matter and
that theory is when the parent signs for the divers license of the
minor and I think once the person becomes an adult, then that
liability no longer exists. So I think the policy call on
something like this is I think the director has explained the
potential problems to a provision like this."
MR. LESSMEIER continued, "There also is a potential benefit, and
the potential benefit exists when you have people in your household
that if you were going to name them as a driver, would raise the
cost of the policy so great that you couldn't afford it. So what
happens sometimes, and this is happening right now actually, is
people will come and say, `Look, my significant other or spouse has
had a drinking problem, has DUIs or what ever the problem may be,'
it may their spouse, it may be their child, `we want to exclude
them from coverage because if we include them, the cost of the
policy is going to be so great because of their driving record.'
And that's the policy call, that is being done right now whether
you pass this amendment or not. It probably would be more
defensible in terms of what the court ultimately is going to do in
terms of enforcing that exclusion if this were passed, but I think
it's a public policy call as the director has said."
Number 1057
REPRESENTATIVE TOM BRICE said some kids work after school and
during the summer. If a child has their own car and are paying for
their own insurance, this would allow them to "disclude" their
parents as well as any other siblings.
MS. BURKE explained that the named driver exclusion would apply to
any policy. You can specifically name an individual that will be
excluded from a policy.
CHAIRMAN ROKEBERG asked Mr. Lessmeier if he would care to comment
on the amendment.
MR. LESSMEIER said he thinks it is a policy call. It is currently
being done and with the amendment it probably would be more
defensible to do it.
CHAIRMAN ROKEBERG said from the perspective of the industry, would
the amendment make it easier for the industry to deny a payoff if
this was in statute and there was a claim?
MR. LESSMEIER said he believes it would.
Number 1188
CHAIRMAN ROKEBERG said, "The policy call is whether the citizenry
of the state should be put in the position of have you deny that
coverage even though they bargained for it presumably."
MR. LESSMEIER said, "Ultimately it comes down to a question of,
`Who pays it?' Does the cost of that when it's denied and/or if
somebody gets in an accident, they're not paying a premium for it,
but then we have to pay it. The cost of that gets spread to
everybody else. So it's a question of who pays it and that's sort
of a policy call that you need to make."
CHAIRMAN ROKEBERG stated a family without children would be paying
higher premiums if this went into effect than a family with a large
number of children. So there is a burden of shift between families
that want to exclude their children from policies to the entire
rate base of the state. He asked if that is a fair analysis.
MS. BURKE responded that is correct. The liability claims paid by
any auto insurer is presented to the division as part of their
justification for increase in premiums. That includes all of their
(indisc.) claims.
CHAIRMAN ROKEBERG said, "So a baby-boomer-aged legislator who has
college-age kids now may be able to lower his personal premium, but
all the other folks in the state may have to pick up the
difference."
MR. LESSMEIER said it depends on whether the court forces the
exclusion or not. If the court enforces the choice that has been
made, the answer would be no.
CHAIRMAN ROKEBERG said why have the amendment if that would be the
case.
MR. LESSMEIER said the argument is stronger with the amendment than
without it. The risk is less with the amendment.
Number 1287
REPRESENTATIVE JERRY SANDERS said he doesn't find that necessarily
wrong because that is the original purpose of insurance in the
first place, to spread the pain out among everybody. He said if
the amendment isn't adopted because it has that effect, then there
should be an amendment that says if we don't have wrecks, we don't
have to have insurance and let the people that have wrecks pay for
it.
CHAIRMAN ROKEBERG said this would tend to create drivers without
coverage if the courts were to side with the argument that a child
is not covered because they are excluded from the policy,
therefore, they would be uncovered.
MR. LESSMEIER said it should force those drivers to get their own
insurance. In other words, if they're driving vehicles, they ought
to have their own policy and they shouldn't be on somebody else's
policy and they should pay the cost of that, whatever the cost may
be, rather than shifting that cost to their parents, etc.
REPRESENTATIVE RYAN said "Mr. Chairman, may I suggest that when
faced with a conundrum, sometimes the best thing to do is to pass
it on to someone else. I would be willing give you a motion to
pass this amendment on to the next committee or referral with no
recommendation and allow them to use their decisive wisdom to make
this tough policy call."
CHAIRMAN ROKEBERG asked if that would be acceptable and several
members indicated it would be. He then suggested that
Representative Ryan make the motion.
Number 1390
REPRESENTATIVE RYAN referred to Amendment R3 and said, "I move we
pass this on to the next committee of referral with no
recommendation and allow them to ponder it for a bit."
CHAIRMAN ROKEBERG asked if there was an objection to the motion.
Hearing none, it was so ordered. Chairman Rokeberg said, "With
that, we shall table House Bill 218 with the recommendation that
the House Finance Committee take up Senate Bill 104, as amended,
with a transmittal letter from the committee to the House committee
of recommendation for Amendment R2 and no recommendation on
Amendment R3.
CHAIRMAN ROKEBERG noted there is a title change in the Senate bill
and asked Senator Donley if there is any need to change the title
because of the change in the amendment.
SENATOR DONLEY indicated he discussed that with Mr. Ford the
previous day and he said that the language that the committee has
suggested to the Finance Committee in Amendment R2 would fit under
the title of the bill. So there would be no necessity for a title
change resolution.
CHAIRMAN ROKEBERG said it would fit, but as the (indisc.) of the
title is keeping with the intent of the amendment.
SENATOR DONLEY said the R2 Amendment is to HB 218.
CHAIRMAN ROKEBERG questioned if that is what was added in the
Senate.
SENATOR DONLEY said that is correct.
CHAIRMAN ROKEBERG questioned if that is in the existing title of SB
104.
SENATOR DONLEY indicated that is correct and it is not a problem.
He said all that is being suggested by Amendment R2 is that the
language that is currently in SB 104 would be modified to the
language in the Amendment R2 which already fits under the existing
title.
CHAIRMAN ROKEBERG said he understands that, but he is concerned
about what is in the existing title of SB 104. Chairman Rokeberg
said, "In our recommendation, we have changed the language of the
amendment and so is the change of language amendment consistent
with title change you did in the Senate?"
SENATOR DONLEY responded, "Yes. I asked that question of Mr. Ford
last night and he agreed that did not necessitate a change in the
Senate title."
CHAIRMAN ROKEBERG said, "For the record, the courts don't look at
the title itself when they're adjudicating something do they?"
SENATOR DONLEY said, "The only question about a title is the
constitutional single subject rule, but we've never had the court
tell us that we've ever passed a bill that violated the single
subject rule."
CHAIRMAN ROKEBERG said they won't look at what the title says, they
will look at what the amendment says.
SENATOR DONLEY said it's not problem because the suggested change
in language to the Senate bill is still within the title of the
Senate bill.
CHAIRMAN ROKEBERG thanked Senator Donley.
HB 266 - LIMITED LIABILITY COMPANIES
Number 1566
CHAIRMAN ROKEBERG indicated that the committee would consider HB
266, "An Act relating to limited liability companies and limited
partnerships; and providing for an effective date."
He entertained a motion to accept as formal minutes of the House
Labor and Commerce Committee those minutes that were transcribe
from the April 30, work session relating to HB 266.
REPRESENTATIVE RYAN made a motion to move the said minutes.
Hearing no objection, it was so ordered.
Number 1632
CHAIRMAN ROKEBERG commented that the feedback he's received related
to this legislation has all been positive. He stated he has some
technical questions which he will further pursue and will
disseminate this legislation to interested parties throughout the
state.
REPRESENTATIVE JOHN COWDERY moved and asked unanimous consent to
move HB 266 out of committee with individual recommendations and
accompanying zero fiscal note. Hearing no objection, HB 266 was
moved out of the House Labor and Commerce Committee.
ADJOURNMENT
CHAIRMAN ROKEBERG adjourned the House Labor and Commerce Committee
meeting at 4:42 p.m.
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