Legislature(1993 - 1994)
09/10/1993 09:00 AM L&C
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
HOUSE LABOR & COMMERCE STANDING COMMITTEE September 10, 1993 Anchorage, Alaska Legislative Information Office 9:00 a.m. MEMBERS PRESENT Representative Bill Hudson, Chairman Representative Joe Green, Vice Chairman Representative Brian Porter Representative Joe Sitton Representative Jerry Mackie Representative Eldon Mulder Representative Bill Williams (via teleconference) OTHER LEGISLATORS PRESENT Representative Fran Ulmer Representative Ed Willis Representative David Finkelstein Representative Cliff Davidson Representative Mike Navarre Representative Jim Nordlund MEMBERS ABSENT None COMMITTEE CALENDAR HB 292: An Act relating to civil actions; amending Alaska Rules of Civil Procedure 49 and 68; and providing for an effective date. HEARD AND HELD HB 300: An Act relating to civil liability for commercial recreational activities; and providing for an effective date. NOT HEARD PREVIOUS ACTION BILL: HB 292 SHORT TITLE: CIVIL LIABILITY SPONSOR(S): LABOR & COMMERCE JRN-DATE JRN-PG ACTION 04/23/93 1459 (H) READ THE FIRST TIME/REFERRAL(S) 04/23/93 1459 (H) L&C, JUDICIARY, FINANCE 09/10/93 (H) L&C AT 09:00 AM CAPITOL 17 BILL: HB 300 SHORT TITLE: LIABILITY: COMMERCIAL RECREATION ACTIVITY SPONSOR(S): LABOR & COMMERCE JRN-DATE JRN-PG ACTION 05/06/93 1665 (H) READ THE FIRST TIME/REFERRAL(S) 05/06/93 1665 (H) L&C, JUDICIARY, FINANCE 09/10/93 (H) L&C AT 09:00 AM CAPITOL 17 WITNESS REGISTER Mike Ford, Attorney Legislative Legal Services Legislative Affairs Agency 130 Seward Street Juneau, Alaska 99801 POSITION STATEMENT: Gave overview of HB 292 Sharon Anderson, Associate Executive Director Alaska State Hospital and Nursing Home Association 420 "L" Street, 5th Floor Anchorage, Alaska 99501 276-1700 POSITION STATEMENT: Supported HB 292 David A. McGuire Orthopedic Surgeon 4048 Laurel Anchorage, Alaska 99502 562-4142 POSITION STATEMENT: Testified on HB 292 Jeff Feldman, President Alaska Academy of Trial Lawyers Association 500 "L" Street, Suite 400 Anchorage, Alaska 99501 272-3538 POSITION STATEMENT: Testified on HB 292 Dan Hensley, Attorney Alaska Academy of Trial Lawyers Association 1016 West Sixth Street, Suite 420 Anchorage, Alaska 99501 274-6551 POSITION STATEMENT: Testified on HB 292 Mano Frey, President AFL-CIO 2501 Commercial Drive Anchorage, Alaska 99501 272-4571 POSITION STATEMENT: Testified against HB 292 Laura Kelley, Vice President AFL-CIO C/O Human Services University of Alaska Anchorage 3211 Providence Drive Anchorage, Alaska 99508 786-1645 POSITION STATEMENT: Testified against HB 292 Steve Conn, Executive Director Alaska Public Interest Research Group P.O. Box 101093 Anchorage, Alaska 99510 278-3661 POSITION STATEMENT: Testified on HB 292 Frank Thomas-Mears State Insurance Administrator Alaska Dental Society P.O. Box 112063 Anchorage, Alaska 99511-2063 345-7181 POSITION STATEMENT: Testified on HB 292 Eric Sanders Address Unavailable POSITION STATEMENT: Testified on HB 292 Gorden Evans Health Insurance Association of America 318 Fourth Street Juneau, Alaska 99801 POSITION STATEMENT: Testified on HB 292 ACTION NARRATIVE TAPE 93-39, SIDE A Number 001 CHAIRMAN HUDSON convened the House Labor and Commerce Committee meeting at 9:23 a.m. Members present were Representatives Hudson, Green, Porter and Mackie. Members via teleconference were Reps. Sitton and Williams. Other legislators present were Reps. Brown, Finkelstein, Willis, Ulmer, Davidson, Navarre, Mulder and Nordlund. HB 292 Relating to civil actions; amending Alaska Rules of Civil Procedure 49, 68, and 82; and providing for an effective date. CHAIRMAN HUDSON noted the members present and announced the day's agenda, explaining that the meeting was being teleconferenced. The meeting was intended to set the stage and to get a better understanding of the issue of Tort Reform. MIKE FORD, Attorney, Legislative Legal Services, Legislative Affairs Agency, began with a general overview. He feels one of the difficulties of this area, from various reports is that tort reform involves a number of fairly technical areas. Tort reform actually is a subset of our civil justice system. Civil justice is intended to provide revenues to the individual as opposed to (indiscernible) public. A tort, essentially is anything for which you can receive compensation, something you can obtain damages for. Tort reform is contrasted to contractual actions. It's not about a breach of contract, or a crime, but some type of civil injury that one can obtain a recovery for. The purpose of the tort laws is compensation. The involvement in this area of the law, over the years, has resulted in expansion of this area. At the beginning of the tort era, there were very narrow areas for which you could obtain a recovery. Over the last 50 - 60 years, particularly, we have seen an enormous expansion in the types of things for which you can take a recovery. Some of that has been done by case law and some has been done by legislators. Between the two, we have seen a fairly large expansion in that area. There are several kinds of basic areas in which you can obtain a recovery. There are torts known as intentional torts, of which the most common area is negligence in that someone has failed to do something that a reasonable person would have done. There is some damage caused and that triggers the traditional lawsuit of which is an effort to recover compensation for that injury. MR. FORD explained the whole system is intended to obtain compensation for someone and the progression of filing a lawsuit to actual recovery can be a very quick one or it can be a very long one, depending on the facts of the case. It is hard to talk about the typical case, they are all different. Some involve years of litigation, some involve very small amounts of money and are settled very quickly. All cases have an impact on the system. Sometimes they involve changes to the law, either to the courts or changes to the law implemented by the legislature. That gives a certain basic understanding of tort reform. MR. FORD told committee members the most significant legislative changes occurred in 1986. At that time, the legislature looked at a number of proposals that changed the way in which someone could recover damages in civil action. The result of that effort was passage of a bill that became an act, Chapter 17, Title 9. It made a number of significant changes to the way in which someone recovers damages in civil action. The adoption of that act resulted in, most significantly, the change in which the system operates in the area of joint and severability. It means when someone has an injury, often the injury is caused by more than one person. Before 1986, one could recover all damages from any one of the multiple defendants. That was the rule of joint and severability. It is several in the sense that each party is liable. It is joint in the sense that all the parties are liable for all of the damages. That was the original issue among all of the states and in Alaska. The legislature decided to change that. In 1986, what we changed to was a modified version of that approach. The legislature decided to allow a recovery against a single defendant for more than the share of the damages, but it limited the amount you could recover. In that sense, it was a modified rule of joint and severability. The other significant change in that area was the cap on non economic damages. MR. FORD said in 1988, the initiative was passed by the voters of the state of Alaska, which made another change to the rule of joint/severability. The rule changed by (indiscernible) initiative to pure severability, a responsible party was only liable for their share of the damage. If there were three defendants, they would all be equally liable. They would only be liable for their one- third share of their liability. That is the law today. The initiative also made another change, in which it eliminated the contribution chapter. CHAIRMAN HUDSON asked Mr. Ford to expand on the attorney fees, and asked if there was an initiative, public referendum, or public vote on the subject at that time. MR. FORD answered that he believed there was and thought it was a proposal. The only two substantive provisions on the initiative ballot were the issue of joint/severability and the contribution chapter. He believed there was an effort to do the Rule 82 provision on attorney fees and, for some reason, it was not admitted to the ballot. He was not sure why. Number 129 REPRESENTATIVE NAVARRE asked if the limit to attorney's fees was not allowed on the ballot. MR. FORD stated it was not on the ballot. Number 138 REPRESENTATIVE GREEN asked Mr. Ford is he may have come across a situation that at the time there seemed to be a change from getting someone well to getting someone more than well. MR. FORD felt that had always been an issue and the response of the legislature was to put the cap on it. The legislation passed in 1986 limited the pain and suffering damages to the amount of $500,000.00 with certain exceptions. Number 154 CHAIRMAN HUDSON asked Mr. Ford to walk the committee through HB 292. Number 202 MR. FORD began his review of HB 292, work draft dated 8/27/93. He began with Section 1, FINDINGS AND PURPOSE. He felt it was self explanatory. The only purpose of this was if the court was to find some ambiguity in one of the other provisions. It also serves the purpose to the public of the intent. The only problem he had was on page 3, (6), which concerns having the attorney general compile certain information. He didn't believe there to be a provision that actually requires the attorney general to do that. MR. FORD stated that if the intent was to leave the paragraph in, he would suggest that the committee think of how they want the attorney general to compile the information, and what information. At present, there is not a provision that states the attorney general shall do this. He felt it was an oversight. He had no other comments on Section. 1. MR. FORD then brought up Section 4, stating it was the existing law which provided a two year period to bring personal injury lawsuits. He explained what was done in Section 4, lines 1, 2, and 3, was that they had taken out the existing rule and moved it to Section 5. It was done because it makes it much clearer in that manner because they are also affecting other provisions of the bill. Section 4 is simply cleaning up the provision, moving the existing rule, and placing it in Section 5. Section 5, is a two year period to bring a lawsuit for personal injury death or property damage. It is two years from the accrual of the action. Accrual is a legal term which basically means that time that one should know or should have known that he/she could file the lawsuit. It is in one sense, a rolling period. When does the clock start? When does the clock stop? Sometimes it is hard to know that and sometimes it is very simple. If someone slips and falls down the stairs, it is pretty clear to know that he/she would have injuries. That is when the clock starts. If someone has an operation, and suffers an injury they don't know about - the doctor leaves a sponge where he shouldn't have left it - one may not know about it for a long, long time. That is a more latent type of injury that may not start until you know that you have that injury; two examples of the opposite extremes. There are two provisions in Section 5, which are different in effect, in each type of civil action. On line 8, it states: "Notwithstanding AS 09.10.140." That means that the provisions of 09.10.140 do not apply. AS 09.10.140 is an exception to the general rule. The general rule being a person has two years to file a lawsuit, except in certain cases. The cases which are being talked about are with people who are in prison, people who are under age that are minors, or people who are incompetent. Those are exceptions to the general rule that one has two years to file a lawsuit. On lines 11 and 12, it states where this period does not apply if there is a shorter period under another provision of law. There are other provisions that may start the clock earlier, so one actually has less than two years. This is why there is subsection (b). Section 2 is a provision that applies to a particular type of civil action, particular type of torts. It gives one six years to bring a lawsuit. A point of significance: on line 13, there is still not included exceptions. Notwithstanding AS 09.10.140, those exceptions are not going to apply. Another point of significance, is that it is a flat six year period, not six years from when one knows, or should have known. It is six years from (1), (2) & (3) dates. It is the earlier of those dates. A person may have more than one of (1), (2) & (3) apply. Look at number (1); six years from the date a product is alleged to have caused the personal injury or property damage was purchased. For instance if someone buys a can of hair spray, and it causes all of their hair to fall out, the day that person buys the hair spray, the clock starts to work. Number (2) deals with construction type cases, substantial conclusion of the construction that one alleges caused their injuries, starts the clock. Number (3) is a generic provision for the last act alleged to have caused the personal injury. The time one has to bring their personal injury is six years from one of those dates. It may be that the earlier provision that was discussed, the two year provision, would not apply because this is a shorter period. In that sense, the two do match. For example, conceivably five years down the road, someone discovers a sponge in their stomach. The last act alleged to have caused their personal injury was the operation. If it is five years down the road, then the person has a year to bring up their action. Whereas the other provision, a person had two years. Number 328 REPRESENTATIVE NAVARRE stated that the two years only apply as a roll. The rolling factor only applies for the first six years. MR. FORD believed that was correct, if in fact that the section applied to the person. He stated there are exceptions, such as in subsection b, intentional injuries, intentional concealment. The doctor knew about the sponge and didn't tell the person. The emphasis here is to require one to bring the action within a period of time after the injury that is the shortest applicable under any of the provisions that they have. An example of the two year provision is: One has the operation and knows it doesn't work correctly, something happened that was wrong. The person has two years to bring the lawsuit, not six years. A shorter period would apply in that type of case. Number 335 REPRESENTATIVE BROWN referenced page 5, line 10, the words "of the accrual of the action" and asked for the explanation. MR. FORD stated "accrual," was a technical term, meaning when one knows or when someone should have known. Number 340 REPRESENTATIVE GREEN asked if he was walking down the street and there was construction going on and a pressure vessel on a Cat blows out which is seven years old, did it mean there is no compensation if someone suffered injuries. MR. FORD answered in the negative. He stated that the company that bought the Cat might be out of luck. All depending if they had contracts or if they had a tort suit. The owner of the Cat is liable. Number 353 REPRESENTATIVE NAVARRE asked what if the valve was supposed to last for ten years, no warranty but the manufacturer stated it would last for ten years. If the valve failed in six years, would the manufacturer be liable under that situation, or if the subcontractor looked for the major construction company that owns the Cat? Where would one recover? MR. FORD answered it would be hard to tell who could recover exactly. If it was an express warranty - a piece of paper stating the part would last for ten years. If that was done, then they would be on the hook for the damages that result. If the manufacturer just gave someone a product and the industry standard is ten years, or one just assumes it is going to be good for ten years, but it doesn't, then it really depends if there is negligence or not. REPRESENTATIVE NAVARRE added that if there was no negligence in that case, there would not be any recovery. MR. FORD stated he was correct. It could be ordinary wear and tear. Number 382 REPRESENTATIVE BROWN said if there was an airplane that crashed that was purchased by Alaska Airlines seven years ago, and the fault for the crash was determined to be a defective part in the airplane and not the fault of the Alaska Airlines pilot, ground crew, weather, or anything else. The reason for the crash was the defective part in the airplane. Would there be any recovery for people who were killed or injured and who would the recovery be from? To what extent would Alaska Airlines, itself, be liable in that situation? MR. FORD stated people spend thousands of dollars to answer those types of questions. He could only give guidelines. It is very hard to predict liability precisely. The rules that apply under this bill, again one must bring certain lawsuits within six years. If there was a part that was defected, that was not known about, for seven years, he felt they lose the right to bring personal injury actions at some point. If there was no negligence in the part of the airlines, that people died as the result of the part, he felt it was hard to believe. If it just happened, then there is no recovery, because there is no negligence. The airline did not act unreasonable. Number 442 REPRESENTATIVE BROWN asked if that would be because of the imposition of the six years from the date the product was purchased by them. MR. FORD answered if the last act alleged to have caused the personal injury was the installation of the part, it was not done negligently. The reason the airplane crashed was the part was defective. The last act alleged to have caused personal injury, in his mind, was the plane crash for the people who died. Alaska Airlines wouldn't be the one to sue the manufacturer, but the person who died might well be. REPRESENTATIVE NAVARRE asked about the severability law. MR. FORD stated that only applies to who is responsible and how much one pays, whether one can bring the lawsuit under the terms of the statute of limitations. REPRESENTATIVE NAVARRE stated that one could bring a lawsuit but if the part was 100 percent responsible for the cause of the accident, one would not have any recovery. Someone could bring a lawsuit, say to sue the airlines, but the airlines will say it was not their fault. MR. FORD felt that was a good question which brought up what was the last act. REPRESENTATIVE BROWN referenced page 3, subsection a, line 13, stating a person may not bring an action for personal injury, death, unless it is brought within six years of the earlier of the date. (1) a product alleged to have caused the problem was purchased. The airlines was flying the plane and the plane came down because of a defect, that is going to be the date the airlines purchased either the part or plane, or whatever was at fault. Right? MR. FORD stated that clearly the airlines could not sue the manufacturer. REPRESENTATIVE BROWN asked if the people that were injured could sue the manufacturer. MR. FORD answered in the affirmative. The fact that the airlines purchased it. He believed number "(3)" would apply. CHAIRMAN HUDSON believed it was important that the area was understood. He asked Mr. Ford if he could contrast what would happen next. MR. FORD answered that at present, again it comes back to the term "accrual," when you know or should have known. If the defective part is installed, and one does not know it for seven years, then when one knows it, you have the right to bring your lawsuit up. Under the laws today, one could sue the manufacturer or the airlines, because they know about it when the plane crashes. Number 476 REPRESENTATIVE MACKIE referenced the original question and stated it was not clear in his mind, under the proposed draft, what is being said. The airlines would not be able to sue the manufacturer because of the six year limitation, but the victims' families would still be able to bring a lawsuit and expect recovery from the manufacturer under this scenario. MR. FORD answered in the affirmative, stating it is the earlier date, if the act alleged is the part of the aircraft. REPRESENTATIVE DAVIDSON asked what is magical about six years and what happens in other states. Is there a six year limitation or some other length of time? Did it not encourage the state of Alaska to become some type of dumping ground for older equipment because people would not be responsible because the company that set the equipment up in the first place wouldn't have to worry about lawsuits? MR. FORD referenced there were a number of states that have periods of time like this. The period of time that one has to bring a lawsuit varies. The state of Colorado has a ten- year provision, which is applicable to architects and engineers. When he states they have other provisions like this, other states don't necessarily have as broad a provision as this. They have statute provisions like this. The provision that Colorado has is a ten-year provision, which was upheld in a court challenge. REPRESENTATIVE DAVIDSON asked if Colorado divided up between design and construction and other actual product purchases. MR. FORD stated that was correct. Number 518 REPRESENTATIVE BROWN referenced back to the question whether (1) governs, or (3) governs under the (indiscernible) medical about the airplane crash. She asked if it states the earlier of (1) or (3), if (1) was seven years ago, and (3) was today, wouldn't the person injured be excluded from suing under the language as it is written now. MR. FORD stated that as he reads number (1), it wouldn't apply to a person who wasn't a purchaser. If a person who wasn't a purchaser was injured by a product, purchased by a third party, in this case Alaska Airlines, he wouldn't read it that way, because the passenger did not purchase the product. REPRESENTATIVE FINKELSTEIN referenced the same point, stating that hypothetically what was being spoken about was the case where the fault was entirely the part. The part was defective, there was no doubt about it. There is nothing in the draft that states there is any relationship to whether the person filing the suit is the one who purchased the product. It only states, "a product alleged to cause the injury," not purchased by the plaintiff, had to be brought within six years. MR. FORD said he understands what Representative Finkelstein was saying. Clearly the case, as he understood it, the airlines could not sue the parts company, but a person could not either. The product, that alleged to have caused the injury, was purchased within six years. That is what is stated. The record needs to be straightened out, it is very confusing. REPRESENTATIVE FINKELSTEIN agreed it was complex material and the clearer it could be made, the better. A court could interpret it that number (1) did apply. He asked where it could be found that the connection to whether or not the plaintiff was the one who purchased it. It didn't seem the words were in the draft. The only words he found were that the product, regardless of who purchased it, was alleged to have caused the damage. MR. FORD asked what was a "product." Is the part that goes in a plane a product? He was assuming those facts. The fact that it was purchased more than six years earlier. Number 594 REPRESENTATIVE GREEN stated that there have been statutes of repose dealing primarily with buildings. Parts within buildings may have been the problem which caused the ultimate damage. How are those litigations handled? Would it be the same as an airplane? MR. FORD answered that there were similarities between those types of cases. A large distinction is that with buildings, they are not subject to the stresses as an airplane. Buildings typically don't have obvious defects, although a defect may exist and may last for 30 years before something happens. REPRESENTATIVE GREEN added there could be exceptions when one looks at an aftermath of earthquake, for example. They do fail primarily for either negligence or stress. MR. FORD stated in that sense, they are similar. Number 623 REPRESENTATIVE MACKIE felt the draft was not clear. He felt it needed to be clearly explained so there would not be any question for a judge to have to interrupt. TAPE 93-39, SIDE B Number 001 CHAIRMAN HUDSON reiterated that some the of questions would be posed to some of the witnesses following the testimony. Number 012 MR. FORD brought up Section 3 AS.09.10 stating it was a different limitation which applies to an action against a health care provider. The exception language "notwithstanding." Moving to Section 2, again it is started with exceptions of line 4, "Notwithstanding AS 09.10.140," which simply means there are exceptions that do not presently apply to a lawsuit brought under this section. If someone were to bring an action based on professional negligence, there is a definition of that. If one has two years from the date of the alleged act. There is also a variation on that, if one is less than six years of age, then the action must be brought before the person's eighth birthday. Those two provisions would apply to actions against health care providers. MR. FORD explained there are sections under subsection (b), again the fraud, intentional concealment and the undiscovered presence of a foreign body is an example like (a). There is also an exception to this two year provision. Number 037 REPRESENTATIVE MACKIE referenced the health provision, asking if it was a two year accrual. MR. FORD answered that it states, "two years from the date of the alleged negligent act or omission." He then stated it did not say "accrual," that it stated "two years from." CHAIRMAN HUDSON reiterated it was different from the last section. MR. FORD agreed with Chairman Hudson, adding it was different from the generic provision. Number 041 REPRESENTATIVE MACKIE referenced number 2 "or if the person is less than six years of age." He felt it could have been something that occurred when the child was one year old, for example, had surgery prior to their sixth birthday, or prior to becoming eight years of age. The action could still be brought up in that case of the infant or a small child. REPRESENTATIVE NAVARRE stated that the argument of child bearing, if there is a problem with the delivery, usually by the eighth birthday, it is known if there is developmental disability or other harm which could be attributed to the birth. What it doesn't do is if someone had corrective surgery done when they are seven years old, they only have until they are nine years old to bring up the case. He felt it should be eight years from the time of the procedure, in some cases. Number 058 MR. FORD referenced Section 6, stating there were three changes. On line 14, adding "wrongful death" to a type of action in which you can recover damages from personal injury. This change has already been made by the courts. Mr. Ford then referenced line 15, "BASED ON NEGLIGENCE" and stated he felt it meant to simply broaden so it would no longer apply the non economic damage limitations, simply to negligent actions. What came to mind were strict liability and intentional torts which would amount to subject to the provision, limiting non economic damages. Number 071 REPRESENTATIVE MACKIE suggested deleting "based on negligence." He asked if he understands correctly that negligence no longer had to be proven in the case of personal injury. MR. FORD answered in the negative. He explained Section 6 reads: "In an action to recover damages for personal injury based on negligence." He then explained if it was taken out, it would read: "In an action to recover damages for personal injury." Damages for non economic damages are limited. He added that any action for personal injury would be limited by the provision. MR. FORD referred to the provision "limited compensation for pain and suffering," and said in order to collect non economic losses, described as pain and suffering, it limited the following: Pain, suffering, inconvenience, physical impairment, disfigurement, loss of enjoyment of life and other nonpecuniary damage. He added that "loss of consortium" was added as well. CHAIRMAN HUDSON asked Mr. Ford to explain "loss of consortium." MR. FORD explained "loss of consortium" meant someone's spouse. If someone loses their spouse, and the enjoyment one received from that companionship, they can recover for the loss. MR. FORD reiterated that negligence actions are limited in this manner. By taking the language out, it would broaden the limitation. Number 100 MR. FORD brought the attention of the committee to Section 7, stating it was the cap on non-economic damages. The changes suggested were an effort to require the cap apply to single injuries or death. He was not sure if the language would actually achieve its goal. Mr. Ford stated that the existing law limited the cap to each claim, based on a separate incident or injury. He was not sure that limiting it to a single injury or death was very clear because one could suffer multiple injuries in one incident. He felt the committee should consider looking at the language very carefully, if in fact, the intent is to limit the cap to injuries that result from single incidents. CHAIRMAN HUDSON suggested the provision should say "single incident" rather than "single injury." REPRESENTATIVE NAVARRE referenced line 20, "may not exceed $500,000 for all claims, including a loss of consortium claim," and said he feels the language does not need to be there. MR. FORD agreed with Representative Navarre. Number 124 MR. FORD stated Section 8 was a section that requires a certain level of evidence if punitive damages were to be awarded. The draft would add some new language that would also require evidence of a certain thing. Such as in line 26, "malice and conscious acts showing deliberate disregard of another person by the person from whom the punitive damages are sought." It is being specific about the kind of evidence that is wanted. He felt that typically what one finds in cases that do award punitive damages, is precisely this. It could certainly be spelled out this way. Number 135 REPRESENTATIVE NORDLUND asked Mr. Ford about situations of recklessness or carelessness. Number 138 MR. FORD did not think carelessness would fit. He stated they were talking degrees of badness. He didn't think reckless would either. Deliberate disregard does not seem to be careless or reckless. They would have the intent to do it. MR. FORD stated that typically there are negligent acts, reckless acts, and an intentional acts, to put three broad categories on it. He felt conscious acts showing deliberate disregard was actual reference to an intentional act. Number 151 REPRESENTATIVE MULDER asked Mr. Ford to clarify what he was talking about as when Ford had the Pinto with the gas tank that was faulty. Did Ford put the Pinto out anyway, calculating the fact that redesigning the car was going to cost more than what computed damages were going to be. That would be showing disregard, clear and convincing evidence of malice and conscious act? MR. FORD agreed and explained that again a lot of the times it would be interpreted by courts and juries. To his mind, someone manufacturing 200,000 vehicles that they know are defective would be a conscious act of deliberate disregard. REPRESENTATIVE MULDER asked if it was deliberate disregard in both drafts. MR. FORD answered in the affirmative. Number 166 REPRESENTATIVE NAVARRE asked how much, after what punitive damage(indiscernible) showing by clear and convincing evidence which is already the standard, now adding an additional standard, which changes have occurred in awarding punitive damages since the 1986 change. How many more would it reduce by putting in the additional language? MR. FORD answered that he did not have any facts or statistics. His understanding was that punitives were awarded in very few cases. The practical effect of the change would be very little. He did not have any facts to support it. Someone could check with the court system, which might have some actual figures on the award of punitive damages. Number 178 REPRESENTATIVE MACKIE referenced the example Mr. Ford used and stated that if a car manufacturer built 200,000 vehicles, that would be considered deliberate disregard. Did that mean that out of 200,000 cars, it came out that one car was defective that someone bought and got in an accident, then there was clear and convincing evidence that it was the manufacturer's fault for the defective vehicle because it was only one and not 200,000. It would preclude anyone from filing action against the manufacturer because it was deliberate disregard but it was still their clear and convincing evidence that it was their fault. MR. FORD answered that one would have to meet the whole standard. They would have to meet clear and convincing evidence of malice and conscious acts showing deliberate disregard. Again, that would be up to a jury to determine what that was. In the example he had used, he was assuming all 200,000 vehicles had the defect, and the manufacturer knew about it. But they decided it was simpler to litigate than to go back and change the part, which he understood were the facts of the Pinto case. He felt that one vehicle out of 200,000, it would not withstand. He was talking about the manufacturer, not installation. REPRESENTATIVE MACKIE referenced that as he understood the complex issue, in the original language, before the "malice and conscious acts showing deliberate disregard," it would have to be proven, unless it was supported by clear and convincing evidence that it was the manufacturer's fault, for example. Now in addition to that, they would have to prove that there was deliberate disregard of the whole works which if it was one vehicle that is defective the day after it is driven off the lot, and it killed a family, they don't have the ability to recover damages because it was only one vehicle and it couldn't be proven it was deliberate disregard. MR. FORD answered it was just punitive damages he was speaking of. Damages are intended to punish someone above and beyond what one would give someone for their injuries. I am assuming they would recover all the damages they are entitled to compensate them for their injuries. REPRESENTATIVE MACKIE stated he meant a jury couldn't award punitive damages unless deliberate disregard was proven. MR. FORD answered in the affirmative. One would have to meet the standards to award punitive damage. REPRESENTATIVE MACKIE stated it was, in effect, the way to limit the size of the award. MR. FORD answered it would have that practical effect. But he did not think punitive damages are awarded very often. For those cases that do, yes, it would eliminate those. Number 219 REPRESENTATIVE FINKELSTEIN thought it was usually in cases where it is a big company and the economic damages are not considered significant enough to have an effect on it. One is not cheating the punitive effect because the amount of money is so insignificant from the actual economic (indiscernible), you would have to get their attention. In those types of cases, he did not know where one could find malice. For instance, the example for the auto company, he did not see any malice. Since it would have to be clear and convincing evidence of malice and conscious act, he felt in the example, they would never suffer punitive damages. There was not malice involved. Number 228 MR. FORD reiterated if one presumes it has to be directed to them personally, then yes it would not have malice. He added that it could also be interpreted as disdain for the public in general. REPRESENTATIVE FINKELSTEIN added he did not think malice was just disdain. He felt it was way beyond that. Disdain is indifference and malice, is pretty horrible intentions. He referenced the auto company and stated it might be covered and it should be recognized that there is no evidence of malice involved in the case. Number 239 REPRESENTATIVE NAVARRE agreed and added that in the Pinto case, most would want to make sure that it meant that Ford Motor Company was going to be held for punitive damages. But, in fact, he felt the definition of malice might be that if "or" was put in, it might work. Certainly "conscious acts showing deliberate disregard" could cover it, but not if there was "malice and conscious acts" because, in that case, they did not want anyone to get hurt. They were just hoping nothing would happen. Number 252 MR. FORD referenced Section 9, stating it was cap on the amount someone could get for punitive damages. It is three times the amount of compensatory damages for $200 thousand, whichever is greater. He felt the intent was to avoid a situation where someone obtains $50 thousand for compensatory damages and $500 million in punitive damages. Number 261 REPRESENTATIVE NAVARRE stated that already with the clear and convincing standard, and adding the additional language that "malice and a conscious acts with deliberate disregard of another person," and then limiting the amount one could collect, undermines the whole idea behind punitive damages. The reason was if Ford Motor Company, in the Pinto case, was charged with $200 thousand punitive damages, then they could have surely made a conscious decision to make sure that every one of the Pintos got sold in Alaska because then they could afford it. That is what it would mean. REPRESENTATIVE PORTER referenced the first time he read the section, he thought $200 thousand was the maximum. Two hundred thousand dollars was not the maximum. It would be the maximum if the compensation was less than one-third of that - $66 thousand. MR. FORD agreed. REPRESENTATIVE PORTER added in the Pinto case, they have 200 or 300 claims and it was only going to total $5 million compensation, it could institute $15 million or three times for punitive damages. REPRESENTATIVE NAVARRE asked what the punitive damages were in the Pinto case. MR. FORD answered he remembered one case in which the jury awarded $100 million. Number 286 CHAIRMAN HUDSON asked if a court could modify an application of three times the amount of compensatory damages. Did the court or the judge have the authority to change that or go above that? MR. FORD answered in the negative. The law would have to be rewritten. Number 295 MR. FORD moved to Section 10, stating, "The existing provision, added in 1986, was intended to prohibit those people who committed crimes from recovering for their injuries. The changes that would be made, on line 5, the language being taken out required someone being engaged in commission of a felony, it would be broadened to be `attempting committing on fleeing from.'" Also to be eliminated is the requirement that the person be convicted of a felony. Lastly, on line 8, being taken out is the word "felony" and substituting it with "action." On lines 9 and 10, delete "an exception for certain civil rights actions under 42 U.S.C. 1983." REPRESENTATIVE MACKIE asked if it was attempting to address the situation as the landmark case, referenced in the Juneau Empire, where a man was suing for his emotional suffering. MR. FORD stated it could apply if the injuries in suffering resulted from his crime he committed. He added one comment, stating as he first read the section, he thought that fleeing from the commission of a felony intended to refer to the person committing the felony, and not to someone who, for example, witnesses a bank robbery and runs out the door. He felt that "attempting to commit or committing" actually came from "fleeing from." REPRESENTATIVE NORDLUND asked who was to prove that someone was attempting to commit a felony. MR. FORD answered that under the existing law, the person would have to be convicted. Under the provision, it would be a battle in a civil suit. There could be a case where a person was actually acquitted, and they had criminal action, but was precluded from recovering personal injury damages. The jury would find that, yes, someone was actually attempting to commit a felony. REPRESENTATIVE NORDLUND asked if in a civil suit, one would bring in all kinds of evidence. MR. FORD answered in the affirmative and added there were different burdens. Criminal action had a different burden of proof than a civil action. One can see that today in the DEI laws, there are dual DEI provisions basically. One is an administrative procedure where one will lose their license and one is a criminal action. There are occasions where someone is acquitted of a criminal action and yet they still lose their license in the administrative action. The same thing happened here. REPRESENTATIVE NORDLUND asked if in some particular cases, would it be likely to create some new issues. MR. FORD answered in the affirmative. REPRESENTATIVE PORTER added that one of the things that would be covered, is an individual who is killed, while attempting a felony, and is never convicted. But his heirs might take off after (indiscernible). Number 349 REPRESENTATIVE FINKELSTEIN did not understand the DEI example because of looking at the DEI, the way the law is written, it did not say in the civil section that someone was involved in a DEI crime. It only talked about particular circumstances that might fit it. What was done was referenced a criminal conclusion in a civil action. It did not seem like it was exactly the same situation. It is not committing an action that involves certain and particular damages, it is saying, committing a felony, which is a criminal conclusion. He still shared the confusion Representative Nordlund had. He did not think it was the same as a DEI because it is referenced in action, not a separate criminal conclusion. A felony is a criminal conclusion, not an action. MR. FORD stated a felony was a conclusion in a criminal prosecution, but they were speaking of a civil suit. REPRESENTATIVE MACKIE asked a question referencing a lawsuit in the newspaper, where a man had gotten a DEI was suing a liquor store for financial damages the man suffered because he got his DEI, because the liquor store sold him the liquor. How does a case such as that apply to what is being spoken about? MR. FORD answered the man would not be committing a felony. The existing law would not apply. REPRESENTATIVE PORTER added that he felt it would apply (indiscernible). MR. FORD referenced something to keep in mind was there was a comparable negligent system. Supposedly, when one is negligent in causing one's own injuries, whatever that is or what percentage of recovery that is, that's (indiscernible). Number 398 REPRESENTATIVE DAVIDSON referenced Mr. Ford's comment on creating some new issues and felt it seemed there were many new issues created throughout the legislation. He asked if it was not true that the fact they were creating these new issues would have the effect of expanding prolonging litigation rather than expediting litigation. MR. FORD answered by saying that was a very hard question to answer. In all fairness to the sponsors of the bill, the system is constantly changing. The courts change the law, this is enacted by the legislature to change the law, and it is not a static fixed thing. It often changes through litigation. The best answer he could give, would be the best job the legislature did to draft legislation would make that easier. It would make the litigation less. Oftentimes, changes the legislature makes to statutes, or creation of statutes, will add to a litigation process. Maybe only in the short running, maybe in the long run, it depends on the perspective. Maybe over a period of twenty years, there will be less litigation. Often changes to statutes result in challenges. Number 424 MR. FORD referenced Section 11, stating it was a provision that requires the verdict to be itemized and an amount awarded for certain types of damages to be reduced by any income tax liability that may exist. He felt it spoke for itself. Number 443 REPRESENTATIVE PORTER stated that the reason Section 11 was included, as he understood it, was the awards are not taxable. What one ends up doing is paying a person money, say for an economic loss of wages of $50 thousand a year. He would have had to pay taxes, resulting in his really receiving $30 thousand. Since it is not a taxable revenue for the individual, award for damages, he is, in effect, getting $20 thousand more than he would have in the first place. REPRESENTATIVE NAVARRE stated the bill works in conjunction with other sections of the bill and if it is already limiting to a set amount, one further reduce that amount, whatever it comes up with by the amount that is equal to taxes. REPRESENTATIVE PORTER stated they could certainly ask that it be clarified. Number 463 MR. FORD moved to Section 12, stating it was a provision that required a portion of a judgement owed to an attorney under a contingent fee agreement, reduced to a present value and paid in a lump sum. He felt it spoke for itself. REPRESENTATIVE BROWN asked what public benefit, to be served by the provision, would be achieved. Number 485 CHAIRMAN HUDSON stated he felt they should hear from the other people wanting to testify on the bill, as to some of the reasons why. He added that something which was mentioned to him was attorneys quite often end up in litigation where they have to front their own travel expenses to go and get depositions and their own office expenses, etc., and the whole thing is to try to get the money that they have already expended back into their hands. The apportionment section is where the settlement to the victim or to the plaintiff can be dealt with over time. Again, to help the victim receive funds over a period of time rather than one time and then be pounced upon by your troop. Number 495 REPRESENTATIVE PORTER added it was his understanding the presumption was that the monies due an attorney are for work done up to time of trial and award. The attorney has no further committal to work on the case afterwards. The funds that the person has earned, should be paid in today's dollars, whereas the victim is being compensated for the future earnings that might have future (indiscernible) considerations. You shouldn't pay an attorney inflationary rate ten years down the road for work that was done ten years ago. REPRESENTATIVE BROWN asked what the significance was of deleting "an injured" on lines 26 and 27, as it seemed like the way it was before, if the injured party wished to get periodic payments then the (indiscernible) was going to structure in that manner. Now it is being changed to the person who is paying the payments and saying that to the maximum extent feasible, they are going to be structured as periodic payments rather than a lump sum which might be a more beneficial (indiscernible). She asked if that was the effect of taking out "an injured" on lines 26 and 27, to give that option to the person that was paying out the money. REPRESENTATIVE PORTER answered in the affirmative. If it is a valid method of paying out money, both the plaintiff and the defendant should have the option (indiscernible). If it is an (indiscernible) way, it was a proposal in 1986 or 1988, "an injured party" was snuck in at the last minute. REPRESENTATIVE BROWN asked what if the company that is paying the damages out, over time, goes bankrupt or the insurance company folds, didn't it put a lot of risk on the person who is supposed to be recovering (indiscernible). REPRESENTATIVE PORTER answered that it may be that there is a greater ability for a company to pay the kind of funding over a period of time than it would be to come up with one lump sum. Either one of those might balance off the other. There are no guarantees. Number 544 REPRESENTATIVE NAVARRE stated he was the chairman of the Labor and Commerce committee in 1986, when the bill came up and the provision was not snuck in. It was put in as a conscious decision by the committee, the reason being that the idea behind tort law was to make the victim whole, the injured party whole. If the injured party felt that it was in their best interest, then they could choose a periodic payment. The periodic payments are done, a lot of the time, at the request of the injured party or through negotiations by their attorney, but forcing them to accept it, even if it may not be in their best interest, but in the interest of the person paying, just didn't seem to make sense. REPRESENTATIVE PORTER responded by saying his point of supporting the provision, is that making a person whole, in his mind, didn't mean giving that person more money than he or she would have had prior to the injury. In case of (indiscernible), if the person is 20 years old and would have earned $2 million in their life time, giving them two million dollars now, and the financial benefit that amounts to, over and above what they would have had, isn't making them whole. That is making them rich and it isn't what compensation is designed to do. Number 622 REPRESENTATIVE NAVARRE felt if there was a limit of $500 thousand for the total claim, and it was reduced to the present value, he thought if they were going to put provisions like that in, the difference between the lump sum of $500 thousand, today versus periodic payment (indiscernible) then it would probably be $300 thousand, if you go over 20 years, you're paying maybe less. "If you have $500 thousand and I owe you $500 thousand, there is $500 thousand at risk. Now if I say, I'll pay that to you at $10 thousand a year for 50 years, then you'd say 'b.s., the volume of that is $500 thousand, I want my $500 thousand now.' Well I'm going to pay you $500 thousand, its just going to be in periodic payments." That needs to make sure we have that clarified because then you have to pay $10,000 for one hundred years. REPRESENTATIVE MULDER felt the whole intent was, as Representative Porter pointed out, not to make somebody rich overnight. It was to be a reasonable alternative to be a lump sum at once. To say, if someone or their heir was to receive $500 thousand, it would be reasonable for the court to work out a ten year payment period whereby they would receive an amount each year as opposed to make Mike Navarre a millionaire overnight. REPRESENTATIVE NAVARRE used another hypothetical situation where someone winds up a quadriplegic and there is no question about who was at fault, and they go to court anyway because they do that a lot, and they end up winning whatever the maximum is, and at that point... (end of tape). TAPE 93-40, SIDE A Number 001 REPRESENTATIVE DAVIDSON agreed and stated he felt they were "tweaking" the system so much that while they were stumbling over themselves to prevent a victim that had been damaged severely, in many instances, they didn't want them to get rich. It seemed that they were tweaking the system so much that they were making it a bonanza for wrongdoers. Maybe what needed to be done was to insure that there will be payment over the long term. Maybe there is a bond mechanism that can be included to insure that there will be payment. There are no guarantees, we all understand that, but it seemed to be an effort that so many people are getting away with so much. That's not how I read the news these days. We've already heard how punitive damages are rarely awarded but I think we have to stay focused on who we are trying to insure, at least has an opportunity to survive. We don't want to re-victimize people because we "tweaked" them out of the system of financial well-being. These victims are the very ones who are going to need more care, undoubtedly, because of the nature of their injuries or their losses. Number 016 CHAIRMAN HUDSON stated because of timing, he wanted to move on through the bill, adding there will be ample opportunity for the philosophy and for the policy commissioners, and who's harmed who and what the value and why, etc. He then asked Mr. Ford to continue. Number 018 MR. FORD referenced Section 13, stating it was a provision that specified when one is entitled to receive future damages that they specify the recipient, the dollar amount, the payment and the amendment here would also require that any future payment include increases for inflation. MR. FORD referenced Section 14, stating it was a collateral benefits section that was basically the existing collateral benefits section that they have for medical malpractice actions. At present, there are two slightly different systems. There is a collateral benefits provision in the existing law that is repealed and reenacted with the provision. A collateral benefit is simply, something you receive, either from insurance or some kind of other source, private or public, in addition to the compensation you received in your lawsuit. The idea of the section was to prevent double recovery. REPRESENTATIVE NORDLUND referenced the exception for social security (indiscernible). These are provisions from the federal government, and yet they don't have any of the same provisions under the state law. In other words, you can't segregate the state benefits under this provision of the bill, but you have to segregate the federal benefits. MR. FORD answered that one cannot recover both benefits. Sometimes there are exceptions in the provision for some benefits, that by federal law, you are not allowed to segregate. You are not allowed to exclude under this provision, one of which is a benefit under the social security act. MR. FORD moved to Sections 15, 16 and 17, stating they were all like a package, resulting from a suggestion from his office. In the enactment of the changes in 1986, by the legislature, one of the things the legislature did was to allow a person who is released from the lawsuit to settle their cases and get out. After the adoption of the 1986 changes, the initiative, actually adopted in 1988, repealed the entire chapter of the law. That repeal resulted in a cross reference in the 1986 provisions that was no longer accurate. In reference, the provision no longer existed. What is being attempted, is simply to provide in statute, what happens when one, in fact, releases someone, when the lawsuit is settled. This clears out the glitch that is on the books at present. Section 18 is the provision that is intended to encourage people against some of their lawsuits. The existing law provides a penalty to someone who, in fact, refuses an offer of settlement that was made in good faith, and turned out to be a good offer; or someone who refuses to accept an offer from someone who is being sued. This changes the penalty portion. The existing penalty only affects the interest one receives on their money. The new penalty provision substitutes actual costs and attorney fees, as the penalty. Essentially, it is intended to encourage people to settle their cases. An example: "If I am suing you, Mr. Chairman, and I offered you $10 thousand to settle our case, and you said, 'No!' In fact, I recover $50 thousand from you, then you would be penalized. I would be foolish to make the offer, but....anyway you would be penalized." It is an incentive to settle your lawsuits, it just changes the penalty that applies if someone, in fact, does not settle their case when they should have. Section 19 is the provision that specifies the rate of interest on judgments. Rather than a flat 2 1/2 percent, which is existing law, they would actually float the rate at 3 percent above the federal reserve discount rate. There would be a floating interest rate on the judgments close to fixed 10 1/2 percent. Section 20 is the provision that prohibits certain interest to be awarded. The type of interest is free judgement interest. It is interest someone would get from the date of injury to the date of judgement. People will no longer be able to get prejudgment interest or certain kinds of damages. Future economic damages, future non-economic damages and punitive damages, all are getting prejudgment interest for those items under this provision. Section 21 is a technical reference because the collateral benefits section was appealed and moved. It is only a technical amendment. Section 22, again is a technical amendment because of Section 23. Section 23 is a limitation on the amount one can receive under a lawful death action, if there is no spouse, minor child, or dependent who survives the deceased person. Right now wrongful death is limited to pecuniary losses if there are no survivors. Under this provision, it is limited to $10 thousand, placing a cap on the amount you can get for pecuniary damages. CHAIRMAN HUDSON asked if this was where there is no immediate next of kin. MR. FORD agreed, adding no father, mother, child, grandchild, sibling, spouse, or dependent. REPRESENTATIVE PORTER asked Mr. Ford to explain pecuniary damages. MR. FORD stated it was money losses. It is what one would have received had the person lived through a normal lifetime. REPRESENTATIVE BROWN asked how it would affect non-married partners, homosexual partners that are not technically spouses. MR. FORD stated there was not a definition of spouse in the provision, but assuming the traditional definition is accepted, they would probably not count. He did not believe the court has held an unmarried partner as a spouse. Number 104 REPRESENTATIVE NAVARRE asked if a parent lost a child, what was it worth. MR. FORD answered it would not apply in this case because there would be a survivor. REPRESENTATIVE NAVARRE agreed there would be a survivor but it wouldn't be a spouse, a minor child or a dependent. MR. FORD answered it would be a father or mother. REPRESENTATIVE MACKIE asked under "dependent," did the definition allow for all of that. MR. FORD answered in the affirmative. If someone lost their child, this would not apply to them. REPRESENTATIVE NAVARRE stated it did say that. It states a dependent means a father, mother, child, grandchild or sibling who was dependent upon the deceased at the time of death. If it is a single child family and the child gets killed, how are they dependent on them? MR. FORD answered, assuming that is true, then correct. Number 127 MR. FORD referenced Section 24, stating it was rule 82, attorney fees provision. REPRESENTATIVE MACKIE referenced the pecuniary description was only meaning a monetary value that one could actually put a value on that one would have received from the person in the future. How can one put a dollar figure on something like that? MR. FORD answered that often it was very difficult. He then moved to Section 24, stating it was the provision that would eliminate attorney fees except in certain cases. Unless there is a statute that allows it or unless there is a grievance to the parties, that you do not receive attorney fees in a civil action for personal injury, death or property damage. This is different from the existing law, in that now you do get attorney fees for certain civil cases. This also affects a court rule which we have noted in the bill. Section 25 applies to civil liability of hospitals for non- employees. It is actually brought about by one particular case, Jackson versus Powers. Under this provision, a health care provider who is not an employee of the hospital, or an actual agent, is in the hospital is not going to be liable for the negligence. Basically, the hospital, itself, would not be liable. The health care provider may be liable. Simply because the hospital allows its facilities to be used by a doctor, they are not going to be held liable. The hospital is still responsible for their negligence. Section 26 is our repealers and I am not going to go through it except for one. There is a provision in 09.17 that is repealed by the bill that relates to non-economic damages (indiscernible). It is line 17.010(c) which provides that our limitation on (indiscernible) does not apply to disfigurement or severe physical impairment. This provision was repealed. The other provision, 040(c), is simply a method for awarding future damages. You might like to examine that. The decision made in 1986 allowed future damages to the award of a certain method. This will repeal that method. The last repealer deals with collateral source and we needed to do that because we have a new collateral source rule. We are simply eliminating the dual provisions from one to one provision in the bill. The remaining provisions deal with (indiscernible). We did have several (indiscernible) provision, we don't like to do that but we were persuaded to do that. (indiscernible) section would, of course, limit the applicability of the bill to lawsuits filed after the effective date of the bill. We do have an effective date of July 1, 1994. That concludes the bill. Number 165 CHAIRMAN HUDSON thanked Mr. Ford. He stated everyone could see it was a complex and intricate area. MR. FORD added one more remark. He compared the August 27 version with the August 25 version and they are identical. He thought it was simply a matter of when they ran off the copies. They are the same version. Number 180 CHAIRMAN HUDSON asked the guests if there was anyone who had come to the meeting to testify specifically on HB 300. It appeared no one was there to testify on HB 300. He then pulled HB 300 off the calendar. It will be brought up at the next hearing, as it was a more directed and pointed piece of specific legislation. CHAIRMAN HUDSON then asked Sharon Anderson to testify. REPRESENTATIVE MACKIE asked Mr. Ford if he was going to be at the meeting throughout the day. MR. FORD answered in the affirmative. Number 192 SHARON ANDERSON, Associate Executive Director, Alaska Regional Hospital, Anchorage, stated she was representing the Alaska State Hospital and Nursing Home Association and speaking in support of HB 292, reforming Alaska's liability laws. The association is a trade and professional association representing Alaska's community health facilities. MS. ANDERSON said hospitals, as well as all health providers in Alaska and across the country, are committed to improving access to health care while maintaining the high quality of health care. Medical liability has a direct impact on access to care for many Americans. In addition, the current medical liability system contributes significantly to the cost of medical care. MS. ANDERSON said HB 292 contains many provisions that have proven successful in other states to have liability insurance available to all health providers at affordable rates. But, before touching on the particulars in HB 292, let me review briefly the need for liability reform: The Issue Those of us who manage Alaska's hospitals believe that as the debate over health reform and health care financing proceeds, the problems caused by the high price, inefficiency, inequity and glacial slowness of the current medical malpractice and adjudication system must be addressed by the state legislature. Persons who are negligently injured by medical care are entitled to prompt and fair compensation of their injuries. However, the current way that we seek to do this is anything but prompt and fair. Numerous studies over the past twenty years have demonstrated that the present system for redressing injuries caused by medical care: 1. Costs far too much and works much too slowly. The cost of claims handling and litigation, including the cost of both plaintiff and defense attorneys, consume over half of the professional liability insurance dollars, meaning that less than half of that dollar is returned to the injured patient. 2. The current system fails to provide access to the legal system for many, particularly those with small claims. Also, the current system sometimes awards nothing to some with legitimate claims while lavishing exorbitant amounts on others. 3. Numerous studies show that billions of dollars of our national health care costs are spent on defense medicine. Doctors are induced to order more examinations, test, and procedures as a hedge against accusations of neglect or negligence. 4. Finally, the current system seriously threatens access to health care, particularly to high risk services such as obstetrical care and emergency room care and to all types of care in the rural setting. It must be recognized that the major reform called for in HB 292 may not immediately reduce overall medical liability insurance costs, but it should result in quicker and fairer settlement of claims. The system will be more predictable and will help patients, providers, and underwriters and, in the long run, will make the delivery of health care less expensive and the cost of insurance both predictable and cheaper. House Bill 292 contains the following provisions (sections) which we feel are vital to medical liability reform in Alaska. Most of the provisions have been reviewed: Statute of Limitations Cap on Non-Economic Damages Limits on Punitive Damages Periodic Payments Collateral Sources Liability of Hospitals for the acts or omissions of nonemployed personnel. Section 24: MS. ANDERSON said she would like to touch on the importance of this section of HB 292, as it is of the utmost importance to Alaska's hospitals. The intent of Section 24 is to return Alaska law to where it was prior to an October, 198,7 Alaska Supreme Court ruling entitled Jackson versus Powers. At that time, the Supreme Court held that a general acute hospital care in Alaska has a nondelegable duty to provide emergency room services, and therefore, is vicariously liable for the negligence of an emergency room physician, regardless if the physician is employed by the hospital. This means Alaska hospitals are responsible for the negligence of a non-employed emergency room physician solely because the hospital is required, by law, to provide emergency room services, regardless if the hospital has been negligent. This decision runs counter to recent trends, when legislatures have attempted to protect the often named "deep pocket" defendants. The language in Section 24 of HB 292 will protect Alaska's municipally owned and other hospitals from being named as deep pocket defendants in every case involving physicians negligence, even though the hospital was not negligent and has done everything within its power to comply with statutory and regulatory requirements. The hospital is and will continue to be liable for their own negligence and would continue to be so liable if this section is adopted. MS. ANDERSON said she would like to briefly address this particular section and briefly address the current situation at the Alaska Regional Hospital pertinent to that. There is a statement that will be brought up later that this is nothing but a legal (indiscernible) attempt of the hospitals to get out of liability for actions of non-employees and the hospital could escape any responsibility for what an emergency room doctor does. This bill does not deprive any hospital patient of a cause of action against the non- employee who may have been negligent. The hospital will still be liable if it negligently contracts with the person who is unfit to perform health care services, and that person subsequently injures a patient. At Alaska Regional Hospital we do require that all contract positions provide proof of professional liability coverage prior to entering into any kind of contractual arrangement that we have with them. It is not the intent to enter into any contractual relationship without this requirement. MS. ANDERSON said the Alaska State Hospital and Nursing Home Association would like to thank the committee for beginning the process to thoroughly review the need for liability reform in Alaska. We know today's hearing may raise more questions than it answers, so we stand ready to provide to the committee additional information or data on the cost and access impact the threat of liability has on patient care in Alaska. Number 278 CHAIRMAN HUDSON asked Ms. Anderson to expand on the area of periodic payments that she listed as one of the provisions she felt was vital that Mr. Ford referenced as he was going through the definition of the bill. MS. ANDERSON asked SUSAN MASON, who had been working with them on the review of the bill, to respond to Chairman Hudson. CHAIRMAN HUDSON asked Ms. Anderson to send in any kind of comments, critique, examples, concerns or support for any provisions of the bill to him as he would see that it got to all of the members of the committee. Number 295 REPRESENTATIVE MACKIE referenced since it was an educational process for the committee, he asked that the problem the hospitals are facing was, should an outside physician, private physician, that may have one of their patients in one of the hospitals, which conducts surgery by the private, outside physician, a non-employee of the hospital. Your being named in all of the lawsuits that may be filed against the physician because it occurred in the hospital, or is it only directed toward emergency room care? What are you doing as far as having your own personnel administer emergency room care in the liability problem? I am trying to understand the situation a little more whereas if a surgery, malpractice lawsuit was filed against a private physician, but it occurred in the hospital, are you being named in those kinds of actions, and is that where the problem is at. Could you define that a little more? Number 300 MS. ANDERSON stated it would be helpful to the committee to know that all physicians at Alaska Regional Hospital, and most of the hospitals in the state of Alaska, are independent practitioners. They apply for medical staff privileges for various (indiscernible) or surgical procedures within the walls of the hospital. There are medical staff rules, by-laws, that they must follow. By doing so, (indiscernible) process that also goes on. As independent practitioners, they are the experts, they are the ones who receive the education to know what tests should be ordered. By going through that application process, are granted privileges ultimately by the board of trustees of the hospitals to perform those tests and to treat and admit patients within the hospital. There are times, with response to your question, that a hospital may be named along with a physician that has been a bad outcome. The patient may then file suit against the physician, and then sometimes the hospital will be named. MS. ANDERSON said Section 24 is an attempt to correct the Jackson versus Powers decision, which applied only to emergency room physicians. There has been discussion that this section may be interpreted in a much broader scope, bringing in other physicians, for example, those who may be on call within the emergency room setting or just anesthesiologist who are also independent practitioners. The intent of Jackson versus Powers was limited in its scope to emergency room physicians. So that by having a contract with hospital based physicians, emergency room physicians or as radiologists, pathologists, and anesthesiologists, will enter into a contractual arrangement with a group of physicians to provide that care. She referred to independent contractors and said we do require that they have special liability insurance, so that it is not releasing the physician from having coverage to provide patients with a way to sue the physicians. Also, the hospital may be continued to be named in a suit such as that. Our hospital did have a lawsuit filed against it where the emergency room physicians were dropped as a result of the Jackson versus Powers' decision. When the jury came back with the fault assignment, 10 percent was assigned to the patient, 10 percent was assigned to the hospital, and 80 percent was assigned to the physician. But because the physician was dropped from the suit, the hospital paid 100 percent of the award that was assigned by the jury in that case. What we are seeking to correct, is that since the emergency room physician is an independent contractor, then the hospital, itself, has no expertise to determine what care should be rendered to a patient. The physician has that, that the physician be held responsible for their acts. The hospital makes some business decisions in entering into those contractual relationships. I think that it is not unreasonable to require that a hospital can choose to enter into a contractual relationship, here required to assure themselves as well as the patients that the physician is also covered. Number 359 REPRESENTATIVE MACKIE stated he was not clear as to what her position was on that particular section of the bill. Whether it was something you agreed with or disagreed with. MS. ANDERSON answered that they agreed with Section 24. Number 362 REPRESENTATIVE MULDER stated the critics would say that Section 24 would simply result in hospitals contracting with all employees. If they have no employees, they are shielding themselves from all liability. What is your response to that? MS. ANDERSON answered she did not think that was a reasonable interpretation of the intent of the law. It didn't make sense, to her, to not be held responsible for acts of your employees. On the other hand, if it is an independent contractor, such as a physician, she felt it was unfair to ask a hospital to assume responsibility for the acts of the physicians. Now if the hospital rented privileges to a physician, without doing proper procedure, that may be that another cause of action that would come about. REPRESENTATIVE MULDER asked if this were enacted in Section 24, would she see Alaska Regional Hospital making more of their employees contract employees as opposed to employees per se. MS. ANDERSON answered in the negative. She stated that in fact, Jackson versus Powers addressed physicians, it did not address nurses as independent contractors. As an example to be shown later, as rent a nurse. In my mind those will still be determined to be employees of the hospital. Number 385 REPRESENTATIVE NORDLUND thanked Ms. Anderson and referenced the fear was exactly how it was stated. The particular statute was drawn very broadly. It didn't talk about physicians, it spoke about health care providers, which could be basically anybody who purchased (indiscernible). If your concern really is just for physicians, would you be in favor of (indiscernible) apply position (indiscernible) nurses and basically anybody who works in the hospital? MS. ANDERSON stated that without speaking on behalf of other hospitals within the Hospital Association, our hospital is not opposed to that. Other hospitals may have different definitions of independent contractors. In this particular field, it would require hospitals to post, within the hospital as well as publishing in to newspapers, those non- employees that they have entered into the contractual arrangement with. Again, the example of the (indiscernible) having to post that (indiscernible). I don't think that there would be opposition to limiting those (indiscernible). REPRESENTATIVE NORDLUND brought up a different point, stating general comments about the bill, he thought Ms. Anderson was correct that definitely they will see there is certainly an effort to reduce the amount of claims. However, her point about this legislation needs more prompt litigation and court action. I don't share your opinion about that as I think there are provisions instilled that are really going to make the process more drawn out. You may take another look at the bill, in terms of just how fast actions are going to be made, to be brought (indiscernible) the court result (indiscernible). Number 400 CHAIRMAN HUDSON stated the committee initially had invited the Department of Law, the court system, and others to participate in this hearing. A lot of the questions, those nature, would likely be answered by them. It is the understanding that the next hearing will try to bring in some of the procedural and the implications and the effects on systems from those various entities. Number 423 REPRESENTATIVE BROWN asked Ms. Anderson if she would be opposed to adding a requirement for professional liability coverage for whatever health care providers or physicians or whoever is ultimately to be covered under this section. She asked Ms. Anderson if she thinks it would be a reasonable thing to require hospitals to do? MS. ANDERSON answered that was correct. It was their current practice at the Alaska Regional Hospital. She said she was representing the Hospital Association today and it was not one of the items the association voted on when reviewing the bill. She said she would be happy to take that back to the association. Number 437 REPRESENTATIVE GREEN did not know hospitals worked this way but his wife was a practicing dental hygienist and I think (indiscernible) required that because of dentists had authority over her actions, that she could no longer act as a contractor, and, in fact, became an employee of (indiscernible). Would nurses also fall into that category? MS. ANDERSON referenced what crossed her desk the day before which was a definition of what is an independent contractor is, as well as an employee. She referred to not contracting with employees and if you have control of the work (indiscernible) or schedules and what they are doing and such as standards of care then the definition would fall into were they are employees rather than contractors. Number 450 REPRESENTATIVE MACKIE had two concerns in regard to the concern Representative Brown brought up about health care providers instead of stating position or something like that. The first concern is, who else would have access or would be in a position to be an actual health care provider that would have access to the facility and could be essentially in that situation. I think probably, that would need to be a little more clearly spelled out, I would agree with that. When you are (indiscernible) contracting these doctors as independent contractor providing they have the insurance and the other things that are necessary. Would anybody working for them also (indiscernible) that same contract? Who else would follow that definition? MS. ANDERSON answered by stating by virtue of the contract, anyone who works for them must be (indiscernible) by the same requirements as the contractor. REPRESENTATIVE MACKIE added so they fall under his liability and his direction and so forth. Then the other thing, I would also agree that if we are going to look at releasing the liability, that we should also require that there is a certain standard of liability insurance being provided by the physician or something of that nature so that somehow somebody doesn't slip in under the wire, unintentionally or anything else, without any kind of insurance and the hospital is resolved to that responsibility. The physician may or may not have that, then the person that suffered the injury won't have any recourse. It may be best spelled out in statute. Number 488 REPRESENTATIVE FINKELSTEIN asked Ms. Anderson if in the Alaska Regional Hospital are any of the physicians in employee positions, or if they are all contract positions. MS. ANDERSON answered they were all independent practitioners and some of them were contract, but not all. MS. ANDERSON stated the intent of this section would be that if the hospital chooses to enter into a contractual relationship for a physician to provide care, such as in the emergency room, which was the intent of Jackson versus Powers, if it were more broadly extended to those where we have contracts. For instance, contracts with physicians to read EKG's or to do neurological studies or radiologist who might perform a test. Those positions with whom we have contractual arrangements, that they be required to be responsible for their actions. In our hospital, to enter into a contractual arrangement, they must show proof of professional liability insurance. Number 542 REPRESENTATIVE FINKELSTEIN referenced the way Ms. Anderson envisioned what she would like to see happen with the bill. The hospital would be liable for some of the positions, the ones that were directly working in the emergency room, and not liable to others that had more of a (indiscernible) basis, they are operating independently. Some would be liable for some and not for others. Is that what you would see as where you would be liable for none of them? MS. ANDERSON stated she felt the goal of the section was that the hospital be held liable for its acts of omission or negligence and that the physician be held liable to their acts of omission or negligence. In some instances, both parties might be named in a suit. Number 550 REPRESENTATIVE FINKELSTEIN guessed the answer was that there would be not a single physician in the facility that the hospital be liable for in the way it's interpreted. Is that what you are saying? I'm just trying to see if there are two groups or one group. Is there a group that is independent that the hospital is still going to be liable for? REPRESENTATIVE MACKIE answered, your own employees, right. MS. ANDERSON answered correct. But not for non-employees. REPRESENTATIVE FINKELSTEIN stated there would be some physicians that are still employees. MS. ANDERSON answered that in their facility, there are not any who are employees. There are facilities within the state of Alaska who do employ physicians and that would not take away their responsibility in this particular section as I read it. REPRESENTATIVE FINKELSTEIN referenced the point Representative Mulder discussed and asked wouldn't this section create an incentive for those hospitals that do have employees who are physicians to convert them all to contracts because they would reduce their liability. There is not much incentive to have them as your employee if you couldn't sever liability. Isn't that the incentive we are creating? MS. ANDERSON stated it was a tough question for her to answer because from her hospital practice that is not the situation. It is certainly a valid question to take back to the association. I do not believe that was the intent to allow hospitals to get out of any liability for the physicians to escape that (indiscernible). Number 569 REPRESENTATIVE GREEN found it a difficult situation for a reputable hospital to authorize a physician to have been in the practice of contracting a physician and then drop them and still not require the physician to have adequate insurance. It seems to me that we're looking for possible problems which means you can ride a bicycle. We're going way too far, I think, in trying to determine what the possible ramification of the hospital trying to avoid litigation by requiring all the doctors, in that hospital, to be independent contractors. As long as they are employees, the hospital will be liable. If they are not, then they're liable under their own insurance program. I don't see that that is any different than going to a doctor who is not in a hospital. Number 591 REPRESENTATIVE FINKELSTEIN stated he was just trying to find out what the categories are. We did find out that their hospital doesn't have any but other hospitals do. There would be some incentive for that standard, which I was trying to say. CHAIRMAN HUDSON added the incentive could be either way. There certainly has to be some incentive to have your own doctor attached to the hospital and perhaps this would or would not have any effect upon that. Number 600 REPRESENTATIVE MACKIE understood where the hospitals were coming from. It is probably like any one of us feel, that we are responsible for our own actions but something that is totally out of our control, it is a little bit harder to be responsible for. There are other employees and other responsibilities of liability in which you would still have. You have cardiology, x-ray technicians, nurses, a number of other hospital staff and employees and probably on-duty emergency room doctors and physicians that come in by ambulance and people that come in by ambulance and other things that the hospital would still... I don't look at this as an attempt to get out of all liability. I look at this as an attempt of not being able to control the action of a physician. That is not an employee, an actual employee, under your supervision in the hospital, is that correct? MS. ANDERSON answered that was correct. As she read it, the hospital would still be liable if we negligently contract with a physician or a group of physicians who are unfit to perform the health care services. REPRESENTATIVE MACKIE added if you were negligent in allowing them to utilize the facility, why not. TAPE 93-40, SIDE B Number 001 REPRESENTATIVE PORTER agreed with Representative Mackie's position. My impression of this provision is to allow hospitals to not be responsible for positions when they do not exercise control, training, supervision and those kinds of standard definitions (indiscernible). Those hospitals which have doctors in that capacity as employees, there is some reason that they do and I don't see this as providing that great of an incentive because as is required now, that insurance has got to be provided by one or the other. (Indiscernible) equity and responsibility if the association can come up with any definition, for example, an independent contractor that might add the issue that we are discussing. REPRESENTATIVE MACKIE added, as we progress through the subcommittee process with this bill, we are bringing out the points that we need further clarification on. Not necessarily whether we are supportive or non-supportive of that particular issue, but at least getting the bill into a position that can be either supported or non-supported by members of the legislature. I think that is real important that we clarify each one of these types of areas that we debate. I look at that for our purpose here today, initially to identify this. Number 016 CHAIRMAN HUDSON stated that was exactly what we are trying to do here, is to understand all the ramifications of this very complex body of policy and cause and then to try to expand those areas where we have some questions as to what the application (indiscernible). CHAIRMAN HUDSON added, that when this first came before him, personally, not being in the industry, he always tries to look for the reasons behind these kinds of justifications for making changes. Since you and those you represent obviously believe that the statute of limitations and obviously section 24, collateral sources, periodic payments and things of this nature, are positive, that it makes for improvements. We've heard the terms that we want to make insurance more affordable, we want to streamline the process, we want to reduce the time in which the injured party can receive compensation and the settlement can be taken off the books. In those areas, any suggestions, applications or problems, what you hope to be the solutions through the various segments of the bill, we would sure like to have that input with us so we can all better understand it. MS. ANDERSON answered, she would be happy to provide that. Number 033 REPRESENTATIVE NORDLUND, added that as far as the request for information, maybe the committee could receive some documentation of what (indiscernible). How the medical liability contributes to the cost, the operating cost. Number 058 BREAK FOR LUNCH Number 059 CHAIRMAN HUDSON asked Dr. McGuire to make his presentation. Number 068 DR. DAVID MCGUIRE, Orthopedic Surgeon, practicing in Anchorage for 20 years was next to testify. I am associated with the Alaskan's for Liability Reform and I speak as one of their delegates today. Mr. Tovanny is here as well. He has expertise in the area of structured settlements and annuities. There were some questions this morning about the effectiveness of those structured settlements and annuities. If we have a few minutes for him, he may be able to explain how they can work. The issue, as noted by yourself and others this morning, is a complicated issue. Therefore, it does take sometime to study each and every one of these points of the bill. But because it is a complicated issue, shouldn't deter us from looking carefully at this because the fact is that the tort system affects us all, and sometimes it affects us in ways that we may not even know. It indicates that there are changes in business practices that there are lost opportunities, that there are businesses, that no longer carry on useful functions. Largely, this can be traced to the detrimental effect of insurance rates that are not affordable, risks that cannot be defined of an ever changing pattern of liability in the tort law. It is important, I believe, that we should all understand that with the exception of the 1986 changes and with the exception of the initiative, all of the laws were, in fact, made by judicial interpretation. Put in another way, it is not the case that these laws have arisen as a result of the legislative body deliberating, and in due process, producing a law that we all have to live by. It is the fact that these laws continue to be interpreted by the judicial bodies, and it is our opinion that they have been detrimentally interpreted to the point that these liability burdens are no longer sustainable. I think we seek that in many different avenues of life, and certainly it is not only medicine, this affects everyone across the board. If we were to take one or two of the points and use them as examples, not to say that they are the only examples that could be found, that may be of use. In this morning's Anchorage Daily News, we have an editorial by the Daily News concerning the lawsuit that was filed against the liquor store by the driver that was a minor at the time, and killed someone when he ran through a red light. It is the case that the idea of being compensated for injury is a good one, but our present tort system has leaned so far that anybody can sue for anything, at any time, with some expectation of compensation. What we are trying to do with the legislation proposed, is to define precisely what those limits ought to be, and under what circumstances compensation should occur. I think most of us feel that when someone is in the process of committing a crime, that they should reasonably have known was likely to bring injury to someone else, that it is ludicrous that someone else should have to pay for their injuries. It doesn't seem reasonable at all, it doesn't seem productive in any way to society. Here is an example: Now whether or not the individual prevails in this (indiscernible) is not even the entire point. The fact of the matter is, society's resources are being consumed in the arguing of the lawsuit, both in terms of the judges that have to sit, the lawyers that are there, the defense, the cost, etc. We have proposed, in this legislation, that it should be the case that if you are in the process of committing a felony, or committed a felony, you should be precluded from a lawsuit to recover your damages. The second piece of paper that I gave you was taken from a brief that was filed with the Supreme Court, the state of Alaska, as we speak. You may recall that in 1988, there was an initiative developed by the Citizens Coalition for Tort Reform. That initiative had to do with a concept of joint and severability. If I may, for a minute, just visit the history of joint and severability. The law of the land, prior to judicial interpretation was one known as contributory negligence. It held that if you, as the plaintiff, were so little as one percent responsible for your own injuries, that you were precluded from a lawsuit to recover damages. I think rightly so, that was harsh, and it showed to be none of comparative negligence, which it is with the exception that prior to 1988, the law was that of joint and severability also known as the deep pocket law, which then whomever the defendants was able to pay, was required to pay, whether or not they were principally at fault. So we sometimes had the ridiculous situation where the municipalities were able to be held liable for the entire costs of an injury that occurred, when in fact, it was very little of the municipality that was at fault. The citizens of Alaska voted with approximately a 70 percent margin, to change this law so that the fault would be a portion amongst the guilty party. So if there were three parties who were said to be negligent one of whom was 10 and another of whom was 20 and one of whom was 70, we felt that they should pay in proportion to their responsibility. That seemed fairly straightforward until things got to court, and then the ploy of only suing the party that apparently had any resources came into play. If an attorney knew that the individual or the entity who was 70 percent responsible, probably didn't have any money, then what you could do was (indiscernible) the party that was 10 or 20 percent responsible, and when you get to court, you preclude the jury from understanding that there was somebody else out there who was more responsible than the present defendant. Therefore, all the damages are awarded against the defendant because the jury doesn't get a chance to understand who and what was at fault. This has now been appealed to the Supreme Court. It is our intention that what we meant and what we advertised and what the citizens of Alaska voted on, was that in fact, we wanted the portion allocated amongst the people who were at fault, regardless of whether they happen to be in the court room that day. We don't know what the court is going to say but it is illustrative of what seems to be a straight forward proposition, because it is then interpreted in what I would prefer to (indiscernible) argument that leads to a conclusion opposite of what was intended. Earlier today we talked about the concept of economic verses non-economic damages. We also talked about the idea of lump sum payments verses annuities or prorated settlements. There is an example, which I think is illustrative of how the situation goes at the present and why I think that in the event of society, and the injured person, this thing should be changed. If a person who is 35 years old is injured and can't work anymore, we would normally expect that they would work until age 65, which is 30 years. If they made $30 thousand. a year, then the present situation multiplied by 30 years times $30,000. which comes up with $900 thousand. and this is how the damages are awarded. It would be as if you went to your employer and said I think I am going to work for you for 30 years, I'd like you to pay me today for all the money that I am going to earn over those 30 years. I think you can see that sum is meant for future income, not for the present income. The consequences are certain. It is enormously more expensive to the society, at large, to repay this kind of money and we (indiscernible) the insurance companies, and so on, but remember that somewhere that money came from a business, from a working person from somewhere the insurance got the premiums. The more the insurance companies pay, the more they are going to charge us. We can debate that all day but they don't get the money off trees. The second thing that happens to the injured and innocent victim, is that they now have a lump sum of some $900 thousand. It has been the case on more than one occasion, that five or ten years down the road, the money is entirely gone, but the injury is not gone. Then the person has no alternative but to return to the state or some other agency for support for the injury of which continues. It is set up an annuity program, and this can be done, as I said, very reliably. I can speak of that even in the case of the executive (indiscernible) in California. The people that were on annuities, in the end, continue to receive their annuities, in spite of the fact that the company went bankrupt. We have proposed that it should be a structured settlement, and the structured settlement should acknowledge the fact that all of this money isn't earned today, that in fact that it is earned over time, it should be paid over time. The same is true with future non-economic damages, future pain and suffering. If you pay it in a lump sum, then it is available today, but it may not be available when it is needed and we would argue that the same kind of treatment should apply. The damages should be repaid in the normal course of how they would have been earned as proposed to having a lump sum payment. The cost of providing such an annuity can be as little as one-third of the cost of the lump sum payment. There is an enormous savings to the system, and I keep saying the system because it is in fact the system, it is not just a single insurance company. Each one of these examples in this legislation is the result of a interpretation by a judge somewhere. None of them are the result of a deliberate body, such as yourself, sitting down, deciding what it is would be the best law of the land. I would suggest that there is absolutely nothing wrong, in fact there are many things right, with an approach that leads us to deciding what is going to be most reasonable, what is going to benefit the largest number of people, and what is going to make this system affordable and predictable. If I may say just a word about the statute of limitations. The problem with the statute of limitations is that it essentially exists no longer. If you do something, whether you meant to cause harm or whether you knew the event may have occurred; whether you were negligent, you don't know when you may be sued for something that you've done. For example, a pediatrician who takes care of a child can be sued up to 21 years later. If the injury occurred at birth, when the child reaches the age of maturity, they are empowered under the present statutes to file a lawsuit on their own behalf. The problem with that is that there is no predictability. When there is no predictability, there is no insurance, so we witnessed the development of what is known as claims made insurance. It used to be that when we thought of insurance, we thought of occurrence insurance. That is if something we did, eventually resolved in a lawsuit, then we would be covered, regardless of when the claim was made. That left the insurance companies with what they call, "the long tail." It left them with an exposure of 20 years or more and they couldn't predict what their loss would be so they found a clever way of putting the loss back on the individual or business or the person who was insured. Here is how they did it. They said, O.K., we will only write claims made insurance. "Claims Made Insurance" means that you must be insured when the event occurred and you must be insured when the claim is made. If you have an event occur in year one but you aren't sued until year three, if you are not insured with the same insurance company or if you haven't bought a very expensive tail coverage, you won't be covered. This exact scenario occurred to the doctors in Cordova. They bought insurance for three years and each year the insurance was higher and higher and higher and in the fourth year, they could no longer afford the premiums nor could they afford the tail, which was 1 1/2 times what the premiums would have been for that year. They were forced to quit buying insurance altogether, and as a result of that, the insurance company kept all the money and they were uninsured for any claims that were filed after the third year, no matter if they had occurred during the first three years that they were insured. Claims made insurance is not unique to medicine. It is in many many areas of life where we have the situation of claims made insurance. What in effect has happened, then, is the insurance companies have responded to the unpredictability of the affects of the statute of limitation and it does so in a way that puts the ultimate burden back on the person who is supposed to be buying insurance for events that were out of their control. Dick Cavanaugh, who is the chairman for the Alaskans for Liability Reform, has made this point. Murder is the only crime that doesn't have a statute of limitations. If you rob a bank or if you embezzled, or if you do these other things, there are statute of limitations in which an action can be brought. I had a conversation this morning in which punitive actions are not now limited by a statute of limitations. On the one hand, we have a criminal behavior that enjoys the statute of limitation, but on the other hand, you have ordinary business activities which do not. It seems to be ludicrous that it should be that way. With a statute of limitations, there is the opportunity for an insurance to once again become an occurrence insurance instead of claims made. There is the opportunity for individuals in businesses to have some control over the future direction of the lives and their businesses. As it is now, an architect may be 20 years down the road, may be out of business, may no longer be practicing, and can still be sued for something he/she did while in practice. That doesn't seem reasonable, it doesn't seem productive. Time moves on. I'm happy to discuss any of these issues. I think there is going to be ample discussion as the session goes on and each of these points will be (indiscernible). The Alaskans for Liability Reform has prepared a graph paper which I think you all have, which takes each of these points and tries to show the changes that is made in legal terms, if you will, and then, in plain English, tells you our reasoning behind each and every one of these. Perhaps a short word and then I would like to leave a little time for questions for Al. There is one other controversial rule of the court, known as Civil Rule 82. If I might take just one moment to say how that works. In (indiscernible) the idea that the other person should pay your law bills if they sue you wrongly, is a great idea. It deters people from frivolous lawsuits. If you are vindicated and you win, you get your fees from the lawyer back. In practice, however, it has been anything but a good idea. The problem is that when the defendants insurance company or otherwise able to pay the bill is at fault, damages for Rule 82 are always assessed. Prior to the 1986 legislation, there was even a schedule contingent fee for non-contested cases for Rule 82. If, at that time, you agreed that it was your fault, you agreed to pay it, you would still be forced to pay a percentage of the final settlement even though you didn't argue the case. That was changed in 1986, but we still have this issue of Rule 82. The Citizens Coalition sued the attorney general for an interpretation of the law. We felt that it would be proper to take as an initiative the subject of the contingent fee. The attorney general said that it was the province of the court and that the court rules are (indiscernible) to the initiative process. The trial bar asked to be adjoined in the suit. We told the judge that we didn't want them to be adjoined in the suit, we wanted the attorney general to render an opinion in court as to why this should be. The judge, nevertheless, enjoying the trial bar, the lawsuit, and then found against us and the rule 82 fee of $10 thousand. The state, meanwhile, had only $2 thousand for their Rule 82 fees. We had to post a bond of $10 thousand in order to appeal this case to the Supreme Court. The Supreme Court ruled against us and said that the rules of the court, including attorney's fees are the proprietary (indiscernible) that the courts prerogative that they are not addressable in any way, shape or form by the initiative process and they took our $10 thousand, thank you very much. Rule 82, on the other side, there was a worker who sued an oil company, the big bad oil company, as you know, and lost. The oil company then asked, in turn, for their Rule 82 fees. It amounted to a substantial amount of money. The individual appealed to the Supreme Court, and the Supreme Court is coming out with a very complicated formula of Rule 82 that says if you make so much money, you only have to pay a percentage. But if you make more money, then you have to pay another percentage, - so on and so on. You can get this opinion, of which I think became in effect July 15 of this year. We argue, that if Rule 82 were equally applied across the board, if everybody lived under the same rules, then it might, indeed, be effective as a deterrent to litigation. But when it is unequally applied the way it has been, traditionally, and the way we've been docking that, that it is unequally applied. All it does is add more money to the pot and it doesn't do anything to deter litigation. I am certainly happy to answer any questions. Number 320 CHAIRMAN HUDSON thanked Dr. McGuire, stating his testimony was helpful. Number 324 REPRESENTATIVE FINKELSTEIN appreciated Dr. McGuire's testimony. On Rule 82, just talking about it, which section was talking about the bill. Number 330 DR. MCGUIRE stated that Section 24 takes a bit of study to understand how something seems to be saying it one way and it ends up meaning another way. We can't just say Rule 82 is appealed, we have to go around it, saying you can't have an agreement to have this, and in effect, it ends being an appeal of Rule 82. In a sense, it is saying that unless specifically authorized by statute agreement, attorney's fees may not be awarded to a party in a civil action for personal injury, death or property damage, related to or arising out of fault. I want to take time to point out that no one has said that Rule 82 doesn't work in the case of civil litigants who are not suing under the tort statutes. When you have two relatively equal parties, say two contractors and say two individuals suing each other, and both have something to lose, then Rule 82 has a salutary effect because both parties know that if they don't settle this thing, somebody is going to be paying the other guy's attorneys fees. We were careful to point out then, that I believe this language says that now, that this is reading us of Rule 82, only as it relates to court law to personal injury property rising out of fault. REPRESENTATIVE FINKELSTEIN asked that on Section 3, there are arguments on both sides on the issue of the two years, and I am certainly very skeptical, myself. The bill, as explained to me, in Section 13, if we're going to say that no matter what, if you're not going to bring an action within two years, you can't pursue the actions. What is it, in the nature of undiscovered foreign body, within a person, that makes that particular case so different from a variety of other medical malpractice cases. Is there something in that particular category that makes it so different that should be (indiscernible). One of the only exceptions to the (indiscernible). Number 368 DR. MCGUIRE stated it arose from the fact that some individuals felt that it was a particularly egregious offense that if a doctor or a nurse or anybody else left with something inside someone's body, and they didn't discover it until sometime later, it was so obviously a malpractice kind of thing that there should not be a statute of limitations. This was felt proliferously to be the case by anybody who addressed the issue. I think it is a matter of opinion and a matter of judgement. I certainly don't have any problem with the idea that there can be exceptions in some instances because I think that, once again, those are quantifiable exceptions. I think that in this instance, it probably has the advantage that everybody doesn't have to run down to do an x-ray to make sure they don't have something there. I wouldn't debate it with you very strongly. Number 380 REPRESENTATIVE FINKELSTEIN asked if there was anything medically more threatening than that one particular type of malpractice, more so than some of the other types of things. It is just more quantifiable. Number 386 DR. MCGUIRE answered that was his impression, yes. Number 388 REPRESENTATIVE MACKIE referenced Dr. McGuire's earlier testimony where he gave situations of doctors, in Cordova, he believed that insurance costs rose and sooner or later were unable to afford insurance. You are suggesting some of these changes out of situations because of that. Where, in this legislation, or where in the effort to reform some of these problems affect a lot of citizens in Alaska, is any kind of working commitment from insurance companies to lower their costs. Number 397 DR. MCGUIRE said I came to speak for the Alaskans for Liability Reform, and I didn't say that I came to speak for the insurance companies. I don't speak for the insurance companies and I have my own separate problems with insurance companies at times. This was the subject of intense debate in 1986, and that is so if we do all of these laws, who says that the insurance companies are going to be around anyway. We went through (indiscernible), the history of insurance beginning with Lloyds of London, and the idea of reinsurance and the idea of competitive markets and so on and so on. Let me try to answer the question, if I may, this way. There was created, in 1975-76, an organization called MICA, which was a Medical Indemnity Corporation of Alaska and it was an express creation of the legislature to answer the problem of no insurance in the medical malpractice area. It was set up to be a mutual non-profit sort of company so that all the records would be available so that we could study in fact what happened in the insurance mechanism. It depends on whose opinion you take as to whether MICA was a success or not. In the end, we learned a very great deal about the actual cost of insurance, about where the money went, and all of that history has been read into the record both with Speaker Cotten's study group and with others and is certainly available. MICA has subsequently been sold to another mutual insurance company and that did have a good effect in terms of moderating the race. I can't argue that whether or not the whole insurance business ought to be that of mutual insurance companies or whether or not it should be that of for profits. But what I can tell you, is that when we had the mutual insurance company, we, as doctors, we still faced the problem of not knowing of what the long tail was going to be and therefore, there still had to be a mechanism of reinsurance and that unpredictability makes for volatility of rates, for one year high and the next year low, and nobody knows where it is. Let me remind you, that we used to have statutes of limitations. It is not a foreign concept. It isn't something that we're dreaming up anew. There used to be statutes of limitations. Even the IRS has a statute of limitations, but these statutes of limitations were voided by judicial decree. They were not voided by legislative action, by referendum or by initiative. While they can be portrayed as being repugnant, in order that there is some predictability of affairs, it is important that there be some. If they were of no good, we wouldn't have statutes of limitations for criminal offenses. Number 450 REPRESENTATIVE FINKELSTEIN stated that Dr. McGuire made mention of the issue of 'while committing a crime,' part of it all and we had a long discussion, I think that you caught earlier on, the whole thing has some very scary implications. I think a lot of us are not completely clear. An example that came to my mind that we are talking about is the recent case with (indiscernible) Hardware, where some kids were out in some sort of felony or misdemeanor crime of theft, and were shot. I assume that there has been a suit of trying to recover some of the things. Are you suggesting in that kind of case that they should be precluded from suing because there was some involvement in what some might consider to be a felony or a crime, that they should be precluded from any compensation? Number 462 DR. MCGUIRE answered the short answer is "no." The long answer is that the kids weren't doing a felony and that is precisely why the language says a felony. I am completely sympathetic to the fact that kids, and sometimes adults, do things that are not exactly within the law but they certainly mean any terrible harm to come by it and some injury occurs. Kids trespass all the time. We did not have the intent of misdemeanors. REPRESENTATIVE FINKELSTEIN understood that, but just the (indiscernible) between misdemeanor and felonies, just the dollar amount... There are some larcenies that are felonies, right? REPRESENTATIVE PORTER added you are presuming that in that case, there would have been a (indiscernible) of larceny which included intent to permanently deprive in that scenario. I don't believe that was the case. REPRESENTATIVE FINKELSTEIN agreed it could be argued that they were just temporarily stealing the item. The key here is that the standard would be changed in proving whether they were involved with that. It wouldn't be beyond reasonable doubt, it would just be a lower standard in a civil case as to whether they were involved in a commission of some sort of larceny which are... My only point, I'm not trying to get into the details of that, but there are larcenies that are felonies, and they were involved in a larceny like act and I just want to bring it up because I think there is examples on the other side where we've seen enough publicity that we realize that not everyone that fits these cases may be some we want to bar from any compensation. DR. MCGUIRE thought he might want to be careful that your remarks are meant to clarify and not obfuscate because the (indiscernible) of civil justice of criminal justice is one that has evolved over the years and we, as a collective society, have decided that some actions are more harmful to society, as a whole, than are others. We call those felonies. We take felonies pretty seriously. When you are charged with a felony, it is no laughing matter. At the same time, we recognize that there are those elements which are not so serious to the fabric of society and we call those misdemeanors. Number 525 REPRESENTATIVE FINKELSTEIN stated he was aware of the differences. DR. MCGUIRE wanted to try to make the point that some of us believe that when you go out and do something that you know or should know, is more likely than not to cause others injuries, when you rob banks, when you drive drunk, when you run red lights, and as a result of that, you cause injury to other people, where in the world does it come with any idea of fairness that you are the victim and that you ought to be compensated because you are the criminal. It doesn't make any sense. Regardless of whether or not it said that it should be so, the fact of the matter is from the Daily News editorial, that those law-suits are filed. The fact of the matter is, we argue that they don't even belong in court in the first place. REPRESENTATIVE FINKELSTEIN clarified, I couldn't agree with you more in cases where there is conviction (indiscernible). The discussion we had earlier is cases where the person was found innocent of a felony and then in the civil case, they try using the lower standard. Made to prove that they were involved in the felony anyway. That is the case I was trying to get at, I agree with you on a conviction, it is just a different level. DR. MCGUIRE responded, I would say to you, alright, then let's use the same standards for determining fault in civil action as they use in criminal action. The point I am trying to make is we, as a society, want protection of the individual, and so from the arm of government we demand a standard of evidence beyond reasonable doubt, for criminal actions. But for civil actions, the plaintiff can use a different standard and can prove a damage using a different standard. Our argument is that the jury who decides whether or not there should be civil damages ought to be able to use the same standard approved relative to the felony as to the standard approved relative to the damages. Therefore, we want, at a very least, this information be mandatorily (indiscernible). I will say to you, that I have a great deal of faith in the jury system. What I don't have much faith in, is what the jury gets to hear. So many times the instructions to the jury are so restrictive that they don't have all the facts of the case and how can they come to any conclusion other than the one that is (indiscernible) or what they want it to be. We argue that this is still a matter of the jury to decide but by having this law in front of the jury, you make sure that the jury, who decides the damages, gets to also decide the appropriateness of the conduct of the plaintiff during the injury. CHAIRMAN HUDSON stated he must cut Representative Finkelstein and Dr. McGuire off to go on with the scheduled meeting. REPRESENTATIVE FINKELSTEIN added he thought it was very helpful and helped him understand that it is two different levels. The first situation, where you want to make sure it is before the jury and the other is where they are actually precluded from any compensation. They are both important but different. CHAIRMAN HUDSON stated it was very good for the preliminary hearing that these kind of discussions come out because these are clearly things that we can amplify and home-in on, on an individual basis. I appreciate Dr. McGuire for being at the meeting. CHAIRMAN HUDSON asked Jeff Feldman and/or Dan Hensley to the table. Number 545 JEFF FELDMAN, PRESIDENT OF THE ALASKA ACADEMY OF TRIAL LAWYERS ASSOCIATION, has lived in the Anchorage community for 18 years and by way of background, I would say it has been his practice represented both plaintiffs and defendants. I have, on occasion, represented injured Alaskans. I have also represented many of Dr. McGuire's colleagues, some in malpractice actions. I have represented engineers and contractors, who have sued, and I am currently representing our Attorney General Cole, and other state officials who were sued in the state action, in a tort action presently pending in the courts. MR. FELDMAN said I come this afternoon with a view that is a little bit broader than what you might expect from me as the president of the Alaska Academy of Trial Lawyers Association. I hope that we would all agree that the citizens of this state, the people that hire and that voted for you, deserve a civil justice system that is fair and protects their rights and their cause for adequate compensation. I don't think anyone would quarrel with that overall goal. I understand that unspoken in this room, today, but very much present in the minds of those of you who have to make these decisions, is a generalized hostility towards the legal system, and perhaps, even a generalized hostility towards lawyers, in particular. I am not here this afternoon as an apologist in the legal system and I have my own concerns about the legal system, as I do about the medical system and the educational system, in which my children currently attend school. I will tell you candidly that the legislation that is before you this afternoon is not reformed legislation, it is a misnomer to call it that. It is legislation which confers immunity and special benefits on a very narrow group of society on special interest groups. It benefits, simply speaking wrongdoers, people who do not commit harm, do not commit negligence on other parties, are not particularly benefited by much in this legislation. This legislation benefits those who's conduct injures and kills your constituents. Injures and kills Alaskans. It benefits insurers, major corporations, those who produce products that are used in our state and professionals, including myself who commit malpractice. It lessons the responsibility and reduces their exposure to liability that is clearly its intent. so lets identify it from what it is. TAPE 93-41, SIDE A Number 001 NOTE: AT THIS POINT THE MINUTES WILL NO LONGER BE VERBATIM. MR. FELDMAN told the committee that HB 292 will, in the end, hurt the very constituents the committee represents, the victims who were unfortunate enough to be maimed or injured. Mr. Feldman noted that the hearing room was full of lawyers, doctors, and lobbyists, but none of the victims most affected by this bill. The victims of catastrophic injuries brought on by someone else's negligence, the widows and orphans etc., these are the people whose rights are being changed with this bill. MR. FELDMAN stated that Dr. McGuire was simply wrong when he stated that everything in the bill was the product of judicially created law. The statutes of limitations, interest rates, rules by which certain issues were determined by the jury, were set by previous legislatures. HB 292 purports to undo what previous legislators have done. MR. FELDMAN pointed out that the statute of limitations set at six years would be bad public policy for Alaskans as some defects won't show until the seventh year. The section would confer immunity to manufacturers of products whose defects may stay concealed for over six years. MR. FELDMAN stated that periodic payments puts the victim at risk because the defendant, whether it be an insurance company or individual, may not be around at the end of the payment schedule. It's also true that the victims needs very during their lifetime and should, therefore, be allowed to use the money as the person sees fit. For instance, a person who is rendered a quadriplegic may find they need to build a special house, or move their family out of state to be close to a facility that can more properly take care of his needs, etc. MR. FELDMAN concluded by saying HB 292 will make Alaska the most anti victim state in the nation. It will not do any of the things it is purported to do and should be called the "wrongdoers relief act". Number 146 DAN HENSLEY, Attorney, reiterated Mr. Feldman's testimony. He added that the people who promote tort reform state as their reasons for their support that they don't like the civil liability system because it costs too much, because it takes too long, because frivolous lawsuits burden the system, and because some people with legitimate claims don't have access. Mr. Hensley noted that he would like the same things but HB 292 does not accomplish these things. For instance, in Section 2 of the statute of repose cuts out claims for people who are injured six years after a product has been manufactured or a building has been designed. MR. HENSLEY explained Section 3 limits malpractice suits such as in the case of a woman whose has a mammogram which clearly shows a small cancerous lesion but the radiologists somehow becomes confused and doesn't tell the patient and the cancer grows and becomes deadly three years after the mammogram was taken the patient would not have a claim. MR. HENSLEY said language in Sections 5 and 6 would exempt the statute of limitations provisions in personal injury cases from applying to people who are mentally incompetent or are children. MR. HENSLEY noted that Sections 20 and 21 weaken the pre judgement interest part of our civil liability system. Currently, if a insurance company owes "X" amount of money today and it knows it will have to eventually pay, they can decide whether it's cheaper of pay now or delay and invest the money and pay the pre judgement interest. If the pre judgement interest rate is low, its incentive is to delay. If it is high, its incentive is to settle now. Section 21 reduces the rate of pre judgement interest to a point where an insurance company will likely earn more money on what it owes than it would have to pay in prejudgment interest. MR. HENSLEY said the Section 20 guts most of the kind of award in which prejudgment interest would have to be paid. MR. HENSLEY noted that Section 11 would necessitate the hiring of an economist, by the plaintiff, to calculate the taxes on future losses. MR. HENSLEY stated that Section 13 would create the need for the plaintiff to hire insurance consultants to find out how periodic payments would work for or against them. This again would increase the costs of the suit. Frivolous lawsuits are by and large prevented by Rule 82 but HB 292, as it stands, would cut that out of the legal system. MR. HENSLEY stated that for the first time under this bill, the jury is allowed to hear that a plaintiff has health insurance In the past, the jury was prohibited from hearing this. The judge would hear this after the case was over and deduct the health insurance payments from the juries award. Under HB 292, the jury will hear about the plaintiff's health insurance but not the fact that the defendant may or may not have liability insurance. Mr. Hensley felt this is not fair as it gives the wealthy defendant an advantage over the victim. Number 257 CHAIRMAN HUDSON thanked the previous speaker. He said speaking for himself, he has not approached this bill with any preordained dislike for lawyers. Chairman Hudson feels it is wrong to enter into an important debate as this presuming there is a strong bias. Number 278 MR. FELDMAN stated he didn't mean to suggest that his comments were personnel to any one on the committee. He said he understands that there is frustration with the legal system, but sometimes the good intentions are misplaced. Number 285 REPRESENTATIVE MACKIE said he did not come to the table with any preconceived notions and listened to Mr. Feldman's presentation closely. Representative Mackie perceived the problem to be that business is getting priced out because of high costs of liability insurance in this state. Number 315 REPRESENTATIVE PORTER asked if given the example of a product or building causing injury after the sixth limitation was imposed, couldn't an attorney assert the claim as gross negligence? Number 330 MR. FELDMAN replied that there were no exceptions in the statute of limitations under HB 292 for gross negligence. So even he, an attorney, could prove gross negligence. Mr. Feldman further stated that gross negligence is a higher standard of negligence then ordinary negligence. Number 347 MANO FREY, President, AFL-CIO, testified that his union does not have a general policy on tort reform. He said he raised the concern that some have alluded to insurance costs decreasing if HB 292 is passed, but no one can say so definitively. MR. FREY stated he doesn't think there is a problem with the size of jury verdicts in this state. Mr. Frey added that he hopes the bill would address the problems in a balanced way. Mr. Frey believes HB 292, as it is currently drafted, will only hurt the victims. MR. FREY stated that when a workers compensation reform bill was on the agenda, one of the popular ideas was to reduce the amount of money that attorneys received. This ended up doing a great disservice to people with legitimate claims as they couldn't find an attorney to represent them. The amount of work involved versus the possible payoff was not high enough to make it worth most attorneys time. Number 510 LAURA KELLY, Vice President, AFL-CIO, testified that she could not see any benefit to the working men and women of the state in this legislation. MS. KELLY cited several example of products that science is just now showing that they can cause damage to people well past the six year limitation in HB 292. Some of those products, for example, are cellular phones, silicone implants, and the radar guns the police use to trap speeders. MS. KELLY stated she has great confidence in the people of this state that make up our juries and would rather have them deciding her case than having some artificial caps imposed by this bill binding the jury. MS. KELLY stated her concern is that HB 292 sets a lower cap for a person in a wrongful death action who was childless then one with children. Ms. Kelly felt that was sending a clear message to citizens of Alaska about there relative worth. TAPE 93-41, SIDE B MS. KELLY stated she was bothered that HB 292 would, in effect, give only $10 thousand for the loss of a child to a parent. MS. KELLY said she did not believe the state should have any interest in the area of punitive damages. There could be no benefit to the state in capping punitive damages in the most outrageous and egregious cases. Number 055 STEVE CONN, Executive Director, Alaska Public Interest Research Group, testified his group is bi-partisan and tries to represent the Alaskan consumer. Mr. Conn noted that he used to be a professor in the university system in the area of justice. Mr. Conn gave a historical outline of torts. MR. CONN stated he thinks it is important to look at past tort reforms to see if they have achieved any benefits for Alaskans. Has it lowered insurance premiums? Has it made the system more cost efficient? Have the injured been served? Have the medical profession been served? Are we safer in terms of the products we use? MR. CONN suggested that the legislature direct, not the attorney general's office, but the Alaska Judicial Council to study past tort reforms to answer the questions previously asked. MR. CONN believes that at both the state and federal levels, the insurance industry has misrepresented the facts in regards to this bill. Mr. Conn cited a report done for the state of New York that contends that the real problem is that there is more malpractice in the health care field than the system can handle and that there aren't too many lawsuits filed, but too few. MR. CONN stated that of the suits filed, the amounts of the awards were not disproportionately high despite the few extreme cases that make the news. MR. CONN pointed out that overall nationally malpractice insurance premiums account for less than 1 percent of the total health care spending according to the studies. MR. CONN again asked the committee to ascertain whether the promises made before the last reform came true before they tinker with the system again. Number 297 CHAIRMAN HUDSON noted that HB 292, like most bills that are introduced in the legislature, serve initially as a forum for putting the issue before those in the legislature that have to make public policy decisions. Chairman Hudson welcomed the input from the various people, throughout Alaska, to help fine tune HB 292. Number 345 FRANK THOMAS-MEARS, State Insurance Administrator, Alaska Dental Society, said he is one of the original founders of the Alaska Citizens Coalition for Tort Reform. Mr. Thomas- Mears stated that this bill is the first attempt to set forth limitations. He said that the citizens coalition has tried to interest the trial attorneys, since 1985, to sit down and open up discussions on tort reform and the reply was "no." Furthermore the trial attorneys have indicated that if the reform passes they will fight it in the courts. MR. THOMAS-MEARS stated that there are finite resources to go around and that a democracy cannot have unlimited liability to everybody for everything and exist. He asserted that law has been enacted through case law without public participation. MR. THOMAS-MEARS stated he believed our society needs more methods of alternate dispute resolution such as mediation, arbitration and peer review. Number 568 REPRESENTATIVE MULDER asked for an explanation of the $10 thousand figure for the death of a child that has been brought up during some of the previous testimony. Number 575 MR. FORD responded that in a wrongful death action, sections 20 through 23, a $10 thousand figure would apply assuming that the child had no dependents. TAPE 93-42, SIDE A Number 001 There was continuation of wrongful death discussion between Mr. Ford and Representative Mulder. Number 045 ERIC SANDERS, Attorney, testified as to how the present law reads versus the legislation before the committee. He said under present law, there are two kinds of clients. There is one type where there are dependents. There is also the wrongful death claim where there are no dependents. If you are married or are a single person with children, then you have dependents. He said if he were supporting his mother because she was disabled, she would also be a dependent. Mr. Sanders said in that situation, if a dependent is survived, then they have a claim for their loss of support. They would also have a claim for loss of companionship. He said that is one set of claimants, those with dependents MR. SANDERS said there is a second group of those people who are not dependents and have no dependents. He said there could be a minor child, under 18 years old. Under that there would be a pecuniarily loss. The way it is currently done is it is projected what that child would have earned during the course of their life minus their consumption. That is the pecuniarily loss. MR. SANDERS said separate and apart from the wrongful death statute there is also a law which provides that parents of a minor child have a claim for the loss of the relationship in their child. MR. SANDERS said then you have claimants that are no dependents over the age of 18. If you're 18 years plus 1 day old, you are killed, you have no dependents, under this law you're going to get the estate. Number 078 REPRESENTATIVE PORTER asked Mr. Sanders what a person could conceivably get under Section 6 of HB 292 for the loss of a child that is over 18 years of age. Number 085 MR. SANDERS explained that HB 292 is limiting tort actions not expanding them. He added that under current law the estate of an 18 year old would be limited to pecuniary loss, the estate would not get anything for the loss of companionship of the child. MR. SANDERS asserted that the civil justice system is arbitrary in some regards and this is one example. MR. THOMAS-MEARS responded that HB 292 is arbitrary but he thinks its as fair as you can get given the framework. MR. THOMAS-MEARS added that he would rather set arbitrary limits now with finite limits under rational circumstances. MR. SANDERS stated that if the insurance companies would commit, in writing, to lower premiums if this bill passes he didn't think there would be opposition to it. He added that the insurance industry is standing on the sidelines promoting the passage of tort reform limiting victims rights without committing to any reductions in premiums. Number 135 CHAIRMAN HUDSON commended both sides and suggested that it be reduced to writing as there are some good ideas for the future. Number 138 REPRESENTATIVE MACKIE commented that when tort reform came up in 1988, he understood insurance rates would be lowered but it hasn't happened. Number 155 GORDEN EVANS, Health Insurance Association of America, testified to their position on HB 292. The Association believes that the major focus should be on the reduction of the occurrence of malpractice. This may involve the relicensing of the medical profession, periodically, with written examinations and peer audits. The association believes in requiring hospitals and other medical facilities to implement effective risk management practices as a requirement of licensure. The association is also promoting the accumulation of information on the medical field, including an analysis of claims or information of license revocations, suspensions and disciplinary actions. Finally, to empower the State Medical Board to be able to act on these measures. MR. EVENS explained that the association is supportive of alternative dispute resolution. He added that if litigation is necessary, then every effort be made to make sure that as much of the award go to the claimant. REPRESENTATIVE MACKIE asked if the insurance industry was supportive of lowering their rates if some of these things in the bill pass. Number 234 MR. EVANS stated that if costs are cut and limited to a finite amount, then it would follow that. Premiums would come down. Number 255 REPRESENTATIVE PORTER asked for Mr. Evans to give the committee an analysis of any savings or reduction in growth in insurance premiums. Number 268 MR. EVANS replied that he was not in the position to make any predictions in that regard. He added that he would pass the request along to the association for a reply. REPRESENTATIVE PORTER responded that he hoped the association could come up with some response before session started as he knew the question would come up during the legislature's debate on tort reform. Number 276 REPRESENTATIVE GREEN asked Mr. Evans for an approximation of how much the payout is for all malpractice claims as opposed to non litigated coverage. Number 290 MR. EVANS replied that he did not have that information but would make an effort to obtain and provide it for the committee. Number 300 CHAIRMAN HUDSON stated that any information provided that would help the committee expand their knowledge on this subject will be appreciated. CHAIRMAN HUDSON adjourned the meeting at 4:12 p.m.