Legislature(1993 - 1994)

11/22/1993 11:00 AM L&C

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                    HOUSE LABOR AND COMMERCE                                   
                       STANDING COMMITTEE                                      
                        November 22, 1993                                      
                           11:00 a.m.                                          
  MEMBERS PRESENT                                                              
  Rep. Bill Hudson, Chairman                                                   
  Rep. Joe Green, Vice Chairman                                                
  Rep. Brian Porter                                                            
  MEMBERS ABSENT                                                               
  Rep. Eldon Mulder                                                            
  Rep. Bill Williams                                                           
  Rep. Joe Sitton                                                              
  Rep. Jerry Mackie                                                            
  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                                                     
  WITNESS REGISTER                                                             
  DR. DAVID JOHNSON                                                            
  Alaska State Medical Association                                             
  4107 Laurel Street                                                           
  Anchorage, Alaska  99508-5334                                                
  Position Statement:  Supported HB 292                                        
                       (via teleconference from Ketchikan)                     
  GLENDA STRAUBE                                                               
  Alaska Women's Lobby                                                         
  1318 N St.                                                                   
  Anchorage, Alaska  99502                                                     
  Position Statement:  Opposed HB 292                                          
                       (Spoke via teleconference)                              
  BOB COWAN                                                                    
  Private Trial Lawyers                                                        
  P.O. Box 1681                                                                
  Kenai, Alaska  99611                                                         
  Position Statement:  Opposed HB 292                                          
                       (Spoke via teleconference)                              
  CHUCK ROBINSON                                                               
  Private Trial Lawyers                                                        
  35401 Spur Highway                                                           
  Soldotna, Alaska  99669                                                      
  Position Statement:  Opposed HB 292                                          
                       (Spoke via teleconference)                              
  JOHN GEORGE, Lobbyist                                                        
  State Farm, Allstate,                                                        
  National Association of Independent Insurers                                 
  9515 Moraine Way                                                             
  Juneau, Alaska  99801                                                        
  Position Statement:  Supported HB 292                                        
  DAVE WALSH, Director                                                         
  Division of Insurance                                                        
  Department of Commerce and Economic Development                              
  P.O. Box 110805                                                              
  Juneau, Alaska  99811-0805                                                   
  Position Statement:  Answered questions regarding HB 292                     
                       (Testified via offnet from Dallas, TX)                  
  DICK CATTANACH                                                               
  Alaskans for Liability Reform                                                
  1318 N St.                                                                   
  Anchorage, Alaska  99501                                                     
  Position Statement:  Supported HB 292                                        
                       (Spoke via teleconference)                              
  MICHAEL SCHNEIDER                                                            
  Alaska Academy of Trail Lawyers                                              
  880 N St. #207                                                               
  Anchorage, Alaska  99501                                                     
  Position Statement:  Opposed HB 292                                          
                       (testified in Juneau)                                   
  MARK CHOATE                                                                  
  Juneau Attorney                                                              
  175 South Franklin, Suite 308                                                
  Juneau, Alaska  99801                                                        
  Position Statement:  Opposed HB 292                                          
  CHRIS CHRISTENSEN, Staff Attorney                                            
  Alaska Court System                                                          
  303 K. Street                                                                
  Anchorage, Alaska  99501                                                     
  Position Statement:  Spoke on behalf of Court system                         
                       (Spoke via teleconference)                              
  AL TAMAGNI                                                                   
  1205 E. International Airport Road, Suite 205                                
  Anchorage, Alaska  99518                                                     
  Position Statement:  Supported HB 292                                        
                       (Spoke via teleconference)                              
  HARLAN KNUDSEN                                                               
  State Hospital and Nursing Home Association                                  
  319 Seward Street, #11                                                       
  Juneau, Alaska  99801                                                        
  Position Statement:  Supported HB 292                                        
  STEVE SCHROEDER, Engineer                                                    
  Address and phone number not available                                       
  Anchorage, Alaska                                                            
  Position Statement:  Supported HB 292                                        
                       (Spoke via teleconference)                              
  THOMAS FINDLEY, Attorney                                                     
  229 Highland Dr.                                                             
  Juneau, Alaska  99801                                                        
  Position Statement:  Opposed HB 292                                          
  HENRY SPRINGER                                                               
  Associated General Contractors of Alaska                                     
  4041 B Street                                                                
  Anchorage, Alaska  99503                                                     
  Position Statement:  Supported HB 292                                        
  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                       
  ACTION NARRATIVE                                                             
  TAPE 93-43, SIDE A                                                           
  Number 001                                                                   
  CHAIRMAN HUDSON called the meeting  to order at 11:12  a.m.,                 
  November 22, 1993.  Members present were Reps. Hudson, Green                 
  and Porter.                                                                  
  HB 292 - CIVIL LIABILITY                                                     
  CHAIRMAN HUDSON stated that the bill before the committee is                 
  a vehicle to educate the committee  on this issue.  Chairman                 
  Hudson further stated that after doing  considerable reading                 
  he felt the opposing sides  have clear differences and  that                 
  those differences of opinions were held nationwide.                          
  Number 010                                                                   
  DR.  DAVID   JOHNSON,  Alaska  State   Medical  Association,                 
  testified via teleconference from Ketchikan that the biggest                 
  issue regarding tort reform was access  to health care.  Dr.                 
  Johnson  believes  that  the  current  liability   situation                 
  restricts Alaskans access to health care especially in rural                 
  DR. JOHNSON went on to  explain that doctors attending women                 
  giving birth  are putting  their professional  lives on  the                 
  line  each time  as they may  be deemed  at fault for  a bad                 
  outcome.  Dr. Johnson believes that  somehow we have to come                 
  up with a  system that fairly protects the medical community                 
  and  gives  the  very  best  care  to those  that  are  most                 
  vulnerable; i.e., pregnant women and small children.                         
  DR. JOHNSON testified that  a second area of concern  was in                 
  complex  injury  cases  where again  the  attending  medical                 
  personnel put their professional careers on the line.                        
  DR.  JOHNSON stated  that physicians, particularly  in small                 
  communities,  must  decide between  providing services  at a                 
  price  that they  think  is fair  and  sustainable or  being                 
  insured and the two are not compatible.                                      
  DR.  JOHNSON  pointed  out  that  approximately 2/3  of  the                 
  insurance premiums paid are consumed  in the processing of a                 
  claim, court costs,  attorneys fees, etc.,  and only 1/3  is                 
  recovered by the victim.                                                     
  DR. JOHNSON  stated  that  the reform  has  to  inject  some                 
  predictability into the  system, especially  in the area  of                 
  noneconomic compensation.  He said economic compensation for                 
  medical  costs,   loss  of   wages  and   rehabilitation  is                 
  relatively  simple to  figure;  noneconomic compensation  is                 
  wide open and  subject to the  eloquence or lack thereof  of                 
  the attorneys involved  and the sympathy  of the jury.   The                 
  resulting  award of  the  jury varies  widely.   Dr. Johnson                 
  believes a cap on damages is needed.                                         
  DR. JOHNSON stated  that current law provides  for a statute                 
  of limitation that  can stretch 20  years or longer after  a                 
  service  or  procedure  has  been   rendered  by  a  doctor.                 
  Insurance coverage is  only good  for the period  of time  a                 
  doctor is paying the premiums, so if a claim is made after a                 
  doctor is retired,  they are  not protected.   This type  of                 
  long term   exposure is  what is driving  doctors away  from                 
  pediatric services.                                                          
  CHAIRMAN HUDSON inquired  about the history of  increases in                 
  medical malpractice premiums and what  percentage of that is                 
  included in the patient's bill.                                              
  Number 292                                                                   
  DR. JOHNSON answered that  that would depend on the  type of                 
  service provided and the level of coverage purchased.                        
  DR.  JOHNSON   added  that   obstetrics,  neurosurgery   and                 
  orthopedic surgery are at  the top end of the  premium scale                 
  and  a general  office  practice  would  be at  the  bottom.                 
  Prices range typically from  $30,000 to $80,000  for  one to                 
  three million  dollars in coverage.   Dr. Johnson  said that                 
  the premiums have  not grown significantly  in the last  two                 
  Number 322                                                                   
  REP. HUDSON asked if specialists  are leaving the state  due                 
  to  our  present tort  system  and  to what  extent  did Dr.                 
  Johnson feel the present system had on the medical community                 
  choosing what state they would work in.                                      
  Number 329                                                                   
  DR. JOHNSON answered that  it is one factor in  the decision                 
  making process, primarily because Alaska is considered a pro                 
  plaintiff state.  Dr. Johnson noted an  interesting trend in                 
  doctors being  hired as hospital employees so  that they may                 
  be covered  under the  hospital's insurance  where the  unit                 
  cost would be lower per employee.                                            
  Number 342                                                                   
  REP. PORTER raised the concern that this problem also causes                 
  duplicative or unnecessary testing.                                          
  Number 346                                                                   
  DR. JOHNSON  agreed that  there is  a significant  amount of                 
  unnecessary testing that  he calls defensive medicine.   Dr.                 
  Johnson suggested that  it is very hard for a  doctor not to                 
  perform a test on someone who shows some indications of need                 
  for  the test and has insurance.   Dr. Johnson stated that a                 
  lawsuit  could be filed  if there is  a bad outcome  and the                 
  test could have prevented it.                                                
  Number 390                                                                   
  REP. GREEN asked  if there  is an increase  of awards  which                 
  prompts higher premiums and costs.                                           
  Number 402                                                                   
  DR. JOHNSON replied yes; that given ten  similar cases, nine                 
  being awarded $100,000  and the tenth  $10 million, the  $10                 
  million case will cause enough fear to drive the system into                 
  increased costs and premiums.                                                
  Number 418                                                                   
  DR. JOHNSON further  noted that the noneconomic  damages are                 
  similar to  the lottery system  in that they  currently vary                 
  widely and this uncertainty drives up cost.                                  
  REP. HUDSON noted  that in some states,  specifically Maine,                 
  they   set  explicit   treatment  guidelines   for  specific                 
  conditions.   Rep. Hudson  inquired if  Dr. Johnson  thought                 
  this direction was helpful.                                                  
  Number 439                                                                   
  DR. JOHNSON answered that  it was too early to  tell because                 
  that system still  has to make  its way through the  courts.                 
  Dr. Johnson noted  that there  is a very  large question  in                 
  medicine as to  what is  science and what  is an  acceptable                 
  course of treatment for any given set of circumstances.  For                 
  example, you can have two experts on the same subject differ                 
  widely on their  opinion of what course of  treatment should                 
  be taken in any given case.                                                  
  Number 473                                                                   
  GLENDA STRAUBE, Alaska  Women's Lobby, read a  statement via                 
  teleconference then answered questions.   The statement read                 
  as follows:                                                                  
  As you know,  there was tort reform in  1986 and tort reform                 
  again in  1988.  I thought  we already gave  away the store,                 
  yet once again  we see  before us even  more so called  tort                 
  reform in 1993.   The Alaska Women's Lobby believes  that it                 
  is  simply not  good public policy  to make  further onerous                 
  changes, all of which are  detrimental to your constituents,                 
  without  any  quantitative or  qualitative  analysis  of the                 
  effects of existing tort reform laws.                                        
  From  listening  to  the previous  speaker  for  the Medical                 
  Association,  I  would like  to  recommend that,  before any                 
  legislation  be   passed,  that   independent  research   be                 
  undertaken to ascertain the following, at a minimum:                         
  1)    Whether medical  tests are  done  merely for  the self                 
  protection of physicians.  If so, to what extent.                            
  2)   Whether or not we have a doctor shortage in Alaska.  If                 
  we do, is it truly because of tort issues?                                   
  3)  The previous speaker testified that awards are sometimes                 
  based on who has the most eloquent attorney.  So, let's find                 
  out who has more money to  hire the most expensive attorneys                 
  and expert witnesses.  And who  are those so called eloquent                 
  attorneys, anyway?                                                           
  4)  Let's  survey jurors who  have served on successful  and                 
  unsuccessful cases  and  determine the  reasoning for  their                 
  5)    What  percentage  of  physicians  in Alaska  have  had                 
  liability claims filed against them.                                         
  6)  What percentage  of tort cases filed have  been settled,                 
  lost and won.   What was  the amount of  the awards and  the                 
  percentage  and amount  of  those upheld  on  appeal.   What                 
  percentage  of  the  awards went  to  attorneys  fees, court                 
  costs, expert witnesses, other costs not directly benefiting                 
  attorney, and how much went to the victim?                                   
  7)   What  is the  true effect  of previous  tort reform  on                 
  insurance rates?   And is the  high cost of insurance  rates                 
  really due to torts or greed of insurers?                                    
  I do  agree with the saying  that "if you've  got a problem,                 
  fix it."  But the real question here is "do you  really have                 
  a problem" and if  you think so, what are you  basing it on?                 
  Horror stories told  by insurance companies and  the medical                 
  profession?  And if you're  introducing legislation based on                 
  anecdotal stories, how  about some  from the victim's  side?                 
  Actually, I'm sure you would  agree that passing legislation                 
  based on anecdotes is bad public policy.                                     
  Look,  I am  not here today  to take  sides with or  pick on                 
  lawyers, doctors, corporations or others.   But I am here to                 
  take sides with your constituents and our constituents.  And                 
  I do not care to pussy foot around this issue.                               
  You know, in order to get tort reform passed in Alaska years                 
  ago, we heard over and over  again how if we didn't do  tort                 
  reform then insurance costs would  escalate unbelievably and                 
  doctors  wouldn't  be able  to practice.   But  neither tort                 
  reform in Alaska nor in other states caused  insurance costs                 
  to decline.   In fact,  an industry study  by the  Insurance                 
  Services Office determined that tort  reforms did not affect                 
  its rates.                                                                   
  Well,  we listened  when  they  cried  "wolf" then,  and  it                 
  appears that  the legislature  is still  listening to  those                 
  crying "wolf" about the need for so called  tort reform.  By                 
  the way, the  word "reform"  always sounds  good, but  let's                 
  call it like  it is:  a  desire to protect those  with money                 
  from having to  answer for  their negligent acts.   This  so                 
  called reform is a crime against  those, through no fault of                 
  their   own,  who   become   quadriplegics,  widowed,   left                 
  childless, or others left in horrible circumstances.                         
  And more than anything  else, this legislation is an  insult                 
  to anyone who has or who could possibly sit in the  jury box                 
  (and that  means most  all Alaskan  adults).   What you  are                 
  saying is  that innocent victims  cannot have  their day  in                 
  court because you  simply trust  the judgement of  insurance                 
  companies, medical  professionals, and  yourselves over  the                 
  judgement  of twelve  independent  and objective  jurors who                 
  have heard all of the facts.                                                 
  I am not going to spend  this committee's time picking apart                 
  every disgusting piece of this anti-constituent legislation.                 
  There are excellent reports that have been made available to                 
  you  which  factually describe  the  onerous impact  of this                 
  legislation.  Even  some sources in the  insurance industry,                 
  independent   insurance   task   forces    and   independent                 
  researchers, have produced studies and reports which clearly                 
  indicate  that  the  provisions  in   this  legislation  are                 
  unnecessary.   Again, legislation such as this  is not based                 
  on any  factual evaluation of  the tort system  operating in                 
  Alaska now.  It  is, instead, based on anecdotes,  myths and                 
  Even though I said  I wouldn't pick it  apart, there is  one                 
  part  of  the  legislation  which   is,  unbelievably,  more                 
  perplexing and stupefying than other parts.  This bill would                 
  preclude a claim of sexual abuse from a victim if it  is not                 
  filed within six years after the  abuse occurred.  Well, any                 
  mental health  professional can tell you that to survive the                 
  abuse,  victims place  the memories  out of  reach in  their                 
  minds and only when they really  feel safe do these memories                 
  return.  I  know this for fact,  because I was 40  years old                 
  before  all the horrible  memories returned.   So, you would                 
  victimize me again by not allowing  me to seek simple, legal                 
  redress in civil court?   Who are you to decide if I have my                 
  day in court?  Even if the legal system is overburdened, and                 
  frankly less  than 3%  of all  civil suits  are actual  tort                 
  cases, you  still do  not  have the  right to  take away  my                 
  access   to   justice,  fairness   and  equity   through  my                 
  constitutional access to  the courts.   And  what does  this                 
  provision mean when the legislature has already passed other                 
  legislation extending the amount of time that a sexual abuse                 
  victim can file against the abuser?                                          
  I am offended that insurance  companies and doctors are  not                 
  accused by legislators  of trying to  line their pockets  or                 
  keeping their  pockets full of what they've already got, but                 
  I have read  and heard  statements by legislators  inferring                 
  that  we  should not  listen to  attorneys because  of their                 
  vested monetary interests.   Well, I think it should  be all                 
  or none.   Either we agree that all vested parties have some                 
  altruistic motives or none of them do!                                       
  And since when do we give special protection to one specific                 
  profession:    health  care providers  (but  we  really mean                 
  doctors).    Why  are  you  willing  to  provide  a  special                 
  provision allowing only two  years to seek redress?   I have                 
  my  own personal story.   I will never  forget being with my                 
  mom in the hospital  when she had serious back  problems and                 
  listening  to the doctor  ridiculing my mom  for "daring" to                 
  play  doctor by  telling him  that  she had  a  lump in  her                 
  breast.  He  ignored her, but  she died several years  later                 
  from this  cancer which  started as  a lump  in her  breast.                 
  Oops!   Too  late,  two years  has gone  by and  tough luck.                 
  Sorry,  I  thought she  was  just another  hysterical woman.                 
  Again,  how dare  you take away  my right to  redress in the                 
  courts.  Now, granted, I never tried to sue anyone over this                 
  negligent act, but I  certainly should have the right  to do                 
  so.   And  that doctor  should have  had to  answer for  his                 
  outrageous action or lack of.                                                
  I know that  the majority of  the members of this  committee                 
  believe that we  need tougher criminal  laws and that  there                 
  should be stricter  accountability of those in  the criminal                 
  arena.   Most people don't care  why a criminal does what he                 
  or she  does, whether  they themselves  were emotionally  or                 
  physically abused as children.  We  don't seem to care about                 
  that.  By God, regardless of original fault, we want them to                 
  be held accountable for their actions.                                       
  Yet,  why  aren't   you  willing  to  demand   white  collar                 
  accountability.   Why shouldn't  people or  corporations who                 
  ruin people's lives through negligence, through malpractice,                 
  through careless and  reckless conduct,  have to answer  for                 
  their  mistakes.    Why  aren't  you willing  to  hold  them                 
  accountable?  And why  are you willing to make  the innocent                 
  victims suffer even more than they already do?  This bill is                 
  one of the  most anti-consumer pieces of work perpetrated by                 
  the legislators against their own constituents.  And believe                 
  me, if  it was your  daughter, wife  or mother who  lost her                 
  life to cancer through a negligent act of another  person...                 
  if it was  your child who  was paralyzed from the  neck down                 
  because  of  a corporation's  negligence...  YOU  WOULD WANT                 
  To sum it up,  you have before you legislation not  based on                 
  any review of  the existing system, but legislation based on                 
  hype.   Nevertheless,  legislation which  would punish  your                 
  innocent constituents.  For those who want to pass this bill                 
  out of committee, you should be ashamed for agreeing to deny                 
  innocent victims  their rights!   I know  some of you  and I                 
  consider you to be kind  and caring persons.  How could  you                 
  even consider creating an  unfair, inequitable and extremely                 
  biased system?                                                               
  Please think carefully about what you  are doing.  Thank you                 
  for your time.                                                               
  TAPE 93-43, SIDE B                                                           
  Number 001                                                                   
  REP. HUDSON clarified  some of his  feelings by saying  that                 
  there are problems and the dialogue has to  begin somewhere.                 
  Rep.  Hudson  added that  it's  with  the  testimony of  the                 
  doctors, lawyers and advocates of victims that the committee                 
  can fine tune the bill.                                                      
  REP.  HUDSON  stated  that there  were  several  issues that                 
  caused him to introduce this bill as a committee bill.   One                 
  concern is that nationwide the victim only gets about 25% of                 
  the actual award.  Rep. Hudson believes the system should be                 
  made more efficient and simpler so that the  victim receives                 
  REP. HUDSON cited the example of a friend as another area of                 
  concern.   This doctor  delivered his grandchild  but had to                 
  leave her high risk pregnancy practice shortly after because                 
  the  new  premiums  were up  to  $80,000  per  year and  her                 
  practice  couldn't sustain  that  big of  an  expense.   Her                 
  absence leaves no  specialist in  Juneau to  care for  other                 
  women with high risk pregnancies, forcing them to leave town                 
  to seek help.                                                                
  Number 010                                                                   
  MS.  STRAUBE  responded  that while  she  doesn't  doubt the                 
  example given above,  she noted that  only 1% of the  actual                 
  cost of health  care can be attributed  to medical liability                 
  Number 026                                                                   
  REP. PORTER  asked Ms.  Straube to  cite her  source of  the                 
  previous statement.                                                          
  MS. STRAUBE gave  the source as  the 1989 publication of  an                 
  article  titled   "National  Health  Expenditures"   in  the                 
  magazine called Health Care Financing Review.                                
  Number 045                                                                   
  BOB   COWAN,  Trial   Lawyers  of   Alaska,  testified   via                 
  teleconference from Kenai.   Mr. Cowan stated  he represents                 
  roughly 3,000  fishing clients.   Mr.  Cowan suggested  that                 
  this legislation  should be  called the  "Exxon Relief  Act"                 
  since  it  would  have  protected  Exxon   from  significant                 
  punitive damages.  The new  standard of  proof will  shelter                 
  most future wrongdoers.                                                      
  MR.  COWAN  added  that the  fishing  community  is strongly                 
  opposed to this legislation.                                                 
  MR. COWAN stated that he feels Sections 6 and 7 of  the bill                 
  placing a cap on noneconomic damages could be grossly unfair                 
  to a  person, for  example, who  is severely  burned to  the                 
  point that the outlook for  the future includes no children,                 
  no marriage, a lifetime of plastic surgery etc.                              
  MR. COWAN opposes the  cap on economic damages to  two years                 
  as it is  unfair to the children  and/or widow who  may have                 
  had to depend on the person's wages.                                         
  MR. COWAN stated he opposes the  change the bill offers that                 
  would give the option  of choosing structured payment to the                 
  wrongdoer.  Mr. Cowan believes this  would put the victim at                 
  the mercy of a insurance company that may become insolvent.                  
  MR. COWAN believes HB 292 would  give relief to big business                 
  and outside corporations  and it shows  no promise that  the                 
  change will reduce premiums.  In short, no clear benefits to                 
  Number 102                                                                   
  REP.  PORTER  stated  that  he  disagrees with  Mr.  Cowan's                 
  assertion that the  punitive damages  wouldn't be enough  to                 
  deter  a big corporation since the amount of damages awarded                 
  could be  up  to  three times  the  amount  of  compensatory                 
  MR. COWAN replied that a large corporation like Exxon  would                 
  consider that just a cost of doing business, a light slap on                 
  the wrist.                                                                   
  Number 119                                                                   
  CHUCK ROBINSON, attorney, testified from Soldotna against HB
  292.  Mr.  Robinson stated that there  seems to be a  lot of                 
  misinformation about the impact of  personal injury cases on                 
  the  judicial  system.   Mr. Robinson  said  that of  the 18                 
  million civil  suits filed in  the United States  each year,                 
  only one  million of them  are actual personal  injury cases                 
  and the vast majority of them are settled out of court.  Mr.                 
  Robinson  suggested  that the  fact that there  are so  many                 
  settled out of court shows that there is much more agreement                 
  between plaintiffs and  defendants of the resolution  of the                 
  claims than disagreement.                                                    
  MR. COWAN  believes that  the wrongdoers  will benefit  from                 
  this legislation; the big losers will be the victims.                        
  MR. COWAN  added that  HB 292  will not  lower premiums,  as                 
  evidenced by previous tort reform bills in the past.                         
  MR. COWAN  questioned  why  HB 292  would  treat  awards  in                 
  personal  injury  suits as  taxable  income when  the United                 
  States Congress and the Internal Revenue Service does not.                   
  MR. COWAN believes that  the certainty that HB 292  hopes to                 
  inject in the system actually will cause more cases to go to                 
  court, not less; most certainly everyone will want to go for                 
  the cap placed by this legislation.                                          
  Number 209                                                                   
  REP.  HUDSON inquired as  to the  guidelines used  to decide                 
  which personal injury cases to take  and which to turn down.                 
  Rep. Hudson added that he has  heard that many times someone                 
  with a legitimate claim  can't find an attorney to  take the                 
  MR.  ROBINSON  replied that  under  the current  system most                 
  people have access to redress their personal injury.                         
  REP. GREEN asked Mr.  Robinson if he had some  percentage in                 
  mind as to the difference between what someone might  settle                 
  for out of  court versus what they  might get if they  go to                 
  Number 260                                                                   
  MR. ROBINSON replied  that he did  not have a percentage  in                 
  mind  but the  uncertainty and  risk in  the current  system                 
  promotes settlements.  Mr. Robinson added that the number of                 
  cases  that   actually  go  to  trial  will   soar  if  this                 
  legislation passes.                                                          
  REP.  GREEN  clarified that  it seems  then that  most cases                 
  settled now out of court are for substantially more than the                 
  caps proposed in this bill.                                                  
  Number 299                                                                   
  JOHN GEORGE, National Organization  of Independent Insurers,                 
  testified that the insurance community wants predictability,                 
  the  ability to  see  forward.   Mr.  George explained  that                 
  insurers unfortunately have to set  the premiums they charge                 
  based on past experience.                                                    
  MR. GEORGE stated that to the extent that HB 292 will reduce                 
  the statute of  limitations may not  be fair to the  injured                 
  person  but it makes  it more predictable  for the insurance                 
  industry and therefore  they can more  finely tune the  rate                 
  they need to charge.                                                         
  MR.  GEORGE  stated  that insurers  are  criticized  for not                 
  writing  certain types  of  insurance, for  example,  OB/GYN                 
  practices.  The fact  is that there is a  significant amount                 
  of loss with this field which leads to higher premiums.  Mr.                 
  George added that there is no right or wrong answers in this                 
  area.   For  example, if  the increased  premium was  spread                 
  amongst all  doctors regardless  of type  of practice,  that                 
  could be called  unfair to  those doctors who  are not in  a                 
  high risk practice.                                                          
  MR.  GEORGE  emphasized   that  it  is  not   the  insurance                 
  industry's  job to  make insurance  affordable,  they simply                 
  charge the appropriate rate for the risk.                                    
  MR. GEORGE observed  that the  increased number of  lawsuits                 
  are a reflection of a changed society.                                       
  MR. GEORGE stated that  it's not the larger awards  that run                 
  up  premiums,  it's  the  accumulation  of small  cases  and                 
  potential exposure.   Mr. George gave  as an example a  case                 
  where a doctor is sued for $10,000 and the doctor says there                 
  was no negligence.  The insurance  company is then placed in                 
  the position of balancing a  $10,000 settlement vs. $100,000                 
  to defend the claim with the outcome possibly being $500,000                 
  in jury awards.                                                              
  MR. GEORGE  pointed out  that the  insurance  industry is  a                 
  highly regulated industry.  Insurance companies have to file                 
  their  rates, losses,  submit  its financial  statements for                 
  review, and is  regulated for solvency.   The industry is  a                 
  very  complex  system  and Mr.  George  summarized  that the                 
  committee needs  to look  for a  balance in the  legislation                 
  that  would  allow   for  the  promotion  of   commerce  and                 
  development  of medical care  and yet  not remove  the award                 
  from someone who is unjustly injured.                                        
  Number 513                                                                   
  CHAIRMAN HUDSON commented that in his overview of this issue                 
  he'd  always  assumed that  it was  the  threat of  the high                 
  payouts that drove the premiums up, but he understood him to                 
  say  that  that  was  not  true,  that it  was  the  smaller                 
  settlements that drove the system.                                           
  Number 520                                                                   
  MR. GEORGE reiterated that  it is the small to  medium sized                 
  settlements that  greatly  influence the  premiums with  the                 
  larger payouts having some impact.                                           
  Number 565                                                                   
  CHAIRMAN HUDSON stated that  he knew Mr. George had  been in                 
  the business many  years and wondered from  his observations                 
  what  had  been the  changes by  tort  reform as  it impacts                 
  medical liability and insurance costs.                                       
  TAPE 93-44, SIDE A                                                           
  Number 001                                                                   
  MR. GEORGE observed  that if  you go back  to 1976,  medical                 
  malpractice insurance in Alaska was essentially unavailable.                 
  In 1976 the state created  the Medical Indemnity Corporation                 
  of  Alaska,  an insurance  company  that required  mandatory                 
  participation by the  doctors.   The doctors  sued over  the                 
  mandatory clause and won.  The state then was left with some                 
  doctors covered and others  not.  At the same  time insurers                 
  were coming into  the state offering  to insure some of  the                 
  doctors but not the high risk ones.                                          
  Number 030                                                                   
  CHAIRMAN HUDSON asked  what position  the industry takes  on                 
  punitive damages and noneconomic caps.                                       
  Number 040                                                                   
  MR. GEORGE stated that  if a punitive damage is  designed to                 
  punish the offending  doctor and it's the  insurance company                 
  that pays  the bill,  it is  not having  the desired  effect                 
  intended.  It may punish the  doctor by raising his premium,                 
  but it also raises everyone else's rates.                                    
  Number 098                                                                   
  CHAIRMAN HUDSON asked if the industry had analyzed how much,                 
  if any, the rates would go down with the passage of HB 292.                  
  Number 103                                                                   
  MR. GEORGE declined to speculate on how much the rates would                 
  go down,  citing the  effect the  courts would  have on  the                 
  Number 130                                                                   
  REP. PORTER asked  Mr. George that  if this bill passes  and                 
  survives  its  challenges  in  court,  would it  not  reduce                 
  insurance costs?                                                             
  Number 145                                                                   
  MR. GEORGE  replied  that if  losses  are reduced,  then  it                 
  follows that rates will drop.                                                
  Number 152                                                                   
  REP. GREEN asked, as a follow  up question to Rep. Porter's,                 
  if the bill passes and is left alone,  would the industry be                 
  forced through regulation to lower rates  or would it be out                 
  of good will?                                                                
  Number 165                                                                   
  MR. GEORGE replied that to the  extent that a coverage falls                 
  in a class that is regulated and done by an admitted carrier                 
  as opposed  to a nonadmitted carrier, the rates regulated by                 
  the Division of  Insurance should  drop.  In  any case,  the                 
  rates should drop due to competition.                                        
  Number 200                                                                   
  CHAIRMAN HUDSON stated that he  has read the suggestion that                 
  there be  different levels  and procedures  for redress  for                 
  different types of  civil liability  suits ranging from  the                 
  least serious to most egregious.                                             
  Number 228                                                                   
  MR.  GEORGE  observed  that  there  are  already alternative                 
  systems  in  place   to  turn  to;  i.e.,   arbitration  and                 
  MR.  GEORGE  commented   that  we  may   want  to  look   at                 
  compensating people for  injuries regardless  of who was  at                 
  fault.  The question  of negligence then would fall,  in the                 
  case of a doctor, to the  medical board to determine whether                 
  or not some action should be taken.                                          
  Number 265                                                                   
  CHAIRMAN  HUDSON asked Mr.  George if  we could  improve the                 
  system to be more efficient, less costly and pro-victim.                     
  Number 285                                                                   
  MR. GEORGE suggested that the committee look at the no fault                 
  vs. fault system.   He explained that this system  would cut                 
  out the adversarial nature of the system.                                    
  MR. GEORGE added  that the arbitration and  mediation system                 
  are a  more efficient method than going  through the courts,                 
  but this system would not work in every case.                                
  Number 320                                                                   
  DAVE WALSH,  Director, Division of Insurance,  Department of                 
  Commerce   and   Economic    Development,   testified    via                 
  teleconference from the Dallas airport.   Mr. Walsh provided                 
  an overview  of the Division.  There are 55 employees in the                 
  Division  evenly  divided between  the  Division's  two main                 
  issues, making sure the insurance companies of the state are                 
  solvent, and secondly doing market surveillance.                             
  MR. WALSH explained that the first duty is to make sure that                 
  the companies have  a sufficient amount of capital  to cover                 
  claims.  Secondly, the Division provides market surveillance                 
  to determine on behalf of the insurance consumer's of Alaska                 
  that they  are  getting the  products they  are paying  for,                 
  getting them at  a fair price,  and that covered claims  are                 
  being handled in a timely fashion.                                           
  MR. WALSH has  not seen any  statistics that would show  the                 
  effect tort reform would have on  lowering premiums.  He did                 
  suggest a couple of general conclusions:  any time costs are                 
  lowered  should  have the  effect  of lowered  premiums, and                 
  similarly  the workers  compensation  reform passed  by  the                 
  legislature in  the mid-1980's  had the  effect of  lowering                 
  MR. WALSH agreed  with Mr. George's comment  regarding using                 
  nonadversarial  methods  as  a  way  of lowering  costs  and                 
  increasing efficiency.                                                       
  MR. WALSH noted that the  Division monitors changes intended                 
  to benefit  consumers and  would most  certainly monitor  to                 
  insure that any tort reform aimed  at lowering cost would be                 
  Number 408                                                                   
  CHAIRMAN HUDSON asked Mr. Walsh if he viewed the Division as                 
  being the watch dog on cost efficiency of the whole system.                  
  Number 415                                                                   
  MR. WALSH replied  that in terms  of insurance premiums  the                 
  Division of  Insurance is  the watchdog.    They follow  how                 
  rates are made and premiums develop.   The Division does not                 
  follow how premiums are passed on to the consumer.                           
  Number 425                                                                   
  REP. GREEN asked, if  premiums go up to cover costs, then is                 
  the reverse true  -- if  the costs come  down will  premiums                 
  come down?                                                                   
  Number 430                                                                   
  MR.  WALSH replied  that  in general  principal  80% of  the                 
  premiums go  to pay claims and 20% to  costs.  He added that                 
  to the extent that any of the  costs items go down the rates                 
  should go down.                                                              
  MR. WALSH noted that it is  difficult to answer Rep. Green's                 
  question with  any certainty as rate making is a complicated                 
  procedure and  public policy  changes take  a while  to take                 
  MR. WALSH further noted that it  is difficult to isolate the                 
  public policy changes from all the other changes that affect                 
  Number 465                                                                   
  CHAIRMAN HUDSON asked if there is any shortage or reluctance                 
  of  the  insurance  industry  to  participate  in  the  full                 
  spectrum of programs required by the current law in Alaska.                  
  Number 467                                                                   
  MR. WALSH said he has not seen any reluctancy.                               
  Number 478                                                                   
  CHAIRMAN HUDSON asked if the state had seen any kind of loss                 
  to its consumers  through failure of  a company to be  fully                 
  solvent or bonded.                                                           
  Number 482                                                                   
  MR. WALSH replied  that there has  been only one  insolvency                 
  since statehood.  This case involved a company called PacMar                 
  and had  less to do  with insolvency than the  fact that the                 
  owner took money out of the business and left the country.                   
  Number 492                                                                   
  CHAIRMAN  HUDSON  asked Mr.  Walsh  to  put in  writing  his                 
  thoughts on what the public policy should  be on noneconomic                 
  and punitive damages.                                                        
  Number 525                                                                   
  DICK CATTANACH testified via teleconference on behalf of the                 
  Alaskans  for  Liability  Reform.    Mr.  Cattanach's  group                 
  believes that  the civil  justice system  must be  reformed.                 
  Mr. Cattanach  believes that more  money should be  going to                 
  the injured parties.                                                         
  MR. CATTANACH  illustrated his point by quoting from a study                 
  done by a  national consulting  firm dealing primarily  with                 
  personal  matters.   The  study showed  the total  amount of                 
  premium dollars returned in the following four categories:                   
  Tort - 50% of premium dollars to beneficiary                                 
  Workers'  Compensation   -  70%   of   premium  dollars   to                 
  Health - 85% to beneficiary                                                  
  SSI - 99% to beneficiary                                                     
  MR.  CATTANACH noted that his  group believes there are many                 
  misstatements about the bill by the trial lawyers.                           
  MR. CATTANACH said that the statute of limitation and repose                 
  should  apply to  all  professions  -- architects,  lawyers,                 
  accountants, engineers, etc., unless it can be clearly shown                 
  that  it would be  in the public's  best interest  to have a                 
  different time period.   Alaskans  for Liability Reform  has                 
  proposed six years as a reasonable time limit.                               
  TAPE 93-44, SIDE B                                                           
  Number 001                                                                   
  MR. CATTANACH explained  that HB 292 provided  for reduction                 
  of economic damages  awarded to a plaintive  to replace lost                 
  wages equal to  the amount  of income  taxes normally  taken                 
  MR. CATTANACH pointed  out that HB 292 provides for periodic                 
  payments  rather than a lump sum to insure the party has the                 
  money during the remainder of their projected life.                          
  MR.  CATTANACH  stated   that  HB  292  proposes   that  the                 
  initiative regarding joint and severed liability approved in                 
  1988 by more than 70% of Alaskans be specifically set out in                 
  MR.  CATTANACH'S  group  proposes  that  the  interest  rate                 
  fluctuate at 3% above the federal discount rate.                             
  MR. CATTANACH  stated that  HB 292  would protect  hospitals                 
  from lawsuits  against  independent  contractors  using  the                 
  MR. CATTANACH pointed  out that  in HB 292  if either  party                 
  offers to settle  and the  offer is rejected  and the  final                 
  settlement is  less than  the original  offer the party  who                 
  refused the settlement  should be responsible for  the other                 
  party's costs and  attorney's fees incurred after  the offer                 
  was  made.    Mr. Cattanach  believes  this  would encourage                 
  settlement and reduce the number of cases going to court.                    
  Number 046                                                                   
  CHAIRMAN HUDSON asked Mr. Cattanach to explain the reasoning                 
  behind the provision for collateral benefits in HB 292.                      
  Number 051                                                                   
  MR. CATTANACH responded that this provision would allow that                 
  other   settlements  or  awards   received  be   taken  into                 
  consideration in subsequent lawsuits.                                        
  Number 068                                                                   
  CHAIRMAN HUDSON asked for the  reasoning behind the six year                 
  statute of limitation; why not four or ten?                                  
  Number 071                                                                   
  MR. CATTANACH responded that there were  a number of reasons                 
  for the six year limitation.  One being that as the years go                 
  by, a person's memory gets hazy and the case gets stale.                     
  Number 090                                                                   
  CHAIRMAN HUDSON brought  up the  concern first expressed  in                 
  the hearing by Glenda  Straube that the six year  limitation                 
  would preclude someone who was sexually assaulted as a child                 
  to  seek  redress in  the courts  because the  memory hadn't                 
  returned within six years.                                                   
  Number 108                                                                   
  MR.  CATTANACH  replied  that the  problem  is  addressed in                 
  Section 2 of the bill where the limitation does not apply if                 
  the injury was caused intentionally.                                         
  Number 123                                                                   
  MICHAEL   SCHNEIDER,   private   attorney,   testified   via                 
  teleconference from Anchorage.   Mr.  Schneider said he  was                 
  frustrated at what he  had been hearing all morning,  but he                 
  would try to keep his comments to the broader issues.                        
  MR. SCHNEIDER stated that  there seems to be a  broad public                 
  policy  issue over what  the system is  in place to  do.  If                 
  efficiency and expediency; i.e., getting the most money to a                 
  given group of people in a  timely and efficient manner; was                 
  the sole  criteria, we  wouldn't have a  democratic form  of                 
  justice, we would be under some other form of government.                    
  MR.  SCHNEIDER  commented  that  probably  another  form  of                 
  government could make our current  system more expedient and                 
  cost efficient.  However,  we have declined to follow  those                 
  paths, not because it's quick,  easy, or pretty, but because                 
  it delivers to  those of  us governed by  it very  important                 
  fundamental values.   Among those is life,  liberty, pursuit                 
  of  happiness and the  right to petition  our government for                 
  redress of grievances.  These things we value above money.                   
  MR. SCHNEIDER suggested  that the committee ask  itself each                 
  time they look at  the provisions of HB 292 if  it will make                 
  Alaska a better place  or not.  He reiterated  Ms. Straube's                 
  previous testimony that  we've visited this area  before and                 
  we do have some data to help determine some of the effect of                 
  this  bill.  Mr. Schneider pointed  out that Ontario, Canada                 
  had  a system  in place  in the  mid-1980's that was  a tort                 
  reformer's  dream, but  he suggested  it also  had  the same                 
  insurance industry problems  we have, hard to  get insurance                 
  and extremely high prices.   He reemphasized the point  that                 
  these changes  the bill  would  provide are  not related  to                 
  costs  and  availability.    This  was  illustrated  by  the                 
  negative reply Mr. George gave to the committee in answer to                 
  the question of whether insurance costs  would go down if HB
  292 passed.                                                                  
  MR.  SCHNEIDER  stated that  there  have been  less  than 10                 
  medical malpractice verdicts  in the  history of the  state.                 
  He added that the number 10 is  very conservative; it may be                 
  as low as six  -- three against hospitals and  three against                 
  individual  health  care   providers.     There  have   been                 
  settlements, but in the face of that kind of predictability,                 
  knowing that when you go to trial  you are going to win most                 
  of the time,  the insurance  industry has what  it needs  to                 
  MR.  SCHNEIDER  stated that  the  medical community  already                 
  enjoyed  a set of  tort rules that  do not cover  any of the                 
  other professions.   He added, as a citizen   of Alaska, not                 
  as a trial  attorney, that he was  offended that one of  the                 
  most prominent and wealthy professions in this country would                 
  want more than they currently enjoy.                                         
  MR.  SCHNEIDER said  that he  doesn't  feel the  proposal is                 
  fair, it's unreasonable  and the committee would have a hard                 
  time justifying their actions to their constituents.                         
  MR. SCHNEIDER encouraged  the committee  to look beyond  the                 
  anecdotes and see the broader picture.                                       
  MR. SCHNEIDER stated that much was made by the prior speaker                 
  that the trial  lawyers were attempting to  misrepresent the                 
  implications of  the proposed  six year  statute of  repose.                 
  Mr.  Schneider  said that  this  was  simply not  true.   He                 
  suggested that  the prior speaker's comments  illustrate the                 
  accuracy of our report's account of HB 292.                                  
  MR. SCHNEIDER again brought up  the issue of predictability.                 
  He  noted that  the changes  made in 1986  and 1988  to tort                 
  reform  had  not  lead to  any  kind  of predictability  the                 
  insurance industry touted.  The changes this bill would make                 
  will make the current system even less predictable than they                 
  are now.  Furthermore, the  system will remain unpredictable                 
  for a long, long time.                                                       
  MR.  SCHNEIDER asked  the committee to  note that  the trial                 
  lawyers agreed there were costs and availability problems in                 
  earlier tort reform movements.   But he explained, the trial                 
  lawyers asked the legislature to wait  18 months before they                 
  passed any kind of reform to allow the insurance industry to                 
  upright  itself.     The  request   was  not  granted;   the                 
  legislature  "gave away the farm,"  and within 18 months the                 
  insurance industry showed some signs of decreasing costs and                 
  increased  availability  not   attributable  to  the  reform                 
  measures but merely a business turnaround.                                   
  MR. SCHNEIDER stated  that contrary to the  testimony of Mr.                 
  George and Mr. Walsh, the insurance industry makes its money                 
  of  its reserves and the favorable  tax treatment that those                 
  reserves receive.   If  they lose money  on those  reserves,                 
  everybody  suffers, and if they  make money, the premiums go                 
  down.  Mr. Schneider indicated  that nothing the legislature                 
  did would change this situation.                                             
  MR. SCHNEIDER  concluded by  saying that  our civil  justice                 
  system,  while  not perfect,  accords  each  one of  us  the                 
  dignity  of  being an  individual in  making  our case.   He                 
  further  stated  that   the  arbitrator  should  not   be  a                 
  compensation board,  the legislature or  some fraternalistic                 
  organization that evaluates this, but by the citizens of the                 
  state, a randomly selected group of people that form a jury.                 
  He  added  that  HB  292  is  a  slap  in  the  face  to the                 
  constituency that elected the legislature.                                   
  Number 475                                                                   
  REP.  PORTER  commented  that   the  trial  attorney's  have                 
  expressed their concern that this legislation is taking away                 
  from the jury system  the ability to make a  good judgement.                 
  Rep. Porter then asked how  can the trial attorneys complain                 
  about collateral damages information going  to a jury to  be                 
  understood before they make an award?                                        
  Number 500                                                                   
  MR. SCHNEIDER  answered that there  are three  or four  good                 
  reasons for this  that are historically well  documented and                 
  well  developed  in the  law.    Mr.  Schneider  added  that                 
  concepts of  basic fairness also  answer that question.   It                 
  has  always been  the rule  in America  that a  jury not  be                 
  informed of a defendant's wealth and insurance.  The  reason                 
  for that is to not prejudice the jury.                                       
  NOTE:    MR.  SCHNEIDER submitted  a  letter  clarifying his                 
  testimony  regarding Section 14,  collateral benefits.   The                 
  letter is dated November 30, 1993, and is on file.)                          
  Number 520                                                                   
  CHAIRMAN HUDSON expressed concern over the value of awarding                 
  punitive damages and  open ended noneconomic damages.   Rep.                 
  Hudson believes the awards in these areas are retribution or                 
  out  of  anger.   Rep.  Hudson  stated that  that  should be                 
  applied in  the law,  and if you  find that a  defendant has                 
  done  something  punitive, then  they  ought to  pay  to the                 
  public till.   In the  interest of trying  to make  a finite                 
  amount of resources go to  the greatest extent possible  and                 
  try  to  get the  maximum amount  of  money to  those people                 
  legitimately injured,  Rep. Hudson asked Mr.  Schneider what                 
  he and the trial lawyers offer to meet this end.                             
  TAPE 93-45, SIDE A                                                           
  Number 001                                                                   
  MR. SCHNEIDER responded  that it's important to  address the                 
  issues  separately.   First,  compensatory  damages are  not                 
  there to  punish, they  are  there to  compensate for  one's                 
  loss, and the jury is there to put a value on the loss.                      
  MR. SCHNEIDER quoted the Insurance Services  Organization as                 
  saying that even a cap as  low as $250,000 would only effect                 
  one in  10,000 claims.   This harmonizes  with Mr.  George's                 
  MR. SCHNEIDER pointed out that no matter what cap you put on                 
  compensatory  damages,  you  are denying  the  victims their                 
  chance at  seeking compensation  equivalent to  the loss  as                 
  they perceive it and as the jury values it.                                  
  MR.  SCHNEIDER   noted  that   punitive  damages   are  much                 
  different.    The  Supreme  Court  often  reverses  punitive                 
  damages.  Also,  it is a rare case where  there are punitive                 
  damages awarded or settled on  before trial.  These damages,                 
  rarely awarded, are usually given in  a case where there has                 
  been outrageous conduct.  Mr. Schneider  went on to say that                 
  a $200,000 award  in punitive damages is a slap on the wrist                 
  to a large corporation, even a million would probably not be                 
  a  deterrent.   Punitive  damages should  be awarded  in the                 
  worst cases at a  level where they will get  the defendant's                 
  MR. SCHNEIDER further noted that punitive damages are almost                 
  exclusively excluded  from insurance policies  so the  money                 
  comes directly from the defendant.                                           
  MR SCHNEIDER  addressed arbitration and  alternative dispute                 
  resolution as an alternative to litigation.   He stated that                 
  the committee would  find agreement  in the legal  community                 
  that plaintiff's  are probably treated more  fairly, receive                 
  more money, and  the system  works more efficiently  through                 
  arbitration and alternative dispute resolution.  However, he                 
  believes  the system could  be co-opted  and the  people who                 
  would most likely co-opt the system are the most wealthy and                 
  best connected, not the  average victim.  He added  that the                 
  jury system is the ultimate equalizer.                                       
  Number 168                                                                   
  CHAIRMAN HUDSON  asked if alternative resolution wouldn't be                 
  useful to the  majority of the  cases that are less  severe;                 
  i.e., where a person may be out of work due to an injury for                 
  six months, but not permanently maimed.                                      
  Number 172                                                                   
  MR.  SCHNEIDER  replied  that having  the  option  to choose                 
  alternative  resolution or a jury trial would be a practical                 
  Number 178                                                                   
  MARK CHOATE, private attorney, testified against HB 292.  He                 
  expressed his feeling  that HB 292  is part of a  consistent                 
  effort to deny Alaskans their right to a jury trial.                         
  MR. CHOATE added that juries add the human element to awards                 
  that tort reformers can't.  He  stated that juries listen to                 
  real people talk about  how injuries affect them.   They use                 
  their  common sense and  base their  decisions on  what they                 
  hear and see.                                                                
  Number 220                                                                   
  CHAIRMAN  HUDSON asked Mr. Choate how  many cases he's asked                 
  to take and how many he actually takes.                                      
  Number 230                                                                   
  MR. CHOATE responded that he rejects  about 93% of the cases                 
  that he's asked  to take.   He stated  the legal  profession                 
  does a tremendous amount of screening so as not to encourage                 
  someone whose case may not be a winner at any level.                         
  MR. CHOATE explained  to the committee one reason  that many                 
  potential clients get turned away is because he can't afford                 
  to take them.   He stated that based on the uniform approach                 
  the medical community takes, which  is to fight every  case,                 
  he can't  afford  to take  a  case unless  it is  valued  at                 
  $100,000  or more.   He concluded  that there  are a  lot of                 
  people with legitimate  claims that  can't find an  attorney                 
  because the institutional defense is so strong.                              
  CHAIRMAN  HUDSON asked if  these types of  cases wouldn't be                 
  good for some type of alternative resolution.                                
  Number 390                                                                   
  REP. GREEN asked if the reason so many cases are settled out                 
  of  court is due  to expediency, and  at what  time does Mr.                 
  Choate make the decision to recommend a settlement?                          
  Number 398                                                                   
  MR.  CHOATE  responded  that,  given  the  small  volume  of                 
  business  in this state  in small  to mid-level  claims, you                 
  just won't  find a "claims mill" like you would in a heavily                 
  populated  state like  California.    Furthermore, he  feels                 
  attorneys are highly  professional in Alaska in  wanting the                 
  best for their clients.                                                      
  Number 414                                                                   
  CHAIRMAN HUDSON asked Mr. Choate to  go through the bill and                 
  provide  the  committee   some  of   his  thoughts  on   it.                 
  Especially in  regard to streamlining the system  to make it                 
  more cost efficient.                                                         
  Number 435                                                                   
  MR. CHOATE added  that when these  types of reforms go  into                 
  effect, we  are reducing  the amount  of costs to  insurance                 
  companies in the  reduction of risk  and payouts.  But  it's                 
  his  contention that we  end up putting  more public dollars                 
  into the process;  i.e., state  services to retrain  injured                 
  workers, etc.                                                                
  MR.  CHOATE   noted  that   lawyers  get   sued  much   more                 
  successfully than doctors.                                                   
  Number 467                                                                   
  CHRIS  CHRISTENSEN, General Council  to the Judicial Branch,                 
  testified via teleconference in regard to Civil Rule 82.  He                 
  stated that he has  been instructed by the Supreme  Court to                 
  voice its opposition to  this change.  This rule  allows the                 
  prevailing party in a civil suit to recover a portion of its                 
  attorney's fees from the losing party.                                       
  MR. CHRISTENSEN said the stated  justification for repeal of                 
  Rule 82 as laid out by the Alaskans for Liability Reform was                 
  to reduce litigation costs and court time and streamline the                 
  civil  process  for expediency  and  fairness.   The Supreme                 
  Court disagrees that this would be  the result of the repeal                 
  of Rule 82.                                                                  
  MR. CHRISTENSEN testified  that Rule 82 and  its predecessor                 
  have been around since 1884.  The rule has been continuously                 
  revised  over  the   years  and  the  Supreme  Court  did  a                 
  substantial review  of it, concluding  this last July.   The                 
  latest  revisions were intended  to make the  rule even more                 
  efficient and fair.                                                          
  MR. CHRISTENSEN  stated that  Rule 82  does make  the system                 
  more efficient as it  discourages frivolous lawsuits against                 
  a  defendant  if they  know that  they  might end  up paying                 
  $5,000 to $15,000 in  attorney's fees to the defendant.   It                 
  also  gives the  client a  personal financial  stake  in the                 
  lawsuit as  a client  is more  likely to  disclose the  weak                 
  parts of his case  so that the attorney can  more accurately                 
  evaluate the merits of the case.                                             
  MR. CHRISTENSEN added that in the interest of fairness, Rule                 
  82 provides partial compensation to the prevailing party.                    
  MR. CHRISTENSEN  pointed  out that  Rule  82 makes  it  more                 
  likely that  insurance companies  will settle  claims before                 
  the hiring of  lawyers or the filing of lawsuits.   It gives                 
  the companies  incentive to  evaluate the  claims early  and                 
  MR. CHRISTENSEN said it allows individuals with small claims                 
  to bring action.   It's  reality that  most attorneys  won't                 
  take contingent fee cases  where the amount of work  vs. the                 
  potential payback makes it  too great a risk.   Clients with                 
  small claims generally  have to pay  attorneys on an  hourly                 
  basis.  The reality is that  a victim will not file a  claim                 
  for $20,000  if he knows that he will  end up giving most of                 
  it to  his lawyer.   Rule 82  insures that if  the plaintive                 
  prevails he will get  at least a portion of  it's attorney's                 
  MR.  CHRISTENSEN stated  that Rule  82 discourages  marginal                 
  appeals by the losing party.                                                 
  MR. CHRISTENSEN said that at its most basic level Rule 82 is                 
  important because it is fair.                                                
  MR. CHRISTENSEN  stated that a fiscal note will be submitted                 
  from the  court system  because HB  292 doesn't  simplify or                 
  make the court  system more  efficient, it  just shifts  the                 
  costs around.   He added  that these changes  will make  the                 
  tort system more costly to administer.                                       
  MR.  CHRISTENSEN  cited two  reasons  why  it will  be  more                 
  1)    Presently  a  defendant  has  no right  to  pay  civil                 
  judgments periodically, the plaintiff does  have this option                 
  but rarely  requests it  as it is  not in its  best economic                 
  interests.  If  Sections 12  and 13 of the work draft  allow                 
  defendants to  make periodic  payments to  plaintiffs.   The                 
  courts will have to  have many hearings to make  a judgement                 
  on the structure of the periodic payments.                                   
  2) Section 14 regarding collateral benefits will add to  the                 
  court system's workload for  similar reasons as above.   The                 
  courts  will  have  to  hold   additional  hearings  on  the                 
  complicated issues involving collateral benefits.                            
  CHAIRMAN HUDSON asked Mr. Christensen to submit something in                 
  writing outlining his testimony.                                             
  Number 570                                                                   
  AL TAMAGNI  testified via  teleconference from  Anchorage in                 
  support of HB 292.  Mr. Tamagni read the following statement                 
  into the record:                                                             
  It is a pleasure  to appear before you today  and to support                 
  the many aspects of HB 292, which are intended to reduce the                 
  cost of litigation  and get the  largest amount of funds  to                 
  innocent victims  and to  rightfully protect  those innocent                 
  defendants  in a  fair  and  just  manner for  all  parties.                 
  Currently,  as  we  know,  the  civil  liability  system  is                 
  unbalanced and unfair,  both in  many instances to  innocent                 
  victims and innocent defendants.  One  of the many questions                 
  and  topics  that have  been raised  is  what have  the Tort                 
  Reform Acts of  1986 and the  Initiative in 1988 have  done.                 
  The most important thing that has been accomplished by these                 
  acts is reflective in the  report of tort reform legislation                 
  general liability by  Richard Z. Eckhauser and  Kip Viscusi,                 
  who are  from the Harvard Kennedy School  of Government, and                 
  Department of  Economics at  Duke University  in which  they                 
  state, "Insurance, like any other factory production, should                 
  have a ready supply sold at a  price to reflect its long run                 
  TAPE 93-45, SIDE B                                                           
  Number 001                                                                   
  The Liability  Reform Acts of  the mid-1980's did  more than                 
  constrain the spiraling costs of insurance.  They stabilized                 
  the  insurance  markets,  and  thereby  fostered  the  sound                 
  function  of the  economy,  while at  the  same time  saving                 
  American  consumers  approximately  2.5 billion  dollars  in                 
  future premium  increases.   We find  this to be  reflective                 
  also in regards to the state  of Alaska, particularly in the                 
  areas  of  the  modified joint  and  civil  liability, which                 
  affects approximately 53-55%  of the  premium dollars.   The                 
  limits  on liability,  which affect approximately  11-14% of                 
  their premium dollars, and limits on economic damages, which                 
  affect  approximately 12-14%  of  the  premium  dollars  and                 
  structured  periodic  payments, which  affects approximately                 
  10-12% of the premium dollars.                                               
  We think these  are positive accomplishments that  need some                 
  small refinement, and  that we  need to further  efficienize                 
  the operation and usage  of the system so that a larger part                 
  of the award gets to the  victim in a more prompt, fair  and                 
  fashionable  manner with  the least  amount of  cost to  the                 
  consumers  statewide  to provide  these  services.   We feel                 
  there are substantial  wrongs being  committed in the  civil                 
  justice system,  and that  the criminal  statutes should  be                 
  more  adequately  revised  to  reflect criminal  prosecution                 
  where the actual criminals are  punished for the crimes that                 
  they personally commit, and the cops  are not the victims of                 
  the system.                                                                  
  I would simply  like to highlight a couple of  the issues on                 
  damages resulting from the  commission of a crime,  in which                 
  the trial lawyers  apparently support the position  that the                 
  criminal  should be rewarded and the cop should be punished.                 
  We feel like  this is a total injustice.  It's not supported                 
  by 75% of Alaskans and should be supported as proposed.                      
  We find that the  proposal by the Trial Lawyers  on Periodic                 
  Payments  is so far  fetched as to  render one to  think and                 
  question the credibility of its thought.   With this type of                 
  legal representation, no wonder our  civil justice system is                 
  in the state of disarray which is apparently  being reviewed                 
  and restructured on  a federal basis  and on a state  basis.                 
  We find that  periodic payments are a very useful mechanism.                 
  They provide long  term tax  free income to  people who  are                 
  injured.  We find that victims, when they are presented with                 
  optional choices of settlement, and are properly informed of                 
  their consequences, are readily acceptable to their use.  We                 
  find   with  the   assignment   of  treasury   certificates,                 
  guarantees and guarantors of other life insurance companies,                 
  that the market is substantially far safer than putting your                 
  money into a  certificate of  deposit in a  local bank,  the                 
  many of them  who have gone  broke in the  last eight to  10                 
  years.   We find there  are substantial guarantees  from the                 
  Insurance  Guarantee  Associations  in the  various  states,                 
  including  that  of Alaska.    The IRS  agrees  and Congress                 
  agrees  these guarantees  are  beneficial safeguards  to our                 
  society as a whole.                                                          
  We  find that  plaintiff  attorneys, in  most cases,  do not                 
  personally  like structured  settlements, as  it  requires a                 
  little additional work  on their part  and it also  requires                 
  them to perform and give their  client informed consent.  We                 
  see this  as one  of the  major problems  in the  profession                 
  today that victims  are not given  offers of judgement  that                 
  reflect periodic payments.  They are not properly disclosed.                 
  They are not properly presented, and in most cases are never                 
  presented at all.   We feel like this is an  aspect that has                 
  been an abusive practice by the  trial lawyers and should be                 
  rectified to allow any person or any entity to provide it as                 
  an offer of judgement.  We feel to restrict the hands of the                 
  jury is improper and is not in the best interest of  society                 
  as a whole.                                                                  
  We feel that the offer of judgement for interest rates at 3%                 
  above  the  federal discount  rate  is  sufficient.   It  is                 
  sufficient  in  two  ways,  that  it adequately  and  fairly                 
  compensates the victim for the funds they would have had and                 
  invested at the  time they would  have received them and  is                 
  far in  excess of  what one  could earn  on certificates  of                 
  It  is  probably  more important  to  note  that  it is  our                 
  position that neither  the defense nor the  plaintiff should                 
  dictate the scheduling of the trial  and the progress of the                 
  case.    It is  the responsibility  of  the third  branch of                 
  government; i.e., the court system that when a case is filed                 
  to  immediately put that on a fast track basis and to secure                 
  justice in the quickest, fairest  and most economical manner                 
  for both sides; i.e., plaintiff and defense.  Therefore, the                 
  argument that  the defendant  capitalizes on  the investment                 
  earnings is not why we should be here today.  The problem is                 
  why isn't the  court system  prioritizing and fast  tracking                 
  these cases for a quick, cost efficient and fair resolution.                 
  As you all know,  we, the general public, have  virtually no                 
  input on  a majority basis  into either the  Alaska Judicial                 
  Council,  the  Alaska  Bar  Association,  nor  the  Judicial                 
  Conduct Commission.   So, therefore,  one should review  the                 
  operations  of  these   entities  and  ensure   more  public                 
  participation, perhaps by increasing and varying the size of                 
  the various commissions, and required public hearings on all                 
  rules, by-laws and operation changes.                                        
  We need to be concerned about the collateral source, and the                 
  purpose  of the collateral source is  that jurors can offset                 
  any awards or fees that have already been paid in regards to                 
  the settlement.   The  purpose of  this is  to allow  a more                 
  efficient  and  fair   operation  in   which  a  50%   legal                 
  contractor's fee would be eliminated and a jury could offset                 
  those costs before  issuing the final  judgement.  This,  of                 
  course, gets the most amount of  money to the victim with  a                 
  smaller percentage of the case to the attorney.  It is fair.                 
  Juries are fully  capable of it  and should be granted  that                 
  This bill affects virtually every  Alaskan, whether they buy                 
  homeowner's insurance,  automobile insurance,  or any  other                 
  type of property  and casualty  liability insurance.   Their                 
  rates are affected  by a number  of ways, including that  of                 
  Alaska  Rule   82,  which  has  a  surcharge  built  in  for                 
  homeowners insurance, automobile  insurance and  substantial                 
  property and casualty additions for liability insurance.                     
  Number 101                                                                   
  CHAIRMAN HUDSON asked  Mr. Tamagni to send  his testimony in                 
  Number 109                                                                   
  HARLAN KNUDSEN, President and Chief Executive Officer, State                 
  Hospital and Nursing Home Association, testified in  support                 
  of HB 292.                                                                   
  MR. KNUDSEN believes one of the  most important issues to be                 
  addressed through HB  292 is  the lack of  access to  health                 
  care in rural areas of Alaska due to liability problems.                     
  MR. KNUDSEN noted  that the London insurance  market dropped                 
  with  the  changes  implemented  in  the  1988  tort  reform                 
  MR. KNUDSEN suggested it is up to all to help bring down the                 
  cost of health care coverage.                                                
  Number 204                                                                   
  STEVE    SCHROEDER,    Civil    Engineer,   testified    via                 
  teleconference from Anchorage.  Mr. Schroeder stated that he                 
  supports HB 292 in general and the statute of limitation and                 
  the statute of repose in particular.                                         
  MR. SCHROEDER commented  that he has  difficulty remembering                 
  what he had for breakfast today let alone trying to remember                 
  why  decisions  were made  five, ten  or  more years  ago in                 
  response to a claim.  Finding  the other parties involved is                 
  equally as difficult.                                                        
  MR. SCHROEDER believes  that small  businesses are the  most                 
  adversely impacted  by  the current  lack  of a  statute  of                 
  Number 324                                                                   
  TOM  FINDLEY, private  attorney,  testified against  HB 292.                 
  Mr. Findley commented  that he has not  heard any complaints                 
  in Juneau about  how the jury  system works.   He has  heard                 
  complaints  about  problems  in  Anchorage.     Mr.  Findley                 
  believes there are not many  complaints in Southeast because                 
  the  perception  is that  the system  is  fair and  that the                 
  juries do a good job.                                                        
  MR. FINDLEY questioned  what this legislation hopes  to fix,                 
  since the  testimony seems  to indicate  that  HB 292  won't                 
  result  in lower premiums.  In fact, he pointed out, the top                 
  nationwide automobile insurance companies  would admit their                 
  rates are not set  by 500,000 people in this  state, they're                 
  going to be set  by five million people in Los  Angeles, the                 
  secondary market.                                                            
  MR.  FINDLEY agreed that  access to the  system is important                 
  and to that  end the  idea of having  an optional  alternate                 
  dispute resolution procedure or arbitration  panel is a good                 
  MR.  FINDLEY said that the last  time the legislature passed                 
  tort  reform legislation there was an attempt to create dram                 
  shop liability  protections.   Currently, if  a person  gets                 
  drunk with a  friend, rides as a passenger in a car with the                 
  friend, and they get  in an accident, the passenger  can sue                 
  the person who served him alcohol.                                           
  Number 343                                                                   
  HENRY SPRINGER,  representing  the  Association  of  General                 
  Contractors,  testified in support  of HB  292, specifically                 
  the statute of limitation  and statute of repose.   He noted                 
  that  the  contracting  business involves  a  whole  area of                 
  people,  engineers,  architects,  subcontractors,  plumbers,                 
  suppliers etc.  At the time the project is  finished and the                 
  final   payment   is  made,   the   bonding   and  insurance                 
  requirements cease.  If there is a problem after this point,                 
  there is no logical  and fair process to determine who is at                 
  fault.    The  current tort  system  usually  identifies the                 
  contractor as the  deep pocket and  they are the ones  sued.                 
  In conclusion, Mr.  Springer believes a six  year limitation                 
  is a fairer limit.                                                           
  REP. PORTER stated that he takes exception to the  testimony                 
  given that  the committee  has not  received testimony  that                 
  this bill would reduce costs, because it is not true.                        
  Number 422                                                                   
  CHAIRMAN HUDSON adjourned the meeting at 4:20 p.m.                           

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