Legislature(1993 - 1994)
03/24/1994 03:00 PM L&C
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
HOUSE LABOR AND COMMERCE STANDING COMMITTEE March 24, 1994 3:00 p.m. MEMBERS PRESENT Rep. Bill Hudson, Chairman Rep. Joe Green, Vice Chair Rep. Brian Porter Rep. Bill Williams Rep. Eldon Mulder Rep. Joe Sitton MEMBERS ABSENT Rep. Jerry Mackie COMMITTEE CALENDAR *HB 514: "An Act relating to risk based capital for insurers; and providing for an effective date." CSHB 514(L&C) PASSED OUT OF COMMITTEE HB 506: "An Act relating to student loans; to sanctions for defaulting on a student loan, including denial of a state occupational license or disbursement of state money; and providing for an effective date." CSHB 506(L&C) PASSED OUT OF COMMITTEE *HB 360: "An Act relating to civil liability for guest passengers on an aircraft or watercraft; and providing for an effective date." PASSED OUT OF COMMITTEE (* First public hearing.) WITNESS REGISTER DAVE WALSH, Director Division of Insurance Department of Commerce and Economic Development P.O. Box 110805 Juneau, Alaska 99811-0805 465-2515 Position Statement: Supported HB 514 REP. CON BUNDE Alaska State Legislature State Capitol Juneau, Alaska 99801-1182 465-4843 Position Statement: Prime Sponsor of HB 506 JOE McCORMICK, Executive Director Postsecondary Education Commission Department of Education 3030 Vintage Blvd. Juneau, Alaska 99811 465-6740 Position Statement: Supported HB 514 PAIGE ADAMS Student Representative University of Alaska, Sitka 6-B Lifesaver Dr. Sitka, Alaska 99835 966-2244 Position Statement: Supported HB 506 PATTI SWENSON, Staff Rep. Con Bunde Alaska State Legislature State Capitol Juneau, Alaska 99801-1182 465-4843 Position Statement: Presented HB 360 JOHN GEORGE, Lobbyist 9515 Morraine Way Juneau, Alaska 99801 789-0172 Position Statement: Supported HB 360 MIKE PANNONE Alaska Airmen Association 1515 E. 13th Anchorage, Alaska 99501 272-1251 Position Statement: Supported HB 360 MIKE SCHNEIDER 880 N Street, Suite 202 Anchorage, Alaska 99501 277-9306 Position Statement: Opposed HB 360 PREVIOUS ACTION BILL: HB 514 SHORT TITLE: RISK BASED CAPITAL FOR INSURERS SPONSOR(S): LABOR & COMMERCE JRN-DATE JRN-PG ACTION 02/28/94 2551 (H) READ THE FIRST TIME/REFERRAL(S) 02/28/94 2551 (H) L&C, STATE AFFAIRS, JUDICIARY 03/24/94 (H) L&C AT 03:00 PM CAPITOL 17 BILL: HB 506 SHORT TITLE: STUDENT LOAN PROGRAM SPONSOR(S): HEALTH, EDUCATION AND SOCIAL SERVICES BY REQUEST JRN-DATE JRN-PG ACTION 02/16/94 2416 (H) READ THE FIRST TIME/REFERRAL(S) 02/16/94 2416 (H) HES, L&C, FINANCE 03/03/94 (H) HES AT 03:00 PM CAPITOL 106 03/03/94 (H) MINUTE(HES) 03/07/94 (H) MINUTE(HES) 03/08/94 (H) MINUTE(HES) 03/08/94 (H) MINUTE(HES) 03/08/94 (H) MINUTE(HES) 03/11/94 2720 (H) HES RPT CS(HES) 3DP 4NR 2AM 03/11/94 2721 (H) DP: G.DAVIS, BUNDE, TOOHEY 03/11/94 2721 (H) NR: VEZEY, OLBERG, NICHOLIA, KOTT 03/11/94 2721 (H) AM: B.DAVIS, BRICE 03/11/94 2721 (H) -FISCAL NOTE (DCED) 3/11/94 03/11/94 2721 (H) -ZERO FISCAL NOTE (DOE) 3/11/94 03/22/94 (H) L&C AT 03:00 PM CAPITOL 17 03/22/94 (H) MINUTE(L&C) 03/24/94 (H) L&C AT 03:00 PM CAPITOL 17 BILL: HB 360 SHORT TITLE: AIRCRAFT/WATERCRAFT GUEST PASSENGER LAW SPONSOR(S): REPRESENTATIVE(S) BUNDE JRN-DATE JRN-PG ACTION 01/11/94 2032 (H) READ THE FIRST TIME/REFERRAL(S) 01/11/94 2032 (H) LABOR & COMMERCE, JUDICIARY 03/24/94 (H) L&C AT 03:00 PM CAPITOL 17 ACTION NARRATIVE TAPE 94-29, SIDE A Number 001 CHAIRMAN HUDSON convened the meeting at 3:15 p.m. and invited DAVE WALSH to present HB 514. HB 514 - RISK BASED CAPITAL FOR INSURERS Number 029 DAVE WALSH, Director, Division of Insurance, Department of Commerce and Economic Development, presented HB 514. Mr. Walsh stated that HB 514 establishes a new way to determine insurance companies' solvency in Alaska. Alaskan insurers fair well under this proposed risk based capital legislation and currently have capital and surplus levels higher than the amount indicated in the risk based capital formula. MR. WALSH went on to say this proposed risk based capital legislation is based on the NAIC (National Association of Insurance Carriers) risk based capital model law that has been adopted as a minimum standard for state accreditation under the NAIC Accreditation Program. The NAIC Accreditation Program establishes minimum standards of regulation through adoption of statutes and procedures. State accreditation is granted by the NAIC after an on-site review verifying that these minimum standards are met. The Alaska Division of Insurance received its accreditation in December 1992 and is committed to maintaining the standards of the NAIC Accreditation Program. MR. WALSH provided a position paper and sectional analysis on HB 514, which is available in the committee files. MR. WALSH stated that consumers, industry, Alaskan domestics and the department is supportive of HB 514. MR. WALSH proposed an amendment that included a number of changes, mostly technical. Mr. Walsh stated these amendments were adopted in the Senate version of the bill. Number 261 REP. PORTER asked if there was a percentage that is considered for investment as opposed to risk. Number 266 MR. WALSH responded yes. He stated that there were a number of different triggers for a review of an insurance company's investment. One of them is that no company can invest more than 5% of its assets in one type of investment without approval of the regulator. Number 297 REP. MULDER asked if HB 514 would increase the likelihood of insolvency. Number 302 MR. WALSH stated he believed it would decrease the likelihood of insolvency because it would trigger the times when regulators would step in. Number 325 REP. MULDER asked what it would mean for State Farm and other national outfits. Number 340 MR. WALSH answered that it would mean very little to them. If anything, it could have a very positive affect on the market. Number 350 REP. PORTER moved Amendment 1 offered by Mr. Walsh. No objections were heard; it was so ordered. Number 360 REP. MULDER moved CSHB 514(L&C) with individual recommendations and zero fiscal notes. No objections were heard; it was so ordered. HB 506 - STUDENT LOAN PROGRAM Number 398 REP. CON BUNDE, Co-Chair of the House HESS Committee, sponsor of HB 506, explained to the committee that there was a letter in their packet that addresses a loophole in the bill regarding people who are enrolled but not attending classes. The letter suggests an amendment that would change the bill to incorporate this technical amendment. Number 429 REP. PORTER asked what the difference was between being admitted to school or enrolled in school. REP. BUNDE responded that you could be admitted to a program but not necessarily be enrolled that semester. Number 447 MR. JOE McCORMICK, Executive Director, Postsecondary Education Commission, Department of Education, explained that an amendment would address the misinterpretation that some students have that they can't apply for the loan until after they are actually attending classes. Number 465 The committee discussed the language of the amendment in an effort to clarify the intent of the amendment, which was that an applicant does not have to be enrolled in a program to apply for a loan. Number 520 REP. BUNDE stated that the program has been working without this amendment and he felt the amendment may cause more problems than it fixes. He withdrew the amendment from consideration. Number 560 REP. PORTER stated that he would still support the concept of the student loan program comparing its listing of defaultees against the Department of Administration's list of vendors on contract with the state. Number 570 CHAIRMAN HUDSON explained that he spoke with Commissioner Usera and she had decided to take the amendment referenced above to the Finance Committee for their consideration. Number 580 REP. GREEN and REP. MULDER told the committee that the commissioner wanted to have the language in statute that would add language to the bid package sent to potential vendors that they need not apply if they are in default to the state on any loan. Number 590 CHAIRMAN HUDSON told the committee he would like to send the bill on without the amendment and abide by the wishes of the commissioner, unless someone on the committee had an amendment they wished to present now. Number 595 REP. PORTER moved an amendment to the bill to delete subsection (c), page 5, lines 22, 23 and 24. Number 600 REP. BUNDE told the committee that the student loan program would probably not survive if the program had to keep coming back to the legislature for appropriations from the general fund. Number 607 MR. McCORMICK explained that the reason they put subsection (c) in HB 506 was to assure priority over other loans. Number 630 REP. SITTON stated that from a practical standpoint this would be impossible to implement. Number 640 REP. PORTER believed there were other programs that could make a good case for top priority for garnishment. He added that the one program he was thinking of was the victim compensation board. TAPE 94-29, SIDE A Number 001 MR. McCORMICK stated he was very willing to compromise on this issue and reiterated how important he felt it was for this legislation to pass this session. Number 014 CHAIRMAN HUDSON stated that he was sympathetic to the idea of a person losing their permanent fund dividend it they were delinquent in their student loan. He added that he felt that giving priority of the student loan program over some of the other programs was not good public policy. The chair stated he supported the amendment. CHAIRMAN HUDSON asked if there were any objections to Rep. Porter's previously offered amendment. No objections were heard; it was so ordered. Number 049 MS. PAIGE ADAMS, Student Representative, University of Alaska, Sitka, testified via teleconference in support of HB 506. She stated she didn't have anything else to add. Number 070 REP. GREEN moved CSHB 506 with individual recommendations and accompanying fiscal notes. No objections were heard; it was so ordered. HB 360 - AIRCRAFT/WATERCRAFT GUEST PASSENGER LAW Number 085 REP. CON BUNDE, Prime Sponsor of HB 360, stated that HB 360 was offered in response to the current law that permits a person to get sued if they take friends out fishing or flying and there is an accident. This bill would allow that to happen without jeopardizing personal finances. The bill would provide for the guest passenger to acknowledge that there are inherent risks when traveling in recreational vehicles to access the outdoors. REP. BUNDE stressed that the bill does not excuse anyone from responsibility for gross negligence. REP. BUNDE offered an amendment that would include watercraft in the bill, stating it was an oversight in drafting. CHAIRMAN HUDSON asked for an explanation of the exception on line 14, page 1. REP. BUNDE answered that the exception covers the situation where a person is demonstrating the use of a vehicle for the purpose of selling it to the person. Number 156 REP. GREEN asked if this would provide for the release of liability that is not afforded to an operator of an automobile. Number 167 REP. BUNDE responded that it did. He noted that the risk is somewhat different than boating or flying. Number 175 REP. MULDER asked if any other states have guest passenger laws on automobiles. Number 180 MS. PATTI SWENSON, Staff, Rep. Bunde, responded that there were no guest passenger laws for automobiles. Number 194 REP. MULDER offered a technical amendment to page 2, line 1, to add "watercraft." No objections were heard; it was so ordered. Number 205 REP. PORTER moved Amendment 1 with friendly amendment. No objections were heard; it was so ordered. Number 214 MR. JOHN GEORGE, Lobbyist, representing the National Association of Independent Insurers and the Alaska Outdoor Council, testified in support of HB 360. He stated that it was important to understand that when buying aircraft insurance you buy two different things, one for the number of seats you have and two for what the airplane does when it crashes into something. Number 257 MR. MIKE PANNONE, immediate past president of the Alaska Airmen's Association, testified via teleconference in support of HB 360. Number 267 MR. MIKE SCHNEIDER testified via offnet in opposition to HB 360. Mr. Schneider noted that HB 360 is special interest legislation that would treat watercraft and aircraft owners differently than owners of other types of vehicles and may pose a constitutional problem. MR. SCHNEIDER suggested that owners of aircraft and watercraft may conclude that they don't need insurance if this bill passes, since they would be immune to any liability. If an owner fails to purchase insurance and the law is found infirm, the owner would find himself in a bad legal situation. MR. SCHNEIDER stated that litigation against uninsured persons in this kind of situation is rare and rarely results in significant judgments. MR. SCHNEIDER said that HB 360 would make it impossible for persons who wish to insure their liability to protect their family if something did happen. Number 337 CHAIRMAN HUDSON asked if other states have this kind of immunity. Number 342 MR. SCHNEIDER replied that he did not know. Number 349 REP. BUNDE listed 14 states that have guest passenger legislation. Number 360 REP. GREEN asked, even if an operator was not liable under HB 360, would not the operator be able to contractually deal with an insurance company? Number 362 REP. BUNDE replied yes. Number 376 CHAIRMAN HUDSON asked Mr. Schneider why he thought this bill would be declared unconstitutional. Number 378 MR. SCHNEIDER replied that since the bill would establish different classes of people: those that operate aircraft and have guest passengers as opposed to those who operate anything else. Mr. Schneider believed this would trigger an equal protection analysis. Under Alaskan constitutional law there is a sliding scale analysis where you have to show a reasonable relationship between the legislative enactment and the purpose that it seeks. Number 410 REP. BUNDE noted that the Department of Law helped craft HB 360 and did not raise any constitutional problems. Number 415 REP. PORTER moved HB 360 as amended with individual recommendations and zero fiscal notes. No objections were heard; it was so ordered. CHAIRMAN HUDSON adjourned the meeting at 4:25 p.m.