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