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