Legislature(2003 - 2004)
03/05/2004 08:04 AM House STA
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
ALASKA STATE LEGISLATURE
HOUSE STATE AFFAIRS STANDING COMMITTEE
March 5, 2004
8:04 a.m.
MEMBERS PRESENT
Representative Bruce Weyhrauch, Chair
Representative Jim Holm, Vice Chair
Representative John Coghill
Representative Bob Lynn
Representative Paul Seaton
Representative Max Gruenberg
MEMBERS ABSENT
Representative Ethan Berkowitz
COMMITTEE CALENDAR
HOUSE BILL NO. 516
"An Act relating to a charge for a bad check."
- MOVED CSHB 516(STA) OUT OF COMMITTEE
HOUSE BILL NO. 423
"An Act relating to accidents involving the vehicle of a person
under the influence of an alcoholic beverage; and providing for
an effective date."
- HEARD AND HELD
HOUSE BILL NO. 422
"An Act repealing the special subaccount established in the
constitutional budget reserve fund; relating to the powers of
the Department of Revenue for the investment of amounts in the
constitutional budget reserve fund; and providing for an
effective date."
- MOVED CSHB 422(STA) OUT OF COMMITTEE
HOUSE BILL NO. 412
"An Act relating to the continuation of pay and benefits to
employees of public corporations called to active duty; and
providing for an effective date."
- BILL HEARING CANCELED
HOUSE BILL NO. 520
"An Act relating to the expenses of investigation, hearing, or
public advocacy before the Regulatory Commission of Alaska, to
calculation of the regulatory cost charge for public utilities
and pipeline carriers to include the Department of Law's costs
of its public advocacy function, to inspection of certain books
and records by the attorney general when participating as a
party in a matter before the Regulatory Commission of Alaska;
and providing for an effective date."
- BILL HEARING POSTPONED TO 3/8/04
PREVIOUS COMMITTEE ACTION
BILL: HB 516
SHORT TITLE: BAD CHECK CHARGE
SPONSOR(S): FINANCE
02/19/04 (H) READ THE FIRST TIME - REFERRALS
02/19/04 (H) STA, JUD
03/04/04 (H) STA AT 8:00 AM CAPITOL 102
03/04/04 (H) <Bill Hearing Postponed to 3/5/04>
03/05/04 (H) STA AT 8:00 AM CAPITOL 102
BILL: HB 423
SHORT TITLE: TAXICAB DRIVER LIABILITY
SPONSOR(S): REPRESENTATIVE(S) ANDERSON
02/02/04 (H) READ THE FIRST TIME - REFERRALS
02/02/04 (H) JUD
02/02/04 (H) STA REFERRAL ADDED AFTER JUD
02/09/04 (H) REFERRAL ORDER CHANGED
02/09/04 (H) STA, JUD
02/10/04 (H) STA AT 8:00 AM CAPITOL 102
02/10/04 (H) <Bill Hearing Postponed>
03/02/04 (H) STA AT 8:00 AM CAPITOL 102
03/02/04 (H) Heard & Held
03/02/04 (H) MINUTE(STA)
03/05/04 (H) STA AT 8:00 AM CAPITOL 102
BILL: HB 422
SHORT TITLE: BUDGET RESERVE FUND INVESTMENT
SPONSOR(S): FINANCE
02/02/04 (H) READ THE FIRST TIME - REFERRALS
02/02/04 (H) STA, FIN
02/10/04 (H) STA AT 8:00 AM CAPITOL 102
02/10/04 (H) Scheduled But Not Heard
02/26/04 (H) STA AT 8:00 AM CAPITOL 102
02/26/04 (H) Heard & Held
02/26/04 (H) MINUTE(STA)
03/02/04 (H) STA AT 8:00 AM CAPITOL 102
03/02/04 (H) Heard & Held
03/02/04 (H) MINUTE(STA)
03/04/04 (H) STA AT 8:00 AM CAPITOL 102
03/04/04 (H) Heard & Held
03/04/04 (H) MINUTE(STA)
03/05/04 (H) STA AT 8:00 AM CAPITOL 102
WITNESS REGISTER
TOM WRIGHT, Staff
to Representative John Harris
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Presented HB 516 on behalf of
Representative Harris, sponsor.
SCOTT KING
Cornerstone Credit Services, L.L.C.
Anchorage, Alaska
POSITION STATEMENT: Testified in support of HB 516.
PEGGY GRADY, Accountant
Girl Scouts, Susitna Council
Address not provided
POSITION STATEMENT: Stated support for HB 516.
JENNIFER YORK, Accounting Manager
Kaladi Brothers Coffee Company
Anchorage, Alaska
POSITION STATEMENT: Stated support for HB 516.
JILL JAECKEL, Legal Assistant
Spenard Builders Supply
Anchorage, Alaska
POSITION STATEMENT: Stated support for HB 516.
JIM SHINE, Staff
to Representative Tom Anderson
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: On behalf of Representative Anderson,
sponsor of HB 423, summarized the changes made in Version D and
answered questions.
JOHN PATTEE
Anchorage, Alaska
POSITION STATEMENT: Testified in support of HB 423.
FRANK DAHL
Anchorage, Alaska
POSITION STATEMENT: Testified in support of HB 423.
BRENT FRASER, Transportation Inspector
Municipality of Anchorage
Anchorage, Alaska
POSITION STATEMENT: Testified and answered questions during the
hearing on HB 423.
MICHAEL LESSMEIER, Attorney at Law
Lessmeier & Winters
Lobbyist for State Farm Insurance Company
Juneau, Alaska
POSITION STATEMENT: Testified in support of HB 423 and
addressed committee concerns.
TOMAS H. BOUTIN, Deputy Commissioner
Office of the Commissioner
Department of Revenue
Juneau, Alaska
POSITION STATEMENT: Answered questions on behalf of the
department during the hearing on HB 422.
ACTION NARRATIVE
TAPE 04-29, SIDE A
Number 0001
CHAIR BRUCE WEYHRAUCH called the House State Affairs Standing
Committee meeting to order at 8:04 a.m. Representatives Holm,
Coghill, Lynn, and Weyhrauch were present at the call to order.
Representatives Seaton and Gruenberg arrived as the meeting was
in progress.
Number 0040
CHAIR WEYHRAUCH informed members that Mr. O'Tierney had traveled
to Juneau to testify on HB 520. He noted that the hearing for
HB 520 had been postponed to 3/8/04, but invited Mr. O'Tierney
to give a brief, informal introduction. [Mr. O'Tierney
testified by teleconference on 3/8/04.]
Number 0100
DANIEL PATRICK O'TIERNEY, Senior Assistant Attorney General,
Commercial/Fair Business Section, Civil Division (Anchorage),
Department Of Law, indicated that he came to his position last
May. He disclosed that "in a prior life" he was a member of the
then Alaska Public Utilities Commission, which was the
predecessor to the [Regulatory Commission of Alaska (RCA)]. He
stated that HB 520 concerns the public advocacy function of the
attorney general, "on behalf of Ray Pears, before the [RCA]."
In response to a question from Chair Weyhrauch, he confirmed
that he had had the chance to speak with [other legislators].
The committee took a brief at-ease at 8:07 a.m.
HB 516-BAD CHECK CHARGE
Number 0285
CHAIR WEYHRAUCH announced that the first order of business was
HOUSE BILL NO. 516, "An Act relating to a charge for a bad
check."
Number 0296
TOM WRIGHT, Staff to Representative John Harris, Alaska State
Legislature, presented HB 516 on behalf of Representative
Harris, sponsor. He stated that the bill simply would increase
the amount for a bad check to $30. He noted that there is a
companion bill that just passed the other body and "we're just
trying to help move the process along a little bit."
Number 0338
CHAIR WEYHRAUCH stated his understanding that "this was related
somehow to the requirement ... to document costs associated with
checks," and would eliminate the language regarding costs
incurred, replacing it with a flat fee.
MR. WRIGHT answered that's correct. He explained that this
would allow businesses to recoup costs related to a bad check,
without going through a lot of bookwork.
CHAIR WEYHRAUCH related having unintentionally written checks
when there wasn't enough money in his account and that he
received fees for NSF [nonsufficient funds] and subsequently put
money in his account and paid "the check." He said, "So, let's
see, I get hit by the bank, and then I get hit by the merchant -
sometimes - although ... sometimes if they know you they say,
'Just pay it.'" He observed, "You still get an NSF, it doesn't
deal with that. And merchants still then sometimes have the
discretion to charge you a $30 fee anyway; but this just gives
them the legal authority to do that without question?"
MR. WRIGHT answered that that's his understanding. He said he
should defer further comment to Scott King, but offered his
understanding that there are 22 other states that have adopted a
$30 fee.
Number 0451
SCOTT KING, Cornerstone Credit Services, L.L.C., testified in
support of HB 516. He said that historically, in Alaska, "we"
have assumed a $25 fee on NSF checks or checks that returned.
The interpretation of the law has been, up to this point, that
if a business can justify [charging] the $25, as an operating or
business practice, then that has been allowed. He indicated
that that justification is easily done. He revealed that a
recent court ruling in Fairbanks has "said that it's actual
cost," which would require a merchant to keep a ledger of each
cost involved in [getting the money for] the check, and [that
merchant] would not be allowed to collect that cost until it was
incurred. Mr. King reviewed that the bill would make two simple
changes to statute: First, it would remove the language
regarding the actual costs incurred. Second, it would change
the amount from $25 to $30.
MR. KING revealed that Cornerstone Credit Services, L.L.C.
represents approximately 2,000 merchants throughout Alaska.
Many of the businesses rely on taking checks in order to conduct
business. He offered to answer questions from the committee.
Number 0562
CHAIR WEYHRAUCH declared a conflict. He explained that he has a
problem with Cornerstone Credit Services, L.L.C., because that
office has been repeatedly calling him regarding a bill that it
says is unpaid, but which Chair Weyhrauch said has been paid for
a long time. He added, "I've been quite irate with
Cornerstone." He provided details.
REPRESENTATIVE GRUENBERG said, "I'll object, so you have to
vote. So moved."
CHAIR WEYHRAUCH said he was going to ask to be excused from
voting, but Representative Gruenberg had objected. He said,
"That's not going to get in the way of dealing with this bill; I
just wanted you to know that."
MR. KING offered to discuss the issue in private with Chair
Weyhrauch.
Number 0660
REPRESENTATIVE HOLM asked if the changes made to the bill would
theoretically take away the legal problem with "having to
support that you deserve the money."
MR. KING answered yes. In response to a question from Chair
Weyhrauch, he said the aforementioned case in Fairbanks was
resolved. He said, "We'd end up having to settle it through our
E&O [errors and omissions] insurance carrier. I think it's in
the process of being settled."
Number 0697
REPRESENTATIVE GRUENBERG said he supports HB 516, because it
would stop "all kinds of ancillary litigation." Notwithstanding
that, he mentioned a problem and the title of the bill and
continued as follows:
Lawyers, because of the unusual canons of ethics, if a
client doesn't pay a bill, they are not allowed to, in
any manner, have that fact, through an agency like
Cornerstone ..., reflected on the person's credit
rating. And this, as you know, Mr. Chairman, is a
very effective way of getting a legitimate bill paid.
And what it does is it requires lawyers to sue their
clients, or arbitrate, rather than just going very
informally, low key, to get the bill paid. And I went
to the bar association to try to get the ethical rule
changed. And a number of states have gone and changed
their ethical rule - some have not. And the ethics
committee wouldn't do it, as I recall. I have a file
and I'm going to talk over the interim with the
industry. But I would be inclined to try to see if we
can change that, because ... it makes it very
difficult for lawyers to collect bills that are
legitimately (indisc. - voice faded out).
Number 0839
PEGGY GRADY, Accountant, Girl Scouts, Susitna Council
("Council"), stated support for HB 516. She told the committee
that current arrangements with the Council's bank allow NSF
[checks] to go directly to the collection agency. When the
check writer pays the collection agency, the Council is able to
recover 100 percent of the cost of each check. Prior to that
agreement, she noted, NSF checks were either written off, or
attempts to collect the debts were made by staff members. She
said she thinks it's fair to assume that if the collection
agencies with trained professionals are not able to charge a
flat fee for their services on behalf of the Council, the cost
to collect the debts would increase for the Council, [which is]
a not-for-profit agency, or worse, the burden of collecting
these debts would fall back on "our agency."
Number 0920
JENNIFER YORK, Accounting Manager, Kaladi Brothers Coffee
Company, stated support for HB 516. She said the bill would
help streamline the collection process. She noted that, as with
the previous testimony [from Ms. Grady], the company's [NSF]
checks automatically go to the bank and are forwarded from
there. She said the company is able to recoup 100 percent of
its NSF checks. She continued as follows:
And it also acts as a deterrent for those who
knowingly write [bad] checks. If they know that the
fee can be arbitrarily waived or $5 here, $10 there -
they play the system. And it's just a straightforward
fact: it's simple, it's straightforward, it cuts down
on the time. That's one of the reasons why we
outsource our collection, is we spend so much time
trying to document how many phone calls we did, how
many minutes worked doing it, going through the
telephone book and going through the telephone bills
and itemizing how many minutes we spend calling this
person or that person. And by the time that we wrote
all of our times down, more than often we had spent
more than $25 in trying to collect ... a $5 check.
And for those people who accidentally, erroneously
[bounce a check] ... a lot of times I even override
the decision and [say], "Okay, well, I'll go ahead and
waive the 30 dollars - just come in and pay the
check." So, we still have that option of waiving the
fee. It's just [that] I use [the NSF fee] as a
deterrent to stop the people from writing bad checks.
... I myself, ten years ago, wrote a bad check for
$1.20 and it ended up costing me $45. I now make sure
that I balance my checkbook and whatnot. It's a
learning experience.
Number 1032
REPRESENTATIVE HOLM noted that Ohio has a $30 fee or 10 percent
of the amount of the check, whichever is greater.
MS. YORK responded that the same amount of work is involved
collecting the amount of a $1 check or a $5,000 check, "if a
person does not want to pay the bill."
REPRESENTATIVE HOLM observed that a check of a larger amount
indicates that a larger purchase was made; therefore, the
merchant has lost the ability to resell a larger amount of
inventory. In many cases, he added, that's a huge expense.
MS. YORK said, "The $25 isn't really to cover the merchandise,
or whatever, it's to cover the time and effort it [takes] to
collect on these checks that people don't want to pay." She
noted that while one person who has written a bad check may pay
immediately, another may persistently postpone payment. She
indicated the law of averages and said that the $25 flat fee is
to cover the cost for, basically, everyone. She added,
"Everyone knows what the fee is; you don't have to worry about
anything else, and they know what it is."
REPRESENTATIVE HOLM suggested that a person who knows that a
$5,000 bad check will cost him/her $500 will probably not do
that too many times.
Number 1200
JILL JAECKEL, Legal Assistant, Spenard Builders Supply, stated
that "we" handle the collections for all the branch locations
throughout the state. She stated support for HB 516. She
stated her belief that a $5 increase in the fee is not in any
way outrageous and barely covers the cost that businesses incur
from habitual [bad] check writing. She said that the bank
charges a fee when the checks come back and the $30 doesn't
begin to cover the loss of profit that occurs in those
instances, whether it be a large or small check. She suggested
that clearing up the language would be beneficial for everyone.
CHAIR WEYHRAUCH said he endorses what Ms. Jaeckel is saying
regarding the problem of dealing with these checks.
Number 1306
REPRESENTATIVE HOLM asked Ms. Jaeckel the aforementioned
question regarding [the $30 fee or 10 percent of the amount of
the check].
MS. JAECKEL answered as follows:
As far as the fees go, when we have large checks, we
tend to file suit with the civil penalties that are
allowed through the Alaska Statute, and that is three
times the amount of the check or $1,000, whichever is
greater. And when you sue an individual with several
civil penalties, you waive your NSF fee altogether.
So, ... as far as a fee that would be posted for those
people [who] accidentally write a [bad] check, I don't
think that there would be very many vendors that would
actually go out of their way to charge 10 percent of
the check over the $30 .... It would cover more of
the cost, but it would alienate a huge group of
customers that accidentally write a bad check. Those
would be the ones that you would be able to collect it
from, I think.
Number 1385
CHAIR WEYHRAUCH said he wants to know that it's not the
intention of the bill that a merchant who receives a bad check
would be bound to charge a fee.
Number 1402
MR. WRIGHT stated his understanding [that that's not the
intention].
CHAIR WEYHRAUCH directed the committee's attention to the
language on page 2, lines 10-11, which read as follows:
(2) the defendant fails to tender, before
the action begins, an amount equal to [AT LEAST] the
amount of the check plus $30 [COST INCURRED BY THE
PLAINTIFF UP TO A MAXIMUM OF $25].
CHAIR WEYHRAUCH suggested that it could be interpreted that that
fee has to be charged. He asked if that is the intent of the
bill.
Number 1455
MR. KING explained that the current language in the bill
explains what can be charged, but is not required. He
clarified, "The statute taken as a whole is something that can
be enforced but is not required to be enforced." He related
that he knows of many cases where merchants waive NSF fees for
those who just write one bad check.
MR. KING, in response to examples posed by Chair Weyhrauch,
reiterated that the statute does not require [the NSF fee] to be
charged; it is an option. He added, "If we go back to a
language that would talk about incurred cost or talk to 'up to'
a maximum, then we would be back in the same boat, and we'd be
arguing again with attorneys and judges about what does it mean
by 'up to.' And that's why we removed that part of the language
to remove any arguments that we would face in the future."
CHAIR WEYHRAUCH reiterated that he just doesn't want well-
meaning people who want to get along to say that the law
requires that they [have to charge the NSF fee]. He added that
he may just want to clarify that when the bill ends up on the
House floor.
Number 1572
REPRESENTATIVE GRUENBERG stated that he could see that that's
not the intent of the statute. Notwithstanding that, he said he
could see that that's how the statute could be misinterpreted.
He suggested a sentence could be added for purposes of
clarification.
CHAIR WEYHRAUCH said he may offer that when the bill is heard in
the House Judiciary Standing Committee.
REPRESENTATIVE GRUENBERG asked Mr. Wright if he has a list of
states that charge less than $30.
Number 1639
MR. WRIGHT answered that there are a number of states that
charge less than $30, which is shown on a list in the committee
packet. In regard to the aforementioned discussion regarding
how the statute may be interpreted, he pointed out that the
language uses the word "may", not "shall". Notwithstanding
that, he said he thinks the sponsor would not have a problem
with adding a sentence to clarify that.
Number 1660
REPRESENTATIVE GRUENBERG stated his support of the bill as
written, but said he sees it doing two things: First, it would
eliminate the requirement for a proof of cost, which he said
would be "administratively tough to do." Second, it would
increase [the NSF fee] from $25 to $30. He mentioned the cost
of living and said he thinks it's been awhile since the statute
was enacted.
MR. WRIGHT answered that is his understanding.
Number 1684
CHAIR WEYHRAUCH noted that Representative Holm owns a business
that deals with lots of checks. He asked Representative Holm if
he would consider the $30 a fee or a surcharge.
Number 1700
REPRESENTATIVE HOLM said it is a fee. On that point, he
referred to previous consideration of "10 percent or whichever
is greater." He indicated that might be an additional deterrent
and said it piqued his interest that there may be something that
"might make it have a little more teeth to it." He related that
sometimes people will write a bad check and then bring back the
merchandise, which is in worse condition than when it left the
store.
Number 1775
CHAIR WEYHRAUCH suggested a possible [Amendment 1] to page 1,
line 11, which would change the language to read: "plus a $30
fee, but the defendant in its discretion may waive the
collection of that fee."
REPRESENTATIVE GRUENBERG said he hopes that amendment would be
offered in this committee [rather than waiting to offer it in
the House Judiciary Standing Committee].
Number 1794
MR. KING responded that he believes that amendment "further
states the already stated intent of the statute." In response
to a previous insinuation that the statute is not challenged, he
noted that it is actually challenged all the time; a lot of law
suits are regularly filed and the court system "battles
regarding this statute." He added, "That's why this Fairbanks
statute came out; there's a lot of very creative attorneys out
there who are very smart and have a great way of interpreting or
- in my opinion - misinterpreting what the intents are of these
different statutes." He opined that simplification of the
statute is imperative.
CHAIR WEYHRAUCH explained he thinks the intent of the committee
is to "take this and just make it sure that - boom: you write a
bad check; you're paying a $30 fee; we're waiving the necessity
of requiring that you prove what costs are in collection of that
fee; and, by golly, if you want to waive it, that's in your
discretion. We're giving that discretion to the defendant ...;
this is not up to the plaintiff to decide whether they want to
waive the justifications of cost or not."
Number 1845
MR. KING responded that he doesn't want to end up in a situation
where a debate ensues over why one defendant was discretionarily
excused [from paying the fee], while another was not, and
whether or not a merchant is being fair in his/her business
practice.
CHAIR WEYHRAUCH offered to broaden the language.
MR. KING stated, "I think as soon as we allow the word
discretion, we open up for discrimination."
Number 1860
CHAIR WEYHRAUCH recrafted [Amendment 1] to read as follows:
Page 1, line 11
Between "plus" and "$30"
Insert "a"
After "$30"
Insert the following:
"fee, but the plaintiff may waive the collection of
any fee."
CHAIR WEYHRAUCH reiterated that he doesn't want anyone to say
he/she has to charge [the fee].
REPRESENTATIVE HOLM suggested [Mr. King] made a good point that
"you then would lay yourself open for discrimination, because
you may or may not."
Number 1942
REPRESENTATIVE GRUENBERG, on that point, indicated that a person
can always find fault with a merchant, and he said, "You can't
guard against that."
MR. KING added the following:
We have gone to great lengths to determine what
language changes ... we would make or how we would
perceive this through our experience in the court
systems. And the words that are in the statute
currently do read, "the plaintiff may recover". That
specific statement right there ensures that there is
no requirement to recover those costs and, therefore,
no language change would be necessary.
CHAIR WEYHRAUCH noted that it doesn't say that the plaintiff may
"waive it too."
MR. KING noted that by simply saying that "it may not recover,
it may not recover." He urged that the committee not change the
language.
Number 1982
REPRESENTATIVE SEATON indicated that he agreed with Chair
Weyhrauch. He said he would like to see clarification that the
merchant has the ability to waive the fee, which would be better
than trying to interpret "where the 'may' is in this." He
offered examples.
Number 2055
MR. WRIGHT directed the committee's attention to [paragraph
(1)], beginning on page 1, line 8, which read as follows:
(1) the plaintiff makes a written demand for
payment of the check at least 15 days before beginning
the action; and
MR. WRIGHT said that if a plaintiff decides not to send that
letter, then in actuality the plaintiff is saying that he/she is
waiving the fee.
REPRESENTATIVE SEATON said he interprets it to mean that "you're
waiving recovery of the money - of the amount of the check, as
well." He indicated that his problem is that the use of the
word "may" is "covering both sections and not clearly allowing
the merchants to waive the fee."
Number 2087
REPRESENTATIVE GRUENBERG brought attention to [page 1, line 4]
and the language, "a check that is dishonored". He noted that a
person could conceivably have a check that's dishonored through
a fault of the bank, rather than a fault of the customer.
MR. KING confirmed that that happens, but the bank absorbs the
fee in many instances because it wants the consumer [to continue
banking there].
[Discussion of Amendment 1 was momentarily set aside.]
REPRESENTATIVE GRUENBERG turned attention to page 1, lines 9-10,
where it reads "beginning the action" and "action begins". He
said "beginning" an action could be subject to a different
interpretation.
Number 2150
REPRESENTATIVE GRUENBERG offered [Conceptual Amendment 2] as
follows:
Page 1, line 9
Delete "beginning"
Insert "commencing"
Page 1, line 10
Delete "begins"
Insert "commences"
REPRESENTATIVE GRUENBERG clarified that this language
specifically speaks to the filing of the lawsuit. In response
to a request for further clarification, he said he would leave
it to the drafters whether to say on line 10 that "the action
commences" or "the action is commenced".
Number 2210
CHAIR WEYHRAUCH announced that there being no objection,
[Conceptual Amendment 2] was adopted.
Number 2234
CHAIR WEYHRAUCH moved to adopt Amendment 1 [text provided
previously]. He asked if there was any objection. He told Mr.
King, "By the time this gets to [the House Judiciary Standing
Committee], if you have an issue, pick that up there with them -
they can 'lawyer it'."
[The committee treated Amendment 1 as adopted.]
Number 2252
REPRESENTATIVE LYNN returned to the previous comment that
sometimes banks make the error and some banks absorb [the fee in
that case]. He said, "This is a case where neither the check
payor or the merchant is at fault, but it's a burden on both."
He asked if there is anything that can be done to mandate that
the bank would absorb this charge.
CHAIR WEYHRAUCH responded that he is not certain whether that
would fall under the banking statutes, or where [it would be
addressed]. He suggested that it may be beyond the scope of [HB
516] to get into that issue.
REPRESENTATIVE GRUENBERG indicated that he would not oppose an
amendment addressing the issue [of ensuring that the bank pays
the fee when it is at fault]. He commented that the bill has "a
ways to go."
CHAIR WEYHRAUCH asked that the committee "not deal with that in
this bill."
REPRESENTATIVE GRUENBERG indicated that he would pursue the
issue [in the House Judiciary Standing Committee].
Number 2313
REPRESENTATIVE HOLM moved to report HB 516, as amended, out of
committee with individual recommendations and the accompanying
zero fiscal note. There being no objection, CSHB 516(STA) was
reported out of the House State Affairs Standing Committee.
HB 423-TAXICAB DRIVER LIABILITY
Number 2340
CHAIR WEYHRAUCH announced that the next order of business was
HOUSE BILL NO. 423, "An Act relating to accidents involving the
vehicle of a person under the influence of an alcoholic
beverage; and providing for an effective date."
Number 2356
JIM SHINE, Staff to Representative Tom Anderson, Alaska State
Legislature, on behalf of Representative Anderson, sponsor of HB
423, offered a summary of the introduction to the bill he read
to the committee at the previous hearing on March 2, 2004. He
stated that HB 423 is a Good Samaritan bill for taxicab
operators who transport an intoxicated person by driving that
person's vehicle to his/her home or other directed location.
The proposed legislation would be a deterrent to those who would
otherwise drive impaired if unable to find an alternative method
of transportation. The bill would grant taxicab companies legal
immunity in the event that an accident occurs, except in the
case of recklessness, gross negligence or intentional
misconduct.
TAPE 04-29, SIDE B
Number 2348
REPRESENTATIVE HOLM moved to adopt the committee substitute (CS)
for HB 423, Version 23-LS1600\D, Luckhaupt, 3/3/04, as a work
draft. There being no objection, Version D was before the
committee.
Number 2315
MR. SHINE highlighted the changes made to HB 423 [in Version D],
as noted in a handout to the committee [available in the
committee packet]. The first change was on page 1, line 11,
where the phrase, "in the course and scope of employment" was
inserted after the phrase, "a person employed". He explained
that this language was added to clarify that the driver must be
currently working for the taxicab company at the time of the
accident. The second change occurred on page 2, [lines 1-2],
where the phrase, "inhalant, or controlled substance" was
inserted after "alcoholic beverage,". Mr. Shine note that this
change conforms to the definition given in AS 28.35.030. The
third change made on page 2, [lines 3-4] was to add the phrase,
"or designated residential location" after the phrase "owner's
residence". He said this clarification was made so that people
would not abuse the service by having taxicab drivers take them
to another bar.
Number 2270
REPRESENTATIVE HOLM asked why the word "dwelling" was not used
instead.
MR. SHINE explained that the words chosen were discussed in a
meeting with Representative Gruenberg and staff.
Notwithstanding that, he indicated there would be no objection
to [using the word "dwelling"].
REPRESENTATIVE HOLM indicated that the word dwelling had been
used during discussion of another bill dealing with carbon
monoxide.
Number 2245
REPRESENTATIVE GRUENBERG remarked that usually the word
"residence" would be used, because it is more of a location,
while "dwelling" refers to the building itself. He noted that
"designated residential location" would include an adjacent
street and is a "reasonable drafting choice."
Number 2200
MR. SHINE turned to [Amendment 1], recommended by Legislative
Legal and Research Services: On page 2, line 4, after the words
"vehicle owner" insert the words "or operator". He explained
that the intent of that is so the person [making the request]
doesn't have to be the owner of the vehicle.
Number 2183
REPRESENTATIVE GRUENBERG moved to adopt Amendment 1.
REPRESENTATIVE HOLM suggested that the word "or" is not
necessary.
REPRESENTATIVE GRUENBERG said he would leave the word "or" in,
because conceptually, a person would not say "motor vehicle
operator". He asked that Amendment 1 be a conceptual amendment.
CHAIR WEYHRAUCH noted that the phrase "motor vehicle owner or
operator" is used on page 2, lines 6-7.
Number 2110
CHAIR WEYHRAUCH asked if there were any further objections to
Conceptual Amendment 1.
Number 2099
REPRESENTATIVE SEATON said he is not opposing the idea, but he
thinks that there may be ramifications having to do with
insurance. He indicated there could be some question regarding
whether a person driving someone else's vehicle is covered under
insurance.
Number 2089
REPRESENTATIVE HOLM asked if Representative Seaton was referring
to "uninsured motorists." He indicated that with his own State
Farm insurance coverage, he is insured in any vehicle. For
example, if he rents a car in California, he doesn't have to pay
the extra insurance coverage, because he is insured under his
policy. He said he doesn't know what other folks do with other
policies.
REPRESENTATIVE GRUENBERG said, "I think he's talking about the
opposite."
Number 2058
REPRESENTATIVE SEATON stated that his concern is in regard to
remembering that the intent of "this" is just to protect
somebody's property. He said he worries about "the liability
incurring."
Number 2018
CHAIR WEYHRAUCH noted that he has an amendment that he "was
going to offer," having to do with offering some kind of
immunity so that "somehow, if somebody's harmed, ... there's
some way you get coverage of this."
Number 2000
REPRESENTATIVE SEATON said he would remove his objection. He
explained that adding the word ["or"] "raises a larger point
than just adding the word operator in there." He said he just
wanted to make that point.
[Amendment 1 was treated as adopted.]
Number 1951
REPRESENTATIVE GRUENBERG stated that this is an interesting
situation because multiple parties are involved: the person who
is drunk, the cab company, the cab driver, the owner of the
vehicle, and the injured person. The situation can be examined
from various points of view. He noted that two different
vehicles would be involved. Representative Gruenberg said, "You
have to look at Frank Dahl's letter to really understand it."
He continued as follows:
We have a situation where the drunk is being separated
from the vehicle, and the rescuer comes in a cab as a
cab driver, and there's a passenger in the cab ...,
and it's another cab driver who drives the vehicle
home. We're not talking about the situation where the
drunk is in the back of the cab. That person is
clearly covered, and it's not within this bill. We're
talking about the second trip. And the reason we're
talking about the second trip, as I understand it, is
... cabbie number two - her insurance doesn't cover
her unless she's driving the cab.
That's the purpose of the bill. It's ... a
potentially uninsured situation, where the second
cabbie is driving the drunk's vehicle only - and this
is the Seaton situation. The vehicle may not belong
to the drunk; it may belong to the drunk's parents, or
cousin, or buddy. However, back to the hierarchy
here, we've got the innocent pedestrian here who's
wiped out by the ... car belonging to the wife or the
cousin, driven by another cabbie who's not covered by
insurance. And that is where we are in this factual
scenario. Am I not right?
Number 1879
MR. SHINE answered that's correct.
Number 1870
REPRESENTATIVE GRUENBERG stated that this is a situation where
the whole program - which is a good one - can fail because of
"the nail in the horseshoe." If cabbie number two isn't
covered, he said, the cab companies won't participate in the
program. If they don't participate by giving the bars a
reasonable break on the price, he continued, the bars won't
participate and the drunk gets behind the wheel. In response to
a remark by Representative Seaton, he added that another party
involved would be the bar owner.
Number 1836
REPRESENTATIVE SEATON asked if it has been fully established
that the cab insurance does not cover the cab driver.
Number 1831
MR. SHINE noted that there are 162 taxicabs operating in "the
Anchorage bowl." He explained that they are independent
operators. The cab companies are dispatchers that "contract
out" to the independent cab drivers who own their own vehicles
and take out their own liability insurance. He said the
insurance only covers the drivers under "that one vehicle." He
mentioned he has copies available of the municipal code.
Number 1799
REPRESENTATIVE HOLM asked what the situation is in other parts
of the state.
Number 1783
REPRESENTATIVE SEATON noted that Representative Holm, for
example, had previously stated that his insurance policy covers
him in whatever vehicle he drives. He indicated that this [kind
of coverage] may be a cheap way to get around "this uninsured
and this policy," so that the person who is participating just
has to have the rider on his/her insurance. He said, "Maybe
it's going to have to be another two dollars or something on
there to compensate for that insurance." He clarified that he
would be much more comfortable with a solution that builds in
protections for the potential victim."
Number 1734
MR. SHINE commented that Mr. Lessmeier represents the insurance
industry and had indicated that he would be able to testify
regarding some of the liability issues. He also noted that both
Mr. Dahl and Mr. Pattee are available to answer questions.
Number 1700
JOHN PATTEE told the committee that as a board member of
Anchorage CHARR [Cabaret Hotel Restaurant & Retailers
Association], the Downtown Community Council, Anchorage, and the
Anchorage Downtown Partnership, he could speak for all three
organizations. He noted that he has owned a couple of
nightclubs in downtown Anchorage for over 20 years. He stated
his support of [HB 423]. Referring to the previous discussion
regarding [all the people who would need to be covered by
insurance], he noted that the administrator of the program would
have to be covered also. Turning to the program itself, he said
it is a great one. He noted that one of the simple, if not
justifiable reasons that people drink and drive is that they
need their cars. A person may need his/her vehicle the next
morning to get to work, or may worry that it will be towed or
vandalized. He indicated that a "no-brainer" program like this,
which would be free to the customer, would make a significant
mark in reducing the number of occurrences of people driving
under the influence (DUI). He said he understands that there
[are concerns regarding] liability; however, he stated that [HB
423] is a Good Samaritan law with good intent. He cautioned
nitpicking the bill to death and encouraged the committee to
just "do it."
Number 1551
REPRESENTATIVE GRUENBERG assured Mr. Pattee that the committee's
intent was not to nitpick the bill to death, but to ensure that
the bill is properly drafted to avoid causing more litigation
later. He asked Mr. Pattee if CHARR or the industry would be
hiring an administrator to work on this program.
MR. PATTEE said Anchorage CHARR will run the program. In
response to a question from Chair Weyhrauch, he opined that if
Fairbanks wants to run such a program, it has the ability to do
so.
Number 1499
REPRESENTATIVE GRUENBERG stated that if an industry group is
going to be running this program, then the committee needs to
consider the language on page 2, lines 9-11, which immunizes
those who are licensed. He pointed out that CHARR and its
employees are not licensed. He opined that if [those employees]
could be "a target defended in this," then the committee needs
to add a provision that immunizes them.
MR. PATTEE concurred. He said it doesn't have to be CHARR; any
organization could run the program. He said, "When it first
started four years ago, it was the Anchorage Downtown
Partnership ... that was going to run this program." He said,
for example, that Mothers Against Drunk Driving (MADD) could run
the program. Whatever language is put in the bill needs to be
vague, so that whoever decides to administer the program can do
so without being held liable, he concluded.
Number 1446
REPRESENTATIVE GRUENBERG said that would require another section
of the bill, or an amendment to subsection (b).
Number 1425
FRANK DAHL told the committee that he is past-president of
Anchorage CHARR and owner of Blues Central at the Chef's Inn.
He stated his support of HB 423. He stated that most of what he
had to say to the committee had been sent in a letter [included
in the committee packet]. He posited that [HB 423] really is an
opportunity to do something proactive and positive about an
ongoing problem, and it is an idea that stands a good chance of
working. He said, "It kind of gets us away from just more and
more punishment that has not worked in the past." He stated,
"We're there to watch out for our friends and patrons and this
gives us the tool to do so." He urged the committee to pass the
bill.
Number 1376
BRENT FRASER, Transportation Inspector, Municipality of
Anchorage, told the committee that he directs the department of
the municipality that regulates the taxicabs, the limousines,
and the chauffeurs of those vehicles. In response to a question
from Representative Gruenberg, he stated his understanding that
the municipality will not have any direct participation in the
program. He imparted [the municipality's] concern that the
legislation does not "put any undue burden upon the chauffeur."
He added that he thinks that the organizations that are in place
seem to be very capable of effectively administering the
program.
REPRESENTATIVE GRUENBERG asked if Mr. Fraser thinks the
municipality needs to be immunized, too.
MR. FRASER answered no, to the best of his knowledge. He
reminded the committee that the taxicabs in Anchorage are all
privately owned and operated and the municipality simply issues
the permits. He surmised that that's not to say that an
enterprising attorney couldn't attempt to "get into the
municipality's pockets" if there was a lawsuit, but he noted
that that has never happened.
Number 1254
MICHAEL LESSMEIER, Attorney at Law, Lessmeier & Winters,
Lobbyist for State Farm Insurance Company ("State Farm"), told
the committee that he has practiced law in the state for 25
years, and most of his work as a practicing lawyer has been
doing litigation work. He said State Farm thinks the bill is a
great idea. He said there are some solutions to the legitimate
concerns raised by Representatives Seaton and Gruenberg.
MR. LESSMEIER stated he thinks the concerns that have been heard
thus far fall into two categories: The first category has to do
with how to "protect an innocent victim who would no longer have
a remedy against somebody that's driving a vehicle, because
they're immunized by this bill." He offered a recommendation to
the committee that the insurance that is on a vehicle [would]
"go with the driver of that vehicle as a permissive user." He
offered his understanding that Representative Gruenberg has
drafted "something to that effect." He said he hasn't talked
about this issue with other members of the industry; however, he
stated he thinks it's something they would support, because the
risk to the industry is a lot less if a sober professional is
delivering the vehicle than it would be if an intoxicated or
impaired person were to get behind the wheel. He emphasized
that State Farm Insurance would certainly support that.
MR. LESSMEIER noted the second thing that should be done is to
ensure that the vehicle isn't uninsured or underinsured, or
"would be treated that way." He gave an example of a vehicle
not being insured, but the person injured having
uninsured/underinsured motorist coverage, and he indicated that
that would be a remedy. He added, "As the bill is written now,
I'm not sure that they would have that remedy." He noted that
there is a "strong scheme" in the state to make
[uninsured/underinsured motorist insurance] available to people.
Number 1136
MR. LESSMEIER turned to a third issue, which he said was
previously raised by Representative Gruenberg. He stated that,
as a practicing lawyer, he thinks it's important that [the
legislature] "immunize to the extent of this bill for
negligence" anybody who participates in the administration of
this program, because he said he thinks the program will save
lives and [prevent] injury.
Number 1087
REPRESENTATIVE SEATON asked if a rider would have to be added to
the insurance that the cab drivers generally have, or if that
would "normally be included in their insurance policy."
Number 1040
MR. LESSMEIER stated, "The insurance to provide this kind of
service is unaffordable for them. And so, we're talking about
the insurance that would go with the vehicle." He clarified
that he is referring to the insurance that would be on the
vehicle of the person who is intoxicated and wants the free ride
home. The cab driver would be a permissive user under that
vehicle owner's policy. He said he thinks most policies now
provide that the insurance applies to a permissive user. He
concluded, "So, our suggestion is that we just make these people
permissive users." That would avoid the problem of
affordability for the taxicab industry, while placing the burden
where it should be placed - on the vehicle owner. He stated
that it seems to him it's a win-win situation all the way
around, because the risk for the intoxicated person is going to
be less if they have a sober cab driver delivering that vehicle.
REPRESENTATIVE GRUENBERG offered to work on a new CS over the
weekend.
Number 0935
MR. SHINE told Chair Weyhrauch that he would work with
Representative Gruenberg.
Number 0928
CHAIR WEYHRAUCH turned to [Conceptual Amendment 2], which would
add a new section to read, "The terms of this act shall be
repealed on January 1, 2006."
Number 0886
MR. SHINE said the issue of whether to have a sunset included in
the language of the bill was brought up at "the last meeting."
Also discussed was whether to have a "reporting back to
legislature to the effectiveness of the program." He turned to
a question previously asked by Representative Holm regarding how
many cabs are in locations other [than Anchorage]. He explained
that this is a pilot program for the Anchorage area, which is
why only Anchorage was looked at [in terms of numbers of cab
drivers, for example].
CHAIR WEYHRAUCH remarked that he doesn't want to add a "report
to legislature," because it's implicit in the sunset that the
legislature will have to [decide] whether to extend [the
program] or not.
Number 0840
REPRESENTATIVE SEATON asked if the January 1, 2006, date would
"give them one year."
REPRESENTATIVE WEYHRAUCH clarified that it would take effect
July 1, 2004, and would be in effect through 2005 [for one and
one half years]. He said, "I just arbitrarily picked 2006. It
could be 2007. That gives them two years."
Number 0827
REPRESENTATIVE GRUENBERG said he wants to know if "they" want to
have a sunset on there. However, if there is a sunset, he
suggested that it be at the end of the legislative session, so
that the legislature would "have that session, then, to extend
it."
Number 0800
CHAIR WEYHRAUCH amended his Conceptual Amendment 2 to read:
"The terms of this act shall be repealed on July 1, 2007."
CHAIR WEYHRAUCH, in response to a question by Representative
Lynn, stated his understanding that [the program] is
predominately being promoted by groups and individuals [in]
Anchorage; however, he said anyone statewide would be able to
take advantage of "this provision."
REPRESENTATIVE LYNN asked, "And use the same language?"
CHAIR WEYHRAUCH answered, "Correct."
Number 0737
REPRESENTATIVE HOLM reiterated that he thinks it's appropriate
to make statewide policy that can easily be incorporated into
other municipalities.
Number 0719
REPRESENTATIVE GRUENBERG asked Mr. Lessmeier if he is aware of
any other places that "do this," and whether the insurance
industry participates at all in the setting of rates.
Number 0708
MR. LESSMEIER responded that he is not aware of that.
Number 0699
CHAIR WEYHRAUCH moved to adopt Conceptual Amendment 2 [as
amended], as previously stated. There being no objection, it
was so ordered.
CHAIR WEYHRAUCH stated his understanding that Representative
Gruenberg would not be offering his amendments today, but
instead would work on amendments with the sponsor and with the
cooperation of CHARR and Mr. Lessmeier.
Number 0608
REPRESENTATIVE HOLM noted that Alberta, Canada, has this kind of
program, and he is waiting to hear back from Senator Ralph
Seekins' daughter who lives in Alberta.
Number 0572
CHAIR WEYHRAUCH announced that HB 423 [was heard and held].
HB 422-BUDGET RESERVE FUND INVESTMENT
Number 0552
CHAIR WEYHRAUCH announced that the last order of business was
HOUSE BILL NO. 422, "An Act repealing the special subaccount
established in the constitutional budget reserve fund; relating
to the powers of the Department of Revenue for the investment of
amounts in the constitutional budget reserve fund; and providing
for an effective date."
Number 0543
REPRESENTATIVE SEATON moved to adopt the committee substitute
(CS) for HB 422, Version 23-LS157\Q, Cook, 3/4/04, as a work
draft. [No objection was stated, and Version Q was treated as
adopted.]
Number 0450
REPRESENTATIVE GRUENBERG moved Amendment 1 to Version Q.
REPRESENTATIVE HOLM objected.
Number 0398
The committee took an at-ease from 9:37 a.m. to 9:38 a.m.
TAPE 04-30, SIDE A
Number 0001
REPRESENTATIVE GRUENBERG said he wanted to know if Amendment 1
would give the Department of Revenue additional flexibility.
Number 0058
TOMAS H. BOUTIN, Deputy Commissioner, Office of the
Commissioner, Department of Revenue, responded that while he has
no problem with Amendment 1, it would not really provide
additional flexibility. Furthermore, he stated that Version Q,
without Amendment 1, would "do just fine," and is worded better
than the original bill.
Number 0126
REPRESENTATIVE GRUENBERG withdrew Amendment 1.
Number 0156
REPRESENTATIVE HOLM moved to report CSHB 422, Version 23-
LS1527\Q, Cook, 3/4/04, out of committee with individual
recommendations [and the accompanying fiscal note].
REPRESENTATIVE SEATON objected for discussion purposes. He
turned to the title of Version Q. He asked, "If the special
subaccount established in the constitutional budget reserve fund
(CBRF) is repealed, does the money automatically flow to the
CBR, or does it flow to the general fund?"
Number 0200
MR. BOUTIN stated he is certain it would be part of the CBR. He
said the department currently reports the CBR balance, without
even delineating the CBR. He explained that the only difference
in the subaccount is that it needs to be invested with a five-
year minimum time horizon in mind.
REPRESENTATIVE SEATON explained that he wanted it on the record
that "this was not a ... CBR draw that we were offering."
Number 0300
REPRESENTATIVE GRUENBERG moved [Amendment 2 to Version Q], a
technical amendment that would remove the words, "On July 1,
2004," from page 1, line 7 of Version Q. He explained that
since the committee had changed the effective date from "July 1,
2004" in the original bill version to "effective immediately",
the July 1, 2004 date in the "TRANSITION" part of the bill was
no longer accurate.
MR. BOUTIN concurred.
Number 0339
REPRESENTATIVE HOLM, at the bequest of the chair, withdrew his
previously stated motion [as a point of order, so that the
committee could address Amendment 2].
REPRESENTATIVE GRUENBERG questioned whether the tense of the
word "merge" on page 1, line 8 should be changed.
Number 0374
CHAIR WEYHRAUCH offered his understanding that line 7 would
therefore begin with the word "The".
REPRESENTATIVE SEATON asked for clarification on whether the
word "TRANSITION" would be deleted.
CHAIR WEYHRAUCH announced that, without objection, the technical
[Amendment 2] was so ordered.
Number 0400
REPRESENTATIVE HOLM moved to report CSHB 422, as amended, out of
committee with individual recommendations and the accompanying
fiscal note. There being no objection, CSHB 422(STA) was
reported out of the House State Affairs Standing Committee.
ADJOURNMENT
Number 0449
There being no further business before the committee, the House
State Affairs Standing Committee meeting was adjourned at 9:46
a.m.
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