Legislature(1995 - 1996)
04/19/1995 01:42 PM JUD
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
SENATE JUDICIARY COMMITTEE April 19, 1995 1:42 p.m. MEMBERS PRESENT Senator Robin Taylor, Chairman Senator Lyda Green, Vice-Chairman Senator Mike Miller Senator Al Adams MEMBERS ABSENT Senator Johnny Ellis COMMITTEE CALENDAR CS FOR HOUSE BILL NO. 115(JUD) am "An Act relating to settlement and payment of claims for overtime compensation claims and to liquidated damages and attorney fees for overtime compensation claims." CS FOR SENATE BILL NO. 95(L&C) "An Act relating to automobile liability insurance for uninsured or underinsured motor vehicles; and providing for an effective date." SJR 14 CONFIRMATION OF MEMBERS OF PUBLIC CORP - SCHEDULED BUT NOT HEARD HOUSE BILL NO. 150 "An Act relating to receipts for bail forfeited in satisfaction for certain offenses." HOUSE BILL NO. 151 "An Act relating to magistrate jurisdiction in presumptive death proceedings." HOUSE BILL NO. 153 "An Act relating to the surety bond for certain judicial officers." HOUSE BILL NO. 23 "An Act relating to referrals involving dental services." PREVIOUS SENATE COMMITTEE ACTION CSHB 115 (JUD) am - See Judiciary minutes dated 4/12/95. SB 95 - See Labor and Commerce minutes dated 2/28/95, 3/21/95, and 3/28/95. See Judiciary minutes dated 4/12/95. HB 150 - No previous Senate action. HB 151 - No previous Senate action. HB 153 - No previous Senate action. HB 23 - See Labor and Commerce minutes dated 4/6/95. WITNESS REGISTER Mike Lesmeier State Farm Insurance One Sealaska Plaza Juneau, Alaska 99801 POSITION STATEMENT: John Dittman Alaska Academy of Trial Lawyers 540 L Street, Suite 206 Anchorage, AK POSITION STATEMENT: Supports proposed CSSB 95 (JUD) Chris Christensen Office of the Administrative Director Alaska Court System 303 K St. Anchorage, AK 99501-2084 POSITION STATEMENT: Commented on HB 150, HB 151, and HB 153 Dr. Arnie Peale Ketchikan, Alaska 99901 POSITION STATEMENT: Supports HB 23 ACTION NARRATIVE TAPE 95-23, SIDE A Number 001 HB 115 DAMAGES & ATTY FEES FOR UNPAID WAGES CHAIRMAN ROBIN TAYLOR called the Judiciary Committee meeting to order at 1:42 p.m. He announced SJR 14 would not be heard by request of the sponsor. The first order of business before the committee was CSHB 115 (JUD)am. SENATOR MILLER moved CSHB 115 (JUD)am out of committee with individual recommendations. SENATOR TAYLOR objected to note there have been no changes made to the measure by the committee. He withdrew his objection, therefore the motion carried. SB 95 INSURANCE AGAINST UNINSURED DRIVERS The committee took up CSSB 95(L&C). SENATOR ADAMS questioned whether testimony would be taken on the proposed committee substitute. SENATOR TAYLOR stated testimony would be taken on the Labor and Commerce Committee version since the proposed committee substitute had not been adopted at this time. MIKE LESSMEIER, representing State Farm Insurance Company, stated the legislative policy issue is about whether the uninsured/underinsured coverage should be considered excess coverage in all situations, and when it should be triggered. State Farm believes the bill, by changing the coverage to pure excess, is detrimental to policy holders and will dramatically increase the cost of coverage by 80 to 100 percent. Policy holders (98 to 99 percent) currently purchase this coverage at some level; State Farm believes if the coverage is broadened, less people will choose to take advantage of it. MR. LESSMEIER discussed the history of the bill. When the Legislature adopted a form of mandatory auto insurance in 1983-84, State Farm advocated mandated offers of uninsured/underinsured motorist coverage in connection with mandatory insurance, to guarantee protection from an uninsured or underinsured motorist. State Farm's concern was that no matter what type of mandatory insurance bill was adopted, a certain percentage of motorists would remain uninsured. The Legislature then made this coverage excess in 1990. In 1991, the rates increased 28 percent, and in March of 1994 they increased another 13 percent. State Farm expects the cost of this coverage to double if the insurance is changed to pure excess, since its experience with the coverage has been very poor. MR. LESSMEIER discussed the two differing court opinions issued recently about the effect of the 1990 amendment. Originally, the coverage was called "difference in limits coverage." If a person chose to purchase uninsured/underinsured motorist coverage of $50,000, that would be the limit of that person's protection from all available sources. If that person was hit by an uninsured motorist, he/she would recover $50,000 from his/her carrier. If that person was hit by a motorist with $50,000 of coverage, the underinsurance coverage was not triggered, because the third party's coverage was not less than $50,000. Number 162 SENATOR TAYLOR stated the portion of the law pertaining to uninsured coverage is not in question and has not changed; if a person is hit by an uninsured driver, that person must look to his/her own policy to collect. The portion that has changed as a result of the two court cases is the underinsured coverage. One judge defined that coverage based upon the amount of damage done; the other defined it based upon the monetary value of the policy issued to the original policy holder. He stated the industry is mixing apples and oranges when discussing both coverages. Number 180 MR. LESSMEIER explained the industry has categorized the two types of insurance together because they are considered a single, combined coverage, by law. It applies in a situation where a person is uninsured, or underinsured. In the Tumbleson case, there was a third party liability policy of $100,000/$300,000. The uninsured/underinsured policy was for $50,000/$100,000. Judge Sedwick ruled that since the third party liability policy was greater than the uninsured/underinsured policy, an underinsured motorist claim did not exist. Subsequent to that, Judge Holland ruled in a separate case that coverage is triggered any time there is a claim in excess of the third party liability coverage. MR. LESSMEIER indicated State Farm does not believe excess coverage should apply in every single case for the following reasons. If the coverage is broadened, rates will increase affecting those who can least afford it. Second, when the insurance was initially considered to cover the difference in limits, a person could buy whatever amount of coverage they needed. This coverage was designed to protect the motorist so that in the event of an accident with an uninsured or underinsured motorist, the insured driver could collect from all available sources the limit of the amount of insurance purchased. MR. LESSMEIER reiterated State Farm expects the cost of the uninsured/underinsured motorist coverage to almost double, if the trigger is changed. If the difference in limits system was used, the rate would drop by 30 percent. Also, the customer would know the amount of coverage they would receive no matter what the coverage status of the other motorist. If the bill passes, the people who want to protect themselves with a high amount of insurance will be able to continue to do so; it is the person who can only purchase a small amount that will no longer be able to do so. Number 269 SENATOR TAYLOR asked whether a person who pays a premium at a set rate, for a set amount of coverage of $100,000, in case of an accident with an uninsured individual, could also buy $50,000 of underinsured coverage as well. MR. LESSMEIER clarified that currently the coverages are a single, combined coverage; the price is based on frequency and severity of loss. They are not priced separately. SENATOR TAYLOR asked what percentage of drivers are uninsured. MR. LESSMEIER replied that figure was calculated in the late 1980s when the mandatory insurance issue was debated. At that time, the figure was about 16 percent. Number 295 SENATOR TAYLOR stated if in 16 percent of accidents, one party is uninsured, the uninsured coverage would apply. That 16 percent would have to be eliminated from the losses that would double the rates, since a policy could only be considered excess if other coverage exists. MR. LESSMEIER commented State Farm recognized the ambiguity in the law, and has tried to give their insureds the benefit of that interpretation, by treating the insurance as excess. State Farm has also been applying the trigger as set forth in Judge Holland's opinion. Number 316 SENATOR TAYLOR asked how long State Farm has been doing that. MR. LESSMEIER replied, "I think we have been doing that ever since day one, ever since we recognized there was an issue about that. I can't say that the industry has been doing that, but we have been doing that." SENATOR TAYLOR noted there will only be a cost increase to the carrier in those instances where the other party's coverage is less than what the insured's coverage is, and the total claim did not exceed the combined coverage. MR. LESSMEIER explained the increase would be due to two factors. State Farm's experience has been poor and has been since the coverage was made excess. SENATOR TAYLOR asserted it is not being broadened under the interpretation State Farm has been using since day one. MR. LESSMEIER answered it has been broadened in the way the coverage would be priced based on Judge Holland's decision. Given State Farm's current experience, that would warrant a rate increase of 80 to 100 percent. From a policy perspective, State Farm believes the mandated offer should provide as broad a range of choices as possible to allow customers to purchase the protection limit they can afford. MR. LESSMEIER concluded if the proposed committee substitute is adopted, the definition of an underinsured motorist would be repealed. The present definition limits the coverage to vehicles licensed for highway use. By eliminating the definition, the coverage would be extended to off-road vehicles. He asserted both uninsured and underinsured coverages need to be defined so that a person could not collect on both policies simultaneously. Number 373 SENATOR ADAMS asked if Mr. Lessmeier was referring to Section 4 of the proposed committee substitute. MR. LESSMEIER replied affirmatively. SENATOR ADAMS asked if any of the committee substitutes deal with the Tumbleson decision. MR. LESSMEIER believed Section 1 of the proposed committee substitute would overrule the Tumbleson decision. Number 390 John Dittman, representing the Alaska Academy of Trial Lawyers, testified in support of the concept contained in the proposed committee substitute, attempting to clarify that the law provides for excess coverage for underinsured motorists, for the following reasons. In 1990 everyone assumed the law to do that, and according to Mr. Lessmeier, the coverage was treated as excess. Mr. Dittman noted he had examples of that interpretation from State Farm as well as other insurance companies, where payments were based on that assumption. Second, the average consumer will assume underinsured coverage is coverage for a motorist who is not insured enough to pay for damages caused. He explained if a consumer buys $50,000 worth of underinsurance coverage, the consumer is essentially buying an illusion unless that coverage is excess, since the law requires anyone who has insurance to carry $50,000 worth of coverage. Third, insurance rates should not increase if State Farm has been operating under the assumption that the law already provides for excess, as stated by Mr. Lessmeier. Mr. Dittman felt the legislation is necessary in light of Tumbleson, because the insurance companies who assumed the law did provide for excess, have begun to cite Tumbleson as the reason they no longer do so. The proposed committee substitute clarifies the intent of the 1990 law. Number 450 SENATOR TAYLOR asked Mr. Dittman to send both the claims information and the letter from State Farm stating they would not be paying according to the Tumbleson decision to the committee. Mr. Dittman explained his client had State Farm underinsured motorist coverage in the amount of $100,00 and was struck and had his neck broken by an Allstate insured who had liability limits of $100,000. State Farm was notified the claim might exceed Allstate's policy limit. Shortly after the Tumbleson decision was issued, the State Farm adjusters replied they were closing the file under the Tumbleson decision. MR. DITTMAN offered to provide the committee with the claim numbers and the names of claimants. SENATOR TAYLOR agreed and asked for a copy of the letter to Mr. Dittman's client from State Farm. SENATOR TAYLOR referred to Mr. Dittman's use of the word "illusory" when a person purchased $50,000 worth of underinsured coverage, since that policy could never be collected upon. MR. DITTMAN explained when one buys a minimum limit policy of $50,000, as long as that person is the sole occupant of the vehicle, he/she could not collect on an underinsured motorist policy, since any insured driver must have a $50,000 liability policy. If the at-fault driver was from a different state with a lower-limit liability policy, of perhaps $20,000, then the policy might be usable. Number 485 SENATOR TAYLOR asked how Mr. Dittman would define the term "underinsured." MR. DITTMAN stated it is a driver whose insurance is insufficient to pay for the damages he/she causes. SENATOR TAYLOR asked if Mr. Dittman would define "sufficient" by the amount of the claim. MR. DITTMAN replied affirmatively, and noted the proposed committee substitute does that by making reference to damages, rather than the fortuity of the third party defendant's liability coverage. SENATOR TAYLOR commented that part of his objection to the legislation is how a carrier could make the assumption that underinsured coverage would not apply when liability insurance was inadequate to cover the claim. It is incongruous for the insurance industry to pay on claims prior to the court case, but to refuse to pay for those claims after the court required it to do so. Number 506 HB 150 RECEIPTS FOR BAIL FORFEITURES There being no further testimony of CSSB 95 (L&C), the committee took up HB 150. CHRIS CHRISTENSEN, general counsel to the Judicial Branch, stated HB 150, HB 151, and HB 153 are housekeeping measures introduced at the request of the Supreme Court. MR. CHRISTENSEN explained the Legislature enacted a system in the 1970s by which persons cited for traffic offenses could mail in the amount specified on the citation in lieu of appearing in court. This statute originally required the court system to mail a receipt to those individuals paying fines by mail. Because there were 45,000 receipts per year, a receipt stamp placed on the back of each check was used, to save time and reduce the cost of mailing separate receipts. The receipt requirement was repealed by the Legislature in 1987, and instead, a receipt is provided on request. Over the years, other mail-in bail statutes were passed by the Legislature, authorizing the payment of fines by mail without a court appearance for non-traffic offenses. Currently there are five statutes patterned after the original traffic bail schedule, requiring the court to provide a receipt. These include birth defect warning signs, fish and game violations, smoking in public violations, park and recreational facility violations, and oversize vehicle violations. There are a total of 10,000 of these violations per year. These statutes were not amended to eliminate the receipt requirement so receipt stamps are placed on the back of all checks. Banks have notified the court system that the receipt stamp is in violation of new federal banking regulations. HB 150 amends the five statutes to require the court system to provide a receipt if requested. SENATOR TAYLOR questioned whether the amended language was grammatically correct. After some discussion, the committee decided to refer the matter to the Division of Legal Services. HB 151 MAGISTRATE PRESUMPTIVE DEATH JURISDICTION MR. CHRISTENSEN discussed HB 151. AS 22.15.120 purports to set forth the jurisdiction of magistrates. Over time, the Legislature passed legislation that gives magistrates additional jurisdiction that was not cross referenced into AS 22.15.120. The presumptive death statutes (Title 9) give magistrates jurisdiction over presumptive death cases. HB 151 lists that jurisdiction in AS 22.15.120. Number 578 HB 153 BONDS FOR JUDGES MR. CHRISTENSEN explained HB 153 proposes to repeal AS 22.15.260, enacted at the time of Statehood. That statute requires that each district judge and magistrate shall execute and file a surety bond in the form and amount to be determined by rule of the court. The bond provides protection when a public official commits intentional misconduct, such as embezzlement. The court system discontinued the practice of providing such bonds about 20 years ago when the Division of Risk Management began purchasing a blanket bond to cover all state employees. TAPE 95-23, SIDE B SENATOR GREEN moved HB 150 out of committee with individual recommendations. There being no objections, the motion carried. SENATOR GREEN moved HB 151 out of committee with individual recommendations. There being no objections, the motion carried. SENATOR GREEN moved HB 153 out of committee with individual recommendations. There being no objections, the motion carried. Number 581 HB 23 REFERRALS INVOLVING DENTAL SERVICES The next order of business before the committee was HB 23. Dr. Arnie Peale of Ketchikan testified via teleconference in support of HB 23. SENATOR MILLER moved HB 23 from committee with individual recommendations. There being no objections, the motion carried. SENATOR TAYLOR adjourned the meeting at 2:31 p.m.