Legislature(1995 - 1996)

04/19/1995 01:42 PM JUD

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= 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."            
 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              
 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            
     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            
 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            
 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                     
 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                    
 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.                
 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                
 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.                             

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