Legislature(1995 - 1996)
04/12/1995 01:40 PM Senate JUD
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
SENATE JUDICIARY COMMITTEE
April 12, 1995
1:40 p.m.
MEMBERS PRESENT
Senator Robin Taylor, Chairman
Senator Lyda Green, Vice-Chairman
Senator Mike Miller
MEMBERS ABSENT
Senator Al Adams
Senator Johnny Ellis
COMMITTEE CALENDAR
ALASKA MENTAL HEALTH TRUST AUTHORITY BOARD OF TRUSTEES CONFIRMATION
HEARINGS: Kay Burrows, Tom Hawkins, John Malone, Nelson Page, John
Pugh, Evelyn Tucker, Phil Younker, Jr.
VIOLENT CRIMES COMPENSATION BOARD CONFIRMATION HEARING: Alison A.
Lauber, M.D.
SENATE BILL NO. 105
"An Act relating to a requirement that a parent, guardian, or
custodian consent before a minor receives an abortion; establishing
a judicial bypass procedure by which a minor may petition a court
for authorization to consent to an abortion without consent of a
parent, guardian, or custodian; amending the definition of
`abortion'; and amending Alaska Rules of Civil Procedure 40, 53,
and 79; Alaska Rules of Appellate Procedure 204, 210, 212, 213,
508, and 512.5; and Alaska Administrative Rule 9."
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."
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."
PREVIOUS SENATE COMMITTEE ACTION
SB 105 - See Health, Education & Social Services minutes dated
3/20/95 and 3/22/95 and Judiciary minutes dated 4/10/95.
SB 95 - See Labor and Commerce minutes dated 2/28/95, 3/21/95, and
3/28/95.
HB 115 - No previous Senate action.
WITNESS REGISTER
John F. Malone
P.O. Box 1032
Bethel, AK 99559
Kay Burrows
2711 W. 84th Ave.
Anchorage, AK 99502
Tom Hawkins
1820 East 24th Ave.
Anchorage, AK 99508
Nelson Page
810 "N" Street
Anchorage, AK 99501
Phil Younker, Jr.
Phil A. Younker & Associates, Ltd.
121 Spruce Avenue
Fairbanks, AK 99709-4150
John Pugh
1011 D Street
Juneau, Alaska 99801
Evelyn Tucker
Anchorage, AK
Jean Pechianault
Kodiak Alliance for the Mentally Ill
Kodiak, Alaska
POSITION STATEMENT: Commented on Mental Health Authority App't.
Frances Kater
Kodiak, Alaska
POSITION STATEMENT: Commented on Mental Health Authority
Henrietta Nugen
Advisory Council on Alcohol and Drug Abuse
Mat-Su
POSITION STATEMENT: Commented on Mental Health Authority
Nancy Odem
Anchorage, AK
POSITION STATEMENT: Supports CSSB 105 (JUD)
Peggy Seeley
Anchorage, AK
POSITION STATEMENT: Supports CSSB 105 (JUD)
Pam Neal, President
Alaska State Chamber of Commerce
217 Second St.
Juneau, AK 99801
POSITION STATEMENT: Supports CSHB 115 (JUD)am
C.J. Zane
9826 Atka Circle
Eagle River, AK 99577
POSITION STATEMENT: Supports CSHB 115 (JUD)am
Sherman Ernouf
Legislative Aide
Alaska State Legislature
Juneau, Alaska 99811-1182
POSITION STATEMENT: Testified on CSSB 95 (L&C)
Dennis Brown
Alaska Independent Insurance Agents and Brokers
POSITION STATEMENT: Commented on CSSB 95 (L&C)
Don Koch, Chief
Marketing Surveillance
Division of Insurance
Dept. of Commerce & Economic Development
P.O. Box 110805
Juneau, Alaska 99811-0805
POSITION STATEMENT: Commented on CSSB 95 (L&C)
ACTION NARRATIVE
TAPE 95-21, SIDE A
Number 001
CHAIRMAN ROBIN TAYLOR announced a quorum was not present to call
the meeting to order, but testimony on the confirmation hearings
and scheduled bills would be taken. The first order of business
was the confirmation of Alison Lauber, M.D., to the Violent Crimes
Compensation Board.
DR. LAUBER gave a brief introductory statement to committee
members. She is a family practice physician, and the director of
the Bethel Family Clinic. In her experience as a physician since
1979, she has been involved in many rape and domestic violence
cases and would like to serve on the board to see that victims of
violent crimes get adequately compensated, especially for
counseling and family support services.
There being no questions for Dr. Lauber, SENATOR TAYLOR commended
Dr. Lauber for her willingness to serve on the board, and thanked
her for her statement.
Number 067
ALASKA MENTAL HEALTH AUTHORITY BOARD OF TRUSTEES¶
JOHN MALONE, a Bethel resident since 1967, stated he has been
involved with mental health issues since the middle 1960's, and the
settlement issue since its inception. SENATOR TAYLOR asked Mr.
Malone what his attitude is toward the management of the trust
properties. MR. MALONE replied it is a fiduciary issue; management
should be focussed in the best and first interest of the
beneficiaries.
Number 090
SENATOR GREEN asked Mr. Malone what his idea of the role of the
Authority is. MR. MALONE stated the primary, or eventual, role of
the Authority is going to be help the state to facilitate a more
comprehensive program of delivery services, similar to what
Congress had intended with the establishment of the Trust in 1956.
That is a process the trustees are presently reviewing to devise a
workplan. The most significant role will be to assist the
administration and the Legislature and to deliver an integrated and
comprehensive program.
Number 120
KAY BURROWS stated she is a 19 year resident who has worked in
health care services most of that time, on behalf of all four
beneficiary groups. She is looking forward to the fiduciary
responsibility of the trust properties and developing a
comprehensive integrated program of services. Her specific
interest is in more effective and efficient use of resources for
the beneficiary group and state.
SENATOR GREEN asked what meaningful impacts Ms. Burrows foresees
the Authority having on establishing an income stream and programs.
MS. BURROWS responded the Authority has just begun to address those
issues, but she hopes there will be less duplication of service
delivery and use of all trust properties and resources to do things
differently on behalf of the beneficiaries; to use seed money to
try new approaches. SENATOR GREEN asked if Ms. Burrows had a firm
date. MS. BURROWS answered she does not; the Authority has just
begun to understand what the trust properties are and what kind of
planning needs to be done.
SENATOR TAYLOR asked Ms. Burrows if she understood Mr. Malone's
comment about the fiduciary responsibilities of the board members.
MS. BURROWS replied she did, and added the board had that
discussion over the last weekend and is clearly committed to that.
SENATOR TAYLOR referred to Ms. Burrows statement about using the
words "for the benefit of the beneficiaries and the state" in the
management policies the Authority might adopt for the property. He
noted the Authority's role is to manage those properties for the
benefit of those beneficiaries and not the State of Alaska. MS.
BURROWS clarified when she used the term "state" she was referring
to the beneficiaries of the State of Alaska.
Number 187
TOM HAWKINS, a 23 year resident with a background in public and
private sector natural resource management, stated he brings land
and money management experience to the Authority. He stated he is
learning about the variety of program responsibilities that the
comprehensive integrated mental health plan entails. He commented
how a society deals with their mental health beneficiaries makes a
strong statement about the quality of that society, therefore he is
pleased to have the opportunity to serve on the Authority Board.
SENATOR GREEN noted each member brings different qualifications to
the Authority. She asked Mr. Hawkins if he believes those
qualifications are complementary to each other. MR. HAWKINS
replied affirmatively, and added the group is compatible, respects
each others' particular expertise, and will benefit from each
others' perspectives. SENATOR GREEN questioned whether Mr. Hawkins
feels the Authority will be getting the assistance it needs from
the Department of Natural Resources (DNR) and the Administration.
MR. HAWKINS replied he feels positively about interactions with
DNR; it has staff in a Mental Health Trust unit which has actually
doubled its income in the few short months of operation. He added
a variety of departments have given short presentations to the
Authority, and all seem dedicated to helping the Authority meet its
needs, and in soliciting advice from the Authority in what they see
as a challenging task.
Number 245
SENATOR GREEN asked whether Mr. Hawkins feels the Authority will be
directing requests, etc. to DNR, or vice versa. MR. HAWKINS stated
DNR is more familiar with the land portfolio and the trust, but has
been very solicitous of the Authority's views. As DNR has
discussed rights-of-way, fair market value, and timber sales, it
has been very interested in the philosophies of the Trust
Authority. He assumes over the next few months the Authority will
devise a policy for DNR to operate within. During the first
meeting, the focus was on various levels of decisions DNR might
make, which will require Authority approval and/or notification.
He believed DNR recognizes the rules of the road will be set by the
Authority. SENATOR GREEN stated that is an important posture to
maintain.
Number 272
SENATOR TAYLOR conjectured the broad policy calls made by the
Authority would come over time, however he expressed concern about
the need for immediate review of ongoing access problems created by
the checkerboard pattern of land. MR. HAWKINS replied the backlog
is a concern of the Authority as well as DNR, and at the last
session, temporary employees were being sought by DNR to reduce
that backlog. There has been a land freeze for a decade, and
although most of the problems are small, they have magnified as
they incubated for a decade. Everyone is mindful of the need to
resolve those problems quickly.
Number 300
NELSON PAGE, an attorney who has served on the Mental Health Board
for four years while the settlement issue was being negotiated,
stated the Authority discussed many of the policy issues raised by
the committee. The Authority discussed goals for the Trust and
adopted a policy to preserve and enhance the corpus of the Trust to
ensure it is there for the beneficiaries in perpetuity. He
interprets that to mean inflation proofing the cash corpus of the
Trust. He noted opportunities provided by the checkerboard pattern
of land exist to enhance the economic value of those lands over
time. The Authority also adopted a goal that will attempt to
maximize the funds available on a long term, sustained basis for
the beneficiaries of the Trust. He added the Authority will do
what it can, but that will not take the place of legislative
funding for mental health programs.
Number 332
SENATOR GREEN expressed concern about staff having more control
than the boards they work for since the board only meets
periodically. She asked Mr. Page if the Authority has taken steps
to ensure that staff will work as assistants and not policy makers.
MR. PAGE replied that he could not say steps have been taken yet,
but the appointees to the Authority all have specialized
backgrounds and are independent advisors.
SENATOR TAYLOR stated he has full faith the board will provide
strong and independent advice. He looks forward to board review of
the operating budgets for mental health programs statewide, and
advising the Legislature on critical and controversial subjects.
such as Harborview, API, and cost-efficiency. He added he hopes
the board will provide innovative solutions and retain its
independence.
Number 374
EVELYN TUCKER, an Athabascan and Aleut Native, discussed her
interest in mental health issues. She originally became involved
because of her concern about the high rate of suicides in rural
villages many years ago. She looked into the Mental Health Trust
to see if there were resources that could be directed to deal with
the suicide problem. She then applied for a seat on the Mental
Health Board and served two terms as chair. She noted she sees all
appointees as having consistent views with committee members
regarding the emphasis on the fiduciary responsibilities being for
the benefit of beneficiaries. She appreciated Senator Green's
concern about staff taking over the policy making duties of a
board.
Number 404
JOHN PUGH, a 25 year Alaska resident, stated he came to Alaska as
a psychiatric social worker in the Air Force and served for four
and one-half years in both inpatient and outpatient services. He
continued a long career in health and social services, working at
McLaughlin Youth Center for five years and in various positions at
the Dept. of Health and Social Services (DHSS). He stated he has
a strong background in delivery services and a strong commitment to
delivering quality services throughout Alaska for individuals who
need mental health services. He served on the AHFC board several
years ago and brings some background in the management of large
sums of money to the Authority. He is presently working with Phil
Younkers developing the RSA with the Permanent Fund Corporation for
the management of the $200 million cash Trust. They plan to
transfer those funds on July 1, to coincide with the fiscal year.
He stated the fiduciary responsibility of the Authority needs to
focus on handling the Trust as a beneficiary one, meaning that both
land and cash management strategies need to be designed to maximize
the trust for the beneficiaries. He complimented the director of
DNR's Mental Health Lands Unit for his expertise and assistance.
Number 453
SENATOR GREEN questioned how much time Mr. Pugh sees the process
taking. MR. PUGH answered the Authority has met twice this month,
and plans to continue that schedule for the short term to get up
and running. He stated the Authority has no staff at this time,
and has to establish policies and procedures, as well as policy.
The Authority has requested that the top two staff positions be
exempt, and is working with the Division of Personnel to classify
all other positions. The Authority will hire all personnel.
Number 484
SENATOR TAYLOR commented on Mr. Pugh's academic and life experience
with mental health management as Commissioner for two years, and
deputy commissioner, and a lengthy involvement politically. He
asked Mr. Pugh how he would respond to a situation in which the
Authority's policy decisions and direction might differ from the
Administration's, and whether he could continue to act in the best
interest of the Trust from the fiduciary perspective. MR. PUGH
responded the statute is clear about the Authority's
responsibilities, and it is incumbent on board members to reiterate
that to the Governor and people within the bureaucracy. He added
that as commissioner, he felt he had constitutional, statutory
responsibilities that superseded his responsibility to the
Governor.
Number 506
SENATOR GREEN discussed a worse-case scenario Mr. Pugh might find
himself in with DNR in which there is no cooperation with DNR. MR.
PUGH replied the Authority is statutorily required to contract with
DNR for land management. The statute contains certain restrictions
in conjunction with DNR's statutes. If the working relationship
becomes a problem, the Authority would have to request a new
management scheme through legislative action.
Number 527
SENATOR TAYLOR thanked Mr. Pugh for his offer to serve as a board
member. He stated it has been his experience in working with Mr.
Pugh that he has always been candid, honest, and a consummate
professional.
Number 531
JEAN PECHIANAULT, president of the Kodiak Alliance for the Mentally
Ill, consumer representative to the Alaska Alliance for the
Mentally Ill Board of Directors, and newly appointed member of the
Mental Health Consumers of Alaska, testified. She stated the
Kodiak Alliance and several affiliates oppose the appointment of
John Malone to the Alaska Mental Health Trust Authority Board of
Trustees. They are very concerned Mr. Malone will not represent
the beneficiaries of the Trust and put his own interests first.
They feel strongly that the Executive Committee, with Mr. Malone as
president, did not represent the great majority of the affiliates
of the Alliance. There has also been discussion about the Trust's
ability to act independently. She concurred with Mr. Page's
statement about the Trust not being a substitute for legislative
funding of mental health programs. She noted proposed cuts of up
to 45 percent of mental health funds are under discussion by the
Legislature.
SENATOR TAYLOR thanked Ms. Pechianault for her testimony and
promised to review the budget cuts to mental health funds.
Number 564
FRANCES KATER testified from Kodiak. She spent several years as
part of a coalition representing the beneficiaries to help further
the settlement. One of the principles behind the coalition was to
ensure that trust land or assets used for the direct benefit of the
beneficiaries when possible. She hoped the Authority would adopt
such a policy if it is not required in the settlement.
SENATOR TAYLOR stated he believes that option is in the settlement.
He thanked Ms. Kater for her assistance.
Number 579
HENRIETTA NUGEN commented she is a newly appointed member of the
Advisory Council on Alcohol and Drug Abuse and looks forward to
working with the Trustees.
Number 589
PHIL YOUNKER, JR., an appointee, specified his background has been
in assisting families of disabled individuals with estate planning.
After seeing problems faced by these families in both funding
crises and in dealing with the state, he decided to apply for the
appointment. He wants to work on investment issues to help
families.
SENATOR TAYLOR thanked all appointees and other participants for
their statements.
TAPE 95-21, Side B
SB 105 PARENTAL CONSENT BEFORE MINOR'S ABORTION
SENATOR TAYLOR announced that David Wilson had prepared written
testimony for the committee which would be distributed to committee
members.
NANCY ODEM testified from Anchorage. She stated Justice James C.
McReynolds, in the case Pierce vs. Society of Sisters, summarized
that the child is not the mere creature of the state, and
recognized the important role played by parents in a child's life.
The court has recognized their rights and high duty to protect and
guide their children. By virtue of ignorance, inexperience and
immaturity and credulity, children are vulnerable. Unprotected
children are at risk for accidental harm, as well as intentional
harm from those would take advantage of their vulnerability.
Without an effective parental consent law, Alaska's children are
terribly vulnerable. The abortion industry relies on the
indiscretions of children for financial gain. Abortion can have
devastating physical and psychological impacts. She urged the
committee's support of SB 105.
Number 540
PEGGY SEELEY testified from Anchorage in support of SB 105. She
stated a minor must have parental consent for any other medical
procedure. Abortion can result in serious injury or death to the
mother. Many of these injuries or deaths go unreported because of
the nature of the abortion industry. Parents have the best
interests of their daughters at heart and no one is more truly
concerned about their physical and emotional wellbeing. Many
studies reveal that abortions significantly increase the young
woman's suicide potential, and such teens are 10 times as likely to
commit suicide within six months of an abortion. Teenagers are not
adults, legally, emotionally, or psychologically, and need parental
guidance for perhaps the most crucial decision they will ever make.
Number 507
There being no one else to testify, SENATOR TAYLOR stated the
committee has received significant testimony and written testimony
from Anchorage and the matter has been given sufficient time. His
personal belief is that this issue involves children and should
require parental consent as for any medical procedure.
SENATOR MILLER moved CSSB 105 (JUD) be discharged from committee
with individual recommendations. There being no objection, the
motion carried.
HB 115 DAMAGES & ATTY FEES FOR UNPAID WAGES
PAM NEAL, President of the Alaska State Chamber of Commerce,
testified in support of CSHB 115 (JUD)am. Employers in violation
of the minimum wage and overtime compensation law is automatically
liable for liquidated damages regardless of the circumstances,
under current law. The federal Fair Labor Standards Act allows the
Court to waive liquidated damages in whole or in part, if it can be
shown the employer acted reasonably and in good faith. The Alaska
Supreme Court's interpretation of Alaska's Wage and Hour Act
prevents the Court and the commissioner of the Department of Labor
from applying the same standard of fairness. Under the provisions
proposed in CSHB 115(JUD)am, employees will still be fully
protected under the law, and the courts and the commissioner will
be allowed to consider the circumstances of the case when
determining the awarding of liquidated damages.
C.J. ZANE, Holland American Lines, testified in support of CSHB 115
(JUD)am. He has been working on this bill for a number of years
with the state and Chamber of Commerce. Many employers statewide,
i.e. Carrs, Tesoro Petroleum, Westmark Hotel, Sheraton, Providence
Hospital, have worked on this bill and made it a legislative
priority. Last year a bill passed the House that was more
favorable to employers. The bill did not pass the Senate. After
extensive good faith negotiations and compromise with Commissioner
Tom Cashen, this new bill was created and is an honest and true
compromise, and restores balance to this area of the law.
Number 443
SENATOR TAYLOR noted there are no proposed amendments to the bill
in the Senate Judiciary Committee at this time. He asked Mr. Zane
for his assurance that should the legislation be amended after it
leaves the committee, he will participate with the chair to have
the bill returned to the committee. MR. ZANE replied the position
of his clients, Holland American Lines, Westmark Hotels, and Gray
Line of Alaska is that they have forged a very good compromise and
they don't want to see amendments more, or less, favorable to
employers. He agreed to work with the chair, as everyone will be
best served with the measure as is.
SENATOR TAYLOR announced he would hold the bill until a quorum was
present to move the bill.
SB 95 INSURANCE AGAINST UNINSURED DRIVERS
SHERMAN ERNOUF, legislative aide to the Senate Labor and Commerce
Committee, testified on the Labor and Commerce committee
substitute. It reduces the maximum mandatory offer of
uninsured/underinsured motorist coverage to $500,000 per person and
$1,000,000 per incident. Uninsured/underinsured motorist coverage
protects the vehicle owner against being injured in an accident
with an at-fault motorist who has no bodily injury liability
insurance. UI motorist coverage applies only if the uninsured
motorist is legally liable for the resulting injury. Uninsured
motorist coverage puts the injured insured in the same position as
he/she would be in if the motorist responsible for the accident had
bodily injury liability insurance. The injured driver who cannot
be compensated for an injury by a negligent party who has no
insurance, can turn to his/her own insurance company for
compensation. In effect, the injured driver's company must take
the place of the at-fault motorist who has no liability insurance.
Three years ago the Alaska Legislature passed legislation which
required Alaskan insurers to make a mandatory offer of
uninsured/underinsured motorist coverage of $1 million per person,
and $2 million per accident. This mandatory offer has increased
the cost of liability insurance for all policy holders. CSSB 95
(L&C) seeks to assure the Alaskan consumer competitive automotive
insurance premiums by encouraging a competitive marketplace. The
bill would encourage a competitive market by requiring insurance
companies to offer a lower mandatory offer allowing smaller
companies to enter the market if the cost of reinsurance drops.
Number 392
SENATOR TAYLOR noted two major issues that have surfaced since the
bill was originally filed. He asked Mr. Ernouf to summarize the
two district court cases that resulted in two different judgements.
MR. ERNOUF deferred the question to Don Koch of the Division of
Insurance. He stated CSSB 95 (L&C) was a consensus approach to the
offer problem. The two court cases pertain to the triggering
mechanism problem.
SENATOR TAYLOR commented the offer issue is non-controversial; but
the underinsured insurance dilemma needs to be addressed. He
stated the uninsured motorist issue was addressed with SR 22 since
a driver must establish and prove that he/she is insured before
his/her license is returned. He asked Mr. Ernouf for the
definition of "underinsured." MR. ERNOUF responded that definition
is what caused the dilemma with the two court cases, since the
triggering mechanism by which the court will decide which part of
underinsurance has to be paid is unclear. He added that issue has
gone around full circle in the Labor and Commerce Committee.
SENATOR TAYLOR asserted it requires the Legislature to establish a
policy call.
Number 345
DENNIS BROWN, President of the Alaska Independent Insurance Agents
and Brokers, (AIIAB) gave the following testimony in opposition to
CSSB 95 (L&C). The AIIAB opposes mandatory offers of uninsured
motorists and underinsured motorists based on two issues:
availability of markets; and possible escalation of the auto
premium. Traditionally, uninsured and underinsured motorist
premiums have not played a large part of the overall insurance
dollars spent on the coverage, that coverage being a fraction of
the auto insurance cost. In the past few years the cost of the
uninsured motorist has risen at a faster rate than what AIIAB has
seen in other classifications, such as automobile liability
insurance. With passage of CSSB 95 (L&C), AIIAB would anticipate
a further acceleration of the auto insurance premiums in the state,
possibly bringing it to the highest level in the country. The
AIIAB has learned by experience in California and New Jersey that
this creates both political problems for the Legislatures, as well
as problems for the insurance-purchasing public. The companies
that left those states would not hesitate to leave Alaska. Second,
the bill is confusing, not only for the industry, but for the
consumer. When an insured buys auto liability coverage there are
two factors that are considered: cost and protection. If the buyer
has little or no assets, cost is the driving factor. If the
consumer has assets, while cost plays a part, protection is a
mandatory factor. In the purchase of uninsured/underinsured
motorist coverage, the primary factor will most likely be cost
which will only drive insurance rates higher. As premiums rise,
more will drop out of the insurance mechanism putting further
pressure on those who remain insured. AIIAB urges returning to the
system of buying uninsured/underinsured motorist coverage up to the
limit that is purchased for the third party liability coverage with
recovery limited to those limits, with offsets provided by the
responsible motorist.
Number 320
SENATOR TAYLOR questioned the statement, "with recovery limited to
that which was chosen by the responsible motorist." MR. BROWN
replied, "The AIIAB would urge that if the purchaser of the
uninsured motorist coverage had third party liability coverage,
that is coverage that is attributed to somebody that he or she runs
into, that the corresponding uninsured motorist coverage that they
have purchased would equal that. If they were involved in an
accident and the responsible party, especially the underinsured
motorist, had a policy of $50,000, that there would be a total of
$300,000 applicable to that loss, with the first $50,000 paid by
the responsible party, and the balance paid by the underinsured
motorist coverage provided to the policyholder."
SENATOR TAYLOR asked for further clarification of Mr. Brown's two
statements. MR. BROWN replied, "We would urge we go back to a
system of buying uninsured motorist and underinsured motorist
coverage up to the limit that is purchased for the third party
coverage and recovery limited to those limits with offsets provided
by the responsible motorist." He explained the uninsured motorist
limits purchased by the policyholder would equal the third party
liability coverage amount.
SENATOR TAYLOR asserted it should be the purchaser's choice to
choose the amount of liability coverage on oneself and on the
amount he/she wished to purchase in case he/she was struck by an
uninsured motorist. He asked Mr. Brown if he believes the amounts
of each policy should be the same. MR. BROWN replied the AIIAB's
position is that the purchaser would have an option to buy an
amount of uninsured/underinsured motorist coverage equal to the
amount in the liability policy.
SENATOR TAYLOR asked if the purchaser would have to choose the same
amount of coverage for both policies. MR. BROWN answered, "No, we
are not saying that, but the problem that we have is when you
purchase uninsured motorist or underinsured motorist limits,
greater than what you are willing to buy for liability insurance
for yourself, that is the problem we are having."
Number 260
SENATOR TAYLOR asked why that would be a problem as it would only
trigger in the event an individual hit someone with a lesser amount
of coverage, or no coverage at all. MR. BROWN stated, "In an ideal
world, it would be great, but in the world of practicality, as we
see it, as an association, is that it is going to drive the auto
rates completely out of sight. There has to be an outward
pressure, or an outward movement of premiums that one has to buy to
buy a family auto policy."
SENATOR TAYLOR discussed the following scenario. "Mr. Brown,
unless I'm misunderstanding you, what you are saying is that
whenever two people have been responsible drivers and have
purchased insurance, and each purchased insurance for amounts they
decided was a fair risk that they should take, and that they should
spend that amount of money to buy the insurance, then
unfortunately, these two responsible drivers have run into one
another. What you are basically saying is the insurance industry
should only have to pay off on one policy, and that is the cheapest
policy. Otherwise it will drive rates right through the ceiling,
right?"
MR. BROWN reiterated the AIIAB's position is that the whole problem
is over the underinsured motorist coverage. AIIAB's goal is to
have the insured be allowed to purchase that protection for
uninsured motorists equal to his/her liability limit. He stated,
"If a person bought $500,000 worth of underinsured motorist
coverage and had third party liability coverage for $500,000, and
that person was involved in an accident with an individual who
carried a $100,000 policy limit, and the claim was worth $500,000,
there would be recovery from the individual for $100,000, and the
person would have the opportunity to collect from his/her
underinsured motorist coverage for the other $400,000. That is
what the AIIAB would like to achieve, instead of stacking the
underinsured motorist limits over the policy of the driver
responsible for the accident."
Number 231
SENATOR TAYLOR said, "Let's say I have the $300,000 underinsured
policy, and you have the $100,000 policy, and you run into me and
cause $400,000 worth of damage. I have the right to sue you
because you had a liability policy good for $100,000. So I get to
sue you and your company confesses policy limits. They kick in
$100,000. I've been paid by you all I can get out of your policy.
Now, I, being a responsible motorist, had gone and purchased
underinsured motorist coverage of $300,000. I've got $400,000
worth of damages. There are two scenarios that can now occur. One
scenario is that my policy that I purchased face value, that said
$300,000, is only good for $200,000 because you want to add the
$100,000 I got from the other guy. In other words, you want me, on
my policy, to be subrogated to the third party who was liable. So
I can recover a maximum total of $300,000, and you say that somehow
this is something I paid for. No, I paid for $300,000 of
underinsured from your company. Your policy of $100,000 you paid
for yourself, that is outside of the contract I have with you. The
second scenario is, as you call, stacking, and stacking says I go
after the bad guy that ran into me. I get $100,000 from him and
since I still have $300,000 of stipulated damages, over and above
that, I then turn to my own carrier, and of course I'll have to
file suit because they will never voluntarily come in and give that
money to me. I'll have to bring a suit in court against my own
insurance company for that $300,000 of underinsured coverage that
I had purchased in good faith in the first place. Under one
district court judge, he says you can't stack, and under the other
district court judge, he says you can. Isn't that the problem we
got?"
MR. BROWN stated he would agree. SENATOR TAYLOR commented,
according to Mr. Brown, those two people who had paid a fair,
actuarially-justified, Commissioner of Insurance-reviewed premium
will cause devastating impacts to the industry if we make those two
companies meet their contractual requirements. MR. BROWN clarified
the AIIAB's position is that it would drive the auto premium rates
upward. Whether the carriers are willing or unwilling to do this
is a matter for the insurance industry to decide. The AIIAB's
membership consists of people at the point of contact, they sell
the product to the consumer and know whether markets exist and what
drives the costs. The uninsured motorist rates have doubled over
the past few years. The AIIAB is questioning at what point does
the consumer pay enough before the marginal ones drop out.
SENATOR TAYLOR replied he understands the consumer aspect of the
problem, and he does not want to do anything that will encourage
the insurance industry to bill the consumer at higher rates. He
asked if his actuaries have been selling insurance based upon the
fact that only half of the claims would have to be paid off. "Your
policy wouldn't get touched as long as you could tap the other
guy's policy, so you'd get that premium for free, and also get an
offset every time that you had an opportunity to push the coverage
off onto Brand X company instead of having to pay under your
underinsured motorist provision that you sold your own customer.
MR. BROWN disagreed, and noted that all rates are loss-driven. The
amount paid out in the form of losses, is directly reflected in the
rates charged. If they are going to pay more out in losses under
the underinsured motorist section, obviously that rate will
increase.
Number 140
SENATOR TAYLOR stated if there was a captive population of 100
people on an island, with mandatory insurance, purchased from two
companies by equal numbers, one company would never have to pay off
on a policy in a given year, depending on who ran into who. When
premiums are determined by losses, insurance companies are counting
on not having to pay off a percentage of the time based upon the
manner in which you interpreted the policy prior to the case.
Number 120
MR. BROWN answered he is not testifying on behalf of the insurance
industry. The AIIAB's clients are paid by the consumer, and he is
testifying on the impact to the consumer. SENATOR TAYLOR asked if
the income of AIIAB's members is derived as a percentage of
premiums sold to the customer. MR. BROWN answered affirmatively.
SENATOR TAYLOR asked if insurance companies have a contractual
agreement with AIIAB and refer to AIIAB as their agent. MR. BROWN
disclosed in some instances they do. SENATOR TAYLOR said that is
why he considered Mr. Brown to be an agent speaking on behalf of
those companies when selling a policy. He pointed out the
Legislature needs to make a policy call on whether it is good or
bad policy to have consumers remain ignorant of what the word
"underinsured" means. The lay person believes he should collect
the amount of his underinsured policy necessary to pay damages less
the amount paid by the underinsured's policy. If that causes
premiums to increase, so be it.
Number 060
DON KOCH, Division of Insurance, explained CSSB 95 (L&C) began as
a repeal of the excess offer legislation that was enacted several
years ago. The Division testified to the Labor and Commerce
Committee that some room for compromise was necessary, because it
believed the mandatory limit in Alaska is the highest in the
nation. In view of the Tumbleson decision, the Division felt the
issues brought forth in that case needed to be addressed. The
Division understood, when the excess offer legislation passed, that
underinsured motorist coverage was intended to be excess, so that
in the $400,000 example, the $100,000 would be available from the
other party, and the full $300,000 would be available as excess
insurance.
SENATOR TAYLOR asked if the Division interpreted the word "excess"
to refer to stacked coverage when the bill passed. MR. KOCH
replied affirmatively. SENATOR TAYLOR asked if anyone in the
industry would have thought otherwise. MR. KOCH described the
disagreement as to what triggered the stacking in the Tumbleson
case. His interpretation of the Tumbleson decision is that the
coverage is treated as excess, but is only triggered if the other
motorist is uninsured. Effectively the case says that uninsured
motorist coverage before underinsured motorist coverage is
triggered.
TAPE 95-22, Side A
SENATOR TAYLOR asked if the lay person would think to ask when
underinsured coverage is triggered, when purchasing insurance. MR.
KOCH felt they would not, and that most producers would not have
the time to explain the whole process. Agents have expressed
concern about E and O exposure for not adequately explaining the
procedure, therefore other alternatives are made more difficult.
He pointed out that to the degree the public fails to insure under
the mandatory automobile law, there will be more exposure in the
uninsured and underinsured area, as more losses arise from it. The
automobile insurance premium contains a part that is mandatory: the
$50,000; $100,000; and $25,000 liability purchase. The uninsured/
underinsured coverages are mandatory offers but are not required.
An insured may elect to waive that insurance. Higher offers of
underinsured motorist coverage are increasing in cost, and
insurance companies have been able to justify those increases with
division actuaries, and it is likely the costs will continue to
rise. But that coverage is still an option for the consumer,
therefore it should not affect all auto insurance consumers, only
those that choose to bear that cost.
SENATOR TAYLOR reiterated the Legislature needs to set a policy
since the two court decisions are conflicting as to what standard
to use. He believed the federal court would adopt the policy once
enacted by the Legislature. MR. KOCH implied the proposed Senate
Judiciary committee substitute would address both the Tumbleson
issue and the mandatory offer limit.
SENATOR TAYLOR pointed out that if all drivers had good liability
coverage, excess coverage would be unnecessary. MR. KOCH replied
that would depend on the amount of liability coverage purchased by
consumers, since minimum limits are often inadequate.
SENATOR TAYLOR thought it is bizarre that a person who has excess
coverage would be paid the full amount if he/she had an accident
with an uninsured motorist, but would only collect the offset
amount after suing his/her own insurance company if the accident
was with an underinsured motorist. MR. KOCH stated some believe a
person should only be able to buy for his/her own protection, the
amount purchased for third party protection. He disagrees as such
a policy would discourage consumers from taking responsibility in
protecting themselves as well as others.
Number 141
SENATOR TAYLOR felt Mr. Brown alluded to the fact that people
should only be allowed to purchase equal amounts of liability
insurance and excess coverage. MR. KOCH agreed, and clarified the
idea is that an individual should only be able to purchase for
their own protection, the amount he/she purchases for the third
party's protection. That opinion prevails in many states,
although several states are moving toward higher mandatory offers
of uninsured/underinsured coverage.
SENATOR TAYLOR asked Mr. Koch about the no-fault insurance movement
in Alaska, which turned out to be uninsured/underinsured motorist
coverage. MR. KOCH replied an individual could purchase
uninsured/underinsured motorist coverage prior to that time, but
only up the limit of one's third party limits. At that time it was
only triggered by uninsured motorists. A few companies voluntarily
offered underinsured motorist coverage but there appeared to be no
marketing effort for it.
SENATOR DONLEY clarified that underinsured motorist coverage was
offered with the adoption of mandatory auto insurance in 1984. MR.
KOCH explained it was never made distinct coverage. In 1990,
legislation clarified that those coverages were to be offered as
excess coverage. During that time period, many states were
enacting no-fault laws with the initial focus for responsibility to
oneself, and contained thresholds from the tort system. Alaska
chose a new departure. In fairness to insurance agents, MR. KOCH
stated this concept is difficult to sell because it is a departure.
SENATOR TAYLOR commented to prevent insurance agents' E and O
exposure from expanding under the two court decisions the
Legislature must make a policy decision one way or the other. MR.
KOCH agreed, and reiterated the proposed Judiciary committee
substitute appears to have a clear expression of intent.
SENATOR TAYLOR announced CSSB 95(L&C) would be held over until next
Wednesday.
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