Legislature(1995 - 1996)
04/19/1995 01:42 PM Senate JUD
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* first hearing in first committee of referral
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+ 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."
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.
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