Legislature(1993 - 1994)
02/09/1993 01:40 PM Senate L&C
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* first hearing in first committee of referral
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+ teleconferenced
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SENATE LABOR AND COMMERCE
February 9, 1993
1:40 p.m.
MEMBERS PRESENT
Senator Tim Kelly, Chairman
Senator Steve Rieger, Vice-Chairman
Senator Drue Pearce
Senator Georgianna Lincoln
Senator Judy Salo
COMMITTEE CALENDAR
SENATE BILL NO. 64
"An Act relating to civil liability for workplace safety
inspections; and providing for an effective date."
SENATE BILL NO. 66
"An Act relating to limited partnerships; and providing for
an effective date."
SENATE BILL NO. 85
"An Act extending the termination date of the Alaska Tourism
Marketing Council; and providing for an effective date."
SENATE BILL NO. 73
"An Act relating to the time for filing certain civil
actions; and providing for an effective date."
PREVIOUS SENATE COMMITTEE ACTION
SB 64 - See Labor & Commerce minutes dated 2/4/93.
SB 66 - NONE
SB 85 - NONE
SB 73 - NONE
WITNESS REGISTER
Michael Schneider
880 N, Suite 202
Anchorage, Alaska 99501
POSITION STATEMENT: Opposed SB 64
Roxanne Stewart, aide
Senator Jim Duncan
State Capitol
Juneau, AK 99801-1182
POSITION STATEMENT: Reviewed SB 66
Arthur Peterson, Attorney
One Sealaska Plaza, Suite 202
Juneau, Alaska 99801
POSITION STATEMENT: Supported SB 66.
Willis Kirkpatrick, Director
Department of Commerce & Economic Development
Division of Banking, Securities, and Corporations
P.O. Box 110807
Juneau, Alaska 99811-0807
POSITION STATEMENT: Supported SB 66.
Tina Lindgren, Executive Director
Alaska Tourism Marketing Council
3601 C Street #700
Anchorage, Alaska 99503
POSITION STATEMENT: Reviewed SB 85.
Josh Fink, aide
Senator Tim Kelly
State Capitol
Juneau, AK 99801-1182
POSITION STATEMENT: Reviewed SB 73.
Doug Green, Chairman
Legislative Liaison Committee
Alaska Professional Design Council
P.O. Box 10-3115
Anchorage, Alaska 99510-3115
POSITION STATEMENT: Supported SB 73.
Richard Ritter, Chairman
Legislative Affairs Committee
American Chapter of American Architects
800 Glacier Avenue
Juneau, Alaska 99801
POSITION STATEMENT: Supported SB 73.
Colin Maynard
Alaska Society of Professional Engineers
1400 W. Benson, Suite 500
Anchorage, Alaska 99517
POSITION STATEMENT: Supported SB 73
ACTION NARRATIVE
TAPE 93-9, SIDE A
Number 001
CHAIRMAN TIM KELLY called the Labor and Commerce Committee
meeting to order at 1:40 p.m.
SENATOR KELLY returned SB 64 (INSURER IMMUNITY FOR SAFETY
INSPECTIONS) to committee to hear testimony from MICHAEL
SCHNEIDER, off-net from Anchorage.
(The testimony from MR. SCHNEIDER is transcribed verbatim.)
MR. SCHNEIDER - "SENATOR KELLY, members of the committee, I
would like to thank you for accommodating my appearance by
telephone at a different date and time. I am an attorney.
I've been practicing in Anchorage since October of 1975,
when I was admitted to the state's bar.
I've reviewed SB 64 and I am here to testify against its
adoption, and I would hope that it would not leave this
committee's hands because, in my view, I will try to explain
why it is a bad piece of public policy. This proposed
statute is an effort to reverse a case decided by our
supreme court, the Van Biene v. E.R.A. Helicopter, Inc.
case. It was decided in 1989, and held that an outfit that
undertakes to provide inspections can be held liable if they
do so negligently, and if that negligence causes injury or
death to someone.
I guess the first notion I would like to dispel is that this
is a radical, new, or unusual statement of the law by our
supreme court. I've done just the briefest research on this
matter, but I can assure the committee that I've got a
October 1912 case, called Hartford Steam Boiler, Inspection,
and Insurance v. Pabst Brewing in front of me. I don't want
to say it's been followed, but the supreme court of Iowa,
for instance, in 1963, came up with the same ruling 30 years
ago.
In 1964 the supreme court of Illinois reached the same
decision. Alabama reached it in 1971. Georgia reached it
in 1974. Our supreme court, when finally confronted with
the issue, issued it's ruling in 1989, and I guess that the
reason that I picked these states, I would just like to get
across to the committee that an insurance company
undertaking to provide inspection services, who does so
negligently can be liable, is an idea that is well
established in the law of this country, probably about a
century old, and that our supreme court was simply getting
in line with radical jurisdictions like Alabama and Georgia,
when it came up with its ruling.
Another thing that I would like to point out, is that the
decision itself was a decision by JUSTICE MOORE. Many of
you may know JUSTICE MOORE personally. He's a good jurist,
and in my view, a fairly conservative individual. He spent
his professional career defending ... the insurance
industries as defense counsel. He authored this opinion,
and it was joined in unanimously by every justice of the
supreme court. This was not a divided court. It wasn't a
close call. It was simply a statement of the obvious, quite
frankly.
The other thing I guess I would like to make apparent to the
committee, and one of the reasons that I picked that whole
1912 case, is to illustrate that the rights that are being
forfeited here by Alaskans, are not simply forfeited by
injured Alaskan workers. They are going to be forfeited by
Alaskans in general, and by businesses as well.
Remember, that the first case that I mentioned to you, was a
case where Pabst Brewing Company was suing the inspecting
insurance company, and while I can't tell you, because I
didn't spend enough time reading the case, if anyone was
killed or injured, I can tell you that the explosion that
fostered that litigation put a heck of a dent in the beer
production for quite awhile.
I guess that I am concerned that the committee not overlook
the importance to businesses and to adjacent property owners
of a rule of law that exists in this state now that protects
people from negligent inspection services. What kinds of
businesses and enterprises are likely to be the subject of
such an inspection? A lot of things come to mind, but major
construction activities, certain kinds of demolition and
explosion activities, oil operations and refinery
operations.
Number 105
You're putting a big dent into the current public policy of
the state that provides protection to people injured through
negligent acts if this legislation leaves the committee.
I have seen some of the correspondence addressed to the
committee with regard to this bill, and I guess I would like
to again state what I think is obvious to practicing lawyers
that may not be obvious to everyone else. And that is, that
by providing an inspection, it is not the law of Alaska, not
the law anywhere else, and never going to be the law of
Alaska, that you are somehow thus liable, period, when an
injury or some sort of damage occurs. Your inspection
activity has to be related causally, has to cause, in fact,
the damage has to be such an important event that a
reasonable person would attach it as the cause, wouldn't
happen, but for the cause. Then you have to be negligent,
and if those things don't apply, you're not liable.
In that old 1912 case, for instance, this insurance company
had done periodic inspections of a boiler, submitted
reports. Pabst relied upon them - and why wouldn't they,
they submitted one just a month before the thing blew up.
They, as part of their advertising campaign, touted the
benefits of their inspection services as an inducement to
procure the coverage in the intended inspection services.
Under this legislation, the inspecting entity would be cut
loose and completely free of any responsibility. I guess I
fail to see, and I hope the committee fails to see, how that
is in the interest of the people of this state.
Number 113
Finally, I guess I've got a couple of comments. Having
looked over some correspondence received by the committee, I
found one of the more fascinating to be a February 1 letter,
addressed to SENATOR KELLY as chair of Labor and Commerce,
from JAMES E. PFEIFER, president of Alaska National
Insurance Company.
With that particular piece of correspondence, it's kind of
hard to know where to start. Let me hit a couple of things
quickly. As I mentioned, this is not a bill that is just
going to affect whether or not injured workers have a third
party claim under certain circumstances. It goes to much
broader segments of society.
Secondly, it is suggested here that in the worker's
compensation system, workers get full recovery for their
injuries, so what's the problem? That's ludicrous! Injured
workers give up the hope of having anything approaching a
full recovery in exchange for the administrative proceeding,
no liability or comparative fault issues, and prompt payment
of their claims. To suggest otherwise, I think, is, well I
think should be an embarrassment to whoever wrote this
letter. It is certainly not the case.
Finally, I think, in evaluating some of the support for this
bill, look carefully at some statements made in this
particular piece of correspondence. Alaska National
suggests that not only should the industry be immune from
liability from its unreasonable and negligent conduct, when
it causes death or damage, but they should also be free from
their intentional misconduct, and I guess that ... I find
that to be such a bizarre and unusual request that, in my
mind, it would somewhat taint the veracity of whoever is
communicating it."
Number 180
SENATOR KELLY said the committee agreed with him on that,
and has decided to leave the language in the bill as is
right now.
MR. SCHNEIDER continued, "Thank you, senator. I am sorry I
was unaware of that.
Frivolous cases are mentioned. Basically the law, as it is,
promotes frivolous litigation. Most people that represent
plaintiffs, do so on a contingency fee basis, and the basic
mathematics of that situation are that a percentage of zero,
or a trivial or frivolous amount of money are zero, or
something trivial. The suggestion that there is some sort
of any number of cases out there based on this claim is
absolutely contrary to my own experience, in my own
knowledge of plaintiff's practice in this town, and I
suspect it is contrary to the record.
So, with that notion, I would like to prevail upon the
committee to seek information before it does anything with
this bill, and some of the questions that I would suggest
would be appropriate would be questions like: How many
inspections were done by Alaska National, State Farm,
Alstate, some of the major, either casualty carriers in the
state, before the case in question? How many have been done
after the case in question? How many lawsuits were there
before and after with this allegation? I think you'll find
that this big problem, is no problem at all.
...I would like to leave the committee with the notion that
this bill, seeming to address something fairly simple on its
face, is not so simple at all. Unfortunate retreat to a
concept dead for about a century in this country, and a real
step backwards for an important legal principal well
established in the juris prudence of this state and every
other state.
And, with that, if the committee has comments or questions,
I would be pleased to answer them."
SENATOR RIEGER asked MR. SCHNEIDER, in reference to his
testimony, "you said that even if the present law of the
state were to stand, that a person performing a work place
inspection, would have to have performed an inspection which
caused the injury before they could be held liable. Could
you elaborate on how that is so?"
Number 221
MR. SCHNEIDER answered, "Sure, I'm happy to, and it is a
critical, critical part of the public policy analysis that I
would be hoping this committee would engage in. Let me give
you a couple of examples. I come and inspect your work
site, you're engaged in construction activity, you're
building a new capitol at Willow, and I look your
construction activity and I see things like, maybe, dump
trucks running through stop signs, no flagmen present, all
... those kinds of violations. You're relying on me to
report them, because I promised to do so. I don't report
them. Nothing is done to alter the activity. Someone is
run over and killed.
Now a plaintiff in that set of facts could argue that the
inspection was negligent, the reporting was negligent, and
that negligence caused or contributed to the death. So
that's one area where you have an argument. Now, a jury
might find otherwise, but you have an argument about
causation and negligence.
Let's say in a different set of facts, the same construction
site, I walk up, I see that everything in front of me is
fine. The next day, because of a design defect in a crane,
which is not noticeable to the naked eye. Or, let's make it
easy, let's make it a manufacturing defect in a crane. Some
metal fatigue, a boom falls off, kills a half a dozen
people. Am I responsible under those facts? If I was sued,
my response would be, 'A careful inspection would not reveal
that defect.' Number 1, I am not negligent. I haven't done
anything unreasonable, and if I have done anything
unreasonable, like not even looked at the crane that I
should have looked at, ok. Had I inspected, I would have
not found the defect, so just like in every single tort case
that ever was, outside the area of strict product's
liability, every case, every auto case, every construction
case. If I can't prove not only unreasonable conduct,
meaning an unreasonable act, or an unreasonable omission
where there is a duty to act. If I can't prove that, and,
and not or, that these negligent failings caused the injury,
I got no case, and I lose."
(This ends the verbatim portion of the minutes.)
Number 250
MR. SCHNEIDER asked if he had answered the question.
(This ended the verbatim testimony.)
SENATOR KELLY thanked MR. SCHNEIDER for his testimony.
SENATOR PEARCE moved to pass SENATE BILL NO. 64 from
committee with individual recommendations. There was
dissent on the bill. A vote was taken, and SB 64 passed
from committee on a 3 to 2 vote.
Number 290
SENATOR KELLY introduced SB 66 (UNIFORM LIMITED PARTNERSHIP
ACT UPDATE) sponsored by SENATOR JIM DUNCAN. SENATOR KELLY
invited ROXANNE STEWART, aide to SENATOR DUNCAN, to review
the bill.
MS STEWART explained the bill completed the upgrade of
Alaska's Limited Partnership Act to conform to the
recommendations of the National Conference of Commissioners
under the Uniform State Laws. In reviewing the sections,
she said Section 1 substitutes the notice form for the
certificate of limited partnership for the old long form
certificate, and the rest of the bill simply conforms to the
remainder of the Limited Partnership Act.
SENATOR KELLY opened the committee to questions.
ART PETERSON, presently in private practice, strongly
supports SB 66. He drew attention to two letters in the
bill file from Anchorage attorneys written last year on this
subject, also, strongly supporting the bill.
MR. PETERSON explained the bill would provide for national
uniformity with other states, and it would provide a modern
approach to the area of limited partnerships, along with
better access to the business communities throughout the
country. He noted Section 1 was the heart of the bill, and
all of the other provisions were compatible amendments.
MR. PETERSON continued to explain the reasons for the
substitution of the modern use of the short form, or notice
form of the certificate of limited partnership, for the old
fashioned long form. He gave an extensive account of the
history and use of the certificate from its inception, and
he explained the current application of the short form as a
cost benefit.
SENATOR RIEGER asked several questions of MR. PETERSON to
clarify other types of joint ownership in business forms.
Number 358
To answer SENATOR LINCOLN, MR. PETERSON explained the format
was used by most states, but the long form dated back to
1917.
SENATOR KELLY agreed with MR. PETERSON this change had been
left out of the re-write last year, which satisfied SENATOR
LINCOLN.
Next, SENATOR KELLY called on WILLIS KIRKPATRICK, Director
of the Division of Banking, Securities, and Corporations, to
testify.
MR. KIRKPATRICK testified in favor of the change since it
would lessen the burden on his department in the filing
procedures. He asked the committee to consider a couple of
changes to update the standard industrial codes and to
include a reminder for the limited partnerships to be filed
in his department.
Number 404
After some discussion, SENATOR LINCOLN moved to pass SENATE
BILL NO. 66 from committee with individual recommendations
and a zero fiscal note. Without objections, so ordered.
Next, SENATOR KELLY introduced a committee sponsored bill,
SB 85 (TOURISM MARKETING COUNCIL) and invited TINA LINDGREN,
Executive Director for the Alaska Tourism Marketing Council,
to testify.
Number 431
MS. LINDGREN explained the bill and gave reasons why the
tourism marketing council should be extended for three
years. She described destination marketing, why it was
important for Alaska, and how it operated within the state.
MS. LINDGREN said there were 12000 operators who used the
council program as their only means to access the national
market place, and they would lose their business without the
assistance of the council. The large tour companies would
then gain the greater share of the market.
SENATOR KELLY opened the meeting to questions.
SENATOR PEARCE gave some information on a proposed omnibus
bill that would extend boards and commission and explained
the Tourism Marketing Council was chosen to be extended for
a longer period of time. MS. LINDGREN said there were no
objections from either the ATMC or the Department of
Commerce.
SENATOR LINCOLN objected to the criteria used to select the
presiding officer and board members, which she thought
denied membership to those in the visitor industry, who
couldn't meet the criteria. She said there weren't any
member on the council from any of her 93 communities, and
she said this eliminated a lot of expertise that could be
used by the council. SENATOR LINCOLN opposed the criteria
for the make-up of the board.
Number 468
MS. LINDGREN reviewed the previous use of the criteria as
being too difficult to meet, and she explained a prospective
member only needed to meet one of the criteria. She said
the Department of Commerce shared her concern about the
representation, and she described how members could come to
the council through the committee structure.
SENATOR LINCOLN asked for an amendment on the make-up of the
board on page 1, line 10 by deleting "substantially." She
still thought the provisions would eliminate a lot of people
who would be good participants on the council.
After discussion with SENATOR KELLY, SENATOR LINCOLN moved
to delete "substantially." SENATOR PEARCE objected because
she wanted to work with SENATOR LINCOLN on the wording.
SENATOR KELLY agreed with SENATOR PEARCE and called an at-
ease to discuss the problem.
Number 505
There was no objection to SENATOR LINCOLN'S amendment, and
it was passed.
SENATOR PEARCE moved to amend page 3, line 17, to change the
date to 1997 for a sunset. Without objections, so ordered.
SENATOR PEARCE moved to pass CS FOR SENATE BILL NO. 85(L&C)
from committee as amended and with a single fiscal note.
Without objections, so ordered.
As prime sponsor, SENATOR KELLY introduced SB 73 (LIABILITY
OF DESIGN/CONSTRUCTION PROFESSIONALS) and asked his aide,
JOSH FINK, to review the bill for committee.
Number 523
MR. FINK explained a similar bill had passed the Senate
last year, and he gave a brief history on the Statute of
Repose along with the rationale. This presumed that after a
building had been utilized safely for 10 years, the facility
should be deemed safe, and the design professions should be
protected from suit after the passage of a reasonable amount
of time.
MR. FINK outlined the legal problems, and explained that
currently design professionals are subject to an indefinite
period of liability. He reviewed the supreme court decision
arising from the 1988 consolidated cases, Turner
construction v. Robert Scales and Iverson Construction v.
DeWayne Carson and referred the committee to two legal
opinions in the bill packet.
MR. FINK said SB 73 would repeal the 6 year Statute of
Repose and reenact a 10 year Statute of Repose in its place,
and he explained the legal implications of the bill, and
referred the Senators to additional information in the bill
packet. In his summation, MR. FINK said the bill would
provide reasonable protection for design professionals. He
noted two zero fiscal notes.
Number 554
SENATOR KELLY asked for additional information on the bill
introduced during the last legislature, and MR. FINK gave
him the voting history on the bill.
SENATOR KELLY invited DOUG GREEN, Chairman of the Alaska
Professional Design Council's legislative liaison committee,
and a registered architect, to begin the testimony.
MR. GREEN commenced with some history on the Alaska
Professional Design Council which represented all of the
design professionals in the State of Alaska - eleven
different associations and 1400 design professionals state-
wide. He made several points in favor of the bill and
explained the Statute of Limitations in relation to the
Statute of Repose, which fixes a time from the date the
project is completed until a period in the future. This
date, 10 years hence, would cut off the time for litigation
against the project and against the design professionals,
except in the case of gross negligence.
MR. GREEN predicted the bill would encourage construction in
Alaska, and he described the number of third party claims
for a slip-and-fall type of incidence that makes the design
professionals vulnerable to litigation.
Number 580
TAPE 93-9, SIDE B
Number 001
MR. GREEN deplored the amount of research it took to answer
the litigations, and he assured the committee the bill would
not limit the access to courts, even after 10 years.
SENATOR SALO asked for an example of what would constitute
gross negligence v. inadequate design or stress on a
building. She said it might be many years before a design
flaw comes to light.
MR. GREEN gave an example of what might be concealed in the
construction of a building which might have a deficiency in
the design. He said that would not be standard practice and
would constitute gross negligence on the part of a designer,
giving recourse through the courts.
SENATOR SALO asked about roofs, which she said are problem
areas in Alaska. She also asked whether a change in the
statute would change the burden of proof.
MR. GREEN described the circumstances and remedies for the
failure of a roof as a maintenance item, and he said the
Statute of Repose could inform the design professional to
look to the maintenance record by the owners as part of the
defense.
Number 066
SENATOR KELLY next called on RICHARD RITTER and COLIN
MAYNARD to testify.
MR. RITTER said that 45 states currently have a Statute of
Repose, and of the 45, 32 have been declared constitutional
in actual court cases. He explained Alaska's Statute of
Repose had been declared unconstitutional.
MR. MAYNARD assured the committee of support from the
engineering society for the Statue of Repose, but he didn't
think they should be subjected to an indefinite period of
liability.
He described being dragged into a suit even though his firm
had been retired for 10 years. He quoted some statistics to
show design problems after 10 years was for other than
failure by the design professionals, but from remodeling and
neglected maintenance.
SENATOR LINCOLN questioned the letter from the legislative
counsel, MIKE FORD, as to why the change had been made from
7 to 10 years. MR. FORD explained the correction.
SENATOR LINCOLN, in reference to the studies by Shinnerer
Management Services, Inc., quoted the "vast majority of
claims filed against Design Professionals are brought within
six years of substantial completion..." She quoted
additional statistics from the legislation as stating 83.6%
of the claims were filed the first 5 years, and 45% of the
claims were filed during construction. SENATOR LINCOLN
wanted to know why the legislature was going to 10 years for
such a small percent of claims.
MR. GREEN explained the legislation stretches out the number
of possible claims to 97% of everyone who would, or could,
file a claim. He further explained the design professionals
want to provide some end point fair to everyone, but as
design professionals wanted to be able to retire and not
have to be called to be accountable for a building.
Number 145
MR. RITTER added that without a Statue of Repose, design
professionals are forced to consider "tail" insurance to
retire their business.
SENATOR SALO asked if after the 10 year period, would the
insurance premiums be less?
MR. MAYNARD said they were unable to see any difference
immediately, but it would enable the design professionals to
throw away their files after 10 years.
MR. RITTER discussed insurance problems including
deductibles and claims. In answer to questions from SENATOR
KELLY, MR. RITTER described expensive court costs, legal
fees, and insurance premiums.
Number 180
SENATOR RIEGER directed MR. FORD to Sections 2 and 3, and
questioned him about an equal protection case on page 3,
line 5, where a number of trades and crafts have been
included in the exemption rather than just the design
professionals.
MR. FORD explained why he thought it might help to have a
broad base of people. He cited the lack of several
liability as a success factor in the bill. SENATOR RIEGER
and MR. FORD discussed some other aspects of the bill
including joint several liability.
SENATOR KELLY called for a motion on the bill.
SENATOR RIEGER moved to pass SENATE BILL NO. 73 from
committee with individual recommendations. Without
objections, so ordered.
There being no further business to come before the
committee, the meeting was adjourned at 2:50 p.m.
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