Legislature(2003 - 2004)

03/04/2004 01:32 PM L&C

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                    ALASKA STATE LEGISLATURE                                                                                  
          SENATE LABOR AND COMMERCE STANDING COMMITTEE                                                                        
                         March 4, 2004                                                                                          
                           1:32 p.m.                                                                                            
TAPE(S) 04-19, 20                                                                                                             
MEMBERS PRESENT                                                                                                               
Senator Con Bunde, Chair                                                                                                        
Senator Ralph Seekins, Vice Chair                                                                                               
Senator Gary Stevens                                                                                                            
Senator Hollis French                                                                                                           
MEMBERS ABSENT                                                                                                                
Senator Bettye Davis                                                                                                            
COMMITTEE CALENDAR                                                                                                            
SENATE BILL NO. 311                                                                                                             
"An   Act  providing   for  a   special   deposit  for   workers'                                                               
compensation insurers; relating to the  board of governors of the                                                               
Alaska  Insurance  Guaranty   Association;  relating  to  covered                                                               
workers'  compensation  claims  paid   by  the  Alaska  Insurance                                                               
Guaranty Association; stating the  intent of the legislature, and                                                               
setting   out   limitations,   concerning   the   interpretation,                                                               
construction, and  implementation of workers'  compensation laws;                                                               
relating  to  restructuring   the  Alaska  workers'  compensation                                                               
system;  eliminating  the  Alaska  Workers'  Compensation  Board;                                                               
establishing  a  division  of workers'  compensation  within  the                                                               
Department  of  Labor  and Workforce  Development  and  assigning                                                               
certain  Alaska  Workers'  Compensation Board  functions  to  the                                                               
division and  the Department of Labor  and Workforce Development;                                                               
establishing   a   Workers'  Compensation   Appeals   Commission;                                                               
assigning certain  functions of the Alaska  Workers' Compensation                                                               
Board to  the Workers' Compensation Appeals  Commission; relating                                                               
to  agreements that  discharge  workers' compensation  liability;                                                               
providing   for  hearing   officers   in  workers'   compensation                                                               
proceedings; relating  to workers' compensation  awards; relating                                                               
to an  employer's failure to  insure and keep insured  or provide                                                               
security;  providing   for  appeals  from   compensation  orders;                                                               
relating  to  workers'  compensation proceedings;  providing  for                                                               
supreme  court   jurisdiction  of   appeals  from   the  Workers'                                                               
Compensation Appeals  Commission; providing for a  maximum amount                                                               
for  the cost-of-  living  adjustment  for workers'  compensation                                                               
benefits;  providing for  administrative penalties  for employers                                                               
uninsured   or    without   adequate   security    for   workers'                                                               
compensation; relating to assigned risk pools and insurers; and                                                                 
providing for an effective date."                                                                                               
     MOVED SB 311 OUT OF COMMITTEE                                                                                              
HOUSE BILL NO. 340                                                                                                              
"An Act relating to damages in an action for a defect in the                                                                    
design, construction, and remodeling of certain dwellings; and                                                                  
providing for an effective date."                                                                                               
     HEARD AND HELD                                                                                                             
SENATE BILL NO. 323                                                                                                             
"An Act relating to a project owner's liability for workers'                                                                    
compensation and the exclusiveness of liability for workers'                                                                    
     HEARD AND HELD                                                                                                             
PREVIOUS COMMITTEE ACTION                                                                                                     
BILL: SB 311                                                                                                                  
SHORT TITLE: INSURANCE & WORKERS' COMPENSATION SYSTEM                                                                           
SPONSOR(s): RULES BY REQUEST OF THE GOVERNOR                                                                                    
02/09/04       (S)       READ THE FIRST TIME - REFERRALS                                                                        
02/09/04       (S)       L&C, FIN                                                                                               
02/10/04       (S)       L&C AT 1:30 PM BELTZ 211                                                                               
02/10/04       (S)       Heard & Held                                                                                           
02/10/04       (S)       MINUTE(L&C)                                                                                            
02/19/04       (S)       L&C AT 1:30 PM BELTZ 211                                                                               
02/19/04       (S)       Heard & Held                                                                                           
02/19/04       (S)       MINUTE(L&C)                                                                                            
02/26/04       (S)       L&C AT 1:30 PM BELTZ 211                                                                               
02/26/04       (S)       Heard & Held                                                                                           
02/26/04       (S)       MINUTE(L&C)                                                                                            
03/04/04       (S)       L&C AT 1:30 PM BELTZ 211                                                                               
BILL: HB 340                                                                                                                  
SHORT TITLE: DAMAGES IN CONSTRUCTION CLAIMS                                                                                     
SPONSOR(s): REPRESENTATIVE(s) MEYER                                                                                             
01/12/04       (H)       PREFILE RELEASED 1/2/04                                                                                
01/12/04       (H)       READ THE FIRST TIME - REFERRALS                                                                        
01/12/04       (H)       L&C, JUD                                                                                               
01/23/04       (H)       L&C AT 3:15 PM CAPITOL 17                                                                              
01/23/04       (H)       Moved CSHB 340(L&C) Out of Committee                                                                   
01/23/04       (H)       MINUTE(L&C)                                                                                            
01/26/04       (H)       L&C RPT CS(L&C) 1DP 4NR                                                                                
01/26/04       (H)       DP: ANDERSON; NR: CRAWFORD, LYNN,                                                                      
01/26/04       (H)       GATTO, GUTTENBERG                                                                                      
02/04/04       (H)       JUD AT 1:00 PM CAPITOL 120                                                                             
02/04/04       (H)       -- Meeting Canceled --                                                                                 
02/09/04       (H)       JUD AT 1:00 PM CAPITOL 120                                                                             
02/09/04       (H)       Moved CSHB 340(JUD) Out of Committee                                                                   
02/09/04       (H)       MINUTE(JUD)                                                                                            
02/12/04       (H)       JUD RPT CS(JUD) 5DP 1NR                                                                                
02/12/04       (H)       DP: OGG, SAMUELS, HOLM, ANDERSON,                                                                      
02/12/04       (H)       MCGUIRE; NR: GARA                                                                                      
02/23/04       (H)       TRANSMITTED TO (S)                                                                                     
02/23/04       (H)       VERSION: CSHB 340(JUD) AM                                                                              
02/25/04       (S)       READ THE FIRST TIME - REFERRALS                                                                        
02/25/04       (S)       L&C, JUD                                                                                               
03/04/04       (S)       L&C AT 1:30 PM BELTZ 211                                                                               
BILL: SB 323                                                                                                                  
SHORT TITLE: WORKERS COMPENSATION AND CONTRACTORS                                                                               
SPONSOR(s): SENATOR(s) SEEKINS                                                                                                  
02/13/04       (S)       READ THE FIRST TIME - REFERRALS                                                                        
02/13/04       (S)       L&C, JUD                                                                                               
03/04/04       (S)       L&C AT 1:30 PM BELTZ 211                                                                               
WITNESS REGISTER                                                                                                              
Mr. Douglas L. Smith                                                                                                            
Arctic Slope Regional Corporation                                                                                               
Division of Energy Services                                                                                                     
Anchorage AK                                                                                                                    
POSITION STATEMENT: Supports SB 311.                                                                                          
Mr. Michael Jensen                                                                                                              
Anchorage AK                                                                                                                    
POSITION STATEMENT: Commented on SB 311.                                                                                      
Mr. Don Gray, Claims Administrator                                                                                              
Arctic Slope Regional Corporation (ASRC)                                                                                        
Anchorage AK                                                                                                                    
POSITION STATEMENT: Supports SB 311.                                                                                          
Mr. Dennis Mellinger                                                                                                            
Arctic Slope                                                                                                                    
Anchorage AK                                                                                                                    
POSITION STATEMENT: Supports SB 311.                                                                                          
Ms. Laura Jackson, Claims Manager                                                                                               
University of Alaska                                                                                                            
Anchorage AK                                                                                                                    
POSITION STATEMENT: Supports SB 311.                                                                                          
Representative Kevin Meyers                                                                                                     
Alaska State Capitol                                                                                                            
Juneau, AK  99801-1182                                                                                                          
POSITION STATEMENT: Sponsor of HB 340.                                                                                        
Mr. Dave Dillard                                                                                                                
321 Construction Inc.                                                                                                           
Fairbanks AK                                                                                                                    
POSITION STATEMENT: Supports HB 340 and commented on SB 323.                                                                  
Mr. Jeff DeSmet                                                                                                                 
Alaska Homebuilders Association                                                                                                 
PO Box 83149                                                                                                                    
Juneau AK                                                                                                                       
POSITION STATEMENT: Supports HB 340.                                                                                          
Mr. Ray Hickel                                                                                                                  
Alaska State Homebuilder Association                                                                                            
Juneau AK                                                                                                                       
POSITION STATEMENT: Supports HB 340.                                                                                          
Mr. Larry Partusch                                                                                                              
Partusch Plumbing and Heating and Northern Sheet metal                                                                          
Juneau AK                                                                                                                       
POSITION STATEMENT: Supports HB 340.                                                                                          
Ms. Robin Ward, Legislative Chair                                                                                               
Alaska State Homebuilders Association                                                                                           
Anchorage AK                                                                                                                    
POSITION STATEMENT: Supports HB 340.                                                                                          
Mr. Mike Lessmeier                                                                                                              
State Farm Insurance                                                                                                            
Juneau AK                                                                                                                       
POSITION STATEMENT: Commented on SB 323.                                                                                      
ACTION NARRATIVE                                                                                                              
TAPE 04-19, SIDE A                                                                                                            
        SB 311-INSURANCE & WORKERS' COMPENSATION SYSTEM                                                                     
CHAIR CON  BUNDE called  the Senate  Labor and  Commerce Standing                                                             
Committee meeting  to order  at 1:32  p.m. Present  were Senators                                                               
Gary Stevens, Ralph  Seekins, Hollis French and  Chair Con Bunde.                                                               
Senator Bettye Davis was excused.  The first order of business to                                                               
come before the committee was SB 311.                                                                                           
MR. DOUGLAS  L. SMITH, Arctic Slope  Regional Corporation, Energy                                                               
Services Division,  supported SB 311  as it is written.  "It does                                                               
not sway  the advantage  to either company  or employee,  but, in                                                               
fact,  favors both."  He  did not  have a  copy  of the  proposed                                                               
CHAIR BUNDE said a copy of the amendment was being faxed to him.                                                                
MR.   MIKE  JENSEN,   Anchorage  attorney   who  specializes   in                                                               
representing  injured  workers  in Alaska  workers'  compensation                                                               
claims,  said he  has 20  years of  experience in  this area  and                                                               
three  other attorneys,  Chancy Croft,  Joe Calamites  and Steven                                                               
Constantino  have extensive  experience  as well.  They have  all                                                               
looked at the proposed amendment and have some concerns.                                                                        
     We do not feel the  current system is broken and should                                                                    
     be  fixed,  especially  if  it  means  creating  a  new                                                                    
     bureaucracy  that is  estimated  to cost  in excess  of                                                                    
     $700,000 a year more than the current system.                                                                              
     The current  system does  provide for  a representative                                                                    
     of  industry  and  a  representative  of  labor.  These                                                                    
     proposed amendments would take that  away - so that the                                                                    
     decision  maker would  be solely  a hearing  officer at                                                                    
     the  initial   administrative  level  and   then  three                                                                    
     commissioned   members   who   are  selected   by   the                                                                    
     As far as the current  system and expediency, we do not                                                                    
     think  the  amendments would  add  anything  as far  as                                                                    
     expediency.   The  current   system  issues   over  300                                                                    
     opinions per year.  Of those, only 10  percent are ever                                                                    
     appealed to  the courts. Of  those 10 percent,  I would                                                                    
     say only a  third are ever reversed. In  other words of                                                                    
     the minority of  appeals that are taken  to the courts,                                                                    
     the vast  majority of those  appeals wind  up affirming                                                                    
     what the board has done.                                                                                                   
     As  far as  the time  concerns that  the administration                                                                    
     pointed  out, they  did cite  the case  of Bradbury  v.                                                                    
     Chugach  Electric.  That  was   the  case  in  which  I                                                                    
     represented Mr.  Bradbury whose wife died  at work. The                                                                    
     administration states  that the  time [indisc.]  as the                                                                    
     reason for making these proposed changes.                                                                                  
     I  should  point out  to  Mr.  Chairman and  the  other                                                                    
     members  of  the  committee...that decision,  first  of                                                                    
     all, it  wasn't 1,400 days. The  administration was off                                                                    
     by  about a  half  a year  and, of  that  time, over  a                                                                    
     third,  if not  more,  was spent  between the  Superior                                                                    
     Court  waiting  for  the Supreme  Court  to  issue  its                                                                    
     decision. As far  as the board was  concerned, it heard                                                                    
     the case within six to  nine months after the claim was                                                                    
     filed  and  we  don't   see  how  creating  an  appeals                                                                    
     commission would in any way speed that process up.                                                                         
     But, if the  appeals commission is a  good amendment to                                                                    
     adopt, we  feel it  could be improved  to make  it less                                                                    
     political  in  that  we would  urge  the  committee  to                                                                    
     require that  the appeals commission have  at least one                                                                    
     representative who has experience  with the practice of                                                                    
     law  representing  industry  and  then  let  the  other                                                                    
     representative  or  member  with  experience  represent                                                                    
     labor.  Then,  of course,  the  third  member could  be                                                                    
     either  way.  At least  that  way,  there would  be  an                                                                    
     assurance that  at least depending  upon who is  in the                                                                    
     administration, Democrat  or Republican, that  at least                                                                    
     one representative of industry  is always there as well                                                                    
     as one  representative of labor. It  would thereby take                                                                    
     out  what   I  feel  would  otherwise   politicize  the                                                                    
     In  addition,  we  would propose  that  the  commission                                                                    
     members  be given  terms of  up  to a  minimum of  five                                                                    
     years.   That,  again,   would  foster   the  idea   of                                                                    
     depoliticizing  the commission.  In addition,  it would                                                                    
     enlarge the pool of  applicants that the administration                                                                    
     could  choose  from  in selecting  commission  members,                                                                    
     because  with five  years, it's  my understanding  that                                                                    
     the  commission  member would  be  vested  in the  PERS                                                                    
     system thereby  making it  more attractive  for members                                                                    
     to be found.                                                                                                               
     There are some other changes  that we would propose. As                                                                    
     far as  at the hearing  level, we would  recommend that                                                                    
     instead of having the decision  decided strictly by one                                                                    
     hearing  officer,  that these  cases  be  heard as  the                                                                    
     board  is currently  constituted with  a representative                                                                    
     of industry  again and a representative  of labor again                                                                    
     with  a  hearing  officer on  that  board.  That  would                                                                    
     insure, again, that this  process remains neutral, that                                                                    
     it   remains   fair  to   both   sides   and  that   it                                                                    
     depoliticizes the system.                                                                                                  
MR. JENSEN said  additional changes were stated in  a letter that                                                               
would  be sent  to the  Legislature as  soon as  the other  three                                                               
lawyers  had signed  off  on  it. It  asks  that intent  language                                                               
states that  nothing in  the amendment  changes the  substance of                                                               
law -  clarifying that the  changes are strictly  procedural and,                                                               
thereby, avoiding additional unnecessary litigation.                                                                            
     In addition, I  think that if attorney's  fees could be                                                                    
     limited  to $400  without obtaining  board or  director                                                                    
     approval of  fees, that would  allow a lot  of needless                                                                    
     litigation  in that  currently a  lot of  unrepresented                                                                    
     injured  workers are  unable to  get the  advice of  an                                                                    
     attorney and  then wind up  filing claims that  need to                                                                    
     be litigated by industry.  By allowing these workers to                                                                    
     at  least seek  the  advice of  competent counsel,  may                                                                    
     avoid filing any unnecessary  litigation that it caused                                                                    
     from misinformation and misunderstanding of the act.                                                                       
He  said  these changes  would  make  a  much fairer  system  and                                                               
protect   the  interests   of  both   industry   and  labor   and                                                               
depoliticize  the system.  He also  understands that  the ad  hoc                                                               
committee was not  involved in the proposed changes  and now that                                                               
they are involved he thought:                                                                                                   
     By creating a  permanent workers' compensation advisory                                                                    
     council...  with  two  members from  industry  and  two                                                                    
     members from  labor, as  well as  the members  from the                                                                    
     guaranty  association, the  public or  the Division  of                                                                    
     Insurance  might  assist  the  Legislature  in  getting                                                                    
     competent advice and proposals to act upon.                                                                                
MR.  DON  GRAY,  Claims   Administrator,  Arctic  Slope  Regional                                                               
Corporation,  supported  SB  311   as  written  and  without  the                                                               
amendment. [Indisc.]                                                                                                            
MR. DENNIS MELLINGER, Arctic Slope, supported SB 311.                                                                           
MS.  LAURA JACKSON,  Claims Manager,  University of  Alaska, said                                                               
she  is   also  a  member  of   the  Multidisciplinary  Insurance                                                               
Association of Alaska and past  president of the Alaska Adjusters                                                               
Association.  She  is currently  on  the  board of  the  Workers'                                                               
Compensation  Committee of  Alaska and  a  member of  the ad  hoc                                                               
committee. She  said she was  testifying on her own  behalf today                                                               
as a person  who has assisted people through  the Alaska Workers'                                                               
Compensation system for over 17 years.                                                                                          
     I am  here to tell  you that the  Workers' Compensation                                                                    
     system  in   Alaska  is   broken.  It   is  cumbersome,                                                                    
     confusing, slow-moving and not  user friendly to either                                                                    
     the employer  or the employee. The  recommended changes                                                                    
     will simplify  and clarify  the process.  Replacing the                                                                    
     delays  due  to  the  lengthy  Superior  Court  appeals                                                                    
     process with an appeals  commission comprised of people                                                                    
     knowledgeable about the act and  the process will speed                                                                    
     the resolution of the disputes.                                                                                            
     In   addition,   in   response  to   Senator   French's                                                                    
     amendment,  the decisions  that  come  out of  Superior                                                                    
     Court are inconsistent as have  been the decisions that                                                                    
     come  out of  the board,  itself, and  their panels.  I                                                                    
     believe  that people  specifically knowledgeable  about                                                                    
     the  act  and  the  act  as  it  was  intended  by  the                                                                    
     Legislature,  you  our  representatives,  when  it  was                                                                    
     promulgated, that  it would be  a more  consistent fair                                                                    
     and  expeditious  process  being heard  by  people  who                                                                    
     understand and know  the act and are  familiar with it.                                                                    
     It is my belief that in  short order we will all find a                                                                    
     workers' compensation  system that will indeed  be more                                                                    
     efficient and predictable.  Therefore, it will decrease                                                                    
     the cost to  employers and the time  delay to employees                                                                    
     and  more  importantly  result  in  fair  and  adequate                                                                    
     compensation to our injured workers.                                                                                       
MS. JACKSON  "put on her  ad hoc hat" to  read a letter  into the                                                               
record  from the  Alaska  Labor Management  Ad  Hoc Committee  on                                                               
Workers' Compensation, dated March  4, 2004, addressed to Speaker                                                               
of the House, Pete Kott, and Senate President, Gene Therriault.                                                                 
     The    Ad   Hoc    Committee,    which   consists    of                                                                    
     representatives  from industry  and labor  historically                                                                    
     has  met periodically  to  address  issues that  affect                                                                    
     substantive  changes, issues  that  affect benefits  in                                                                    
     the Workers'  Compensation Act. In  January, management                                                                    
     and labor  decided that time  had come to  address such                                                                    
     issues  again.  In  the  meantime,  the  administration                                                                    
     proposed SB 311 and HB  450, which deal with procedural                                                                    
     issues, issues  regarding the makeup and  management of                                                                    
     the  board. Although  the Ad  Hoc  Committee had  never                                                                    
     dealt  with such  issues previously,  labor recommended                                                                    
     the Ad  Hoc Committee consider the  bill. The committee                                                                    
     reached agreement  on sections  of the bill  that refer                                                                    
     to  the Guaranty  Fund,  capping out-of-state  workers'                                                                    
     compensation at  what the  employees would  have earned                                                                    
     in-state,   placing   administrative   responsibilities                                                                    
     formerly  rested   in  the  board  with   the  Workers'                                                                    
     Compensation  Division  director,  uninsured  penalties                                                                    
     and  replace   the  Superior  Court  with   an  appeals                                                                    
     commission.  The  committee  has scheduled  no  further                                                                    
     meetings  on  the  issue. We  do,  however,  anticipate                                                                    
     meeting in the future  on substantive issues of concern                                                                    
     to both management and labor.                                                                                              
     Judith A. Peterson, President, WCCA                                                                                        
     Kevin Dougherty, Alaska Laborers                                                                                           
     Members of the Ad Hoc Committee                                                                                            
MR. KEVIN DOUGHERTY, Co-Chair, Ad Hoc Committee, said he is                                                                     
attorney for the Alaska District Council of Laborers and that                                                                   
they did reach agreement on the Guaranty Fund and the non-                                                                      
resident cost  of living  adjustment and  agreed to  preserve the                                                               
board  as it  is,  but  have an  appeals  commission replace  the                                                               
Superior Court and  added some uninsured employer  penalties of a                                                               
civil nature.  They hadn't agreed  on a  number of issues  and he                                                               
suggested that those items not move forward.                                                                                    
     I would  like to  point out that  the Ad  Hoc Committee                                                                    
     has   been  in   place  for   about  23   years.  After                                                                    
     legislation  that we  have worked  on jointly  with the                                                                    
     employer, the  decreases in premiums  have added  up to                                                                    
     over  40  percent  decrease in  premiums.  During  that                                                                    
     time, our  goal has been  to retain benefits and  we go                                                                    
     at it  in the same sphere  as here. So, it  is critical                                                                    
     that the  administration's bill does nothing  to impact                                                                    
     benefits. That's,  of course, why my  organization, the                                                                    
     Alaska Laborers, are  opposed to section 9  of the bill                                                                    
     and  opposed to  section 10  of the  bill, which  would                                                                    
     have wiped out the bill.  But, fortunately, we have the                                                                    
     news to report to you, as Ms. Jackson said, that we do                                                                     
     have agreement on five solid issues which we hope will                                                                     
     help the act overall.                                                                                                      
CHAIR BUNDE asked if anyone else wanted to testify on SB 311.                                                                   
Seeing no one, he closed public testimony.                                                                                      
SENATOR FRENCH moved amendment 1.                                                                                               
                      A M E N D M E N T  1                                                                                  
OFFERED IN THE SENATE                         BY SENATOR FRENCH                                                                 
     TO:  SB 311                                                                                                                
Page 1, lines 10 - 11:                                                                                                          
     Delete "Workers' Compensation Appeals Commission"                                                                        
     Insert "workers' compensation hearings office"                                                                           
Page 1, line 12:                                                                                                                
     Delete "Workers' Compensation Appeals Commission"                                                                        
     Insert "workers' compensation hearings office"                                                                           
Page 2, lines 5 - 6:                                                                                                            
     Delete "providing for supreme court jurisdiction of appeals                                                              
from the Workers' Compensation Appeals Commission;"                                                                           
Page 5, line 22:                                                                                                                
     Delete "Workers' Compensation Appeals Commission"                                                                      
     Insert "workers' compensation hearings office"                                                                         
Page 5, line 24:                                                                                                                
     Delete "Workers' Compensation Appeals Commission"                                                                      
     Insert "workers' compensation hearings office"                                                                         
Page 6, line 1:                                                                                                                 
     Delete "Workers' Compensation Appeals Commission"                                                                      
     Insert "workers' compensation hearings office"                                                                         
Page 7, lines 21 - 22:                                                                                                          
     Delete "Workers' Compensation Appeals Commission"                                                                          
     Insert "workers' compensation hearings office"                                                                             
Page 7, line 27, through page 11, line 2:                                                                                       
     Delete all material and insert:                                                                                            
   "* Sec. 11.  AS 23.30 is amended by adding a new section to                                                              
          Sec. 23.30.007.  Workers' compensation hearings                                                                   
     office.   (a)   There  is established  in the  Department of                                                             
     Labor  and  Workforce  Development a  workers'  compensation                                                               
     hearings  office.    The   hearings  office  hears  original                                                               
     petitions when a  claim is filed under this  chapter and has                                                               
     jurisdiction to  hear appeals from  decisions and  orders of                                                               
     the director.                                                                                                              
          (b)  The commissioner shall appoint a chief hearing                                                                   
     officer and assistant hearing officers.                                                                                    
          (c)  The chief hearing officer may                                                                                    
               (1)  employ and supervise office staff and                                                                       
     hearing officers and appoint a hearings office clerk;                                                                      
               (2)  establish and implement a time management                                                                   
     system  for   the  hearings   office,  staff,   and  hearing                                                               
               (3)  assign the work of the hearing officers and                                                                 
     staff  so   that  hearings  and  appeals   are  resolved  as                                                               
     expeditiously   and  competently   as  possible,   including                                                               
     designating  hearing officers  to hear  preliminary matters;                                                               
               (4)  prepare an annual budget of the hearings                                                                    
          (d)  The hearings office, in its administrative                                                                       
     capacity,  shall maintain,  index,  and  make available  for                                                               
     public  inspection the  final  administrative decisions  and                                                               
     orders  of the  hearing  officers.   To promote  consistency                                                               
     among legal  determinations, the  chief hearing  officer may                                                               
     review and  circulate among the  other hearing  officers the                                                               
     drafts of formal  decisions, decisions upon reconsideration,                                                               
     and other  legal opinions of  the other hearing  officers of                                                               
     the hearings office.  The  drafts are confidential documents                                                               
     and are not subject to disclosure.                                                                                         
          (e)  The hearings office, in its administrative                                                                       
     capacity, may  adopt regulations implementing  its authority                                                               
     and duties under this chapter,  including rules of procedure                                                               
     and  evidence for  proceedings  before  hearing officers  in                                                               
     workers'  compensation  proceedings under  AS 23.30.090  and                                                               
     23.30.110  and  for  the  adjudication  of  all  claims  and                                                               
     petitions under  this chapter.   The provisions  of AS 44.62                                                               
     (Administrative  Procedure Act)  apply  to  the adoption  of                                                               
     regulations by the hearings office.                                                                                        
          (f)  The hearings office shall award a successful                                                                     
     party reasonable costs  and, if the party  is represented by                                                               
     an  attorney,   attorney  fees  that  the   hearings  office                                                               
     determines   to  be   fully  compensatory   and  reasonable.                                                               
     However,  the  hearings office  may  not  make an  award  of                                                               
     attorney fees against an injured  worker unless the hearings                                                               
     office  finds  that  the worker's  position  on  appeal  was                                                               
     frivolous or  unreasonable or  the appeal  was taken  in bad                                                               
          (g)  The hearings office, in its administrative                                                                       
     capacity, may  adopt and alter  an official seal and  do all                                                               
     things necessary, convenient, or  desirable to carry out the                                                               
     powers  expressly granted  or  necessarily  implied in  this                                                               
Page 13, line 9:                                                                                                                
     Delete "with the office of the commission [BY"                                                                         
     Insert "by a hearing officer ["                                                                                        
Page 14, line 9:                                                                                                                
     Delete "commission"                                                                                                    
     Insert "hearings office"                                                                                               
Page 29, lines 27 - 28:                                                                                                         
     Delete "office of the commission"                                                                                      
     Insert "hearings office"                                                                                               
Page 30, line 3:                                                                                                                
     Delete "or commission"                                                                                                 
Page 30, line 14:                                                                                                               
     Delete  "office of  the commission,  and the  office of  the                                                       
commission "                                                                                                                
     Insert "hearings office, and the hearings office"                                                                  
Page 31, line 4, following "defense.", through line 17:                                                                         
     Delete all material.                                                                                                       
     Insert "[IF A  DISCOVERY DISPUTE COMES BEFORE  THE BOARD FOR                                                               
REVIEW OF A DETERMINATION BY  THE BOARD'S DESIGNEE, THE BOARD MAY                                                               
NOT CONSIDER ANY  EVIDENCE OR ARGUMENT THAT WAS  NOT PRESENTED TO                                                               
THE BOARD'S  DESIGNEE, BUT  SHALL DETERMINE  THE ISSUE  SOLELY ON                                                               
THE BASIS OF  THE WRITTEN RECORD. THE DECISION BY  THE BOARD ON A                                                               
DISCOVERY DISPUTE SHALL  BE MADE WITHIN 30 DAYS.  THE BOARD SHALL                                                               
UPHOLD   THE  DESIGNEE'S   DECISION  EXCEPT   WHEN  THE   BOARD'S                                                               
DESIGNEE'S DETERMINATION IS AN ABUSE OF DISCRETION.]"                                                                           
Page 32, line 1:                                                                                                                
     Delete "office of the commission"                                                                                      
     Insert "hearings office"                                                                                               
Page 32, lines 8 - 9:                                                                                                           
     Delete "office of the commission"                                                                                      
     Insert "chief hearing officer"                                                                                         
Page 32, lines 27 - 28:                                                                                                         
     Delete "commission"                                                                                                    
     Insert "director"                                                                                                      
Page 34, line 7:                                                                                                                
     Delete "commission"                                                                                                        
     Insert "hearings office"                                                                                                   
Page 34, line 11:                                                                                                               
     Delete "partially exempt service under AS 39.25.120"                                                                       
     Insert "classified service under AS 39.25.100"                                                                             
Page 34, lines 12 - 13:                                                                                                         
     Delete ", but is not a public employee for purposes of                                                                     
AS 23.40"                                                                                                                       
Page 34, line 31:                                                                                                               
     Delete "commission"                                                                                                        
     Insert "hearings office"                                                                                                   
Page 35, line 5:                                                                                                                
     Delete "commission"                                                                                                        
     Insert "hearings office"                                                                                                   
Page 35, lines 30 - 31:                                                                                                         
     Delete "commission or"                                                                                                 
Page 36, line 5:                                                                                                                
     Delete "commission or"                                                                                                 
Page 36, line 6:                                                                                                                
     Delete "The commission clerk"                                                                                          
     Insert "A hearing officer"                                                                                             
Page 36, line 9:                                                                                                                
     Delete "commission"                                                                                                    
     Insert "hearing officer"                                                                                               
Page 36, line 24:                                                                                                               
     Delete "office of the commission"                                                                                          
     Insert "hearings office"                                                                                                   
Page 36, line 27:                                                                                                               
     Delete "office of the commission"                                                                                          
     Insert "hearings office"                                                                                                   
Page 37, line 2:                                                                                                                
     Delete "commission"                                                                                                        
     Insert "hearings office"                                                                                                   
Page 37, line 4, through page 41, line 21:                                                                                      
     Delete all material and insert:                                                                                            
   "* Sec. 64. AS 23.30.125(a) is amended to read:                                                                          
          (a)  A compensation order becomes effective when filed                                                                
     with the director  [IN THE OFFICE OF THE  BOARD] as provided                                                           
     in AS 23.30.110,  and, unless proceedings  to suspend  it or                                                           
     set  it aside  are instituted  as  provided in  (c) of  this                                                               
     section,  it becomes  final  on  the 31st  day  after it  is                                                               
   * Sec. 65.  AS 23.30.125(c) is amended to read:                                                                            
          (c)  If not in accordance with law, a compensation                                                                    
     order filed by a hearing officer  as provided in (a) of this                                                           
     section may be suspended or set  aside, in whole or in part,                                                           
     through  injunction   proceedings  in  the   superior  court                                                               
     brought by a party in  interest against the division [BOARD]                                                           
     and  all  other  parties  to  the  proceedings  [BEFORE  THE                                                               
     BOARD].   The payment  of the amounts  required by  an award                                                               
     may not be  stayed pending final decision  in the proceeding                                                               
     unless upon application for  an interlocutory injunction the                                                               
     court on hearing, after not  less than three days' notice to                                                               
     the  parties in  interest and  the director  [BOARD], allows                                                           
     the stay of payment, in  whole or in part, where irreparable                                                               
     damage would otherwise ensue to  the employer.  The order of                                                               
     the court  allowing a stay  must [SHALL] contain  a specific                                                           
     finding,  based upon  evidence submitted  to  the court  and                                                               
     identified  by  reference  to it,  that  irreparable  damage                                                               
     would result to  the employer, and specifying  the nature of                                                               
     the damage.                                                                                                                
   * Sec. 66.  AS 23.30.125(d) is amended to read:                                                                            
          (d)  If an employer fails to comply with a                                                                            
     compensation order making an award  that has become final, a                                                               
     beneficiary of the  award or the director  [BOARD] may apply                                                           
     for the enforcement of the order  to the superior court.  If                                                               
     the court determines  that the order was made  and served in                                                               
     accordance with law,  and that the employer  or the officers                                                               
     or agents  of the  employer have failed  to comply  with it,                                                               
     the court  shall enforce obedience  to the order by  writ of                                                               
     injunction or  by other  proper process  to enjoin  upon the                                                               
     employer  and  the  officers  and  agents  of  the  employer                                                               
     compliance with the order.                                                                                                 
   * Sec. 67.  AS 23.30.125(f) is amended to read:                                                                            
          (f)  Subject to an employer's or employee's burden of                                                                 
     proof,  a  finding  of  fact made  by  the  hearing  officer                                                           
     [BOARD]  as a  part of  a compensation  order is  conclusive                                                               
     unless  the  court  specifically  finds  that  a  reasonable                                                               
     person could  not have  reached the  conclusion made  by the                                                               
     hearing officer [BOARD]."                                                                                              
Renumber the following bill sections accordingly.                                                                               
Page 46, lines 4 - 11:                                                                                                          
     Delete all material.                                                                                                       
Renumber the following bill sections accordingly.                                                                               
Page 55, line 24:                                                                                                               
     Delete ", the commission,"                                                                                             
Page 56, lines 3 - 9:                                                                                                           
     Delete all material and insert:                                                                                            
               "(35)  "director" means the director of the                                                                      
     division of workers' compensation;                                                                                         
               (36)  "division" means the division of workers'                                                                  
               (37)  "hearing officer" means a hearing officer                                                                  
     employed under AS 23.30.112 to hear workers' compensation                                                                  
     claims and petitions under this chapter;                                                                                   
               (38)  "hearings office" means the workers'                                                                       
     compensation hearings office established by AS 23.30.007."                                                                 
Page 56, lines 13 - 20:                                                                                                         
     Delete all material and insert:                                                                                            
   "* Sec. 103.  AS 39.25.120(c) is amended by adding a new                                                                 
paragraph to read:                                                                                                              
               (20)  the reemployment benefits administrator of                                                                 
     the division of workers' compensation in the Department of                                                                 
     Labor and Workforce Development."                                                                                          
Renumber the following bill sections accordingly.                                                                               
Page 56, line 25:                                                                                                               
     Delete "and"                                                                                                               
     Insert ";"                                                                                                                 
     Following "AS 23.30.395(3)":                                                                                               
          Insert "; and AS 39.50.200(b)(31)"                                                                                    
Page 56, line 28:                                                                                                               
     Delete "sec. 86"                                                                                                           
     Insert "sec. 87"                                                                                                           
Page 56, line 29:                                                                                                               
     Delete "sec. 86"                                                                                                           
     Insert "sec. 87"                                                                                                           
Page 57, lines 13 - 18:                                                                                                         
     Delete all material.                                                                                                       
Renumber the following bill sections accordingly.                                                                               
Page 58, line 13:                                                                                                               
     Delete "Section 110"                                                                                                       
     Insert "Section 109"                                                                                                       
Page 58, line 14:                                                                                                               
     Delete "sec. 111"                                                                                                          
     Insert "sec. 110"                                                                                                          
CHAIR BUNDE objected for discussion purposes.                                                                                   
SENATOR  FRENCH  explained  that  amendment 1  would  remove  the                                                               
appeals  commission that  would replace  the appeals  function of                                                               
the Superior  Court. SB  311 calls for  the appointment  of three                                                               
appeals commissioners who would  be confirmed by the Legislature.                                                               
The  bill  calls   for  two  range  29   commissioners  with  the                                                               
commission chair set at range 30.                                                                                               
     Our  committee  heard  testimony... that  the  Superior                                                                    
     Court hears  some 36 workers'  comp appeals  each year.                                                                    
     Creating three new highly paid  state employees to hear                                                                    
     36  appeals per  year seems  extravagant. The  proposed                                                                    
     amendment  would  keep  the  appeals  function  in  the                                                                    
     Superior Court.                                                                                                            
     The  amendment  also  keeps  the  hearing  officers  in                                                                    
     classified  service.   SB  311   as  it   stands  would                                                                    
     reclassify the  hearing officers into  partially exempt                                                                    
     service.  Keeping the  hearing  officers in  classified                                                                    
     service gives  these decision makers  greater autonomy.                                                                    
     The proposed amendment does not  alter the basic thrust                                                                    
     of SB 311;  it merely streamlines the  reforms that the                                                                    
     bill  envisions. I'll  close by  saying that  I believe                                                                    
     the most  apolitical appeals panel available  is in the                                                                    
     Superior  Court. These  are  judges  appointed to  long                                                                    
     terms.  They are  mostly  isolated  from the  political                                                                    
     process. They  have all  the autonomy  in the  world to                                                                    
     hear these  appeals. From the  testimony we  heard from                                                                    
     Mr.  Wooliver  [Alaska  Court System],  they're  rarely                                                                    
     overturned  when  those  decisions go  to  the  Supreme                                                                    
     I also  took to heart  the part of his  testimony about                                                                    
     how  a  litigant  feels   facing  an  in-house  appeals                                                                    
     commission. I  can just speak  for myself - I'd  want a                                                                    
     guy  in  a black  robe  to  decide  my case.  I'd  want                                                                    
     someone  who  isn't a  state  employer  per se  in  the                                                                    
     Department  of Administration  to hear  my case.  And I                                                                    
     think  what we're  going to  do is  simply create  this                                                                    
     enormous pass-through of  decisions through the appeals                                                                    
     commission  on  to  the Supreme  Court  clogging  their                                                                    
     calendar more. So, I think  in these tough budget times                                                                    
     to create three new - two range  29s and a range 30 - a                                                                    
     range 30 is  over $100,000 per year. I  just think that                                                                    
     there  are school  districts all  over  the state  that                                                                    
     would love to  have some of these  employees that we're                                                                    
     thinking about creating here.                                                                                              
     For that reason and also  for the reason of keeping the                                                                    
     hearing officers  in classified  service, that's  a way                                                                    
     to  give  them  some  political  cover  for  the  tough                                                                    
     decisions they make every day.  Keep them in classified                                                                    
     service   and  let   them  go   about  their   business                                                                    
     unsupervised, really, by a state  supervisor who may be                                                                    
     putting pressure on them to go one way or the other.                                                                       
CHAIR BUNDE remarked that his concern about the cost resonates                                                                  
with him.                                                                                                                       
     I, at  this point, think  that maybe the total  cost to                                                                    
     the public  might be less avoiding  the Superior Court,                                                                    
     but again  those are areas that  I don't have a  lot of                                                                    
     personal experience.  I would  prefer to send  the bill                                                                    
     forward as  it is and  let Judiciary review  that issue                                                                    
     and continue my opposition to the amendment.                                                                               
A roll call vote was taken on amendment 1. Senators Gary Stevens                                                                
and Chair Bunde voted nay; Senator French voted yea. Amendment 1                                                                
was not adopted.                                                                                                                
1:58 - 2:04 - at ease                                                                                                           
CHAIR BUNDE said that SB 311 would be set aside for the moment.                                                                 
             HB 340-DAMAGES IN CONSTRUCTION CLAIMS                                                                          
CHAIR CON BUNDE announced HB 340 to be up for consideration.                                                                    
REPRESENTATIVE  KEVIN MEYERS,  sponsor, said  that HB  340 limits                                                               
damages that  can be  collected due to  a construction  defect to                                                               
four  things:  the actual  cost  of  the repairs  necessary,  the                                                               
reasonable  attorney   costs  and   fees,  reasonable   costs  of                                                               
temporary  housing and  the reduction  in market  value, if  any,                                                               
caused by the construction defect.                                                                                              
     What  this bill  doesn't do,  it doesn't  cap the  cost                                                                    
     that can  be collected  if the construction  defect was                                                                    
     done through gross negligence or  if there was personal                                                                    
     injury or death involved.                                                                                                  
     The reason we  are bringing this bill  forward is that,                                                                    
     as you know,  in the State of  Alaska general liability                                                                    
     insurance  is  a  requirement  for  the  folks  in  the                                                                    
     homebuilding and  construction industry. Unfortunately,                                                                    
     it  is  extremely  difficult  for   them  to  get  this                                                                    
     insurance. When they do get  it, it is very limited and                                                                    
     very  costly.  Unfortunately,   those  costs  then  get                                                                    
     passed on to our  constituents, the consumer, when they                                                                    
     try to  buy a new house.  In fact, the State  of Nevada                                                                    
     has  estimated that  every time  the insurance  goes up                                                                    
     $1,000, - 1,400  people then do not qualify  for a home                                                                    
     and these folks are first-time homebuyers.                                                                                 
     Currently,  there are  two companies  writing insurance                                                                    
     in  Alaska. What  we're  hoping this  bill  will do  is                                                                    
     encourage   more  insurance   companies  to   write.  A                                                                    
     question that is  frequently asked is well,  if we pass                                                                    
     this  bill, will  the  insurance rates  go  down and  I                                                                    
     can't guarantee  that, Mr. Chairman, and  I don't think                                                                    
     anybody can.  However, what we  do know is that  if you                                                                    
     have  more competition,  then theoretically,  the rates                                                                    
     should come down.                                                                                                          
     As  we all  know,  the  price of  housing  is going  up                                                                    
     statewide and  we certainly  can't control  labor costs                                                                    
     and we can't control the  price of goods that they have                                                                    
     to pay  for or even  the availability of land.  What we                                                                    
     can do  is attempt  to control  the cost  of insurance,                                                                    
        which is a requirement that we have put on this                                                                         
     The other thing  I like about this  bill, Mr. Chairman,                                                                    
     is that it  rewards the good builders  and punishes the                                                                    
     bad  builders in  the  sense that  this  bill does  not                                                                    
     pertain to  those builders out  there who are  in gross                                                                    
     negligence, but  it will help  those who are  trying to                                                                    
     do good...and the industry would agree....                                                                                 
MR. DAVID DILLARD, 321 Construction,  Inc., said he builds upper-                                                               
end custom  homes from $150,000 to  $600,000 and about 5  - 6 per                                                               
year.  Jack  Randall  with  State Farm  Insurance  has  been  his                                                               
representative for  15 years. He  has never had any  claims. Last                                                               
year  workers' compensation  cost him  about $6,500  per million,                                                               
but this year  the only company that talked to  him so far wanted                                                               
$20,000 for less coverage. Another  company wouldn't even talk to                                                               
him  for less  than  $50,000. He  didn't know  how  he could  pay                                                               
$10,000 per house for insurance.  He supported HB 340 although it                                                               
isn't a cure-all bill. [Indisc.]                                                                                                
MR.  JEFF DESMET,  Alaska Homebuilders  Association,  said he  is                                                               
considered one  of the  better builders  in the  area, but  he is                                                               
considering getting  out of the  business next year  because it's                                                               
more and more difficult to  be a small business owner, especially                                                               
with  increasing insurance  premiums. Last  year he  was able  to                                                               
acquire insurance for  this year, but for double  the premium for                                                               
less  coverage. He  supported everything  Mr. Dillard  said about                                                               
the  difficulty he  faces as  a builder.  "I just  want to  go on                                                               
record saying I support HB 340...."                                                                                             
MR.  RAY HICKEL,  Alaska Homebuilders  Association, supported  HB                                                               
340. [His testimony was indisc.].                                                                                               
MR. LARRY  PARTUSCH, Partusch Plumbing  and Heating  and Northern                                                               
Sheet  Metal Fabricators,  said that  Representative Meyer  did a                                                               
great job  with this bill.  He put  some numbers together  on new                                                               
construction homes and the cost  of insurance for a $220,000 home                                                               
is  7 percent,  which  is really  ridiculous.  "Since 1982,  I've                                                               
plumbed  about 6,000  houses and  I've had  one claim  against my                                                               
insurance and I've heated about 4,500. [Indisc.]"                                                                               
MS.  ROBIN WARD,  Legislative  Chair,  Alaska State  Homebuilders                                                               
Association, said  she supported all builders'  previous comments                                                               
and would answer questions.                                                                                                     
CHAIR BUNDE said that her members  were doing a good job for her.                                                               
"You'd better  be careful or  they'll ask  you for a  refund." He                                                               
asked Representative Meyer if he  had any concluding comments. He                                                               
indicated  not. The  chair  said the  bill would  be  held for  a                                                               
hearing next week.                                                                                                              
SENATOR  GARY  STEVENS  asked  if  any  builders  avoid  carrying                                                               
insurance and is that an issue.                                                                                                 
REPRESENTATIVE MEYER replied, "That is the concern...."                                                                         
2:18 - 2:20 - at ease                                                                                                           
        SB 311-INSURANCE & WORKERS' COMPENSATION SYSTEM                                                                     
CHAIR CON BUNDE announced SB 311  to be back before the committee                                                               
and that  public testimony had  been closed. Amendments  had been                                                               
SENATOR RALPH  SEEKINS moved to  pass SB 311 from  committee with                                                               
individual  recommendations  and  attached fiscal  note.  SENATOR                                                               
FRENCH objected.  A roll call  vote was taken.  Senators Seekins,                                                               
Gary Stevens and Chair Bunde  voted yea; and Senator French voted                                                               
nay; and  SB 311 moved  from committee.  The chair noted  that he                                                               
would ask the Senate President for a Judiciary referral.                                                                        
          SB 323-WORKERS COMPENSATION AND CONTRACTORS                                                                       
CHAIR CON BUNDE announced SB 323 to be up for consideration.                                                                    
SENATOR  RALPH SEEKINS,  sponsor, explained  that it  revises the                                                               
workers'  compensation  acts as  it  applies  to contractors  and                                                               
     The two principal modifications  are really as follows:                                                                    
     First,  the  responsibility  for  payment  of  workers'                                                                    
     compensation is  extended up the chain  of contracts to                                                                    
     include  project owners.  Secondly, injured  parties in                                                                    
     receipt  of benefits  under  the Workers'  Compensation                                                                    
     Act  would be  barred from  double dipping  via a  tort                                                                    
     liability  claim.  Under  AS 23.30.045(a),  an  injured                                                                    
     employee  only has  recourse  to workers'  compensation                                                                    
     benefits  against his  immediate employer  and, if  the                                                                    
     employer  is a  subcontractor,  against the  contractor                                                                    
     who retained the subcontractor.                                                                                            
     The  proposed legislation  allows recourse  for payment                                                                    
     of  compensation  benefits  against project  owners  as                                                                    
     well as contractors  and subcontractors. This extension                                                                    
     of  the   rights  of  injured  employees   is  sensible                                                                    
     inasmuch as  the project owner  is the  beneficial user                                                                    
     of  the  work performed  by  the  injured employee.  It                                                                    
     should be noted  that a project owner  does not include                                                                    
     individuals   who   have   engaged  the   services   of                                                                    
     contractors to build or renovate a residential home.                                                                       
     Finally,   the   proposed   legislation   extends   the                                                                    
     exclusivity provision set forth  in AS 23.30.055 to all                                                                    
     parties  in the  contracting claim  chain related  to a                                                                    
     project.  This includes  the  employer  of the  injured                                                                    
     employee  and those  parties that  are upstream  in the                                                                    
     chain  of contracts  from the  employer of  the injured                                                                    
     employee. In other words, if  an injured employee works                                                                    
     for  a  subcontractor,   then  the  subcontractor,  the                                                                    
     contractor  and project  owner would  be  free of  tort                                                                    
     liability so long as the  injured employee receives the                                                                    
     benefits set forth in  the Alaska Workers' Compensation                                                                    
     SB 323  will encourage  all parties participating  in a                                                                    
     project   to  identify   and   enforce  strict   safety                                                                    
     standards for  the benefit of  all workers  rather than                                                                    
     deflecting responsibility through  the use of indemnity                                                                    
     agreements as is the common  practice currently. At the                                                                    
     same  time, it  insures that  the injured  workers will                                                                    
     receive  all   benefits  available  under   the  Alaska                                                                    
     Workers   Compensation  Act.   It   is  intended,   Mr.                                                                    
     Chairman,  to eliminate  double  dipping,  but to  make                                                                    
     sure that every employee on  a project is covered under                                                                    
     the act.                                                                                                                   
CHAIR BUNDE explained that this would expand the requirement to                                                                 
carry workers' compensation insurance from the subcontractor and                                                                
the contractor to the project manager.                                                                                          
SENATOR SEEKINS replied that everyone in the up chain must make                                                                 
sure that every worker on the job is covered no matter who they                                                                 
work for.                                                                                                                       
CHAIR  BUNDE asked  if currently  you're a  contractor, you  need                                                               
workers' compensation.                                                                                                          
SENATOR SEEKINS replied yes, for employees.                                                                                     
CHAIR  BUNDE   said  that  subcontractors  might   not  have  the                                                               
insurance  because  they might  not  be  covered by  the  owner's                                                               
SENATOR SEEKINS  responded that a  subcontractor might be  a sole                                                               
proprietorship  and might  say  he doesn't  need  to buy  workers                                                               
CHAIR  BUNDE  wanted  to  go  the other  way  and  asked  if  the                                                               
contractor has a policy, does the  project manager have to have a                                                               
policy as well.                                                                                                                 
SENATOR  SEEKINS  replied  that   the  project  manager  has  the                                                               
responsibility to make sure that they are covered.                                                                              
     If that  means they have  to carry the policy,  I guess                                                                    
     they would  have to.  It's a  downstream responsibility                                                                    
     to make sure  that every worker that's  on that project                                                                    
     is  covered.... We're  trying  to  avoid the  situation                                                                    
     that  does  exist  where  someone   is  injured  and  a                                                                    
     subcontractor,  for example,  is  saying that  he is  a                                                                    
     sole proprietorship  and doesn't need it.  Then they're                                                                    
     injured and they go and  say we were really an employee                                                                    
     and goes to the board  saying we want coverage. In many                                                                    
     cases that happens. [END OF TAPE]                                                                                          
TAPE 04-19, SIDE B                                                                                                            
[SIDE B IS BLANK. GO ON TO TAPE 04-20, SIDE A]                                                                                  
TAPE 04-20, SIDE A                                                                                                            
2:25 p.m.                                                                                                                       
SENATOR SEEKINS continued:                                                                                                      
     That means that  the project owner, before  he can hire                                                                    
     that subcontractor or contractor  has to make sure that                                                                    
     those  people  are  covered  or  carry  that  coverage,                                                                    
CHAIR BUNDE said in all  likelihood, the project manager wouldn't                                                               
hire contractors who don't carry  insurance or would require some                                                               
kind of  proof of  coverage rather  than purchase  the insurance,                                                               
SENATOR  SEEKINS   said  project   managers  generally   sign  an                                                               
indemnification   agreement.  They   don't  care   because  their                                                               
negligence can  go right back  to the contractor. Because  of the                                                               
way courts  have ruled in  some cases, project owners  don't even                                                               
want  to  get  into  whether  the  contractor  is  having  safety                                                               
meetings, etc., because then, they are knowingly involved.                                                                      
SENATOR GARY STEVENS  asked what kind of proof  would be required                                                               
so a project owner would not have to purchase it.                                                                               
SENATOR SEEKINS replied, "Through certificates of insurance."                                                                   
SENATOR FRENCH asked why people  who build a residential home are                                                               
excluded from the bill.                                                                                                         
SENATOR SEEKINS answered:                                                                                                       
     I am excluding homeowners who  may hire someone to come                                                                    
     in  to fix  their driveway  or  fix their  roof or  fix                                                                    
     their  bathroom   leak  from  being  included   in  the                                                                    
     definition of project owner.                                                                                               
SENATOR FRENCH asked if they would still have tort liability.                                                                   
SENATOR  SEEKINS said  they are  looking primarily  at commercial                                                               
MS.  PAM LABOLLE,  President, Alaska  State Chamber  of Commerce,                                                               
said  this  issue was  brought  forward  by her  membership.  Her                                                               
personal experience in this area  is limited, but she promised to                                                               
take any questions she couldn't answer to the group.                                                                            
     We are  in support, obviously, of  this legislation....                                                                    
     This has  been done in  several other states.  The risk                                                                    
     of injury to employees engaged  in work on a project is                                                                    
     the same  regardless of whether the  employer works for                                                                    
     a subcontractor,  the contractor or the  project owner.                                                                    
     The immediate  employer and other  project participants                                                                    
     are  obligated   to  an  injured   employee's  workers'                                                                    
     compensation  benefits regardless  of fault  in causing                                                                    
     the  injury. So,  all  project  participants should  be                                                                    
     free of  tort liability. The project  participants take                                                                    
     an integrated  approach to  completion of  the project;                                                                    
     they  are a  part of  it. Therefore,  the price  of the                                                                    
     insurance  is worked  into  the  contract when  someone                                                                    
     contracts  to build  something for  someone.... So  the                                                                    
     project  owner  is,  in essence,  paying  part  of  the                                                                    
     workers' compensation insurance. In  the event a worker                                                                    
     is  injured,  he or  she  is  entitled to  receive  the                                                                    
     compensation   benefits  regardless   of  fault.   This                                                                    
     includes situations where no one  is at fault and where                                                                    
     the  injured  employee,   himself,  is  exclusively  at                                                                    
     fault. In exchange for  accepting liability payments of                                                                    
     workers'  compensation  benefits regardless  of  fault,                                                                    
     the injured  employees need an  employer and  all other                                                                    
     parties who are potentially  liable for the payments of                                                                    
     workers'   compensation  benefits   should  enjoy   the                                                                    
     immunity from tort claims.                                                                                                 
     Evidently,  in  Alaska  law, project  owners  were  not                                                                    
     historically liable  for injuries  caused by  action or                                                                    
     inaction of independent  contractors they retained. For                                                                    
     example, when  the State of Alaska  retains a qualified                                                                    
     contractor as an independent  contractor to construct a                                                                    
     roadway, the  state should not  be liable  for injuries                                                                    
     suffered by  the employees of  the contractor.  In that                                                                    
     situation, by contract,  the contractor represents that                                                                    
     he has the necessary expertise  to build the road, that                                                                    
     he  has  the  necessary  tools and  equipment  and  the                                                                    
     experienced workmen  to complete the work.  Because the                                                                    
     contractor,  not the  state, prosecutes  the work,  the                                                                    
     state should  be free of  court liability in  the event                                                                    
     that an  employee of the  contractor is injured  in his                                                                    
     course of work.                                                                                                            
     In  Alaska, the  courts  have substantially  diminished                                                                    
     the independent contractor rule  by adoption of what is                                                                    
     referred  to as  the retained  control doctrine.  Under                                                                    
     the   doctrine,  parties   other  than   an  employee's                                                                    
     immediate  employer  can  be liable  in  tort  for  any                                                                    
     injury to  an employee of an  independent contractor if                                                                    
     the party retains any amount  of control over the work,                                                                    
     including the  right to review the  contractor's safety                                                                    
     practices. That's  one of the  benefits that  this bill                                                                    
     would  bring about.  Right now,  the  project owner  is                                                                    
     better to have hands-off  control over the contractors,                                                                    
     including their  safety practices, in order  to protect                                                                    
     themselves. With  the passage of this  legislation, the                                                                    
     benefit would be that they  would have more of a reason                                                                    
     and it would be to their  benefit to make sure that all                                                                    
     safety practices are followed.                                                                                             
     Secondly,  the  Alaska  Workers'  Compensation  Act  is                                                                    
     intended  to provide  injured  workers with  reasonable                                                                    
     compensation  for their  work-related injuries  without                                                                    
     regard  or   fault.  If  the  levels   of  compensation                                                                    
     benefits are  not adequate to fully  compensate injured                                                                    
     workers,  then  the  amount  and  type  of  recoverable                                                                    
     benefits  should  be   reviewed.  However,  an  injured                                                                    
     worker  should  not  be  allowed  to  recover  workers'                                                                    
     compensation  benefits and  then be  allowed to  assert                                                                    
     tort claims for that  same work-related injury. Injured                                                                    
     employees  should be  compensated only  once for  their                                                                    
     work-related  injuries  and the  Workers'  Compensation                                                                    
     system has been set up specifically to do just that.                                                                       
     Third, the  tort claims based  on the  retained control                                                                    
     doctrine  burden the  court system  by allowing  claims                                                                    
     under  the workers'  compensation  system and  separate                                                                    
     claims in state  Superior Court based on  tort law. The                                                                    
     proposed   amendment   would  encourage   all   parties                                                                    
     participating  in a  project  to  identify and  enforce                                                                    
     strict safety standards for the  benefit of all workers                                                                    
     while at  the same  time insuring that  injured workers                                                                    
     will receive  all benefits  available under  the Alaska                                                                    
     Workers'  Compensation   Act.  Job  safety   should  be                                                                    
     everyone's main  concern and the proposed  amendment is                                                                    
     the best  way to meet the  goal while at the  same time                                                                    
     protecting the injured workers.                                                                                            
CHAIR BUNDE asked her if she  was contending that if this passed,                                                               
a  project  owner  would  demand   proof  under  potential  legal                                                               
liability   for  loss   that   their   contractor  has   workers'                                                               
compensation and then  the contractor would have  the same demand                                                               
on subcontractors. He wondered about the double coverage.                                                                       
MS.  LABOLLE replied  that is  her understanding,  but she  would                                                               
CHAIR  BUNDE said  if that  were  true, he  thought that  project                                                               
owners should  want to  have some  kind of  workers' compensation                                                               
coverage as  well, in the  event someone was fraudulent  in their                                                               
SENATOR FRENCH  indicated to Ms.  LaBolle that he  was addressing                                                               
his remarks  to the  people who  do have  expertise. He  had some                                                               
issues with her statement from the State Chamber, especially the                                                                
part about Alaska law and wanted their response.                                                                                
     I'll begin  by saying that  I read both the  cases that                                                                    
     the Alaska law  section of your report  refers to, both                                                                    
     the  Martinson vs  Arco case  and the  Miloso vs  State                                                                    
     case. The  real issue I  have with some of  the remarks                                                                    
     in here  specifically with respect to  safety practices                                                                    
     is this.  The assertion is -  in this section -  that a                                                                    
     project owner can  be liable in tort for  any injury to                                                                    
     an employee  of an independent contractor  if the party                                                                    
     retains any  amount of control over  the work including                                                                    
     the right to review the contractor's safety practices.                                                                     
     After I read  Martinson and after I read  Miloso, I was                                                                    
     left  with the  belief that  that's just  not true,  at                                                                    
     least  under those  two  cases.  That's absolutely  not                                                                    
     true. Indeed,  the Martinson  case says  that everybody                                                                    
     does have a common law  duty to provide a safe worksite                                                                    
     to  independent contractor  employees, if  the employer                                                                    
     supplies or controls the  worksite. That's the retained                                                                    
     control. So, if  you supply the warehouse  and you know                                                                    
     there's a  vat of poisonous waste  inside the worksite,                                                                    
     you  should probably  put  a sign  on  there that  says                                                                    
     don't weld here, don't drill  here, don't get in behind                                                                    
     this poisonous vat.  The Martinson case goes  on to say                                                                    
     that  there  are  bright   lines  of  what  constitutes                                                                    
     retained  control. It  further  says  that an  employer                                                                    
     does not  retain control if the  employer only reserves                                                                    
     the right to inspect the  work to see that the contract                                                                    
     specifications   are  met   -  while   the  independent                                                                    
     contractor  controls how  and  when the  work is  done.                                                                    
     Then it  says an  employer does  retain control  if the                                                                    
     employer retains the right to  direct the manner of the                                                                    
     independent   contractor's   performance   or   assumes                                                                    
     affirmative duties with respect to safety.                                                                                 
     So, when  I read  in this synopsis  of Alaska  law that                                                                    
     you  can be  sued  in court  for  simply reviewing  the                                                                    
     contractor's  safety practices,  I  find the  statement                                                                    
     almost  directly in  opposition to  that in  Martinson.                                                                    
     So, I would  appreciate it if you can go  on to whoever                                                                    
     wrote that and  come back and say no, no,  no, here's a                                                                    
     better read  on that.  So, I guess  my question  is are                                                                    
     there  other cases  that I'm  unaware of  besides these                                                                    
     two that you've cited that  I've gone ahead and read or                                                                    
     is it simply  the position of the author  of this paper                                                                    
     that these  cases really  do stand  for what's  here in                                                                    
     this write up. Thank you.                                                                                                  
MS. LABOLLE said she would take that back to the author.                                                                        
SENATOR SEEKINS  said this bill makes  project owners responsible                                                               
to make sure that  any of the workers that are  hired either by a                                                               
contractor  or  by  a subcontractor  are  covered  with  workers'                                                               
compensation insurance regardless of  the area of responsibility,                                                               
because that's a point that can be argued on both sides.                                                                        
     I've talked to  some of the attorneys on  both sides of                                                                    
     the issue  as well. But  in this  case, as I  read this                                                                    
     bill  and the  way  we've put  this  bill together,  it                                                                    
     would now require  that every employee on  that site be                                                                    
     covered  with workers'  compensation [insurance].  Am I                                                                    
MS. LABOLLE replied that is her understanding.                                                                                  
SENATOR SEEKINS asked if that is good public policy or bad.                                                                     
MS. LABOLLE replied that she thought that is good public policy.                                                                
SENATOR  SEEKINS continued  his thought  saying that  it protects                                                               
the  employee  at whatever  level.  He  has had  experience  with                                                               
people who  have said  they don't want  any employees;  all their                                                               
employees  were going  to  be  subcontractors with  subcontractor                                                               
agreements - the  idea being that they don't want  to have to pay                                                               
workers' compensation  insurance. He asked  if she had  seen that                                                               
MS. LABOLLE replied yes.                                                                                                        
SENATOR SEEKINS  said this bill absolutely  makes that impossible                                                               
to happen.                                                                                                                      
MS. LABOLLE replied that is her understanding.                                                                                  
SENATOR SEEKINS said:                                                                                                           
     That's  what we're  after. Whether  we argue  where the                                                                    
     line  of  responsibility  is,   what  we're  trying  to                                                                    
     protect here, Mr. Chairman, is  the employer who may be                                                                    
     forced  into a  subcontractor situation  because that's                                                                    
     the  kind of  scumbag  he  might be  working  for as  a                                                                    
     contractor. We've all seen it  done.... The intent here                                                                    
     is  to  say  everyone  is   covered  and  you  have  an                                                                    
     exclusive remedy.                                                                                                          
CHAIR BUNDE  said he  had personal knowledge  of people  who have                                                               
been  creative  in  defining subcontractors  to  avoid  insurance                                                               
payments.  He  said  there  was  a  question  earlier  about  the                                                               
relationship of  the homeowner contracting  to have  some repairs                                                               
or to have  a house built; he saw headshaking  from the insurance                                                               
section of the audience.                                                                                                        
SENATOR SEEKINS responded:                                                                                                      
     Mr. Chairman, I wouldn't have  any problem with that as                                                                    
     long  as the  homeowner is  willing to  make sure  that                                                                    
     they provide workers' compensation  for somebody on the                                                                    
     same basis that a project owner would.                                                                                     
MR. MIKE LESSMEIER,  State Farm Insurance, said  he practiced law                                                               
in  this state  for  almost  25 years  and  could answer  Senator                                                               
French's question.                                                                                                              
     Right now under the law, if  you hire a plumber to come                                                                    
     into your  house or  an electrician  or even  a general                                                                    
     contractor to build  your house for you,  it's hard for                                                                    
     me to see  how you would have any  liability to someone                                                                    
     that  was injured  on the  job. The  analysis that  you                                                                    
     talked about  when you reviewed  those two  cases would                                                                    
     probably  be  the  analysis to  go  through.  In  other                                                                    
     words, you would  look to see if  the homeowner retains                                                                    
     sufficient control  over the  details of the  work that                                                                    
     is performed. I've rarely seen  that kind of liability;                                                                    
     I've rarely  even seen the  attempt to  make homeowners                                                                    
     liable under  those sorts of circumstances.  One of our                                                                    
     concerns in  looking at  this bill  was whether  it was                                                                    
     intended to  cover homeowners and  people, but  it does                                                                    
CHAIR  BUNDE thanked  him  and  asked if  anyone  else wanted  to                                                               
testify on SB 323.                                                                                                              
MR. DAVE DILLARD,  321 Construction, asked, "Why can't  we make a                                                               
homeowner liable  for whoever  has worked on  his house  to build                                                               
that house?"                                                                                                                    
CHAIR BUNDE  replied, "I'm  not sure  why we  can't. I'm  sure we                                                               
could. The question might be why would you want to, but."                                                                       
MR. DILLARD replied:                                                                                                            
     Because  technically,  a  homeowner  can  call  up  job                                                                    
     service  and  have  the  people   come  out  and  start                                                                    
     building the house  and if he pays over  $600, he's got                                                                    
     to  hold  back  federal   income  tax  and  stuff,  but                                                                    
     technically,  he  doesn't  have  to  cover  them  under                                                                    
     liability workers'  compensation. Why wouldn't  we want                                                                    
     him to cover that person?                                                                                                  
CHAIR  BUNDE answered  that he  would have  to ask  the insurance                                                               
industry  again,  but  he  suspected   there  would  be  personal                                                               
SENATOR SEEKINS inserted:                                                                                                       
     I   wouldn't   have   a  problem   holding   homeowners                                                                    
     responsible  provided -  but here  again we're  getting                                                                    
     into a situation  where when I hire someone  to work on                                                                    
     my  house,  they're  a sole  proprietorship  and  under                                                                    
     current law, as  I understand it, as long  as I haven't                                                                    
     set a  booby trap  for them some  way or  another, they                                                                    
     are the  expert in what  a safe workplace would  be and                                                                    
     I'm just a homeowner who  may not be capable, or should                                                                    
     not  even be  capable  of, being  able  to assess  that                                                                    
     responsibility.  But the  professional holding  himself                                                                    
     out    as    professional     has    that    additional                                                                    
MR. DILLARD said  he could build one house a  year as a homeowner                                                               
and not have to  pay any of that. His son and  wife could build a                                                               
house a  year, too. He thought  everyone should be able  to build                                                               
his  own house,  but he  didn't see  why they  shouldn't have  to                                                               
take liability for  people who were hired to work  on it the same                                                               
way a professional builder has to.                                                                                              
CHAIR BUNDE  said, "I think if  you're going to have  a potential                                                               
homeowner have  workers' compensation, well, why  would they ever                                                               
have  a general  contractor  then, because  that's just  doubling                                                               
their expense?"                                                                                                                 
CHAIR BUNDE said this bill would  be set aside for a future date.                                                               
There being no further business  to come before the committee, he                                                               
adjourned the meeting at 2:50 p.m.                                                                                              

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