Legislature(1993 - 1994)
03/25/1993 05:12 PM Senate O&G
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* first hearing in first committee of referral
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+ teleconferenced
= bill was previously heard/scheduled
SENATE SPECIAL COMMITTEE ON OIL & GAS
March 25, 1993
5:12 p.m.
MEMBERS PRESENT
Senator Loren Leman, Chairman
Senator Judith Salo
MEMBERS ABSENT
Senator Rick Halford
Senator Bert Sharp
Senator Al Adams
COMMITTEE CALENDAR
Group Insurance Pooling
WITNESS REGISTER
Larry Eppenbach
Legislative Research Agency
130 Seward St. Suite 218
Juneau, Alaska 99801-2196
POSITION STATEMENT: Commented on Group Insurance Pooling.
Ray Gillespie
Association of Refined Fuel Distributors
9478 Riverbend Court
Juneau, Alaska 99801
POSITION STATEMENT: Commented on Direct Action Insurance.
James Cantor, Assistant Attorney General
Department of Law
1031 W. 4th, Suite 200
Anchorage, Alaska 99501-1994
POSITION STATEMENT: Commented on Direct Action Insurance.
ACTION NARRATIVE
TAPE 93-11, SIDE A
Number 001
SENATOR LEMAN called the Special Committee on Oil and Gas
meeting to order at 5:12 p.m. and announced they would
discuss group insurance pooling.
LARRY EPPENBACH, Legislative Research, said his report grew
out of SB 405 from last year which was remedial in nature.
It solved the open ended liability insurance companies faced
with uncertain coverage amounts that could have exceeded
their policies. SB 405 limited the policy amounts.
The Section of SB 405 addressed to non-crude operators
waived a requirement for non-crude operators to pay for
financial responsibility with insurance with a direct action
clause.
The major findings in this report say that state or private
pooling isn't likely to create a competitive insurance
product, because there are not that many non-crude
operators. There are about 72 in the state and 9 of those
are exempt (because they're part of the federal government),
29 are quite large and self insure or are guaranteed by
others. Thirty one of them purchase insurance. Six of
those have insurance that successfully contains a direct
action clause. The other 25 have been granted waivers by
the DEC.
The most attractive alternative is for a private insurance
product to be developed that would have a direct action
clause. There are two ways that could occur, MR. EPPENBACH
said. One, the clause could be directly in the insurance,
and two, an umbrella policy could be written that provided
direct action in addition to other insurance the operator
might possess. Therefore, the package of the two might meet
all the requirements.
Number 177
SENATOR LEMAN asked if the direct action clause would be
secondary to the other insurance. MR. EPPENBACK answered
almost certainly.
MR. CANTOR said some private entities are working to put
together a package with Lloyd's of London that will solve
Alaska's problems.
MR. EPPENBACH commented that it looked a lot like private
insurance would be solving the insurance problem in the very
immediate future and the delay suggested in the report was
not unreasonable.
Number 244
RAY GILLESPIE, representing three refined product
distributors, said direct action insurance has been
consistently unavailable since the Exxon-Valdez incident.
He said right now the companies have an indemnification
policy underwritten by Lloyd's of London, which says if
there is a judgement rendered against the company, they will
come in and pay the judgement. Lloyd's of London has never
agreed to be sued in any court in the United States.
MR. GILLESPIE said that the direct action requirement for
companies like the ones he represents is superfluous,
because they have strong ties in Alaska and have assets
large enough to cover any spill. He noted that California,
Florida, Washington, and Virginia have dropped their direct
action requirement. These states have in law a requirement
for a bond. The bond is waived if the company meets certain
conditions - that is substantial assets and a history of
connections with the state.
Number 323
SENATOR SALO asked what our history was on lawsuits over
direct action issues. MR. GILLESPIE said there had been
maybe one at the most.
SENATOR SALO said she understood that Lloyd's of London was
having financial difficulties and asked if that would affect
their ability to write insurance for direct action.
MR. CANTOR explained that one part of Lloyd's was in trouble
and possibly the Exxon Valdez incident was making it
difficult to purchase this type of insurance.
Number 355
SENATOR LEMAN asked why other states were dropping the
direct action provision. MR. CANTOR said that the realities
of the insurance market have caused the other states to
change their financial responsibility requirements.
SENATOR LEMAN thanked everyone for their participation and
adjourned the meeting at 5:40 p.m.
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