HOUSE JUDICIARY STANDING COMMITTEE March 11, 1994 1:15 p.m. MEMBERS PRESENT Rep. Brian Porter, Chairman Rep. Jeannette James, Vice-Chair Rep. Pete Kott Rep. Joe Green Rep. Jim Nordlund Rep. Cliff Davidson (1:40 p.m.) Rep. Gail Phillips (1:45 p.m.) COMMITTEE CALENDAR HB 292: "An Act relating to civil actions; amending Alaska Rules of Civil Procedure 49 and 68; and providing for an effective date." HEARD AND HELD *HB 445: "An Act relating to operating or driving a motor vehicle, commercial motor vehicle, aircraft, or watercraft." NOT HEARD *HB 460: "An Act relating to bail after conviction for various felonies if the defendant has certain previous felony convictions." NOT HEARD HB 376: "An Act relating to services for and protection of vulnerable adults; and providing for an effective date." NOT HEARD (* First public hearing.) WITNESS REGISTER DANIELLA LOPER, Committee Counsel House Judicial Standing Committee Alaska State Legislature Capitol Building, Room 118 Juneau, AK 99811 Phone: 465-6841 POSITION STATEMENT: Informational testimony regarding HB 292 MICHAEL FORD Legislative Legal Counsel Legislative Affairs Agency Goldstein Building, Room 404 130 Seward Street Juneau, AK 99801 Phone: 465-2450 POSITION STATEMENT: Informational testimony regarding HB 292 PREVIOUS ACTION BILL: HB 292 SHORT TITLE: CIVIL LIABILITY SPONSOR(S): LABOR & COMMERCE JRN-DATE JRN-PG ACTION 04/23/93 1459 (H) READ THE FIRST TIME/REFERRAL(S) 04/23/93 1459 (H) L&C, JUDICIARY, FINANCE 09/10/93 (H) L&C AT 09:00 AM CAPITOL 17 11/22/93 (H) MINUTE(L&C) 01/27/94 (H) L&C AT 03:00 PM CAPITOL 17 01/27/94 (H) MINUTE(L&C) 02/01/94 (H) L&C AT 03:00 PM CAPITOL 17 02/01/94 (H) MINUTE(L&C) 02/03/94 (H) L&C AT 03:00 PM CAPITOL 17 02/03/94 (H) MINUTE(L&C) 02/07/94 2280 (H) L&C RPT CS(L&C) NEW TITLE 3DP 4NR 02/07/94 2280 (H) DP: HUDSON, MULDER, PORTER 02/07/94 2280 (H) NR: GREEN, WILLIAMS, SITTON, MACKIE 02/07/94 2280 (H) LETTER OF INTENT WITH L&C REPORT 02/07/94 2280 (H) -ZERO FISCAL NOTE (LAW) 2/7/94 02/16/94 (H) JUD AT 01:15 PM CAPITOL 120 02/18/94 (H) JUD AT 01:15 PM CAPITOL 120 02/18/94 (H) MINUTE(JUD) 02/21/94 (H) JUD AT 01:15 PM CAPITOL 120 02/21/94 (H) MINUTE(JUD) 03/02/94 (H) JUD AT 01:15 PM CAPITOL 120 BILL: HB 445 SHORT TITLE: DWI LAWS SPONSOR(S): RULES BY REQUEST OF THE GOVERNOR JRN-DATE JRN-PG ACTION 02/04/94 2261 (H) READ THE FIRST TIME/REFERRAL(S) 02/04/94 2262 (H) JUDICIARY, FINANCE 02/04/94 2262 (H) -3 ZERO FISCAL NOTES (2-ADM, LAW) 2/4/94 02/04/94 2262 (H) -FISCAL NOTE (DPS) 2/4/94 02/04/94 2262 (H) GOVERNOR'S TRANSMITTAL LETTER 03/11/94 (H) JUD AT 01:00 PM CAPITOL 120 BILL: HB 460 SHORT TITLE: NO BAIL FOR FELONS W/PREVIOUS CONVICTIONS SPONSOR(S): REPRESENTATIVE(S) NAVARRE JRN-DATE JRN-PG ACTION 02/11/94 2344 (H) READ THE FIRST TIME/REFERRAL(S) 02/11/94 2345 (H) JUDICIARY, FINANCE 03/11/94 (H) JUD AT 01:00 PM CAPITOL 120 BILL: HB 376 SHORT TITLE: ASSIST & PROTECT VULNERABLE ADULTS SPONSOR(S): RULES BY REQUEST OF THE GOVERNOR JRN-DATE JRN-PG ACTION 01/14/94 2066 (H) READ THE FIRST TIME/REFERRAL(S) 01/14/94 2066 (H) HES, JUDICIARY, FINANCE 01/14/94 2067 (H) -4 FNS (3-DHSS, ADM) 1/14/94 01/14/94 2067 (H) -ZERO FISCAL NOTE (ADM) 1/14/94 01/14/94 2067 (H) GOVERNOR'S TRANSMITTAL LETTER 02/09/94 (H) HES AT 03:00 PM CAPITOL 106 02/09/94 (H) MINUTE(HEB) 02/09/94 (H) MINUTE(HES) 02/11/94 2341 (H) HES RPT 4DP 3NR 1AM 02/11/94 2341 (H) DP: BUNDE, TOOHEY, B.DAVIS, NICHOLIA 02/11/94 2341 (H) NR: KOTT, G.DAVIS, OLBERG 02/11/94 2341 (H) AM: VEZEY 02/11/94 2342 (H) -ZERO FISCAL NOTE (DPS) 2/11/94 02/11/94 2342 (H) -4 PREVIOUS FNS (ADM, 3-DHSS) 1/14/94 02/11/94 2342 (H) -PREVIOUS ZERO FISCAL NOTE (ADM) 1/14/94 03/11/94 (H) JUD AT 01:00 PM CAPITOL 120 ACTION NARRATIVE TAPE 94-37, SIDE A Number 000 The House Judiciary Standing Committee was called to order at 1:23 p.m. on March 11, 1994. A quorum was present. Chairman Porter announced that the committee would take up HB 292. HB 292 - CIVIL LIABILITY Number 028 CHAIRMAN PORTER: "We are to take up the conclusion of HB 292 and we will continue where we were with the amendments. We are on Amendment 12. Let me add before we start that most of you have heard and in some cases read the 35 page treatise we got finally from the Department of Law. I hope I would characterize it correctly as saying that they found no problems with 3/4 of the bill. They found equivocal concerns with another 15 percent. They spent a considerable amount of time and space on two items: the statute of repose and the medical malpractice statute of limitations. Within those two areas, quite frankly, some of the things that they mention are interesting; some of them are bizarre. There will be, before the end of the meeting, for each member of the committee, that 35 page report and responses that we have already received from other points of view on their feelings on those two sections that they've challenged. I think with a careful reading of those you can see that while there are no guarantees, ever, [indisc. - dealing with our Supreme Court?], the concerns expressed by the two members of the Department of Law who furnished us with their opinions, I think, have been countered. So, with that said, let's move along to Amendment 12. Daniella, would you tell us about that." Number 081 DANIELLA LOPER, Committee Counsel, House Judiciary Standing Committee, recommenced her review of the amendments of HB 292 with Amendment 12: "This section is talking about collateral benefits. We believe and have been asked by the trial courts, that subsection (c) talks about the claimants' rights, the coverage [inaud. - exhaustion?] pleaded by the payment of a collateral benefit, and what they've paid out to get this collateral benefit. We believe that it's very important that the fact-finder take this into consideration. What we have done is to shorten up the section; we have removed it from subsection (c) and have placed it in subsection (b). So, after `benefits' on line 9, we are saying `Or the amount of value lost by payment' and simply saying that they'll take that into consideration." REP. JAMES [?] moved the amendment. Number 133 REP. GREEN: "What I heard you say was that this small group of words in effect does (c). Sounds good to me." MS. LOPER: "Yes." Number 146 REP. NORDLUND: "I'm not sure if I'm understanding this, but, does this amendment affect the use of collateral sources of evidence in relation to before or after a finding of fact?" Number 165 MS. LOPER: "Section (c) does not even deal with that. Section (c) talks about showing the fact-finder evidence on the claimant's monies that he or she has expended by getting this collateral benefit. So, by putting it in (b), it's saying the same thing, because Section (b) is also talking about offering evidence to the fact-finder and showing them this. So, it's kind of a balancing scale. It's showing them the collateral benefit, but on the other hand, it's also showing what the plaintiff has expended to get this collateral benefit. We believe that both of these issues should be taken into consideration." REP. NORDLUND: "What that explanation, I guess I don't have an objection." Number 185 There being no further discussion or objections, Amendment 12 was adopted by the committee. Number 192 MS. LOPER reviewed Amendment 13a and Amendment 13 (page 10, lines 24-25): "Sue Cox from the Department of Law felt that there was some ambiguity with the language on line 24, even though the phrase has been in the books for umpteen years, when it talks about that it `reduces the claim against the others to the extent of any amount stipulated by the release.' This amendment involves a defendant who is offering a settlement; the plaintiff takes it; there are maybe two or three other defendants involved, and so what happens is that after the jury renders their award, the amount shall be decreased by the settlement that the plaintiff accepted from one of the defendants, and then the rest will be proportioned by the rest of the defendants at fault. "And so, just simply to clarify the language, instead of saying `but it reduces the claim' she felt that that verbiage didn't really clarify what was going on, so in 13a we simplified it in saying `but it reduces the total amount awarded by the jury or court to the extent of any amount stipulated by the release or the covenant.' Just, simply, a clarification." Number 247 REP. JAMES moved Amendment 13a. There being no discussion or objections, Amendment 13A was adopted by the committee. Number 254 MS. LOPER: "Amendment 14 deals with rate of interest. On the books we have Alaska Statute 4.54.510. In this particular section it talks about that there should be a 10.5 percent interest on this judgment taken into consideration. As you can see in the bill, we state that it is three percent above the 12th Federal Reserve District discount rates; sort of a floating discount rate. It is not a fixed rate. It is something that is going to be a variable, that can be looked at in the course of the year and in the future. This is why we put [in] Amendment 14 to say `notwithstanding 4.54.510.' On top of that, this entire section really relates to, and also includes prejudgment interest, not just interest on the judgment. We wanted to clarify that as well. It should read something like this: `Notwithstanding 4.54.510' - you know, the rate of interest on judgment including prejudgment interest and so forth." Number 285 REP. GREEN moved Amendment 14. CHAIRMAN PORTER asked if there were any objections to the amendment. Number 287 REP. KOTT: "I'm not really wanting to object to movement of the amendment. Let me just hold my comment until a little later." Number 293 REP. NORDLUND requested clarification regarding the three percent above the federal reserve rate. Was Ms. Loper saying that previously it did not apply to prejudgment interest and now it was being applied to prejudgment interest also? CHAIRMAN PORTER replied that it did previously apply to prejudgment interest, but this was being made clearer. Number 305 There being no further discussion or objection, Amendment 14 was adopted by the committee. Number 314 MS. LOPER: "Amendment 15 is taking a look at page 12, line 17. This has to do with the wrongful death issues. As it stands on the books today in current law, when there are nondependents that are seeking a claim on a wrongful death, they are limited to pecuniary, or economic, loss. We are opening up the door to say that in wrongful death actions a nondependent plaintiff can sue for economic loss limited to $10,000 as well as noneconomic and punitive. In order to do that we needed to delete that phrase `but shall be limited to economic loss' and we simply said, `when the decedent is survived by no spouse or children or other dependents the amount recovered shall be administered as other personal property of the decedent as provided in AS 9.55.580', which limits the economic loss to $10,000, but it doesn't limit or it does not prevent a plaintiff from pursuing noneconomic or punitive damages." Number 345 REP. JAMES: "You're putting that back like it was before?" Number 357 MS. LOPER: "No, actually, we are completely deleting `but shall be limited to economic loss' and we're simply saying, hey, refer to that statute that has a $10,000 cap on economic loss, but you're not going to be limited just to economic loss." REP. JAMES asked for confirmation that the amendment being discussed was the second, not the first Amendment 15, and Ms. Loper confirmed this. Number 357 REP. JAMES moved Amendment 15. CHAIRMAN PORTER: "Amendment 15 has moved, then. For anybody looking at all this after the fact, Amendment 15, the one we're talking about, is the one that does not have a date and Michael Ford number on it; rather, it has nothing at the top right. It merely has `Amendment 15'." There being no further discussion or objection, Amendment 15 as described was adopted by the committee. Number 370 MS. LOPER: "In Amendment 16, on page 14, line 17, after `hospital' we are defining `independent contractor' since the whole section deals with it. `Independent contractor' means a licensed health care provider, is a member of a hospital's medical staff, or has otherwise been granted specified privileges to render health care services directly or indirectly to patients at the hospital, but who is not an employee or actual agent of the hospital in condition with the rendition of the health care services. That is the definition of an independent contractor." Number 385 REP. JAMES moved Amendment 16 and Chairman Porter invited discussion. Number 388 REP. NORDLUND: "For the information of the committee, I am going to be offering an amendment that attempts to tighten this section down a little bit. I see this as an attempt to tighten it down and define exactly who would be covered and wouldn't be." He explained that his amendment would state which parties could contract with a hospital without the hospital being responsible for them. This one moves down the road towards that definition. I think the problem has been, as I understand it, primarily with physicians. I don't think we want to have hospitals be relieved of the duty for not covering their nurses and any of the rest of their staff. I would vote for this amendment because I think it's an improvement, but my amendment is more of an improvement beyond this." Number 407 There being no further discussion or objection, Amendment 16 was adopted by the committee. Number 411 MS. LOPER introduced discussion of Amendment 17 on page 15, line 5. "In this particular section we are attempting to make a stab at trying to stop frivolous lawsuits by using Federal Court Rule 11. Where it says `an initiative shall immediately set the matter for hearing', the trial courts suggested that we simply eliminate `shall' and place `may' - - `may immediately set the matter for hearing.' That hearing is already established. It's called a summary judgment hearing." Number 429 REP. GREEN: "You said `may immediately.' The way this is written, we would knock out both `shall' and `immediately' and just say `may', not `may immediately'?" Number 449 MS. LOPER: "Right. Exactly. That's what I meant." After some inquiries from and discussion among committee members concerning numbering within the amendment, Ms. Loper said, "This whole entire section directly affects Rule 11 and Rule 95. So when we put a special order to hold an immediate hearing, that went against that Court Rule 11 and 95 the way it's been set up for years. We thought about it and said, no, let's just go on with 11 and 95, and that's why you see the deletion of just those two numbers." Number 458 REP. GREEN: "By going to `may', which would then imply that the court may not, what affect would that have on this section?" Number 460 MS. LOPER: "By eliminating `shall immediately' we are going back to what is happening today, and what has been occurring today. That particular hearing is called a summary judgment. The judge will take into consideration the motion for summary judgment on [what might be] a frivolous lawsuit, and he or she will review the facts or the claims that each party is making. And then if there is some kind of foundation to the claim, then, they may hold, based on what they see, a summary judgment hearing." CHAIRMAN PORTER remarked that this was a response to concerns about possibly improper litigating scenarios. Number 481 There being no further discussions or objection, Amendment 17 was adopted by the committee. Number 486 MS. LOPER addressed Amendment 18 on page 16, line 6. "This section is asking the Division of Insurance to come up with and compile information on exactly how the bill has affected insurance rates. The date that is in the bill at this time said that the information must be compiled by June 1, 1995. The intent behind the amendment is this: first of all, you have within two years an accrual to discover that there is an injury. So that's two years. Then finally, to file the suit, could be a matter of another year or two years, maybe three. That's if the case isn't appealed. That is the only way that we are really going to find that time period, to find really if there has been any effect. So, June 1, 1995, does not give enough time in order to have the whole process be taken into consideration. So we have changed the date to 1998." Number 509 REP. DAVIDSON: "What was the last so-called tort reform bill we did? How long ago was that? Three, four years ago, right? So, what kind of data do we have on how the rates were affected from that legislation? It's been four years now, which is what you're asking for here. Do we know? Do we have that information?" Number 516 CHAIRMAN PORTER: "No, and the main reason that we don't is another reason why we may get something relevant and may not from this date. I could argue logically that we should have this report ten years out, because it takes that long before the challenges that will automatically accrue with this legislation if it passes are going to be ultimately settled. We passed, by initiative, doing away with joint and several liability; a loophole was found in the wording of the initiative, and now some folks think we have joint and several liability, and some folks think we don't. Consequently, tracking what effect that initiative has is difficult if not impossible because we don't have it yet." Number 531 REP. DAVIDSON challenged the paucity of data, asking, "Is it not true not all of these things are always appealed? Right? You're going to have a database that..." CHAIRMAN PORTER stressed four years as an optimal period of time. Referring back to Ms. Loper's comments, he reminded committee members, "Nothing that is in the pipeline right now will be affected by this law, that's ex post facto.... Civil cases in the norm take three years to get resolved unless they are settled out of court.... Insurance companies have to wait and see what happens." Chairman Porter noted that after the three years there might yet be an appeal, but in any case it would be a year beyond that period before statistics could be assembled. He concluded, "That's four years, that's 1998." REP. DAVIDSON expressed willingness to accept 1997 as an initial point for compilation and analysis of data, but urged against delaying such review until 1988, asking, "Who knows what we're going to be stuck with as a result of another effort at tort reform as far as insurance rates are concerned?" REP. PORTER asked if there was further discussion or any objections on Amendment 18. There being objection, a roll call vote was taken. Rep. Davidson voted "No" and Reps. Nordlund, Green, Phillips, Kott, James and Porter voted "Yeah". Amendment 18 was therefore adopted by the committee. Number 570 MS. LOPER began discussion of Amendment 19a, saying, "We wanted to tighten up this section." She referred the committee to page 14, lines 14-15. "You see where it says health care provider. Health care provider as defined in this bill includes almost everyone. We wanted to make sure that we hit the particular areas that are at issue." Ms. Loper noted that providers included doctors of medicine, surgeons, psychologists, osteopaths, dentists, optometrists and registered nurses of anesthesiology. Regarding the latter she explained, "In many rural communities, it is a registered nurse who is the anesthesiologist, who works with the doctor on the operating table." Number 599 REP. PHILLIPS: "Wouldn't the definition of health care provider include nurses, general nurses?" Number 604 MS. LOPER: "That is correct. We do not want to use the word `physician' as you can see on the amendment. We want to cross that out and put `health care provider.' We want to delete `physician,' we want to insert `Health care provider includes,' and therefore, a nurse would be." Number 608 REP. PHILLIPS: "At that point, then, it should be `health care providers includes but is not limited to' because you don't have nurses, regular nurses?" Number 610 CHAIRMAN PORTER: "No. That is correct. We don't want regular nurses. The idea of this division is that we don't think that the hospital should be required to be responsible for people that they don't supervise. Basically, that's physicians, unless the physician is a contract person with them. The definition of `health care provider' includes everybody down to the -- you know... what the industry wants is not what everybody that criticizes this section feels, that eventually they are going to make independent contractors out of nurses and janitors and be responsible for nobody. What we're saying is, `No, that isn't what we're after. We're after just these guys.'" Number 624 REP. DAVIDSON: "So, what is the responsibility of the hospital? Because these people are going to be independent contractors, and I guess I'm having trouble understanding why all these different specialists are each going to have to have their own insurance policy -- because they're not going to be accredited to practice in a hospital without some kind of insurance, right? My question is, why is it that all of these different policies will be less expensive than one large policy that the hospital will cover? How does this affect the billing for the patient? Are we thinking of the patient at all?" Number 638 CHAIRMAN PORTER: "That is precisely one of the recognized criteria for separating an independent contractor from the hospital people. The hospital doesn't bill for the doctor's fees even though the surgery was performed in the hospital. That's something traditionally that the doctor bills for. The hospital will bill for the medicines and the support staff and all that... but the doctor's fee is a separate bill. That is the kind of separation that you look for when you're trying to determine who is really an independent contractor, and who isn't. The other main differentiation is that the facility doesn't supervise, instruct, control this person's activities. The profession of medicine does, so to speak, with the certification of the state. So, what we're trying to say is that they shouldn't be responsible for things that they don't control. They do control their own employees and they ought to be responsible for them -- the nurses, and everybody else." Number 658 REP. DAVIDSON: "I don't know exactly how it works, but it seems that the hospital has a certain responsibility as to who they allow to practice in their hospital." CHAIRMAN PORTER: "Yes. And that's covered also. The hospital is responsible for exercising reasonable care in granting staff privileges to practice in the hospital, for reviewing those privileges on a regular basis, for taking appropriate steps to revoke or restrict privileges in appropriate circumstances. The hospital is not otherwise liable for [indisc.]." REP. DAVIDSON: "What kind of standard is reasonable care, Mr. Chairman?" Number 666 MS. LOPER: "Reasonable care is just a standard used in law, just a general standard." MR. DAVIDSON: "Is there a lesser standard, or a greater standard? What would be the next greater standard?" MS. LOPER: "You can put anything down, if you want, to make it a higher standard or lesser standard, but this is the standard that you use, and that's pretty strict in itself." Number 675 REP. JAMES: "I have a question, not necessarily on that point, if Rep. Davidson has not finished with that question, but I do have a question regarding this amendment. Are you finished?" REP. DAVIDSON did have further inquiries on the points he raised. He said, "There really then does not exist a higher standard here, as regards a situation like this in granting staff privileges as far as the law is concerned?" Number 683 MS. LOPER: "This is the way it is written. I mean, this is the way it's been, it's just the way it's done. Any time that a hospital reviews their doctors -- I mean, they have to, I imagine, check out their license to make sure that nothing, that the doctor is not in violation of any of this, and they would use and exercise a reasonable care." Number 692 REP. GREEN: "Wouldn't this be somewhat akin then to, say, a torts liability case where somebody was under a duty for negligence to exercise the degree that the average reasonable person would exercise under the same or similar circumstances; that kind of thing?" MS. LOPER: "Exactly." REP. GREEN: "And that's, I know, been in the law for years and years." Number 697 REP. JAMES: "On the question that Rep. Davidson had about the insurance, about why would we be paying all this insurance? I might point out that I believe that all of these people would already have insurance because they don't only operate at the hospital, and so this gives it so that the hospital isn't also covered." Number 706 REP. NORDLUND stated a correction to Rep. James' assertion concerning physicians' insurance, saying, "Twenty-five percent of the physicians in this state do not have any insurance. That's a fact." He noted he had an amendment concerning these insurance issues that he would subsequently be offering. Rep. Nordlund cautioned, "Since we are letting the hospitals out of the responsibility of providing coverage for these people, I think we have to make absolutely sure that the doctors themselves have insurance." REP. PORTER: "We'll debate that one when we get to it. Rep. Green?" Number 711 REP. GREEN: "Not on that issue, back on this amendment. Does AS 18.23.070, [indisc.], in the statute, does it tabulate the persons..." CHAIRMAN PORTER: "We've taken that out..." REP. GREEN: "No, that question hasn't anything to do with what this amendment..." MS. LOPER: "Are you simply asking what is included in 18.23.070?" REP. GREEN: "Yes, we're requesting now to drop that language out...?" MS. LOPER: "It is because there is just a huge list, almost to the janitor of the hospital, literally, that this is what it includes. The intent behind this amendment is to say, `No, we don't want the janitor of the hospital to be included. These particular professions should only be included.' So it limits what 18.23.070 is a list of." Number 726 REP. GREEN: "The reason I am asking is that we now have an abbreviated list, but in other areas where lists have been included, we always get heartburn, because when you start a list, then, have you excluded, or have you included, does that modify, does that change? It's because of the long list that you're trying to avoid, is why you're listing a short list." Number 732 CHAIRMAN PORTER: "No, we're trying to make sure that what we mean is what we say. What we mean is, that we just want doctors, who are not otherwise supervised by the hospital and employed by the hospital, to fall into this category." Number 735 REP. GREEN: "That's kind of what I thought. It seems to me that the wording that you've got does that, does not include a hospital employee, or the hospital. But now you've got these people -- I'm wondering, for example, in some hospitals, if a physical therapist might be an independent contractor..." CHAIRMAN PORTER: [Indisc.] REP. GREEN: "Okay, but that's not listed." CHAIRMAN PORTER: "That's right, and we don't want to list it, because we want them to be..." REP. GREEN: "They're not in the hospital..." CHAIRMAN PORTER: "Oh, I see what you're saying. I see what you're saying." REP. GREEN: "They're not on this list. And I'm just pointing that out as one, and there may be others." Number 770 REP. JAMES: "That's why it said `including but not limited to'." CHAIRMAN PORTER: "The only thing I can say is that this was reviewed by the medical facility representatives who didn't have a problem with it. Maybe physical therapists are..." REP. GREEN: "Maybe not in this state..." Number 752 REP. JAMES: "A couple of things, and on that point, I would suspect that the reason that you have this list is because this is a list, and even though Rep. Nordlund says that 25% of the doctors don't have malpractice insurance, that this is a list of those people that you would expect to have malpractice insurance, and not be a double insurance. However, I think that if the hospital stops covering these, one of the hospital's options is to not let anyone practice in their hospital unless they have it. And that's pretty effective. In any event, and the fact is they would do that, if their insurance wasn't covering them, I believe that they would. But the other point is, on line 5, where it says `the following health care providers are independent contractors and are not employees of the hospital, see specific health care providers,' is that a reference down to this issue that we're putting in here? Or is that list supposed to be in that area?" Number 768 CHAIRMAN PORTER: "Line 9, `The hospital is [not?] otherwise liable for the acts or omissions of the health care provider who is an independent contractor." REP. JAMES: "Up at the top..." REP. GREEN: "In the parenthetical portion -- is that complete that way? Is there some list to go...?" REP. JAMES: "This is a form, [indisc.], and then they have to have those lists... okay, I'm sorry, I misunderstood that." Number 773 MS. LOPER: "Mr. Chairman, and Rep. Green, just to follow up on your question. You're asking the question on [an] independent contractor and [the] making [of] a list. There are a lot of janitorial services that are independent contractors with hospitals. So, if we simply just stated 18.23.070, that could include them as well. There are many, many, many professions that use the hospitals as independent contractors besides physicians, and so that is why there is a list. It is not an example list, that is why it is `not limited to but also including,' that is why we have used this list in particular, to really hone in on the professions that deal with the patients." Number 784 CHAIRMAN PORTER: "I'm guessing that there is some supervisory relationship between a physician and a physical therapist, and if that physical therapist has been ordered by one of these independent contractor doctors, then that might fall under that category. The doctor might be responsible for him or her. As I say, this is the wording that -- we asked them to give us wording that depicted what it was that we understood them to mean when they wanted this exclusion, and that was just the doctors that [we're?] not responsible for... and that's what we're trying to say." Number 794 REP. NORDLUND commented, "The more practitioners we add to the list, the less protection to the public we're affording here. Not that it might be doubled, but I think that we want to try and limit it. On Rep. James' comment -- That is a good point about hospitals requiring their doctors to have insurance. Fairbanks Memorial, as you probably know, has gone through that battle and is now requiring that. However, Alaska Regional and Providence do not require their doctors to have insurance. That's where the public is left exposed. "I have a question. We just adopted the independent contractor definition and now we're adopting a definition for health care provider. I don't see that they necessarily conflict, but it is somewhat confusing why we need two separate definitions. One says, `the independent contractor is a member of a hospital's medical staff.' What is, exactly, the medical staff? Are they the nurses? Or just the doctors? Or? I don't know what, exactly, the medical staff is." CHAIRMAN PORTER: "Staff physicians." REP. NORDLUND: "Medical staff is not nurses?" CHAIRMAN PORTER: "No, those are employees." REP. NORDLUND: "We're defining what are and what aren't employees. We're using a term to define a term. I don't know what `medical staff' means. Mike Ford is here, maybe he could help us through some of this stuff, too, since he wrote them up." MS. LOPER agreed that Mr. Ford might be able to assist the committee in clarifying these definitions. Number 821 MICHAEL FORD introduced himself as an attorney with Legal Services. "I can't tell you what `medical staff' is limited to. There is no definition of it. I think the common meaning of the term is someone who is employed by the hospital in the practice of medicine." Number 828 REP. DAVIDSON: "It could be a nurse." MR. FORD: "It could be a nurse. Right." Number 831 CHAIRMAN PORTER: "Is there anyone here who is associated with the Hospital Association in the audience?" There was no response from the audience to this question. "Well, what is the inconsistency that we're trying to fix?" Number 832 REP. NORDLUND: "Originally we talked about health care providers as being independent contractors. Then we went on to define what an `independent contractor' was. Now we're also defining what `health care provider' is, and I think there's an inconsistency there. [Words muffled by other voices and shuffling of papers.] I don't mean to impede what you're trying to do here, I just think that you can rework this and come up with a definition that's consistent." REP. JAMES [?]: "No, there is no connection between `independent contractor' and `health care provider.' They are two different [inaud.]." CHAIRMAN PORTER and committee members reviewed their bill texts to research the question of possible inconsistencies between the terms `health care provider' and `independent contractor.' REP. JAMES [?]: "I think we do have an inconsistency." [Further skimming of texts and exchanges thereon; largely inaudIBLE.] REP. NORDLUND: "It may not be inconsistent, but I think it is at least confusing." [Concurring voice audible, identity not clear.] Rep. Nordlund pondered and analyzed potentially confusing situations. Number 868 MR. FORD: "I don't think it's inconsistent, but I think it's circular. That's the odd thing about it. If you say, you're a health care provider who is an independent contractor when this happens, but you're defining both `health care provider' and `independent contractor' intertwined with each other, I'm not sure that you achieve anything. But I don't think it's inconsistent. It's simply circular." CHAIRMAN PORTER: "It's circuitous." MR. FORD: "They blend into each other. An `independent contractor' is a `health care provider' who is an `independent contractor' to get the benefit of the section." Number 873 REP. JAMES: "These specific names of workers that we have in this line will be the list of specific health care providers that will be on the form where people will see it." CHAIRMAN PORTER: "If the hospital so elects, yes. This doesn't require hospitals not to hire [inaud.]." REP. JAMES: "It just allows them to [inaud.]." Number 879 CHAIRMAN PORTER: "Yes. It does what it is that we want, so..." Number 880 REP. JAMES: "I'll move Amendment 19." CHAIRMAN PORTER: "Is there further discussion of number 19 as amended?" Number 882 REP. PHILLIPS: "Getting back to Rep. Green's comment on the physical therapist. What do we do about them?" CHAIRMAN PORTER: "I think that they would be employees under that circumstance. Certainly physical therapists can be employed by a hospital, a clinic, or whatever. If a physical therapist is working independently, I would guess they would have to be under the supervision of a doctor, and I..." TAPE 94-37, SIDE B Number 000 REP. DAVIDSON: "There are other specialists, too, involved. I remember I went to the hospital once about a pulmonary problem. I was under the supervision of a doctor but there was another specialist who worked with me." This specialist, a pulmonary specialist, was not a physician. Rep. Davidson explored the issue of how one might define the insurance position of such a supervised nonphysician, querying, "If you say that that type of person is under the supervision of that doctor, does that mean that that doctor's insurance policy hangs in the balance because of the way that person [functions] under that doctor's supervision? And, if not, why not? And if so, then that makes that person's irresponsible acts come under the hospital's insurance policy, is that correct?" Number 040 CHAIRMAN PORTER: "If I interpret this correctly, the only category of person that we're saying can be an independent contractor, for the purposes of not falling under the responsibility of the hospital, are these physicians that we've named as independent contractors, and these nurse anesthesiologists." Number 047 MR. FORD: "That's not exactly true. There are other classes of independent contractors who would not be liable because they are independent contractors. The hospital would not be liable. I don't think we've changed that law at all. What we've really done is set up a class of people who are independent contractors who would not otherwise be independent contractors under the case that the Supreme Court decided that we're attempting to reverse, I believe. So, what we're actually doing is changing law for certain classes of health care providers -- those people are going to be independent contractors under the provisions of this section. But there may be other people, such as your physical therapist, who are independent contractors, under the review of the court now. Those are not affected by this. They'll still be independent contractors." Number 070 CHAIRMAN PORTER: "Further discussion?" Number 073 REP. DAVIDSON: "So the intent here is to save the hospital money, right? We're trying to save some costs for the hospital by ensuring that these people that we've listed, by their acts, do not jeopardize the hospital's insurance? Is that correct?" Number 091 CHAIRMAN PORTER: "Thereby saving the patient money, yes." REP. DAVIDSON: "`Thereby' -- does that mean, then, that we would expect to see a drop in hospital rates, then? And if not, why not?" CHAIRMAN PORTER: "That's the thing that we wanted to give enough time to be able to assess. That is one of the ingredients of this, yes." REP. DAVIDSON, assessing the putative fiscal benefits of the legislation, noted it did not contain price controls. "...[If] in fact the numbers come out and the price continues to rise, that's too bad, right? There's nothing that says we've got to have that price control." Number 102 CHAIRMAN PORTER: "No, that's true, and the reason that we can't bring something like that right on there is just for the reason that I explained why we would have been ill- advised to have done it in 1987 when we passed the initiative. Because look what's happened to it. We're trying. There's no guarantees, but we try. Further discussion of number 19?" Number 116 REP. JAMES: "I feel, and I have no other way of doing it, and I think this is perfectly fine and it will work that way, but `independent contractor' and `health care provider' are two terms that can really reach out and take care of lots of things. It's difficult to find them in here specifically. I suspect that when it relates to an independent contractor, should there be some reference to this list? Or is it fine just to have it in the section? I think it's sufficient." However, Rep. James continued, "If they only read part of the section they are going to be totally misled, is the point, and I don't know whether -- I don't know how many times `independent contractor' is in here, I don't know how many times `health care provider' is in here." CHAIRMAN PORTER: "This is only for this section, that we're referring to." REP. JAMES: "I know, but I don't know how many times it says `independent contractors' or it says `health care providers.' Is having a description like this, is that going to be sufficient to get the point across?" Number 145 MS. LOPER: "Since this section is particularly just focusing on the civil liability of hospitals for nonemployees, that's why the list is there -- because it directly affects the hospital and nonemployees." Number 153 CHAIRMAN PORTER: "In these three definitions `hospital' also would be following one right after the other." Number 155 REP. JAMES: "This is a pretty blank sentence. It says, `The hospital is not otherwise liable for the acts or omissions of the health care provider who is an independent contractor.' Without the definition of a specific list of health care providers, or a specific list of those who meet the criteria of an independent contractor, that sentence could be misleading. I'm just wondering if it should say something like `omissions of certain health care providers who may be an independent contractor' or something..." Rep. James expressed some ambivalence concerning the language of the amendment, saying she felt that while she had no more suggestions or changes and was convinced that the language was OK, "I just feel a little uncomfortable with it." Number 174 CHAIRMAN PORTER: "I understand what you're saying. I just think that this is a statute, and it's very rare that a patient, if you will, is going to be reading these statutes. They're going to be read by people who in the main are familiar with interpreting statutes. Whenever they reach a term that they are not familiar with, or they see has a pivotal bearing on the thing, they look for a definition section and this thing follows probably on the same page." REP. JAMES: "Okay." Number 189 MS. LOPER: "When there is a section just on definitions, it is the only... by that definition alone, that is what they are limited to, period." Number 202 CHAIRMAN PORTER: "They've even -- when I've been reviewing statutes, as many years as I've been doing that, sometimes when there's a big definition section in the back, that's kind of frustrating. This is right in the section. Further discussion? Is there objection?" There being no further discussion or objections, Amendment 19 as amended by adding `health care provider' instead of `physician' and `registered nurse of anesthesiology' after `optometrist', was adopted by the committee. Number 212 MS. LOPER presented Amendment 20. "As the testimony went by Sue Cox of the Department of Law, they urged that a standard shall be set for persons who are committing or attempting to commit or have committed a felony. Remember, that is the sections that are relating to the exception to the cap on noneconomic or punitive damages. So, in here we are just putting `who by a preponderance of the evidence was'...and that is the standard used in the civil law." Brief discussion ensued between committee members. Several superfluous appearances of the word "who" were removed from the amendment's text and the language was clarified. Number 259 Amendment 20 was moved by Rep. James. There being no further discussion or objection, Amendment 20 as amended was adopted by the committee. Number 264 MS. LOPER took up Amendment 21, found on page 9, line 21. She said, "See where it says `a person who provides a collateral benefit admissible under (a) or (b) -- oops, that actually has nothing to do with admissing into evidence anything, it's actually (b) or (c). So (b) talks about evidence that's admissible, and (c) talks about the same." Responding to questions from committee members, Ms. Loper said that every amendment needed to be independent and that (c) would be X'd out after the drafter had gone though the text. Number 286 REP. JAMES moved Amendment 21. There being no further discussion or objection, Amendment 21 was adopted by the committee. Number 291 MS. LOPER continued with Amendment 22 on page 4, line 5. She stated, "Amendment 22 deals with the statute of repose in the construction industry. In this amendment, the intent is to open up the doors a little bit further to plaintiffs `where a defendant intentionally or recklessly disregarded specific project design plans and specifications or building codes.' We've made an exception to the statute of repose in the construction industry." REP. JAMES moved Amendment 22. Number 314 REP. DAVIDSON requested further explanation of Amendment 22, which CHAIRMAN PORTER paraphrased: "This is the infamous statute of repose as it applies to contractors. After six years there is a bar from suit -- and there is a bar from suits in general under the statute of repose, except for certain situations -- and we're saying, in addition to those standard exceptions, we want to add another exception to that six-year statute of repose that said it does not apply to a claim resulting from an intentional or reckless disregard of specific project design plans or specifications or building codes. Well, if somebody intentionally or really messed up and didn't apply the right codes or specs, this is an exception to the six- year statute of repose." Number 337 REP. DAVIDSON: "Intentional or reckless disregard. Is that a difficult thing to prove in law?" Number 346 MS. LOPER: "It depends. If the facts pretty much speak for themselves I guarantee that it is not going to be that hard. As you can tell, in Section (b), there is already a section established that gives a window out of the statute of repose if it was caused `intentionally or resulted from gross negligence, fraud, fraudulent misrepresentation or breach of an express warranty or guarantee.' What this amendment really hits at is, it's trying to really look at the construction industry -- and I imagine that when you put together a house there are project design plans, specifications and building codes -- and so it's saying that even in these particular areas that they have to work on, if there is intentional or reckless disregard, in these three specific areas, we will not take a look at the statute of repose, and allow a claim to be brought in, at any time." REP. DAVIDSON: "There was a constituent I had who bought a house and he had real big problems with the foundation... with the placement, and how they placed the foundation. Would this affect that person's ability to go after the contractor, because he apparently did not do the foundation correctly considering the location of where the foundation was? Is that a different matter entirely?" Number 386 MS. LOPER: "If I understand your fact scenario right, if he intentionally misrepresented the foundation and said, `This is a perfect foundation, you're not going to have any problem with it,' I imagine that that would raise a red flag to fraudulent misrepresentation of the foundation, so the plaintiff will be given a window of opportunity there -- particularly if it affects the construction of the house, and if the person had a design plan that was whipped up by an architect, and the construction agency used that, and they intentionally or recklessly disregarded the design plan or the building codes. Of course, then, they would definitely be given that window." Number 404 REP. DAVIDSON: "This was done under current law, and the man had incredible problems trying to go after this person. I'm trying to decide whether this helps that constituent or if his situation becomes more difficult." Number 409 CHAIRMAN PORTER: "Well, it's really difficult to answer the question not knowing what the problems are that he's having. Is it a problem with the statute of repose, or a problem with the building code, or a problem with....?" Number 412 REP. NORDLUND: "Maybe I can help with Rep. Davidson's question. I think in a limited, a very limited way, it does help your person's situation. My opinion, though, Mr. Chairman, is that this does not go far enough. I think that at a minimum we have to trust that design professionals will at least follow the specifications and building plans and applicable codes. And if they don't, they should be liable to suit. The standard is way too high for intentionally or recklessly disregarding those codes. I think, simply, if they have not followed the building codes and did not follow the design specifications or building plans that they should be open to suit. I have an amendment to that effect later. I think that this is an improvement, but it does not go far enough." Number 427 REP. GREEN: "I'm wondering -- this doesn't object to, necessarily, the wording, but.... why wouldn't we start with the middle of the second line there with `intentional' and put it down here where we have these other exceptions? In other words, if we were to start with `intentional or reckless disregard' and put that after `warranty' on line 11, it seems like then somebody reading this would see altogether where the exceptions are and not have to page through it." MS. LOPER said it did not matter "if it's situated there or in Section 2," noting, "but we have the bill drafter here, and Mike." Number 443 MR. FORD analyzed the wording placement in the text of Amendment 22 and concluded that he felt it was acceptable. CHAIRMAN PORTER asked if there was further discussion or objection on Amendment 22. There being objection, a roll call vote was taken. Reps. Green, Phillips, Kott, James and Porter voted "Yeah;" Reps. Davidson and Nordlund voted "No." Amendment 22 was therefore adopted by the committee. Discussion of the next amendment, which was not numbered, followed. It was agreed to number it 23 and renumber other amendments as needed. Number 488 MS. LOPER began discussion of Amendment 23, beginning on page 11, line 10. She said, "This particular section is talking about the settlement offers. On line 10 it says, `the offeree shall pay the actual costs and attorney fees.' We looked at the definition of actual costs and felt that it is somewhat ambiguous, and in fact there is a specific court rule, 79, that hits on, exactly, defining costs, a list of the costs that it includes, and there is already a rule that is developed. That is why we said, `costs allowed under the Alaska Rules of Civil Procedure.' And, in fact, in this Civil Rule 79, if a party contests a certain cost, that there is a hearing that they can go to. It's already a procedure that's developed. And then, when we looked at attorney's fees, we wanted to put the word `reasonable' attorney fees." Number 511 REP. PHILLIPS: "Following Rep. Davidson's arguments, is there a definition of `reasonable attorney's fees' anywhere in any statutes? What is `reasonable' to one attorney may not be `reasonable' to another attorney." Number 524 CHAIRMAN PORTER: "That's why we have courts." REP. PHILLIPS: "I don't think the word `reasonable' here is going to mean a darn thing to the judge." Number 525 REP. NORDLUND: "Within the context of this section, if you're trying to create an inducement to settle, and you're qualifying it by saying `reasonable fees,' that means the fees could be less, and there would be less inducement to settle. That's what we're trying to do here with this section, right? I don't really have an objection to it, but I think that could be the effect of it." Number 536 CHAIRMAN PORTER: "Well, I think, fair being fair, even with an inducement to settle, which obviously this is what this is for, I wouldn't want a court, and I wouldn't think many judges would interpret this this way, but I certainly wouldn't want anyone trying to convince a court that what we meant when we said this was every attorney fee, or every fee that a particular attorney dreamt up, and applied to this case -- whether it was right or wrong or indifferent -- the term to me is inherently definable. It's reasonable. It gives the judge the ability to say, `This is reasonable'." Chairman Porter asserted the preferability of a flexible over an absolute term. Number 552 MS. LOPER: "That is why we particularly excluded the word `actual' because we wanted to make sure that costs and attorney's fees both would be reasonable. Furthermore, we found a Civil Rule of Procedure, Rule 79, that goes through and allocates what our costs, what's the definition of it, what's reasonable, so it follows along with the intent." Number 561 REP. PHILLIPS: "Chairman, do we want to identify the Rules of Procedure rule?" Number 562 CHAIRMAN PORTER: "Not really, because it might change, they might reconfigure them. Mike?" Number 563 MR. FORD asked if he could raise a separate issue on the section. CHAIRMAN PORTER replied that they would finish with the amendment first. Number 567 REP. DAVIDSON: "When we talk about costs under these rules of procedure, and `reasonable,' would this then include all these different delay motions, and will the judge take into consideration the extended time in the process, and would some of those then be ruled unreasonable? Because it seems like there is an unreasonable amount of time that passes every time some of these cases go to court; it seems like just the judge and the attorneys involved are the only ones who understand the delay. It seems like there's always another hoop that they can jump through. How does `reasonable' affect that kind of thing, as far as the judge's mind is concerned? Some of them are obviously delay tactics, and so people who are responsible for the fees -- on either side of the issue, the plaintiff or the defendant -- they get zapped with even greater attorney's fees. How does that affect that in this instance?" Number 588 MS. LOPER: "In the section, Alaska Rule 79, it goes through and just talks about exactly, makes a list of all the costs that are to be considered under this settlement. And then, to answer your question on attorney fees, I don't think that there is a clear definition of what is reasonable." She noted the existence of a civil rule that contemplates the question of what is reasonable -- $175? $75? -- which does not arrive at a clear definition, but rather leaves the matter to the discretion of the judge on a case by case basis. Number 605 MR. FORD: "If your concern is undue litigation, that sounds like what you're talking about, then I think the amendment would be one you're in favor of, because it limits the fees to those that are reasonable as opposed to those that are actual. If you had actual fees then it wouldn't matter how long it took, as long as you fell under the provisions of the section. Not everyone will. It's only in a certain case where you make the offer and the offer meets the criteria set out here, that you get the benefits of this section. But assuming you do, and you have actual fees, then it's whatever they are. By putting `reasonable' in here, I think you at least take a step down the road towards dampening that effect of undue litigation, someone who delays, for example, for no reason." Number 618 REP. DAVIDSON: "That was my concern, `undue delay' in litigation. Undue delay -- the clock rate clock is ticking for both of the parties. But one party is going to lose. Even if you win, and you get these fees, it seems that there will be a certain amount of the fees you will not get because it's just not included in what we're trying to accomplish here. But you're saying that to try to be fair to the person who prevails, this would be a good step." Number 631 MR. FORD: "This is a good step, not only for the person who prevails, but the person who prevails in a manner that doesn't delay unnecessarily." CHAIRMAN PORTER: "`Justice delayed is justice denied.' Further discussion on number 23?" Number 637 REP. NORDLUND: "Because we are introducing the possibility of differing interpretations of what is reasonable, could we get into a situation here where there would be further appeals filed based on what is `reasonable'?" CHAIRMAN PORTER: "I would guess that we would be reducing that, because if we said `attorney fees' it begs the question. Now, do you mean any attorney fee that I put in? Or what the judge thinks is reasonable, or what? I think we're reducing that chance by saying `reasonable.' I mean, we're at least making reasonable people look at this -- maybe that's a contradiction in terms -- from a standpoint of, there's going to be a standard, like we've said previously, of `reasonable care;' there's going to be a standard of `reasonable attorney fees' applied to this, and most attorneys know which judge they're dealing with, and that kind of gives them a feeling of where to go. But [if] you just say `attorney fees,' you can argue to an otherwise reasonable judge that, `No, no, no, you don't have any discretion in what this means.' Further discussion on number 23?" Number 656 REP. PHILLIPS requested the committee review the allowed costs section in Rule 79 and read aloud a portion of the rule. Number 673 CHAIRMAN PORTER asked if there was any further discussion or objection on Amendment 23. Number 675 REP. DAVIDSON: "I'm not objecting, I'm just thinking of the case we had here last year where the lawyer sued his client for not taking his legal advice." [Startled unidentified voice: "Can they do that?"] "Well, I'm talking about the Division of Elections..." [Very brief exchange among committee members.] Number 682 CHAIRMAN PORTER: "With that in mind... is there any further discussion on number 23?" There being no further discussion or objection, Amendment 23 was adopted by the committee. Chairman Porter recognized Mike Ford to make a point on the next section at hand. Number 687 MR. FORD made a recommendation for amending this section of HB 292. "[This] is something we have discovered as we have in the past, going through the bill. The way we have amended this section of law, under `offer of judgment,' what we have done here is to delete the provision on awarding interest, and instead insert the attorney fee and cost language. However, in looking at our section on amending this rule, we have not clearly indicated that in fact we are removing the award of interest. So, I would suggest that the committee amend, I think it's Section 31, to clearly indicate that the rule is amended to eliminate the award of interest as well as to deal with awarding costs and attorney fees, to avoid any confusion on that point. If we passed it the way it reads now, the court simply can say, `Well, we have a rule here on awarding interest, now we're awarding interest, costs and attorney fees.'" Number 703 REP. DAVIDSON requested that Mr. Ford explain under what circumstances interest would be awarded; why was the provision on deleting interest being deleted; and what would be the effect of doing so?" Number 707 MR. FORD: "Well, as the provision of law reads now, you get an interest adjustment depending on who you are. If you qualify for the benefit. What this section of the bill does is take that out -- the intent, I believe, is to take that out, and to award costs and attorney fees as we've just amended, in our last amendment. By the fact that we are amending the rule in court, however, means we have to set out a separate section and tell the court system what we're doing, in amending the court rule. Because there's a court rule on this section here, the offer of judgment. There's a court rule specifically on that. So all I'm saying is to be clear in what we are doing to the court rule, we should indicate that not only are we providing for the award of costs and attorney fees, but we are deleting an award of interest." Number 721 REP. DAVIDSON: "So, traditionally, the award of interest began to accrue from when? The time the case went to trial? And then going through all the appeal process? We're talking about interest that could have been earned on that money over the course of however long that case takes to be resolved?" MR. FORD: "Correct." REP. DAVIDSON: "I'm not in favor of removing that because it seems to me in essence the amount that an aggrieved person is rightfully entitled to." Number 733 MR. FORD: "Well, what we've done is actually switched penalties here. We have simply removed the interest and inserted a higher penalty. We haven't removed the incentive to settle. I think we have enhanced the incentive to settle, which was the purpose of this section. The section is intended to reduce litigation, and it does that by providing an incentive to someone who makes an offer of judgment in good faith, and the other person will accept it, or, if they don't accept it, then they're hit, under existing law, with an interest adjustment. So, what we've done in this section is say, well, we're going to remove the interest award, but we're going to substitute something that's even harder, a bit more difficult hit, if you will, in costs and attorney fees." Number 747 REP. DAVIDSON: "There's so many things to consider in a situation like this that I have great fear that we're going to take a damaged individual and make them more damaged in some way." Number 752 CHAIRMAN PORTER: "When we ran this through different kinds of scenarios, small cases, big cases, whatever, this usually came out to be a greater incentive than just the interest. And that is what it is designed to do, to get it out of court." CHAIRMAN PORTER addressed Section 31, suggesting that committee members consider page 15, Section 31, line 20, a friendly amendment to Amendment 23, augmenting the language as discussed. There being no objection to Amendment 23 as amended, Amendment 23 as amended was adopted by the committee. Number 773 MS. LOPER presented Amendment 24 on page 8, line 5. She said, "The Department of Law looked this section over... it's dealing with the periodic payments. If a party does choose to go after periodic payments, the court is going to set up this security to be posted, and so forth. The Department of Law suggests that a city or a municipality or a state should not be subject to this." The result of Amendment 24 is that the court may not require a security be posted by a state or municipality. Number 790 REP. PHILLIPS asked, "What would happen in the case of a small municipality that doesn't have the finances available for security against a claim?" Number 793 CHAIRMAN PORTER said he believed the municipality would have to acknowledge to the court their obligation to discharge the judgment. Number 795 Committee members, Ms. Loper and Mr. Ford reviewed the use of the term `self-insured' in terms of state or municipal entities and discussed state responsibility and authority with respect to municipalities. There being some ambiguity in these matters, it was agreed for the time being to set aside further discussion of Amendment 24. Number 813 MS. LOPER introduced Amendment 25, which she said should replace Amendment 8. "In Amendment 8, that we have passed, we said that the threshold for periodic payments should be $50,000. Under the suggestion of the Department of Law, we have raised the threshold to $100,000." REP. PHILLIPS asked whose recommendation that was and Ms. Loper replied, "The Department of Law." Rep. Phillips asked for the Department's justification for the change. CHAIRMAN PORTER replied it was a policy call reflecting a review of the range of thresholds in other states. REP. PHILLIPS expressed the belief that $50,000 had been a middle range figure. CHAIRMAN PORTER acknowledged that this was "a little bit of a concession to those that think periodic payments are not something that should be considered" for smaller cases. REP. DAVIDSON moved Amendment 25. There being no further discussion or objection, Amendment 25 was adopted by the committee. TAPE 94-38, SIDE A Number 000 REP. NORDLUND presented some suggested amendments. He noted that they might not be in the order that they would appear in the bill. The first amendment was on page 2, line 15, in the Purpose section, adding additional language to conform with No. 4 in the Findings section, which, Rep. Nordlund said, "...just recognizes the fact that...`on the whole, society would be better served with a statute of repose even though in a few limited circumstances injuries may go without compensation.' "That same kind of concept is then carried down into the Purpose section, so it would read: `The purpose of this act is to reduce the costs associated with the civil justice system while ensuring that adequate and appropriate compensation for persons injured through the fault of others is available except in a few limited instances.'" Number 044 REP. PHILLIPS asked for the legal ramifications of the amendment. CHAIRMAN PORTER asked Ms. Loper to comment. REP. JAMES was more immediately familiar with the portion of the bill under discussion, however, and provided an analysis. Number 063 REP. JAMES: "Well, it's two different issues. First of all, in No. 4, it says, `On the whole society is better served with the statute of repose even though in a few limited instances injuries may go without compensation.' And then... [there is] this one, where it indicates that `reduced costs associated with the civil justice system while ensuring that adequate and appropriate compensation for a person's injury through the fault of others is available,' and there is nothing to say up above that there is fault. My reason for even picking at that is, particularly in the statue of repose, it is possible without any fault of the person that's doing the building, or whatever, that there is something that goes wrong with the building and people could then be found to be compensated. I think that saying `through the fault of others' we're trying to determine here that when the fault is there they will get paid; when the fault is not there, they won't. And that is one of the reasons for the repose -- to stop unnecessary lawsuits when there is no fault." Number 094 REP. NORDLUND: "I just think that you are going to find that in a few limited circumstances that there will not be adequate compensation for people who are injured. And it's not hard to imagine that there will be situations when people are injured beyond the $500,000 cap that's imposed by this bill. And this is just recognizing that fact." Number 103 CHAIRMAN PORTER said he felt it was recognizing the point of view and not necessarily the law and stated that he would not support the amendment. Number 107 REP. GREEN asked for clarification of the intent of the amendment and the kind of cases in which an injured party would not be compensated. REP. NORDLUND: "I guess what I'm trying to get at here is simply that when you set caps arbitrarily, that there will be a few limiting instances where people will not receive adequate compensation." CHAIRMAN PORTER: "Well, we have set caps on punitive damages and noneconomic damages. Those are, by your definition, arbitrary. Somebody has got to make up their mind. For us to say that we're going to recognize it -- I think it goes without saying that any time there is an award in those kinds of cases the plaintiff wanted more and the defendant wanted less. But to say that we expect in a few limited circumstances that [the award] wouldn't be adequate is not the intent, and that's what this section is, and so I would oppose it." Number 146 REP. JAMES stated opposition, for the same reason. "In no way, shape or form would I be proposing to pass this if I thought that there were going to be some people who were going to be not getting compensation. I believe that this legislation does provide adequate compensation." Number 155 REP. DAVIDSON: "If Rep. James has that feeling, why do we have that on line 3? We're making the admission here that there are going to be some injuries that go without compensation, and I think it makes the effort here a little more honest." Number 165 MS. LOPER: "I think that there are two completely different issues here. Rep. Davidson, you are looking at the statute of repose, which in some instances, people will wait past the six years or whatever length of time and they will miss bringing a claim to the courts. However, in the section that Rep. Nordlund is referring to, it is referring to the issue of percentage fault, what is adequate and appropriate compensation for persons injured through the fault of others. I imagine that it might involve caps and damages but, in particular, it's looking at the percentage of fault." Number 185 REP. DAVIDSON: "That may be so, but sometimes people are not going to get compensated who would be eligible for compensation. Because when you look and see what we've been doing, we're not giving people more access to the legal system, we're giving them less access to the legal system. And, you know the cuts that we see going on? That's the thing that bothers me. Justice denied is where we're headed. I think [this amendment] makes it a little more honest. It may be two different issues, but I have real concerns about the way we're going." Number 205 REP. NORDLUND offered clarification, saying, "This could easily apply also to the statute of repose. People will not be receiving appropriate compensation for injuries they receive if they get in an automobile accident and the car is six and a half years old. They will absolutely not receive adequate compensation for that, because of the effect of this bill. So it does apply directly to the statute of repose as well as to the caps on damages." Number 216 CHAIRMAN PORTER: "Well, the statute of repose -- your example presumes that the fault was a manufacturing fault that was absolutely the fault of the manufacturer that was found six and one half years later. As is the general consideration for statutes of repose, those kinds of problems are in the main either intentionally hidden, as is the case in the Pinto case that was graphically portrayed by the Department of [indisc.], or the fact that there is negligence on the part of the owner or the maintainer. So, from that standpoint, I would disagree with your statement that a person who had a problem after six and a half years is automatically out of the running for any compensation. That's not the case. Maybe they don't have any coming because they injured their own car and more than likely it was a maintenance problem and perhaps if they were doing their own maintenance that's their maintenance that's their fault. If someone else was doing it, they have a problem with them. There's all sorts of other alternatives other than suing the manufacturer." CHAIRMAN PORTER asked if there was further discussion on Amendment 26. REP. PHILLIPS suggested holding the amendment to give her the opportunity to check with the Department of Law concerning the insertion of the statement proposed in the amendment. It was agreed that Amendment 26 be held. Number 253 Committee members discussed numbering of amendments. REP. NORDLUND presented Amendment 27, which would remove from the statute of repose the section dealing with newly manufactured products. Rep. Nordlund recognized a perceived need and desire among Alaskans for a statute of repose encompassing Alaskan professionals such as contractors, architects and medical personnel. He urged, however, that Alaskans maintain their legal protections from injuries or deaths caused by outside manufacturers. REP. NORDLUND: "I cannot understand, for the life of me, why we're seeking to protect outside manufacturers from injuries that they might cause to Alaskans. I see this section as being particularly un-Alaskan, as unfriendly to the Alaskan public. We're not a large manufacturing state. Most of the products we purchase up here are produced out- of-state, and frankly, I haven't even been able to identify any of the interest groups out there that are strongly supporting this part of the bill. I think it's a great disadvantage to the folks in our state." Number 298 REP. DAVIDSON amplified Rep. Nordlund's concerns, saying, "I would even call it anti-Alaskans.... I do think Alaska is the end of the line. We get a lot of shoddily manufactured goods up here... they just send [them] up -- `ha, ha, ha, the Alaskans took it!' That's why I strongly support this amendment...." Rep. Davidson enumerated factors unfavorably affecting Alaskan consumers and concluded that Rep. Nordlund's proposed amendment was important in protecting Alaska citizens. Number 325 CHAIRMAN PORTER: "If I may, by way of response, I would ask the previous two speakers to review the material that we have... supporting this point of view, and this whole bill." Chairman Porter referred to a survey by the small business association of the state, asserting that the small business people in the state strongly support the bill. CHAIRMAN PORTER stated, "[I]f we can provide an environment that's healthy for business, then we won't have so many outside manufacturers, we'll have some inside manufacturers who we can go down and talk to personally." He cited testimony from a small business person in Juneau "who was trying to make it but was having problems with their insurance costs, and supported very vigorously this bill, just for that reason, that they want to be able to continue to provide quality products here in this state.... I think that what we're trying to do is create a business-friendly environment here by this bill." Number 353 REP. JAMES reinforced Chairman Porter's comments with further testimony, citing the example of a Fairbanks sports dealer who'd been put out of business after ten years, "through no fault of his own," after a recreational vehicle he had been selling for ten years was involved in an accident and it was established that there was a design defect in the product. Noting that the manufacturer and the dealer were both put out of business, Rep. James concluded, "I think we need to protect our business people." Number 373 REP. DAVIDSON: "Perhaps there is a more creative way we could protect our Alaskan business people. Certainly the argument is there, and I would want to do that. But why should we be protecting everybody else and have the Alaskan consumer end up with all the junk that's left over? I see the problem, but it seems to me we could be more creative in protecting the Alaskan businesses manufacturer. It seems ironic that a[nother] state that does not have a six-year statute of repose, if we are exporting things [to it], they can still come after that Alaskan business in another state. Isn't that correct?" CHAIRMAN PORTER requested clarification of the question. REP. DAVIDSON: "If an article is manufactured here and shipped out to another state and is purchased, and this kind of suit is brought against the manufacturer here in Alaska, because that state does not have a statute of repose of six years, does that mean that that person could bring an action against that Alaskan manufacturer?" MS. LOPER: "That is correct, yes, but in 22 states they have a statute of repose." CHAIRMAN PORTER: "This isn't new ground." REP. DAVIDSON: "Well, it's new every day, for me." CHAIRMAN PORTER asked if there was further discussion. Number 410 REP. NORDLUND: "I'd just like to point out that, in the memo that did come from legal, this is one of the areas where they point out a possible [indiscernible because of another voice over this portion - constitutional?] problem." Number 425 CHAIRMAN PORTER: "Ah, good, we'll deal with that right after we deal with this amendment. There is objection to Amendment 27. Can we have a roll call vote please?" Reps. Porter, James, Phillips and Green voted "No;" Reps. Nordlund and Davidson voted "Yeah." Amendment 27 was therefore not adopted by the committee. The meeting of the House Judiciary Standing Committee was adjourned [no time given]. Chairman Porter noted that committee members now had before them a folder containing the Department of Law analysis of HB 292, as well as responses to the criticisms presented. He encouraged committee members to review it prior to the next scheduled House Judiciary committee meeting scheduled for 10:00 a.m. the next morning. HB 445 - NOT HEARD TODAY HB 460 - NOT HEARD TODAY HB 376 - NOT HEARD TODAY