Legislature(1995 - 1996)
02/19/1996 01:30 PM Senate JUD
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* first hearing in first committee of referral
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+ teleconferenced
= bill was previously heard/scheduled
SENATE JUDICIARY COMMITTEE
February 19, 1996
1:30 p.m.
MEMBERS PRESENT
Senator Robin Taylor, Chairman
Senator Lyda Green, Vice-Chairman
Senator Mike Miller
Senator Al Adams
Senator Johnny Ellis
MEMBERS ABSENT
None
COMMITTEE CALENDAR
CS FOR HOUSE BILL NO. 158(FIN) am(ct rls pfld)(efd fld)
"An Act relating to civil actions; amending Alaska Rule of Civil
Procedure 95."
PREVIOUS SENATE COMMITTEE ACTION
HB 158 - See Judiciary minutes dated 5/3/95, 8/21/95,
8/23/95, 8/24/95, 8/25/95, and 2/9/96.
WITNESS REGISTER
John Suddock
Alaska Trial Lawyers Association
500 L St.
Anchorage, AK 99501
POSITION STATEMENT: Opposes HB 158, supports amendments
Chrystal Smith
Department of Law
P.O. Box 110300
Juneau, AK 99811-0300
POSITION STATEMENT: Answered questions on HB 158
Mike Lessmeier
State Farm Insurance Co.
One Sealaska Plaza, #303
Juneau, AK 99801
POSITION STATEMENT: Supports HB 158
Dr. David Johnson
Alaska State Medical Assn.
Ketchikan Medical Clinic
Ketchikan, AK 99901
POSITION STATEMENT: Commented on HB 158
Pam LaBolle
Alaska State Chamber of Commerce
217 Second St. #201
Juneau, Alaska 99801
POSITION STATEMENT: Answered questions on HB 158
ACTION NARRATIVE
TAPE 96-10, SIDE A
Number 001
CHAIRMAN ROBIN TAYLOR called the Judiciary Committee meeting to
order at 1:36 p.m. All members were present. The committee took
up CSHB 158(FIN)am (ct rls pfld)(efd fld) and pending amendments.
HB 158 CIVIL LIABILITY
JOHN SUDDOCK, representing the Alaska Trial Lawyers Association,
repeated his opposition to HB 158 and stated each proposed
amendment statistically increases the likelihood that an injured
person will not be made whole. The Alaska Trial Lawyers
Association believes the bill should be defeated in its entirety
but recognizing that might not occur, suggests the following. If
the rights of injured Alaskans are being diminished to benefit
commercial interests, the rate rollback amendment should be
enacted, as other states have done, to provide some balance. The
rate rollback amendment is well drafted because at any time during
the next four years the industry can file the 10 percent rate
decrease to activate the legislation. He counseled against
accepting the insurance industry's reassurance that it will reduce
rates after the bill passes.
MR. SUDDOCK supported the mandatory arbitration amendment for the
following reason. Approximately 80 to 90 percent of injury and
property damage claims are under $100,000. The amendment would
establish a mechanism where those claims, at an early date, after
minimal expenditure by the parties, can have an expedited hearing
before an arbitrator and be settled. The State of Washington has
used a similar system for the past ten years and it works well.
There is a perfunctory amount of discovery, and most hearings take
one day. If either side is not satisfied with the arbitrator's
award, a trial can occur. The penalty associated with going to
trial is that if the party moving for trial does not improve
his/her position over the arbitrator's decision, that party pays
the defendant's attorney fees. He believed that sanction to be
appropriate.
Number 121
MR. SUDDOCK discussed his reasons for opposing the offer of
judgment provision which impose the payment of actual attorney fees
of the losing party. If an attorney is representing a plaintiff
with a claim against four defendants, there is no way the attorney
can accurately predict what the jury awards will be in all four
cases. That almost guarantees the attorney will make an error of
judgment which will increase client costs because the client will
have received an offer of judgment, the attorney will have guessed
wrong about at least one of the four offers of judgment, which will
require that party's attorney fees be paid. In contrast, if an
arbitration occurs first, and the client chooses to take the case
to trial but does not do better, the extra cost is acceptable. He
did not believe more than 25 percent of arbitrated cases would
proceed to trial. This one amendment would place 90 percent of the
litigated tort cases in a cost-effective summary proceeding,
resulting in an estimated 75 percent of the cases settled. Tort
reform should make the procedure more fair, more expeditious, and
less expensive for all concerned, rather than cutting the award
calculation back until there is very little left for recovery.
Number 165
SENATOR TAYLOR noted most mandatory arbitration provisions in other
states use a lower limit, such as $50,000. He asked Mr. Suddock's
opinion of the $100,000 amount and whether the arbitration
amendment meshes with the offer of judgment provision in the bill.
MR. SUDDOCK replied he might have set the amount at $50,000 because
that is the jurisdictional ceiling for the district court. The
State of Washington uses $35,000. He did believe a limit of
$50,000 would capture more than 50 percent of the cases, however he
projected an additional 25 percent of cases would fall under the
$100,000 limit.
SENATOR TAYLOR commented part of the dramatic increase in the costs
of litigation over the past several years is due to the expansion
and misuse of the discovery process. He asked Mr. Suddock if he
could recommend any changes to the amendment that would limit or
extend the discovery period within the bill to decrease costs.
MR. SUDDOCK felt the discovery process should be short. The Alaska
Supreme Court has recently gone to an entirely new concept of civil
discovery. It can be characterized as requiring the plaintiff to
show all of one's cards immediately. It is the ancillary
responsibility of the defendant, without formal discovery request,
to do the same. Therefore, at the outset of the case, all of the
relevant material is voluntarily and immediately exchanged. One
deposition is then taken on each side, which rarely takes more than
four hours. If there is an injured party, it is reasonable for the
defendant or the insurance carrier to be allotted an opportunity
for an independent medical exam. That process can be easily
completed in 30 days, and will provide approximately 90 percent of
the necessary and available information. The other 10 percent of
the information is most likely not worth obtaining, however the
arbitrator could be given some discretion to grant extra discovery
in individual cases.
Number 244
SENATOR TAYLOR asked what the time line is in the Washington State
arbitration system. MR. SUDDOCK explained there is provision for
some attenuated amount of discovery, as described. From the date
the arbitrator is appointed, regulations require a trial occur
between three and nine weeks, from the date the case was filed.
SENATOR TAYLOR observed the amendment requires the court system to
appoint the arbitrator and asked what procedure is used in
Washington State. MR. SUDDOCK reported Washington has a "strike"
system. The court issues a list of five proposed arbitrators from
a list of attorneys with some degree of experience in civil
practice. Each side can peremptorily strike, or reject, two. In
an extreme case, four of the proposed arbitrators could be rejected
by the two parties, leaving the fifth person as the arbitrator. If
both parties rejected the same arbitrators, the court would appoint
from the remainder. In draft language Mr. Suddock proposed, a list
of arbitrators would be provided, the right of preemptory challenge
would be preserved, and the Alaska Supreme Court would figure out
the mechanics.
SENATOR TAYLOR commented the same procedure is used to disqualify
judges once a case has been assigned. MR. SUDDOCK stated the
procedure could become complicated when multi-party cases are
involved. SENATOR TAYLOR questioned how successful the Washington
State arbitration requirement is. MR. SUDDOCK indicated it appears
to be successful since no one is interested in changing it.
Number 300
SENATOR ADAMS inquired whether some businesses in the state are
waiting for tort reform legislation to pass before processing
claims and making payments. He discussed a Chugach Electric
Company case in which an electric cable fell off a company truck
and hit another driver. Chugach Electric has paid for car repairs
but has only paid a small amount of medical fees, only after the
situation was publicized in a newspaper. MR. SUDDOCK hesitated to
speculate on that case, but asserted there are institutional
pressures for a tort feasor to not pay. Lack of payment places
tremendous pressure on the injured party to pay medical costs and
other expenses while recovering and often creates credit problems
for the injured. The defendant takes the position that costs will
not be paid in a piecemeal fashion. He believed Chugach Electric
would benefit from an arbitration system, because it is far easier
for a neutral party to review the situation and determine the award
amount. If the defendant agrees, he/she will save the cost of
further attorney fees.
Number 321
SENATOR ADAMS asked whether there is an insurance crisis in the
state, and whether there is a pattern of injured parties receiving
excessive awards from the court system. MR. SUDDOCK replied he
sees a consistent pattern of undercompensation of victims in cases
in the Superior Court of Anchorage and he is unaware of any cases
in which a plaintiff received a windfall. He believes almost all
Superior Court judges would agree that juries are severely
undercompensating plaintiffs. Regarding an insurance crisis, MR.
SUDDOCK stated according to industry publications, insurance
profits are high and coverage is available.
SENATOR TAYLOR informed committee members the committee received a
memo, dated February 16, from Ms. Williams of the Attorney
General's Office on the legal issues associated with HB 158.
CHRYSTAL SMITH, representing the Department of Law, offered to
convey questions to Ms. Williams. SENATOR ADAMS asked if the bill
is constitutional as written. MS. SMITH could not answer at this
time.
Number 370
SENATOR ADAMS requested elaboration on the department's position on
the statute of repose provision in Section 2. MS. SMITH stated Ms.
Williams' memo indicated although Section 4 was intended to solve
the constitutional questions, due process problems may exist if an
action is barred before the cause of action accrues. Ms. Williams
also questioned the definition of "substantial completion" that
begins the eight year statute of repose.
SENATOR ADAMS questioned whether the Department of Law plans to
specify which statutes will contradict court rules and recommend
changes to HB 158. MS. SMITH replied she would ask Ms. Williams to
respond to that request.
Number 390
SENATOR ELLIS referred to page 2 of the memo, regarding actions by
minors. He asked for additional research on what the definition of
mental disability encompasses, and whether it is a standard
definition in Alaska statutes. He questioned whether it includes
people born developmentally disabled as well as people with mental
illness. He further asked if the state is required to use the
definition of mental disability in the American Disabilities Act.
He requested information on whether other states have successfully
challenged in court a differentiation among children who are
mentally deficient, and children who are physically deficient, due
to a birth problem, in their rights to bring suit when they reach
the age of majority if the parents did not bring suit. MS. SMITH
offered to provide the committee with further information.
SENATOR TAYLOR expressed concern about the constitutionality of
tolling the statute of limitations for mental incompetence but not
for minors, who, by definition, are incompetent. It appears to be
a significant violation of due process and equal protection rights.
His concern is directed to children having to bring suit against
their parents because the parent failed to bring an action on their
behalf within the time constraints established by the statute of
repose. Latent injuries may not appear until a child reaches a
certain developmental stage. He noted the possibility that some
injuries might not be discernible for diagnosis within eight years.
He discussed the need to have these questions answered before
enacting the bill, to prevent the Supreme Court from having to
determine these issues several years from now at great cost.
Number 440
SENATOR ADAMS asked Ms. Smith if the Department had positions on
the four proposed amendments. MS. SMITH replied the department has
not taken a position at this time.
SENATOR TAYLOR asked Ms. Smith to investigate the effect of the
implementation of the mandatory arbitration requirement in the
State of Washington.
MIKE LESSMEIER, representing State Farm Mutual Automobile Insurance
Company and State Farm Fire and Casualty Company, testified in
response to previous questions raised by committee members.
Regarding whether there would be an incentive for insurance
companies to delay resolution and payment of claims pending passage
of tort reform legislation, HB 158 would apply only to causes of
action that accrue after the effective date, therefore would not
affect cases currently under consideration. Furthermore, delays
are costly, therefore most companies uniformly pay claims as soon
as they are owed. Partial payments are made because in previous
cases, when an amount being disputed was paid in advance, it was
used against the company even when evidence rules admitted in a
court of law were contrary.
SENATOR ADAMS stated Chugach Electric did not make advance
payments. The only time a payment was made was after the story was
published in a newspaper. MR. LESSMEIER emphasized the importance
of not making decisions on this legislation based on newspaper
articles.
Number 490
SENATOR TAYLOR agreed that advance payments made by the insured may
work against the insured, because that amount of payment might be
disclosed at the trial implying some level of liability on the part
of the insured. He asked Mr. Lessmeier his view of how the
collateral source provision within the bill would impact that
argument since that provision allows the insurance company to use
the expenses sustained by the injured and his/her family to offset
the amount the insurance company is required to pay. He questioned
why it should work differently for the insurer and the injured
party.
MR. LESSMEIER felt the issue raised by the collateral benefits
provision to be the concept of self-insuring to a certain degree,
which is a policy decision. The issue of admitting collateral
benefits was recommended in the only study on excessive claiming he
is aware of. The two issues differ in that advanced payments made
by the insurer can be used to determine whether there is fault in
the case, or when fault is designated, the amount to be
compensated. There is a rational basis for allowing the
admissibility of one and not the other, if you make the policy
decision that it is better to self insure for a percentage of a
loss. If that policy decision is not made, the evidence should not
be entered on either side. The policy decision is not something
State Farm is advocating strongly, it is a different approach. He
stated it may be better to take those kinds of cases out of the
litigation system.
SENATOR TAYLOR questioned how those cases are taken out of the
litigation system. He discussed a scenario in which he responsibly
maintains a policy of insurance on his family, or self insures. If
a member of his family is injured due to the negligence of a drunk
driver, a State Farm customer, this policy change would allow State
Farm to use the payments made by his insurance policy as a credit
toward any judgment awarded against State Farm. He argued why he,
as a responsible policyholder, should be held accountable for the
negligence and fault of the wrongdoer, and be penalized by a
premium increase because he filed a claim.
MR. LESSMEIER disagreed with Senator Taylor's premise for the
following reasons. First, premiums do not increase if a party is
not at fault. Second, society as a whole may be better off if
people self insure for a percentage of potential losses. If the
legislature does not agree with that policy, that provision should
be removed. It is not an issue that can be analyzed by reviewing
a single case. All cases and applications that would occur under
the collateral benefits provision would have to be reviewed.
Number 551
SENATOR TAYLOR discussed the experience of many people whose rates
increased after filing claims for injuries sustained as the result
of negligent acts of others. MR. LESSMEIER stated that is not
common practice, and one which State Farm does not engage in.
He reiterated if the legislature does not support the collateral
benefits provision, it should be removed from the legislation, as
it is not a major part of the legislation from State Farm's point
of view.
SENATOR TAYLOR repeated he does not believe the victim who was not
at fault should have to pay for the negligent party's act. He
discussed the historical basis for subrogation. On a global basis,
large insurance companies who sue each other have to resolve the
costs under subrogation. The provision in HB 158 holds the injured
responsible for the collateral sources, does not require the
insurer to admit to paying for any portion of the claim, but
requires the injured's family to admit to paying a portion of the
injured's expenses.
MR. LESSMEIER emphasized the advantage of the collateral sources
provision, where subrogation does not occur, is that less time and
money is spent arguing about who was at fault. Each party bears
its own loss.
Number 581
SENATOR TAYLOR asked how the collateral benefit provision would be
advantageous to an injured party who was not at fault. MR.
LESSMEIER indicated to the extent the insurance companies are
better able to control costs, clients would benefit.
SENATOR TAYLOR asserted if this provision was adopted, and
insurance companies reduced their costs, then Senator Adams'
amendment requiring a rate rollback would pose no problem.
MR. LESSMEIER replied the specific law enacted, and the motivations
behind the industry's claims-making practices in Alaska, will
affect the industry's loss experience. State Farm's premiums are
based on its loss experience in Alaska. To the extent the loss
experience can be improved, the money will ultimately be
redistributed to Alaskans, or it will not be paid to State Farm
initially. State Farm is a mutual company with respect to
automobile insurance, and has voluntarily returned money to
Alaskans when its experience was better than projected.
SENATOR TAYLOR commented the insurance commissioner frequently
orders insurance companies to rollback money from companies that
overcharge. He commended State Farm for providing the rollbacks
voluntarily.
TAPE 96-10, Side 2
SENATOR TAYLOR reiterated his belief that the collateral benefits
provision penalizes the insured party who is not at fault, because
the no-fault philosophy would relinquish responsibility of the at-
fault party.
MR. LESSMEIER explained the collateral benefits provision applies
to medical expenses only, and not to the remainder of damages that
could be caused by a drunk driver. In such an example, a claim
would be made, and payments would be made, including, most likely,
punitive damages. All of those things would have to be taken into
consideration and defended. The collateral benefits provision is
narrowly confined to medical costs only, and the philosophy behind
it is that creating a no-fault approach would benefit everyone.
Number 580
MR. LESSMEIER addressed the memorandum from the Department of Law.
The only case in Alaska that addresses the statute of repose is the
Turner Construction Company Case. The Supreme Court found the
purpose of the statute of repose, which is to encourage
construction and avoid stale claims by shielding certain defendants
from potential future liability, to be a legitimate government
purpose. The Supreme Court found the classes created as a result
of the statute of repose were not suspect. It found the statute of
repose to be unconstitutional because it creates separate classes
of people: the potential liability of one class would increase as
a result of the distinction made by that statute. He suggested if
there is a constitutional problem with the statute of repose in
general, the court would not have bothered to analyze the Turner
case. By last count, 29 states have statutes of repose, most of
them for a similar duration. He emphasized the statute of repose
in HB 158 does not suffer from the problem set forth in the Turner
decision.
SENATOR ADAMS asked Mr. Lessmeier if he could offer any suggestions
in case the statute of repose is found unconstitutional. MR.
LESSMEIER repeated he thinks this statute of repose is
constitutional because it applies across the board, except for
classes of claims that were removed in the House after extensive
debate, such as product liability and environmental claims. He
believed this statute of repose to be as fair as possible. He
cautioned that the Supreme Court has reversed at least 50 percent
of the cases they review, therefore it is difficult to predict the
outcome of an appeal.
MR. LESSMEIER discussed Ms. Williams' opinion that Sections 8 and
9 might violate rules of court. He was unsure what rules of court
Ms. Williams' was referring to because no rules of court deal with
periodic payments. Rules of court have been adopted by the Supreme
Court after legislation has been enacted, to implement the
substantive rule of law enacted by the legislature. An example is
a rule of court on medical advisory panels in medical malpractice
cases. The rule of court was designed to implement the substantive
law passed by the legislature. Another example is Court Rule 68,
which existed before the legislature addressed the subject of
offers of judgment. Ten years ago the legislature chose to include
in that provision a prejudgment interest penalty. That was then
set forth in Court Rule 68. The court reviews the substantive law
enacted by the legislature, and incorporates those changes in
existing rules or in new rules. The issue is whether legislative
changes are substantive versus procedural. Sections 8 and 9 deal
with minor, noncontroversial changes to the periodic payment
provision so it is unlikely those changes would change a rule of
court. Section 17, regarding medical expert witnesses, deals with
a procedural rule of court. He did not believe the court has ever
determined that an evidence provision adopted by the legislature
would be constitutionally prohibited. He felt the only concern
about rules of court is in relation to the offer of judgment
provision. He personally believed it is the legislature's
prerogative to have an offer of judgment provision.
Number 484
SENATOR TAYLOR asked Mr. Lessmeier to address Mr. Suddock's
concerns about the scenario in which a plaintiff is suing four
defendants when the plaintiff does not know who caused what percent
of the $100,000 damages. One of the four plaintiffs offers to
settle in an offer of judgment of $20,000. How would the attorney
advise the plaintiff, and by what information does the plaintiff
discern whether that 20 percent is the appropriate amount of
liability a jury will find after trial.
MR. LESSMEIER stated he would advise his client to investigate the
claim thoroughly, to understand the facts, and to make an
assessment of that fault based on professional judgment and
experience. It is not a precise science, but judgments as to
potential liability are made in every single case.
SENATOR TAYLOR noted the offer of judgment is limited to ten days.
MR. LESSMEIER commented claims are investigated before they are
filed with the court. There is a two year period of time in which
to investigate a claim before it has to be filed. There is an
additional period of time to do discovery. If a plaintiff did not
have an adequate opportunity to respond to an offer of judgment of
$20,000, and two months after the offer of judgment expires the
plaintiff learns new facts, there is nothing to prevent the
plaintiff from entering an offer of judgment for the same amount.
The amount of exposure would be only for the period of time until
the new information was received, entered the offer of judgment,
waited for the defendant to accept or reject the offer.
Number 447
SENATOR TAYLOR felt the problem is that from the time the offer of
judgment arrives, the client must make a decision within ten days.
If the offer of judgment of $20,000 is rejected, and the jury finds
the defendant liable for $10,000 during the trial, who will pay the
defendant's attorney's fees. MR. LESSMEIER verified under HB 158
the plaintiff would have to reimburse the defendant's actual
attorney's fees. He explained the provision works both ways: if
the plaintiff had entered an offer of judgment of $10,000 and did
better after the trial, the plaintiff would be entitled to collect
actual attorney's fees and costs. The idea is to provide an
incentive that applies equally to both sides to evaluate offers to
take reasonable positions.
SENATOR TAYLOR stated he does support the idea, but cannot answer
Mr. Suddock's question because the playing field is not level. The
plaintiff must decide within ten days of receiving four offers of
judgment, what amount the jury will decide each defendant is liable
for. If the plaintiff guesses incorrectly, he/she will pay the
full attorney's fees for any incorrect guess. The same burden is
not being placed on the other side.
MR. LESSMEIER disagreed because although the offer of judgment must
be rejected or accepted within ten days, the plaintiff also has a
period of time before filing suit, to investigate the claim. The
plaintiff also has the ability to offer his/her own offer of
judgment to make the penalty provisions apply to the party being
sued. In addition, if the plaintiff learns new facts after
rejecting the offer of judgment, he/she is not prevented from
making an offer of judgment.
Number 402
SENATOR TAYLOR stated the unlevel playing field is caused by the
major economic differences between the two parties, especially if
a plaintiff is suing a company like Prudential. The larger company
can afford to bluff, and go through the trial process. If the
plaintiff guesses wrong, and has to pay attorney fees, he/she will
probably lose half of the judgment on those costs alone. SENATOR
TAYLOR stated it is important to create a loser-pay situation that
works effectively to slow down litigation, and is equitable to both
sides.
Number 381
SENATOR TAYLOR asked Mr. Lessmeier what State Farm's position is on
the mandatory arbitration amendment. MR. LESSMEIER responded State
Farm's primary concern is the arbitration provision is potentially
complicated, but is willing to work with the committee to create an
arbitration provision that will work at any level. He asked the
committee not to make mandatory arbitration part of the bill as it
will delay the movement of HB 158 or kill the bill after many hours
have been put into it. He explained State Farm's concern with the
proposed arbitration amendment. State Farm's experience is very
different from Mr. Suddock's because almost all cases involve
plaintiffs who request in excess of $100,000, even for soft tissue
injuries. He referred to a pretrial memorandum of a case tried in
Ketchikan two weeks ago. State Farm had valued this particular
case at $7,500 but the claims presented amounted to $292,000. The
judgment was $0. The cases tried in Juneau in the past three or
four years have been similar. One case went to the Supreme Court:
State Farm evaluated the case at $35,000, the plaintiff evaluated
the case at $900,000. The award was $35,500. He has never been on
a case that would fall within the mandatory arbitration provision
because the request for damages is always greater, therefore he
does not believe this provision would apply to very many cases. At
present, cases within the $50,000 range can be heard in District
Court, without the cost of an arbitrator. State Farm's second
concern about arbitration is that it can be much more expensive
than simple litigation because if the cost of the arbitrator is
split against the parties, both sides have to hire the equivalent
of one and one-half attorneys. Often, three arbitrators hear a
case. State Farm is also concerned that as drafted, the amendment
provides no incentive for one side to take a meaningful position
before going to the expense of arbitration. It contains no
prevailing party provision and Rule 82 does not apply to
arbitration proceedings according to the Uniform Arbitration Act.
He discussed an arbitration he was involved in to collect money.
Much of the case was not contested, and State Farm won. Because
there was no Rule 82 provision, no attorney fees could be
reimbursed. State Farm believes there needs to be incentives in
the system to encourage people to take reasonable positions. The
last concern State Farm has with the mandatory arbitration
amendment is with admissibility of the arbitrator's decision when
the case goes to trial. There are no rules of evidence to allow
that to occur. In the medical malpractice arena, the report of the
medical advisory panel can be admitted in court. State Farm favors
alternative dispute resolution that is quick as it benefits all
parties.
MR. LESSMEIER noted State Farm is concerned about the empty chair
amendment because the voters were told the effect of the 1988
initiative was that no party would be held responsible for more
than his or her percentage of fault. The initiative passed by over
70 percent. This amendment would shift fault back and increases
the allocation beyond what a person caused, which is contrary to
what the voters wanted.
Number 291
SENATOR TAYLOR stated the amendment would allow, if the bill passed
in its current form, an empty chair to shift the blame to. MR.
LESSMEIER clarified that he believes the committee should implement
the intent of the voters which is that no party should be held
responsible for more than their percentage of fault. SENATOR
TAYLOR asked who would pay for the portion that goes unrecompensed.
MR. LESSMEIER replied it is similar to any situation where a claim
is barred by a statute of limitations or a statute of repose. If
a claim is not filed within a certain time period, it is the policy
of this body to dismiss the claim.
MR. LESSMEIER addressed the rate rollback amendment. State Farm
sets rates in Alaska by the frequency and severity of loss. Tort
reform will affect the severity of loss, but not the frequency of
loss. State Farm believes it will have a positive effect on
severity, but cannot be sure. In looking at California's
experience with respect to MICRA, the state litigated every
provision in MICRA over a ten year period. They did not know how
the provisions would be interpreted and applied for years. State
Farm has had that experience in Alaska with the several liability
initiative: it took five years to get a decision on that
initiative from the Supreme Court, and that decision was contrary
to what the voters voted on. The legislature cannot guarantee this
bill will become law even if it is passed, because it will be
challenged. Second, the director of the Division of Insurance is
responsible for ensuring fair and reasonable insurance rates.
Additionally, in some markets in the insurance industry, there is
good competition. Finally, State Farm is a mutual company, and to
the extent it does better, it will give the money back.
Number 242
DAVID JOHNSON, representing the Alaska State Medical Association,
offered to answer committee questions. SENATOR TAYLOR discussed a
situation in which a 14 year old child is in his third cycle of
problems with mental illness. Each cycle becomes worse and lasts
around three years. The physicians currently involved indicate the
problem was caused at birth as the result of the use of forceps.
The full impact of the injury will not be known until he reaches
his late teens. The problem is severe, and the family has reached
its coverage limit and is facing an additional $30,000 in bills for
one month. He asked Dr. Johnson what the impact of the statute of
repose as contemplated in HB 158 would be upon that family, if the
bill passes.
DR. JOHNSON stated under the statute of repose, the cause for
action must be known at age eight years or after two years,
whichever comes last. Therefore if the child's first episode was
at age five, the operative amount of time would be age eight.
SENATOR TAYLOR explained although the episodes occurred at age five
and age ten, the causative factor was not determined until
recently, after brain mapping and other procedures were used. DR.
JOHNSON responded that without knowing the details of the case,
there are two sides of opinions. If the diagnosis is so
complicated as to take 15 years to sort out, but first appeared at
age five, that is the issue that would be litigated. SENATOR
TAYLOR stated the diagnosis has been a process of tracking back and
finding that earlier symptoms are related, and develop a pattern,
and more clearly indicate the original cause.
SENATOR TAYLOR discussed the Jackson v. Powers case and Senator
Ellis' amendment which would allow a hospital to be granted
immunity for granting privileges to contracting doctors only if
those contracting doctors carry a specified amount of liability
coverage.
SENATOR MILLER announced he and Senator Adams were leaving to
attend a free conference committee meeting on SB 123.
Number 161
SENATOR GREEN asked if the clock starts with the diagnosis in the
case Senator Taylor referred to. SENATOR TAYLOR responded it would
not if HB 158 passes. SENATOR GREEN believed the most recent
diagnosis would trigger the statute of repose. SENATOR TAYLOR
explained under HB 158, eight years is the statute of limitations,
or two years beyond the point of discovery if within the eight
years. SENATOR GREEN asked for clarification of when the clock
would start.
DR. JOHNSON responded the tragedy of birth injuries is one of the
most emotional aspects of apportioning responsibility. As
physicians are taking a more aggressive approach toward operative
deliveries in an effort to prevent injuries during labor, they are
discovering the majority of abnormal labors are caused by abnormal
pregnancies. The stress of labor is the first evidence that a
problem with the pregnancy exists. Even though the cesarean
section rate has increased substantially, the incidents of cerebral
palsy, for example, are not significantly decreasing because the
vast majority of those problems are not caused by traumatic birth.
While birth is a hazardous process, it is safer now than ever.
Diagnoses based on new data and evidence that point to occurrences
years ago is often speculative. Such a case would be reportable as
a journal article because it would be blazing new territory. In
such a case there would clearly be a variety of opinions, and
obviously other physicians have had different opinions over the
last 15 years.
Number 102
SENATOR TAYLOR stated in this particular case, it has taken 15
years for a pattern to develop. He felt this is an example of a
situation that would not fall under Section 2 because there is no
presence of an undisclosed foreign body, nor were facts
intentionally concealed, nor was the last act alleged to have
caused the injury within eight years. He believed the statute of
repose would not cover a child whose injury was not discovered
until age ten, if that injury was the result of a birth
complication. Because the parents did not bring the suit on behalf
of the child, even though they were unaware of the cause, they
could not bring a suit when the cause was discovered.
DR. JOHNSON believed that to be an extremely extraordinary case.
SENATOR TAYLOR agreed, and noted it is rare for a suit to be filed
after eight years. He expressed concern however, that passage of
HB 158 would prevent a suit from being filed in such a case.
DR. JOHNSON addressed Senator Ellis' amendment. He repeated that
the matter is a public policy call by the legislature. Requiring
$5 million in coverage would be unaffordable for most physicians if
it were available. SENATOR TAYLOR asked what amounts doctors
routinely carry. DR. JOHNSON replied there is no routine amount.
He reviewed NORCAL's policy limits and associated rates. He was
unaware of whether such policies were available to other health
care providers listed in the bill.
SENATOR TAYLOR asked what level the hospitals carry because both
the hospital and independent contractor will be held liable under
Jackson v. Powers under existing law. Placing the burden on the
independent contractor will eliminate the risk from the hospital.
DR. JOHNSON was not aware of the amount of coverage hospitals
carry, and reiterated the issue is a public policy call. SENATOR
TAYLOR explained the legislature is trying to make that public
policy call with no information on the subject.
TAPE 96-11, Side One
SENATOR ELLIS stated the Hospital Association has taken a position
on the amendment and offered to provide the information to the
committee.
DR. JOHNSON addressed the mandatory arbitration amendment. He
believed the issue deserves serious consideration separate from HB
158. He stated it breaks new ground, but needs to be reviewed
independent of HB 158. SENATOR TAYLOR responded he is
contemplating that approach, however tort reform supporters are
requesting systemic reform. He did not believe the amendment does
disservice to the bill, and might gain more support for the bill.
He agreed that if it appears HB 158 will not be enacted, he intends
to submit the amendment as separate legislation.
Number 074
DR. JOHNSON commented that this hearing is the seventh on tort
reform, therefore to introduce new legislation at this point
without giving previous witnesses the chance to address it seems
inappropriate. He repeated the Alaska State Medical Association
supports mandatory arbitration and would like to see it introduced
as a new bill.
Regarding the rate rollback amendment, DR. JOHNSON made the analogy
of requiring the Permanent Fund Corporation to invest only in
stocks that were going to go up. The amendment is antithetical
because of the enactment trigger. SENATOR TAYLOR stated the final
draft of that amendment will not have that double triggering
effect. He likened the amendment to the statute of repose in that
a gym ceiling could collapse nine years after it was built, but no
injured party could bring suit because the statute of repose has
expired. SENATOR GREEN suggested a suit could be brought for gross
negligence. SENATOR TAYLOR disagreed.
Number 126
DR. JOHNSON discussed the problem with court rules. The fact there
is a mechanism by which the legislature can, through a
supermajority, directly make rules for the court, in no way means
that the legislature cannot make laws that will have to be
considered by the Supreme Court in making rules for the courts.
It is the Supreme Court's responsibility to look at the
Constitution, and statutes as passed by the legislature, and modify
the court rules accordingly. SENATOR TAYLOR agreed but noted the
subtle distinction is in a mandated rule change versus a
substantive law.
DR. JOHNSON commented on Section 17. The purpose of this section
was to address the issue of junk science. Current laws on medical
liability responsibility contain penalties for both frivolous
prosecution of claims, and for frivolous defense. The purpose of
this section is to establish basic qualifications for medical
expert witnesses. This section would require a witness testifying
to be a licensed physician. He offered to provide the committee
with a simplified amendment to clarify the section. He reiterated
the purpose is to establish the medical standard of care, but was
misinterpreted by the Attorney General's Office.
PAM LABOLLE, representing the Alaska State Chamber of Commerce,
informed committee members she is in the process of polling
members, as requested by the committee.
Number 203
SENATOR TAYLOR stated this issue is bigger than HB 158. The
legislature needs to review the public perception that there are
outrageous and unfair damage awards. Mr. Suddock's testimony was
to the contrary. If, in fact, outrageous and unfair decisions are
being handed down in Alaska's court system, the legislative
Judiciary Committees are the appropriate bodies to review those
claims.
PAM LABOLLE clarified she did not use the words "outrageous" and
"unfair" in her letter to the committee. She specified her letter
stated, "More and more frequently, stories are brought forth from
around the country of frivolous lawsuits and outrageous awards for
damages." SENATOR TAYLOR stated if that statement is true, he wants
information on those types of cases in Alaska. MS. LABOLLE
believed HB 158 does address items that bring about some of the
frivolous and outrageous lawsuits and settlements, and is a
starting point to remedy the problem.
SENATOR TAYLOR reemphasized he would be interested to see any back-
up information on such cases in Alaska because if they exist, the
legislature will do more than pass HB 158. He stated if people are
being led to believe such cases are the norm from anecdotal stories
around the country, then the public needs to be informed of what is
really happening. Such a message conveys to people that we have a
corrupt, imbalanced system. If that is true, it is imperative that
such cases in Alaska are reviewed. He adjourned the meeting at
3:30 p.m.
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