Legislature(1995 - 1996)
02/28/1996 01:30 PM Senate JUD
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HB 158 CIVIL LIABILITY
SENATOR TAYLOR announced many tort reform hearings, including
hearings in Fairbanks, Anchorage, and Sitka, have been held, and
several amendments have been considered by the committee. A
proposed committee substitute has been drafted, which incorporates
many suggested changes.
SENATOR TAYLOR moved, and asked unanimous consent, that the
proposed committee substitute be adopted for purposes of
discussion. SENATOR ADAMS objected, and asked if the proposed
committee substitute incorporates the amendments submitted by
committee members. SENATOR TAYLOR replied it does, and noted
Senator Adams' amendment was incorporated as Section 27.
SENATOR ADAMS removed his objection to the motion, therefore SCS
CSHB 158(JUD) was adopted.
DENNIS MESTES, representing Alaska Action Trust, gave the following
sectional analysis of the differences between the SCS CSHB 158(JUD)
and the House version.
Section 1 of SCS CSHB 158(JUD) does not contain one of the purposes
listed in the House version. That purpose was designed to ensure
liable parties equitably share fault in accordance with the amount
of damage caused by each party. The elimination is appropriate
since the bill did not provide for equitable sharing of fault; it
provided for consideration of people who are out of the
jurisdiction of the court for various reasons.
The time limit in the statute of repose in Section 2 was increased
from eight years to 15 years. Section 2 is broader in scope in
that subsection (1) refers to construction and subsection (b)
refers to personal injury, death, or property damage. Subsection
(b)(3) is problematic, however, because it provides for a 15 year
statute of repose, unless there is a shorter period of time imposed
under another provision of law. Section 4 imposes a two year time
limit for action. MR. MESTES stated if the committee desires to
grant a longer statute of repose for construction, medical care, or
anything else, that intent needs to be stated in Section 2 and
differentiation needs to be made between what Sections 2 and 4
apply to.
Section 3 does not differ from the House version. Section 4 links
with Section 2 but is unclear as previously stated.
SENATOR TAYLOR stated the committee has questioned the Department
of Law and others about how those two sections coordinate, as well
as the definitional change regarding minors. The Department of Law
has not provided clarification of either. He agreed the
differentiation of minors and mentally incompetent individuals is
a fallacy, however major constitutional research concerning due
process would be necessary to correct the definition, and perhaps
the legislature wishes to not bound mentally incompetent
individuals by the statute of repose.
MR. MESTES responded Section 4 eliminates the language, "not
withstanding the disability of minority ..." but the same language
is retained in the 15 year statute of repose. The Attorney
General's Office believed it to be unconstitutional to discriminate
against some children versus others. Alaska Action Trust does not
believe this differentiation can be fixed, because children should
not be discriminated against since they have no legal rights to
contract or manage their own affairs until the age of majority.
This legislation victimizes them.
SENATOR TAYLOR commented the medical community supports that
provision because it does not believe it should have to continue to
carry malpractice coverage for 23 years to cover undiscovered birth
problems since most problems are discovered within 18 years. He
discussed the story about the teenage child who has been
misdiagnosed until recently, whose family cannot sue under the
eight year statute of repose. MR. MESTES agreed the 15 year limit
is better, but repeated his concern that the linkage between
Sections 2 and 4 is unclear.
MR. MESTES explained Section 5 of the House version pertained to
non-economic damages, and has been removed from the Senate
Judiciary version. Alaska Action Trust approves of its removal,
since juries would have to differentiate how damaged a person was
in terms of permanency. It used a "Mr. Potatohead" concept since
a person would have to be completely incapacitated before the
larger cap of $500,000 would apply. The fixed amounts provided in
that section were arbitrary and most likely unconstitutional.
Section 5 of the Senate Judiciary version defines punitive damages,
and is identical to Section 6 of the House version.
SENATOR TAYLOR indicated the definition of punitive damages was
determined by the Alaska Supreme Court, and probably does not need
to be restated. Including the definition in the bill may lock the
Supreme Court into using it when it may prefer a harsher
definition. MR. MESTES explained it is the definition contained in
jury instructions.
Regarding the removal of the non-economic section, SENATOR TAYLOR
drew the committee's attention to a letter received from the United
Fishermen of Alaska (UFA) in response to the committee's request
for suggestions to the Cordova Fishermen's Union (CDFU) dilemma.
The CDFU believed the non-economic damages cap of $300,000,
contained in the House version, would allow an Exxon Valdez
bailout. Environmental damages would be considered non-economic
because one cannot speculate the monetary value of a damaged
portion of the environment. If a small community brought an action
against a company that spilled oil over the surrounding coastline,
the company would only be required to pay $300,000. When
attempting to separate environmental non-economic damages from pain
and suffering as an economic damage, definitional difficulties
arise that violate due process of law. Input was solicited on this
problem from all interested parties, however the committee has
received no response or suggested solutions which is why that
provision was removed from the bill.
MR. MESTES explained Section 6 of the Senate Judiciary version
defines the cap on punitive damages, which is three times the
amount of compensatory damages or $300,000, whichever is greater.
He submitted there are instances in which this limit is completely
inappropriate, such as fraudulent schemes used to deceive
consumers. Because the compensatory damages may be relatively
small, but the scheme is nationwide, the company may be making
hundreds of millions of dollars in profits. The Consumer
Protection Division can verify it is one of its major concerns.
Alaska Action Trust believes this provision is not appropriate in
that it makes no exception for such schemes.
SENATOR TAYLOR commented the punitive damage award against Exxon
was $5 billion. He felt if support for that provision continues,
other committees can choose to keep it in the bill. MR. MESTES
pointed out the last of the Exxon Valdez Phase Four trial has been
proposed to be settled. The $284 million award has been reduced by
the courts to $26 million because of payments under the TAPS fund
and settlements made by Exxon. If this provision was in effect,
the punitive damage award would have been under $90 million, which
is less than Exxon probably pays per year for coffee. It would
provide no disincentive whatsoever.
TAPE 96-18, SIDE B
Number 000
MR. MESTES noted Section 7 of the Senate Judiciary version contains
two minor changes: a state or self-insured municipality was removed
from the list of entities that do not have to post security when
periodic payments are required; and the reference to when periodic
payments become due was deleted.
Section 9 prohibits fault from being allocated to a person who
cannot be a party to the suit under the statute of repose. The
House version allowed anyone, anywhere, anytime to be considered as
a person at fault in the suit, regardless of factors such as
whether that person was a minor. The Senate version rectifies and
limits who may be considered at fault. SENATOR TAYLOR clarified
this section removes the "empty chair" provision.
The collateral benefits provision of the House version (Sec.10) was
eliminated in the Senate Judiciary version. Alaska Action Trust
supports that elimination as there is no double recovery problem
because subrogation provisions exist among carriers, and it is
confusing and unfair to disclose the plaintiff's insurance benefits
and payments to a jury, but not provide similar information about
the defendant. SENATOR TAYLOR felt that provision penalized people
conscientious enough to purchase insurance.
MR. MESTES stated Section 10 of the Senate Judiciary version is
very confusing and removes any incentive for the wealthy defendant
to settle because it only requires that costs and attorneys' fees
be paid, which is required under Rule 82 anyway. SENATOR TAYLOR
remarked the language in Section 10 is from the House version
except for the addition of the sentence on lines 15-17. He
explained that sentence was included so that in a case with
multiple defendants, all defendants must come forward as a group
when making offers of judgment. This would eliminate the guesswork
on the part of the plaintiff in trying to determine whether one
offer of judgment is the true portion of liability for that party.
Section 10 in the Senate Judiciary version eliminates the provision
allowing the jury to consider all parties for allocation of fault,
whether each party is capable of being served or is beyond the
jurisdiction of the court. MR. MESTES asserted Alaska Action Trust
supports the elimination of that provision as it is unfair and
confusing.
SENATOR TAYLOR explained Section 11 of the Senate Judiciary version
sets the rate on judgments, including prejudgment interest, at
three percent above the interest rate set by the United States
Bureau of the Public Debt for five-year treasury notes to better
reflect the true market rate, rather than on the 12th Federal
Reserve discount rate. The floating interest rate will eliminate
the need for legislative action every few years to readjust the
interest rate.
SENATOR TAYLOR discussed Section 12, which provides for mandatory
arbitration. MR. MESTES believed this provision to be marvelous as
it will have a major effect upon the legal system and should affect
insurance rates. Alternate dispute resolution is happening across
the country and cuts down on litigation costs as well as the number
of cases filed and amount of time spent on each case. SENATOR
TAYLOR mentioned that this provision has had universal support from
all people testifying on this bill.
MR. MESTES noted Section 15 of the House version was not included
in the Senate Judiciary version, and wisely so because present law
disallows interest on punitive damages but does allow prejudgment
interest for future damages in order to compensate for the loss of
use of the money after awards have been reduced to present value.
Therefore, the present system will be left intact.
SENATOR TAYLOR believed no one would ever want to settle a case if
no interest had to be paid on the settlement until the case was
decided, as he/she could earn a large sum off of investments in the
meantime. MR. MESTES remarked Alaska Action Trust supports the
elimination of that section. He added federal and state
governments charge interest and penalties on money owed during a
dispute.
Regarding Section 13 of the Senate Judiciary version, SENATOR GREEN
asked if health care providers were intentionally dropped from that
section. SENATOR TAYLOR replied the reference to medical
professionals was removed to broaden the expert witness
qualification provision to apply to all professionals. He
expressed concern about this requirement because in professions
with a limited number of practicing individuals, such as
neurosurgery, conflicts of interest may arise among those
individuals when asked to testify against each other.
Alaska Action Trust supported the change made to Section 15 as it
requires independent contractors to carry a minimum of $2,500,000
per incident of malpractice insurance before a hospital can claim
immunity from liability for that contractor's conduct. SENATOR
TAYLOR noted Harlan Knudson responded to the committee's request
for information which was provided to committee members. He felt
the amount may need to be revisited as it may be high for some
specializations, and low for others.
MR. MESTES indicated Section 18 contains several repeals, the
affects of which he was unaware. One repealer allows a physician
to refuse to treat a patient who will not agree to participate in
mandatory arbitration if a dispute arises. A second repealer
disbands the Medical Advisory Board, which screens all malpractice
cases.
Alaska Action Trust supports Section 27 which activates the
legislation only when insurance rates are reduced by 10 percent.
MR. MESTES noted Alaska Action Trust provided a three page document
to committee members which outlines court system statistics that do
not reveal an avalanche of tort cases being heard by the court
system. In 1995, 43 civil jury trials took place in Alaska.
Alaskans are three times more likely to be indicted for a felony
and four times more likely to be divorced than they are to be
involved in a personal injury accident. SENATOR TAYLOR commented
the 43 civil cases include contract suits, appeals on decisions by
administrative bodies, and other civil actions. The personal
injury suits probably account for 25 percent of those trials.
JEFF BUSH, Deputy Commissioner of the Department of Commerce and
Economic Development, testified on behalf of the Governor's Office.
The Governor has stated that any tort reform legislation that
appears on his desk must contain three essential elements. First,
the bill must effectively lower insurance rates. He believed the
Governor would support Section 27. Second, the Governor strongly
supports efforts to reduce frivolous lawsuits and the workload of
the Court System therefore strongly supports mandatory arbitration
and mediation efforts. He suspected the Governor would also
support the provision in the bill relating to reduction of
frivolous lawsuits through enhancement of the offers of judgment.
Third, the Governor has stated that any tort reform legislation
that passes must be "clean" as far as the Attorney General's Office
is concerned, therefore legal and constitutional issues have to be
resolved. He noted that although constitutional issues related to
the statute of repose still remain, the Senate Judiciary version is
cleaner than existing statute.
MR. BUSH pointed out three technical errors in the bill: on page 3,
line 22, the word "or" should be moved to the end of line 24; on
page 5, line 7 the language, "Except as provided in this
subsection," should be deleted; and on page 10, line 19 a comma
needs to be inserted after the word "felony."
MR. BUSH explained the repealers are all in reference to the
medical malpractice arbitration provisions which will no longer be
necessary if mandatory arbitration is adopted.
SENATOR TAYLOR believed one of the provisions may still be
necessary if a physician can require a patient to sign a more
binding arbitration agreement before services are provided. He
also questioned why two separate sections are contained in the bill
dealing with the statute of limitations, and noted the board
certification requirement for expert witnesses poses problems
because certification procedures do not exist for all professions.
There are a limited number of practitioners in certain professions
in the state, and the licensure requirement may prevent anyone from
testifying. He stated that section was drafted to be as broad as
possible yet address some the of medical community's concerns.
SENATOR TAYLOR moved to amend SCS CSHB 158 (JUD) with the technical
corrections identified by Mr. Bush. There being no objection, the
motion carried.
There being no further discussion on SCS CSHB 158 (JUD), SENATOR
MILLER moved the measure out of committee with individual
recommendations. SENATOR ADAMS objected to the motion.
SENATOR ADAMS objected on the basis that the legislation benefits
the wrongdoer, attempts to keep victims out of court, and prevents
adequate compensation for injuries from being awarded. He also
discussed drafting problems with the bill, particularly Sections 2
and 4, and expressed concern that this bill is unconstitutional
because it discriminates among a class of plaintiffs by violating
equal protection and due process rights. He thanked committee
members for the hard work it did on this bill.
SENATOR TAYLOR also thanked committee members for the considerable
amount of time and effort put into this legislation. He also
thanked members of the tort reform movement who have worked on the
bill.
The motion carried with Senators Taylor, Green and Miller voting
"yea," and Senator Adams voting "nay." Senator Taylor adjourned
the meeting at 3:05 p.m.
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