Legislature(2003 - 2004)
05/06/2003 08:06 AM Senate JUD
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* first hearing in first committee of referral
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= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HB 214-PUNITIVE DAMAGES AGAINST EMPLOYERS
CHAIR SEEKINS announced HB 214 to be up for consideration.
REPRESENTATIVE RALPH SAMUELS, sponsor of HB 214, said the bill
creates new guidelines for damages against an employer under
vicarious liability. It stipulates that an employer shall not be
responsible for paying damages unless he okayed the act. The
point is if a company did nothing wrong, it should not be
punished, which is what punitive damages are for.
The bill does not have anything to do with direct damages or
compensatory damages. Language comes from restatements of
National Standards. The Alaska Supreme Court found in the
Laidlaw case, that if it had come up in trial, they would have
leaned toward the National Standards.
SENATOR FRENCH said he thought the purpose of this bill was to
overturn the result of the Laidlaw case.
REPRESENTATIVE SAMUELS said he didn't know how the case ended,
but he knows what the court said.
SENATOR FRENCH said the one place this bill differs from the
restatement of National Standard has to do with the employee
working in a managerial capacity for the employer.
REPRESENTATIVE SAMUELS said they wanted to make sure they had
someone who had control over the policies of the company.
SENATOR FRENCH said he noticed that the restatement was careful
to add to the managerial reference "who was acting in the scope
of employment." This bill says you can only award punitive
damages if the employee was a manager of the employer, not that
they were acting within the scope of employment.
MS. SARAH NELSON, Staff to Representative Samuels, responded
that there are two different kinds of this law, the narrower
complicity of rule and the one that is acting within the scope
of employment. They were aiming at a narrower construction.
MS. MARSHA DAVIS, General Counsel, Era Aviation, said she
thought that language was left out because it resulted in a
tighter definition than the restatement, but it broadens the
number of people it would affect.
TAPE 03-38, SIDE B
SENATOR FRENCH asked if this would penalize the lead on a night
shift for Exxon or BP.
MS. DAVIS replied that you would have to ask yourself whether
that individual has sufficient authority and control to make
decisions for the alter ego - the employer. They are looking for
someone who can create and alter company policies.
SENATOR OGAN said the most infamous case of vicarious liability
he could think of was Joe Hazelwood on the Exxon Valdez. Exxon
has a policy that you don't drink and drive their ships. So, are
they suddenly not liable because he violated their policy?
MS. DAVIS replied that the $5 million in punitive damages were
assessed against Exxon directly. Mr. Hazelwood had punitive
damages for $5,000. This bill wouldn't touch anything that has
to do with maritime law, but it would make Exxon or BP liable
for Mr. Hazelwood's punitive damage assessment.
SENATOR FRENCH asked if she thought this bill would have
produced a different result in the Laidlaw case.
MS. DAVIS replied she didn't think it would, but it would be a
very close question. The question was did Laidlaw know the
individual had a drug/alcohol problem and yet allow him to drive
the van. The jury could conclude that was reckless behavior on
the part of Laidlaw and that would have the same result, that
Laidlaw was responsible for the punitive damages.
MS. DAVIS said one reason the vicarious liability should stay
with the employee is that lawyers go after the deep pockets. In
this case Laidlaw was liable to pay the $100,000 that was
assessed and the employee got off scot-free.
It's appropriate if you're going to punish someone for
the wrong doing that they actually be punished rather
than sliding that punishment to what is essentially an
innocent party in the transaction and allows the bad
behavior to proceed on because they [don't have the
deepest pocket.]
SENATOR FRENCH asked why they wouldn't include the phrase "held
in the course and scope of employment" since that's the test
they used in Laidlaw.
MS. DAVIS replied that under Alaska law, you couldn't be
determined to be vicariously liable without an initial finding
that the conduct of the employee was within the scope of
employment. It's a bit duplicative to have a precondition that
presumes the action was within the scope of employment. It
wouldn't hurt anything to put it back in, but it would be
duplicative.
SENATOR THERRIAULT asked if is he acting as an employee if he
lets an employee use one of his mobile rigs over the weekend.
MS. DAVIS said the question would be whether his business
receives any compensation for that use.
SENATOR THERRIAULT said no.
MS. DAVIS said she would question whether any conduct by that
employee could be tied back to his business.
MR. JIM WILSON, Alaska Air Carriers, supported HB 214 saying it
would reduce the cost of their insurance. They have an extensive
training program, but one pilot didn't follow procedure and use
the mirror to observe external loads carried under the aircraft
when landing in a confined area. His blades hit a stump and the
aircraft was totaled. Fortunately, there were no injuries or
deaths, but had there been, they could have seen punitive damage
suits. The pilot put the company at risk and those are the kind
of things he is concerned about.
SENATOR FRENCH asked if he was sued or whether any money changed
hands.
MR. WILSON replied it was an expensive accident; they lost a
helicopter and the pilot lost his job.
SENATOR ELLIS asked if he thought his insurance rate would go
down with this legislation.
MR. WILSON replied his insurance underwriter told him it would
be one of the tools that would help it go down.
SENATOR ELLIS asked Mr. Wilson if the insurance underwriter said
he would reduce his insurance premium if he got this bill
passed.
MR. WILSON repeated he just said it would be one of the tools
that would make it go down.
SENATOR ELLIS said after the bill has been signed into law, he
wanted Mr. Wilson to tell him how much his insurance went down.
"I'll be really excited if that, in fact, ever happens."
MR. WILSON said he believed it would.
MS. PAM LABOLLE, President, Alaska State Chamber of Commerce,
supported HB 214. Prior to the passage of tort reform in 1996 or
97, the insurance rates in this state were escalating at an
astonishing rate. A great deal of it was because of the punitive
damage assessments, because you can't insure against punitive
damages because they are used to punish a wrongdoer.
If you go to court, however, you run the risk of getting a
punitive assessment and that causes many businesses and their
insurance companies to settle out of court rather than take that
chance. She said the insurance rate might not go down, but it
could level out or rise slightly versus the astronomical
increases that happened before passage of the tort reform
legislation and the punitive damages definition.
CHAIR SEEKINS said that negotiating an insurance rate is a long
process, especially with a business. He agreed that rates could
fall or at least not rise as fast as they find ways to keep the
truly responsible parties liable for their actions.
SENATOR FRENCH said he thought this bill restricts the doctrine
too far.
Reading the Laidlaw is kind of an eye-opener for
anybody with a child who goes to school, because in
the Laidlaw case this bus driver was, as far as I can
tell, smoking marijuana every single day and showing
up to work after having smoked marijuana and, in the
course of her job, rolled the bus with a bunch of kids
in it and hurt the kids. The trial jury, as they
sometimes do, kind of lays down a big heavy punitive
award, which the trial court reduced substantially -
because contrary to popular opinion, there is some
oversight of punitive damage awards. Frankly, I think
a bus company that employs a bus driver that is
smoking marijuana every single day should tighten down
the screws a little bit to make sure that isn't
happening. If it takes a punitive damage award to make
them tighten down the screws, I'm okay with that. I
think this bill needs to be amended to make sure that
employees acting within the scope of their employment
are included within the definition of those
individuals who put the company on the hook.
He would be much more comfortable if the bill mirrored the
language of the restatement, which is the national standard.
SENATOR THERRIAULT said he needed more time to go through the
issues.
SENATOR SEEKINS said they would hold HB 214 for further
consideration. There being no further business to come before
the committee, he adjourned the meeting at 9:20 a.m.
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