Legislature(1997 - 1998)
04/22/1997 05:00 PM Senate FIN
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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
SENATE BILL NO. 104
"An Act relating to regulation and examination of insurers
and insurance agents; relating to kinds of insurance;
relating to payment of insurance taxes and to required
insurance reserves; relating to insurance policies; relating
to regulation of capital, surplus, and investments by
insurers; relating to hospital and medical service
corporations; relating to the portability and availability
of health care insurance; making amendments to the insurance
statutes to conform to federal requirements regarding health
insurance; relating to the repeal of certain small employer
health care insurance provisions; requiring that uninsured
and underinsured motor vehicle insurance apply to claims of
an insured even if other policy limits are not exhausted;
repealing delayed provisions relating to dental, vision, and
hearing insurance in secs. 3 and 4, ch. 101, SLA 1992;
repealing delayed provisions relating to small employer
health care insurance in secs. 4, 7, 9, and 12, ch. 39, SLA
1993; repealing the delayed effective date in sec. 5, ch.
101, SLA 1992, and in sec. 13, ch. 39, SLA 1993; and
providing for an effective date."
Co-chair Sharp provided a history of the bill in committee.
Senator Donley MOVED to ADOPT Amendment 1.
There was an OBJECTION for discussion.
Senator Donley explained that cases in other states had raised
potential problems related to rental car insurance; the purpose of
the amendment was to prevent litigation. The amendment would
clarify the hierarchy of claims when a rental car was damaged. The
first place a claim would go would be the collision policy
purchased when someone rented a car and purchased collision; the
second place would be the operator of the car, if they had a
policy; the third place would be the owner of the rental-car
company. Most people believed the listed order was already
required in current law, but litigation in other states had shown
that the claim order was not always clear.
Senator Donley informed the committee that he had sponsored
language in existing law eight years prior that stipulated that an
auto insurance policy in Alaska required coverage of rental cars.
The amendment was consistent with the original language to prevent
litigation.
Senator Torgerson asked why Canada was listed in the provision.
Senator Donley answered that the language was in existing law.
In response to a question by Co-chair Sharp, Senator Donley
explained how the legislation would work: If a person renting a
car bought a collision waiver, the collision policy would be the
first thing covering damage costs. If a person did not buy a
collision waiver, and the person's auto insurance covered rental
cars, then that would be the next in line. The person who rented
the car out would be responsible if the renting person had neither
of the first two options.
Co-chair Sharp summarized that the person who owned the rental car
would be liable if the person renting the car did not buy
additional coverage and did not have it themselves. Senator Donley
agreed.
[SFC-97, Tape 122, Side B]
Senator Donley noted that the issue was not completely clear in
other states. Under the old law, a person with uninsured or
underinsured motorist coverage would have a policy up to a certain
amount; the only way the person could file a claim under such a
policy was if there was a claim and compensation did not cover the
whole amount of the damages. Because of overlap with other
policies and because Alaska had mandatory auto insurance, the
system only worked if someone without insurance caused the
accident. Anyone with insurance had coverage. He believed that
people were confused about the coverage. The law had been changed
to clarify that if one person was in an accident resulting in
damages of $125,000 with a second person who had $100,000 worth of
insurance, the policy of the second person would pay $100,000 and
the policy of the first person would pay the $25,000 balance.
Senator Donley continued that there was a section in another
statute [AS 28.22.020(1)(a)] that was not modified. The presence
of the conflicting statute enabled the insurance companies to go
to federal court and get a ruling that the legislature did not
mean what it said. The federal court determined that the
protection did not have to be paid for. The ruling was appealed up
to the ninth circuit to get it back to the state court, where it
should have been in the first place. At the same time, there was
another case that resulted in the opposite ruling-that the
legislature meant what it said. In other words, one case said pay,
the other said not to pay; some insurance companies in Alaska had
to pay, and some did not. The amendment would clarify the issue
and establish that the payment should be stacked.
Senator Donley articulated the policy arguments on both sides. On
the one hand, the argument was that stacked policies became more
expensive.
SENATOR TIM KELLY reported that the Rules Committee had sponsored
the bill at the request of the Division of Insurance. He did not
object to Amendment 2. He stated that he understood the public
policy call. He did not believe Amendment 1 belonged in the bill,
however.
MARIANNE BURKE, DIRECTOR, DIVISION OF INSURANCE, DEPARTMENT OF
COMMERCE AND ECONOMIC DEVELOPMENT, testified that Senator Donley
had succinctly described the issue, which was controversial and
long-standing. She affirmed that there were two court rulings and
that the attorney general's office had filed a brief supporting
the provision. The division supported the brief and concurred
with it. However, she noted that the issue was highly
controversial and asked that the amendment [Amendment 1] not be
attached to the bill. She stressed that there were convincing and
strong arguments either way. She stated that both the original SB
104 and the Kassenbaum-Kennedy amendment were deliberately
structured to be as non-controversial as possible, because the
bill was critical to Alaska.
Co-chair Sharp noted the OBJECTION to Amendment 1.
Ms. Burke emphasized that an amendment as controversial as the
proposed amendment could kill the bill. She stressed that the
bill had to go through during the current session or the
Kassenbaum-Kennedy (the federal regulation) effective date would
start.
Senator Kelly asked whether the controversial issue had been
introduced on its own merits. Senator Donley replied that it had
not been introduced during the current year.
A roll call was taken on the motion. [The answers were difficult
to hear on the tape, which was double-recorded with another
meeting. The answer of Senator Parnell was unclear and the
outcome regarding Amendment 1 unclear.]
IN FAVOR: Phillips, Donley, Adams
OPPOSED: Torgerson, Pearce, Sharp
Senate Pearce MOVED to REPORT SB 104 (FIN) out of committee with
individual recommendations and the accompanying fiscal note.
There being NO OBJECTION, it was so ordered.
CSSB 104(FIN) was REPORTED out of committee with "no
recommendation" and fiscal note by the Department of Revenue and
zero impact note by the Department of Commerce and Economic
Development.
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