Legislature(1993 - 1994)
09/10/1993 09:00 AM L&C
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
HB 292 Relating to civil actions; amending Alaska Rules of Civil Procedure 49, 68, and 82; and providing for an effective date. CHAIRMAN HUDSON noted the members present and announced the day's agenda, explaining that the meeting was being teleconferenced. The meeting was intended to set the stage and to get a better understanding of the issue of Tort Reform. MIKE FORD, Attorney, Legislative Legal Services, Legislative Affairs Agency, began with a general overview. He feels one of the difficulties of this area, from various reports is that tort reform involves a number of fairly technical areas. Tort reform actually is a subset of our civil justice system. Civil justice is intended to provide revenues to the individual as opposed to (indiscernible) public. A tort, essentially is anything for which you can receive compensation, something you can obtain damages for. Tort reform is contrasted to contractual actions. It's not about a breach of contract, or a crime, but some type of civil injury that one can obtain a recovery for. The purpose of the tort laws is compensation. The involvement in this area of the law, over the years, has resulted in expansion of this area. At the beginning of the tort era, there were very narrow areas for which you could obtain a recovery. Over the last 50 - 60 years, particularly, we have seen an enormous expansion in the types of things for which you can take a recovery. Some of that has been done by case law and some has been done by legislators. Between the two, we have seen a fairly large expansion in that area. There are several kinds of basic areas in which you can obtain a recovery. There are torts known as intentional torts, of which the most common area is negligence in that someone has failed to do something that a reasonable person would have done. There is some damage caused and that triggers the traditional lawsuit of which is an effort to recover compensation for that injury. MR. FORD explained the whole system is intended to obtain compensation for someone and the progression of filing a lawsuit to actual recovery can be a very quick one or it can be a very long one, depending on the facts of the case. It is hard to talk about the typical case, they are all different. Some involve years of litigation, some involve very small amounts of money and are settled very quickly. All cases have an impact on the system. Sometimes they involve changes to the law, either to the courts or changes to the law implemented by the legislature. That gives a certain basic understanding of tort reform. MR. FORD told committee members the most significant legislative changes occurred in 1986. At that time, the legislature looked at a number of proposals that changed the way in which someone could recover damages in civil action. The result of that effort was passage of a bill that became an act, Chapter 17, Title 9. It made a number of significant changes to the way in which someone recovers damages in civil action. The adoption of that act resulted in, most significantly, the change in which the system operates in the area of joint and severability. It means when someone has an injury, often the injury is caused by more than one person. Before 1986, one could recover all damages from any one of the multiple defendants. That was the rule of joint and severability. It is several in the sense that each party is liable. It is joint in the sense that all the parties are liable for all of the damages. That was the original issue among all of the states and in Alaska. The legislature decided to change that. In 1986, what we changed to was a modified version of that approach. The legislature decided to allow a recovery against a single defendant for more than the share of the damages, but it limited the amount you could recover. In that sense, it was a modified rule of joint and severability. The other significant change in that area was the cap on non economic damages. MR. FORD said in 1988, the initiative was passed by the voters of the state of Alaska, which made another change to the rule of joint/severability. The rule changed by (indiscernible) initiative to pure severability, a responsible party was only liable for their share of the damage. If there were three defendants, they would all be equally liable. They would only be liable for their one- third share of their liability. That is the law today. The initiative also made another change, in which it eliminated the contribution chapter. CHAIRMAN HUDSON asked Mr. Ford to expand on the attorney fees, and asked if there was an initiative, public referendum, or public vote on the subject at that time. MR. FORD answered that he believed there was and thought it was a proposal. The only two substantive provisions on the initiative ballot were the issue of joint/severability and the contribution chapter. He believed there was an effort to do the Rule 82 provision on attorney fees and, for some reason, it was not admitted to the ballot. He was not sure why. Number 129 REPRESENTATIVE NAVARRE asked if the limit to attorney's fees was not allowed on the ballot. MR. FORD stated it was not on the ballot. Number 138 REPRESENTATIVE GREEN asked Mr. Ford is he may have come across a situation that at the time there seemed to be a change from getting someone well to getting someone more than well. MR. FORD felt that had always been an issue and the response of the legislature was to put the cap on it. The legislation passed in 1986 limited the pain and suffering damages to the amount of $500,000.00 with certain exceptions. Number 154 CHAIRMAN HUDSON asked Mr. Ford to walk the committee through HB 292. Number 202 MR. FORD began his review of HB 292, work draft dated 8/27/93. He began with Section 1, FINDINGS AND PURPOSE. He felt it was self explanatory. The only purpose of this was if the court was to find some ambiguity in one of the other provisions. It also serves the purpose to the public of the intent. The only problem he had was on page 3, (6), which concerns having the attorney general compile certain information. He didn't believe there to be a provision that actually requires the attorney general to do that. MR. FORD stated that if the intent was to leave the paragraph in, he would suggest that the committee think of how they want the attorney general to compile the information, and what information. At present, there is not a provision that states the attorney general shall do this. He felt it was an oversight. He had no other comments on Section. 1. MR. FORD then brought up Section 4, stating it was the existing law which provided a two year period to bring personal injury lawsuits. He explained what was done in Section 4, lines 1, 2, and 3, was that they had taken out the existing rule and moved it to Section 5. It was done because it makes it much clearer in that manner because they are also affecting other provisions of the bill. Section 4 is simply cleaning up the provision, moving the existing rule, and placing it in Section 5. Section 5, is a two year period to bring a lawsuit for personal injury death or property damage. It is two years from the accrual of the action. Accrual is a legal term which basically means that time that one should know or should have known that he/she could file the lawsuit. It is in one sense, a rolling period. When does the clock start? When does the clock stop? Sometimes it is hard to know that and sometimes it is very simple. If someone slips and falls down the stairs, it is pretty clear to know that he/she would have injuries. That is when the clock starts. If someone has an operation, and suffers an injury they don't know about - the doctor leaves a sponge where he shouldn't have left it - one may not know about it for a long, long time. That is a more latent type of injury that may not start until you know that you have that injury; two examples of the opposite extremes. There are two provisions in Section 5, which are different in effect, in each type of civil action. On line 8, it states: "Notwithstanding AS 09.10.140." That means that the provisions of 09.10.140 do not apply. AS 09.10.140 is an exception to the general rule. The general rule being a person has two years to file a lawsuit, except in certain cases. The cases which are being talked about are with people who are in prison, people who are under age that are minors, or people who are incompetent. Those are exceptions to the general rule that one has two years to file a lawsuit. On lines 11 and 12, it states where this period does not apply if there is a shorter period under another provision of law. There are other provisions that may start the clock earlier, so one actually has less than two years. This is why there is subsection (b). Section 2 is a provision that applies to a particular type of civil action, particular type of torts. It gives one six years to bring a lawsuit. A point of significance: on line 13, there is still not included exceptions. Notwithstanding AS 09.10.140, those exceptions are not going to apply. Another point of significance, is that it is a flat six year period, not six years from when one knows, or should have known. It is six years from (1), (2) & (3) dates. It is the earlier of those dates. A person may have more than one of (1), (2) & (3) apply. Look at number (1); six years from the date a product is alleged to have caused the personal injury or property damage was purchased. For instance if someone buys a can of hair spray, and it causes all of their hair to fall out, the day that person buys the hair spray, the clock starts to work. Number (2) deals with construction type cases, substantial conclusion of the construction that one alleges caused their injuries, starts the clock. Number (3) is a generic provision for the last act alleged to have caused the personal injury. The time one has to bring their personal injury is six years from one of those dates. It may be that the earlier provision that was discussed, the two year provision, would not apply because this is a shorter period. In that sense, the two do match. For example, conceivably five years down the road, someone discovers a sponge in their stomach. The last act alleged to have caused their personal injury was the operation. If it is five years down the road, then the person has a year to bring up their action. Whereas the other provision, a person had two years. Number 328 REPRESENTATIVE NAVARRE stated that the two years only apply as a roll. The rolling factor only applies for the first six years. MR. FORD believed that was correct, if in fact that the section applied to the person. He stated there are exceptions, such as in subsection b, intentional injuries, intentional concealment. The doctor knew about the sponge and didn't tell the person. The emphasis here is to require one to bring the action within a period of time after the injury that is the shortest applicable under any of the provisions that they have. An example of the two year provision is: One has the operation and knows it doesn't work correctly, something happened that was wrong. The person has two years to bring the lawsuit, not six years. A shorter period would apply in that type of case. Number 335 REPRESENTATIVE BROWN referenced page 5, line 10, the words "of the accrual of the action" and asked for the explanation. MR. FORD stated "accrual," was a technical term, meaning when one knows or when someone should have known. Number 340 REPRESENTATIVE GREEN asked if he was walking down the street and there was construction going on and a pressure vessel on a Cat blows out which is seven years old, did it mean there is no compensation if someone suffered injuries. MR. FORD answered in the negative. He stated that the company that bought the Cat might be out of luck. All depending if they had contracts or if they had a tort suit. The owner of the Cat is liable. Number 353 REPRESENTATIVE NAVARRE asked what if the valve was supposed to last for ten years, no warranty but the manufacturer stated it would last for ten years. If the valve failed in six years, would the manufacturer be liable under that situation, or if the subcontractor looked for the major construction company that owns the Cat? Where would one recover? MR. FORD answered it would be hard to tell who could recover exactly. If it was an express warranty - a piece of paper stating the part would last for ten years. If that was done, then they would be on the hook for the damages that result. If the manufacturer just gave someone a product and the industry standard is ten years, or one just assumes it is going to be good for ten years, but it doesn't, then it really depends if there is negligence or not. REPRESENTATIVE NAVARRE added that if there was no negligence in that case, there would not be any recovery. MR. FORD stated he was correct. It could be ordinary wear and tear. Number 382 REPRESENTATIVE BROWN said if there was an airplane that crashed that was purchased by Alaska Airlines seven years ago, and the fault for the crash was determined to be a defective part in the airplane and not the fault of the Alaska Airlines pilot, ground crew, weather, or anything else. The reason for the crash was the defective part in the airplane. Would there be any recovery for people who were killed or injured and who would the recovery be from? To what extent would Alaska Airlines, itself, be liable in that situation? MR. FORD stated people spend thousands of dollars to answer those types of questions. He could only give guidelines. It is very hard to predict liability precisely. The rules that apply under this bill, again one must bring certain lawsuits within six years. If there was a part that was defected, that was not known about, for seven years, he felt they lose the right to bring personal injury actions at some point. If there was no negligence in the part of the airlines, that people died as the result of the part, he felt it was hard to believe. If it just happened, then there is no recovery, because there is no negligence. The airline did not act unreasonable. Number 442 REPRESENTATIVE BROWN asked if that would be because of the imposition of the six years from the date the product was purchased by them. MR. FORD answered if the last act alleged to have caused the personal injury was the installation of the part, it was not done negligently. The reason the airplane crashed was the part was defective. The last act alleged to have caused personal injury, in his mind, was the plane crash for the people who died. Alaska Airlines wouldn't be the one to sue the manufacturer, but the person who died might well be. REPRESENTATIVE NAVARRE asked about the severability law. MR. FORD stated that only applies to who is responsible and how much one pays, whether one can bring the lawsuit under the terms of the statute of limitations. REPRESENTATIVE NAVARRE stated that one could bring a lawsuit but if the part was 100 percent responsible for the cause of the accident, one would not have any recovery. Someone could bring a lawsuit, say to sue the airlines, but the airlines will say it was not their fault. MR. FORD felt that was a good question which brought up what was the last act. REPRESENTATIVE BROWN referenced page 3, subsection a, line 13, stating a person may not bring an action for personal injury, death, unless it is brought within six years of the earlier of the date. (1) a product alleged to have caused the problem was purchased. The airlines was flying the plane and the plane came down because of a defect, that is going to be the date the airlines purchased either the part or plane, or whatever was at fault. Right? MR. FORD stated that clearly the airlines could not sue the manufacturer. REPRESENTATIVE BROWN asked if the people that were injured could sue the manufacturer. MR. FORD answered in the affirmative. The fact that the airlines purchased it. He believed number "(3)" would apply. CHAIRMAN HUDSON believed it was important that the area was understood. He asked Mr. Ford if he could contrast what would happen next. MR. FORD answered that at present, again it comes back to the term "accrual," when you know or should have known. If the defective part is installed, and one does not know it for seven years, then when one knows it, you have the right to bring your lawsuit up. Under the laws today, one could sue the manufacturer or the airlines, because they know about it when the plane crashes. Number 476 REPRESENTATIVE MACKIE referenced the original question and stated it was not clear in his mind, under the proposed draft, what is being said. The airlines would not be able to sue the manufacturer because of the six year limitation, but the victims' families would still be able to bring a lawsuit and expect recovery from the manufacturer under this scenario. MR. FORD answered in the affirmative, stating it is the earlier date, if the act alleged is the part of the aircraft. REPRESENTATIVE DAVIDSON asked what is magical about six years and what happens in other states. Is there a six year limitation or some other length of time? Did it not encourage the state of Alaska to become some type of dumping ground for older equipment because people would not be responsible because the company that set the equipment up in the first place wouldn't have to worry about lawsuits? MR. FORD referenced there were a number of states that have periods of time like this. The period of time that one has to bring a lawsuit varies. The state of Colorado has a ten- year provision, which is applicable to architects and engineers. When he states they have other provisions like this, other states don't necessarily have as broad a provision as this. They have statute provisions like this. The provision that Colorado has is a ten-year provision, which was upheld in a court challenge. REPRESENTATIVE DAVIDSON asked if Colorado divided up between design and construction and other actual product purchases. MR. FORD stated that was correct. Number 518 REPRESENTATIVE BROWN referenced back to the question whether (1) governs, or (3) governs under the (indiscernible) medical about the airplane crash. She asked if it states the earlier of (1) or (3), if (1) was seven years ago, and (3) was today, wouldn't the person injured be excluded from suing under the language as it is written now. MR. FORD stated that as he reads number (1), it wouldn't apply to a person who wasn't a purchaser. If a person who wasn't a purchaser was injured by a product, purchased by a third party, in this case Alaska Airlines, he wouldn't read it that way, because the passenger did not purchase the product. REPRESENTATIVE FINKELSTEIN referenced the same point, stating that hypothetically what was being spoken about was the case where the fault was entirely the part. The part was defective, there was no doubt about it. There is nothing in the draft that states there is any relationship to whether the person filing the suit is the one who purchased the product. It only states, "a product alleged to cause the injury," not purchased by the plaintiff, had to be brought within six years. MR. FORD said he understands what Representative Finkelstein was saying. Clearly the case, as he understood it, the airlines could not sue the parts company, but a person could not either. The product, that alleged to have caused the injury, was purchased within six years. That is what is stated. The record needs to be straightened out, it is very confusing. REPRESENTATIVE FINKELSTEIN agreed it was complex material and the clearer it could be made, the better. A court could interpret it that number (1) did apply. He asked where it could be found that the connection to whether or not the plaintiff was the one who purchased it. It didn't seem the words were in the draft. The only words he found were that the product, regardless of who purchased it, was alleged to have caused the damage. MR. FORD asked what was a "product." Is the part that goes in a plane a product? He was assuming those facts. The fact that it was purchased more than six years earlier. Number 594 REPRESENTATIVE GREEN stated that there have been statutes of repose dealing primarily with buildings. Parts within buildings may have been the problem which caused the ultimate damage. How are those litigations handled? Would it be the same as an airplane? MR. FORD answered that there were similarities between those types of cases. A large distinction is that with buildings, they are not subject to the stresses as an airplane. Buildings typically don't have obvious defects, although a defect may exist and may last for 30 years before something happens. REPRESENTATIVE GREEN added there could be exceptions when one looks at an aftermath of earthquake, for example. They do fail primarily for either negligence or stress. MR. FORD stated in that sense, they are similar. Number 623 REPRESENTATIVE MACKIE felt the draft was not clear. He felt it needed to be clearly explained so there would not be any question for a judge to have to interrupt. TAPE 93-39, SIDE B Number 001 CHAIRMAN HUDSON reiterated that some the of questions would be posed to some of the witnesses following the testimony. Number 012 MR. FORD brought up Section 3 AS.09.10 stating it was a different limitation which applies to an action against a health care provider. The exception language "notwithstanding." Moving to Section 2, again it is started with exceptions of line 4, "Notwithstanding AS 09.10.140," which simply means there are exceptions that do not presently apply to a lawsuit brought under this section. If someone were to bring an action based on professional negligence, there is a definition of that. If one has two years from the date of the alleged act. There is also a variation on that, if one is less than six years of age, then the action must be brought before the person's eighth birthday. Those two provisions would apply to actions against health care providers. MR. FORD explained there are sections under subsection (b), again the fraud, intentional concealment and the undiscovered presence of a foreign body is an example like (a). There is also an exception to this two year provision. Number 037 REPRESENTATIVE MACKIE referenced the health provision, asking if it was a two year accrual. MR. FORD answered that it states, "two years from the date of the alleged negligent act or omission." He then stated it did not say "accrual," that it stated "two years from." CHAIRMAN HUDSON reiterated it was different from the last section. MR. FORD agreed with Chairman Hudson, adding it was different from the generic provision. Number 041 REPRESENTATIVE MACKIE referenced number 2 "or if the person is less than six years of age." He felt it could have been something that occurred when the child was one year old, for example, had surgery prior to their sixth birthday, or prior to becoming eight years of age. The action could still be brought up in that case of the infant or a small child. REPRESENTATIVE NAVARRE stated that the argument of child bearing, if there is a problem with the delivery, usually by the eighth birthday, it is known if there is developmental disability or other harm which could be attributed to the birth. What it doesn't do is if someone had corrective surgery done when they are seven years old, they only have until they are nine years old to bring up the case. He felt it should be eight years from the time of the procedure, in some cases. Number 058 MR. FORD referenced Section 6, stating there were three changes. On line 14, adding "wrongful death" to a type of action in which you can recover damages from personal injury. This change has already been made by the courts. Mr. Ford then referenced line 15, "BASED ON NEGLIGENCE" and stated he felt it meant to simply broaden so it would no longer apply the non economic damage limitations, simply to negligent actions. What came to mind were strict liability and intentional torts which would amount to subject to the provision, limiting non economic damages. Number 071 REPRESENTATIVE MACKIE suggested deleting "based on negligence." He asked if he understands correctly that negligence no longer had to be proven in the case of personal injury. MR. FORD answered in the negative. He explained Section 6 reads: "In an action to recover damages for personal injury based on negligence." He then explained if it was taken out, it would read: "In an action to recover damages for personal injury." Damages for non economic damages are limited. He added that any action for personal injury would be limited by the provision. MR. FORD referred to the provision "limited compensation for pain and suffering," and said in order to collect non economic losses, described as pain and suffering, it limited the following: Pain, suffering, inconvenience, physical impairment, disfigurement, loss of enjoyment of life and other nonpecuniary damage. He added that "loss of consortium" was added as well. CHAIRMAN HUDSON asked Mr. Ford to explain "loss of consortium." MR. FORD explained "loss of consortium" meant someone's spouse. If someone loses their spouse, and the enjoyment one received from that companionship, they can recover for the loss. MR. FORD reiterated that negligence actions are limited in this manner. By taking the language out, it would broaden the limitation. Number 100 MR. FORD brought the attention of the committee to Section 7, stating it was the cap on non-economic damages. The changes suggested were an effort to require the cap apply to single injuries or death. He was not sure if the language would actually achieve its goal. Mr. Ford stated that the existing law limited the cap to each claim, based on a separate incident or injury. He was not sure that limiting it to a single injury or death was very clear because one could suffer multiple injuries in one incident. He felt the committee should consider looking at the language very carefully, if in fact, the intent is to limit the cap to injuries that result from single incidents. CHAIRMAN HUDSON suggested the provision should say "single incident" rather than "single injury." REPRESENTATIVE NAVARRE referenced line 20, "may not exceed $500,000 for all claims, including a loss of consortium claim," and said he feels the language does not need to be there. MR. FORD agreed with Representative Navarre. Number 124 MR. FORD stated Section 8 was a section that requires a certain level of evidence if punitive damages were to be awarded. The draft would add some new language that would also require evidence of a certain thing. Such as in line 26, "malice and conscious acts showing deliberate disregard of another person by the person from whom the punitive damages are sought." It is being specific about the kind of evidence that is wanted. He felt that typically what one finds in cases that do award punitive damages, is precisely this. It could certainly be spelled out this way. Number 135 REPRESENTATIVE NORDLUND asked Mr. Ford about situations of recklessness or carelessness. Number 138 MR. FORD did not think carelessness would fit. He stated they were talking degrees of badness. He didn't think reckless would either. Deliberate disregard does not seem to be careless or reckless. They would have the intent to do it. MR. FORD stated that typically there are negligent acts, reckless acts, and an intentional acts, to put three broad categories on it. He felt conscious acts showing deliberate disregard was actual reference to an intentional act. Number 151 REPRESENTATIVE MULDER asked Mr. Ford to clarify what he was talking about as when Ford had the Pinto with the gas tank that was faulty. Did Ford put the Pinto out anyway, calculating the fact that redesigning the car was going to cost more than what computed damages were going to be. That would be showing disregard, clear and convincing evidence of malice and conscious act? MR. FORD agreed and explained that again a lot of the times it would be interpreted by courts and juries. To his mind, someone manufacturing 200,000 vehicles that they know are defective would be a conscious act of deliberate disregard. REPRESENTATIVE MULDER asked if it was deliberate disregard in both drafts. MR. FORD answered in the affirmative. Number 166 REPRESENTATIVE NAVARRE asked how much, after what punitive damage(indiscernible) showing by clear and convincing evidence which is already the standard, now adding an additional standard, which changes have occurred in awarding punitive damages since the 1986 change. How many more would it reduce by putting in the additional language? MR. FORD answered that he did not have any facts or statistics. His understanding was that punitives were awarded in very few cases. The practical effect of the change would be very little. He did not have any facts to support it. Someone could check with the court system, which might have some actual figures on the award of punitive damages. Number 178 REPRESENTATIVE MACKIE referenced the example Mr. Ford used and stated that if a car manufacturer built 200,000 vehicles, that would be considered deliberate disregard. Did that mean that out of 200,000 cars, it came out that one car was defective that someone bought and got in an accident, then there was clear and convincing evidence that it was the manufacturer's fault for the defective vehicle because it was only one and not 200,000. It would preclude anyone from filing action against the manufacturer because it was deliberate disregard but it was still their clear and convincing evidence that it was their fault. MR. FORD answered that one would have to meet the whole standard. They would have to meet clear and convincing evidence of malice and conscious acts showing deliberate disregard. Again, that would be up to a jury to determine what that was. In the example he had used, he was assuming all 200,000 vehicles had the defect, and the manufacturer knew about it. But they decided it was simpler to litigate than to go back and change the part, which he understood were the facts of the Pinto case. He felt that one vehicle out of 200,000, it would not withstand. He was talking about the manufacturer, not installation. REPRESENTATIVE MACKIE referenced that as he understood the complex issue, in the original language, before the "malice and conscious acts showing deliberate disregard," it would have to be proven, unless it was supported by clear and convincing evidence that it was the manufacturer's fault, for example. Now in addition to that, they would have to prove that there was deliberate disregard of the whole works which if it was one vehicle that is defective the day after it is driven off the lot, and it killed a family, they don't have the ability to recover damages because it was only one vehicle and it couldn't be proven it was deliberate disregard. MR. FORD answered it was just punitive damages he was speaking of. Damages are intended to punish someone above and beyond what one would give someone for their injuries. I am assuming they would recover all the damages they are entitled to compensate them for their injuries. REPRESENTATIVE MACKIE stated he meant a jury couldn't award punitive damages unless deliberate disregard was proven. MR. FORD answered in the affirmative. One would have to meet the standards to award punitive damage. REPRESENTATIVE MACKIE stated it was, in effect, the way to limit the size of the award. MR. FORD answered it would have that practical effect. But he did not think punitive damages are awarded very often. For those cases that do, yes, it would eliminate those. Number 219 REPRESENTATIVE FINKELSTEIN thought it was usually in cases where it is a big company and the economic damages are not considered significant enough to have an effect on it. One is not cheating the punitive effect because the amount of money is so insignificant from the actual economic (indiscernible), you would have to get their attention. In those types of cases, he did not know where one could find malice. For instance, the example for the auto company, he did not see any malice. Since it would have to be clear and convincing evidence of malice and conscious act, he felt in the example, they would never suffer punitive damages. There was not malice involved. Number 228 MR. FORD reiterated if one presumes it has to be directed to them personally, then yes it would not have malice. He added that it could also be interpreted as disdain for the public in general. REPRESENTATIVE FINKELSTEIN added he did not think malice was just disdain. He felt it was way beyond that. Disdain is indifference and malice, is pretty horrible intentions. He referenced the auto company and stated it might be covered and it should be recognized that there is no evidence of malice involved in the case. Number 239 REPRESENTATIVE NAVARRE agreed and added that in the Pinto case, most would want to make sure that it meant that Ford Motor Company was going to be held for punitive damages. But, in fact, he felt the definition of malice might be that if "or" was put in, it might work. Certainly "conscious acts showing deliberate disregard" could cover it, but not if there was "malice and conscious acts" because, in that case, they did not want anyone to get hurt. They were just hoping nothing would happen. Number 252 MR. FORD referenced Section 9, stating it was cap on the amount someone could get for punitive damages. It is three times the amount of compensatory damages for $200 thousand, whichever is greater. He felt the intent was to avoid a situation where someone obtains $50 thousand for compensatory damages and $500 million in punitive damages. Number 261 REPRESENTATIVE NAVARRE stated that already with the clear and convincing standard, and adding the additional language that "malice and a conscious acts with deliberate disregard of another person," and then limiting the amount one could collect, undermines the whole idea behind punitive damages. The reason was if Ford Motor Company, in the Pinto case, was charged with $200 thousand punitive damages, then they could have surely made a conscious decision to make sure that every one of the Pintos got sold in Alaska because then they could afford it. That is what it would mean. REPRESENTATIVE PORTER referenced the first time he read the section, he thought $200 thousand was the maximum. Two hundred thousand dollars was not the maximum. It would be the maximum if the compensation was less than one-third of that - $66 thousand. MR. FORD agreed. REPRESENTATIVE PORTER added in the Pinto case, they have 200 or 300 claims and it was only going to total $5 million compensation, it could institute $15 million or three times for punitive damages. REPRESENTATIVE NAVARRE asked what the punitive damages were in the Pinto case. MR. FORD answered he remembered one case in which the jury awarded $100 million. Number 286 CHAIRMAN HUDSON asked if a court could modify an application of three times the amount of compensatory damages. Did the court or the judge have the authority to change that or go above that? MR. FORD answered in the negative. The law would have to be rewritten. Number 295 MR. FORD moved to Section 10, stating, "The existing provision, added in 1986, was intended to prohibit those people who committed crimes from recovering for their injuries. The changes that would be made, on line 5, the language being taken out required someone being engaged in commission of a felony, it would be broadened to be `attempting committing on fleeing from.'" Also to be eliminated is the requirement that the person be convicted of a felony. Lastly, on line 8, being taken out is the word "felony" and substituting it with "action." On lines 9 and 10, delete "an exception for certain civil rights actions under 42 U.S.C. 1983." REPRESENTATIVE MACKIE asked if it was attempting to address the situation as the landmark case, referenced in the Juneau Empire, where a man was suing for his emotional suffering. MR. FORD stated it could apply if the injuries in suffering resulted from his crime he committed. He added one comment, stating as he first read the section, he thought that fleeing from the commission of a felony intended to refer to the person committing the felony, and not to someone who, for example, witnesses a bank robbery and runs out the door. He felt that "attempting to commit or committing" actually came from "fleeing from." REPRESENTATIVE NORDLUND asked who was to prove that someone was attempting to commit a felony. MR. FORD answered that under the existing law, the person would have to be convicted. Under the provision, it would be a battle in a civil suit. There could be a case where a person was actually acquitted, and they had criminal action, but was precluded from recovering personal injury damages. The jury would find that, yes, someone was actually attempting to commit a felony. REPRESENTATIVE NORDLUND asked if in a civil suit, one would bring in all kinds of evidence. MR. FORD answered in the affirmative and added there were different burdens. Criminal action had a different burden of proof than a civil action. One can see that today in the DEI laws, there are dual DEI provisions basically. One is an administrative procedure where one will lose their license and one is a criminal action. There are occasions where someone is acquitted of a criminal action and yet they still lose their license in the administrative action. The same thing happened here. REPRESENTATIVE NORDLUND asked if in some particular cases, would it be likely to create some new issues. MR. FORD answered in the affirmative. REPRESENTATIVE PORTER added that one of the things that would be covered, is an individual who is killed, while attempting a felony, and is never convicted. But his heirs might take off after (indiscernible). Number 349 REPRESENTATIVE FINKELSTEIN did not understand the DEI example because of looking at the DEI, the way the law is written, it did not say in the civil section that someone was involved in a DEI crime. It only talked about particular circumstances that might fit it. What was done was referenced a criminal conclusion in a civil action. It did not seem like it was exactly the same situation. It is not committing an action that involves certain and particular damages, it is saying, committing a felony, which is a criminal conclusion. He still shared the confusion Representative Nordlund had. He did not think it was the same as a DEI because it is referenced in action, not a separate criminal conclusion. A felony is a criminal conclusion, not an action. MR. FORD stated a felony was a conclusion in a criminal prosecution, but they were speaking of a civil suit. REPRESENTATIVE MACKIE asked a question referencing a lawsuit in the newspaper, where a man had gotten a DEI was suing a liquor store for financial damages the man suffered because he got his DEI, because the liquor store sold him the liquor. How does a case such as that apply to what is being spoken about? MR. FORD answered the man would not be committing a felony. The existing law would not apply. REPRESENTATIVE PORTER added that he felt it would apply (indiscernible). MR. FORD referenced something to keep in mind was there was a comparable negligent system. Supposedly, when one is negligent in causing one's own injuries, whatever that is or what percentage of recovery that is, that's (indiscernible). Number 398 REPRESENTATIVE DAVIDSON referenced Mr. Ford's comment on creating some new issues and felt it seemed there were many new issues created throughout the legislation. He asked if it was not true that the fact they were creating these new issues would have the effect of expanding prolonging litigation rather than expediting litigation. MR. FORD answered by saying that was a very hard question to answer. In all fairness to the sponsors of the bill, the system is constantly changing. The courts change the law, this is enacted by the legislature to change the law, and it is not a static fixed thing. It often changes through litigation. The best answer he could give, would be the best job the legislature did to draft legislation would make that easier. It would make the litigation less. Oftentimes, changes the legislature makes to statutes, or creation of statutes, will add to a litigation process. Maybe only in the short running, maybe in the long run, it depends on the perspective. Maybe over a period of twenty years, there will be less litigation. Often changes to statutes result in challenges. Number 424 MR. FORD referenced Section 11, stating it was a provision that requires the verdict to be itemized and an amount awarded for certain types of damages to be reduced by any income tax liability that may exist. He felt it spoke for itself. Number 443 REPRESENTATIVE PORTER stated that the reason Section 11 was included, as he understood it, was the awards are not taxable. What one ends up doing is paying a person money, say for an economic loss of wages of $50 thousand a year. He would have had to pay taxes, resulting in his really receiving $30 thousand. Since it is not a taxable revenue for the individual, award for damages, he is, in effect, getting $20 thousand more than he would have in the first place. REPRESENTATIVE NAVARRE stated the bill works in conjunction with other sections of the bill and if it is already limiting to a set amount, one further reduce that amount, whatever it comes up with by the amount that is equal to taxes. REPRESENTATIVE PORTER stated they could certainly ask that it be clarified. Number 463 MR. FORD moved to Section 12, stating it was a provision that required a portion of a judgement owed to an attorney under a contingent fee agreement, reduced to a present value and paid in a lump sum. He felt it spoke for itself. REPRESENTATIVE BROWN asked what public benefit, to be served by the provision, would be achieved. Number 485 CHAIRMAN HUDSON stated he felt they should hear from the other people wanting to testify on the bill, as to some of the reasons why. He added that something which was mentioned to him was attorneys quite often end up in litigation where they have to front their own travel expenses to go and get depositions and their own office expenses, etc., and the whole thing is to try to get the money that they have already expended back into their hands. The apportionment section is where the settlement to the victim or to the plaintiff can be dealt with over time. Again, to help the victim receive funds over a period of time rather than one time and then be pounced upon by your troop. Number 495 REPRESENTATIVE PORTER added it was his understanding the presumption was that the monies due an attorney are for work done up to time of trial and award. The attorney has no further committal to work on the case afterwards. The funds that the person has earned, should be paid in today's dollars, whereas the victim is being compensated for the future earnings that might have future (indiscernible) considerations. You shouldn't pay an attorney inflationary rate ten years down the road for work that was done ten years ago. REPRESENTATIVE BROWN asked what the significance was of deleting "an injured" on lines 26 and 27, as it seemed like the way it was before, if the injured party wished to get periodic payments then the (indiscernible) was going to structure in that manner. Now it is being changed to the person who is paying the payments and saying that to the maximum extent feasible, they are going to be structured as periodic payments rather than a lump sum which might be a more beneficial (indiscernible). She asked if that was the effect of taking out "an injured" on lines 26 and 27, to give that option to the person that was paying out the money. REPRESENTATIVE PORTER answered in the affirmative. If it is a valid method of paying out money, both the plaintiff and the defendant should have the option (indiscernible). If it is an (indiscernible) way, it was a proposal in 1986 or 1988, "an injured party" was snuck in at the last minute. REPRESENTATIVE BROWN asked what if the company that is paying the damages out, over time, goes bankrupt or the insurance company folds, didn't it put a lot of risk on the person who is supposed to be recovering (indiscernible). REPRESENTATIVE PORTER answered that it may be that there is a greater ability for a company to pay the kind of funding over a period of time than it would be to come up with one lump sum. Either one of those might balance off the other. There are no guarantees. Number 544 REPRESENTATIVE NAVARRE stated he was the chairman of the Labor and Commerce committee in 1986, when the bill came up and the provision was not snuck in. It was put in as a conscious decision by the committee, the reason being that the idea behind tort law was to make the victim whole, the injured party whole. If the injured party felt that it was in their best interest, then they could choose a periodic payment. The periodic payments are done, a lot of the time, at the request of the injured party or through negotiations by their attorney, but forcing them to accept it, even if it may not be in their best interest, but in the interest of the person paying, just didn't seem to make sense. REPRESENTATIVE PORTER responded by saying his point of supporting the provision, is that making a person whole, in his mind, didn't mean giving that person more money than he or she would have had prior to the injury. In case of (indiscernible), if the person is 20 years old and would have earned $2 million in their life time, giving them two million dollars now, and the financial benefit that amounts to, over and above what they would have had, isn't making them whole. That is making them rich and it isn't what compensation is designed to do. Number 622 REPRESENTATIVE NAVARRE felt if there was a limit of $500 thousand for the total claim, and it was reduced to the present value, he thought if they were going to put provisions like that in, the difference between the lump sum of $500 thousand, today versus periodic payment (indiscernible) then it would probably be $300 thousand, if you go over 20 years, you're paying maybe less. "If you have $500 thousand and I owe you $500 thousand, there is $500 thousand at risk. Now if I say, I'll pay that to you at $10 thousand a year for 50 years, then you'd say 'b.s., the volume of that is $500 thousand, I want my $500 thousand now.' Well I'm going to pay you $500 thousand, its just going to be in periodic payments." That needs to make sure we have that clarified because then you have to pay $10,000 for one hundred years. REPRESENTATIVE MULDER felt the whole intent was, as Representative Porter pointed out, not to make somebody rich overnight. It was to be a reasonable alternative to be a lump sum at once. To say, if someone or their heir was to receive $500 thousand, it would be reasonable for the court to work out a ten year payment period whereby they would receive an amount each year as opposed to make Mike Navarre a millionaire overnight. REPRESENTATIVE NAVARRE used another hypothetical situation where someone winds up a quadriplegic and there is no question about who was at fault, and they go to court anyway because they do that a lot, and they end up winning whatever the maximum is, and at that point... (end of tape). TAPE 93-40, SIDE A Number 001 REPRESENTATIVE DAVIDSON agreed and stated he felt they were "tweaking" the system so much that while they were stumbling over themselves to prevent a victim that had been damaged severely, in many instances, they didn't want them to get rich. It seemed that they were tweaking the system so much that they were making it a bonanza for wrongdoers. Maybe what needed to be done was to insure that there will be payment over the long term. Maybe there is a bond mechanism that can be included to insure that there will be payment. There are no guarantees, we all understand that, but it seemed to be an effort that so many people are getting away with so much. That's not how I read the news these days. We've already heard how punitive damages are rarely awarded but I think we have to stay focused on who we are trying to insure, at least has an opportunity to survive. We don't want to re-victimize people because we "tweaked" them out of the system of financial well-being. These victims are the very ones who are going to need more care, undoubtedly, because of the nature of their injuries or their losses. Number 016 CHAIRMAN HUDSON stated because of timing, he wanted to move on through the bill, adding there will be ample opportunity for the philosophy and for the policy commissioners, and who's harmed who and what the value and why, etc. He then asked Mr. Ford to continue. Number 018 MR. FORD referenced Section 13, stating it was a provision that specified when one is entitled to receive future damages that they specify the recipient, the dollar amount, the payment and the amendment here would also require that any future payment include increases for inflation. MR. FORD referenced Section 14, stating it was a collateral benefits section that was basically the existing collateral benefits section that they have for medical malpractice actions. At present, there are two slightly different systems. There is a collateral benefits provision in the existing law that is repealed and reenacted with the provision. A collateral benefit is simply, something you receive, either from insurance or some kind of other source, private or public, in addition to the compensation you received in your lawsuit. The idea of the section was to prevent double recovery. REPRESENTATIVE NORDLUND referenced the exception for social security (indiscernible). These are provisions from the federal government, and yet they don't have any of the same provisions under the state law. In other words, you can't segregate the state benefits under this provision of the bill, but you have to segregate the federal benefits. MR. FORD answered that one cannot recover both benefits. Sometimes there are exceptions in the provision for some benefits, that by federal law, you are not allowed to segregate. You are not allowed to exclude under this provision, one of which is a benefit under the social security act. MR. FORD moved to Sections 15, 16 and 17, stating they were all like a package, resulting from a suggestion from his office. In the enactment of the changes in 1986, by the legislature, one of the things the legislature did was to allow a person who is released from the lawsuit to settle their cases and get out. After the adoption of the 1986 changes, the initiative, actually adopted in 1988, repealed the entire chapter of the law. That repeal resulted in a cross reference in the 1986 provisions that was no longer accurate. In reference, the provision no longer existed. What is being attempted, is simply to provide in statute, what happens when one, in fact, releases someone, when the lawsuit is settled. This clears out the glitch that is on the books at present. Section 18 is the provision that is intended to encourage people against some of their lawsuits. The existing law provides a penalty to someone who, in fact, refuses an offer of settlement that was made in good faith, and turned out to be a good offer; or someone who refuses to accept an offer from someone who is being sued. This changes the penalty portion. The existing penalty only affects the interest one receives on their money. The new penalty provision substitutes actual costs and attorney fees, as the penalty. Essentially, it is intended to encourage people to settle their cases. An example: "If I am suing you, Mr. Chairman, and I offered you $10 thousand to settle our case, and you said, 'No!' In fact, I recover $50 thousand from you, then you would be penalized. I would be foolish to make the offer, but....anyway you would be penalized." It is an incentive to settle your lawsuits, it just changes the penalty that applies if someone, in fact, does not settle their case when they should have. Section 19 is the provision that specifies the rate of interest on judgments. Rather than a flat 2 1/2 percent, which is existing law, they would actually float the rate at 3 percent above the federal reserve discount rate. There would be a floating interest rate on the judgments close to fixed 10 1/2 percent. Section 20 is the provision that prohibits certain interest to be awarded. The type of interest is free judgement interest. It is interest someone would get from the date of injury to the date of judgement. People will no longer be able to get prejudgment interest or certain kinds of damages. Future economic damages, future non-economic damages and punitive damages, all are getting prejudgment interest for those items under this provision. Section 21 is a technical reference because the collateral benefits section was appealed and moved. It is only a technical amendment. Section 22, again is a technical amendment because of Section 23. Section 23 is a limitation on the amount one can receive under a lawful death action, if there is no spouse, minor child, or dependent who survives the deceased person. Right now wrongful death is limited to pecuniary losses if there are no survivors. Under this provision, it is limited to $10 thousand, placing a cap on the amount you can get for pecuniary damages. CHAIRMAN HUDSON asked if this was where there is no immediate next of kin. MR. FORD agreed, adding no father, mother, child, grandchild, sibling, spouse, or dependent. REPRESENTATIVE PORTER asked Mr. Ford to explain pecuniary damages. MR. FORD stated it was money losses. It is what one would have received had the person lived through a normal lifetime. REPRESENTATIVE BROWN asked how it would affect non-married partners, homosexual partners that are not technically spouses. MR. FORD stated there was not a definition of spouse in the provision, but assuming the traditional definition is accepted, they would probably not count. He did not believe the court has held an unmarried partner as a spouse. Number 104 REPRESENTATIVE NAVARRE asked if a parent lost a child, what was it worth. MR. FORD answered it would not apply in this case because there would be a survivor. REPRESENTATIVE NAVARRE agreed there would be a survivor but it wouldn't be a spouse, a minor child or a dependent. MR. FORD answered it would be a father or mother. REPRESENTATIVE MACKIE asked under "dependent," did the definition allow for all of that. MR. FORD answered in the affirmative. If someone lost their child, this would not apply to them. REPRESENTATIVE NAVARRE stated it did say that. It states a dependent means a father, mother, child, grandchild or sibling who was dependent upon the deceased at the time of death. If it is a single child family and the child gets killed, how are they dependent on them? MR. FORD answered, assuming that is true, then correct. Number 127 MR. FORD referenced Section 24, stating it was rule 82, attorney fees provision. REPRESENTATIVE MACKIE referenced the pecuniary description was only meaning a monetary value that one could actually put a value on that one would have received from the person in the future. How can one put a dollar figure on something like that? MR. FORD answered that often it was very difficult. He then moved to Section 24, stating it was the provision that would eliminate attorney fees except in certain cases. Unless there is a statute that allows it or unless there is a grievance to the parties, that you do not receive attorney fees in a civil action for personal injury, death or property damage. This is different from the existing law, in that now you do get attorney fees for certain civil cases. This also affects a court rule which we have noted in the bill. Section 25 applies to civil liability of hospitals for non- employees. It is actually brought about by one particular case, Jackson versus Powers. Under this provision, a health care provider who is not an employee of the hospital, or an actual agent, is in the hospital is not going to be liable for the negligence. Basically, the hospital, itself, would not be liable. The health care provider may be liable. Simply because the hospital allows its facilities to be used by a doctor, they are not going to be held liable. The hospital is still responsible for their negligence. Section 26 is our repealers and I am not going to go through it except for one. There is a provision in 09.17 that is repealed by the bill that relates to non-economic damages (indiscernible). It is line 17.010(c) which provides that our limitation on (indiscernible) does not apply to disfigurement or severe physical impairment. This provision was repealed. The other provision, 040(c), is simply a method for awarding future damages. You might like to examine that. The decision made in 1986 allowed future damages to the award of a certain method. This will repeal that method. The last repealer deals with collateral source and we needed to do that because we have a new collateral source rule. We are simply eliminating the dual provisions from one to one provision in the bill. The remaining provisions deal with (indiscernible). We did have several (indiscernible) provision, we don't like to do that but we were persuaded to do that. (indiscernible) section would, of course, limit the applicability of the bill to lawsuits filed after the effective date of the bill. We do have an effective date of July 1, 1994. That concludes the bill. Number 165 CHAIRMAN HUDSON thanked Mr. Ford. He stated everyone could see it was a complex and intricate area. MR. FORD added one more remark. He compared the August 27 version with the August 25 version and they are identical. He thought it was simply a matter of when they ran off the copies. They are the same version.