Legislature(2003 - 2004)
05/02/2004 03:50 PM Senate JUD
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* first hearing in first committee of referral
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= bill was previously heard/scheduled
CSHB 336(JUD)am-MOTOR VEHICLE INS./ UNINSURED DRIVERS
REPRESENTATIVE KEVIN MEYER, sponsor of HB 336, introduced staff
member Suzanne Cunningham, and told members that this
legislation states that if a person knowingly breaks the law by
driving without mandated vehicle insurance, that person cannot
sue for the same amount in damages as a person with the required
insurance. He pointed out the key word is "knowingly." If an
accident occurred, the uninsured driver could sue for non-
economic and compensatory damages but not for pain and
suffering. He noted that damages for pain and suffering are most
costly to the 82 percent of people who do have insurance
coverage. This issue was brought to his attention by a
constituent who said she pays $1500 per year in insurance and
must listen to a neighbor brag that he has no insurance, yet
both would collect the same damage award if either were in an
accident. The California Legislature enacted similar legislation
because 35 percent of drivers there had no insurance. He said
although he carries insurance coverage in case an uninsured
motorist hits his vehicle, if that happened, his rates would
increase.
REPRESENTATIVE MEYER said this bill is a matter of fairness.
Although there are probably many reasons that 18 percent of
drivers have no insurance in Alaska, one reason may be that they
are unsafe drivers with multiple DUI offenses or reckless
driving offenses so the 82 percent of insured drivers become the
true victims. He said the bottom line is whether the legislature
wants to protect the people who comply with the laws. He noted
that theoretically, reducing the number of pain and suffering
lawsuits should lower rates.
CHAIR SEEKINS questioned how "knowingly" is defined.
REPRESENTATIVE MEYER said the language on page 1, line 10, says
the person must know that he or she was not in compliance.
CHAIR SEEKINS said the only argument he could imagine that would
hold water is that the person might not know his policy was
cancelled or lapsed because of an unanticipated oversight.
REPRESENTATIVE MEYER said it would be the insurance company's
responsibility to prove the driver knew he didn't have
insurance, which is a high hurdle.
SENATOR OGAN asked how that would affect an uninsured driver who
was in an accident in which someone else was at fault.
REPRESENTATIVE MEYER clarified that the driver could sue for all
damages except pain and suffering. The logic is that the driver
broke the law by driving without insurance.
SENATOR OGAN felt that is too limiting because the driver who
caused the accident could be very drunk, eluding police, or
involved in criminal activity and driving dangerously and be let
off the hook.
CHAIR SEEKINS said the uninsured driver should not have been on
the road in the first place. This legislation says if a person
chooses to drive without insurance, that person is assuming the
risk of not being able to recover economic damages, no matter
the cause of the accident.
SENATOR OGAN agreed that driving without insurance is
irresponsible and said he does not condone it but he knows of
seniors who live on very limited fixed incomes who drive without
insurance because of the financial hardship. Those people have
no other options and he does not believe it is right to let
someone with criminal culpability off on a tort claim in such a
case.
REPRESENTATIVE MEYER said Senator Ogan raised a good point but
he believes that many of the 18 percent of drivers without
insurance should not be driving. So, the question becomes, is it
fair for one of those drivers to be on the road and hit an
insured motorist. He noted the uninsured motorist could have
been drunk. He reminded members that driving is a privilege, not
a right, and that part of the responsibility is mandated
insurance coverage. He repeated that rates are increasing
because the 18 percent are not paying into the system.
SENATOR OGAN disagreed that is the only reason rates are
increasing.
SENATOR THERRIAULT asked what would happen if he, as a father,
knowingly let his insurance policy lapse and his teenage son and
friends took the car and got into an accident. He questioned
whether they would be covered because they did not know the car
was uninsured.
REPRESENTATIVE MEYER deferred to a representative from an
insurance company to answer but said he believes the father
would probably be responsible.
MS. SUZANNE CUNNINGHAM, staff to Representative Meyer, said the
bill is written to apply to the person who is operating the
motor vehicle so if the son did not know, it would not apply.
CHAIR SEEKINS thought if the son caused the accident, the friend
and son's only recourse would be against the father. If another
driver caused the accident, a claim for non-economic damages
would be available against that driver by the passengers and
son, who did not know.
SENATOR THERRIAULT asked how that would apply to an uninsured
parked vehicle in which a person was injured.
CHAIR SEEKINS noted the key word is "operating" a motor vehicle.
He then said, in response to Senator Ogan's earlier comment,
people who make the choice to drive without insurance knowingly
are giving up their rights to recover non-economic damages.
MR. MIKE LESSMEIER, a Juneau attorney representing State Farm
Insurance, stated support for CSHB 336(JUD)am. State Farm did
not ask Representative Meyer to introduce Section 1 but it did
ask him to introduce some of the other sections, which he would
explain. Those sections have not been controversial. Sections 2,
4 and 5 deal with what is called the "mirror rule." That rule
says if the liability portion of a policy provides coverage for
punitive damages, then the uninsured and underinsured motorist
coverage must also include coverage for punitive damages.
Therefore, in effect, the policyholder is funding his ability to
recover punitive damages. Those damages are designed to punish
the person without coverage but, in effect, the insured driver
is paying for that coverage himself. He said that makes no sense
and has caused that coverage to increase in price. To address
that situation, State Farm proposed an amendment, which was
adopted, that says regardless of what the liability provision of
a driver's policy says, the uninsured/underinsured motorist
provision need not provide coverage for punitive damages.
SENATOR THERRIAULT asked, "...right now the law requires that if
it is in one, it must be in the other, so you're alleging that
you're paying for double?"
MR. LESSMEIER responded that it forces people to pay for
something most would choose not to purchase, if they had the
choice. A person might want that coverage in the liability
portion of a policy because often when a person is sued for
reckless driving, for example, there is an allegation of
punitive damages in that claim. However, when one turns around
and looks at an uninsured/underinsured motorist claim, most
policyholders would not want to pay for damages that are
essentially punitive damages, designed to punish another person.
The policyholder is essentially punishing himself because it
does not affect the uninsured motorist that ran into him as he
is recovering punitive damages under his own policy. HB 336 says
the coverage in the uninsured/underinsured portion of one's
policy does not have to mirror the liability coverage with
respect to punitive damages.
MR. LESSMEIER said the other change is in Section 3. He
explained:
When we ... go all the way back to the history of
uninsured/underinsured motorist coverage in the state,
in 1983 and 1984 we passed a system that mandated
offers of uninsured and underinsured motorists and
that system has evolved. Now what happens, when you
buy an insurance policy, it contains coverage for
uninsured/underinsured motorists unless you decline it
in writing. And then what happens is every six months,
if you're a State Farm insured, you get a written
offer of uninsured/underinsured motorist coverage all
the way up to $1 million. What the Supreme Court said
in a case called [Indisc.] vs. State Farm, is that in
umbrella policies, there has to be these offers as
well and the difficulty with that is if we make these
offers on each vehicle, and people make the selection
on each vehicle and then we're required to make them
in the umbrella policy as well, it leads to
conflicting offers. We don't know what the price - and
as a result of that it's just created a mess in terms
of the umbrella policies and one major carrier in this
state has actually stopped writing because of that
decision.
Our point is that we have a wonderful system for
making this coverage available through these mandated
offers already and that it ought to be on the primary
policy and this would just mean that we don't have to
make those offers on excess or umbrella policies. We'd
still make them on the primary policies and I think
those changes make eminent good sense.
If we go back to the first provision, we look at this
provision really as an issue of fairness. The issue of
fairness is this issue: if a person is unwilling to
provide liability coverage for someone else, provide
protection for someone else, it's not unfair for them
to not expect to receive the same level of benefit.
Now with respect to Senator Ogan's concern, the person
that is the violator, the bad actor that is
intoxicated, that person is subject to all of the
criminal penalties, is subject to an award for
economic damages, and is also subject to an award of
punitive damages. This does not affect the ability of
an injured person to recover punitive damages so they
have a pretty big hammer to get whatever that person
would have in terms of assets. They're not left
unprotected and I think that's important.
We look at this, and one of our judges across the
street, he talks about what he calls the goose/gander
rule, and this is really the goose/gander rule. We
think that people that make this choice - and the way
this bill was changed in the House, it was changed to
be knowing - so we don't - the situation that you were
talking about Senator Therriault, we don't want to
cover anyone with this bill that does not knowingly
violate the law. One of the amendments that had
originally been proposed was with knew or should have
known, and it became knowing. That's a pretty high
standard to meet and we would hope that as a result of
this, what would happen is that we would have less
people that make that choice to drive without
insurance. The less people that sign the registration
certification that says I certify that I have and will
maintain automobile insurance on this car and then
turn around and don't.
We would hope that there would be more financially
responsible drivers on the road so we don't end up
with a situation where what we have now is probably 16
to 18 percent and it truly is a situation where every
person that drives and doesn't buy insurance is being
subsidized by those that do - everyone of us. Ninety-
six percent of our policyholders do buy
uninsured/underinsured motorist coverage and that
coverage has been a coverage that certainly has
changed over the years. It's increased in terms of its
benefit but it's also increased in its price. It's
gotten way away from what it originally was intended
to be and so we think this bill is a good idea and I'd
be willing to answer any questions that anybody might
have of me.
4:30 p.m.
SENATOR THERRIAULT asked for the definition of "operating a
motor vehicle."
MR. LESSMEIER said he wished he had a good answer but thinks it
depends on where the vehicle was parked. He thought, for
example, if a person drove to downtown Juneau, stopped and was
waiting to get out of the vehicle and was hit, that would fall
under operating a motor vehicle. However, if a vehicle was off
the roadway, it would not.
SENATOR OGAN asked what percentage of non-economic damage claims
involves clear criminal activity.
MR. LESSMEIER was unable to provide a percentage but said there
are always scenarios in which the application of a law is not
perfect. He suggested that using the remaining tools of the
criminal law and the ability to collect punitive damages in
egregious cases, he suspects there will be very few cases where
every single penny that the bad actor has available is not paid.
He said in looking at this, he keeps coming back to the fact
that people make the choice not to provide protection for others
and, at the same time, to give up some compensation for them.
The consequence of that choice is fair under this bill.
CHAIR SEEKINS announced a 3-minute recess.
CHAIR SEEKINS asked if he chose not to buy insurance on his
family's vehicles without the knowledge of the other family
members, whether those family members would have the right to
recover non-economic damages. He then questioned whether a
person could not recover non-economic damages under this bill
but could recover punitive damages if the act was egregious.
MR. LESSMEIER said that is correct.
CHAIR SEEKINS noted that 50 percent of punitive damages must be
shared with the State of Alaska. He then asked, "So it would
mean if it was truly an egregious act on the part of the non-
insured or the other person, then you still can go after those
punitive damages under the law but not what we would classify as
non-economic - pain and suffering."
MR. LESSMEIER agreed.
CHAIR SEEKINS then expressed concern that an uninsured driver
could hit a pedestrian. He thought this bill might not provide
an incentive for those people without insurance to get it, but
it will limit some of the exposure for the legal drivers.
With no further participation, he closed public testimony.
TAPE 04-58, SIDE B
SENATOR OGAN asked Representative Meyer if he would oppose an
amendment to address a situation where:
...if someone is driving with criminal culpability -
either a reckless driver, a DUI, felony looting - and
run into somebody, I think they should get hammered
with as many tools as the guy that gets hurt
regardless of whether or not they had insurance. I
support what the bill does if it's just a simple
violation but I think - I haven't talked to the MADD
folks about it among others about drunk driving, I
don't know how they'd feel about it, but I mean I
think this goes a little too far in that area....
REPRESENTATIVE MEYER expressed concern about the late date in
the session and noted this bill has a referral to the Senate
Finance Committee.
CHAIR SEEKINS offered to hear the bill again on Wednesday. The
committee then took a brief at-ease.
SENATOR OGAN moved to adopt a conceptual amendment [1], which
read:
The limitation of recovery does not apply, however, if
the driver of the other vehicle (1) is cited for a
violation of the state's operating a motor vehicle
while intoxicated as a result of the accident and is
convicted of the offense, (2) intentionally causes the
accident, (3) flees from the scene of the accident,
(4) at the time of the accident is in furtherance of
an offense that is a felony.
He noted that language is from a Louisiana statute.
CHAIR SEEKINS announced that without objection, Amendment 1 was
adopted.
SENATOR THERRIAULT indicated that he would work with the prime
sponsor on a definition of what constitutes operating a motor
vehicle.
SENATOR THERRIAULT then moved SCS CSHB 336(JUD) from committee
with individual recommendations and its zero fiscal note.
The motion carried with Senators Ogan, Therriault and Seekins in
favor.
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