Legislature(1993 - 1994)
02/04/1993 01:40 PM Senate L&C
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
SENATOR KELLY moved on to SB 64 (INSURER IMMUNITY FOR SAFETY INSPECTIONS), sponsored by the Senate Labor and Commerce Committee, and gave some history on this legislative intent in previous years. Number 311 SENATOR KELLY invited DAVID HUTCHENS, representing the Alaska Rural Electric Cooperative Association, to testify. MR. HUTCHENS explained he also managed the ARECA Insurance Exchange, which writes insurance for most of the larger utilities in the state. He reviewed the decision in the Van Biene v. ERA Helicopter, Inc. case in which it was concluded that insurance companies doing safety inspections on the work site for the employer could be sued for alleged negligent work site safety inspections. MR. HUTCHENS described the effect on those doing work site inspections for the employers, which was to quit doing them, because his board could not accept the unlimited liability that would come from doing the work site safety inspections. Since the responsibility for the inspections had fallen back on the employers, he thought some were doing a good job in policing themselves, but others were not able to do an effective job. As a result, MR. HUTCHENS was fearful that the work site in Alaska is not nearly as safe as it was before the case in 1989, but the bill would restore the law to what everyone thought it was before the Van Biene case in 1989. Number 337 SENATOR KELLY asked for some perspective on the legislation in relation to workers' compensation insurance as a trade off. He paraphrased the decision where someone could get beyond that arrangement and sue an insurer, who performed the safety inspection, if the safety inspection was faulty. MR. HUTCHENS agreed that was the problem, and he elaborated on the level of previous safety services most of the insurance companies have provided in the past. He discussed, with the committee, the danger in insuring without performing a safety inspection, and MR. HUTCHENS' termed it a "crap shoot." Number 369 Testifying from Seattle, Washington, JAMES PFEIFER, president of Alaska National Insurance Company, read the following letter, portions of which are included in the minutes: "This legislation (with the deletion of one key phrase) will help restore the workers' compensation system to its original intent -- i.e. a no fault system. As you know the workers' compensation system covers employee injuries whether or not the employee is at fault. Even gross negligence on the part of the employee does not free the employer of liability. In return, the employer and its insurance carrier are entitled to exclusive remedy. That is, the employer or carrier should not be subject to any liability beyond what is provided under the workers' compensation act. If, in fact, an insurance carrier makes a mistake (intentional or otherwise) in a safety inspection, the employee is taken care of under the workers' compensation system. No need exists, nor should there be any incentive, for an employee to reap windfall benefits. If an insurance carrier displays a pattern of poor inspection practices, remedies are available for the Director of the Division of Insurance to address the matter. From a practical standpoint, however, the market place will quickly come into play and employers (or the insured) will go elsewhere for coverage and safety services. I strongly urge your committee to delete the language relative to "intentional misconduct." As currently written, this language may appear to embrace "motherhood" and "apple pie" but I assure you that such a belief is erroneous. First, as I have already pointed out, this additional club is not needed. The important consideration is that the employee is already taken care of. Second, this type of language invites frivolous causes of action for which the principal beneficiaries are plaintiffs and defense attorneys. The problem is that such words as "intentional" or "misconduct" are issues of fact and, therefore, ultimately would have to be decided by a judge or jury. I know I am being repetitious here but the workers' compensation system was not designed to be adversarial in determining fault. Fault is not supposed to be an issue. Thus, I suggest that this language is inappropriate and respectfully request that it be removed. I appreciate the fact that this overall issue is being addressed this year and urge that this corrective legislation be passed." MR. PFEIFER offered to answer questions. Number 402 SENATOR RIEGER asked if the intent was to remove lines 9 and 10 on page 1. MR. PFEIFER didn't have a copy of the bill, but explained it would be the removal of "intentional misconduct," which, he said, would be the original intent of the workers' compensation system. SENATOR RIEGER reviewed the supreme court ruling report and asked what would happen if an insurance carrier intentionally did not pay what was due under the workers' compensation statutes. He was not comfortable with denying an employee the right to at least sue for actual damages. MR. PFEIFER said there were avenues to be used for the protection of the employee. Number 429 SENATOR LINCOLN, in reference to the position paper from the Department of Commerce and Economic Development, wondered how they could have a neutral position and specific objections to the same bill. She read portions of the position paper to MR. PFEIFER to sustain her argument. SENATOR KELLY assured SENATOR LINCOLN the bill would be held over because the committee must adjourn to attend a caucus meeting. He referred her to a position paper from the Legislative Council on the following page, in answer to her objection. MR. PFEIFER, in response to SENATOR RIEGER, said "if in fact an experienced carrier did not handle a claim properly, an employee could go before the board and the board could award as much as a 25% penalty against a carrier."
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