Legislature(1993 - 1994)
01/27/1994 01:45 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 introduced SB 254 (CIVIL LIABILITY) and invited the sponsor, SENATOR DRUE PEARCE, to review the bill. SENATOR PEARCE explained there was a companion bill, HB 292, going through the committee process, also. SENATOR PEARCE reviewed her Sponsor Statement by quoting, "This bill embodies a generally accepted fact that a person who has been injured or suffered damages as a result of negligence on the part of another has the right to be made whole. The bill ensures the victims maintain the right to compensation; however, in today's court system, we sometimes perceive the system as being capricious and arbitrary. Occasionally, victims receive less compensation or the negligent are required to reimburse more than common sense dictates. This bill attempts to assure that those situations become unusual." SENATOR PEARCE listed the suggested changes to the Alaska Civil Code: (1) "Legal actions involving personal injury, death, or property damage must be brought within six years ......... The six year limitations would not apply if the injury, death, or property damage was caused by an intentional act or if there was an intentional concealment of the facts. (2) Limits the time within a person can bring an action for professional negligence against a health care provider to two years, unless that person is less than six years old on the date of injury, in which case the person has until their eighth birthday. (3) Limits the time within which a person can bring an action for personal injury, death, or property damage to two years after the date the claimant could reasonably believe they had a claim. (4) Extends the definition for non-economic loss to include claims for wrongful death. Non-economic loss is further defined to include the loss of consortium. (5) Prevents someone from filing multiple claims over the same incident to claim multiple awards over a single incident. (6) Defines the standard a plaintiff must show to establish "clear and convincing evidence" when trying to secure punitive damages." Number 051 SENATOR PEARCE continued: (7) "Defines damages to be three times the amount of compensatory damages awarded or $200 thousand, whichever is greater. (8) Prohibits a person from recovering damages if the person suffers the damages while committing a felony. (9) Subtracts from the award the amount of state and federal taxes that would have been owed if the person had suffered no damage. The victim is restored his or her original state, not overcompensated. ...... (10) Allows either party in the suit to require future damages to be paid by periodic payment instead of a lump sum. Attorney contingency would be reduced to present value and paid in a lump sum. Periodic payments would include increases for anticipated inflation. (11) In the bill juries are made aware of any other awards and collateral payments made to plaintiffs. The damages awarded have collateral payments deducted. ..... (12) Provides for the reduction of the claim against other parties when one person in a multiparty suit settles. ...... (13) Provides financial motivations for pretrial settlements. (14) Ties the interest rate charged on judgements and decrees to 3% above the federal discount rate. (15) Stipulates that an award for economic loss is limited to $10,000 when the deceased is not survived by a spouse, children, or other dependents. (16) Prohibits the award of attorney fees in a civil action for personal injury, death, or property damage. and (17) Limits the civil liability of a hospital for an act or omission of a health care provider who is not an employee of the hospital when the claim is only based on the actions of the health care provider and the hospital publishes which health care providers are independent contractors." SENATOR PEARCE noted the attached list of organizations that to date are supporting the tort reform measure before the legislature this year. She suggested other organizations would join the list as information is spread about the bill. SENATOR PEARCE explained the technical work on the bill would be done by others. SENATOR KELLY introduced ROGER HOLMES, the lead attorney in support of the bill, testifying on teleconference from Anchorage, and the lead attorney in opposition, ERIC SANDERS, who will be testifying from Juneau. MR. HOMES said, unless there were technical questions about the bill, he would prefer to be a resource person and let others from the organization, Alaskans for Liability Reform, testify. Number 102 Next, SENATOR KELLY called on AL TAMAGUI, to testify in Anchorage. MR. TAMAGUI testified in support of SB 254, praised the research, and noted the number of organizations working with the committee on the bill. He asked that the bill be moved from committee. ERIC SANDERS, an attorney from Anchorage testifying in Juneau, reminded SENATOR PEARCE of her involvement in civil justice and civil rights, and her activity in the legislation that was passed in 1986. He recalled a meeting at the end of the session of that year when there was a conference committee on the tort reform bill in which she called all of the players together for a commitment that everyone was satisfied with the compromise that had been reached. MR. SANDERS had a clear recollection that not only the people that were appearing on behalf of the potential victims of the state, but also the Citizens Coalition for Tort Reform made a commitment to SENATOR PEARCE that they were satisfied with the compromise. In view of that, MR. SANDERS expressed surprise at the language in the introductory part of her presentation that the legislation of 1986 fell short of accomplishing the goals of the legislature. He said the problems of 1986 still exist in 1993. MR. SANDERS returned the committee to what was happening in 1986. There was an alleged crisis, a position taken by the Citizens Coalition for Tort Reform that required immediate attention by the legislature because insurance rates were sky-rocketing, businesses were closing, and people couldn't get insurance or do business in the state. MR. SANDERS described the solution sought by the group was to limit victim's rights. He said there was no crisis at the time, but legislation was passed irregardless. Number 157 MR. SANDERS said he doesn't hear anyone claiming any sort of insurance crisis, and he declared it was a bill to inhibit, limit, restrict, and get rid of more victim's rights. He wondered what would be lost in exchange for giving up their rights and suggested the citizens in Alaska would be giving up their civil rights. MR. SANDERS quoted MR. TAMAGUI as saying it is a fair bill, and he asked, "Fair to whom." The wrong doer or the victim? MR. SANDERS agreed it was fair to the wrong doer, but he preferred to discuss what was in the best interests of the citizens of the State and the constituents. MR. SANDERS quoted the introduction to the bill, given by SENATOR PEARCE, that the goals and purpose of SB 254 was to create a more equitable distribution of the cost and risk of injury, reduce costs associated with civil justice, while assuring adequate compensation for injured people. He strongly disagreed with her introduction to the bill, and he proposed to go through the bill to describe the destruction of the rights of citizens to be compensated fairly for their injuries as the result of negligence. Number 200 MR. SANDERS denied there was anything in SB 254 that created rights for victims or enables them to recover easier than now. He labeled it anti-victim legislation and directed attention to Section 23 on page 11. He said Section 23 was the $10 thousand cap on pecuniary loss or death, and he claimed it was unique for Alaska to put the price of $10 thousand on one of its citizens, possibly a child. He discussed the possible justification for this section saying it sends the wrong message. MR. SANDERS said the present law allows people to recover their future economic earnings minus their consumption, and he didn't agree that people end up with some type of outrageous windfall. MR. SANDERS next directed attention to Section 2, actions that must be brought in six years, and he gave the example of someone injured in a crash of a plane. The plane was over six years old, and no one in Alaska could recover damages. He said if the six year old plane crashed in the State of Washington, the victims could recover damages. He claimed Alaska would be protecting the manufacturer of a defective product, such as cars manufactured before the 6 years. Number 258 MR. SANDERS gave the example of women who had taken DES in the 1950's and 60's to prevent miscarriages, but it turned out to cause cancer in their daughters. Under SB 254, he said these claims would not be viable, since the defect in the product was not apparent until after six years. MR. SANDERS then noted Sections 12 and 13 deals with mandatory periodic payments, and he said these provisions had been discussed in 1986. He said the change made in the bill would preclude an injured party from making the decision to receive payments in the future; it would now be at the discretion of the defendants. He touched on the lump sum payment, medical costs, and lost income and explained how these would be controlled by the person who caused the injury. Number 313 MR. SANDERS projected problems with a tort feasor, who stops payments before the plaintiff is paid, and he gave the example of the State's litigation with Executive Life Insurance Company, the major broker of structured settlements in 1986. He explained he had placed clients in Executive Life Insurance Company who are not now being compensated as expected under the contract. He claimed the bill would make the victim take the risk the company is going to be there when the payments are to be made in the future. MR. SANDERS explained there was a twist which says there shall be increases for anticipated inflation, and he suggested this could spawn a multitude of hearings on inflation rates after the verdict. He listed a series of possible disputes in deciding these rates, and he claimed it would cause havoc in the court system. Number 374 MR. SANDERS outlined problems about the tax consequences of structured settlements and suggested the legislation be checked from a tax standpoint. MR. SANDERS drew attention to Section 14, collateral benefits, and suggested this section would work adversely to a victim, to assure the victim is not justly compensated. As an example, he explained under current law, workers compensation benefits, and third party claims, and how the legislation would benefit the wrong doer at the expense of the innocent party, who would not be compensated fully. Number 399 Next, MR. SANDERS turned to Section 15, which would allow fault apportioned to any person, whether or not that party could be named as a party to the action. He reviewed joint and several liability which was modified by the 1986 Legislature, again changed in 1988, and proposed for a fourth change in SB 254, which he explained would be unfair to the victims. MR. SANDERS said there were situations where the State is going to be immune, and gave road design as an example. He described phantom defendants which lead to inequities in how claims are litigated. MR. SANDERS concluded by stressing the legislation is ill-conceived and recommended a careful look at the anti-constituent provisions. SENATOR RIEGER referred to the argument on structured settlements and suggested it was all ready in law, and he read the bill as an additional protection for the plaintiff rather than the defendant. He also spoke in favor of the process of anticipated inflation and thought there might be some standardized language that addresses inflation, such as indexes. He questioned MR. SANDERS on some aspects of existing law concerning judgements. MR. SANDERS addressed his second point on structured settlements, and he quoted the federal law as being tax free if the victim doesn't take constructive receipt of the settlement money. He described, in an example, the implication of various settlements in relation to taxes. He explained the language on structured settlements is very complicated, so there are seminars given on how to draft a structured settlement agreement to avoid any tax consequences on the settlement. SENATOR RIEGER and MR. SANDERS continued to discuss the intricacies of structured settlements, taxes, constructive receipts, and the IRS. MR. SANDERS repeated his charge the legislation would enable the defendant to decide on the payment rather than the victim. He voiced his opposition to allowing the defendant to define the terms under which the victim is paid. Number 499 SENATOR LINCOLN asked MR. SANDERS for a summary of his opposition to the legislation, and he provided a written summary to the committee members. He explained the summary was somewhat out of date because the legislation had changed since the summary was introduced. SENATOR KELLY said the summary would be included in the bill packets. MR. SANDERS didn't see anything in the legislation for victims and asked for provisions he might have missed. SENATOR LINCOLN questioned the six year limitation on legal action, and SENATOR KELLY said he would ask an attorney testifying in support of the bill in Anchorage, ROGER HOLMES. MR. SANDERS agreed to meet with SENATOR LINCOLN at her convenience to explain his side of the legislation. SENATOR KELLY then went to Sitka, to hear from DR. D.R. LEHMAN, who was testifying, not only as a doctor, but as President-Elect of the Alaska State Medical Association. DR. LEHMAN introduced himself as being in practice since 1976 and strongly urged support for the passage of SB 254. He declared the present tort system is neither fair nor just and has become little more than a lottery to wring thousands or millions of dollars with an injury. DR. LEHMAN explained he was board certified and has never been sued, but his malpractice premiums are approximately $30 thousand per year, which he said was considerably higher than if he was a plastic surgeon in Anchorage. He stated his premiums were high, primarily because of the malpractice risk associated with delivering babies. He explained he could be sued over one of the babies until the child reaches the age of majority, plus three years, and he gave what he called a bizarre example. DR. LEHMAN blamed the current court system for the problems, and he listed the hospitals throughout the state that have closed because of the cost of malpractice insurance. He said doctors have quit practicing in Alaska because of the unavailability of affordable malpractice insurance. He described the additional tests and procedures prescribed by doctors to "cover their ass," out of fear of litigation. DR. LEHMAN said tort reform had worked in other states, and he urged speedy passage of SB 254. Number 519 Next, SENATOR KELLY invited BONNIE NELSON to testify OFFNET from Chugiak, and he asked the remainder of those testifying to limit their testimony to three minutes. MS. NELSON explained she has been involved in health reform for fourteen years, and she complained there should be health coverage for all people before there is tort reform. She thought there should be data collected how much the doctors make to determine the cost effectiveness of tort reform. She explained she was offended when people claim there is not a health crisis. Number 552 SENATOR KELLY said health care reform was a separate issue, and he predicted the legislature would do something on health care reform this session. SENATOR KELLY returned to Anchorage to call on STEPHANIE GALBRAITH to testify. STEPHANIE GALBRAITH-MOORE identified herself with the Municipality of Anchorage Law Department and deferred to HARRY SJOBERG, who is in charge of Risk Management for Anchorage. MR. SJOBERG explained he has been involved in risk management since 1962 and in Anchorage since 1967. He expressed general support for SB 254 but suggested there were items that needed to researched. He referred to Section 7 and praised the cap on non-economic awards as an important item for the city. In Section 10, MR. SJOBERG said they supported the new language as protection for the police. MR. SJOBERG noted in Section 15, the city was supportive of the clarification of fault, and he reviewed some of points in the tort reforms of 1986 and 1988 which helped to reduce the claims of the old deep pocket system ....... TAPE 93-4, SIDE B Number 001 MR. SJOBERG credits SB 254 with reducing legal fees, lawsuits from public entities, but he would like to see punitive relief for public entity employees. MR. SJOBERG spoke in rebuttal to MR. SANDERS saying the rules, as far as insurance, have really changed. He explained many people join insurance pools now and have large self-insured deductibles, but he thought without tort reform, there could be a crisis again. He reiterated the support from the Municipality of Anchorage for tort reform, and he gave his reasons why he thought plaintiffs lawyers, like MR. SANDERS, liked the present system. STEPHEN CONN, from Anchorage, testified as the Executive Director of the Alaska Public Interest Research Group, (AKPIRG) representing about 4,000 consumers. MR. CONN said he is a retired professor of justice at the University of Alaska, has taught legal history, and is familiar with the history of torts over the years. MR. CONN explained he had sought the advice of a number of other people, who have had direct experience with both the medical and legal process - both positive and negative - in order to direct the action of AKPIRG. He discussed both health care reform and tort reform and agreed with BONNIE NELSON, that it appears there is an effort to coerce tort reform as a precondition to health care reform. MR. CONN said this information had been in the newspapers and articles from medical practitioners, who were blunt about the subject. MR. CONN said there is a crisis of uninsured Alaskans, who are in desperate need of medical care, and he suggested a realignment of priorities. He claimed the legislation for tort reform was based on a crisis that does not exist and is premised on values to the civil law system, that has yet to be determined. MR. CONN referred to Paragraph 6 of Section 1 which, he said, suggests a study by the attorney general that was used in previous tort reform legislation, and he claimed tort reform did not need to be fixed, since it wasn't broken. Number 050 MR. CONN accused the legislation as being skewed in a very specific way against justice in the civil offenses not only to the victims, but in the case of punitive damages. He said they were the only way to police the market place against defective products and other malicious acts by large corporations, which can well afford to pay minuscule judgements. He accused the drafters of SB 254 of representing special interests who believe this is a legislature that is prepared to buy-in to their special pleading. MR. CONN said that AKPIRG is vigorously opposed to SB 254, and believes it to be the most narrow piece of legislation that has "come down the pike in Alaska." He said AKPIRG plans to work strongly to encourage public participation of persons other than those who stand to benefit. MARK WILKERSON, an attorney in Anchorage, explained he practiced primarily defense law, as well as plaintiff's work and was probably speaking against his own self interest by supporting SB 254. He described the crisis of insurance companies not being able to make periodic payments and going out of business. MR. WILKERSON referred to Section 12, saying the section does not deal with structured settlements that occur before a judgement, so it doesn't deal with cash receipts, cash repayment, but deals with the judgement. He explained some of the ramifications of the lump sum in relation to taxes and suggested it was fair to the victims. MR. WILKERSON referred to Section 18, which he thought spoke to the lawyers who try to get results for people on both sides of the issue. He thought the section created a level playing field, and he explained how it helps both sides of the lawsuit by forcing reasonableness. Number 133 SENATOR KELLY questioned, in a case where an offer is made from an attorney to an attorney, is it incumbent upon an attorney to inform his client of the offer. MR. WILKERSON explained how that lawyer could get in trouble both ethically and legally if the client was not informed of the offer. SENATOR LINCOLN relayed a concern from constituents in Bush Alaska concerning Section 2 on page 3 to MR. WILKERSON about the six year limitation on legal claims, and whether the small aircraft flown in the Bush, which are usually older than six years, preclude claims in the event of a crash. Number 167 MR. HOLMES explained SB 254, as written, would preclude a suit against the aircraft manufacturer if the plane was more than six years old; however, the operator, or maintenance personal, could be sued. He also explained that manufacturers of those old aircraft are no longer in the business because of their product liability clause, and the planes are no longer for sale. Additionally, SENATOR LINCOLN expressed concern for buildings in the Bush, where it can take a number of years to complete the building, and she asked about the liability. MR. HOLMES said, in that case, the six years would begin with the date of the certificate of occupancy. SENATOR LINCOLN relayed another question in reference to page 6, lines 10 and 11, to consider substituting convicted of instead of attempting to commit on line 11. MR. HOLMES said the substitution would push it back to the present wording, and the new wording was precipitated by an incident in Barrow, in which someone had a gun, the police came to the scene, the police were fired upon, the police returned the fire, and the assailant was killed. The Municipality of Bethel attempted to invoke this statute for immunity, but immunity was denied because the assailant was killed before he could be convicted, so this change was patterned after an Arizona provision that would provide immunity to the municipality. SENATOR LINCOLN thought this erred on the other side as well and said there should be some middle ground. Number 215 SENATOR KELLY announced there would be about six more minutes of testimony on this legislation before a recess, and he called on BREWSTER JAMIESON, an attorney in Anchorage. MR. JAMIESON said he practiced primarily defense law and is in favor of the bill, but not because it might be in his self interest. He pointed to Sections 19 and 20 as being important. He began a discussion of prejudgment interest in Section 20, and he gave an example of its importance in changing current law on future non-economic damages. MR. JAMIESON answered a previous question as to what was in it for the victims, saying it was just and fair compensation for injuries that are caused by the wrong doing of others. He said it would not burden someone beyond their degree of fault and would take the lottery out of the present system. Number 271 In Juneau, SENATOR KELLY called on SHARON MACKLIN, representing the Alaska Professional Design Council, a coalition of architects, engineers, and land surveyors from across the State. MS. MACKLIN referred to Section 2, that certain actions must be brought in six years, to discuss some of the statements from earlier testimony from MR. SANDERS, about an architect moving from California to design a roof of a school which, after six years, caved in because the snow loads were not factored into the construction. MS. MACKLIN explained an architect from California could move to Alaska to design a structure only after they have passed the Alaska licensing law and registered in Alaska. Within the law, there is a requirement that they take an arctic engineering course to become aware of things like snow loads and other Alaskan problems. MS. MACKLIN explained it would be a structural engineer who would be required to comply with the codes on a State and local level in designing a roof in the arctic. She gave an extensive description of the process and the liability. Number 304 SENATOR KELLY closed the meeting for a five minute break. SENATOR KELLY returned SB 254 (CIVIL LIABILITY) to committee and asked for a motion to move the bill. SENATOR SHARP moved to pass SENATE BILL NO. 254 from committee with individual recommendations. Without objections, so ordered.
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