Legislature(1997 - 1998)

04/15/1997 08:08 AM Senate RLS

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
-- RESCHEDULED TO 4/15/97 AT 8:00 AM --
HB 58 CIVIL ACTIONS/ATTY FEES/ INSURANCE
RULES SCS
txt
                                                                               
        CSSSHB 58(FIN) am CIVIL ACTIONS/ATTY FEES/INSURANCE                    
                                                                               
 CHAIRMAN KELLY called the Senate Rules Committee meeting to order             
 at 8:08 a.m., and noted the presence of Senators Leman, Duncan and            
 Kelly.                                                                        
                                                                               
 CHAIRMAN KELLY brought HB 58 before the committee and directed                
 attention to a draft SCS CSSSHB 58(RLS) version "Z."  He noted that           
 Representative Porter worked on the draft committee substitute, and           
 over the past several days has been in contact with many of players           
 involved, both those that support tort reform and those that oppose           
 tort reform.  He then requested that testimony be limited to the              
 differences between the Senate Finance Committee version and the              
 Senate Rules Committee version.                                               
                                                                               
 Number 040                                                                    
                                                                               
 REPRESENTATIVE PORTER related that discussions have been going on             
 with representatives from the Executive Branch in trying to reach,            
 at least as much as possible, a consensus on this legislation.                
 While a consensus has not been reached yet, he thinks the Rules SCS           
 represents many of the things that were tentatively agreed upon               
 within that process and in the major items is as close as he thinks           
 they can get.                                                                 
                                                                               
 Number 075                                                                    
                                                                               
 CHAIRMAN KELLY asked Representative Porter to explain the                     
 differences between the previous day's draft, version "X" and the             
 draft before the committee, version "Z."                                      
                                                                               
 REPRESENTATIVE PORTER directed attention to Section 9 on page 5,              
 which relates to noneconomic damages.  He explained that on line              
 31, within the specific definitions of injuries that could result             
 in a higher level of noneconomic damage recovery, the words "or               
 totally deaf" have been added.                                                
                                                                               
 REPRESENTATIVE PORTER presented the following comparison of                   
 sections in the Finance version and the Senate version.                       
                                                                               
 Section 1 provides the legislative intent of the bill.   The                  
 Finance version added a provision which makes it unequivocal the              
 fact that it is not the intent of this bill to have any effect on             
 existing litigation; specifically, it does not have any effect on             
 the Exxon Valdez case nor any other federal maritime action now or            
 in the future.  Many provisions of the bill, both in the Finance              
 version and in the Rules version, are verbatim from the Governor's            
 Task Force.                                                                   
                                                                               
 Section 2 is identical in the Finance version and the Rules                   
 version, and it is a conforming amendment so as to not amend the              
 Banking Code.                                                                 
                                                                               
 Section 3, relating to certain property actions to be brought in              
 six years, is identical in both versions and is verbatim from the             
 report of the Governor's Task Force.  It removes the existing six-            
 year statute of limitations for recovery of, or damages to,                   
 personal property, and reduces it to 2 years in Section 7.                    
                                                                               
 Section 4, relating to contract actions to be brought in three                
 years, is identical in both versions and is verbatim from the                 
 report of the Governor's Task Force.  It adds a new section which             
 imposes a three-year statute of limitations on contract actions,              
 thereby reducing it from the existing six-year statute of                     
 limitations.                                                                  
                                                                               
 Section 5 is the statute of repose.  It has been altered slightly             
 from the Finance version to take into consideration additional                
 coverage or protection for children.  On page 4, line 14, whereas             
 as an exception to the statute of repose the facts would give                 
 notice of a potential cause of action of a minor are not                      
 discoverable in the exercise of reasonable care by the minor or the           
 minor's parent or guardian.  The Rules version changes the statute            
 of repose from 8 years, as provided in the Finance version, to 10             
 years.                                                                        
                                                                               
 Section 6 is identical in the Finance version and the Senate                  
 version, and is the standard two-year statute of limitations                  
                                                                               
 Section 7 is a conforming amendment.                                          
                                                                               
 Section 8, relating to disabilities of minority and incompetency,             
 gives the other half of the protection for children, and it                   
 basically provides that the two-year statute of limitations is                
 tolled completely during the period of a child's life from 0 to 8,            
 which, in effect, provides the opportunity for a child or their               
 parent or guardian to file a suit for any instance that occurs and            
 isn't discovered up until the child is 10 years of age.                       
                                                                               
 Section 9 relates to noneconomic damages.  Both versions put a                
 finite cap on noneconomic damages.  The Finance version caps                  
 noneconomic damages at $300,000 per occurrence, and the Rules                 
 version changes that figure to $500,000, or the $10,000 per year of           
 life expectancy, which, in a long period of years, would even                 
 exceed $500,000.  In the Rules version, for severe injuries the cap           
 would be $1.5 million or $30,000 per year of life expectancy.                 
                                                                               
 Section 10 relates to punitive damages.  The language that defines            
 the court procedures and the elements that are necessary to find              
 punitive damage and then the items that the jury should consider              
 when determining the level of punitive damages are verbatim out of            
 the task force report.  Representative Porter noted that they                 
 stayed with the process of the Finance version for the exception to           
 this cap, making a firm cap rather than a variable cap like the               
 task force recommended.  In the Rules version, the caps are raised            
 very substantially to the greater of four times compensatory                  
 damages or $3,000,000.  As in previous versions of the bill, 50               
 percent of the award of punitive damages goes to the state.                   
                                                                               
 Section 11 relates to apportionment of fault.  Representative                 
 Porter noted concessions have been made moderating the position               
 previously held in the apportionment of fault area.  The concession           
 in the Rules version recognizes that if it is known that there may            
 be another person that is responsible and that person or entity is            
 available to be joined, they are reasonably locatable and within              
 the jurisdiction of the court, the defendant then would have to               
 join that person or entity, otherwise fault would be apportioned as           
 indicated to each and every person that was responsible.                      
                                                                               
 Section 12, relating to apportionment of damages, is a conforming             
 amendment with that apportionment of fault.                                   
                                                                               
 Section 13, relating to apportionment of damages; workers'                    
 compensation lien, provides that if fault is apportioned to a                 
 person not present at trial, they can't be held liable for that and           
 they would have to be sued in a separate action.                              
                                                                               
 Section 14 relates to the definition of intentional torts.  It is             
 taken verbatim from the task force report and amends AS 09.17.900             
 to clarify its application to intentional acts.                               
                                                                               
 Number 290                                                                    
                                                                               
 CHAIRMAN KELLY interjected that the comparison of the Finance                 
 version and the Rules version notes that Sections 12, 13, 14, 15              
 and 16 of the Finance version have been deleted from the Rules                
 version.  REPRESENTATIVE PORTER acknowledged that in trying to seek           
 agreement on this legislation, three contentious sections, Sections           
 12, 13 and 14, were deleted.                                                  
                                                                               
 Section 15, relating to expert witness qualification, is slightly             
 different in the Rules version from the Finance version only to the           
 extent that it is a rendition of what was in last year's bill.                
                                                                               
 Section 16, relating to offers of judgment, has also been altered.            
 In the Finance version, the offer of judgment provision basically             
 follows the task force report's process.  The Rules version makes             
 it a little more of an incentive than what was in the task force              
 report by providing that the offer must be within 5 percent if                
 there is one defendant and 10 percent if there is more than one               
 defendant.  Also, in the Finance version, the percentage of                   
 attorney fees awarded was 100 percent, 75 percent and 50 percent.             
 The Rules version reduces these percentages to 75 percent, 50                 
 percent and 30 percent.                                                       
                                                                               
 Section 17, relating to offers of judgment, provides that if the              
 offer of judgment recovery exceeds Rule 82 recoveries, which is the           
 existing court rule about prevailing party and attorney fees, then            
 the offer of judgment provision would take precedence over the Rule           
 82 provision.  Conversely, if Rule 82 provision provided actually             
 more recovery than the offer of judgment provision, then the Rule             
 82 provision would take precedence, but in no case could a party              
 get both.                                                                     
                                                                               
 Section 18, relating to interest on judgments; prejudgment                    
 interest, takes the fixed rate of prejudgment interest to a                   
 floating rate, so as to better tract the cost of money.                       
                                                                               
 Section 19, relating to prejudgment interest, conforms with the               
 Supreme Court decision on prejudgment interest, and precludes                 
 prejudgment interest from being awarded for future economic and               
 future noneconomic damages, as well as for punitive damage awards.            
                                                                               
 Section 20, relating to judgment for plaintiff; punitive damages,             
 is a conforming section.                                                      
                                                                               
 Section 21, relating to interest in condemnation proceedings,                 
 conforms to the flexible rate.  Both Section 2 and Section 21                 
 leaves the interest rate in condemnation proceedings unchanged at             
 10.5 percent, notwithstanding the interest rate change in Section             
 19.                                                                           
                                                                               
 Section 22, relating to medical advisory panels, is verbatim from             
 the report of the Governor's Task Force.  It amends AS 09.55.536(a)           
 by making expert advisory panels available to state health care               
 providers.                                                                    
                                                                               
 Section 23, relating to expert advisory panel; panel questions, is            
 verbatim from the report of the Governor's Task Force.  The                   
 proposed changes are intended to clarify that omissions as well as            
 commissions are within the purview of the questions to be answered            
 by the medical advisory panel.                                                
                                                                               
 Section 24, relating to expert advisory panel; discovery, is                  
 verbatim from the report of the Governor's Task Force.  The changes           
 allows discovery to proceed within 60 days after the selection of             
 a panel, irrespective of whether the panel has rendered its report.           
                                                                               
 Section 25, relating to expert advisory panel; public sector                  
 provider, is verbatim from the report of the Governor's Task Force.           
 The provision makes clear the access of government health care                
 providers to the expert medical advisory panel.                               
                                                                               
 Section 26, relating to definitions; health care provider, adds to            
 the definition of "health care provider" some of the more newly               
 developed types of health care activity.                                      
                                                                               
 Section 27, relating to definitions; professional negligence and              
 professional services, adds new subsections to define professional            
 negligence and professional services in the health care area.                 
                                                                               
 Section 28, relating to contingent fee agreements, provides that              
 the 50 percent of punitive damage awards to the state would be                
 taken before contingent fee subtractions would be made.                       
                                                                               
 Section 29, relating to civil liability of electric utility, is the           
 same as in the Finance version, and confirms that electric utility            
 activity is a service and not a product so as not to be held a                
 strict liability.                                                             
                                                                               
 Section 30, relating to civil liability of hospitals for certain              
 physicians, is the same as the Finance version.  It allows                    
 hospitals to have independent contractor physicians in the                    
 emergency room, but provides the requirement that the individual              
 physician have liability coverage of $500,000 per incident, and               
 $1,500,000 for all incidents in a year.                                       
                                                                               
 Section 31, relating to damages resulting from commission of a                
 felony, or while under the influence of alcohol or drugs, is the              
 same as recommended by the Governor's Task Force except for adding            
 the inability of someone who was driving the vehicle under the                
 influence of alcohol and/or drugs from filing a tort claim if that            
 conduct substantially contributed to the injury or to the death               
 that would result from that case.  This section requires clear and            
 convincing evidence that the claimant's conduct substantially                 
 contributed to the personal injury or death.                                  
                                                                               
 Section 32, relating to collection of settlement information, is              
 responding to the recognition that was also recognized at the time            
 that the task force met.  It amends AS 09.68 by adding a new                  
 section which requires civil litigants who settle, or otherwise               
 dispose of a case, to file information about the settlements or               
 judgments, including the amounts received by the attorneys on both            
 sides.  This provides that the Alaska Judicial Council, in                    
 cooperation with the court, will receive this information on                  
 settlements, document it without identifying the parties, and be              
 able to maintain the information that will be useful in fine tuning           
 subsequent legislation in this area.                                          
                                                                               
 [DUE TO A RECORDING ERROR, THE TESTIMONY ON SECTIONS 33 - 40 WAS              
 LOST AND HAS BEEN RECONSTRUCTED FROM NOTES AND A COMPARISON MEMO              
 PROVIDED BY REPRESENTATIVE PORTER'S OFFICE.]                                  
                                                                               
 Section 33, relating to insurance reports, is identical in the                
 Finance version and the Rules version.  This section is intended to           
 require insurance companies to report information necessary to                
 evaluate the impact of tort reform.                                           
                                                                               
 Section 34, relating to appointment of independent counsel;                   
 conflicts of interest, is identical in the Finance version and the            
 Rules version.   This section makes an insurer responsible only for           
 the costs and attorney fees incurred by an independent counsel                
 defending against claims for which the insurer has either accepted            
 coverage or reserved its right to deny coverage.  The insurer is              
 not responsible for costs and attorney fees incurred in defending             
 against claims for which the insurer has denied coverage.                     
                                                                               
 Section 35 is also identical in the Finance version and the Rules             
 version.  In the context of an insured represented by independent             
 counsel, this section allows an insurer to settle directly with a             
 plaintiff as to claims for which the insurer has either accepted              
 coverage or reserved its right to deny coverage, even though the              
 claims for which the insurer denied coverage are not settled.                 
                                                                               
 Section 36, relating to workers' compensation lien is identical in            
 the Finance version and the Rules version.  This section is a                 
 consistency change to the workers' compensation statutes required             
 by the change in Section 19 of this Act.  The employer's workers'             
 compensation lien is reduced by the amount of fault attributed to             
 the employer in the third-party action.                                       
                                                                               
 Section 37, relating to claims against the state for medical                  
 claims, is identical in the Finance version and the Rules version.            
 This section is amended for purposes of effecting a consistency               
 change in connection with the reduction of the statute of                     
 limitations for contract claims from 6 years to 3 years at the time           
 AS 09.10.053 was split off from AS 09.10.050.                                 
                                                                               
 Section 38, relating to motion to set trial and certificate, is               
 identical in the Finance version and the Rules version.  This                 
 section is taken verbatim from the report of the Governor's Task              
 Force.  It is intended to improve upon existing Superior Court fast           
 track procedures by providing for a meeting of the parties and a              
 pretrial conference.                                                          
                                                                               
 Section 39, relating to Alaska Rule of Civil Procedure 16.1(n), is            
 identical in the Finance version and the Rules version.  This                 
 section is verbatim from the report of the Governor's Task Force,             
 and it replaces the pretrial order section of the existing fast               
 track rule with a meeting of parties requirement.                             
                                                                               
 Section 40, relating to limited discovery; expedited calendaring,             
 is a new section in the Rules version.  It expedites Superior court           
 cases by requiring that in cases involving less than $100,000 the             
 parties take only two depositions, and then try the case quickly.             
                                                                               
 SENATOR LEMAN asked if the Alaska Court System concurred with the             
 new Section 40.                                                               
                                                                               
 CHRIS CHRISTENSEN, Staff Counsel, Alaska Court System, expressed              
 concern that this section was a significant amendment that would              
 result in a tremendous increase in the trial rate and the court               
 system's workload.  He said cases under the $100,000 amount are               
 approximately 90 percent of their caseload.                                   
                                                                               
 TAPE 97-4, SIDE B                                                             
                                                                               
 REPRESENTATIVE PORTER pointed out that there are provisions in the            
 bill that work as very good incentives to settle and not go to                
 trial.  A provision requiring the court, like in a criminal case,             
 to calendar and hear that case within 30 and 90 days has been                 
 removed.  In Section 46 it indicates that the trial shall be set as           
 soon as practicable.  He said he thinks that would provide an                 
 extension of time so that the offers of judgment and other things             
 that play into this, from this bill's perspective, would reduce               
 considerably the amount of trials that would actually result.  It             
 would also reduce the amount of cost during that process.                     
                                                                               
 MR. CHRISTENSEN agreed there may be some disincentives in the                 
 legislation to trial, but he thinks by reducing the amount of money           
 a person might collect, it is also reducing some of the risks of              
 going to trial, so disincentives to go to trial are to some extent            
 compensated by that.  He also pointed out that this change probably           
 affects 15 percent of the retort cases.  He said this is not a tort           
 reform provision, this is a major change to the whole civil justice           
 system.                                                                       
                                                                               
 SENATOR KELLY asked if the language in Section 40 was from the                
 Governor's Task Force.  REPRESENTATIVE PORTER replied that it was             
 from the task force to the extent that it takes the limited                   
 provision of cases at $100,000 or less and throws them into a                 
 category that is an expedited process, but it doesn't include other           
 provisions within that same area.  SENATOR KELLY said the committee           
 would come back to that provision later in the meeting.                       
                                                                               
 Section 41, relating to settlement information, is identical in the           
 Rules version with Section 47 of the Finance version and is                   
 verbatim from the report of the Governor's Task Force.  This                  
 section applies the District Court streamlined provisions found in            
 Section 45 and 46 of this bill to Superior Court personal injury              
 and property damage cases involving $100,000 in claims or less.               
                                                                               
 Section 42, relating to medical advisory panel; discovery, is                 
 identical in the Rules version with Section 48 of the Finance                 
 version and is verbatim from the report of the Governor's Task                
 Force.  It amends Civil Rule 72.1(g) by allowing discovery to                 
 proceed after 60 days after the selection of the panel in order to            
 expedite obtaining panel reports.                                             
                                                                               
 Section 43, relating to sanctions for rule violations, is similar             
 in the Rules version to Section 49 of the Finance version in                  
 assessing fines against lawyers.  It permits fines of up to $50,00            
 against attorneys, increased from $1,000 under the existing rule.             
 The Finance version permitted fines of up to $10,000.                         
                                                                               
 Section 44, relating to sanctions for rules violations, is                    
 consistent with the Finance version, and it is a provision that               
 allows the court, the trier of fact, to find against a party who it           
 is determined has lied during the presentation of a case.                     
                                                                               
 Section 45, relating to District Court; deposition limitation, is             
 a new section in the Rules version.  It requires that in District             
 Court personal injury and property damage cases, depositions be               
 limited to two for each side, unless the parties otherwise agree,             
 or the court for good cause otherwise directs.                                
                                                                               
 Section 46, relating to District Court; expedited trials, is new in           
 the Rules version.  It requires that all parties must file a                  
 memorandum to set the case for trial within six months after                  
 service of the complaint, and that the court shall set the case for           
 trail "as soon as practicable" after confirming that all parties              
 have exchanged the discovery materials required by Rule 26(a).                
                                                                               
 Section 47, relating to settlement information, is consistent with            
 the Finance version and is taken verbatim from the report of the              
 Governor's Task Force.  It changes Appellate Rule 511 to require              
 the gathering of settlement information at the appellate level.               
                                                                               
 Sections 48 through 54 are conforming court rules.                            
                                                                               
 Section 55, relating to alternative dispute resolution, differs               
 from the task force report only to the extent that it proposed a              
 pilot program in the Third Judicial District on arbitration.  The             
 Rules version provides that the existing alternative dispute                  
 resolution programs that are in existence in other jurisdictions              
 and in the federal system be looked at by the Alaska Judicial                 
 Council as they might apply to the caseload in the Alaska Court               
 System, as well as making a recommendation to the Legislature by              
 the beginning of next session on what would be the most efficient             
 form of alternative dispute resolution.                                       
                                                                               
 SENATOR LEMAN asked why language in Section 55 ties in the cost of            
 the work to be done to a March 17, 1997 Alaska Court System fiscal            
 note.  REPRESENTATIVE PORTER clarified that the fiscal note is in             
 the amount of $19,400, and the language in the bill is merely                 
 seeking to define the scope of the activity.                                  
                                                                               
 REPRESENTATIVE PORTER stated that concluded in comparison on the              
 Finance version and Rules version of the legislation.                         
                                                                               
 CHAIRMAN KELLY stated HB 58 would be set aside until 5:00 p.m., at            
 which time testimony would be taken and would be limited to the               
 changes between the Senate Finance Committee version and the Senate           
 Rules Committee version.                                                      
 CHAIRMAN KELLY announced the continuation of the hearing on HB 58,            
 and stated the committee would deal with the proposed amendments to           
 the Rules SCS before taking testimony on the legislation.                     
                                                                               
 REPRESENTATIVE PORTER explained Amendment No. 1 resulted from a               
 discussion with the Department of Law earlier in the day.  In that            
 discussion they found areas that they felt could be improved and be           
 made more clear.  He also noted that the amendment makes no                   
 substantive changes.                                                          
                                                                               
 JEFF BUSH, Deputy Commissioner, Department of Commerce & Economic             
 Development, said he only question relates to the change on page              
 10, lines 14 - 16, relating to the fact that the provisions do not            
 apply if the state has not recognized a board that could certify              
 the witness in the particular field or matter at issue.  He said              
 the problem is that this state does not do board certification.               
 The boards that exist are occupational licensing boards and are the           
 only kind of boards that he is aware of that might qualify here,              
 and those are boards are not in the position to do certifications,            
 so to speak, on particular expertise.  He said if it is the desire            
 to have people certified in various areas of expertise, the                   
 department would have to attach a fiscal note to it because it will           
 be an expensive proposition in trying to figure out how to certify            
 people.                                                                       
                                                                               
 CHAIRMAN KELLY stated the committee would take a 5-minute recess.             
                                                                               
 Following the 5-minute recess and a discussion with Mr. Bush,                 
 REPRESENTATIVE PORTER announced they arrived at wording they could            
 both agree on.  It would read in part "if the state has not                   
 recognized a board that has certified the witness in the particular           
 field..."                                                                     
                                                                               
 SENATOR LEMAN moved adoption of Amendment No. 1 to SCS CSSSHB
 58(RLS).  Hearing no objection, the following amendment was                   
 adopted.                                                                      
                                                                               
 Amendment No. 1                                                               
                                                                               
 Page 4, line 4:  Delete "fraudulent"                                          
                                                                               
 Page 4, line 15:  Delete "the minor or"                                       
                                                                               
 Page 8, line 29:  Following "responsible person" insert ", the                
 person is not a person protected from a civil action under AS                 
 09.10.055."                                                                   
                                                                               
 Page 8, line 31, through page 9, line 1:  Delete "is not a person             
 protected from a civil action under AS 09.10.055 and"                         
                                                                               
 Page 10, lines 14 - 16:  Delete all material and insert:                      
      "(b)  The provisions of (a) of this section do not apply if              
 the state has not recognized a board that has certified the witness           
 in the particular field or mater at issue."                                   
                                                                               
 Page 18, line 10:  Delete "defending" and insert "or owed by all"             
                                                                               
 Page 25, line 32:  Delete "a pilot" and insert "an"                           
                                                                               
 CHAIRMAN KELLY brought Amendment No. 2 before the committee, and he           
 explained it addresses a concern raised earlier in the hearing by             
 Mr. Christensen of the Alaska Court System with Section 40, which             
 relates to expedited calendaring.  The amendment provides that this           
 section will only apply to tort cases and not civil action in                 
 total.                                                                        
                                                                               
 TAPE 97-5, SIDE A                                                             
                                                                               
 CHRIS CHRISTENSEN, Alaska Court System, acknowledged that Section             
 40 will increase the trial rate, but the amendment will make the              
 increase a much smaller number of trials.                                     
                                                                               
 Mr. Christensen, speaking to Sections 45 and 46, which he said are            
 two of the three sections that this amendment affects, directed               
 attention to the language on line 11 and 17.  He said he has spoken           
 with the court rules attorney and with several judges, and they               
 would be much more comfortable with the potential ramifications of            
 this if the phrase "in exceptional cases" were removed on lines 11            
 and 17.  This would still require good cause to be shown in order             
 to waive these discovery requirements, but it still gives judges in           
 cases a little bit more leeway to change discovery requirements.              
                                                                               
 CHAIRMAN KELLY stated the additional change suggested by  Mr.                 
 Christensen would be set aside until later in the meeting.   He               
 then requested a motion on Amendment No. 2                                    
                                                                               
 SENATOR LEMAN moved adoption of Amendment No. 2 to SCS CSSSHB
 58(RLS).  Hearing no objection, the following amendment was                   
 adopted.                                                                      
                                                                               
 Amendment No. 2                                                               
                                                                               
 Page 23, line 2:  Delete "cases" and insert "a civil action for               
 personal injury or property damage"                                           
                                                                               
 Page 23, line 31:  Following "action insert "involving personal               
 injury or property damage"                                                    
                                                                               
 Page 24, line 10:  Following "However," insert "in a civil action             
 for personal injury or property damage."                                      
                                                                               
 Page 24, line 17:  Delete "Unless" and insert "In a civil action              
 for personal injury or property damage, unless"                               
                                                                               
 CHAIRMAN KELLY brought Amendment No. 3 before the committee.                  
                                                                               
 REPRESENTATIVE PORTER directed attention to language in Section 11            
 on page 8, and said the way it was worded it could mean that if               
 there were multiple claimants, that the only person that could be             
 found responsible would be someone who had damaged each claimant.             
 The fact of the situation may be that this one defendant or person            
 damaged one claimant and not another, so it eliminates that                   
 situation by eliminating the words "to each claimant."  The                   
 amendment also deletes the word "or" on page 9, line 4, and                   
 replaces it with "and."                                                       
                                                                               
 SENATOR LEMAN moved adoption of Amendment No. 3 to SCS CSSSHB
 58(RLS).  Hearing no objection, the following amendment was                   
 adopted.                                                                      
                                                                               
 Amendment No. 3                                                               
                                                                               
 Page 8, line 28:  Delete "to each claimant"                                   
                                                                               
 Page 9, line 4:  Delete "or" and insert "and"                                 
                                                                               
 CHAIRMAN KELLY asked Senator Duncan if he was ready to offer his              
 proposed amendments.  SENATOR DUNCAN responded that he wanted to              
 wait until he heard further testimony from the Administration and             
 others.                                                                       
                                                                               
 MIKE SCHNEIDER, Chair, Alaska Action Trust, stated, in his view,              
 the legislation is an ill considered 11th hour effort, and while it           
 has the appearance of some improvements and compromise, it is bill            
 that is crafted by primarily by State Farm Insurance Company's                
 attorney, Mr. Lessmaier.                                                      
                                                                               
 After outlining concerns with specific sections of the legislation,           
 Mr. Schneider said the sponsor's memo on the legislation suggests             
 that many provisions are not controversial, but he believes that              
 virtually the entire bill is controversial.  He asserted there is             
 little factual support or any need for any of the changes in the              
 bill.                                                                         
                                                                               
 In his closing comments, Mr. Schneider said the Alaska Action Trust           
 group has offered to engage in an audible process of debate,                  
 discussion and compromise, but they think that effort has been                
 abandoned in the terms of the bill before the committee.  He said             
 neither the Administration or his group agreed to any of it or had            
 input on it, and the bill bears no relationship to either the task            
 force compromise bill or other compromise discussions that took               
 place over the last number of days.                                           
                                                                               
 SENATOR DUNCAN requested that Mr. Schneider forward a copy of his             
 comments on the legislation to his office.                                    
                                                                               
 JEFF BUSH, Deputy Commissioner, Department of Commerce & Economic             
 Development, said he thinks the committee needs to remember when              
 working with this bill that a lot of work has been done, there has            
 been a lot of negotiations going on and these negotiations continue           
 to go on, but he feels a little frustrated with the process.  He              
 expressed the importance of both the Administration and the                   
 Legislature to remember the need to protect the interests of all              
 Alaskans when looking at this particular legislation.                         
                                                                               
 Mr. Bush stated the most significant controversial section from the           
 position of the Administration right now is the section relating to           
 punitive damages.  The first problem relates to how one gets                  
 through the gate into the caps.  First of all, it is limited to               
 situations where the party was involved in a prior incident                   
 involving personal injury or death.  By its very description that             
 eliminates property damage cases from the higher cap.  The other              
 kinds of cases that are excluded from the higher cap are bad faith            
 insurance claims.                                                             
                                                                               
 The other part of the higher cap issue which is of some concern is            
 the one free death case, which Mr. Bush believes is a mistake from            
 a policy perspective.  He said that by enacting this section with             
 a higher cap limit as an option, we must be saying they are serious           
 incidents that deserve a higher cap, and he believes that                     
 particular behavior should not require that someone be hurt before            
 you should be able to punish that particular behavior if you are              
 determining that that behavior is serious enough to warrant the               
 higher caps anyway.                                                           
                                                                               
 Speaking to emergency room doctor liability insurance requirements,           
 Mr. Bush related that he did some research to find out the                    
 difference between the numbers proposed in the legislation,                   
 $500,000 per incident and $1,500,000 per year, and the numbers that           
 are currently required by the Anchorage hospitals for their                   
 doctors, $1,000,000 per incident and $2,000,00 per year, and he               
 found that the difference is 18 percent.  He asserted an 18 percent           
 difference in rates is not sufficiently large enough to justify the           
 risk.                                                                         
                                                                               
 Directing attention to Section 9 and the "laundry list" on the                
 bottom of page 5, Mr. Bush said it very difficult to define, in the           
 abstract, what particular kinds of cases warrant higher damages               
 than other kinds of cases.  As an example, he noted that none of              
 the exceptions include severe disfigurement, but he said if someone           
 was severely disfigured in their face, they may deserve higher                
 noneconomic damages.  He said in our judicial system we have                  
 traditionally trusted juries to determine a relative scale of                 
 severity of injury.  He suggested it would be better to remove the            
 specific exemptions and put in some specific language that                    
 indicates that in cases of severe disfigurements, severe physical             
 injuries, the higher limits would be more appropriate.                        
                                                                               
 SENATOR TORGERSON requested that Mr. Bush provide a comparison of             
 rates for emergency room liability insurance for hospitals in rural           
 areas as opposed to rates for Anchorage hospitals.  MR. BUSH                  
 responded that he was told that there is, in fact, no difference in           
 rates, that there is one rate for Alaska for emergency room                   
 doctors.  He added there is only one company that offers rates at             
 the prices set forth in the bill.  Most companies offer it at the             
 $1,000,000/$2,000,000 amounts.                                                
                                                                               
 SENATOR DUNCAN asked Mr. Bush if he had input on the legislation              
 before the committee, or had that process broken down.  MR. BUSH              
 said the Administration did not have any direct influence on the              
 legislation before the committee other than their involvement in              
 the amendments adopted earlier by the committee.  However, they               
 have been involved in a lot of the negotiations relating to the               
 smaller issues.                                                               
                                                                               
 SENATOR KELLY asked if the two majors issues addressed by Mr. Bush            
 were incorporated in the Senate Finance committee substitute.  MR.            
 BUSH answered that these issues were in the Finance version but,              
 from their perspective, they are actually better in the Rules                 
 version.   SENATOR KELLY pointed out that the issues were nothing             
 new, but there has been an attempt to alleviate some of his                   
 concerns, although not all of them.                                           
                                                                               
 MICHAEL LESSMEIER, an attorney representing State Farm Insurance,             
 stated that they did not draft the bill, but they have been                   
 involved in the process.  He said it is a bill that was generated             
 as a result of concern on the part of many Alaska businesses and              
 many people throughout Alaska; it is a compromise piece of                    
 legislation where many changes have been made in order to                     
 accommodate some of the concerns that were expressed by literally             
 everyone.                                                                     
                                                                               
 Mr. Lessmeier outlined some of the changes made in the legislation,           
 but he said that most of the provisions in the Finance version and            
 the Rules version are the same.  He said there were some changes              
 made which are significant and substantial, and they were made to             
 find some middle ground.                                                      
                                                                               
 In his closing comments, Mr. Lessmeier said the Rules version is a            
 compromise piece of legislation, and he urged the committee's                 
 support for it.                                                               
                                                                               
 TAPE 97-5, SIDE B                                                             
                                                                               
 SENATOR DUNCAN asked Mr. Lessmeier if he viewed this piece of                 
 legislation as something that evolved through the ongoing                     
 negotiation process that was started by Senator Miller and brought            
 the parties together.  MR. LESSMEIER responded that he thought it             
 was fair to say that it was a result of that, although it certainly           
 isn't something that is agreed upon by both sides, but many of the            
 provisions were changed in an effort to reflect concerns.                     
                                                                               
 CHAIRMAN KELLY interjected that from his point of view, the                   
 negotiations broke down because the Alaska Trial Attorneys don't              
 want a bill, that they would not agree to a compromise version.               
 SENATOR DUNCAN said from information he had, the trial attorneys              
 signed off on an agreement, and he believes it was the other side             
 that backed out.                                                              
                                                                               
 REPRESENTATIVE PORTER said there have been endeavors to reach a               
 compromise piece of legislation over the last three or four years.            
 In the last few weeks, those efforts have continued with the                  
 Administration and with the trial attorneys.  Everyone was very               
 clear that no one was empowered to make a binding resolution, that            
 anything would be a proposal.  He said he was very upfront about              
 the fact that there had to be ratification on the legislative side            
 so as to make sure that the legislation represented comprehensive             
 tort reform.  However, the proposal that Mr. Feldman and Mr. Holmes           
 reached did not, and he said it is obvious to him that they will              
 not consider moving to a point in the process that would allow the            
 Legislature to consider a proposal that would still result in                 
 meaningful comprehensive tort reform.                                         
                                                                               
 SENATOR DUNCAN said he heard on the news that an initiative                   
 petition had been resubmitted to the Lieutenant Governor's Office             
 on tort reform, and he asked if this legislation passes and becomes           
 law, is this the end of it, or does the initiative still get                  
 circulated and there could be a ballot question in 1998 that goes             
 much further on tort reform than this piece of legislation does.              
 REPRESENTATIVE PORTER responded that it is his understanding that             
 if this bill passes and becomes law, that there is no desire to go            
 forward with an initiative.                                                   
                                                                               
 SENATOR DUNCAN offered and moved adoption of the following                    
 Amendment No. 4 to SCS CSSSHB 58(RLS):                                        
                                                                               
 Amendment No. 4                                                               
                                                                               
 Page 7, lines 18 - 27:  Delete all material and insert:                       
      "(g)  If the fact finder finds that the conduct proven under             
 (b) of this section was motivated by financial gain and the average           
 annual net income earned by the defendant for the five years before           
 the date the trial began exceeded $1,000,000 per year, it may award           
 an amount of punitive damages not to exceed the greatest of                   
           (1)  the amount calculated under the limitation in (f) of           
 this section;                                                                 
           (2)  the average net annual income earned by the                    
 defendant for the five years before the date the trial began; or              
           (3)  two times the amount of financial gain that the                
 defendant received or expected to receive as a result of the                  
 defendant's misconduct."                                                      
                                                                               
 CHAIRMAN KELLY objected to the adoption of Amendment No. 4.  The              
 roll was taken with the following result:  Senator Duncan voted               
 "Yea" and Senators Leman, Torgerson and Kelly voted "Nay."  The               
 Chairman stated the motion failed on a 1-3 vote                               
                                                                               
 SENATOR DUNCAN offered and moved adoption of the following                    
 Amendment No. 5 to SCS CSSSHB 58(RLS):                                        
                                                                               
 Amendment No. 5                                                               
                                                                               
 Page 7, line 21:  Delete "(1)"                                                
                                                                               
 Page 7, line 22:  Delete ", and" and insert "."                               
                                                                               
 Page 7, lines 23 - 27:  Delete all material                                   
                                                                               
 CHAIRMAN KELLY objected to the adoption of Amendment No. 5.  The              
 roll was taken with the following result:  Senator Duncan voted               
 "Yea" and Senators Torgerson, Leman and Kelly voted "Nay."  The               
 Chairman stated the motion failed on a 1-3 vote.                              
                                                                               
 SENATOR DUNCAN offered and moved adoption of the following                    
 Amendment No. 6 to SCS CSSSHB 58(RLS):                                        
                                                                               
 Amendment No. 6                                                               
                                                                               
 Page 8, line 1:  Following "(1)" delete "$50,000" and insert                  
 "$200,000"; and following "less than" delete "15" and insert "100"            
                                                                               
 Page 8, lines 2 - 3:  Delete all material                                     
                                                                               
 Page 8, line 4:  Delete "(3)"  and insert "(2)"                               
                                                                               
 Page 8, line 6:  Delete "(4)" and insert "(3)"                                
                                                                               
 Page 8, line 8:  Delete "(5)" and insert "(4)"                                
                                                                               
 SENATOR TORGERSON objected to the adoption of Amendment No. 6.  The           
 roll was taken with the following result:  Senator Duncan voted               
 "Yea" and Senators Leman, Torgerson and Kelly voted "Nay."  The               
 Chairman stated the motion failed on a 1-3 vote.                              
                                                                               
 SENATOR DUNCAN offered and moved adoption of the following                    
 Amendment No. 7 to SCS CSSSHB 58(RLS):                                        
                                                                               
 Amendment No. 7                                                               
                                                                               
 Page 5, line 24:  Delete "injured"                                            
                                                                               
 Page 5, lines 25 - 31:  Delete all material and insert "damages are           
 awarded for severe permanent physical impairment or severe                    
 disfigurement."                                                               
                                                                               
 SENATOR TORGERSON objected to the adoption of Amendment No. 7.  The           
 roll was taken with the following result:  Senator Duncan voted               
 "Yea" and Senators Torgerson, Leman and Kelly voted "Nay."  The               
 Chairman stated the motion failed on a 1-3 vote.                              
                                                                               
 SENATOR DUNCAN offered and moved adoption of the following                    
 Amendment No. 8 to SCS CSSSHB 58(RLS):                                        
                                                                               
 Amendment No. 8                                                               
                                                                               
 Page 16, line 8:  Delete "$500,000" and insert "$1,000,000"; and              
 delete "$1,500,000" and insert "$2,000,000"                                   
                                                                               
 SENATOR TORGERSON objected to the adoption of Amendment No. 8.  The           
 roll was taken with the following result:  Senator Duncan voted               
 "Yea" and Senators Leman, Torgerson and Kelly voted "Nay."  The               
 Chairman stated the motion failed on a 1-3 vote.                              
                                                                               
 There being no further amendments, CHAIRMAN KELLY requested a                 
 motion to adopt the Rules SCS.                                                
                                                                               
 SENATOR LEMAN moved the adoption of SCS CSSSHB 58(RLS), as amended.           
 Hearing no objection, it was so ordered.                                      
                                                                               
 SENATOR LEMAN commented that based on what he has seen, in all                
 cases and with the amendments that have been added to either the              
 Finance version or the Rules version of the bill, the movement has            
 been toward compromise.  He said that although he doesn't agree               
 with all of the changes, he wouldn't want the record to show that             
 there hasn't been an attempt by the parties to achieve some level             
 of compromise.                                                                
                                                                               
 CHAIRMAN KELLY stated he's not too happy with a lot of the changes,           
 which he thinks have gone too far towards trying to reach a                   
 position that the Governor could at least accept.  He added that he           
 has given up on trying to reach a position that the Alaska Trial              
 Attorneys might consider, because he thinks the distance between              
 the Alaska Trial Attorneys and the majority of both sides of this             
 Legislature is too vast to reach an agreement on.  However, he                
 expressed his hope that the Governor would separate himself just a            
 bit from that crowd and would look at the Senate Rules CS in the              
 spirit to which it was offered as reaching out to his position to             
 try to enact some meaningful tort reform.                                     
                                                                               
 SENATOR LEMAN moved SCS CSSSHB 58(RLS) be approved for calendaring            
 as the discretion of the Chair.  SENATOR DUNCAN objected.  The roll           
 was taken with the following result:  Senators Torgerson, Leman and           
 Kelly voted "Yea" and Senator Duncan voted "Nay."  The Chairman               
 stated the motion carried on a 3-1 vote.                                      
                                                                               
 There being no further business to come before the committee, the             
 meeting was adjourned at 6:50 p.m.                                            

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