Legislature(1993 - 1994)
02/21/1994 01:15 PM House JUD
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HOUSE JUDICIARY STANDING COMMITTEE
February 21, 1994
1:15 p.m.
MEMBERS PRESENT
Rep. Brian Porter, Chairman
Rep. Jeannette James, Vice-Chair
Rep. Gail Phillips
Rep. Joe Green
Rep. Cliff Davidson
Rep. Jim Nordlund
MEMBERS ABSENT
Rep. Pete Kott
COMMITTEE CALENDAR
HB 292: "An Act relating to civil actions; amending Alaska
Rules of Civil Procedure 49 and 68; and providing
for an effective date."
HEARD AND HELD
WITNESS REGISTER
DICK CATTANACH, Contractor
Alaska Liability Reform
8101 Old Seward Highway
Anchorage, AK 99518
349-6666
Position Statement: Supported HB 292
(Spoke via teleconference)
JEFF FELDMAN, President
Alaska Academy of Trial Lawyers
500 L Street, Suite 400
Anchorage, AK
272-3538
Position Statement: Opposed HB 292
(Spoke via teleconference)
MICHAEL LESSMEIR, Attorney
Hughes, Thorsness, Gantz, Powell & Brundin
One Sealaska Plaza - Suite 303
Juneau, AK 99801-1249
586-5912
Position Statement: Testified in support of HB 292 on
behalf of State Farm Insurance
JOHN DEISCHER
Vocational Rehabilitation Specialist
Vocational Management
4045 Lake Otis, Suite 107
Anchorage, AK 99508
Position Statement: Opposed HB 292
(Spoke via teleconference)
ROGER HOLMES, Attorney
Bliss & Holmes
705 Christianson Drive
Anchorage, AK 99507
277-8564
Position Statement: Supported HB 292
(Spoke via teleconference)
TIM DOOLEY, Attorney
Alaska Academy of Trial Lawyers
733 W. 4th Avenue, Suite 200
Anchorage, AK 99501
279-7327
Position Statement: Opposed HB 292
(Spoke via teleconference)
LINDA HALL, President
Independent Insurance Agents & Brokers
3111 C Street, Suite 300
Anchorage, AK 99503
561-1250
Position Statement: Supported HB 292
(Spoke via teleconference)
BILL ASHTON, Executive Director
Alaska Health Project
1818 W. Northern Lights Blvd., Suite 103
Anchorage, AK 99517
276-2864
Position Statement: Opposed HB 292
(Spoke via teleconference)
PHIL HINDELBERGER, General Counsel
Norcal Insurance Company
50 Fremont Street
San Francisco, CA 94105
1-800-652-1051
415-388-1451
Position Statement: Supported HB 292
(Spoke via offnet)
PAULA JACOBSON
Alaska Academy of Trial Lawyers
1015 W. 7th Avenue
Anchorage, AK 99501
276-1191
Position Statement: Opposed HB 292
(Spoke via teleconference)
ROBERT LOISELLE, President
Klukwan, Inc.
P.O. Box 32077
Juneau, AK 99803
789-7361
Position Statement: Supported HB 292
DR. DONALD LEHMANN
Alaska State Medical Association
700 Katlian, Suite E
Sitka, AK 99835
747-5861
Position Statement: Supported HB 292
(Spoke via teleconference)
MICHAEL SCHNEIDER
Alaska Academy of Trial Lawyers
880 N St., Suite 202
Anchorage, AK
277-9306
Position Statement: Opposed HB 292
(Spoke via teleconference)
DAVID HIGGINS, Attorney
Brobeck & Phleger
550 S. Hope, Suite 2300
Los Angeles, CA 90071-2604
(213) 745-3464
Position Statement: Supported HB 292
(Spoke via offnet)
STEVE BORRELL, Executive Director
Alaska Miners Association, Inc.
501 Northern Lights Blvd., Suite 203
Anchorage, AK 99503
276-0347
Position Statement: Supported HB 292
(Spoke via teleconference)
BRAD THOMPSON, Director
Division of Risk Management
Department of Administration
State of Alaska
P.O. Box 110218
Juneau, AK 99811-0218
465-5724
Position Statement: Supported HB 292
PREVIOUS ACTION
BILL: HB 292
SHORT TITLE: CIVIL LIABILITY
SPONSOR(S): LABOR & COMMERCE
JRN-DATE JRN-PG ACTION
04/23/93 1459 (H) READ THE FIRST TIME/REFERRAL(S)
04/23/93 1459 (H) L&C, JUDICIARY, FINANCE
09/10/93 (H) L&C AT 09:00 AM CAPITOL 17
11/22/93 (H) MINUTE(L&C)
01/27/94 (H) L&C AT 03:00 PM CAPITOL 17
01/27/94 (H) MINUTE(L&C)
02/01/94 (H) L&C AT 03:00 PM CAPITOL 17
02/01/94 (H) MINUTE(L&C)
02/03/94 (H) L&C AT 03:00 PM CAPITOL 17
02/03/94 (H) MINUTE(L&C)
02/07/94 2280 (H) L&C RPT CS(L&C) NEW TITLE
3DP 4NR
02/07/94 2280 (H) DP: HUDSON, MULDER, PORTER
02/07/94 2280 (H) NR: GREEN, WILLIAMS, SITTON,
MACKIE
02/07/94 2280 (H) LETTER OF INTENT WITH L&C
REPORT
02/07/94 2280 (H) -ZERO FISCAL NOTE (LAW) 2/7/94
02/16/94 (H) JUD AT 01:15 PM CAPITOL 120
02/18/94 (H) JUD AT 01:15 PM CAPITOL 120
02/18/94 (H) MINUTE(JUD)
02/21/94 (H) JUD AT 01:15 PM CAPITOL 120
ACTION NARRATIVE
TAPE 94-26, SIDE A
Number 000
The House Judiciary Standing Committee was called to order
at 1:28 p.m. on February 21, 1994. A quorum was present.
Chairman Porter announced that the committee would continue
the hearing on HB 292 and invited testimony from individuals
on the invited participants list. Chairman Porter indicated
that the list was representative of different sides of the
issue.
Number 146
DICK CATTANACH, Contractor, Alaska Liability Reform,
presented testimony via teleconference in support of HB 292.
He expressed belief in an urgent need for tort reform in the
state of Alaska and averred that HB 292 would address
current unfairnesses in the liability laws of the state.
MR. CATTANACH noted that in Alaska "only murderers and
contractors" suffered lifelong liability and asserted the
six-year statute of repose incorporated in HB 292 could
provide a fair and just limit for civil liability actions.
MR. CATTANACH maintained that HB 292 would (a) close current
loopholes in civil liability laws; (b) impose needed limits;
(c) reduce litigation expenses; (d) increase the percentage
of claim dollars going directly to victims (whereas the
percentage of award monies absorbed by litigation and other
costs is currently as high as 50% in civil actions); and (e)
clarify liability law for all parties.
Number 345
REP. NORDLUND asked why a six-year statute of repose was
selected especially for buildings when the useful life of
the building may extend beyond six years and defects in a
building might not be discovered until the seventh year. He
asked what was magical about the six-year date, especially
in terms of construction, and also how many other states
have a six-year statute of repose for structures.
Number 336
MR. CATTANACH detailed the process of constructing a
building and explained the accountability of the parties
involved. He noted the obligation of architects and
engineers to be licensed by the state and pointed out the
construction industry employs professionals whose work is
continually subject to the review of state inspectors. MR.
CATTANACH asserted that problems which manifested themselves
after a lapse of six years were likely to be a result of
poor or insufficient maintenance.
Number 419
REP. NORDLUND posed a question concerning possible design
flaws, asking if it was true that if, [in] the seventh
year... a building roof was to collapse, and it could be
determined that it was definitely the fault of the
architect, that there was a design flaw, and the architect
said it was 100% at fault, an injured party could not bring
suit against the architect?
Number 430
MR. CATTANACH replied that if it was a design flaw, and it
did not meet specifications, he believed that suit could be
brought.
REP. NORDLUND asked how this could be so.
MR. CATTANACH responded that the owner, having given
specifications -- if the architect did not follow those
specifications, and was aware of that, then the statute of
repose would not protect him.
Number 440
REP. NORDLUND commented, "You said that the bill limits the,
makes a change to the percentage of dollars that would go to
an injured party. I don't see that in the bill. I see that
there's a limitation on the overall amount that an injured
party could collect. I don't see that there's any change in
the percentage of dollars that the injured party would
collect. What section is that in?"
Number 446
MR. CATTANACH replied that these percentages were not dealt
with specifically in a section. He said the intent of the
bill was to add certainty to the system. MR. CATTANACH
said, "If an insurance company knows that they're going to
have to pay out an amount, that's certain, then it does them
no good to contest that. And if they don't contest it, then
the legal profession doesn't get involved... then the
injured party is not going to have 1/3 or 40 percent of
their claim, of their payment, going for legal fees. They
will get basically what they've got coming because the
insurance company is going to pay direct. So that we
increase the amount that will be going to the injured party.
Not only that, the injured party will be getting that money
sooner."
Number 474
JEFF FELDMAN, an Attorney and President of the Alaska
Academy of Trial Lawyers, testified via teleconference
against the HB 292. MR. FELDMAN stated that HB 292 would
affect every single Alaskan citizen and declared that this
bill would drastically damage the rights of Alaskans to
obtain justice in the court system. He asserted that HB 292
principally benefits insurers and out-of-state manufacturers
and corporations and severely limits the rights of
individuals to pursue legal remedies for their damages. MR.
FELDMAN expressed concern over the timing of the hearing and
opined it prevented in-depth analysis of HB 292's complexity
and precluded a larger attendance by citizens.
Number 316
CHAIRMAN PORTER responded that the purpose of the committee
hearing was to bring committee members up to speed on the
bill and said that six previous public hearings on the bill
been held and noted that MR. FELDMAN had previously
testified at several of these hearings. CHAIRMAN PORTER
refuted the inference that the hearing was designed to
eliminate participation by the public.
Number 524
MR. FELDMAN asserted that the eighteen amendments had not
been brought forward previously as a subject for discussion.
He testified concerning the sections on wrongful death and
noneconomic damages and stated that he believed these two
sections "effectively strip Alaskan juries of their right to
decide significant issues that are presented for court
cases" and deny Alaskans the possibility of a jury trial on
these issues. MR. FELDMAN detailed his objections to HB 292
at some length. He asserted that this bill "strips Alaska
victims of their sacred right to seek justice in court."
MR. FELDMAN urged that the bill be defeated.
Number 673
MICHAEL LESSMEIR, Attorney, presented testimony on behalf of
State Farm Insurance in support of HB 292. MR. LESSMEIR
noted that State Farm was not a participant in the
introduction of HB 292 but wished to express belief that the
legislation "will do good things for Alaska." He asserted
that the purpose for legislation of this kind "is to make
the system better for everybody. It is to take the lottery
aspect out of the system. What we have now is a system
where one is fortunate or unfortunate. So if you are
unfortunate enough to be injured by someone but yet
fortunate enough that they have a level of insurance that's
high enough to compensate them, that's the lottery aspect of
it, and that's the luck aspect of it. I think the purpose
of this kind of legislation is that you allow more people to
be compensated; in other words, people who wouldn't
otherwise be compensated. If you take windfalls out of the
existing system, what you do is you go further to
guaranteeing a level of recovery that's fair for everybody.
And that, to us, is really what you ought to look at in
terms of this legislation." He specifically addressed and
analyzed a number of provisions of the bill as being very
good for Alaska.
Number 812
REP. NORDLUND asked how placing limits on the time that
somebody can recover damages, as well as placing limits on
the amount they can recover for damages, opens up the
process for more people to have access to the tort system.
Number 819
MR. LESSMEIR responded by saying that everyone would have
access to the tort system regardless of changes made by this
bill. He said that "the effect of these changes is whether
the person that you happen to sue has money or has been able
to afford insurance to insure them against the loss. And
the effect of these changes is to reduce the cost of
obtaining that coverage by making the litigation
predictable, by making insurance more affordable, by making
it more available. The idea is that if you do that your
chances of being one of these, an unfortunate person that is
injured, by perhaps that is not covered by insurance or less
-- that's the philosophy."
Number 831
REP. NORDLUND commented that he felt it was debatable
whether the bill would have any effect on insurance rates.
Number 837
MR. LESSMEIR asserted that the bill would have an effect on
insurance rates, but the question was when, because the true
effect of the bill would not be experienced until 1996 or
beyond when the statute of limitations for certain extant
cases had run out. He added that the true effect would not
be seen until the provisions had been litigated and applied
by the courts.
REP. DAVIDSON questioned MR. LESSMEIR'S comment that
"$500,000 is better than nothing" in view of the reality of
the lives of severely disabled victims.
Number 866
MR. LESSMEIR replied that the bill would help minimize the
risk that "the person who is injured will be hurt by someone
that is not covered by insurance."
TAPE 94-26, SIDE B
Number 000
REP. DAVIDSON requested clarification.
Number 007
MR. LESSMEIR stated that passing certain levels of
limitations would make insurance more affordable at those
levels, and more people would be covered, and there would be
fewer persons injured by uninsured parties. He asserted
that this is the justification for a cap.
REP. DAVIDSON challenged this assertion and expressed a
belief that a victim's compensation should not be
automatically limited in this way, but should rather be
commensurate with his needs. He did not see how a
generalized cap on award amounts could logically be
reconciled with an individual's real needs.
Number 038
JOHN DEISCHER, Vocational Rehabilitation Specialist,
Vocational Management, presented testimony via
teleconference in opposition to HB 292 and asserted that
damages should be awarded based on injury and not statutory
provisions. [Portions of this testimony was inaudible.] He
recounted how his professional and personal experiences had
caused him to arrive at the conclusion that awards need to
be made on a case by case basis. MR. DEISCHER also
expressed concern that the legislation contained no
provisions for the prevention of injuries.
Number 250
ROGER HOLMES, Attorney, Bliss & Holmes, presented testimony
via teleconference in support of HB 292. He drew a
correlation between malpractice costs and insurance premiums
and asserted a need for tort reforms to reduce overall
inflationary trends of health care costs. MR. HOLMES noted
that malpractice premiums had risen at a rate 20 times
greater than the state of California, which had instituted
tort reform laws. He expressed optimism that HB 292,
patterned after the California legislation, would prove
effective in reducing litigation costs. He also suggested
it would take time for the full effect of changes to be
realized.
Number 442
TIM DOOLEY, Attorney, Alaska Academy of Trial Lawyers,
testified via teleconference against HB 292. He analyzed
the low proportionate cost in real terms of litigation in
the context of gross revenues of corporate entities and
concluded that these costs were proportionately too low to
justify the proposed caps on awards. MR. DOOLEY drew
attention to the need to protect the existing legal
mechanisms which address and challenge outrageous or abusive
behaviors. He counseled caution in removing from society
the leverage to maintain higher standards of behavior
imposed by the existence of punitive damages awards.
Number 603
LINDA HALL, President of Alaska Independent Insurance Agents
& Brokers, testified via teleconference in support of HB
292. She expressed the belief that punitive damages awards
were jeopardizing the availability of insurance. She cited
a need to expand market availability and encourage more
insurance companies to do business in Alaska. MS. HALL
asserted Alaskans' need for access to a greater pool of
insurance carriers and the presence of healthy competition.
Number 645
BILL ASHTON, Executive Director of the Alaska Health Project
in Anchorage, which provides information on environmental
and occupational health for Alaskans, presented testimony
via teleconference against HB 292. He requested that the
committee consider to what degree the bill would actually
reduce malpractice and litigation costs and whether it would
allow for reasonable compensation. He asserted that the
high level of worker safety in the United States relative to
other nations is a result of checks and balances in the
system which recognizes the needs of individuals to be
protected. MR. ASHTON emphatically recommended a strong
emphasis on prevention as well as protection. He expressed
concern that HB 292 did not address sufficiently the
importance of prevention and advised caution in promulgating
any tort reform legislation which might affect the needs of
Alaskans.
Number 704
PHIL HINDELBERGER, General Counsel for Norcal Insurance
Company, testified from an offnet site in support of HB 292.
He shared his experiences of tort reform in California and
asserted that similar reforms in Alaska would result in
similar benefits, including the lowering of medical
malpractice costs. MR. HINDELBERGER asserted that tort
reform would reduce insurance costs. He invoked examples of
states which have not undergone tort reform and noted their
spiraling litigation associated costs. Mr. HINDELBERGER
provided supporting literature, including a legislator's
guide to medical malpractice published in California which
details the history and results of tort reform measures in
that state. He reminded legislators that the full effects
of reform would not be realized for some years.
Number 791
REP. DAVIDSON asked in what year Norcal had purchased Micah,
and inquired whether Norcal had so achieved a species of
insurance monopoly. REP. DAVIDSON asked if, subsequent to
this acquisition of Micah, Norcal had issued any dividends
to stockholders in Alaska.
MR. HINDELBERGER responded that dividends had been paid. He
denied that Norcal was a monopoly and made reference to
other insurance companies in Norcal's field.
Number 803
REP. DAVIDSON requested further clarification concerning
Norcal's purchase of Micah, "a company that was put together
through the legislature." Subsequent to purchase, he asked,
"...[Y]ou did collect enough in dividends for your members
that you could return a, could I say, sizeable dividend to
those people? Does that mean, then, that there were not
that many cases you had to pay out? And thereby, you could
afford to pay a sizeable dividend?"
Number 810
MR. HINDELBERGER replied, "I don't think I used the word
sizeable, I think that's strictly your word. Dividends
could be paid... in the amounts of several hundred dollars."
He cited efforts made with local divisions and hospitals
which had rendered further stability to the claims picture.
Number 820
PAULA JACOBSON, Alaska Academy of Trial Lawyers and a
registered nurse, testified via teleconference against HB
292. She stated that her experiences as a health care
professional and as an attorney enabled her to bring a broad
understanding of all sides of the legal issues involved in
HB 292. She asserted that HB 292 does not constitute a
"doctor vs. lawyer" issue. MS. JACOBSON stated that the
bill "is of particular significance to those Alaskans who
seek health care services. In other words, just about all of
us." She identified 27 on the civil liability of hospitals
as a particular cause for concern and noted that it revoked
the accountability of hospitals with regard, for example, to
hired contractors of an institution. MS. JACOBSON stated
that the "proposal has terrible and far-reaching
consequences;" most significantly, in absolving hospitals of
responsibilities which need to be undertaken on behalf of
patients.
TAPE 94-27, SIDE A
Number 000
MS. JACOBSON cautioned against significant insurance
inequities which were likely to arise as a result of the
bill. She urged the committee to consider the ramifications
of a measure which could eradicate means of remedy for
injuries sustained by Alaskans.
Number 082
ROBERT LOISELLE, President, Klukwan, Inc, testified in
Juneau in favor of HB 292. He stated, "Tort reform is an
important issue to our corporation. We pay over $1,000,000
in insurance premiums each year and the premiums keep rising
from year to year. We believe that victims need fair and
adequate compensation, but we also believe that the
situation has gotten out of hand in recent years, driven by
aggressive and sometimes greedy attorneys. Corporations are
particularly at risk since they are often viewed as being
able to afford large settlements. I can assure you that our
shareholders do not agree with this statement. The current
situation also encourages litigation where other methods of
dispute resolution would be quicker and less costly. Our
society wastes a tremendous amount of resources on needless
litigation each year. Anything that we can do to curb this
trend will have real benefits for our society. Again, we
urge you to support HB 292, a positive step towards reform
of our legal system, and we sincerely appreciate your
consideration of our comments."
Number 127
DR. DONALD LEHMANN, President, Alaska State Medical
Association (ASMA), testified via teleconference in support
of the HB 292. He condemned the present tort system as
being unfair and unjust and urged reform. DR. LEHMANN noted
that he practices rural family medicine, is board certified
and has never been sued, and yet his malpractice premiums
are approximately $30,000 per year; significantly higher
than, for example, the premiums borne by a plastic surgeon
in Anchorage. Dr. Lehmann maintained that "we should be
able to do better than having the tort system resemble the
Publishers' Clearinghouse Sweepstakes." He asserted the
number of rural hospitals and the extent of their services
had been reduced due to high costs of malpractice insurance
and that independent practitioners were being forced to go
uninsured and/or to reduce their services due to the
enormous costs of premiums. He pronounced HB 292 "a good
bill, comprehensive and fair" and urged its speedy passage.
Number 200
MICHAEL SCHNEIDER, Alaska Academy of Trial Lawyers,
testified via teleconference in opposition to HB 292. He
specifically addressed 3 of the statute of repose provision
and asked that the record "be very clear that we think it's
unfair, it's unreasonable, it's bad law for Alaska, it's bad
law for Alaskans." He clarified the distinction between a
statute of repose and a statute of limitations. He asserted
that the provision would "allow professionals to engage in
wrongful acts, the horror of which is later visited upon
Alaskans; only by then, Alaskans' rights will have
disappeared completely." MR. SCHNEIDER analyzed and
detailed the perceived flaws of the proposal and presented
hypothetical examples of how the flaws might affect
Alaskans.
Number 395
DAVID HIGGINS, Attorney, Brobeck & Phleger, testified in
favor of HB 292 from in Los Angeles. He identified himself
as a tax lawyer by trade and said that he had drafted the
provisions of the internal revenue code that makes periodic
payments exempt from tax when they are paid for personal
injury. He stated that he had acted as an advisor to the
committee which drafted the Uniform Periodic Payments
Judgment [tax?] on which the Alaska bill is based. He
stated that this law, containing a periodic payment
provision, or bills like it, are now law in 37 states, and
it constitutes part of the present health care reform and
legislation. Attorney Higgins discussed the role and the
positive ramifications of periodic payments in tort reform
legislation.
Number 495
STEVE BORRELL, Executive Director, Alaska Miners
Association, Inc., testified via teleconference in support
of HB 292 on behalf of the association. He maintained that
the time "had come for comprehensive reform in Alaska and
this bill will accomplish what is needed." He expressed
belief that the bill would reduce insurance costs to
businesses in Alaska. MR. BORRELL stated that the "Alaska
Miners Association supports fair compensation for injured
persons, but we do not support the current system that
encourages the use of civil liability laws as a profit
opportunity...."
Number 553
BRAD THOMPSON, Director, Division of Risk Management, State
of Alaska Department of Administration (the self-insurance
providers for the state and its agencies), testified in
Juneau in support of HB 292. He noted that, unlike 33 other
states, Alaska has no cap of compensatory damages awarded
against the state, leaving the state and private industries
in the state open to liability judgments and exposures
against state agencies. MR. THOMPSON said, "We see that
this Bill 292 will reduce future loss and future claims
expense. Several liability is the strongest section that --
frankly, when the '88 initiative passed, I thought we did
have certainty that we would no longer be paying for
obligations of others. And as previous speakers have
mentioned, it's been five years, and we're still arguing it.
"Prejudgment interest rate -- this is again part of another
bill that the governor has submitted to peg the interest
rate at a prevailing rate, not at some predetermined rate
that will be inequitable, either too high or too low.
"Reduction of future wages -- there should be consideration
for income taxes. I think that's just a fair method to
calculate future wage loss. Likewise, the restriction of
prejudgment interest on future damages.
"It must be remembered that probably 90 - 95% of tort
actions are settled -- they don't go to judgment. So when
you sit down and weigh and calculate what are the exposures,
what is your liability risk, and then you also try to
calculate and pencil out the total amount of damages that
could be brought against you, you have to weigh in and add
in all of these add-ons, and they're significant. The state
has, on average -- I looked at the last nine years -- we
spend, or incur, losses of about $7-10 million a year in
liability claims against state agencies. We have unfunded
liabilities now projected by a casualty actual of $80+
million. That's out there. And those need and will be
resolved in future years. If this legislation passes the
future claims... will be limited in magnitude...."
Number 601
REP. NORDLUND requested clarification of the collateral
benefits section of the bill and the subrogation clause,
saying, "I am trying to understand, if a person is damaged,
and if a judgment has been rendered, and under the
provisions of this bill, and the person has disability
insurance [through] the state of Alaska, under the
provisions of this bill, all money will be collected first
from the state, and that amount would offset the damages
that were owed by the wrongdoer. Is that correct?"
Number 611
MR. THOMPSON replied, "I think, Mr. Chairman, the answer to
the question relies on whether that program has the right of
subrogation by law or by contract. And I believe the
current version of the bill allows and considers those
claims -- should the plaintiff be responsible to pay those
back, they can be considered.... There is no right of
subrogation, then they should not be brought forward. The
state's disability program through PERS, I believe, does not
have a right of subrogation. Some disability insurance
programs have no such right."
Number 625
REP. NORDLUND explained his criticism of the subrogation
section of the bill, saying, "Mr. Chairman. I think that if
a person has the foresight to provide disability insurance,
which is basically kind of a gamble, they've been paying
premiums all along, and they undergo an unfortunate injury,
they should be allowed to collect those damages, and collect
that benefit. And the collection of that benefit shouldn't
relieve the wrongdoer of their responsibility to pay those
damages."
Number 634
CHAIRMAN PORTER interjected the point that one of the
amendments of HB 292 touches on this issue. He thanked
participants in the hearing for appearing and suggested
options for the remainder of the hearing. He said, "We've
got some amendments we could take up now, or we could wait
and take them all up at one meeting."
CHAIRMAN PORTER explained his idea of the provision under
discussion. He said, "It is definitely -- that issue is a
policy call, in terms of restricting the rights of
subrogation other than what federal law requires. And
basically, it's a policy call that, in effect, kind of
establishes in this area of insurance coverage, a form of
no-fault insurance. What it says, basically, is in the
typical example of -- I'm in a traffic accident in which I
am not at fault, and I have medical injuries, and I've got
insurance, and my medical injuries. I sue the person that's
[injured] me and in effect I'm suing his insurance company.
And we go to court. And under this provision, I am not
allowed to receive compensation that would take the place of
what I've already received from my own insurance company.
Nor can my insurance company go after, if I receive more
money, which I might.... what money I received nor sue the
insurance company of the defendant that provided the balance
of that. The idea being that I've got an insurance company,
this guy's got an insurance company. If I've paid for my
premiums, then I am entitled to that. I can, as a matter of
fact, ask the court, and they can consider, and generally
do, I can ask the court's consideration to make up the
difference of what I paid into that policy, my premiums, and
if I had a substantial depletion -- in other words, I've got
a maximum for life of $100,000 coverage, or something -- and
they just paid me $50,000, I can ask the court to consider
that I just lost that value in that policy, also. But all
we're really doing -- and it is a policy call -- when we say
that my insurance can subrogate against his insurance, is
guaranteeing another court trial where the two insurance
companies fight it out. And Chris is sitting back there
saying, we don't want more court trials, so -- that's what
that whole thing is aimed at. It's a policy call."
Number 686
REP. NORDLUND reiterated the role of insurance companies in
promoting safety in the workplace; the fact of liability
exposure encourages insurance companies "to take measures to
make sure that the company or whomever they are insuring are
going to do a better job. But if they don't, ultimately,
have to pay, in a situation like you described, then I think
they lose that incentive."
Number 693
CHAIRMAN PORTER pointed out that insurance companies may
insure both plaintiffs and defendants; therefore, achieving
a balance is in their best interests. He said, "That's the
whole idea of no-fault insurance. Statistically, over time,
payments will average out among companies.... if there is an
award, both companies should be inspired to enhance safety.
Is that fair?"
Number 706
MR. THOMPSON concurred with Chairman Porter's comments and
offered further clarification regarding workers'
compensation, "truly a non-fault system." He noted that
prior claims experience affected premium calculations. He
said, "If you as a private contractor, general contractor,
have a good loss record, with very little or no claims
experience, and you are actively involved in maintaining
that low loss record, you will have a lesser premium in
future years than someone with a prior loss experience."
CHAIRMAN PORTER announced that discussion would be continued
in the next meeting with discussion of the amendments. He
again thanked participants and expressed belief that a good
balance of testimony and exposure to the issues had been
achieved.
REP. NORDLUND asked if an overall explanation of HB 292
would be forthcoming in addition to discussion of individual
amendments, since the committee had not gone through the
bill section by section.
CHAIRMAN PORTER agreed that this was fair and said that the
next meeting would begin with such a presentation.
The committee meeting was adjourned at 3:45 p.m.
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