Legislature(1993 - 1994)

03/24/1994 03:00 PM House L&C

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                    HOUSE LABOR AND COMMERCE                                   
                       STANDING COMMITTEE                                      
                         March 24, 1994                                        
                            3:00 p.m.                                          
  MEMBERS PRESENT                                                              
  Rep. Bill Hudson, Chairman                                                   
  Rep. Joe Green, Vice Chair                                                   
  Rep. Brian Porter                                                            
  Rep. Bill Williams                                                           
  Rep. Eldon Mulder                                                            
  Rep. Joe Sitton                                                              
  MEMBERS ABSENT                                                               
  Rep. Jerry Mackie                                                            
  COMMITTEE CALENDAR                                                           
  *HB 514:  "An Act relating to risk based capital for                         
            insurers; and providing for an effective date."                    
            CSHB 514(L&C) PASSED OUT OF COMMITTEE                              
  HB 506:   "An Act relating to student loans; to sanctions                    
            for defaulting on a student loan, including denial                 
            of a state occupational license or disbursement of                 
            state money; and providing for an effective date."                 
            CSHB 506(L&C) PASSED OUT OF COMMITTEE                              
  *HB 360:  "An Act relating to civil liability for guest                      
            passengers on an aircraft or watercraft; and                       
            providing for an effective date."                                  
            PASSED OUT OF COMMITTEE                                            
  (* First public hearing.)                                                    
  WITNESS REGISTER                                                             
  DAVE WALSH, Director                                                         
  Division of Insurance                                                        
  Department of Commerce and Economic Development                              
  P.O. Box 110805                                                              
  Juneau, Alaska  99811-0805                                                   
  Position Statement:  Supported HB 514                                        
  REP. CON BUNDE                                                               
  Alaska State Legislature                                                     
  State Capitol                                                                
  Juneau, Alaska  99801-1182                                                   
  Position Statement:  Prime Sponsor of HB 506                                 
  JOE McCORMICK, Executive Director                                            
  Postsecondary Education Commission                                           
  Department of Education                                                      
  3030 Vintage Blvd.                                                           
  Juneau, Alaska  99811                                                        
  Position Statement:  Supported HB 514                                        
  PAIGE ADAMS                                                                  
  Student Representative                                                       
  University of Alaska, Sitka                                                  
  6-B Lifesaver Dr.                                                            
  Sitka, Alaska  99835                                                         
  Position Statement:  Supported HB 506                                        
  PATTI SWENSON, Staff                                                         
  Rep. Con Bunde                                                               
  Alaska State Legislature                                                     
  State Capitol                                                                
  Juneau, Alaska  99801-1182                                                   
  Position Statement:  Presented HB 360                                        
  JOHN GEORGE, Lobbyist                                                        
  9515 Morraine Way                                                            
  Juneau, Alaska  99801                                                        
  Position Statement:  Supported HB 360                                        
  MIKE PANNONE                                                                 
  Alaska Airmen Association                                                    
  1515 E. 13th                                                                 
  Anchorage, Alaska  99501                                                     
  Position Statement:  Supported HB 360                                        
  MIKE SCHNEIDER                                                               
  880 N Street, Suite 202                                                      
  Anchorage, Alaska  99501                                                     
  Position Statement:  Opposed HB 360                                          
  PREVIOUS ACTION                                                              
  BILL:  HB 514                                                                
  SHORT TITLE: RISK BASED CAPITAL FOR INSURERS                                 
  SPONSOR(S): LABOR & COMMERCE                                                 
  JRN-DATE    JRN-PG                     ACTION                                
  02/28/94      2551    (H)   READ THE FIRST TIME/REFERRAL(S)                  
  02/28/94      2551    (H)   L&C, STATE AFFAIRS, JUDICIARY                    
  03/24/94              (H)   L&C AT 03:00 PM CAPITOL 17                       
  BILL:  HB 506                                                                
  SHORT TITLE: STUDENT LOAN PROGRAM                                            
  JRN-DATE    JRN-PG                     ACTION                                
  02/16/94      2416    (H)   READ THE FIRST TIME/REFERRAL(S)                  
  02/16/94      2416    (H)   HES, L&C, FINANCE                                
  03/03/94              (H)   HES AT 03:00 PM CAPITOL 106                      
  03/03/94              (H)   MINUTE(HES)                                      
  03/07/94              (H)   MINUTE(HES)                                      
  03/08/94              (H)   MINUTE(HES)                                      
  03/08/94              (H)   MINUTE(HES)                                      
  03/08/94              (H)   MINUTE(HES)                                      
  03/11/94      2720    (H)   HES RPT  CS(HES) 3DP 4NR 2AM                     
  03/11/94      2721    (H)   DP:  G.DAVIS, BUNDE, TOOHEY                      
  03/11/94      2721    (H)   NR:  VEZEY, OLBERG, NICHOLIA,                    
  03/11/94      2721    (H)   AM:  B.DAVIS, BRICE                              
  03/11/94      2721    (H)   -FISCAL NOTE (DCED) 3/11/94                      
  03/11/94      2721    (H)   -ZERO FISCAL NOTE (DOE)                          
  03/22/94              (H)   L&C AT 03:00 PM CAPITOL 17                       
  03/22/94              (H)   MINUTE(L&C)                                      
  03/24/94              (H)   L&C AT 03:00 PM CAPITOL 17                       
  BILL:  HB 360                                                                
  SPONSOR(S): REPRESENTATIVE(S) BUNDE                                          
  JRN-DATE    JRN-PG                     ACTION                                
  01/11/94      2032    (H)   READ THE FIRST TIME/REFERRAL(S)                  
  01/11/94      2032    (H)   LABOR & COMMERCE, JUDICIARY                      
  03/24/94              (H)   L&C AT 03:00 PM CAPITOL 17                       
  ACTION NARRATIVE                                                             
  TAPE 94-29, SIDE A                                                           
  Number 001                                                                   
  CHAIRMAN HUDSON convened the meeting at 3:15 p.m. and                        
  invited DAVE WALSH to present HB 514.                                        
  HB 514 - RISK BASED CAPITAL FOR INSURERS                                     
  Number 029                                                                   
  DAVE WALSH, Director, Division of Insurance, Department of                   
  Commerce and Economic Development, presented HB 514.  Mr.                    
  Walsh stated that HB 514 establishes a new way to determine                  
  insurance companies' solvency in Alaska.  Alaskan insurers                   
  fair well under this proposed risk based capital legislation                 
  and currently have capital and surplus levels higher than                    
  the amount indicated in the risk based capital formula.                      
  MR. WALSH went on to say this proposed risk based capital                    
  legislation is based on the NAIC (National Association of                    
  Insurance Carriers) risk based capital model law that has                    
  been adopted as a minimum standard for state accreditation                   
  under the NAIC Accreditation Program.  The NAIC                              
  Accreditation Program establishes minimum standards of                       
  regulation through adoption of statutes and procedures.                      
  State accreditation is granted by the NAIC after an on-site                  
  review verifying that these minimum standards are met.  The                  
  Alaska Division of Insurance received its accreditation in                   
  December 1992 and is committed to maintaining the standards                  
  of the NAIC Accreditation Program.                                           
  MR. WALSH provided a position paper and sectional analysis                   
  on HB 514, which is available in the committee files.                        
  MR. WALSH stated that consumers, industry, Alaskan domestics                 
  and the department is supportive of HB 514.                                  
  MR. WALSH proposed an amendment that included a number of                    
  changes, mostly technical.  Mr. Walsh stated these                           
  amendments were adopted in the Senate version of the bill.                   
  Number 261                                                                   
  REP. PORTER asked if there was a percentage that is                          
  considered for investment as opposed to risk.                                
  Number 266                                                                   
  MR. WALSH responded yes.  He stated that there were a number                 
  of different triggers for a review of an insurance company's                 
  investment.  One of them is that no company can invest more                  
  than 5% of its assets in one type of investment without                      
  approval of the regulator.                                                   
  Number 297                                                                   
  REP. MULDER asked if HB 514 would increase the likelihood of                 
  Number 302                                                                   
  MR. WALSH stated he believed it would decrease the                           
  likelihood of insolvency because it would trigger the times                  
  when regulators would step in.                                               
  Number 325                                                                   
  REP. MULDER asked what it would mean for State Farm and                      
  other national outfits.                                                      
  Number 340                                                                   
  MR. WALSH answered that it would mean very little to them.                   
  If anything, it could have a very positive affect on the                     
  Number 350                                                                   
  REP. PORTER moved Amendment 1 offered by Mr. Walsh.  No                      
  objections were heard; it was so ordered.                                    
  Number 360                                                                   
  REP. MULDER moved CSHB 514(L&C) with individual                              
  recommendations and zero fiscal notes.  No objections were                   
  heard; it was so ordered.                                                    
  HB 506 - STUDENT LOAN PROGRAM                                                
  Number 398                                                                   
  REP. CON BUNDE, Co-Chair of the House HESS Committee,                        
  sponsor of HB 506, explained to the committee that there was                 
  a letter in their packet that addresses a loophole in the                    
  bill regarding people who are enrolled but not attending                     
  classes.  The letter suggests an amendment that would change                 
  the bill to incorporate this technical amendment.                            
  Number 429                                                                   
  REP. PORTER asked what the difference was between being                      
  admitted to school or enrolled in school.                                    
  REP. BUNDE responded that you could be admitted to a program                 
  but not necessarily be enrolled that semester.                               
  Number 447                                                                   
  MR. JOE McCORMICK, Executive Director, Postsecondary                         
  Education Commission, Department of Education, explained                     
  that an amendment would address the misinterpretation that                   
  some students have that they can't apply for the loan until                  
  after they are actually attending classes.                                   
  Number 465                                                                   
  The committee discussed the language of the amendment in an                  
  effort to clarify the intent of the amendment, which was                     
  that an applicant does not have to be enrolled in a program                  
  to apply for a loan.                                                         
  Number 520                                                                   
  REP. BUNDE stated that the program has been working without                  
  this amendment and he felt the amendment may cause more                      
  problems than it fixes.  He withdrew the amendment from                      
  Number 560                                                                   
  REP. PORTER stated that he would still support the concept                   
  of the student loan program comparing its listing of                         
  defaultees against the Department of Administration's list                   
  of vendors on contract with the state.                                       
  Number 570                                                                   
  CHAIRMAN HUDSON explained that he spoke with Commissioner                    
  Usera and she had decided to take the amendment referenced                   
  above to the Finance Committee for their consideration.                      
  Number 580                                                                   
  REP. GREEN and REP. MULDER told the committee that the                       
  commissioner wanted to have the language in statute that                     
  would add language to the bid package sent to potential                      
  vendors that they need not apply if they are in default to                   
  the state on any loan.                                                       
  Number 590                                                                   
  CHAIRMAN HUDSON told the committee he would like to send the                 
  bill on without the amendment and abide by the wishes of the                 
  commissioner, unless someone on the committee had an                         
  amendment they wished to present now.                                        
  Number 595                                                                   
  REP. PORTER moved an amendment to the bill to delete                         
  subsection (c), page 5, lines 22, 23 and 24.                                 
  Number 600                                                                   
  REP. BUNDE told the committee that the student loan program                  
  would probably not survive if the program had to keep coming                 
  back to the legislature for appropriations from the general                  
  Number 607                                                                   
  MR. McCORMICK explained that the reason they put subsection                  
  (c) in HB 506 was to assure priority over other loans.                       
  Number 630                                                                   
  REP. SITTON stated that from a practical standpoint this                     
  would be impossible to implement.                                            
  Number 640                                                                   
  REP. PORTER believed there were other programs that could                    
  make a good case for top priority for garnishment.  He added                 
  that the one program he was thinking of was the victim                       
  compensation board.                                                          
  TAPE 94-29, SIDE A                                                           
  Number 001                                                                   
  MR. McCORMICK stated he was very willing to compromise on                    
  this issue and reiterated how important he felt it was for                   
  this legislation to pass this session.                                       
  Number 014                                                                   
  CHAIRMAN HUDSON stated that he was sympathetic to the idea                   
  of a person losing their permanent fund dividend it they                     
  were delinquent in their student loan.  He added that he                     
  felt that giving priority of the student loan program over                   
  some of the other programs was not good public policy.  The                  
  chair stated he supported the amendment.                                     
  CHAIRMAN HUDSON asked if there were any objections to Rep.                   
  Porter's previously offered amendment.  No objections were                   
  heard; it was so ordered.                                                    
  Number 049                                                                   
  MS. PAIGE ADAMS, Student Representative, University of                       
  Alaska, Sitka, testified via teleconference in support of HB
  506.  She stated she didn't have anything else to add.                       
  Number 070                                                                   
  REP. GREEN moved CSHB 506 with individual recommendations                    
  and accompanying fiscal notes.  No objections were heard; it                 
  was so ordered.                                                              
  HB 360 - AIRCRAFT/WATERCRAFT GUEST PASSENGER LAW                             
  Number 085                                                                   
  REP. CON BUNDE, Prime Sponsor of HB 360, stated that HB 360                  
  was offered in response to the current law that permits a                    
  person to get sued if they take friends out fishing or                       
  flying and there is an accident.  This bill would allow that                 
  to happen without jeopardizing personal finances.  The bill                  
  would provide for the guest passenger to acknowledge that                    
  there are inherent risks when traveling in recreational                      
  vehicles to access the outdoors.                                             
  REP. BUNDE stressed that the bill does not excuse anyone                     
  from responsibility for gross negligence.                                    
  REP. BUNDE offered an amendment that would include                           
  watercraft in the bill, stating it was an oversight in                       
  CHAIRMAN HUDSON asked for an explanation of the exception on                 
  line 14, page 1.                                                             
  REP. BUNDE answered that the exception covers the situation                  
  where a person is demonstrating the use of a vehicle for the                 
  purpose of selling it to the person.                                         
  Number 156                                                                   
  REP. GREEN asked if this would provide for the release of                    
  liability that is not afforded to an operator of an                          
  Number 167                                                                   
  REP. BUNDE responded that it did.  He noted that the risk is                 
  somewhat different than boating or flying.                                   
  Number 175                                                                   
  REP. MULDER asked if any other states have guest passenger                   
  laws on automobiles.                                                         
  Number 180                                                                   
  MS. PATTI SWENSON, Staff, Rep. Bunde, responded that there                   
  were no guest passenger laws for automobiles.                                
  Number 194                                                                   
  REP. MULDER offered a technical amendment to page 2, line 1,                 
  to add "watercraft."  No objections were heard; it was so                    
  Number 205                                                                   
  REP. PORTER moved Amendment 1 with friendly amendment.  No                   
  objections were heard; it was so ordered.                                    
  Number 214                                                                   
  MR. JOHN GEORGE, Lobbyist, representing the National                         
  Association of Independent Insurers and the Alaska Outdoor                   
  Council, testified in support of HB 360.  He stated that it                  
  was important to understand that when buying aircraft                        
  insurance you buy two different things, one for the number                   
  of seats you have and two for what the airplane does when it                 
  crashes into something.                                                      
  Number 257                                                                   
  MR. MIKE PANNONE, immediate past president of the Alaska                     
  Airmen's Association, testified via teleconference in                        
  support of HB 360.                                                           
  Number 267                                                                   
  MR. MIKE SCHNEIDER testified via offnet in opposition to HB
  360.  Mr. Schneider noted that HB 360 is special interest                    
  legislation that would treat watercraft and aircraft owners                  
  differently than owners of other types of vehicles and may                   
  pose a constitutional problem.                                               
  MR. SCHNEIDER suggested that owners of aircraft and                          
  watercraft may conclude that they don't need insurance if                    
  this bill passes, since they would be immune to any                          
  liability.  If an owner fails to purchase insurance and the                  
  law is found infirm, the owner would find himself in a bad                   
  legal situation.                                                             
  MR. SCHNEIDER stated that litigation against uninsured                       
  persons in this kind of situation is rare and rarely results                 
  in significant judgments.                                                    
  MR. SCHNEIDER said that HB 360 would make it impossible for                  
  persons who wish to insure their liability to protect their                  
  family if something did happen.                                              
  Number 337                                                                   
  CHAIRMAN HUDSON asked if other states have this kind of                      
  Number 342                                                                   
  MR. SCHNEIDER replied that he did not know.                                  
  Number 349                                                                   
  REP. BUNDE listed 14 states that have guest passenger                        
  Number 360                                                                   
  REP. GREEN asked, even if an operator was not liable under                   
  HB 360, would not the operator be able to contractually deal                 
  with an insurance company?                                                   
  Number 362                                                                   
  REP. BUNDE replied yes.                                                      
  Number 376                                                                   
  CHAIRMAN HUDSON asked Mr. Schneider why he thought this bill                 
  would be declared unconstitutional.                                          
  Number 378                                                                   
  MR. SCHNEIDER replied that since the bill would establish                    
  different classes of people:  those that operate aircraft                    
  and have guest passengers as opposed to those who operate                    
  anything else.  Mr. Schneider believed this would trigger an                 
  equal protection analysis.  Under Alaskan constitutional law                 
  there is a sliding scale analysis where you have to show a                   
  reasonable relationship between the legislative enactment                    
  and the purpose that it seeks.                                               
  Number 410                                                                   
  REP. BUNDE noted that the Department of Law helped craft HB
  360 and did not raise any constitutional problems.                           
  Number 415                                                                   
  REP. PORTER moved HB 360 as amended with individual                          
  recommendations and zero fiscal notes.  No objections were                   
  heard; it was so ordered.                                                    
  CHAIRMAN HUDSON adjourned the meeting at 4:25 p.m.                           

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