Legislature(1995 - 1996)
03/22/1996 03:25 PM House L&C
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
HOUSE LABOR AND COMMERCE STANDING COMMITTEE March 22, 1996 3:25 p.m. MEMBERS PRESENT Representative Pete Kott, Chairman Representative Norman Rokeberg, Vice Chairman Representative Beverly Masek Representative Jerry Sanders Representative Brian Porter Representative Kim Elton Representative Gene Kubina MEMBERS ABSENT All members present COMMITTEE CALENDAR HOUSE BILL NO. 434 "An Act relating to unclaimed property; and providing for an effective date." - PASSED CSHB 434(L&C) OUT OF COMMITTEE HOUSE BILL NO. 533 "An Act relating to the board of directors of the Alaska Aerospace Development Corporation." - PASSED CSHB 533(L&C) OUT OF COMMITTEE HOUSE BILL NO. 482 "An Act relating to state procurement practices and procedures; and providing for an effective date." - PASSED CSHB 482(L&C) OUT OF COMMITTEE CS FOR SENATE BILL NO. 197(L&C) "An Act relating to insurance covering an insured who is a victim of domestic violence and requiring certain disclosures by an insurer." - HEARD AND HELD *HOUSE BILL NO. 489 "An Act regulating auctions and auctioneers; and providing for an effective date." - BILL POSTPONED (* First public hearing) PREVIOUS ACTION BILL: HB 434 SHORT TITLE: UNCLAIMED PROPERTY SPONSOR(S): RULES BY REQUEST OF THE GOVERNOR JRN-DATE JRN-PG ACTION 01/19/96 2486 (H) READ THE FIRST TIME - REFERRAL(S) 01/19/96 2486 (H) STATE AFFAIRS, LABOR & COMMERCE, JUD 01/19/96 2486 (H) ZERO FISCAL NOTE (REV) 01/19/96 2486 (H) GOVERNOR'S TRANSMITTAL LETTER 02/27/96 (H) STA AT 8:30 AM CAPITOL 102 02/27/96 (H) MINUTE(STA) 03/06/96 2990 (H) STA RPT CS(STA) 5DP 03/06/96 2990 (H) DP: JAMES, PORTER, GREEN, ROBINSON 03/06/96 2990 (H) DP: WILLIS 03/06/96 2990 (H) ZERO FISCAL NOTE (REV) 1/19/96 03/22/96 (H) L&C AT 3:00 PM CAPITOL 17 BILL: HB 533 SHORT TITLE: ALASKA AEROSPACE DEVELOPMENT CORP. BOARD SPONSOR(S): COMMUNITY AND REGIONAL AFFAIRS JRN-DATE JRN-PG ACTION 02/28/96 2913 (H) READ THE FIRST TIME - REFERRAL(S) 02/28/96 2913 (H) LABOR & COMMERCE 03/18/96 (H) L&C AT 3:00 PM CAPITOL 17 03/18/96 (H) MINUTE(L&C) 03/20/96 (H) L&C AT 3:00 PM CAPITOL 17 03/20/96 (H) MINUTE(L&C) 03/22/96 (H) L&C AT 3:00 PM CAPITOL 17 BILL: HB 482 SHORT TITLE: STATE PROCUREMENT PRACTICES & PROCEDURES SPONSOR(S): RULES BY REQUEST OF THE GOVERNOR JRN-DATE JRN-PG ACTION 02/09/96 2686 (H) READ THE FIRST TIME - REFERRAL(S) 02/09/96 2686 (H) L&C, STATE AFFAIRS, FINANCE 02/09/96 2687 (H) 2 FISCAL NOTES (ADM, DOT) 02/09/96 2687 (H) 5 ZERO FNS (2-ADM, DCED, DCRA, CORR) 02/09/96 2687 (H) 5 ZERO FNS (DOE, DEC, F&G, GOV, DHSS) 02/09/96 2687 (H) 5 ZERO FNS (LABOR, LAW, DMVA, DNR, DPS) 02/09/96 2687 (H) 2 ZERO FNS (REV, UA) 02/09/96 2687 (H) GOVERNOR'S TRANSMITTAL LETTER 03/18/96 (H) L&C AT 3:00 PM CAPITOL 17 03/18/96 (H) MINUTE(L&C) 03/20/96 (H) L&C AT 3:00 PM CAPITOL 17 03/20/96 (H) MINUTE(L&C) 03/22/96 (H) L&C AT 3:00 PM CAPITOL 17 BILL: SB 197 SHORT TITLE: INS:DOMESTIC VIOL. VICTIMS & DISCLOSURES SPONSOR(S): SENATOR(S) DONLEY, Ellis, Salo, Duncan, Pearce, Zharoff, Lincoln; REPRESENTATIVE(S) Davies JRN-DATE JRN-PG ACTION 01/05/96 2058 (S) PREFILE RELEASED - 1/5/96 01/08/96 2058 (S) READ THE FIRST TIME - REFERRAL(S) 01/08/96 2058 (S) LABOR & COMMERCE 01/16/96 2144 (S) COSPONSOR(S): DUNCAN 02/15/96 (S) L&C AT 1:30 PM BELTZ ROOM 211 02/15/96 (S) MINUTE(L&C) 02/20/96 (S) MINUTE(L&C) 02/23/96 2512 (S) L&C RPT CS 5DP NEW TITLE 02/23/96 2513 (S) ZERO FISCAL NOTE TO SB & CS (DCED) 02/26/96 (S) RLS AT 12:45 PM FAHRENKMAP RM 203 02/26/96 (S) MINUTE(RLS) 02/28/96 2568 (S) RULES TO CALENDAR & 1NR 2/28/96 02/28/96 2571 (S) READ THE SECOND TIME 02/28/96 2572 (S) L&C CS ADOPTED UNAN CONSENT 02/28/96 2572 (S) COSPONSOR(S): PEARCE, ZHAROFF, LINCOLN 02/28/96 2572 (S) ADVANCED TO THIRD READING UNAN CONSENT 02/28/96 2572 (S) READ THE THIRD TIME CSSB 197(L&C) 02/28/96 2572 (S) PASSED Y18 N- E2 02/28/96 2579 (S) TRANSMITTED TO (H) 02/29/96 2955 (H) READ THE FIRST TIME - REFERRAL(S) 02/29/96 2956 (H) LABOR & COMMERCE, FINANCE 03/18/96 (H) L&C AT 3:00 PM CAPITOL 17 03/18/96 3186 (H) CROSS SPONSOR(S): DAVIES 03/20/96 (H) L&C AT 3:00 PM CAPITOL 17 03/20/96 (H) MINUTE(L&C) 03/22/96 (H) L&C AT 3:00 PM CAPITOL 17 WITNESS REGISTER RACHEL MARSHALL, Administrator Unclaimed Property Section Income and Excise Audit Division Department of Revenue P.O. Box 110420 Juneau, Alaska 99811-0420 Telephone: (907) 465-5885 POSITION STATEMENT: Explained HB 434. BOB BARTHOLOMEW, Deputy Director Income and Excise Audit Division Department of Revenue P.O. Box 110420 Juneau, Alaska 99811-0420 Telephone: (907) 465-2320 POSITION STATEMENT: Answered questions on HB 434. AMY DAUGHERTY, Legislative Assistant to Representative Alan Austerman Alaska State Legislature Capitol Building, Room 434 Juneau, Alaska 99801 Telephone: (907) 465-4956 POSITION STATEMENT: Answered questions on HB 533. REPRESENTATIVE ALAN AUSTERMAN Alaska State Legislature Capitol Building, Room 434 Juneau, Alaska 99801 Telephone: (907) 465-4956 POSITION STATEMENT: Sponsor of HB 533. DUGAN PETTY, Director Division of General Services Department of Administration P.O. Box 110210 Juneau, Alaska 99811-0210 POSITION STATEMENT: Spoke on HB 482. JAYNE ANDREEN, Executive Director Council on Domestic and Sexual Assault Box 111200 Juneau, Alaska 99801 Telephone: (907) 465-4356 POSITION STATEMENT: Testified in support of SB 197. SENATOR DAVE DONLEY Alaska State Legislature Capitol Building, Room 11 Juneau, Alaska 99801 Telephone: (907) 465-3892 POSITION STATEMENT: Sponsor of SB 197. KEN SYKES, Analyst III Market and Conduct Division of Insurance Department of Commerce and Economic Development P.O. Box 110805 Juneau, Alaska 99811-0805 Telephone: (907) 465-2564 POSITION STATEMENT: Answered questions in SB 197. MARGARET DOWLING, Attorney State Farm Lessmeier and Winters One Sealaska Plaza, Suite 303 Juneau, Alaska 99801-1249 Telephone: (907) 586-5912 POSITION STATEMENT: Testified against SB 197. ACTION NARRATIVE TAPE 96-27, SIDE A Number 001 The House Labor and Commerce Standing Committee was called to order by Chairman Pete Kott at 3:25 p.m. Members present at the call to order were Representatives Sanders, Masek, Kubina, Elton, Rokeberg and Kott. Representative Porter arrived late. HB 434 - UNCLAIMED PROPERTY Number 011 CHAIRMAN PETE KOTT announced the first order of business would be HB 434, "An Act relating to unclaimed property; and providing for an effective date," introduced by Rules by request of the Governor. RACHEL MARSHALL, Administrator, Unclaimed Property Section, Income and Excise Audit Division, Department of Revenue, explained HB 434 has to do with some cleanup areas. Many of recommendations in the bill were from an audit done by the Office of Management and Budget (OMB). The bill is also in line with the uniform law commissioner's 1995 revision to the Uniform Unclaimed Property Act. MS. MARSHALL said Section 1 cleans up language for property that is dividend reinvestment plan oriented. It specifically addresses mutual funds because they are not actively monitored by an owner. Mutual funds become unclaimed property usually because a mailing has not been received by the owner. By the time a second mailing hasn't been received by the owner, it is flagged as unclaimed property. Ms. Marshall noted this is in line with the Uniform Law Commission's changes for 1995. Number 284 MS. MARSHALL explained Section 2 was a recommendation by OMB which streamlines reporting amounts. Currently, there are amounts that are $25 for certain types of property and $50 for other types of property. This would lump sum all types of property into a $100 aggregate. She said it is up to the holder, which is a company, an association, a bank or financial institution, etc., reporting the property to either itemize those amounts or they could list them, for example, as 16 unclaimed checks in the amount $14, instead of listing them as 2 cents, 4 cents, etc. MS. MARSHALL said Section 3 provides for the filing dates to be the same, November 1. Currently, life insurance companies report by May 1, and remit the property November 1. All other companies report the property November 1, and remit the property May 1. She said this is very confusing for holders. Why not clean up all your records all at once - once a year and call it good. MS. MARSHALL referred to Section 4 and said it has to do with increasing property values which holders are required a due diligence requirement to contact the owner one last time prior to recording it as unclaimed property and to make this dollar amount consistent with the reporting amount, the aggregate amount and the publication amount - all to be $100. Number 417 CHAIRMAN KOTT referred to Section 4 and asked Ms. Marshall to explain how it would work. MS. MARSHALL explained that section is for the holders to send their due diligence requirement. Depending on the property, the dormancy period which is five years on the average, for five years a bank statement has been going to you once a month - mail has been sent to your address and it is being returned. This section asks that property that is at a level of $100 or more, one more time you must send them a notice before it is reported as unclaimed property. For most of the other items under $100, you already have significant flagging in your system that the owners have moved, but because the value is $100, they would be asked to try to contact the person one more time before the property is reported. Currently, if it is under $50, you don't have to send out the due diligence notice. By increasing the amount to $100 would be consistent with the increase to the reporting amount and publication amount. She noted 120 days before the unclaimed property is reported by a holder, they would send the owner one more written notice. CHAIRMAN KOTT asked how many previous notices Ms. Marshall would have sent. MS. MARSHALL said she wouldn't have sent any. This is the responsibility of the company holding the money. She noted it varies depending on what type of property it is. If it is wages, the company may have only sent that last paycheck one time. If it is a bank, they automatically send a statement every month and have for the last seven years. Number 599 MS. MARSHALL referred to Section 5 and said the way the current law reads, not later than March 1 of each year, the department is required to publish the names of owners who have property in excess of $50 or more. She stated the Uniform Law Commission has made a change to the uniform law and the department is trying to follow suit with that. More and more property is being reported every year and her section is not given any more time to key the information into the computer system and to work with the holders in returning the property prior to publication. By having an extra four months, the department would have enough time to administer it and publish it when the resources are there to handle the incoming phone calls. Although it says not later than March 1, with a staff of three they have to start at the beginning of February in order to hit Anchorage first and Fairbanks, because you can't publish names around the whole state at the same time or the phone lines would be clogged. Ms. Marshall said by moving the time to June 30, it would leave the administrator or the department manageable time to publish names when the office and resources can handle it. She noted the Uniform Law Commission's change was no later than November 1, so the department would still have a shorter deadline than the commission's deadline. Number 790 MS. MARSHALL referred to Section 6 and said it has to do with requirements to publish a owner's last known addresses. She said currently, the statute requires the owner's address be put in the publication. She explained in order to clean up areas, the owners are listed under the last known city. The reason this is important is because the owners look for their name in each town they lived in instead of using addresses. She said she lists the names by city because it is much easier for people to be found. CHAIRMAN KOTT asked if the publication is a handbook. MS. MARSHALL explained the names are inserted in newspapers statewide. They are inserted in the Bush Mailer which goes to 214 communities, the Anchorage Daily News, the Fairbanks News Miner and the Juneau Empire. Ms. Marshall said each year they call the newspapers and ask what their highest circulation date is and the publication is inserted in that date. CHAIRMAN KOTT asked if the names are published as a community service item or if there is a cost. MS. MARSHALL said she would be reviewing that area because the names are supposed to be published for two consecutive weeks and the department wants to make it one time. CHAIRMAN KOTT asked what is done for the rural areas that are not serviced by a newspaper. MS. MARSHALL said she takes things to library. She also noted the publications are given to the legislators and there has been a good response. Number 995 REPRESENTATIVE NORMAN ROKEBERG said he identified a constituent of his in the publication he received. He stated it does work. MS. MARSHALL noted the information is all public information. When a legislator does call a constituent to inform them they have unclaimed property, they are going to want to know what kind of a dollar amount it is. REPRESENTATIVE ROKEBERG asked if he could find out by calling the Unclaimed Property Office. MS. MARSHALL indicated he could as it is public information. Number 1035 MS. MARSHALL said Section 7 is in line with making all the dollar amounts consistent. Currently, the department publishes a name for property of $50. That amount would be increased to $100. Not only the cost for publishing has become expensive, but there are some easier and less costly methods for putting peoples' names out in order for them to be located. One is the Internet which doesn't cost anything. She said they could provide the items of $99 by the Internet and $100 or above would still be published. CHAIRMAN KOTT questioned how many people have unclaimed property below $99. MS. MARSHALL said she isn't sure. She said the number would be a lot less than then amounts above $100. Ms. Marshall said it may reduce the publication by one page or maybe two. She noted it is an eight page circular. It would probably be kept at eight pages because she would also list the Internet address for the items under $100 and give other ways to look for property of less than $100. Number 1173 MS. MARSHALL referred to Section 8 and said the people who are reporting unclaimed property, the holders, sends the department their report on November 1. She said she advertises it and then by May 1, if those people haven't come forward then the holder sends the department another report with the changes of the people who have come forward. Ms. Marshall noted some of those people have come forward and have not completed their paperwork so they are still included on the list. Some are deleted off the list. They have to add interest and deduct service charges on a second report. The Uniform Law Commission and OMB have recommended that they do a report/remit. The holder would send both the names and money November 1. When people call after seeing their name in the paper, the department would have their money and owners wouldn't have to go to the holders. The way things currently are is by the time the owners call the holders, the money has been sent to the department. MS. MARSHALL referred to Section 9 and said this section has to do with people who help locate owners. They are called heir finders, fee finders and other names. Ms. Marshall said the department gets an awful lot of complaints. Some finders charge people 35 to 50 percent of their unclaimed property. This section asks for two items. She said property that is on its way to the department cannot have a charge put on it until it has been in the department's possession for 24 months, which is a nice window period for the department to be able to return the property to the owner. This time period would give the property time to work through the system. It would have worked through due diligence through the holder and through the publication period. After that 24 month period if the department still hasn't been able to locate the owner, someone else could assist. Ms. Marshall explained many states are going to a percentage the fee finders can collect. She said 15 states have a 10 percent limit, 5 states have a 15 percent limit, 5 states have a 20 percent limit and 2 have a 5 percent limit. Ms. Marshall said the department wanted to be in line with 33 other states to have some kind of a cap on this fee. The fee finders aren't doing all the work, the holders and the state are and for the cost of a stamp and a phone call, they're charging a lot of money. Number 1359 REPRESENTATIVE JERRY SANDERS asked Ms. Marshall if she has an idea as to what percentage of the returns are instigated by a finder. MS. MARSHALL said she doesn't have that information. She noted that sometimes the owner will send her copies of the agreement with the fee finder, but that doesn't necessarily mean that the owner actually pays them or all the property that they located was included in that fee finder agreement. Ms. Marshall said if she had to guess, she would say it may be between 5 and 10 percent. She noted the larger the value of the property, the more someone is hounded. REPRESENTATIVE SANDERS said, "The reason I asked, and I may be completely backwards if -- and you know, I'm not going to argue this point. I just want to bring it up (indisc.). These people are performing a service because they're looking these people up - people who obviously haven't seen it in the paper and you obviously haven't gone to find out where they moved to. So if these guys are doing that and they do it for a high amount, I could understand that. On the low amount, you know for $200 at 10 percent I wouldn't write their name down for $20, you know and they wouldn't either, and people might want their $200 back. So I'm wondering if you might want to put in a variation there. Maybe 50 percent on anything under $500 or something and 10 percent over that. It is just something I wanted to bring out. I'm not going to push it, I don't care, but everybody knows about it. Thank you." CHAIRMAN KOTT noted he also had a concern in that area. Number 1483 REPRESENTATIVE KIM ELTON said anymore, this isn't a tough business. You can buy CD Roms that gives every name listed in every phone book in the United States. All you have to do is a name search. Number 1515 BOB BARTHOLOMEW, Deputy Director, Income and Excise Audit Division Department of Revenue, explained that for the department, there are three components to that change which is having to require that the fee finder has to tell the owner the value of the property that they found. The fee finder can't contact the owner for 24 months so that the state can have a chance to try and refund the property for free. The third part is the percentage cap which is the least important of the three to the department. Mr. Bartholomew noted the idea of the bill is to reduce some of the paperwork and get back to the function of finding owners. CHAIRMAN KOTT said there is a lot of technology that would make it fairly simple to locate people, but even with that it obviously isn't working otherwise there wouldn't be eight pages of unclaimed property. There may be something more to it than just looking at CD Roms. Number 1593 MS. MARSHALL said the owners are being hit up for money before the property comes to Unclaimed Property. Sometimes she hasn't even had a chance to try and find them. Ms. Marshall said on a $5,000 claim, $1,400 is a lot. REPRESENTATIVE SANDERS said he didn't have a problem with the 24 month time period. He asked Ms. Marshall if she what she thought about changing the percentage rate to 25 or 50. MS. MARSHALL indicated she would love to hear any recommendations the committee has. Number 1644 REPRESENTATIVE PORTER referred to money being held by the state for two years and asked what the disposition of the interest is on the money. MS. MARSHALL said property is only paid interest if it is interest bearing when it comes to the state. Number 1671 MR. BARTHOLOMEW explained the department is required to deposit the money into the general fund, but if it was an uncashed warrant that was sitting in someone's desk drawer where interest wouldn't be earned, the department would then not pay interest on the money when it is returned to the owner. If a savings account was received that was an interest bearing account, then interest would be paid on that account as if it were left in the bank. Interest is paid on property if it was earning interest when it was submitted to the state. He noted the general fund would benefit from the interest earned during that interim. Number 1696 MS. MARSHALL explained Section 10 defines business associations to include mutual funds. MS. MARSHALL informed the committee Section 11 includes warrants under intangible property. MS. MARSHALL referred to Section 12 and said, "The state is required to - once - a 120 days before November 1, the holder sends out a written notice and once we get it we're supposed to send out a written notice. It is a duplicate mailing notice. In the next few months after we receive the property, we're gonna advertise it anyway or have it out on the Internet. We're asking that that written notice be deleted from the department's responsibilities. OMB also had that in their recommendations for their audit this year too." MS. MARSHALL said Section 13 asks that this take effect in July. Number 1750 CHAIRMAN KOTT questioned what section asks that the names be published one time. MS. MARSHALL informed him it is Section 5. Number 1791 MR. BARTHOLOMEW informed the committee the department spends $22,000 to $25,000 to do one statewide publication. Of the total cost of the program, which is about $188,000, that is a lot of money and to do it twice.... There would have to be an increase in their budget to do it twice. He said they haven't actually been doing it twice. CHAIRMAN KOTT asked how successful the program is and how many claims are actually returned to the rightful owner. MS. MARSHALL said there is about a 30 percent return to the owner and that is high. MS. MARSHALL informed the committee there is a gentleman in Anchorage where the department has had about $250,000 for him. The department has a good address for him. Ms. Marshall said she asked him to sign a form that says he wants his unclaimed property and she'd be happy to send it to him. He has so much money he doesn't know what to do with it and hasn't requested his money from Unclaimed Property. She noted he is an attorney. Number 1911 REPRESENTATIVE GENE KUBINA asked what happens to the $250,000. MS. MARSHALL said it is in the general fund. She said when he dies and his children want to come forward for it, they can have it. REPRESENTATIVE KUBINA asked how long it has to be kept in the general fund. MR. BARTHOLOMEW said forever. REPRESENTATIVE SANDERS said he thought it was for seven years. MS. MARSHALL said that was the escheat law that went out in 1986. This law came in September, 1986. MR. BARTHOLOMEW explained there is a unclaimed property trust account and a balance is kept in there almost equal to what the department returns annually. The rest of it actually gets deposited into the unrestricted general fund. If there was ever a claim in excess of what is collected in a year, which is $2.5 million to $3 million, the department would have to get authorization for all past deposits. Even if the example of the $250,000 came in a year, the department would have plenty of authority to return it out of those annual receipts. There may be a smaller deposit into the general fund, but it wouldn't require an appropriation. Close to $2 million a year would flow into the general fund and a large run on the fund would shrink that deposit. He noted he doubts there would ever be a year that would exceed the deposits. Number 2001 CHAIRMAN KOTT closed public testimony as there were no further witnesses to testify on the measure. Number 2021 REPRESENTATIVE SANDERS made a motion that on page 5, line 3, after the word "property" add "provided the property is over $500;". It would then read: "(1) the fee or compensation if not more than 10 percent of the value of the property provided the property is over $500;". REPRESENTATIVE ROKEBERG made a motion to amend the amendment to say, "20 percent of the value..." REPRESENTATIVE ELTON said he would like to make a friendly suggestion that it read, "the fee or compensation is not more than 20 percent provided that any property with a value over $500 the fee is not more than 10 percent." REPRESENTATIVE ROKEBERG said he would rather have the 10 percent first because people will read the statute that way. He said, "Not more than 10 percent of the value of the property in the amount of $500 or under 20 percent of the value of the property under $500." CHAIRMAN KOTT said conceptually, we want to establish a fee of no more than 10 percent of property valued at $500 or more, and less than $500, the percentage will be no more than 20 percent. CHAIRMAN KOTT asked if there was an objection to the friendly amendment to the amendment to the amendment. REPRESENTATIVE SANDERS said he would like to point out that at $490, they get 20 percent which is almost $100. At $500, they get 10 percent which is $50. Number 2185 CHAIRMAN KOTT said without objection, conceptual Amendment 1 is adopted. Number 2189 REPRESENTATIVE ROKEBERG made a motion to move CSHB 434, as amended, out of committee with individual recommendations and the attached zero fiscal note. CHAIRMAN KOTT asked if there was an objection. Hearing none, CSHB 434(L&C), was moved out of the House Labor and Commerce Committee. HB 533 - ALASKA AEROSPACE DEVELOPMENT CORP. BOARD CHAIRMAN KOTT announced the next order of business would be HB 533 "An Act relating to the board of directors of the Alaska Aerospace Development Corporation." REPRESENTATIVE ROKEBERG made a motion to adopt CSHB 533(L&C), 9- LS1731/F, Lauterbach, 3/20/96. CHAIRMAN KOTT asked if there was an objection to the adoption of the committee substitute. Hearing none, it was so ordered. CHAIRMAN KOTT informed the committee about the amendments adopted at the previous hearing on the measure. Amendment 1 on page 2, deleted "the executive director of the Alaska Science and Technology Foundation;". Amendment 2 was on page 1, line 8, where two state residents was added. Amendment 3 was on page 2, line 28 and 29, where the board of directors of the corporation shall select the chair and vice-chair. The last amendment was on page 2, line 7, where "aerospace" was added. He explained those amendments have been incorporated into the committee substitute. Number 2356 REPRESENTATIVE ELTON said, "I think you held this bill because I had a proposed amendment. My proposed amendment was going to be on page 2, line 13, eliminate "nonvoting." So it would be one member who has recognized... And then on page 2, line 6, three members. So you're substituting the international expert for one of the four who also have aerospace or commercial space industry (indisc.). Talking to the sponsor and representatives of the sponsor, their preference was simply delete paragraph 6, beginning on line 13. The reason I'm offering the amendment is instead of paying for nine people to travel or ten people to travel back and forth to the board meeting, this is nine - (indisc.) pay for nine. The sponsor indicated he had no -- he would prefer just eliminating paragraph 6 beginning on line 13 of page 2, rather than (indisc.)." CHAIRMAN KOTT clarified the amendment which was to delete subsection (6) on line 13, page 2, which also affects line 6, page 1, where ten would then become 9. Number 2413 AMY DAUGHERTY, Legislative Assistant to Representative Alan Austerman, said it was her understanding that they just wanted to delete lines 13 and 14 on page 2, so that there would be just nine members. CHAIRMAN KOTT asked if the committee understood the amendment. He then asked if there was objection. Number 2428 REPRESENTATIVE KUBINA asked if the word "and" needed to be deleted also. The response was in the affirmative. Number 2432 REPRESENTATIVE SANDERS objected for clarification. He questioned the purpose of the amendment. REPRESENTATIVE ELTON responded lower costs. Instead of transporting ten people, you're transporting nine people to the board meetings. CHAIRMAN KOTT noted it would be the nonvoting member. REPRESENTATIVE ROKEBERG asked if the famous person is supposed to be a voting member. REPRESENTATIVE ELTON said, "We're going to assume if there is a famous person, they're going to be one of the other nine members." REPRESENTATIVE SANDERS explained his only concern is that if this is going to be a viable industry in the state, we're going to have to deal internationally and we're going to need all the help we can get. He said he wanted to make sure there will be some high powered people on the board. He said he thought maybe the committee was eliminating this person and he doesn't want to do that. REPRESENTATIVE ELTON said the effect of the amendment would be that the international slot would be eliminated. The assumption would be that in subsection (5), those four people with aerospace or commercial space industry expertise would already have that knowledge. CHAIRMAN KOTT noted the sponsor concurs with the amendment. TAPE 96-27, SIDE B Number 001 REPRESENTATIVE ALAN AUSTERMAN said if he understands the amendment right on line 6, page 2, the four members have been changed to three members. CHAIRMAN KOTT indicated that was incorrect. He explained the effect of the amendment is to remove the one nonvoting member who has recognized prominence and influence within the international space industry. That would come out of the bill. Subsequently, that would effect, on page 1, the make up. It would be reduced from ten to nine. REPRESENTATIVE AUSTERMAN said he endorses the amendment. CHAIRMAN KOTT said without objection, that conceptual amendment will be adopted. Number 066 REPRESENTATIVE ROKEBERG made a motion to move CSHB 533(L&C), as amended, Version F, with individual recommendations and a zero fiscal note. CHAIRMAN KOTT asked if there was an objection. Hearing none, CSHB 533(L&C), as amended was moved out of the House Labor and Commerce Committee. HB 482 - STATE PROCUREMENT PRACTICES & PROCEDURES Number 102 CHAIRMAN KOTT announced the committee would hear HB 482, "An Act relating to state procurement practices and procedures; and providing for an effective date," introduced by the Governor. He informed the committee there has been two other hearings on the measure. DUGAN PETTY, Director, Division of General Services, Department of Administration, came forward to address the bill. At the last meeting on the bill there were five concerns that Representative Rokeberg had with various sections. He said he got together with Representative Rokeberg and in the committee member's packets there are four proposed amendments. Number 129 REPRESENTATIVE ROKEBERG moved that Amendment 2 be adopted. REPRESENTATIVE ELTON objected for the purpose of an explanation. REPRESENTATIVE ROKEBERG said it relates to Section 4. This particular section in the bill had a threshold of 5,000 square feet to allow leases to go into the marketplace and to qualify for the small procurement procedures. He said the change would be to go from 5,000 square feet to 3,000 square feet. There is also the addition of providing public notice to be prospective (indisc.) in the market area. It is his understanding that under the small procurement procedure basis they would only have to have three potential offers. His concern was that they need to at least publish that to invite anybody who would have space available an opportunity to make an offer. They could do it under the procedures of the small procurement code. Representative Rokeberg said he thinks this is a good accommodation and recommends approval. Number 182 REPRESENTATIVE ELTON said the offering would not be threatened if an offer was skipped. He said he is assuming the department would be able to work off of the list that they maintain in their office. If they happen to miss somebody that says, "Hey, I've got 3,000 feet," it is not going to threaten. REPRESENTATIVE ROKEBERG indicated that is correct. Number 203 MR. PETTY explained the department would either put a notice in the paper or they would go off of their list of bidders on their bidders list. If somebody had not been placed on the department's bidder list because they had not applied or they missed the add in the paper, they would be under no obligation to give them further notice. REPRESENTATIVE ELTON withdrew his objection to the adoption of Amendment 2. CHAIRMAN KOTT asked if there were further objections to the adoption of Amendment 2. Hearing none, Amendment 2 was adopted. Number 227 REPRESENTATIVE ROKEBERG moved that Amendment 3 be adopted. CHAIRMAN KOTT said there is a motion to adopt Amendment 3 which deals with Section 5. REPRESENTATIVE ELTON objected. REPRESENTATIVE ROKEBERG explained the amendment does two things. The way the bill is currently drafted, it allows the department to renegotiate a lease right up to the last day of the natural expiration of the lease. The insertion would be on line 12. At the end of the first paragraph in the amendment it reads, "and has at least 6 months remaining under the lease term,". He explained the reason he wanted this inserted is that in a larger urban area where there is a dynamic lease market, he thinks it is essential that the other lessors have an opportunity to bid on a major lease hold acquisition if they are about ready to expire. As a practical matter in the marketplace, landlords are aware of lease expirations and track them and even plan for them to give themselves to opportunity to bid on them. Without some type of a cutoff point, this would disruptive to the natural flow of the marketplace. Representative Rokeberg said although he would like to see a slightly longer time period, he did agree on a six month provision. REPRESENTATIVE ROKEBERG referred to the subsections and said a 15 percent savings was added and a 10 percent savings if there is ADA requirement modifications. He explained the reason those figures were inserted was to create a higher threshold. When we're talking about rents that could be expressed in square footage of about $1.50 a square foot, per month, a 10 percent decrease would only be 15 cents a square foot. He noted that may be substantial in some instances, it depends on the market conditions. Representative Rokeberg said he thinks a higher threshold will benefit the department because they might be able to use the statute as a tool to generate higher achievable savings. Number 359 REPRESENTATIVE ELTON referred to the numerous effective dates of the bill, and asked Representative Rokeberg if he means to change the first report is due August 31, 1996, when the original bill says the report is due in 1997. REPRESENTATIVE ROKEBERG explained Mr. Petty assisted him in the drafting of the amendments. MR. PETTY said it probably was intended to be 1997, and then it must cover the fiscal year for 1997. Number 392 REPRESENTATIVE ELTON said he would offer that as a friendly amendment. The report would be due August 31, 1997. REPRESENTATIVE ROKEBERG explained it was a typographical error. Number 400 REPRESENTATIVE ELTON withdrew his objection to Amendment 3. CHAIRMAN KOTT asked if there were further objections. Hearing none, Amendment 3 was adopted. Number 409 REPRESENTATIVE ROKEBERG moved that Amendment 4 be adopted. He explained the amendment make it symmetrical with the terms expressed in Amendment 2. He indicated it is a conforming amendment. CHAIRMAN KOTT asked if there was an objection to Amendment 4. Hearing none, Amendment 4 was adopted. Number 438 REPRESENTATIVE ROKEBERG moved that Amendment 5 be adopted. REPRESENTATIVE ELTON objected to the adoption of Amendment 5. REPRESENTATIVE ROKEBERG explained Amendment 5 does two things. It (indisc.-coughing) the time allowable for a claim up to 90 days. The last sentence of the amendment exempts lease rate adjustments that are stipulated in the lease. It would exempt those types of things from the time period. Representative Rokeberg explained in many leases for office space or space, there are escalation clauses for utilities and things of this nature. Because of the delays in receiving bills and accounting for them, etc., the back charges many times are delayed and it is really difficult to meet an artificial deadline. The state does have these types of escalation in their leases based on percentages of consumer price indexes (CPIs) and various other factors. Representative Rokeberg said he thinks this is consistent with common business practices and the department doesn't have an objection to it. REPRESENTATIVE ELTON said that is three months that the state may be at risk for office space. He said that seems like a long time for him. MR. PETTY informed the committee members that currently the statue has no time limit on when a claim against the state and the contract controversy may be brought for any type of contractual circumstance for which there is a claim and a controversy. He said they started out with 30 days. The question here is really trying to have a reasonable period of time in which the contractor must bring their claims so that they can't simply wait a year or two and bring it in later. He indicated the department is comfortable with 90 days. Mr. Petty said with respect to the lease adjustment circumstance, the department's bid document for lease includes a specific clause that says, "So much of your cost are uncontrollable for utilities or operational costs that are affected by inflation, you can come in and request an increase if the consumer price index has gone up high enough to warrant that." He said the fact that somebody would overlook that or be late on it, the department doesn't believe it should keep them from coming back and the department honoring the bargain that was initially stuck. Number 564 REPRESENTATIVE ELTON withdrew his objection. REPRESENTATIVE ROKEBERG said there are two different things that are being discussed with regards to the amendment. He said lease hold interests are excluded from this 90 day (indisc.), it is the other contracts in the whole global universe of other claims that are covered by the 90 day.... CHAIRMAN KOTT said Amendment 5 has been adopted. Number 599 REPRESENTATIVE ROKEBERG explained he had one more amendment and then directed the committee to page 14, Section 40. He then moved conceptual Amendment 6 which deletes page 14, line 31 and page 15 line 1. On page 15, line 2, delete the subsection 35 and add 34. This deletes Section 34 as it is presented in the bill which affects the Governor's office. Number 35 becomes 34. REPRESENTATIVE ELTON objected. He said he wouldn't have a problem with it if the same thing is done to the legislature that does these same kinds of procurement and is exempted. It seems unfair to say that the legislature can go out and hire a law firm in Washington, D.C., to lobby Congress and not have to comply with the procurement code, but the Governor's office does have to comply. REPRESENTATIVE ROKEBERG stated if his colleague persists in this line, he is going to suggest adding a further amendment to delete subsection 33 from the bill which relates to Alaska Seafood Marketing Institute (ASMI). REPRESENTATIVE ELTON said we can make whatever amendment offers we want. This amendment doesn't work and he can think of many examples in which the Governors office have gone out for procurement which are in the interest of the state. He said this would essentially mean that after the Exxon Valdez oil spill, the Governor's office would have to wait on some procurement for a..... He then asked Mr. Petty how long the normal period of time is when you go through the state procurement code MR. PETTY said depending on the complexity, it could be 120 days to 300 days. He said one of the issues is it is simply not possible to use the competitive bid or the RFP process to acquire effectively some of these items. He said Section 40 doesn't identify if it would be lobbying, public relations or advertising for line agencies of government which is very particular to the Governor's office. Mr. Petty said he thinks that it is a recognition that at some level within the Executive Branch, there are times when they must act, they must buy direct media or advertising in a particular market to influence a vote in Congress or to have lobbying that is effective within the political influence that the Governor is obligated to exercise. It is simply not possible to use a RFP process to buy that kind of direct media or advertising or to get the kind of lobbyists to that is necessary to effectively conduct the Governor's business in Washington, D.C. Number 780 REPRESENTATIVE PORTER questioned what the current law is. MR. PETTY explained the law requires that these type of contracts go through the invitation to bid process or the RFP process or an exception process such as a sole emergency or limited competition procurement. REPRESENTATIVE PORTER said the Governor's office has been dealing with this impossibility for the last 40 years. MR. PETTY said very ineffectively. Number 798 REPRESENTATIVE ELTON said he doesn't think it is a partisan issue. It seem to him that it ties the hands of the Governor, whoever it is. In services like lobbying and public relations, you don't necessarily want the cheapest. You want to go with the people who can do the work and can do it quickly and in a timely manner. A 120 day wait is not a timely manner and the state procurement code is designed to get you the least expensive. You can do all kinds of waivers and other things, but the purpose here is to get the best as fast you can. REPRESENTATIVE ROKEBERG indicated confusion. This includes both lobbying, public relations and advertising. He said he sees no reason why advertising cannot be conducted under the standard procurement procedures. If we need to change the procurement code lets change the code and not start exempting. This would be the 35th exemption to the ASMI. He said if there is a circumstance that is important, for example like the Exxon Valdez, he would think the Governor has some discretionary funds he would draw on immediately. Number 900 MR. PETTY said the funding may be available within the budget, but the expenditure of the fund would be governed by the procurement code. If it were over 25,000, under current statute, it would have to go out as an RFP or an invitation to bid, unless it went out under the sole source limited competition or emergency process. REPRESENTATIVE PORTER said there is the procurement code with 37 exceptions to it, all for different reasons and concerns. The problem obviously isn't in the exceptions, the problem is the procurement code. If we exempted the Governor's office, all motivation for really changing it is gone. Number 986 REPRESENTATIVE KUBINA said you wouldn't be exempting the Governor's office. You're only exempting them on lobbying, public relations and advertising. He said think what you guys have done, as the majority in the legislature, this year hiring people that are experts. He indicated they didn't go out and do a public bid and allow RFPs go out on the fish and game experts that were hired. REPRESENTATIVE PORTER pointed out there is a separation of powers issue that comes into the procurement code. What we do is probably what the Democratic majority did six years ago. That is the way it has been for different majorities. Representative Porter said what he is talking about is the effect of the procurement code on all the other agencies. REPRESENTATIVE KUBINA said the procurement code is obviously a very complicated thing. He said look what happens with the federal government procurement code. We're not talking about going out buying nuts, bolts, tools and clean supplies. We ought to have rules and we do have rules. He questioned how you can go on a competitive bid for a lobbyist or public relations. REPRESENTATIVE PORTER said he totally agrees with Representative Kubina. If that is a realistic problem, why shouldn't it be a problem for the Department of Public Safety, the Department of Natural Resource, the Department of Corrections and not for the Governor. REPRESENTATIVE KUBINA said he isn't sure they're out buying lobbyists or public relation firms. REPRESENTATIVE SANDERS said the Department of Transportation does. Number 1155 MR. PETTY explained that this is not intended to be an out for (indisc.) agencies of government because he believes they are able to anticipate their need for public relations. The Department of Commerce does an effective job of acquiring their public relations and advertising through an RFP process, but they have an ongoing program where they can project that. Oftentimes that doesn't happen at the Governor's office level. There simply isn't time to do that kind of RFP process to make it work and that is why this special exemption was only intended to cover the Governor's office. There are circumstances that the Governor's office can anticipate far enough down the line that they might be able to use an RFP process. Mr. Petty explained the Governor's office deals in political issues that are fundamentally different. REPRESENTATIVE ROKEBERG suggested putting some of these people on a retainer so you wouldn't have to go through the process. He said he thought we already had a representative in Washington, D.C., Mr. Katz. REPRESENTATIVE ELTON said he is in an odd position where he doesn't disagree with some of what he has heard. He said he would like to note that if we go for the argument that the Governor's office ought to share the same pain felt by the agencies, the logical extension of that is so should the legislature because that will might force the legislature to take a good look at the procurement code and figure out how we can make it work for everybody. He said if we do this, where tying the hands of one of the elected officials in the state that probably has a very legitimate interest in what is happening in Congress, just as the legislature does. He said he would find this easier to accept if the rules were applied equally to everybody and we're not doing that with the proposed amendment. CHAIRMAN KOTT asked if there were further questions for Mr. Petty on the amendment. There were no further questions. Chairman Kott asked if there still was an objection. REPRESENTATIVE ELTON maintained his objection. Number 1431 A roll call vote was taken. Representatives Masek, Porter, Rokeberg, Sanders and Kott were in support of the amendment. Amendment 6 was adopted. Number 1488 REPRESENTATIVE ROKEBERG made a motion to pass HB 482, Version A, as amended, out of committee with individual recommendations and the accompanying fiscal note. CHAIRMAN KOTT asked if there was an objection. Hearing none, CSHB 482(L&C) was moved out of the House Labor and Commerce Committee. SB 197 - INS:DOMESTIC VIOL. VICTIMS & DISCLOSURES Number 1555 CHAIRMAN KOTT announced the next order of business would be CSSB 197(L&C), "An Act relating to insurance covering an insured who is a victim of domestic violence and requiring certain disclosures by an insurer." JAYNE ANDREEN, Executive Director, Council on Domestic and Sexual Assault, testified in support of SB 197. She said as the committee already heard in previous testimony, insurance discrimination in terms of domestic violence is not a problem that has been identified in Alaska. However, they do have documentation that it has been a significant problem in California, Delaware, Iowa, Minnesota, Oregon, Pennsylvania and Washington. In 1994, the U.S. Judiciary Subcommittee on crime and criminal justice found that 8 of the 16 major insurance companies were using the history of domestic violence victimization as a factor on whether or not to insure and how much to charge for insurance premiums. In March, 1995, the Pennsylvania Insurance Commission found that 28 percent of insurers responding to a survey utilized domestic violence as a underwriting criteria. Ms. Andreen said something she heard at the previous meeting was that this is a problem that pertains only to health insurance. She said they have found that is not the case. There is documentation that battered women's shelters have been denied professional and property liability. Not because they posed an increased risk, but because many of their workers were former victims of domestic violence. She said there is documentation of this impacting life, mortgage and homeowners insurance. There is also documentation of coverage being denied for injuries sustained in domestic violence in spite of there being an existing policy in place. Based on a study conduced in 1986, over 13,000 women living in Alaska have obtained medical treatment because of injuries they sustained in domestic violence. Ms. Andreen said they are concerned that because there has been so much publicity on the national level, victims here in Alaska have stopped and will stop seeking necessary medical treatment. They will stop seeking necessary counseling and will refrain, when they do seek services, from identifying the cause of those injuries. Ms. Andreen said Ms. Hugonin from the Network on Domestic Violence and Sexual Assault talked about Maternal, Child and Family Health receiving a federal grant to train medical providers on how to identify domestic violence injuries. She said she is concerned that if they know their records would be used to deny a victim future insurance that they will stop identifying and documenting those injuries. MS. ANDREEN referred to the previous meeting where there was a question, "Doesn't this bill allow victims to stay in an unsafe situation?" She said that is not the case. Victims do not choose to live in a violent lifestyle. The first time there is violence, the victim assumes that it is a one time event. The perpetrator is usually apologetic and promises it'll never happen again. Eventually, over a period of time a pattern is established and it becomes harder and harder for a victim to leave. Ms. Andreen pointed out that there is a number of economic, social, family value, and safety issues that a victim has to factor in when deciding to leave a relationship. Without this type of protection, it is possible that loss of health insurance and other types of insurance for a victim and her children could be a deciding factor for a victim to stay in an abusive relationship where she already has the insurance. MS. ANDREEN stated she doesn't agree with the position established by Mr. Lessmeier. She said she does acknowledge that State Farm has voluntarily agreed, in other parts of the country, to stop its discrimination policy, but when they talk about using medical conditions as a criteria for determining whether or not someone is eligible for insurance coverage, she is concerned this will indirectly open the door to discriminate against victims of domestic violence. She said it has been found with other insurance companies that it is sometimes used to target the types of injuries that result in domestic violence as the criteria for not insuring (indisc.--coughing) increasing their premiums. MS. ANDREEN said they support the need for the required disclosure as a standard policy for all insurance, since a person applying for an insurance policy must be notified that they're not receiving that insurance. She said she doesn't believe it would be that much more difficult to give the reason why. Ms. Andreen said she thinks it would be very difficult for the general public to know that they have the right to ask why they're being rejected. She explained they also support the need for a strong confidentiality clause that insurance companies need to keep any information they have about domestic violence as confidential information because of the risk it can place to the victim if that information is disclosed elsewhere. Number 1969 REPRESENTATIVE PORTER said as he reviewed the bill and Mr. Lessmeier's concerns, the first question that came to his mind was, "How does a insurance company determine that an injury was a result of domestic violence?" MS. ANDREEN said it is her understanding that it could happen in a number of different ways. If it is an existing policy, then insurance companies have access to the medical records. If the person sought medical treatment or counseling services, where the insurance company is being used to pay for that, the insurance company has access to those records. REPRESENTATIVE PORTER explained he has been involved in a couple of cases, as an employer, and never had access to counseling records. REPRESENTATIVE KUBINA asked Ms. Andreen if she meant records of the counseling sessions or the billing for counseling. REPRESENTATIVE PORTER clarified the subject of the counseling. He said he is trying to figure out how it is that insurance companies know that they are discriminating against domestic violence victims as opposed to victims with repeated injury (indisc.). Number 2029 SENATOR DAVE DONLEY, sponsor of SB 197, said if they don't know, it is not a problem. We don't assume that they have the knowledge of whether or not somebody is a victim and that the injury to them is based on that. It is only prohibited if they know that somebody is a victim and they discriminate because of that. So, if they don't know, then that's clearly not the only reason that they're making that assessment and it's not prohibited by the bill. REPRESENTATIVE PORTER said, "You're saying that they may not keep records -- they may not attempt to determine if it's domestic violence, but yet they can't discriminate if it is domestic violence. So, what I'm thinking is that there is probably -- and I don't know much about insurance, but there is probably some degree of increase in rates or whatever that's gonna happen if somebody comes in with repeated costs against policy. It is like your car insurance goes up if you had the second accident. That being the case, if they can't ask if these injuries are as a result of domestic violence, then how are they going to know whether they're discriminating or not against victims of domestic violence?" Number 2186 SENATOR DONLEY explained they could have gotten the information from another source, from an independent investigation, from police records, or other things that may be available to them. He said it is not a problem unless they know about it and it is the only reason they discriminate against that individual. MS. ANDREEN said it is her understanding, and she may be wrong, that when you file a claim for health insurance coverage, you sign a disclaimer saying that your medical records are available to the insurance company for reviewing their claim. She said it is her understanding that is the most common way that the information gets passed through. Number 2278 REPRESENTATIVE SANDERS said he has a concern that some women, in some circumstances, when they have two or three kids, would stay in abusive relationships partly for the insurance. MS. ANDREEN explained that is one of the things that they are concerned about. If they have, for example, an existing policy through their husband's employer, and one of the things they're concerned about in leaving the relationship is their economic ability to support themselves and their children. (Indisc.) being denied health insurance or other forms of insurance and/or looking at higher premiums because they have this history. It will be a factor that will help keep them in an abusive relationship. REPRESENTATIVE SANDERS said he guesses he is looking at it in another way. He said he is thinking that if her insurance was yanked, it would get her to leave the situation. He said maybe he is wrong, but he sees it that way. Number 2436 REPRESENTATIVE ELTON said one way that information may get into an insurance file record is that the insurance company doesn't really have control on the information that may come in from a doctor. If the doctor's report says, "A blunt force trauma imposed by spouse," then that would be part of the record. Then the provision would be that they couldn't knowingly release that except under several circumstance which are outlined. TAPE 96-28, SIDE A Number 001 REPRESENTATIVE ROKEBERG said if an insurer doesn't know what the cause of repeated injuries are and they came up and said, "Well this person is accident prone so we want to risk assess them by increasing their premium because they have had -- three times they've falling down the stairs and broken their leg. We don't know how it happened but..." Representative Rokeberg said they couldn't do that under this. He said it is being prohibited whether they knew the approximate cause of the injury or not. If somebody is accident prone, maybe they should have a higher premium. SENATOR DONLEY said this discussion came up in the Senate. That is why the bill was drafted in concurrence with the Division of Insurance to say on line 9 the word "only." That word is crucial to addressing the concern Representative Rokeberg raised. If they don't know, then it's not the only reason. It is only if they know that it is caused by domestic violence or if the insured or potential insured is a victim of domestic violence that they can violate this prohibition. If they don't know, they're not in violation because it is not the only reason that they're discriminating. They don't have a duty to know, either. Number 136 REPRESENTATIVE ROKEBERG asked if the premium could be increased if there was more than that knowledge. If there was a clear pre- existing health condition that was unrelated to any traumatic injuries as a result of domestic violence, wouldn't the insurance company have a chance to increase their premiums? Representative Rokeberg questioned that if they start smoking, couldn't they increase the premiums? SENATOR DONLEY said the answer is yes, they can increase the premium. In that case, it is not the only reason they're increasing the premium. The only reason is that they're a victim of domestic violence. The reason is because they have a pre- existing condition or that they're smoking. He said that is not a prohibited discrimination under the bill. REPRESENTATIVE ROKEBERG asked if an insurance company underwrites for people who have a pattern of injuries over a period of time that were caused by domestic violence but the insurer didn't know that. SENATOR DONLEY said unless the insured knows they're a victim of domestic violence, there is no violation. REPRESENTATIVE ROKEBERG said then it is a matter of evidence and proof if there is any kind of cause of action filed or claimed. SENATOR DONLEY said at that point, under this legislation, if they cancelled somebody or raised their rates, they would notify them just as they do in their existing law as to why. If they were denying original coverage, this bill says they would have to say why they denied them coverage. They would have to articulate a reason other than that they were a victim of domestic violence for their discrimination. If they could do that, they wouldn't be in violation of the law. Number 312 REPRESENTATIVE PORTER referred to the required disclosure on page 2, and said it doesn't seem to apply to this case. It seems to say the standard or requirement for the insurance company in general for any termination of a policy. He asked Senator Donley if there is any way to get at what he wants without having to create a whole new operation for the insurance industry. SENATOR DONLEY said his understanding, under the existing insurance code, any time an insurance company cancels or raises an injured person's rates, they're required to provide notice of why they did so. The only additional element in the bill is if they deny insurance to a new applicant, they would have to advise that person as to why. Since the bill covers the full range of insurance available, property, (indisc.--coughing) feasibility, it seems important that they provide that disclosure. The only modification would be for people whom they deny original coverage to. REPRESENTATIVE PORTER inquired about the reason people are discriminating against domestic violence victims, and whether it is the fear of having costs from the injuries. SENATOR DONLEY said it is profit. If you know that they have a former spouse who is inclined to commit acts of violence or property damage, it is only a good profit motive to cancel the insurance so you don't have to pay a claim on something that happens. Number 577 MS. ANDREEN said it is her understanding that there are no actual studies that shows domestic violence costs insurance companies more money. It is more of a perception. REPRESENTATIVE ELTON referred to the disclosure where we're adding a new disclosure for original applicants. He said that is what essentially happens if you apply for credit and are denied. You have a right to know why you've been denied credit. CHAIRMAN KOTT referred to applying for a credit card and you are rejected. They would have to provide a reason for that rejection without you prompting them. REPRESENTATIVE ELTON said he thinks the difference is that they are not necessarily required to tell you when they reject, but if you ask they have to tell you. You have a right to ask and they must tell you why you were denied. Number 691 REPRESENTATIVE ROKEBERG referred to the definitions on page 2 and asked if everything had to be defined for the new section. KEN SYKES, Analyst III, Market and Conduct, Division of Insurance Department of Commerce and Economic Development, explained the division currently supports CSSB 197(L&C). He said it encompasses all insurers, property, casualty and life and health, writing business in the state of Alaska. He said that would be an answer as to why we need all the definitions on page 2. He said there are a myriad of definitions that apply to different entities in their statute. This incorporates all of them. Mr. Sykes said the bill makes the insurer write for a condition and not for a cause. In other words, the condition of a bad heart, bruised ribs or a broken arm, not that it was caused by an industrial accident or domestic violence or just plain clumsiness. Insurers can deny for a myriad of reasons. Mostly, you will find that they will not accept an application based on frequency. If somebody has ten accidents within a two month period, that is definitely a high risk. The insurer is allowed to rate for that risk because of the ten accidents as a frequency, but not because the individual cases of those accidents because there may not be a relation between those two. What you're looking at is the relationship of the condition. Number 842 REPRESENTATIVE PORTER said what the bill asks is to not discriminate because of domestic violence, but to allow an insurance company to discriminate based on any other rational reason that they now do. So if the two happen to coincide, it doesn't mean that they're stuck with a risk because it's domestic violence as opposed to clumsiness. MR. SYKES said that is correct. It goes hand in hand with another statute concerning unfair discrimination, AS 21.36.090(d). MR. SYKES explained to the committee members that currently in statute, if a insurance company wants to raise or cancel your premium they must send you a notice within a specified time period and they must also state the reason why they are either increasing your premium, non-renewing your coverage or cancelling your coverage. This hits at the first step. In other words, if I do not accept your application for coverage, then I will tell you why. Number 984 MARGARET DOWLING, Attorney, Lessmeier and Winters, was next to address the committee on behalf of State Farm. She said State Farm strongly supports legislation that would prohibit discrimination against a victim of domestic violence, but the way the bill is currently drafted it creates some practical problems. She said a bill could be drafted in a more precise way that would address the same public policy that seems to be driving the bill. For example, State Farm's position is that the bill is drafted too broadly. She said there is no problem in Alaska that they have knowledge of where there is discrimination against victims of domestic violence. Nationwide, the problem seems to limited to health life insurance and disability insurance. Since that is the case, State Farm believes it should be limited to those insurers in Alaska. Otherwise there will be an incredible burden on a huge range of insurance carriers. MS. DOWLING explained the bill will create a special class of people who would enjoy exemption from adjustments to premiums or coverage based on their status as a victim of domestic violence. She said even though this discrimination can't occur if the carrier is aware of or has knowledge that this person is a victim of domestic violence, the burden is shifted to the carrier to prove that they didn't know that the person was a victim of domestic violence. So there is a situation where the coverage is adjusted, the person claims that they're a victim of domestic violence, the burden shifts to the carrier to prove they don't know. Ms. Dowling said in many cases, victims of domestic violence are reluctant to reveal that they're a victim. MS. DOWLING referred to confidentiality of records and said State Farm sees that as raising some problems. Sometimes the carrier is not going to know. There may be a record that reveals an injury but doesn't link the injury to any particular case, this would place the burden on the carrier to try and find out. She said this shifts the burden to the carrier and puts them in an awkward situation where they may actually be breaking the law by revealing information that they did not know was records of a person who was a victim of domestic violence. Ms. Dowling pointed out that is not a provision that is necessary. At present, there is a common law privilege, it is the patient/physician privilege that protect confidentiality. This extends not to just victims of domestic violence, but also people with other medical conditions. Ms. Dowling said the bill is drafted too broad. The problem is you're trying to fix a problem where there is no problem. She continued to give testimony against the legislation. Number 1378 REPRESENTATIVE ROKEBERG recommended the bill be held over or put in a subcommittee. He said he has some concerns with the bill. He said there are a lot more insurance companies that operate in the state that the committee hasn't heard from. REPRESENTATIVE PORTER referred to the disclosure section and recommended the reason be given upon request as opposed to every single one having to state a finding. REPRESENTATIVE ELTON pointed out the committee passed out a major procurement bill without hearing from any contractors. He said some of the people who have testified know a lot of people in the industry and he would have expected that the committee would have heard from them. CHAIRMAN KOTT indicated the bill would be held. ADJOURNMENT CHAIRMAN KOTT adjourned the House Labor and Commerce Committee meeting at 5:10 p.m.