Legislature(1997 - 1998)

04/02/1998 01:40 PM Senate L&C

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
         SENATE LABOR AND COMMERCE COMMITTEE                                   
                    April 2, 1998                                              
                      1:40 P.M.                                                
MEMBERS PRESENT                                                                
Senator Loren Leman, Chairman                                                  
Senator Tim Kelly                                                              
Senator Mike Miller                                                            
Senator Lyman Hoffman                                                          
MEMBERS ABSENT                                                                 
Senator Jerry Mackie, Vice Chairman                                            
COMMITTEE CALENDAR                                                             
SENATE BILL NO. 283                                                            
"An Act relating to noneconomic damages resulting from an                      
automobile accident."                                                          
     PASSED CSSB 283(L&C) OUT OF COMMITTEE                                     
SENATE BILL NO. 160                                                            
"An Act relating to registration, inspection, and testing relating             
to radiological equipment in dentists' offices."                               
     PASSED CSSB 160(L&C) OUT OF COMMITTEE                                     
SPONSOR SUBSTITUTE FOR SENATE BILL NO. 212                                     
"An Act relating to automated teller machines and to night deposit             
facilities; and providing for an effective date."                              
     PASSED CSSB 212 (L&C) OUT OF COMMITTEE                                    
SPONSOR SUBSTITUTE FOR SENATE BILL NO. 202                                     
"An Act relating to insurance; amending Rules 79 and 82, Alaska                
Rules of Civil Procedure; and providing for an effective date."                
     PASSED CSSB 202 (L&C) OUT OF COMMITTEE                                    
PREVIOUS SENATE COMMITTEE ACTION                                               
SB 283 - See Labor and Commerce minutes dated 2/19/98 and 2/24/98.             
SB 160 - See Labor and Commerce Committee minutes dated 3/5/98.                
SB 212 - See Labor and Commerce Committee minutes dated 3/3/98 and             
SB 202 - See Labor and Commerce minutes dated 2/19/98.                         
WITNESS REGISTER                                                               
Ms. Annette Kreitzer, Staff                                                    
Senate Labor and Commerce Committee                                            
State Capitol Bldg.                                                            
Juneau, AK 99811-1182                                                          
POSITION STATEMENT: Commented on SB 283, SB 160, and SB 212.                   
Mr. Mike Schneider                                                             
880 N St., Ste 202                                                             
Anchorage, AK 99501                                                            
POSITION STATEMENT: Opposed SB 283.                                            
Dr. Peter Nakamura, Director                                                   
Division of Public Health                                                      
Department of Health and Social Services                                       
P.O. Box 110610                                                                
Juneau, AK 99811-0610                                                          
POSITION STATEMENT: Opposed SB 160.                                            
Ms. Catherine Reardon, Director                                                
Division of Occupational Licensing                                             
Department of Commerce and Economic Development                                
P.O. Box 110806                                                                
Juneau, AK 99811-0806                                                          
POSITION STATEMENT:  Commented on SB 160.                                      
Dr. Ellenberg                                                                  
POSITION STATEMENT: Supported CSSB 160.                                        
Mr. Tim Woller, President                                                      
Alaska Dental Society                                                          
3529 College Rd. #205                                                          
Fairbanks, AK 99709                                                            
POSITION STATEMENT: Supported CSSB 160.                                        
Mr. Lynn Levengood                                                             
931 Vide Way                                                                   
Fairbanks, AK 99701                                                            
POSITION STATEMENT: Supported CSSB 160.                                        
Senator Dave Donley                                                            
State Capitol Bldg.                                                            
Juneau, AK 99811-1182                                                          
POSITION STATEMENT: Sponsor of SB 202.                                         
Ms. Trisha Connors                                                             
National Association of Independent Insurers                                   
Des Plaines, IL                                                                
POSITION STATEMENT: Opposed SB 202.                                            
Mr. John George                                                                
National Association of Independent Insurers                                   
3328 Fritz Cove Rd.                                                            
Juneau, AK 99801                                                               
POSITION STATEMENT: Opposed SB 202.                                            
Mr. Mike Schneider                                                             
880 N St., Ste 202                                                             
Anchorage, AK 99501                                                            
POSITION STATEMENT: Supported SB 202.                                          
Mr. Michael Lessmeier                                                          
State Farm Insurance                                                           
123 W. 5th                                                                     
Juneau, AK 99801                                                               
POSITION STATEMENT: Opposed SB 202.                                            
Ms. Marianne Burke, Director                                                   
Division of Insurance                                                          
Department of Commerce and Economic Development                                
P.O. Box 110805                                                                
Juneau, AK 99811-0805                                                          
POSITION STATEMENT: Commented on SB 202.                                       
Mr. John Ference, Staff                                                        
Division of Insurance                                                          
Department of Commerce and Economic Development                                
P.O. Box 110805                                                                
Juneau, AK 99811-0805                                                          
POSITION STATEMENT: Commented on SB 202.                                       
ACTION NARRATIVE                                                               
TAPE 98-19, SIDE A                                                             
Number 001                                                                     
               SB 283 - AUTOMOBILE CIVIL LIABILITY                             
CHAIRMAN LEMAN called the Senate Labor and Commerce Committee                  
meeting to order at 1:40 p.m. and announced SB 283 to be up for                
MS. KREITZER, Staff, Senate Labor and Commerce Committee, said she             
would refer to work draft LS1467E by Ford, dated 4/2/98.                       
SENATOR MILLER moved to adopt the work draft.  There were no                   
objections and it was so ordered.                                              
MS. KREITZER said there are two changes to the bill.  The first one            
makes it very plain that AS 09.652.158 does not apply to a person              
unless he is an owner or operator of the vehicle.                              
The second change so as not to be inconsistent with tort reform                
that passed last year, was to delete that portion of the bill that             
deals with drunken drivers.                                                    
MR. MIKE SCHNEIDER, Anchorage, said he did not have the Committee              
Substitute before him, but he thought he knew what it said.  He                
didn't like it because in our society typically there are penalties            
for things like not buying insurance and specific kinds of conduct.            
If you are completely innocent in a situation and are hurt by                  
someone else, you should not be penalized.  It's not fair, right,              
or reasonable.                                                                 
CHAIRMAN LEMAN thanked him for his testimony.                                  
SENATOR MILLER moved to pass CSSB 283 (L&C) from Committee with                
individual recommendations.  There were no objections and it was so            
              SB 160 - DENTAL RADIOLOGICAL EQUIPMENT                           
CHAIRMAN LEMAN announced SB 160 to be up for consideration.                    
MS. KREITZER explained the changes in the committee substitute that            
answer concerns brought up in a previous meeting: deleting Section             
1 relating to the Alaska Dental Society making nominations for                 
appointments to the Dental Board.  References to inspecting the                
control panel were changed to say the inspection is of dental                  
radiological equipment and a definition of inspectors was added.               
Language was changed to allow the Board to adopt federal standards             
and to include a person working under a dentist's supervision in               
the sections relating to the use of uninspected or registered                  
equipment.  "Owners of equipment" was expanded to include lessees.             
The intent of the previous version was that an inspection occur                
once every five years and that the inspection seal has an                      
expiration date on it, has all been clarified, in the CS.                      
MS. KREITZER said one point remains to be resolved by the Committee            
on page 4, line 12 in the transitional provisions.  There is a                 
phrase that says, "records, equipment, and other property of                   
agencies of the State whose functions are transferred under this               
Act shall be transferred commensurate with the provisions of this              
Act."  After speaking with the Department of Health and Social                 
Services, she thought the board only needs records of agencies of              
the State.  There is no other equipment or property and this                   
wording might set up the expectation that there is.                            
Number 170                                                                     
SENATOR MILLER moved to adopt the committee substitute to SB 160.              
There were no objections and it was so ordered.                                
DR. PETER NAKAMURA, Director, Division of Public Health, said most             
of the changes in the CS are very positive and he supports them,               
but he still has some significant concerns.  In Section 1 he has a             
problem with the fees which are defined to be for certification of             
any equipment and its inspection.  The problem is that there are a             
lot of radiation devices in distant, rural communities and it costs            
a lot of money to go out there, even every five years, to inspect              
and certify the equipment.  The fee is low for someone in an urban             
community where an inspector resides, but the costs of traveling to            
a rural area would make the fee much more significant to an                    
individual owning that radiation device.  Also, once an individual             
gets out there, he can be weathered in for two or three days adding            
to the cost.                                                                   
There is also a problem with the training standards which are set              
by the manufacturer.  If all you're going to do is look at the                 
medical device, that's fine; but in terms of public health safety,             
frequently of greater concern is who is operating the equipment and            
what kind of training they have.  Do they have the appropriate                 
policies and procedures and are those posted?  Are they following              
them and is someone looking at the x-ray films to see if they have             
been taken appropriately.  None of that is involved in this                    
certification or inspection process.  It's all presently done by               
inspections performed by the Department of Health and Social                   
Services.  Once this responsibility is transferred, he would not               
have the resources to continue any kind of certification evaluation            
of the practitioners or the quality of the film device.                        
He said that the Dental Board will now assume responsibility for               
the safety of the devices or procedures.  According to his                     
radiation specialist, they measure scatter radiation around the                
room, check the kilovolt peak from the tube housing and check the              
dose to the patients and the staff involved which would not be done            
under this new procedure.   Other materials involved are computers             
for reports, records, and letters.  The Department would not be                
able to release this equipment, since it is used for other                     
responsibilities regarding radiation and medical devices.  If this             
change takes place, there will be no assurance of dental radiation             
safety as practiced in a dentist's office.  No one will provide any            
oversight or assurance of training.                                            
CHAIRMAN LEMAN asked what he thought about deleting "equipment and             
other property" on page 4, line 12.                                            
DR. NAKAMURA answered they are more than willing to transfer the               
records if the responsibility is transferred.  He said the                     
equipment and property exists for his department, but does not                 
exist for the Dental Board.                                                    
SENATOR MILLER moved to delete that language.  There were no                   
objections and it was so ordered.                                              
Number 281                                                                     
MS. CATHERINE REARDON, Director, Division of Occupational                      
Licensing, said the amendment deleting the equipment was fine with             
her, because the Dental Board, itself, will not be doing                       
inspections, so it doesn't need any equipment or property.  That               
responsibility will go to the private sector that is going to be               
hired by the dentists.  If there are complaints from the public or             
anyone saying that they think the radiological equipment is not                
functioning properly, the Dental Board will not be going out to                
check the equipment and HESS wouldn't be responsible for that                  
anymore, either.  The statute says what's required of an owner of              
radiological equipment is to provide evidence to the Dental Board              
that they have had it inspected every five years.  There is no                 
responsibility to spot check to make sure the equipment really is              
working properly.                                                              
SENATOR KELLY said he didn't think anyone could complain because               
they couldn't tell if the equipment was working well or not.                   
DR. ELLENBERG said they were told by the Department that the                   
inspector's job was just more than measuring kdp, that when the                
inspector is onsite, he is involved in educating the staff on the              
taking and developing of x-rays and that dentist's pay a                       
registration fee so they aren't disappointed when 10 years elapse              
and there's no inspection.  He asked how much education could the              
Department give his staff when they don't come to his office.  He              
also asked who took the dentist out of the equation, because they,             
as owners of the equipment, are the best suited to train staff and             
are with them every day, not just a couple of hours every seven to             
10 years.  The best person to inspect an x-ray unit would be a                 
qualified technician, since he has the technical capabilities to               
calibrate the equipment at the same time and SB 160 mandates this              
to be done every five years.                                                   
The Department also testified that you can't say there is no risk              
in dental radiography which is true, but no one can prove that                 
there is a risk in such low doses.  Most investigators agree that              
there is probably some threshold level of radiation that our bodies            
deal with, or possibly need.  Today, we cannot directly attribute              
any diagnosed cancer or genetic change to dental radiography.                  
Academically, we can calculate a risk factor, if we make some                  
assumptions which haven't been proven.  The only way to calculate              
this risk is through extrapolation from high dose data such as in              
post-war Japan.  No one can estimate the risk of liver cirrhosis in            
a person who drinks on New Year's Eve.  If we can extrapolate a                
risk, the cancer risk from dental x-rays is approximately the same             
as the cancer risk from drinking 30 cans of diet soda.                         
Furthermore, recent studies suggest that our bodies actually need              
low-dose radiation to synthesize certain proteins.  To be on the               
safe side, dentistry has to assume that there may be some risk and             
has done a remarkable job to lessen patient exposure by using high             
speed films, sensitive screens, and lead protective aprons.  SB 160            
would provide another layer of protection by having the x-ray unit             
fine-tuned to manufacturer's specifications once every five years.             
A State registration fee, on the other hand, does nothing to                   
protect anyone.                                                                
MR. TIM WOLLER, President, Alaska Dental Society, supported the                
committee substitute to SB 160.                                                
MR. LYNN LEVENGOOD, private citizen, supported CSSB 160 because it             
provides additional protection for individual citizens of Alaska.              
Number 378                                                                     
SENATOR KELLY said he would support this bill, but this legislation            
is not on the books in the face of a vacuum.  "There is danger in              
radiology that has been known since at least the second world war              
and he wasn't certain how much risk there is in dental equipment.              
One of the fundamental reasons for the Legislature to be here is to            
protect the public health and safety and I'm not certain we are                
doing that by totally eliminating any oversight by the Department."            
SENATOR MILLER moved CSSB 160(L&C) out of Committee with individual            
recommendations.  There were no objections and it was so ordered.              
        SB 212 - FEES FOR USE OF AUTOMATED TELLER MACHINES                     
CHAIRMAN LEMAN announced SB 212 to be up for consideration.                    
SENATOR KELLY moved to adopt the committee substitute to SB 212.               
There were no objections and it was so ordered.                                
MS. ANNETTE KREITZER, Staff, Senate Labor and Commerce Committee,              
said there was some concern that this bill targeted banks, so on               
page 1, line 11, it makes it clear that it applies to both a bank              
or other person who owns or operates an automated teller machine in            
this state.  Electronic notification to a customer of the total                
amount of the charge was deleted.                                              
SENATOR KELLY moved to pass CSSB 212 (L&C) from Committee with                 
individual recommendations.  There were no objections and it was so            
CHAIRMAN LEMAN asked Senator Ellis if he approved.                             
SENATOR ELLIS answered that he thought the committee substitute was            
                 SB 202 - MOTOR VEHICLE INSURANCE                              
CHAIRMAN LEMAN announced SB 202 to be up for consideration.                    
SENATOR DONLEY, sponsor, said the proposed committee substitute                
made considerable progress.  an insurance company could not                    
terminate a contract with an agent solely because the agent refused            
to perform an unfair settlement practice or report such activities             
to the Division of Insurance.  The next change was because there               
was concern that this would limit confidential communications                  
between attorneys and their insurance companies and a provision was            
added to specifically exempt that type of communication as                     
confidential. Section Four, prejudgement interest, was moved into              
AS 21.36 which regulates unfair insurance trade practices.  Section            
Four, payment of a loss, was also moved into AS 21.36 and clarified            
language that the payment is due 30 days after a loss becomes                  
determinable, so it's clear they are not required to speculate and             
make a payment which they can't determine.  The required telephone             
contact was moved into AS 21.36 also.  Sections Five and 10 of the             
original bill were deleted, because those appear in SB 158.  The               
arbitration award section makes it clear that if the arbitrator                
awards the cost of the arbitration to the insurer, the insurer                 
could deduct the awarded fees from the amount due to the insured,              
giving the insurance companies a way to recoup their costs.                    
The premium for short-term policies has been changed and a new                 
section specifies that policies of less than 30 days can't exceed              
200 percent of the pro-rated premium charge for longer policies.               
The purpose of this was that in 1986 Mandatory Auto Insurance Act,             
a lot of people were concerned they couldn't get insurance for a               
short period of time.  That is why existing statutes require that              
they offer policies for as low as seven days.  This sets out for               
the first time how much premiums can be for all insurance                      
The medical payments have been limited to allow the mandatory offer            
to only occur at the initial time.  Medical claims coverage has                
been deleted because it's covered under Section Four, payment of               
loss claims which has been incorporated in AS 21.36.                           
SENATOR DONLEY said he supported the committee substitute.                     
Number 491                                                                     
SENATOR MILLER moved to adopt the CS to SB 202.  There were no                 
objections and it was so ordered.                                              
MS. TRISHA CONNORS, National Association of Independent Insurers,              
Des Plaines, Illinois said her organization represents 49 percent              
of the property/casualty market in the State of Alaska.  She said              
they are still opposed to CSSB 202.  Their main concern is with the            
payment of claims required within 30 days which places insurers in             
an untenable position.  She didn't see the problem that it was                 
trying to address other than to provide for another lawsuit for                
trial lawyers to collect contingency fees on, because one of the               
penalties is a bad faith lawsuit and to erase the agreed upon                  
policy limits on the underlying policy.  She said their claims                 
adjusters for most all of their member companies are encouraged                
and, in some cases, compensated for settling claims faster.                    
Performance reviews are based on whether and how many files they               
can close in a year.                                                           
Under this bill if they get a claim they are going to have to                  
decide immediately if they have the time to order the records which            
takes more than 30 days to receive and analyze them and negotiate              
based on what they think is due or not due or pay right away which             
could encourage fraud, because anything could be put forward as                
their medical claim and companies would pay to save themselves from            
the prospect of a second lawsuit and the penalties.  There is                  
nothing  to give them a way to fully analyze a claim and pay it as             
they see fit.  Surely, all this would do would be to raise costs.              
Number 533                                                                     
MR. JOHN GEORGE, National Association of Independent Insurers, said            
it is appropriate that an insurance company pay every nickel that              
they should pay, but not pay any more.  We all pay higher premiums             
if an insurance company pays out excessive claims, so they need to             
give insurance companies an adequate time to determine what a fair             
amount is.  He knows that people are concerned about the premiums              
they pay, so while they are trying to provide protection for a                 
person who has a claim, they also have to think about providing                
protection for everyone else who is paying an insurance premium.               
The required 800 number applies to insurers, but he recalls that               
the definition of insurer in the Insurance Code includes agents and            
brokers.  Therefore, every insurance agent in the State would also             
have to have an 800 number.                                                    
The law clearly says that rates for short-term policies should be              
adequate, not excessive, and not unfairly discriminatory.  By                  
definition, that means they need to charge the premium, the cost of            
issuing the policy, and an appropriate amount for the risk of the              
time period the policy covers.  Two hundred percent may or may not             
be right.  It costs a fair amount to issue a policy by the time                
paperwork is done.  He ended by commending the work that Senator               
Donley had done on meeting his concerns so far.                                
Number 570                                                                     
SENATOR HOFFMAN asked on page 2, lines 26 - 28 if he needed more               
time than 30 days and asked how much.                                          
MR. GEORGE answered that he didn't know if there was a magic date,             
but it could take maybe six months to get repairs done.  Insurance             
companies should be held to a standard, but not a specific number              
of days.  In any case, the director of the Division can say it's               
been an unreasonable time and level penalties.                                 
TAPE 98-19, SIDE B                                                             
MR. MIKE SCHNEIDER said he is an attorney in Anchorage.  He said               
when their constituents pay insurance premiums, they are not making            
donations to the insurance industry, but expect something for their            
premium.  They expect what they have been promised which is prompt             
and fair resolution of their claims.  His comments are premised on             
the notion that attorneys, doctors, and health care providers                  
generally do not work for free.  A sum of $5,000 can easily be                 
exceeded in a fairly minor injury setting, but is a lot of money to            
most of their constituents.                                                    
Medical coverage is supposed to pay reasonable medical bills; it               
doesn't matter who is at fault.  The way it works now is that a                
constituent is in an auto accident of some kind, they go to their              
doctor, follow his instructions, and submit their medical bills.               
Their carrier may pay those bills or not.  The time for payment of             
these bills is in the hands of the carrier completely.  If they                
want to request records until hell freezes over, they can do that.             
In the meantime, the doctor, who has a right to be paid, isn't                 
being paid.  The constituent is risking damage to his credit                   
reputation as well as not getting needed treatment because the                 
insurance coverage is looking more theoretical by the minute.  At              
some point, there is a letter from an adjuster who says that they              
have done a records review and don't know if all the stuff is                  
related and want the constituent to appear sometime in the future              
at an "independent" medical evaluation.  Under the terms of the                
policy, the constituent has to show up and this all takes time.                
They have the examination and then wait a period of time for the               
results of the examination which might say that the treatment was              
not all warranted and the whole bill shouldn't be paid.                        
In the typical medical payments insurance contract, there is an                
arbitration provision which typically takes three lawyers.  The                
constituent needs a personal lawyer.  If the lawyer charges him by             
the hour, it's one more bill they can't pay.  If the lawyer charges            
a contingency fee and wins, he solves a part of their problem, but             
the doctor wants all the bill paid, not just 75 percent.  These                
arbitrations are evidentiary proceedings that require the physician            
to appear and provide testimony.  So someone with a $5,000 problem             
can't afford to resolve it, even if they win.                                  
MR. SCHNEIDER said this bill would make the insurance industry put             
its money where its mouth is.  He referenced Ms. Connor's letter               
for the flavor of the NAII's position which said, "As above, these             
provisions simply make an insurers investigation of fraud too                  
expensive."  He said when an insurance company accuses its                     
constituents of fraud and is ultimately able to prove it, nothing              
harms the industry in any way.  On the other hand, when the                    
constituents are accused of fraud and the accusation is, itself,               
nothing more than a fraudulent effort to deprive the constituents              
of what they are entitled to, the insurance industry should pay the            
price of this sort of outrageous conduct.  This bill does nothing              
more than make the industry bear the burdens of its own sins.                  
Number 590                                                                     
MR. MICHAEL LESSMEIER, State Farm Insurance, said they have about              
31 percent of the automobile insurance market in the State of                  
Alaska.  Last year they gave back to policy holders in the State               
$6.6 million and reduced automobile insurance premiums.  One of the            
challenges they have is making insurance affordable.  This bill, as            
written, would be an absolute disaster for their policy holders                
because it creates a new cause of action of third-party bad faith              
liability.  When it has been created in other states, claim costs              
have exploded.  He used the example of what happened in California             
in 1978 and 1979 when they created a cause of action for third                 
party bad faith.  For the 10 years following that, until they took             
it away, the average automobile liability premium claim costs just             
about tripled.  This is their primary objection to this bill.                  
Number 472                                                                     
MR. LESSMEIER said they remain adamantly opposed to the termination            
provision saying their contracts with their agents have been a very            
successful way of doing business and didn't see any reason to                  
change that.  The prejudgement interest also still concerns them               
because it's not clear whether it runs on the policy or some                   
projected verdict.  They have a concern about changing the                     
arbitration provisions because the power of an arbitrator to award             
his costs is within his discretion right now.  The premium for                 
short-term policies, when they are artificially limited, end up                
being subsidized by another sector of the market which isn't fair.             
The real concern has to do with the payment provisions.  There are             
two reasons why claims are not paid: one is that there is a lack of            
available information.  This bill says an insurer has to pay claims            
within a certain amount of time, but places no corresponding duty              
on the other party to provide the information that is necessary to             
evaluate that claim.  He guaranteed that in almost every instance,             
there will be litigation over the claim payment provisions.  It is             
unfair because the insured needs to have incentive to provide                  
information and there is no incentive under this bill. The second              
problem is that the obligations in this bill are on one side and               
not the other.  They spent 10 years dealing with tort reform before            
this legislature and one of the most important parts of that                   
package was the "offer of judgement" provision which says both                 
sides to litigation ought to be treated equally.  This bill changes            
that provision and makes it a one-way street which isn't fair.  He             
urged that they not revisit something on which they spent so much              
time and effort working out a compromise that was fair to all                  
Regarding Mr. Schneider's comments, he has been practicing in this             
state for 19 years and had never seen an insurer dispute a $5,000              
medical payments claim.  He has never seen an insurer request an               
independent medical evaluation for a $5,000 claim.  When there are             
disputes over those payments, most of the time it has to be a                  
significant dispute before someone is going to spend the time and              
money necessary to create that dispute on both sides.                          
He pointed out that we already have an Unfair Claims Settlement                
Practices Act in AS 21.36.125.  There are extensive regulations                
that were promulgated by the Division of Insurance that deal with              
that and if the insurance company does not comply, they can be                 
Number 413                                                                     
MS. MARIANNE BURKE, Director, Division of Insurance, thanked                   
Senator Donley for accepting her help in making sure this                      
legislation meshed with other provisions.  She suggested a three               
word addition to page 2, line 15, under prejudgement interest.  It             
is her understanding that the sponsor intended this to apply not               
only to first party, but to third parties as well.  So she                     
suggested making that sentence read: "Prejudgement interest due an             
insured or third party from an insurer as a result of a claim                  
covered under..."  She said these are actual complaints filed by               
Alaskan consumers.                                                             
MR. JOHN FERENCE, Staff, Division of Insurance, said in the most               
recent 12-month period, they have received approximately 467                   
complaints involving the handling of claims.  Of those,                        
approximately 60 percent are legitimately justified and 75 percent             
of those involve unreasonable delays in claim payments.                        
CHAIRMAN LEMAN said he appreciated Ms. Burke's support in crafting             
SB 283, but then Mr. Jeff Bush testified on the Administration's               
position which was different from hers.  He testified that they did            
not want to take up another tort reform bill this year, and yet the            
Committee hears that SB 202 is a retrenching of some tort reform               
efforts made last year.  He asked if she saw the two positions                 
being inconsistent.                                                            
MS. BURKE answered that she hadn't considered that question.  She              
explained that this bill has many sections that are not in any way             
tort reform related.  They are provisions that address specific                
needs and addresses them appropriately.  She has concerns about                
whether or not the payment time frames will work in all cases, but             
she also has evidence that there are unreasonable delays in claims             
payments.  She said she is not an expert in tort reform.                       
SENATOR HOFFMAN asked if she had any problem with the 30 days on               
page 2, lines 26 and 28.                                                       
MS. BURKE answered that in most cases she thought it would be quite            
workable and she strongly supported the prompt settlement of                   
claims.  She felt this section was much fairer in that it does                 
recognize there will be a period of time necessary to accumulate               
all of the data.  The one area where that might be troublesome                 
might be where there are multiple claims that might exceed policy              
limits.  She didn't have an answer for the multiple claims                     
CHAIRMAN LEMAN said he wanted there to be some flexibility, but                
having 30 days as a target was o.k.  He asked if she had language              
they could insert that would convey that.                                      
MS. BURKE answered that she felt language saying after it's                    
determinable will handle the situation of parts coming in.                     
Number 303                                                                     
SENATOR DONLEY said he thought the determinable trigger takes those            
kind of factors into account.  He said he discussed Section Four,              
the prejudgement interest, with his attorneys and they said it was             
clearly based on policy limits.  He remains open to additional                 
suggestions about how to make that clearer.                                    
He noted there was some argument that there was no corresponding               
duty to pay a loss.  But there is a duty, he said, obviously all               
insurance contracts include a corresponding duty for the insured               
and, also, since it says reasonably determined, if the insured                 
doesn't come forward with the information to make a reasonable                 
determination, they don't get paid.  There is clearly an incentive             
to provide.                                                                    
He thought this legislation treated both sides equally to the                  
extent that's fair.  He explained when you have one large corporate            
party that's worth billions of dollars holding the money and                   
another single injured party trying to get the money, we can't                 
presuppose these parties are in any way equal in the beginning.  If            
they just hold the money back and don't have reasonable regulations            
on when they should pay it, we can't consider them equal from the              
start.  There needs to be a balance, not just pure equality when               
you are dealing with such disparate economic situations.                       
SENATOR DONLEY agreed with the Director that this bill doesn't deal            
with tort reform and, in fact, it only deals with insurance reform.            
We are just talking about how insurance companies pay their claims,            
not the liability of the parties.  The third-party section only                
triggers if the Director of Insurance finds a violation.                       
He agreed with the Director's suggestion of inserting "or third                
Number 251                                                                     
SENATOR MILLER moved to insert "or third party" on page 2, line 15.            
There were no objections and it was so ordered.                                
CHAIRMAN LEMAN commented that he still wasn't comfortable with the             
bill, but he would not stand in the way of reporting it.  He                   
thought there may be unintended consequences and this would have to            
be addressed before it moved from the next committee.                          
SENATOR MILLER said he was concerned, also, but would work with                
Senator Donely to address them in Senate Finance, and moved to pass            
CSSB 202(L&C) from Committee with individual recommendations.                  
There were no objections and it was so ordered.                                
CHAIRMAN LEMAN adjourned the meeting at 3:00 p.m.                              

Document Name Date/Time Subjects