HOUSE BILL NO. 158 "An Act relating to civil actions; amending Alaska Rules of Civil Procedure 49, 68, and 95; amending Alaska Rule of Evidence 702; and providing for an effective date." 1 Representative Brown WITHDREW Amendment 20 (copy on file). Representative Navarre MOVED to RESCIND the Committee's action in adopting Amendment 19 (copy on file). Amendment 19 would allow the defendant to bring evidence into the case in order to allocate a portion of the fault to a third party, in defense of themselves. He questioned if previously made statements in regards to the "empty chair" were correct. He observed that the argument was made that plaintiffs wait until the last moment, in regards to the statue of limitations, to file a lawsuit. In which case, other potential defendants would be exempt from liability. He maintained that the argument is incorrect and that the statutes would be tolled. MIKE LEESMEIER, ATTORNEY, STATE FARM ATTORNEY described a case in which he was involved. He observed that the plaintiffs in the case knew about another potential responsible party. The court ruled that the defendant would be responsible for the negligence of the third party unless they were brought into the case. He maintained that it is an open question as to whether the statute of limitations tolls. The plaintiffs agreed that they did not have a direct claim against the third party. The third party was only involved in order to establish a percentage of fault. They were ultimately dismissed out of the case. Representative Navarre asked if the plaintiff would have the right to a civil claim against a defendant that was left out of the suit. Mr. Lessmeier referred to the case in which he was involved. He noted that the third party was joined solely for purpose of establishing an allocation of fault. The judgement was that the defendant would not be responsible for the third party fault if they were joined and the plaintiff did not have a direct action against them. Representative Navarre suggested that court rules be clarified to ensure that everyone can get into the court room without creating an imbalanced playing field. He suggested that section 14 would warrant a veto. He acknowledged that there are some plaintiffs that wait until the statute of limitations has almost run out before filing a claim. He maintained that defendants and their attorneys often "stonewall" and will not provide ample information to the plaintiff until a suit has been initiated. He asserted that plaintiffs may not have access to the information they need to ascertain an accurate claim before filing a suit. Representative Porter observed that the Attorney General's Office stated that this provision, as contained in legislation during the past Legislature, was needed to 2 clarify the law. Representative Navarre suggested that the Alaska Court System, as the third branch of government, may have better expertise and knowledge of the subject. He suggested that the court should address the issue. Representative Therriault summarized that the plaintiff's initial filing tolls the statute of limitations, so that after the fact, third parties can be brought into the case even though they are past the statute of limitations. Mr. Lessmeier stressed that the question has not been resolved under the law. If the plaintiff chooses not to sue someone that they knew or should have known to investigate and sue, then in his estimation, they would have a statute of limitations problem. He noted that if the statute of limitations are allowed to toll then potential defendants loose the protection of a two year statute of limitation. Representative Navarre stressed that the potential defendant's attorney or insurance company do not always admit that they are willing to accept some liability. He noted the difficulty of obtaining documentation from potential defendants. Mr. Lessmeier asserted that plaintiffs sue the party that has money. Representative Navarre disagreed with Mr. Lessmeier's assessment. He stressed that plaintiffs often do not know who should be sued or who has money or insurance. A roll call vote was taken on the MOTION to RESCIND the Committee's action in failing to adopt Amendment 19. IN FAVOR: Brown, Navarre, Therriault OPPOSED: Kelly, Martin, Mulder, Parnell, Foster, Hanley Representatives Grussendorf and Kohring were absent for the vote. The MOTION FAILED (3-6). Representative Brown MOVED to adopt Amendment 5A (copy on file). Amendment 5A would delete "hazardous waste" and insert "hazardous substance" and add a definition of hazardous substance (copy on file). Representative Ported stated that he did not object to the amendment. Representative Martin OBJECTED. He expressed concern that the definition is too broad. Representative Mulder suggested that the definition in Amendment 5a be amended. He MOVED to delete from the 3 definition, "or to fish, animals, vegetation, or any part of the natural habitat in which fish, animals, or wildlife may be found." There being NO OBJECTION, it was so ordered. Representative Martin reiterated his concern with the substitution of "substance". Representative Brown noted that the definition of "hazardous substance", contained in Amendment 5A, is similar to that used in AS 46.08.900. A roll call vote was taken on the MOTION to adopt Amendment 5A. IN FAVOR: Brown, Navarre, Kelly, Mulder, Parnell, Therriault, Hanley OPPOSED: Martin, Foster Representatives Grussendorf and Kohring were absent from the vote. Representative Brown provided members with Amendment 21A (copy on file). Amendment 21A changes the interest on judgments from 10 and one half percent to a floating rate that is 3 percent above the federal reserve discount rate. She maintained that the current provision is an attempt by insurance companies to secure a windfall at the expense of injured persons who are forced to litigate in order to be compensated. She observed that a prudent investor can earn substantially more on an investment than 3 percent above the federal discount rate. She stated that the provision would give insurance companies an incentive to delay litigation and to delay paying valid claims. She noted that the state of Alaska receives a rate of 5 percent above the federal reserve rate or 11 percent, whichever is higher. She alleged that the amendment would be less fair than the status quo, but better than provisions in HB 158. Representative Mulder noted that a floating rate will be in real dollar terms of the time. Co-Chair Hanley noted that the interest rate could be less than the federal interest rate. He suggested that the 10.5 percent floor be deleted. He explained that under the provisions of HB 158 if the federal interest rate went to 15 percent the prejudgment interest would be 16 percent. Under the amendment the interest would remain at 10.5 percent. Representative Brown MOVED to delete "or 10.5 percent, whichever is less." There being NO OBJECTION, it was so ordered. A roll call vote was taken on the MOTION to adopt Amendment 4 21A. IN FAVOR: Brown, Grussendorf, Navarre OPPOSED: Kelly, Martin, Mulder, Parnell, Therriault, Foster, Hanley Representative Kohring was absent for the vote. The MOTION FAILED (3-7). Representative Navarre MOVED to adopt Amendment 22 (copy on file). Representative Hanley OBJECTED for purpose of discussion. Amendment 22 would delete sections 19 and 30 regarding prejudgment interest. Representative Navarre maintained that without the amendment most of the claim would be shown as future economic or non-economic loss. He expressed concern that there would be no prejudgment interest. In response to a question by Representative Mulder, Mr. Lessmeier explained that prejudgment interest runs from the time that written notice of the claim is sent to the defendant. The interest runs at 10 and a half percent. The court recently ruled that there is no longer prejudgment interest on future economic loss. Prejudgment interest is paid on all damages from the time written notice is given until the time of trial. Prejudgment interest can also be collected on future pain and suffering. Representative Mulder spoke against the amendment. Representative Navarre demonstrated that in a case of extreme disfigurement involving a 22 year old that there would be no penalty for a delay of the case in terms of prejudgment interest. Mr. Lessmeier pointed out that prejudgment interest will continue for past losses. Representative Navarre stressed that insurance companies want to settle on their terms. He maintained that if a plaintiff is not willing to settle that the threat remains that the case can continue indefinitely. He acknowledged that both sides abuse the system, but maintained that the legislation is weighted to the side of the defense. Representative Brown noted that prior to 1986, prejudgment interest was calculated from the day of injury. Under current law the interest is calculated from the time there is written notice of the claim. Representative Brown spoke in support of the amendment. She expressed concern that there would not be an incentive for insurance companies or defendants to settle under the provisions of HB 158. 5 Representative Porter clarified that prejudgment interest will accrue and be paid from the date of the notice until the time of the disposition of the case. Representative Parnell questioned the policy of including punitive damages. Representative Porter stated that there is no prejudgment interest on punitive damages. Representative Navarre stressed that the jury system reflects what the public deems to be the best judgment. Mr. Lessmeier explained how juries currently derive the portion of past judgement on intangible damages. (Tape Change, HFC 95-55, Side 2) A roll call vote was taken on the MOTION to adopt Amendment 22. IN FAVOR: Brown, Grussendorf, Navarre OPPOSED: Kelly, Martin, Mulder, Parnell, Therriault, Foster, Hanley Representative Kohring was absent for the vote. The MOTION FAILED ( 3-7). Representative Brown amended Amendment 23 to delete lines 3,4 and 5 (copy on file). Representative Brown MOVED to adopt Amendment 23. Representative Mulder OBJECTED. Amendment 23 would delete references to AS 09.55.553, Medial Expert Witnesses. Representative Brown suggested that provisions of HB 158 would limit the pool of people available to testify as an expert witness. Witnesses would have to be of the same specialty, certified and recognized by the State Medical Board and be in active practice within one year. She suggested that the court should be left to decide who is qualified. Representative Porter stated that the section proposed for deletion attempts to address a concern within the medical community that there are hired guns that can be obtained to provide expert testimony on a point of view. He stressed that the provision provides that the medical expert's information will be current and meet the standards for medical qualifications in the state of Alaska. Representative Porter noted that the provision does not preclude outside expert medical witnesses. 6 Representative Navarre asked if the determination of expert witnesses should be decided by the Legislature or the Alaska Supreme Court. Representative Porter stated that the best qualified source for deciding medical expert testimony is the State Medical Board. In response to a question by Representative Therriault, Representative Porter stated that the qualifications of outside medical experts would be accepted by the State Medical Board. In response to a question by Representative Grussendorf, Mr. Lessmeier stated that a retired family physician would be allowed to testified through his connection to the case. He maintained that the provision states that expert witnesses ought to be recognized by the National Board, in active practice and of the same specialty. In response to a question by Representative Mulder, Mr. Lessmeier clarified that the amount of compensation given to an expert witness is admissible in court. Representative Porter explained page 14, lines 4 - 6 addresses the possibility of contingency fees to protect objectivity. Representative Mulder summarized that the provision prevents people who are outside medical experts and don't have a related interest to the field to which the case is being tried from providing testimony. Representative Brown referred to page 14, lines 4 - 6 ,(b). She read from a sectional analysis prepared by the Alaska Action Trust (copy on file). She read: "Paragraph (b) is problematic. When read literally, it would preclude law firms or sole practitioners from associating with other law firms in medical malpractice cases. For example, if a law firm associated with a sole practitioner engaged in a split contingency fee and provided a medical expert as part of that agreement, the defense could challenge the admissibility of such testimony under this statutory framework. Even more troubling, it could be read to preclude any law firm from taking a malpractice case on a contingency because, by necessity, lawyers have to contract with an expert to render testimony. Lawyers are the third party and have a contingency agreement. As such, the statute may prohibit attorney participation. On the other hand, if the statute is only meant to prohibit contracting with outside (or within the state) organizations whose sole business is arranging medical expert witnesses, it would be unethical to enter into a contingency agreement with such a nonlawyer entity in the first place. There are 7 organizations (including those headed up by licensed attorneys) whose sole practice is limited to reviewing medical legal cases and obtaining viable expert witnesses." Representative Porter responded that it is not the intent of (b) on page 14, to indicate that the third party is the law firm that is involved in the case. The provision is directed toward brokers for medical testimony. Mr. Lessmeier stated that contingency fees could be utilized by either side. He acknowledged that they may be more common on the plaintiffs' side. Representative Navarre observed that plaintiffs may not have money to pay for expert witnesses unless there is a contingency arrangement. Representative Porter conceded that problems concerning "hired guns" as medical experts are more common in other states. He emphasized that the provision would be preventative. (Tape Change, HFC 95-56, Side 1) Representative Brown read from the sectional analysis prepared by the Alaska Action Trust: "By redefining professional negligence this provision appears to statutorily define duty of care. For any number of reasons this is extremely problematic and an attempt to limit plaintiff's litigants from access to potential medical defendants. That is, it limits professional negligence to "rendering" professional services. It would effectively eliminate medical professionals who fail to render any services at all or were used as consultants rather than actively participating in the health care delivered to the patient... On the other hand, if this is an attempt to codify the common law definition of medical negligence it is woefully inadequate. Professional services definitionally would insulate hospitals from the negligent acts of their employees if they were done outside the scope of licensing provisions. Moreover, it would insulate doctors form a negligence claim if they operate outside the scope of their licensing requirements. Literally then, a doctor who is a G.P. who renders service as an orthopedist could be insulated. More troubling, how is a patient to know? This section would effectively allow the licensing provisions of the individual or institution to dictate medical negligence." Representative Porter replied that a doctor operating outside his scope would be rendering unprofessional services. He emphasized that the provision tries to define what services are covered by the normal everyday occurrence of a doctor performing their occupation. He added that professional negligence means a negligent act or omission by 8 a health care provider in rendering professional services. Representative Mulder suggested that the third party should be identified to clarify that it is not the plaintiff's attorney. Members discussed alternative language. Co-Chair Hanley suggested the addition of "with a third party other than the plaintiff or defense attorney." Representative Porter suggested that "an attorney representing a party in the case" be added. A roll call vote was taken on the MOTION to adopt Amendment 23. IN FAVOR: Brown, Grussendorf, Navarre, Foster OPPOSED: Therriault, Kelly, Martin, Mulder, Hanley Representatives Parnell, and Kohring were absent from the vote. The MOTION FAILED (4-5). Representative Brown MOVED adopt a conceptional amendment, to insert on line 7, after "third party", "with a third party other than an attorney representing a party in the case." There being NO OBJECTION, it was so ordered. Representative Brown MOVED to adopt Amendment 25 (copy on file). She explained that the amendment would tie the Act's effective date to a 20 percent deduction in liability insurance rates. She spoke in support of the amendment. Representative Porter stated that the intent language does not suggest that the bill will have a specific impact on reducing insurance rates within a specific time. He indicated that the amendment is not reasonably accomplishable. He stressed that the general trend is that rates are positively affected in terms of a reduction in the rate of increase. A roll call vote was taken on the MOTION to adopt Amendment 25. IN FAVOR: Brown, Grussendorf, Navarre OPPOSED: Kelly, Martin, Parnell, Therriault, Foster, Hanley Representatives Mulder and Kohring were absent from the vote. The MOTION FAILED (3-6). Representative Brown MOVED to adopt Amendment 26 (copy on 9 file). Co-Chair Hanley OBJECTED for purpose of discussion. Amendment 26 would delete page 11, lines 17 - 27. She maintained that the drafting language is confusing. She stated that the language could be interpreted to mean that a partial settlement is deducted from the jury award and that the remaining defendant's percentage of fault is then applied to the reduced number. Under this interpretation it would be mathematically impossible for the plaintiff to fully recover unless the jury finds the remaining defendant 100 percent of fault. She noted that the section would discourage pretrial settlements. Representative Porter disagreed with her interpretation. He maintained that the provision sets out that if there are multiple defendants and one defendant settles that the settlement does not discharge the other parties from their determination of fault by the jury. Mr. Lessmeier stated that the provision is designed to ensure that there is no double recovery. Representative Porter stated that he did not object to the amendment since case law has established the intent of the provision. There being NO OBJECTION, Amendment 26 was adopted. Representative Brown WITHDREW Amendment 27 (copy on file). Representative Brown MOVED to adopt Amendment 28 (copy on file). She stated that the amendment would set the cap on punitive damages at $5.0 billion dollars. She questioned if the intent of HB 158 is to remove the deterrent effect of punitive damage law. Representative Martin spoke against the amendment. Representative Brown suggested that the court be allowed to decide awards for punitive damages. She argued in support of the amendment. She maintained that there would be no punitive deterrent for large, international, multi-national corporations. A roll call vote was taken on the MOTION to adopt Amendment 28. IN FAVOR: Brown, Grussendorf OPPOSED: Kelly, Martin, Mulder, Navarre, Parnell, Therriault, Hanley Representatives Kohring and Foster were absent from the vote. The MOTION FAILED (2-9). 10 Representative Brown MOVED to adopt Amendment 20 (copy on file). Co-Chair Hanley OBJECTED. Representative Brown explained that the amendment would remove the offer of judgment provision. She asserted that the provision would make it difficult for people to guess the allocation of fault or recovery. She stated that the provision would increase the cost of misjudging the allocation of fault or recovery, to an intolerable level, full cost of attorney fees to the person making the offer. She read from a report prepared by John Suddock, President, The Alaska Academy of Trial Lawyers (copy on file). "This provision is breathtaking in its scope and ferocity. Not only will the victim who loses at trial pay the defendant's entire attorney fee and all costs. Also, the victim who wins at trial, but guesses wrong about the size of the verdict, will pay just as if he had lost. The victim pays if he loses; the victim pays if he wins." She continued to give examples from Mr. Suddock's report. She concluded: "Victims would choose between accepting a low offer and the risk of financial ruin." She asserted that this section gives excessive leverage to insurance companies to under- compensate injured Alaskans. Representative Porter maintained that the section is a disincentive to "low ball" an offer. He observed that if the offer of judgment is not accepted and the award is greater, then whoever made the offer is penalized. Current law provides that offers of judgments should be considered seriously. He stressed that a penalty exists under current law. He observed that the provision would increase the penalty in order to inspire settlement. A roll call vote was taken on the MOTION to adopt Amendment 20. IN FAVOR: Brown, Grussendorf, Navarre OPPOSED: Kelly, Martin, Mulder, Parnell, Therriault, Foster, Hanley Representative Kohring was absent from the meeting. The MOTION FAILED (3-7). Representative Brown provided members with Amendment 29 (copy on file). Amendment 29 amends section 2, Statute of Repose. She explained that the amendment would limit the section to birth related injury or death and require commencement within eight years. The statue of repose regarding building construction would remain at 15 years. The statute of repose in regards to personal injury would remain at two years from the time the injury was known. 11 Representative Porter suggested that the amendment would nullify the statute of repose except for cases involving injury. A roll call vote was taken on the MOTION Amendment 29. IN FAVOR: Brown, Grussendorf, Navarre, Foster OPPOSED: Kelly, Martin, Mulder, Parnell, Therriault, Hanley Representative Kohring was absent for the vote. The MOTION FAILED (4-6). Representative Navarre MOVED to delete "adequate and appropriate" on page 3, line 12. He maintained that the language is not necessary. Representative Porter spoke against the amendment. A roll call vote was taken on the MOTION. IN FAVOR: Brown, Grussendorf, Navarre OPPOSED: Kelly, Martin, Mulder, Parnell, Therriault, Foster, Hanley Representative Kohring was absent for the vote. The MOTION FAILED (3-7). Representative Navarre referred to page 3, line 25 (g), "reduce the ultimate costs to the state and to local governments of providing medical services to those who cannot otherwise afford those services." He questioned how the bill accomplishes subsection (g). Representative Porter observed that there are medical services provided by state and local governments to people who cannot afford services. He stressed that if the overall costs of health services decrease then costs to the state will also be reduced. Representative Navarre MOVED to delete page 3, line 25 - 26. He asserted that there is no evidence that health care costs will be reduced. Representative Brown suggested that victims who are not adequately compensated will end up costing the state money. A roll call vote was taken on the MOTION. 12 IN FAVOR: Brown, Grussendorf, Navarre OPPOSED: Kelly, Martin, Mulder, Parnell, Therriault, Foster, Hanley Representative Kohring was absent for the vote. The MOTION FAILED (3-7). Representative Brown referred to section 33. Representative Porter stated that rule 95 deals with the ability of the court to sanction attorneys that have filed frivolous lawsuits. The provision allows the court to impose fines up to $10.0 thousand dollars, for frivolous suits. Representative Mulder MOVED to report CSHB 158 (FIN) out of Committee with individual recommendations and with the accompanying fiscal notes. Representative Navarre OBJECTED. Representative Navarre referenced section 25, Damages Resulting From the Commission of a Crime. He noted that current law requires a conviction to show that there was a crime or attempted crime. Representative Porter noted that someone fleeing from the commission of a crime may be killed. In which case, a conviction cannot ensue. Representative Porter discussed situations which may pertain to section 25. (Tape Change, HFC 95-56, Side 2) Representative Navarre asked if there is any information indicating that a change is necessary in section 25. Representative Porter stated that the current law requires that there is a conviction. He noted that a conviction cannot be obtained if the defendant is deceased. A roll call vote was taken on the MOTION to move CSHB 158 (FIN) out of Committee. IN FAVOR: Kelly, Martin, Mulder, Parnell, Therriault, Foster, Hanley OPPOSED: Brown, Grussendorf, Navarre Representative Kohring was absent from the meeting. The MOTION PASSED (7-3).