HB 379-COMM FISHERMEN'S FUND:VESSEL OWNER CLAIMS  11:09:24 AM CHAIR STUTES announced that the final order of business would be HOUSE BILL NO. 379, "An Act relating to claims against protection and indemnity insurance policies of vessel owners." 11:10:49 AM REPRESENTATIVE DAN ORTIZ, Alaska State Legislature, introduced HB 379, reading from his sponsor's statement, which read as follows [original punctuation provided]: In 2010, the Legislature amended the Fishermen's Fund statute to allow a vessel owner to receive 50% of the owner's Protection & Indemnity insurance deductible from the fund in cases where an injured crewmember made a claim against the Fund and against the P&I policy. The intent of this amendment was to encourage vessel owners to obtain P&I insurance to fully cover crewmember's medical expenses in the event of an injury, and to reduce the financial burden on the State. HB 379 will allow an owner to fully recover the P&I deductible from the Fund up to an amount of $5,000. This would provide further financial incentive for vessel owners to obtain P&I insurance to fully cover crewmembers in the event of an injury or illness at sea. REPRESENTATIVE ORTIZ said this bill was brought forward at the behest of fishermen and the fishing industry. This would provide a means to pursue insurance and protection in the dangerous fisheries that often exist, he said. 11:12:47 AM REPRESENTATIVE NEUMAN asked for further clarification on the Fishermen's Fund. He expressed an interest in learning how claims are approved, the fund balance, the type of fund and whether the fund earns any interest. 11:13:38 AM LIZ HARPOLD, Staff, Representative Dan Ortiz, Alaska State Legislature, responded that the Fishermen's Fund predates Alaska statehood. It was established in 1951 to provide the treatment and care of Alaska licensed commercial fishermen who have been injured while fishing onshore or offshore in Alaska. She said the benefits from the fund are financed from revenue received from each resident and non-resident commercial fisherman's license and permit fees - 39 percent but not to exceed $50 for each license holder per year. The commissioner of Department of Labor & Workforce Development (DLWD) oversees the administration of the program, with assistance from the Fishermen's Fund Advisory and Appeals Council (FFAAC). She reminded members that Mr. Saldi, a member of the FFAAC, had testified earlier during confirmation hearings. 11:14:27 AM MS. HARPOLD stated that the FFAAC was comprised of the commissioner, or designee, who serves as chairman and five members appointed by the governor. She directed attention to AS 23.35, which outlines benefits and process for a fisherman to file a claim. She deferred to the division to answer technical questions about the fund. 11:15:16 AM MARIE MARX, Director, Division of Workers' Compensation (DWC), Department of Labor & Workforce Development (DLWD), recalled that Representative Neuman had previously asked what benefits were available to fishermen under the Fishermen's Fund. REPRESENTATIVE NEUMAN clarified he was interested in the structure of the Fishermen's Fund, for example, if it was an enterprise fund. MS. MARX responded that the Fishermen's Fund is a dedicated, completely self-sustaining fund. The amount of money collected provides enough funding to run the program and pay for the benefits available through the fund. REPRESENTATIVE NEUMAN asked for further clarification on the level the division attempts to maintain the fund, noting that medical costs continue to rise. He further asked for how the division maintains the costs at 39 percent tax. 11:16:41 AM MS. MARX said that the amount of increase shown in the fiscal note is $18,900. which is not a huge increase compared to the amount of benefits paid since this reimburses vessel owners up to $5,000. She explained that most claims are paid to fishermen, which would not be changed by this bill. This bill would allow a vessel owner to be reimbursed more of the deductible, but still with a limit of $5,000. 11:17:30 AM CHAIR STUTES related her understanding that the bill would provide the vessel owners with an incentive to carry the protection and indemnity (P&I) insurance since they will receive the deductible back. MS. MARX agreed. 11:17:53 AM CHAIR STUTES, in response to a question by Representative Neuman, clarified the goal of the bill. She explained that if a vessel owner does not have P&I insurance, an injured crewmember would submit a claim to the Fishermen's Fund. This bill would encourage vessel owners to carry P&I insurance since it would reimburse the entire deductible of $5,000 when a crewmember becomes injured. Currently, the vessel owner would be reimbursed $2,500 of the deductible; however, under the bill, the vessel owner would receive the entire $5,000 deductible. This provides an incentive to vessel owners to carry the P&I insurance. 11:18:41 AM REPRESENTATIVE NEUMAN said his question related to the fund balance. He asked for further clarification on whether there would be an increase in tax to offset the additional amount of money that would be reimbursed to vessel owners to cover their deductible. 11:19:07 AM MS. MARX responded that there was enough revenue to cover the increased liability. She explained that the revenue was approximately $1.4 million each year REPRESENTATIVE NEUMAN asked whether the tax should be reduced since the Fishermen's Fund might be collecting excess funds. 11:20:07 AM ROBERT KEHOE, Executive Director, Purse Seine Vessel Owners Association (PSVOA), stated that PSVOA fully supports HB 379. He said the bill would expand on the legislature's effort in 2010 to provide a financial incentive to vessel owners to obtain insurance to fully cover their crewmembers in the event of an injury. MR. KEHOE stated that as small, independent business owners, the cost of liability insurance is a major fixed cost. This bill would ease the financial burden on vessel owners in paying for the cost of insurance. It would further promote the goal of ensuring all the medical needs of injured crewmembers are satisfied. He said PSVOA respectfully requests that the committee supports HB 379 and move it forward. 11:21:40 AM CHAIR STUTES opened public testimony on HB 379. 11:22:09 AM MARK VINSEL, Executive Administrator, United Fishermen of Alaska (UFA), stated that the UFA reviewed HB 379 at its board meeting last week and the board voted to support passage of HB 379. All fishermen are supportive of the Fishermen's Fund, which was essentially the equivalent of workers' compensation, he said. He emphasized that most important was the solvency of the fund. He said in 2009 and 2010, the UFA supported increasing the maximum claim limit [audio skip]. Ultimately the legislature changed it to $10,000 and at the time, this concept had been discussed but it was important to see over time how the fund would hold up and to ensure that it was solvent. The people in support of this have been patient, and according to those who manage the fund, it is appropriate to do so now. The UFA offers its support for HB 379. He urged the committee members to support the bill. 11:23:57 AM CLAY BESENEK stated he was testifying on behalf of himself, although he also serves on the Fishermen's Fund Advisory and Appeals Council (FFAAC), having been appointed by former Governor Sarah Palin. He explained that managing the Fishermen's Fund was a function that each council member takes seriously. He concurred with Mr. Vinsel's testimony. He stated that he previously served on the [council] when the [compensation amount] was increased to $10,000 since medical costs have not decreased. He acknowledged that some fishermen have not always used the fund as a means of last resort. He emphasized that the [council] has been striving for responsibility from fishermen since the Fishermen's Fund was a fund of last resort. He offered his belief that HB 379 would fix a loophole. He offered his full support for HB 379; however, he could not speak for the [council] since the bill had not yet been discussed; however, he anticipated the full support of the council. In response to an earlier comment by Representative Neuman, he said the fund was formed prior to statehood so if the FFAAC needed something from the state he would be willing to ask for it. 11:26:32 AM CHAIR STUTES closed public testimony on HB 379. 11:26:40 AM REPRESENTATIVE NEUMAN indicated his support for commercial fishermen and the issues and dangers they face, noting medical costs were rising. He expressed concern that $1.4 million was sitting in a fund instead of being in fishermen's pockets. He further expressed an interest in reviewing the tax rates on commercial fishermen. He commented that their biggest complaint has been the amount of government that they must deal with, noting the cost of licenses and permits was very high. He said the legislature could take an opportunity to be more equitable with the fund to assist fisherman. He reiterated that he would prefer that the fishermen would have the funds rather than to have the money sit in the Fishermen's Fund. CHAIR STUTES offered her belief that the bill would assist the fishermen in reducing their [medical] costs overall and help promote carrying insurance on behalf of fishermen. She stated her support for HB 379. She asked Representative Eastman if he had any comments but did not receive a response. 11:28:36 AM The committee took a brief at-ease. 11:28:55 AM CHAIR STUTES commented that HB 379 has a fiscal note with an estimated impact of $18,900 annually on the fund; however, from the testimony received, the fund will remain solvent. This bill would encourage more people to carry insurance and may represent a cost savings to the fund in the long term due to reduced claims against the fund. 11:29:43 AM REPRESENTATIVE TARR moved to report HB 379 out of committee with individual recommendations and the accompanying fiscal notes. There being no objection, HB 379 was reported from the House Special Committee on Fisheries.