HB 57 - STATE & MUNI IMMUNITY FOR Y2K Number 1260 CHAIRMAN KOTT announced the next order of business is HB 57, "An Act relating to immunity for certain claims against the state, a municipality, or agents, officers, or employees of either, arising out of or in connection with the year 2000 date change; and providing for an effective date." CHAIRMAN KOTT opened the meeting up to the teleconference network. Number 1285 GAIL VOIGTLANDER, Assistant Attorney General, Special Litigation Section, Civil Division, Department of Law, testified via teleconference from Anchorage. She stated the department is proposing an amendment to clarify the definition of "state" in the bill. There is some concern because the organizations that fall within the state are not automatically thought of as the "state". The amendment flushes that out and ensures that public authorities such as the Alaska Industrial Development and Export Authority (AIDEA) are clearly within the ambit of the bill. The amendment reads as follows: Page 3, following line 19: Insert a new paragraph to read: "(3) "state" includes a department, institution, board, commission, division authority, public corporation, council, committee, or other instrumentality of the state including the University of Alaska;" Page 3, line 20: Delete "(3)" Insert "(4)" Number 1385 REPRESENTATIVE GREEN made a motion to adopt Amendment 1. There being no objection, it was so adopted. Number 1478 BOB POE, Commissioner-designee, Department of Administration, stated HB 57 intends to address a big problem of potential litigation related to the year 2000 (Y2K). There are three alarming statistics involved: the national cost to clean up Y2K is expected to be about $300 billion to $400 billion, the cost of litigation is expected to be about $1 trillion, and 300 national law firms have already opened up Y2K practices. In addition, the state doesn't have a cap on what it can be sued for. He further stated that the bill intends to try to mitigate the liability issues. There are lawsuits now in the courts where somebody has tried to do the right thing, but were sued because they were a deep pocket. The state is a likely candidate for those types of suits. He deferred to Brad Thompson from the department. Number 1585 BRAD THOMPSON, Director, Division of Risk Management, Department of Administration, stated the division offers the state's property casualty insurance protection. The division anticipates a significant cost to be realized should the state not be provided the protection afforded in HB 57 as proposed. Twenty states, at the moment, are actively considering similar legislation to protect both the state and local municipal governments. Five state have already enacted a law. Thirty-two states have already limited the type or value of claim that can be brought against them and/or the local municipalities. The state of Alaska has no such protection. He reiterated the bill provides for limited protection just for the Y2K exposure. It does nothing to remove or vacate the state's responsibility for people to provide a benefit or perform a duty to the public. Number 1668 REPRESENTATIVE CROFT asked whether the bill requires due diligence from the state in protecting people from the effects of the Y2K change. MR. THOMPSON replied the state is performing exhaustive efforts with the available funding, personnel and time. He doesn't believe that there is a condition preceding the protection provided by this. Number 1714 MS. VOIGTLANDER stated the bill does not have due diligence as a requirement for immunity. The state has been undertaking quite an effort on Y2K remediations. Each agency has had to access mission critical programs and come up with remediation and contingency plans. The bill really accompanies the efforts that Commissioner-designee Poe has been leading. Number 1759 REPRESENTATIVE CROFT asked Ms. Voigtlander whether there is anything in the bill that requires an effort to get this immunity. In other words, if one state agency does absolutely nothing and another state agency makes substantial efforts, are both immune? MS. VOIGTLANDER replied yes. The bill in its present form does not have a standard of performance attached for immunity. It does address the efforts being made for remediation. Number 1821 REPRESENTATIVE ROKEBERG stated that he is concerned about the definition of "year 2000 date change" in the bill. Does it mean January 1, 2000 or does it mean January 1, 2001? It is debatable. He announced he has an amendment to specify the years. Number 1860 COMMISSIONER-DESIGNEE POE stated the definition in the bill is a similar definition that has been used in lots of other things that describe Y2K. He understands Representative Rokeberg's point, that being when does the actual millennium occur - 2000 or 2001. In testing systems, there is a range of dates that fall under the Y2K moniker, such as a date projected four months in advance. Number 1895 REPRESENTATIVE ROKEBERG announced he has an amendment that provides for an 18-month window at which time the millennium bug will have come out of its cocoon. Number 1922 REPRESENTATIVE GREEN asked whether there would be any other immunity drawn into this alleviating the obligation of the state. MS. VOIGTLANDER stated the bill intends to cover only acts or omissions for damages caused directly or indirectly by the failure of an electronic computing device. She said, "If I understand the question which I presume is in the nature of what if there's just some very tangential link to a year 2K issue, would this--is this intended to immunize for that? I don't see the bill as doing that because what it--the act or omission is immunized through this bill for damages that are caused by a failure of an electronic computing device. So I think that if--it would have to circle back to that for it to fall within the gambit of (indisc.--coughing)." Number 2038 REPRESENTATIVE MURKOWSKI referred to the definition of "physical apparatus that is not primarily used as a computer". She noted it includes medical equipment and asked whether the state would still have immunity if that equipment failed to work and killed somebody, especially if there hadn't been an upgrade and it was not Y2K compliant. COMMISSIONER-DESIGNEE POE stated medical devices are in mission critical areas. They have been checked out. In addition, they have to be covered with a contingency plan. It is covered under the state's due diligence effort. MR. THOMPSON stated he is not so sure that the state or its agencies are directly involved with that type of medical care. There may be some, but as Ms. Voigtlander said it would have to be directly or indirectly caused by the Y2K date change. He said, "But, I don't think there's a disincentive that members may be concerned about of the state's efforts to be prepared and to do what it can to prevent any fallout for Y2K. We are doing the best we can. I don't think this bill would have any effect to that effort." Number 2165 REPRESENTATIVE MURKOWSKI asked whether the Administration looked at a carve-out in the event of death caused by a medical malfunction. COMMISSIONER-DESIGNEE POE stated he didn't look at it specifically. MS. VOIGTLANDER stated she doesn't recall it as being an issue probably because that is not the type of medical care the state renders. She said, "Usually, if you're going to be rendering medical care with that type of equipment, then people have been moved out of the state system, so to speak, and are receiving medical care through private medical sources. Either they've been transferred to an emergency room or another hospital, or there are physicians that are not state employees who are brought in to see people and to use the particular equipment. But, I don't recall seeing something specifically other than some--I have a somewhat vague recollection that one of the Eastern states maybe had a bill that had to do with medical devices. Unfortunately, I can't put my hands right on that right away." Number 2252 REPRESENTATIVE MURKOWSKI explained she was referring to legislation from the state of Montana which says, "...the state's immunity does not apply to a health care facility if death or bodily injury results from failure or malfunction..." Number 2277 REPRESENTATIVE KERTTULA asked whether a situation like Juneau where the municipality owns the hospital is the concern. COMMISSIONER-DESIGNEE POE stated that sounds right. There is also the Alaska Psychiatric Institute (API) and the pioneers' homes. So far, it hasn't been found that biomedical devices are causing a problem. On the same token, Providence Alaska Medical Center in Anchorage and Fairbanks Memorial Hospital are finding devices that have Y2K problems. He referred to Senator Bob Bennet's Year 2000 report addressing health care issues and stated that a lot of the issues focus on doctor's offices. But, they aren't paying that much attention to this because they don't have that much in their offices that really affect life and death situations on a Y2K basis, whereas hospitals do. Number 2344 REPRESENTATIVE CROFT asked Commissioner-designee Poe how the state has been paying for the Y2K efforts. COMMISSIONER-DESIGNEE POE replied the state has been paying for it out of the Risk Management Fund. The state has used about $2.1 million to $2.2 million to date. REPRESENTATIVE CROFT asked Commissioner-designee Poe whether using money from the Risk Management Fund was appropriate because of the potential liability risk. COMMISSIONER-DESIGNEE POE replied right. The state would be exposed to more suits without taking a due diligent effort. The Risk Management Fund is used to settle suits and it also made sense to use it to avoid suits. CHAIRMAN KOTT stated it was a good business decision. CHAIRMAN KOTT indicated that the bill would be held over for further consideration.