SENATE BILL NO. 104   "An Act relating to regulation and examination of insurers and insurance agents; relating to kinds of insurance; relating to payment of insurance taxes and to required insurance reserves; relating to insurance policies; relating to regulation of capital, surplus, and investments by insurers; relating to hospital and medical service corporations; relating to the portability and availability of health care insurance; making amendments to the insurance statutes to conform to federal requirements regarding health insurance; relating to the repeal of certain small employer health care insurance provisions; requiring that uninsured and underinsured motor vehicle insurance apply to claims of an insured even if other policy limits are not exhausted; repealing delayed provisions relating to dental, vision, and hearing insurance in secs. 3 and 4, ch. 101, SLA 1992; repealing delayed provisions relating to small employer health care insurance in secs. 4, 7, 9, and 12, ch. 39, SLA 1993; repealing the delayed effective date in sec. 5, ch. 101, SLA 1992, and in sec. 13, ch. 39, SLA 1993; and providing for an effective date." Co-chair Sharp provided a history of the bill in committee. Senator Donley MOVED to ADOPT Amendment 1. There was an OBJECTION for discussion. Senator Donley explained that cases in other states had raised potential problems related to rental car insurance; the purpose of the amendment was to prevent litigation. The amendment would clarify the hierarchy of claims when a rental car was damaged. The first place a claim would go would be the collision policy purchased when someone rented a car and purchased collision; the second place would be the operator of the car, if they had a policy; the third place would be the owner of the rental-car company. Most people believed the listed order was already required in current law, but litigation in other states had shown that the claim order was not always clear. Senator Donley informed the committee that he had sponsored language in existing law eight years prior that stipulated that an auto insurance policy in Alaska required coverage of rental cars. The amendment was consistent with the original language to prevent litigation. Senator Torgerson asked why Canada was listed in the provision. Senator Donley answered that the language was in existing law. In response to a question by Co-chair Sharp, Senator Donley explained how the legislation would work: If a person renting a car bought a collision waiver, the collision policy would be the first thing covering damage costs. If a person did not buy a collision waiver, and the person's auto insurance covered rental cars, then that would be the next in line. The person who rented the car out would be responsible if the renting person had neither of the first two options. Co-chair Sharp summarized that the person who owned the rental car would be liable if the person renting the car did not buy additional coverage and did not have it themselves. Senator Donley agreed. [SFC-97, Tape 122, Side B] Senator Donley noted that the issue was not completely clear in other states. Under the old law, a person with uninsured or underinsured motorist coverage would have a policy up to a certain amount; the only way the person could file a claim under such a policy was if there was a claim and compensation did not cover the whole amount of the damages. Because of overlap with other policies and because Alaska had mandatory auto insurance, the system only worked if someone without insurance caused the accident. Anyone with insurance had coverage. He believed that people were confused about the coverage. The law had been changed to clarify that if one person was in an accident resulting in damages of $125,000 with a second person who had $100,000 worth of insurance, the policy of the second person would pay $100,000 and the policy of the first person would pay the $25,000 balance. Senator Donley continued that there was a section in another statute [AS 28.22.020(1)(a)] that was not modified. The presence of the conflicting statute enabled the insurance companies to go to federal court and get a ruling that the legislature did not mean what it said. The federal court determined that the protection did not have to be paid for. The ruling was appealed up to the ninth circuit to get it back to the state court, where it should have been in the first place. At the same time, there was another case that resulted in the opposite ruling-that the legislature meant what it said. In other words, one case said pay, the other said not to pay; some insurance companies in Alaska had to pay, and some did not. The amendment would clarify the issue and establish that the payment should be stacked. Senator Donley articulated the policy arguments on both sides. On the one hand, the argument was that stacked policies became more expensive. SENATOR TIM KELLY reported that the Rules Committee had sponsored the bill at the request of the Division of Insurance. He did not object to Amendment 2. He stated that he understood the public policy call. He did not believe Amendment 1 belonged in the bill, however. MARIANNE BURKE, DIRECTOR, DIVISION OF INSURANCE, DEPARTMENT OF COMMERCE AND ECONOMIC DEVELOPMENT, testified that Senator Donley had succinctly described the issue, which was controversial and long-standing. She affirmed that there were two court rulings and that the attorney general's office had filed a brief supporting the provision. The division supported the brief and concurred with it. However, she noted that the issue was highly controversial and asked that the amendment [Amendment 1] not be attached to the bill. She stressed that there were convincing and strong arguments either way. She stated that both the original SB 104 and the Kassenbaum-Kennedy amendment were deliberately structured to be as non-controversial as possible, because the bill was critical to Alaska. Co-chair Sharp noted the OBJECTION to Amendment 1. Ms. Burke emphasized that an amendment as controversial as the proposed amendment could kill the bill. She stressed that the bill had to go through during the current session or the Kassenbaum-Kennedy (the federal regulation) effective date would start. Senator Kelly asked whether the controversial issue had been introduced on its own merits. Senator Donley replied that it had not been introduced during the current year. A roll call was taken on the motion. [The answers were difficult to hear on the tape, which was double-recorded with another meeting. The answer of Senator Parnell was unclear and the outcome regarding Amendment 1 unclear.] IN FAVOR: Phillips, Donley, Adams OPPOSED: Torgerson, Pearce, Sharp Senate Pearce MOVED to REPORT SB 104 (FIN) out of committee with individual recommendations and the accompanying fiscal note. There being NO OBJECTION, it was so ordered. CSSB 104(FIN) was REPORTED out of committee with "no recommendation" and fiscal note by the Department of Revenue and zero impact note by the Department of Commerce and Economic Development.