SB 98-LIABILITY: PLANE AND BOAT PASSENGERS  CHAIR SEEKINS announced that Version H of SB 98 was before the committee. SENATOR CON BUNDE, sponsor of SB 98, provided the following background information on the measure, which he referred to as the "good neighbor bill." Thousands of Alaskans own airplanes and boats and magnify their enjoyment of Alaska's out of doors by showing access to our outdoors with friends, relatives, neighbors. That's the good news. Perhaps the equally important news, but not always so good, is that there are certain inherent risks in accessing Alaska's wilderness and out of doors. Traveling off the highways and byways does have some inherent risk. SB 98 is designed to clarify that people who accept an invitation to a plane or boat trip also accept some of these inherent risks. I call it the 'good neighbor bill,' Mr. Chairman and committee members, because as Representative Ogan probably has experienced and others that may have had a boat or airplane at one time in their lives that a neighbor will say, gee, that's really a nice boat you got there and I'd sure like to go for a ride sometime, I'd be happy to help you pay for the gas.' And, unfortunately in today's society, by being a good neighbor and taking a friend, a neighbor out, the boat owner or airplane owner are putting themselves and their families' assets at great risk - great risk because at this point if there's any unforeseen and truly accidental occurrence, they are liable for suit. Common law recognizes that certain activities do carry inherent risk and participants take some responsibility for injuries they may sustain while participating in those activities. Currently in state statute there's laws about private runways, zoos, unimproved land, the ski safety act. Unfortunately in today's society, people often sue without consideration for their own responsibility for participating in these activities. This has made insurance almost unaffordable for most Alaskan plane and boat owners and, in some cases, forcing them to forego insurance at all and/or refuse to take guests along or simply just get out of the business. When I say business I mean the activity, not a commercial.... Certainly both flying and boating have these inherent risks that I discussed earlier. This bill would suggest that if you participate in an activity like that and the owner - the operator - are not guilty of gross negligence or intentional misconduct, then the passenger should indeed accept some of the inherent risk. SB 98 does not - let me emphasize not - absolve owners from all responsibility to maintain and operate their equipment in a safe and prudent manner. SB 98 only applies to private owners; it doesn't apply to commercial planes or boats. SB 98 will discourage expensive, frivolous lawsuits and help contain rising insurance costs. I'd like to point out that it doesn't discourage a person from getting insurance and some people do because there's a liability to folks outside of the plane or the boat as well and wise people would carry some liability coverage there if they can afford it. What it does exempt the owner/operator from is a suit in excess of the insurance coverage that they have or, in the event that they simply are not able to even at any cost or any reasonable cost get insurance, it says, if you notify your passenger that there is an inherent risk, that you are without insurance, that they are assuming some of the risk if they join you, then you are not liable or subject to a suit at all. So, two things could happen. One, you have insurance; you're not sued beyond the coverage. The other is you don't have insurance, you notify the passenger of this, and then you're not subject to suit at all, assuming you're not grossly negligent, you're not involved in any intentional misconduct - criminal activity. With that, Mr. Chairman, I'll make myself available for questions. CHAIR SEEKINS referred to the language on page 2, line 7 that reads "if not being used for commercial purposes" and asked what the definition of "commercial" is. SENATOR BUNDE said the FAA has very clear and strict aircraft regulations: a passenger can reimburse for his or her share of the gas, oil and operating expenses. Any costs beyond one's share of the operating expenses, if one is operating under the FAA rules for commercial operation, are considered to be commercial. The FAA does not have a clear definition of "commercial" for boating but, obviously, the intent is that it applies to anyone who is operating for a profit or for hire. CHAIR SEEKINS asked whether a boat owned by a company that is used to entertain would be covered under SB 98. SENATOR BUNDE said it would. An amendment in the Senate Transportation Committee addressed that scenario. If a common carrier, for example an aircraft company, owns a boat for its employees' recreational use, it would fall under this bill if that boat is not used commercially at all. If the company uses the boat for profit, it would fall outside of the bill. SENATOR OGAN pointed out the Coast Guard has regulations that require an operator to have a six-pack license for commercial use of a boat. He asked how guides would be affected by this legislation if they fly under Part 91. He indicated that a guide might use an airplane to fly people around but the plane would not be used commercially for hire. He suggested clarifying that matter in the legislation. SENATOR BUNDE said the guide scenario would be a for-profit venture. He said the FAA has been tightening up on Part 91 operations for guiding and is urging people to become single pilot 135 operations. SENATOR OGAN said he does not believe the FAA has required that at this point in time so he questioned whether Senator Bunde intends to exempt guides from liability under SB 98. He then suggested changing the phrase to "not being used for lawful commercial purposes" so that drug smugglers are not covered. SENATOR BUNDE said any boat or aircraft that is used in a business venture, such as guiding, would not be covered under SB 98. This bill is aimed at private recreational activities only, not for any commercial venture in any shape or form. Regarding unlawful businesses, SB 98 contains language that exempts only recreational activities that that do not involve any illegal activities. CHAIR SEEKINS asked whether he would be covered if he flew a friend around in his company-owned airplane. SENATOR BUNDE said he would as long as he does not own an air taxi company. SENATOR OGAN said that an illegal activity like bootlegging might apply in Alaska. A person could offer to fly someone around with the intent of delivering liquor to a dry village. SENATOR BUNDE said SB 98 would not cover anyone who is involved in gross negligence, intentional misconduct, or an illegal activity. SENATOR FRENCH asked Senator Bunde if he could provide examples of outrageous lawsuits that have been filed and successfully prosecuted under the existing laws. SENATOR BUNDE replied: I would, I guess, try to answer by indicating that any commercial air taxi that I'm familiar with felt that they had to insure for at least $1 million per seat to feel that they were adequately covered because of potential lawsuits and often that meant Lloyds of London to find that kind of coverage. So, specific lawsuits, you know, I just know there's a lot of anxiety out there so - what's a relative loss? Somebody who instead of a lot of other hobbies they do a lot of sweat equity to have a boat or an airplane but they're of middle class but modest means - you know a $100,000 loss could mean their home and with court costs and things it doesn't take very long to get to $100,000. SENATOR OGAN referred to the language on page 3, lines 3 through 7, and asked if that language is included in case a child takes a parent's boat without his or her knowledge. SENATOR BUNDE said that's correct. In addition, if a stranger or someone without direct permission took your boat, that person would not be exempt. SENATOR ELLIS asked Senator Bunde what facts he could provide related to [liability suits for] boating and private plane operations. He also asked if Senator Bunde has a commitment from insurance companies to reduce or maintain insurance rates if this legislation passes. SENATOR BUNDE said he has no commitment from insurance companies and, if he did, he would be suspicious of it. He said insurance companies base rates on actuarial data so that the loss they are likely to sustain does not increase. However, the likelihood of an increase to rates may be reduced. In addition, the number of competitive companies should increase. He said the best we can hope for is a decrease in the rate of increase. He repeated that it is very challenging to get coverage in the amount of $1 million per seat and it involves reinsuring through Lloyds of London. SENATOR ELLIS maintained that rate increases are based on factors other than actuarial information, such as what the market will bear. He said he thought insurance companies might have promised Senator Bunde something if this legislation passes. SENATOR BUNDE said he has received no promise from the insurance companies and he has been generous in his opinion that the insurance business operates on the principle of insuring for the highest rate for the lowest risk and, if there's a loss, they delay payment to make money on the float. That is their responsibility to their stockholders. SENATOR ELLIS commented that Senator Bunde has a more realistic view than many policy makers. SENATOR FRENCH commented that the letters of support for the legislation contain two main factors: high insurance rates and fear of frivolous lawsuits. He said he couldn't speak to insurance rates because he does not own a boat or plane, but frivolous lawsuits are penalized under our justice system. People who bring frivolous lawsuits must pay for the opposing party's attorneys. He said he believes the fear of frivolous lawsuits may be exaggerated. SENATOR BUNDE said he does not know that he would use the word "frivolous" but he is more concerned about a sympathetic jury that might think a boat owner has deep pockets. SENATOR OGAN said as a life long boater he has spent thousands of hours on the water and, as pilot he has spent hundreds of hours in the air. He said one of the joys of owning a plane and a boat is sharing them with friends and family. He noted with the inherent risks in traveling in Alaska, this bill would let people who do share get a better sleep so it is worthwhile. 2:45 p.m.  TAPE 03-27, SIDE A SENATOR BUNDE said everyone who has lived in Alaska for a while tends to become complacent about the scenery. He finds it refreshing to take someone to see Mt. McKinley for the first time because doing so reinvigorates his appreciation for where he lives. CHAIR SEEKINS said he knows from firsthand experience that insuring boats and airplanes is costly. On top of the cost of insurance, there is the Rule 82 charge. He thanked Senator Bunde and announced he would hold SB 98 in committee.