HB 214-PUNITIVE DAMAGES AGAINST EMPLOYERS  CHAIR SEEKINS announced HB 214 to be up for consideration. REPRESENTATIVE RALPH SAMUELS, sponsor of HB 214, said the bill creates new guidelines for damages against an employer under vicarious liability. It stipulates that an employer shall not be responsible for paying damages unless he okayed the act. The point is if a company did nothing wrong, it should not be punished, which is what punitive damages are for. The bill does not have anything to do with direct damages or compensatory damages. Language comes from restatements of National Standards. The Alaska Supreme Court found in the Laidlaw case, that if it had come up in trial, they would have leaned toward the National Standards. SENATOR FRENCH said he thought the purpose of this bill was to overturn the result of the Laidlaw case. REPRESENTATIVE SAMUELS said he didn't know how the case ended, but he knows what the court said. SENATOR FRENCH said the one place this bill differs from the restatement of National Standard has to do with the employee working in a managerial capacity for the employer. REPRESENTATIVE SAMUELS said they wanted to make sure they had someone who had control over the policies of the company. SENATOR FRENCH said he noticed that the restatement was careful to add to the managerial reference "who was acting in the scope of employment." This bill says you can only award punitive damages if the employee was a manager of the employer, not that they were acting within the scope of employment. MS. SARAH NELSON, Staff to Representative Samuels, responded that there are two different kinds of this law, the narrower complicity of rule and the one that is acting within the scope of employment. They were aiming at a narrower construction. MS. MARSHA DAVIS, General Counsel, Era Aviation, said she thought that language was left out because it resulted in a tighter definition than the restatement, but it broadens the number of people it would affect. TAPE 03-38, SIDE B    SENATOR FRENCH asked if this would penalize the lead on a night shift for Exxon or BP. MS. DAVIS replied that you would have to ask yourself whether that individual has sufficient authority and control to make decisions for the alter ego - the employer. They are looking for someone who can create and alter company policies. SENATOR OGAN said the most infamous case of vicarious liability he could think of was Joe Hazelwood on the Exxon Valdez. Exxon has a policy that you don't drink and drive their ships. So, are they suddenly not liable because he violated their policy? MS. DAVIS replied that the $5 million in punitive damages were assessed against Exxon directly. Mr. Hazelwood had punitive damages for $5,000. This bill wouldn't touch anything that has to do with maritime law, but it would make Exxon or BP liable for Mr. Hazelwood's punitive damage assessment. SENATOR FRENCH asked if she thought this bill would have produced a different result in the Laidlaw case. MS. DAVIS replied she didn't think it would, but it would be a very close question. The question was did Laidlaw know the individual had a drug/alcohol problem and yet allow him to drive the van. The jury could conclude that was reckless behavior on the part of Laidlaw and that would have the same result, that Laidlaw was responsible for the punitive damages. MS. DAVIS said one reason the vicarious liability should stay with the employee is that lawyers go after the deep pockets. In this case Laidlaw was liable to pay the $100,000 that was assessed and the employee got off scot-free. It's appropriate if you're going to punish someone for the wrong doing that they actually be punished rather than sliding that punishment to what is essentially an innocent party in the transaction and allows the bad behavior to proceed on because they [don't have the deepest pocket.] SENATOR FRENCH asked why they wouldn't include the phrase "held in the course and scope of employment" since that's the test they used in Laidlaw. MS. DAVIS replied that under Alaska law, you couldn't be determined to be vicariously liable without an initial finding that the conduct of the employee was within the scope of employment. It's a bit duplicative to have a precondition that presumes the action was within the scope of employment. It wouldn't hurt anything to put it back in, but it would be duplicative. SENATOR THERRIAULT asked if is he acting as an employee if he lets an employee use one of his mobile rigs over the weekend. MS. DAVIS said the question would be whether his business receives any compensation for that use. SENATOR THERRIAULT said no. MS. DAVIS said she would question whether any conduct by that employee could be tied back to his business. MR. JIM WILSON, Alaska Air Carriers, supported HB 214 saying it would reduce the cost of their insurance. They have an extensive training program, but one pilot didn't follow procedure and use the mirror to observe external loads carried under the aircraft when landing in a confined area. His blades hit a stump and the aircraft was totaled. Fortunately, there were no injuries or deaths, but had there been, they could have seen punitive damage suits. The pilot put the company at risk and those are the kind of things he is concerned about. SENATOR FRENCH asked if he was sued or whether any money changed hands. MR. WILSON replied it was an expensive accident; they lost a helicopter and the pilot lost his job. SENATOR ELLIS asked if he thought his insurance rate would go down with this legislation. MR. WILSON replied his insurance underwriter told him it would be one of the tools that would help it go down. SENATOR ELLIS asked Mr. Wilson if the insurance underwriter said he would reduce his insurance premium if he got this bill passed. MR. WILSON repeated he just said it would be one of the tools that would make it go down. SENATOR ELLIS said after the bill has been signed into law, he wanted Mr. Wilson to tell him how much his insurance went down. "I'll be really excited if that, in fact, ever happens." MR. WILSON said he believed it would. MS. PAM LABOLLE, President, Alaska State Chamber of Commerce, supported HB 214. Prior to the passage of tort reform in 1996 or 97, the insurance rates in this state were escalating at an astonishing rate. A great deal of it was because of the punitive damage assessments, because you can't insure against punitive damages because they are used to punish a wrongdoer. If you go to court, however, you run the risk of getting a punitive assessment and that causes many businesses and their insurance companies to settle out of court rather than take that chance. She said the insurance rate might not go down, but it could level out or rise slightly versus the astronomical increases that happened before passage of the tort reform legislation and the punitive damages definition. CHAIR SEEKINS said that negotiating an insurance rate is a long process, especially with a business. He agreed that rates could fall or at least not rise as fast as they find ways to keep the truly responsible parties liable for their actions. SENATOR FRENCH said he thought this bill restricts the doctrine too far. Reading the Laidlaw is kind of an eye-opener for anybody with a child who goes to school, because in the Laidlaw case this bus driver was, as far as I can tell, smoking marijuana every single day and showing up to work after having smoked marijuana and, in the course of her job, rolled the bus with a bunch of kids in it and hurt the kids. The trial jury, as they sometimes do, kind of lays down a big heavy punitive award, which the trial court reduced substantially - because contrary to popular opinion, there is some oversight of punitive damage awards. Frankly, I think a bus company that employs a bus driver that is smoking marijuana every single day should tighten down the screws a little bit to make sure that isn't happening. If it takes a punitive damage award to make them tighten down the screws, I'm okay with that. I think this bill needs to be amended to make sure that employees acting within the scope of their employment are included within the definition of those individuals who put the company on the hook. He would be much more comfortable if the bill mirrored the language of the restatement, which is the national standard. SENATOR THERRIAULT said he needed more time to go through the issues. SENATOR SEEKINS said they would hold HB 214 for further consideration. There being no further business to come before the committee, he adjourned the meeting at 9:20 a.m.