SB 283 - AUTOMOBILE CIVIL LIABILITY CHAIRMAN LEMAN announced SB 283 to be up for consideration. Mr. JOHN GEORGE, National Association of Independent Insurers, supported SB 283 because it represents public fairness. When he was the Director of the Division of Insurance, and before that, a lot of people would complain about uninsured drivers that have accidents and sue you, if you run into them; but if they run into you, you don't get anything. It's been a real problem, and this bill really addresses the personal responsibility issue. There is a law that says you must have insurance and this bill rewards those people who do have insurance. While there is a penalty for people without insurance, if they are involved in an accident where they are not at fault, they can still get their car fixed and their medical bills paid, but they won't have the opportunity to go after the noneconomic awards. The real crux of this bill should go to reduce the number of uninsured motorists with additional incentive to become insured. The Insurance Commissioner in the state of California, when California passed an initiative which did essentially the same thing, said they have had at least a five percent reduction in automobile insurance premiums since its passage. Some of the member companies in the NAII believe it's many times that. They see a significant reduction in uninsured motorists' claims being filed and it could be because there is no need to file a lawsuit, because the medical bills and the repairs to the car are fairly straight-forward costs. Pain and suffering, noneconomic awards, are more difficult to put a number on and, therefore, that's where most of the litigation would come from. SENATOR KELLY asked if this was ever part of tort reform packages in the past. MR. GEORGE answered that he wasn't the person to answer that, although it does have some aspects of tort reform. SENATOR KELLY asked if it was an initiative on its own in California or was it a package. MR. GEORGE said it was an initiative on its own. CHAIRMAN LEMAN said he thought it was linked with commission of a felony. MR. GEORGE agreed and added that they also had a retroactive provision which has been upheld on appeal in California, that says after 60 days, you could not bring suit. This bill would not do that. He noted that our tort reform package had already addressed people in commission of a felony. SENATOR KELLY said he is concerned that, as written, this might include any passengers involved in an accident through no knowledge of their own in an uninsured car. He proposed adding language to subsection (a) saying "does not apply to a person unless the person is an owner or operator of a vehicle involved in the accident," so that any innocent passengers would be able to have the same rights as the guilty person. MR. GEORGE said he thought as it's currently worded, only the driver or an owner of the vehicle who failed to buy the insurance would be affected. He thought the language Senator Kelly suggests further clarifies that. However, he understands this is not the case in California. If you are a passenger in an uninsured vehicle, you are not entitled to sue for noneconomic awards. Number 560 CHAIRMAN LEMAN asked if he was uninsured and driving a vehicle and his wife is riding with him and is a co-owner of the vehicle, he assumed that she, too, could not place that claim. But what if they have one of their children with them, can they as passengers bring that suit or would they be excluded as minor children of the owners. MR. GEORGE thought they should ask attorneys, but his opinion is if a child is not an owner of the vehicle, they would be entitled to recover. The spouse who is a co-owner would be excluded from recovery of noneconomic awards. The spouse would have the equal obligation to have insurance on an owned vehicle. SENATOR KELLY said he didn't see this as a case where they are rewarding the uninsured parent. Rather you're protecting the child whose not responsible for their parent who didn't have insurance. MR. JEFF BUSH, Deputy Commissioner, Department of Commerce and Economic Development, said that the Administration has some concerns about this bill. Driving under the influence sections of this bill are inconsistent with the tort reform measure that was passed last year that says if you are drunk while operating a vehicle that is involved in an accident, if your state of inebriation was a significant cause to the accident, you are denied recovery. That was the way the discussions related to drunk driving went last year. This particular bill appears to not necessarily be in conflict with that, but to extend it one step further to the case where if you are operating a vehicle while drunk and are totally innocent in the accident, you would be denied a claim. You would already be denied, if being drunk had anything to do with the accident in the first place. TAPE 98-8, SIDE B His second point is that this proposal as it relates to the uninsured motorist may conflict with financial responsibility laws in AS 28.20. As explained to him by DMV, they are required to take administrative action against a license while that person cannot get compensated for noneconomic damages. The third point is that this is a tort reform bill and the Administration spent a lot of time last year dealing with tort reform. This particular proposal should have been brought to the table at that time. He said the Administration opposes any more tort reform and for that reason they oppose this bill. CHAIRMAN LEMAN said his first point was somewhat convincing, the second point has been resolved by Ms. Juanita Hensley, and the third point he finds unconvincing. SENATOR MACKIE said he would like to hear from the Administration about how they could make this work. MR. BUSH responded that the arguments are things they have heard over and over again. This bill will set up a system where a person who is perfectly innocent in an accident, although they may not be innocent in their private behavior in a sense that they are not insured or may be drunk and driving and those facts do not have any impact on the accident that results in their being injured, will be denied recovery because of that. The Administration believes that people who are innocent should not be denied recovery simply because of some other behavior they've engaged in. SENATOR MACKIE asked what happens to someone who is uninsured in that a situation like he just described. They may be innocent, but uninsured. MR. BUSH said he understands if someone is in that situation, they take administrative action against the license, even if the person is innocent in terms of the accident, itself. It comes to their attention that a State law is being violated. CHAIRMAN LEMAN said they would work with Mr. Bush and the drafters to address some of his concerns. MR. MICHAEL LESSMEIER, State Farm, supported SB 283. He thought that a quote from a Supreme Court Justice in California summarized his feeling, "Tax paying law abiding citizens will no longer need to support those who choose to break the law." He said people who do follow the law and buy liability insurance end up supporting those who choose not to. This bill, the intent of which is to decrease the number of uninsured drivers, is a good and fair bill. He didn't think it was anyone's intent that innocent passengers be precluded from recovering. He thought that should be clarified. There is a difference in how an intoxicated driver is treated in last year's discussions. Number 481 SENATOR KELLY commented that his concern remains about passengers. He wanted staff to find out the relationship between what they did last year and this bill on the noneconomic damages. He didn't want to go backwards from last year on tort reform legislation. MR. BUSH responded that this bill does not go back; it adds another step. If a person is intoxicated and substantially contributes to an accident, that person is denied recovery of any damages. This bill says in those cases where the intoxication did not substantially contribute to the accident, they can't recover noneconomic damages. They would be able to recover medical expenses and lost wages. SENATOR KELLY asked if drunk driving was one element and uninsured is the second element. MR. BUSH answered that is correct and this bill deals with both situations in the same way. SENATOR KELLY asked about a scenario where a couple of people go to a party, the owner drives and has three drinks, throws the keys to his buddy and says, "you be the driver." They take off and somebody hits them from behind and the owner of the vehicle, who's legally intoxicated, gets hurt. What's the status under this legislation? MR. BUSH answered, assuming the buddy was not legally drunk at the time and, therefore, driving legally, and assuming there was insurance for their vehicle, this legislation wouldn't affect the case at all. If the driver was legally drunk, this legislation would affect it or if the owner had not insured his vehicle, this legislation would affect it. SENATOR KELLY said the intoxication part might be a little too complicated. CHAIRMAN LEMAN said he would like to work on that issue, also. SENATOR KELLY said he thought they should use the word passenger somewhere as opposed to owner or operator. CHAIRMAN LEMAN said they would work further on the bill and adjourned the meeting at 3:05 p.m.