SENATE LABOR AND COMMERCE COMMITTEE February 4, 1993 1:40 p.m. MEMBERS PRESENT Senator Tim Kelly, Chairman Senator Steve Rieger, Vice-Chairman Senator Drue Pearce Senator Georgianna Lincoln Senator Judy Salo OTHERS PRESENT Senator Bert Sharp COMMITTEE CALENDAR SENATE BILL NO. 52 "An Act relating to liability insurance and bond requirements for guide-outfitters or marine mammal guide-outfitters." SENATE BILL NO. 64 "An Act relating to civil liability for workplace safety inspections; and providing for an effective date." PREVIOUS SENATE COMMITTEE ACTION SB 52 - NONE SB 64 - NONE WITNESS REGISTER Karl Luck, Director Division of Occupational Licensing Department of Commerce & Economic Development P.O. Box 110806 Juneau, Alaska 99811-0806 POSITION STATEMENT: Chuck Gray 311 Slater Street Fairbanks, Alaska 99701 POSITION STATEMENT: Supports SB 52. Sandy Jamieson 3 1/2 Mile Old Nenana Fairbanks, Alaska 99725 POSITION STATEMENT: Supports SB 52. David Morris P.O. Box 81572 Fairbanks, Alaska 99708 POSITION STATEMENT: Supports SB 52. Kim Daniels, Executive Director Alaska Air Carriers Association 1117 E. 35, #102 Anchorage, Alaska 99508 POSITION STATEMENT: Opposed SB 52. David P. Hutchens Alaska Rural Electric Cooperative Assn. 703 West Tudor Road #200 Anchorage, Alaska 99503 POSITION STATEMENT: Supported SB 52. James E. Pfeifer, President Alaska National Insurance Company 7001 Jewel Lake Anchorage, Alaska 99502 POSITION STATEMENT: Supported SB 52. ACTION NARRATIVE TAPE 93-8, SIDE A Number 001 CHAIRMAN TIM KELLY called the Labor and Commerce Committee meeting to order at 1:40 p.m. SENATOR KELLY introduced SB 52 (GUIDE-OUTFITTER AIRCRAFT INSURANCE) and invited the prime sponsor, SENATOR BERT SHARP, to testify. Before SENATOR SHARP'S testimony, SENATOR KELLY distributed a committee substitute which would drop out the old first Section 1 of the bill. SENATOR SHARP explained SB 52 would limit the requirement for liability insurance for registered guides doing their own flying, who guide 5 or less hunts a year and transport clients by aircraft less than thirty hours a year. He also explained the current insurance requirements are costly, and overly burdensome, for small guide outfitters, particularly those who conduct just a few hunts a year in the family airplane. SENATOR SHARP asked consideration for the adoption of the committee substitute. SENATOR KELLY called on KARL LUCK, director of the Division of Occupational Licensing to testify. Number 073 MR. LUCK limited his comments to Section 2 of the bill citing eighteen guide-outfitters who would fall into the category as determined by the bill. He said it would be a limited problem for the state to track and follow the flight time, but might present some liability for the state. He expressed concern over the message to the prospective hunter to let them know they would not covered. SENATOR RIEGER asked for additional information on tracking some details. MR. LUCK explained how his department would be tasked by various responsibilities to follow the application of the legislation to a guides's contract, performance, or record. SENATOR KELLY opened the teleconference and asked CHUCK GRAY of Fairbanks to testify. Number 120 MR. GRAY testified in support of the bill and mentioned the department's problem with record keeping could be solved by accepting the hunt records from the guide-outfitter. He said the camp and aircraft insurance has raised the overhead expenses to the cost of the revenue from one hunt. MR. GRAY claimed the small guide-outfitters offer the highest quality hunts, and that he had hunted for 35 years without insurance. He said he was going to give up hunting this year if the insurance requirements remained in effect. Also from Fairbanks was SANDY JAMIESON, who testified, as a 20 year guide, didn't get insurance until it was required. He described being in a crunch with insurance, fees, reallocation of guide areas, and the strict limitation on the number of hunts. He asked for the flexibility of doing without insurance. Number 186 SENATOR RIEGER asked the guides who just testified from Fairbanks about the insurance disclaimer being buried in the fine print of the contract, and asked if they had any problem of having it prominently displayed. MR. JAMIESON suggested having it in bold print on the hunt record. He said most of his clients were European, provide their own insurance, and prefer not to pay for other client's insurance. DAVID MORRIS from Fairbanks also supported the bill. He described how the increased restrictions and overhead costs had limited his profits. He thought, if the guides had gotten along without any restrictions for years, why they needed them now. MR. MORRIS wanted to eliminate both the aircraft and the camp insurance. Number 225 SENATOR KELLY called on KIM DANIELS, Executive Director for the Alaska Air Carriers Association, from Anchorage. MS DANIELS testified on behalf of the association membership in strong opposition to SB 52, and gave some history about the need for continued liability insurance by all carriers. She referred to the testimony from MR. GRAY, who indicated a willingness to take chances without carrying insurance, and said the association members felt an obligation to see that all passengers traveling in Alaska are given the necessary insurance protection. MS DANIELS thought Section 2 would give an unfair competitive advantage to the guides and outfitters exempted from the insurance requirements. SENATOR RIEGER moved to amend SB 52, and he suggested on page 1, line 14 "prominently displayed" should be inserted before the word statement. On the second page, line 3, after subsection he moved to add the words for purposes of the subsection, prominently displayed means, in bolder face type than the other type used in the main text of the contract on the front page of the contract. Without objections, it was placed in the new committee substitute. SENATOR KELLY asked for the adoption of the amended committee substitute. Number 259 SENATOR RIEGER moved to adopt CS FOR SENATE BILL NO. 52(L&C) as amended. Without objections, so ordered. SENATOR PEARCE indicated her lack of support for the bill, and SENATOR RIEGER wanted to review the testimony. SENATOR KELLY said the bill would be held for the next committee meeting on 2/9/93. SENATOR PEARCE asked the staff to work with the sponsor and the air carriers to determine the actual costs of liability insurance in the $100 thousand per seat range. She expressed concern about allowing any aviation transportation for pay to happen without liability coverage. SENATOR KELLY asked MR. FINK to work on the request. Number 311 SENATOR KELLY moved on to SB 64 (INSURER IMMUNITY FOR SAFETY INSPECTIONS), sponsored by the Senate Labor and Commerce Committee, and gave some history on this legislative intent in previous years. Number 311 SENATOR KELLY invited DAVID HUTCHENS, representing the Alaska Rural Electric Cooperative Association, to testify. MR. HUTCHENS explained he also managed the ARECA Insurance Exchange, which writes insurance for most of the larger utilities in the state. He reviewed the decision in the Van Biene v. ERA Helicopter, Inc. case in which it was concluded that insurance companies doing safety inspections on the work site for the employer could be sued for alleged negligent work site safety inspections. MR. HUTCHENS described the effect on those doing work site inspections for the employers, which was to quit doing them, because his board could not accept the unlimited liability that would come from doing the work site safety inspections. Since the responsibility for the inspections had fallen back on the employers, he thought some were doing a good job in policing themselves, but others were not able to do an effective job. As a result, MR. HUTCHENS was fearful that the work site in Alaska is not nearly as safe as it was before the case in 1989, but the bill would restore the law to what everyone thought it was before the Van Biene case in 1989. Number 337 SENATOR KELLY asked for some perspective on the legislation in relation to workers' compensation insurance as a trade off. He paraphrased the decision where someone could get beyond that arrangement and sue an insurer, who performed the safety inspection, if the safety inspection was faulty. MR. HUTCHENS agreed that was the problem, and he elaborated on the level of previous safety services most of the insurance companies have provided in the past. He discussed, with the committee, the danger in insuring without performing a safety inspection, and MR. HUTCHENS' termed it a "crap shoot." Number 369 Testifying from Seattle, Washington, JAMES PFEIFER, president of Alaska National Insurance Company, read the following letter, portions of which are included in the minutes: "This legislation (with the deletion of one key phrase) will help restore the workers' compensation system to its original intent -- i.e. a no fault system. As you know the workers' compensation system covers employee injuries whether or not the employee is at fault. Even gross negligence on the part of the employee does not free the employer of liability. In return, the employer and its insurance carrier are entitled to exclusive remedy. That is, the employer or carrier should not be subject to any liability beyond what is provided under the workers' compensation act. If, in fact, an insurance carrier makes a mistake (intentional or otherwise) in a safety inspection, the employee is taken care of under the workers' compensation system. No need exists, nor should there be any incentive, for an employee to reap windfall benefits. If an insurance carrier displays a pattern of poor inspection practices, remedies are available for the Director of the Division of Insurance to address the matter. From a practical standpoint, however, the market place will quickly come into play and employers (or the insured) will go elsewhere for coverage and safety services. I strongly urge your committee to delete the language relative to "intentional misconduct." As currently written, this language may appear to embrace "motherhood" and "apple pie" but I assure you that such a belief is erroneous. First, as I have already pointed out, this additional club is not needed. The important consideration is that the employee is already taken care of. Second, this type of language invites frivolous causes of action for which the principal beneficiaries are plaintiffs and defense attorneys. The problem is that such words as "intentional" or "misconduct" are issues of fact and, therefore, ultimately would have to be decided by a judge or jury. I know I am being repetitious here but the workers' compensation system was not designed to be adversarial in determining fault. Fault is not supposed to be an issue. Thus, I suggest that this language is inappropriate and respectfully request that it be removed. I appreciate the fact that this overall issue is being addressed this year and urge that this corrective legislation be passed." MR. PFEIFER offered to answer questions. Number 402 SENATOR RIEGER asked if the intent was to remove lines 9 and 10 on page 1. MR. PFEIFER didn't have a copy of the bill, but explained it would be the removal of "intentional misconduct," which, he said, would be the original intent of the workers' compensation system. SENATOR RIEGER reviewed the supreme court ruling report and asked what would happen if an insurance carrier intentionally did not pay what was due under the workers' compensation statutes. He was not comfortable with denying an employee the right to at least sue for actual damages. MR. PFEIFER said there were avenues to be used for the protection of the employee. Number 429 SENATOR LINCOLN, in reference to the position paper from the Department of Commerce and Economic Development, wondered how they could have a neutral position and specific objections to the same bill. She read portions of the position paper to MR. PFEIFER to sustain her argument. SENATOR KELLY assured SENATOR LINCOLN the bill would be held over because the committee must adjourn to attend a caucus meeting. He referred her to a position paper from the Legislative Council on the following page, in answer to her objection. MR. PFEIFER, in response to SENATOR RIEGER, said "if in fact an experienced carrier did not handle a claim properly, an employee could go before the board and the board could award as much as a 25% penalty against a carrier." There being no further business to come before the committee, the meeting was adjourned at 2:10 p.m.