Legislature(2003 - 2004)

04/23/2003 01:07 PM Senate JUD

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
           SB 98-LIABILITY: PLANE AND BOAT PASSENGERS                                                                       
CHAIR SEEKINS announced that Version H of SB 98 was before the                                                                  
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                                                                   
     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                                                              
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                                                              
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                                                              
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                                                              
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.                                                                                 

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