Legislature(2003 - 2004)

05/02/2004 03:50 PM JUD

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
     CSHB 336(JUD)am-MOTOR VEHICLE INS./ UNINSURED DRIVERS                                                                  
REPRESENTATIVE KEVIN  MEYER, sponsor of HB  336, introduced staff                                                               
member   Suzanne  Cunningham,   and   told   members  that   this                                                               
legislation states that  if a person knowingly breaks  the law by                                                               
driving without  mandated vehicle  insurance, that  person cannot                                                               
sue for the same amount in  damages as a person with the required                                                               
insurance.  He pointed  out the  key word  is "knowingly."  If an                                                               
accident  occurred,  the  uninsured  driver could  sue  for  non-                                                               
economic  and   compensatory  damages   but  not  for   pain  and                                                               
suffering. He noted that damages  for pain and suffering are most                                                               
costly  to  the  82  percent  of people  who  do  have  insurance                                                               
coverage.  This  issue   was  brought  to  his   attention  by  a                                                               
constituent who  said she  pays $1500 per  year in  insurance and                                                               
must listen  to a  neighbor brag  that he  has no  insurance, yet                                                               
both would  collect the same  damage award  if either were  in an                                                               
accident. The California  Legislature enacted similar legislation                                                               
because 35  percent of  drivers there had  no insurance.  He said                                                               
although  he  carries insurance  coverage  in  case an  uninsured                                                               
motorist  hits his  vehicle, if  that happened,  his rates  would                                                               
REPRESENTATIVE  MEYER said  this bill  is a  matter of  fairness.                                                               
Although  there are  probably  many reasons  that  18 percent  of                                                               
drivers have no insurance in Alaska,  one reason may be that they                                                               
are  unsafe  drivers  with  multiple  DUI  offenses  or  reckless                                                               
driving offenses so the 82  percent of insured drivers become the                                                               
true victims. He said the  bottom line is whether the legislature                                                               
wants to  protect the people who  comply with the laws.  He noted                                                               
that  theoretically, reducing  the number  of pain  and suffering                                                               
lawsuits should lower rates.                                                                                                    
CHAIR SEEKINS questioned how "knowingly" is defined.                                                                            
REPRESENTATIVE MEYER said  the language on page 1,  line 10, says                                                               
the person must know that he or she was not in compliance.                                                                      
CHAIR SEEKINS said the only  argument he could imagine that would                                                               
hold  water is  that the  person might  not know  his policy  was                                                               
cancelled or lapsed because of an unanticipated oversight.                                                                      
REPRESENTATIVE  MEYER said  it would  be the  insurance company's                                                               
responsibility  to   prove  the   driver  knew  he   didn't  have                                                               
insurance, which is a high hurdle.                                                                                              
SENATOR OGAN asked how that  would affect an uninsured driver who                                                               
was in an accident in which someone else was at fault.                                                                          
REPRESENTATIVE MEYER clarified that the  driver could sue for all                                                               
damages except pain  and suffering. The logic is  that the driver                                                               
broke the law by driving without insurance.                                                                                     
SENATOR OGAN  felt that  is too limiting  because the  driver who                                                               
caused  the accident  could  be very  drunk,  eluding police,  or                                                               
involved in criminal activity and  driving dangerously and be let                                                               
off the hook.                                                                                                                   
CHAIR SEEKINS said  the uninsured driver should not  have been on                                                               
the road  in the first place.  This legislation says if  a person                                                               
chooses to drive  without insurance, that person  is assuming the                                                               
risk of  not being  able to recover  economic damages,  no matter                                                               
the cause of the accident.                                                                                                      
SENATOR   OGAN  agreed   that   driving   without  insurance   is                                                               
irresponsible and  said he does  not condone  it but he  knows of                                                               
seniors who live on very  limited fixed incomes who drive without                                                               
insurance because  of the financial  hardship. Those  people have                                                               
no  other options  and he  does not  believe it  is right  to let                                                               
someone with criminal  culpability off on a tort claim  in such a                                                               
REPRESENTATIVE MEYER  said Senator Ogan  raised a good  point but                                                               
he  believes that  many  of  the 18  percent  of drivers  without                                                               
insurance should not be driving.  So, the question becomes, is it                                                               
fair  for one  of those  drivers to  be on  the road  and hit  an                                                               
insured  motorist. He  noted the  uninsured  motorist could  have                                                               
been drunk. He reminded members  that driving is a privilege, not                                                               
a  right,  and  that  part  of  the  responsibility  is  mandated                                                               
insurance  coverage.  He  repeated   that  rates  are  increasing                                                               
because the 18 percent are not paying into the system.                                                                          
SENATOR  OGAN  disagreed  that  is  the  only  reason  rates  are                                                               
SENATOR THERRIAULT  asked what would  happen if he, as  a father,                                                               
knowingly let his insurance policy  lapse and his teenage son and                                                               
friends  took the  car and  got into  an accident.  He questioned                                                               
whether they would  be covered because they did not  know the car                                                               
was uninsured.                                                                                                                  
REPRESENTATIVE  MEYER  deferred  to   a  representative  from  an                                                               
insurance  company to  answer  but said  he  believes the  father                                                               
would probably be responsible.                                                                                                  
MS. SUZANNE  CUNNINGHAM, staff to Representative  Meyer, said the                                                               
bill  is written  to apply  to the  person who  is operating  the                                                               
motor vehicle so if the son did not know, it would not apply.                                                                   
CHAIR SEEKINS thought if the  son caused the accident, the friend                                                               
and son's only  recourse would be against the  father. If another                                                               
driver  caused the  accident, a  claim  for non-economic  damages                                                               
would  be available  against that  driver by  the passengers  and                                                               
son, who did not know.                                                                                                          
SENATOR THERRIAULT  asked how  that would  apply to  an uninsured                                                               
parked vehicle in which a person was injured.                                                                                   
CHAIR SEEKINS noted the key  word is "operating" a motor vehicle.                                                               
He  then said,  in response  to Senator  Ogan's earlier  comment,                                                               
people who make  the choice to drive  without insurance knowingly                                                               
are giving up their rights to recover non-economic damages.                                                                     
MR.  MIKE LESSMEIER,  a Juneau  attorney representing  State Farm                                                               
Insurance,  stated support  for CSHB  336(JUD)am. State  Farm did                                                               
not ask  Representative Meyer to  introduce Section 1 but  it did                                                               
ask him to  introduce some of the other sections,  which he would                                                               
explain. Those sections have not  been controversial. Sections 2,                                                               
4 and  5 deal with  what is called  the "mirror rule."  That rule                                                               
says if the  liability portion of a policy  provides coverage for                                                               
punitive damages,  then the  uninsured and  underinsured motorist                                                               
coverage  must  also  include   coverage  for  punitive  damages.                                                               
Therefore, in effect, the policyholder  is funding his ability to                                                               
recover punitive  damages. Those  damages are designed  to punish                                                               
the person  without coverage but,  in effect, the  insured driver                                                               
is paying for that coverage himself.  He said that makes no sense                                                               
and has  caused that  coverage to increase  in price.  To address                                                               
that  situation,  State Farm  proposed  an  amendment, which  was                                                               
adopted, that says regardless of  what the liability provision of                                                               
a  driver's  policy  says,  the  uninsured/underinsured  motorist                                                               
provision need not provide coverage for punitive damages.                                                                       
SENATOR THERRIAULT asked, "...right now  the law requires that if                                                               
it is in  one, it must be  in the other, so  you're alleging that                                                               
you're paying for double?"                                                                                                      
MR.  LESSMEIER  responded  that  it  forces  people  to  pay  for                                                               
something  most would  choose not  to purchase,  if they  had the                                                               
choice.  A  person might  want  that  coverage in  the  liability                                                               
portion  of a  policy because  often when  a person  is sued  for                                                               
reckless  driving,  for  example,   there  is  an  allegation  of                                                               
punitive damages  in that claim.  However, when one  turns around                                                               
and  looks  at  an uninsured/underinsured  motorist  claim,  most                                                               
policyholders  would  not  want  to  pay  for  damages  that  are                                                               
essentially punitive damages, designed  to punish another person.                                                               
The  policyholder is  essentially  punishing  himself because  it                                                               
does not  affect the uninsured motorist  that ran into him  as he                                                               
is recovering punitive damages under  his own policy. HB 336 says                                                               
the  coverage  in  the uninsured/underinsured  portion  of  one's                                                               
policy  does  not have  to  mirror  the liability  coverage  with                                                               
respect to punitive damages.                                                                                                    
MR.  LESSMEIER  said  the  other  change  is  in  Section  3.  He                                                               
     When  we ...  go all  the way  back to  the history  of                                                                    
     uninsured/underinsured motorist coverage  in the state,                                                                    
     in  1983 and  1984  we passed  a  system that  mandated                                                                    
     offers  of  uninsured  and underinsured  motorists  and                                                                    
     that  system has  evolved. Now  what happens,  when you                                                                    
     buy  an  insurance  policy, it  contains  coverage  for                                                                    
     uninsured/underinsured motorists unless  you decline it                                                                    
     in writing. And then what  happens is every six months,                                                                    
     if  you're a  State  Farm insured,  you  get a  written                                                                    
     offer of  uninsured/underinsured motorist  coverage all                                                                    
     the way up  to $1 million. What the  Supreme Court said                                                                    
     in a case  called [Indisc.] vs. State Farm,  is that in                                                                    
     umbrella  policies, there  has  to be  these offers  as                                                                    
     well and the  difficulty with that is if  we make these                                                                    
     offers on  each vehicle, and people  make the selection                                                                    
     on each  vehicle and then  we're required to  make them                                                                    
     in   the  umbrella   policy  as   well,  it   leads  to                                                                    
     conflicting offers. We don't know  what the price - and                                                                    
     as a result  of that it's just created a  mess in terms                                                                    
     of the umbrella policies and  one major carrier in this                                                                    
     state  has actually  stopped  writing  because of  that                                                                    
     Our  point  is that  we  have  a wonderful  system  for                                                                    
     making this  coverage available through  these mandated                                                                    
     offers already and  that it ought to be  on the primary                                                                    
     policy and this  would just mean that we  don't have to                                                                    
     make those offers on excess  or umbrella policies. We'd                                                                    
     still make  them on  the primary  policies and  I think                                                                    
     those changes make eminent good sense.                                                                                     
     If we go  back to the first provision, we  look at this                                                                    
     provision really as an issue  of fairness. The issue of                                                                    
     fairness is  this issue:  if a  person is  unwilling to                                                                    
     provide  liability coverage  for someone  else, provide                                                                    
     protection for  someone else, it's not  unfair for them                                                                    
     to not  expect to  receive the  same level  of benefit.                                                                    
     Now with respect to Senator  Ogan's concern, the person                                                                    
     that   is  the   violator,  the   bad  actor   that  is                                                                    
     intoxicated,  that  person is  subject  to  all of  the                                                                    
     criminal  penalties,   is  subject  to  an   award  for                                                                    
     economic damages,  and is also  subject to an  award of                                                                    
     punitive damages.  This does not affect  the ability of                                                                    
     an injured  person to recover punitive  damages so they                                                                    
     have a  pretty big hammer  to get whatever  that person                                                                    
     would  have  in  terms  of  assets.  They're  not  left                                                                    
     unprotected and I think that's important.                                                                                  
     We  look at  this, and  one  of our  judges across  the                                                                    
     street, he  talks about what he  calls the goose/gander                                                                    
     rule,  and this  is  really the  goose/gander rule.  We                                                                    
     think that people  that make this choice -  and the way                                                                    
     this bill was  changed in the House, it  was changed to                                                                    
     be knowing - so we don't  - the situation that you were                                                                    
     talking  about Senator  Therriault,  we  don't want  to                                                                    
     cover  anyone with  this bill  that does  not knowingly                                                                    
     violate  the  law.  One  of  the  amendments  that  had                                                                    
     originally been  proposed was with knew  or should have                                                                    
     known,  and it  became  knowing. That's  a pretty  high                                                                    
     standard to meet and we would  hope that as a result of                                                                    
     this,  what would  happen is  that we  would have  less                                                                    
     people  that   make  that   choice  to   drive  without                                                                    
     insurance. The  less people that sign  the registration                                                                    
     certification that says I certify  that I have and will                                                                    
     maintain  automobile insurance  on  this  car and  then                                                                    
     turn around and don't.                                                                                                     
     We  would hope  that  there would  be more  financially                                                                    
     responsible  drivers on  the road  so we  don't end  up                                                                    
     with a situation where what  we have now is probably 16                                                                    
     to 18 percent  and it truly is a  situation where every                                                                    
     person that  drives and doesn't buy  insurance is being                                                                    
     subsidized by those  that do - everyone  of us. Ninety-                                                                    
     six    percent   of    our    policyholders   do    buy                                                                    
     uninsured/underinsured   motorist  coverage   and  that                                                                    
     coverage  has  been  a   coverage  that  certainly  has                                                                    
     changed over the years. It's  increased in terms of its                                                                    
     benefit  but it's  also increased  in  its price.  It's                                                                    
     gotten way  away from what  it originally  was intended                                                                    
     to be and so we think this  bill is a good idea and I'd                                                                    
     be willing  to answer any questions  that anybody might                                                                    
     have of me.                                                                                                                
4:30 p.m.                                                                                                                       
SENATOR  THERRIAULT  asked for  the  definition  of "operating  a                                                               
motor vehicle."                                                                                                                 
MR. LESSMEIER said  he wished he had a good  answer but thinks it                                                               
depends  on  where  the  vehicle  was  parked.  He  thought,  for                                                               
example, if  a person drove  to downtown Juneau, stopped  and was                                                               
waiting to  get out of the  vehicle and was hit,  that would fall                                                               
under operating  a motor vehicle.  However, if a vehicle  was off                                                               
the roadway, it would not.                                                                                                      
SENATOR OGAN asked what percentage  of non-economic damage claims                                                               
involves clear criminal activity.                                                                                               
MR. LESSMEIER was  unable to provide a percentage  but said there                                                               
are always  scenarios in which  the application  of a law  is not                                                               
perfect.  He suggested  that  using the  remaining  tools of  the                                                               
criminal  law and  the  ability to  collect  punitive damages  in                                                               
egregious cases, he  suspects there will be very  few cases where                                                               
every single penny that the bad  actor has available is not paid.                                                               
He said  in looking  at this,  he keeps coming  back to  the fact                                                               
that people make the choice  not to provide protection for others                                                               
and, at  the same time,  to give  up some compensation  for them.                                                               
The consequence of that choice is fair under this bill.                                                                         
CHAIR SEEKINS announced a 3-minute recess.                                                                                      
CHAIR  SEEKINS asked  if he  chose not  to buy  insurance on  his                                                               
family's  vehicles  without the  knowledge  of  the other  family                                                               
members, whether  those family  members would  have the  right to                                                               
recover  non-economic  damages.  He  then  questioned  whether  a                                                               
person  could not  recover non-economic  damages under  this bill                                                               
but could recover punitive damages if the act was egregious.                                                                    
MR. LESSMEIER said that is correct.                                                                                             
CHAIR SEEKINS noted  that 50 percent of punitive  damages must be                                                               
shared with  the State  of Alaska.  He then  asked, "So  it would                                                               
mean if  it was truly  an egregious act on  the part of  the non-                                                               
insured or  the other person, then  you still can go  after those                                                               
punitive damages under the law but  not what we would classify as                                                               
non-economic - pain and suffering."                                                                                             
MR. LESSMEIER agreed.                                                                                                           
CHAIR  SEEKINS then  expressed concern  that an  uninsured driver                                                               
could hit  a pedestrian. He  thought this bill might  not provide                                                               
an incentive  for those people  without insurance to get  it, but                                                               
it will limit some of the exposure for the legal drivers.                                                                       
With no further participation, he closed public testimony.                                                                      
TAPE 04-58, SIDE B                                                                                                            
SENATOR OGAN  asked Representative  Meyer if  he would  oppose an                                                               
amendment to address a situation where:                                                                                         
     ...if someone  is driving  with criminal  culpability -                                                                    
     either a reckless  driver, a DUI, felony  looting - and                                                                    
     run  into somebody,  I think  they should  get hammered                                                                    
     with  as  many   tools  as  the  guy   that  gets  hurt                                                                    
     regardless  of whether  or not  they  had insurance.  I                                                                    
     support  what  the bill  does  if  it's just  a  simple                                                                    
     violation but  I think -  I haven't talked to  the MADD                                                                    
     folks  about it  among  others about  drunk driving,  I                                                                    
     don't  know how  they'd feel  about  it, but  I mean  I                                                                    
     think this goes a little too far in that area....                                                                          
REPRESENTATIVE  MEYER expressed  concern about  the late  date in                                                               
the session  and noted  this bill  has a  referral to  the Senate                                                               
Finance Committee.                                                                                                              
CHAIR SEEKINS  offered to hear  the bill again on  Wednesday. The                                                               
committee then took a brief at-ease.                                                                                            
SENATOR OGAN  moved to  adopt a  conceptual amendment  [1], which                                                               
     The limitation of recovery does  not apply, however, if                                                                    
     the  driver of  the other  vehicle (1)  is cited  for a                                                                    
     violation  of the  state's  operating  a motor  vehicle                                                                    
     while intoxicated  as a result  of the accident  and is                                                                    
     convicted of the offense,  (2) intentionally causes the                                                                    
     accident,  (3) flees  from the  scene of  the accident,                                                                    
     (4) at  the time of  the accident is in  furtherance of                                                                    
     an offense that is a felony.                                                                                               
He noted that language is from a Louisiana statute.                                                                             
CHAIR SEEKINS  announced that without objection,  Amendment 1 was                                                               
SENATOR THERRIAULT  indicated that he  would work with  the prime                                                               
sponsor on  a definition  of what  constitutes operating  a motor                                                               
SENATOR THERRIAULT  then moved SCS  CSHB 336(JUD)  from committee                                                               
with individual recommendations and its zero fiscal note.                                                                       
The motion carried with Senators  Ogan, Therriault and Seekins in                                                               

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