Legislature(2003 - 2004)

04/08/2003 01:34 PM Senate TRA

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
          SB  98-LIABILITY: PLANE AND BOAT PASSENGERS                                                                       
SENATOR CON  BUNDE, sponsor of  SB 98, told members  the nickname                                                               
of this  bill is the "Good  Neighbor Bill."  Right  now, boat and                                                               
airplane owners cannot afford to be  a good neighbor and offer to                                                               
take  a  friend  for  a  boat   or  plane  ride  because,  if  an                                                               
unforeseeable accident  occurs that  does not  involve negligence                                                               
or illegal activities, the "good  neighbor" could lose his or her                                                               
estate.  Some people  have suggested  that a  guest could  sign a                                                               
waiver accepting some of the liability  but, it is a proven legal                                                               
fact that another person's interest  cannot be suborned.  A guest                                                               
could  sign  away his  right  to  sue  but  not his  family's  or                                                               
employer's right to sue. The purpose  of SB 98 is to clarify that                                                               
the people who accept an opportunity  to travel as a passenger on                                                               
a non-commercial outing accept some of the inherent risks.                                                                      
SENATOR  BUNDE  noted that  common  law  recognizes that  certain                                                               
activities involve  inherent risks  and that  participants should                                                               
take  some of  the  responsibility for  injuries sustained  while                                                               
participating  in  those  activities.  He  stressed  that  he  is                                                               
referring to an  inherent risk that does  not involve negligence,                                                               
intentional  misconduct or  illegal  activities. SB  98 will  not                                                               
absolve  owners   of  their  responsibility  to   maintain  their                                                               
equipment in  a safe and  prudent manner.  SB 98 only  applies to                                                               
privately owned  planes and boats, not  to commercial activities.                                                               
In  his  opinion,  SB 98  will  discourage  frivolous,  expensive                                                               
lawsuits and help contain rising insurance costs.                                                                               
SENATOR BUNDE  pointed out  that SB  98 does  provide that  if an                                                               
owner has insurance,  the owner cannot be sued  beyond the limits                                                               
of  that policy.  If the  owner  does not  obtain insurance,  the                                                               
owner must  notify the passengers  of that lack of  insurance and                                                               
that the  passengers must  assume some of  the risk.  He informed                                                               
members  that  a  proposed  committee   substitute  (CS)  was  in                                                               
members' packets. It contains an  additional section that applies                                                               
to the Alaska  Boating Safety Act, which is  necessary to clarify                                                               
that SB 98 only applies  to non-commercial aircraft and boats. He                                                               
offered to answer questions.                                                                                                    
CHAIR  COWDERY  then  pointed  out   that  this  same  issue  was                                                               
contemplated  by  the  Thirteenth   Legislature  to  address  the                                                               
lawsuit  problem. He  asked what  would happen  if a  pilot in  a                                                               
privately  owned airplane  landed to  assist someone  in distress                                                               
and was not able to inform that person of the liability issue.                                                                  
SENATOR  BUNDE  said  if  the pilot  has  insurance,  nothing  is                                                               
required.  Unfortunately,  the pilot  would  have  to inform  the                                                               
passenger that he or she would have to assume some of the risk.                                                                 
CHAIR  COWDERY asked  if Senator  Bunde expects  owners to  use a                                                               
standard form to inform passengers.                                                                                             
SENATOR BUNDE said he was unsure of that then stated:                                                                           
     As an  individual, you  might want  to check  with what                                                                    
     you're  comfortable  with.  I  don't  think  the  state                                                                    
     necessarily should  come up with a  standard form. And,                                                                    
     when you're talking about written,  as I read - as this                                                                    
     is   -   the    [legislation]   is   proposed,   verbal                                                                    
     notification is  adequate. If  I might ask  - use  - an                                                                    
     example that Senator Olson pointed  out to me, he's out                                                                    
     doing something in rural Alaska,  somebody needs to get                                                                    
     to  town or  the doctor,  and he,  as a  non-commercial                                                                    
     operator, could give them a  ride to town. Without this                                                                    
     legislation in  effect, however, he puts  his equipment                                                                    
     and  himself in  great jeopardy  even though  he's just                                                                    
     trying to be a Good Samaritan.                                                                                             
CHAIR COWDERY  said he  believes SB  98 is  very much  needed. He                                                               
told members  that he intended  to put defibrillator  machines on                                                               
every  floor of  the Capitol  Building until  he found  out there                                                               
could be a liability issue involved with their use.                                                                             
SENATOR THERRIAULT  referred to language  on page 2,  line 16-26,                                                               
and asked  if a person  with insurance is  only liable up  to the                                                               
policy limit.                                                                                                                   
SENATOR BUNDE said that is correct.                                                                                             
SENATOR THERRIAULT asked  why a boat owner wouldn't  just buy the                                                               
cheapest  policy with  the lowest  limits.  He expressed  concern                                                               
that  section encourages  people  to carry  a  minimum amount  of                                                               
SENATOR BUNDE said that is what  the situation is now, if one can                                                               
even  get  insurance.  It  is  very difficult  to  get  and  very                                                               
expensive. He has learned from  his past experience in commercial                                                               
aviation that most  people feel they are underinsured  if they do                                                               
not  have at  least $1  million of  coverage for  each seat.  The                                                               
other option is to have no insurance at all.                                                                                    
SENATOR  LINCOLN referred  to language  on page  2, line  10, and                                                               
asked  the difference  between the  terms "gross  negligence" and                                                               
SENATOR  BUNDE  explained  that  gross  negligence,  reckless  or                                                               
intentional misconduct are synonymous.                                                                                          
MS.  KAREN  McCARTHY, staff  to  Senator  Bunde, added  the  bill                                                               
drafter said  that the terms "gross  negligence, recklessness, or                                                               
intentional  misconduct" are  commonly  used  in civil  liability                                                               
statutes  in  Alaska  law  and are  commonly  recognized  by  the                                                               
SENATOR  LINCOLN  asked  if  there   is  any  difference  between                                                               
negligence and gross negligence.                                                                                                
MS.  MARSHA DAVIS,  General Counsel  for ERA  Aviation, explained                                                               
that negligence  is a much  lower standard. Innocent  mistakes or                                                               
simple  negligence will  be immune  from liability  under SB  98.                                                               
Gross negligence  is the next step  up and will be  excluded from                                                               
immunity.  The next  levels are  reckless or  outrageous behavior                                                               
and  intentional  misconduct.   She  said  that Ms.  McCarthy  is                                                               
correct  in  that gross  negligence  or  reckless or  intentional                                                               
misconduct  is the  general standard  [applied when  considering]                                                               
the  liability of  people who  render assistance.  She noted  the                                                               
same phrase is used in AS  09.65.090, which is the Good Samaritan                                                               
1:47 p.m.                                                                                                                     
SENATOR  LINCOLN  asked Senator  Bunde  what  the Alaska  Boating                                                               
Association meant by  the sentence in its letter  of support that                                                               
     Alaskans  are  involved  in  a  high  rate  of  boating                                                                    
     accidents  with  personal  injury  and  death  to  both                                                                    
     operators and passengers  - one of the  results is high                                                                    
     insurance rates.                                                                                                           
She said that insurance rates and accidents do not correlate.                                                                   
SENATOR  BUNDE  agreed that  insurance  coverage  is not  causing                                                               
accidents,  but the  more  claims filed,  the  higher the  rates.                                                               
Accordingly, the more accidents, the more claims filed.                                                                         
SENATOR LINCOLN  said if  that statement is,  in fact,  true, the                                                               
Legislature should look at the cause of the accidents.                                                                          
SENATOR BUNDE  recalled the Legislature worked  on boating safety                                                               
legislation last  year because of  the high number  of accidents.                                                               
Unfortunately,  a lot  of accidents  involve alcohol.  He pointed                                                               
out a drunk person who has  a boat accident would be charged with                                                               
gross negligence and would not be absolved from liability.                                                                      
CHAIR COWDERY commented that he is  a boat owner and gives all of                                                               
his passengers  a card  when they  come on  board that  lists his                                                               
safety rules and procedures.                                                                                                    
SENATOR  OLSON asked  Senator Bunde  to repeat  what effect  this                                                               
bill will have on someone with no insurance.                                                                                    
SENATOR  BUNDE explained  that a  person  without insurance  must                                                               
notify  the  potential  passenger  of  that  fact  and  that  the                                                               
passenger is assuming  some of the risks of  participating in the                                                               
activity and  would not  be able  to recover  should there  be an                                                               
SENATOR  OLSON asked  if  there  is any  civil  recourse for  the                                                               
SENATOR BUNDE  said there  would be  if the  boat or  plane owner                                                               
were  grossly  negligent,  reckless or  involved  in  intentional                                                               
SENATOR OLSON asked:                                                                                                            
     What happens if you have a  problem and you - there's a                                                                    
     personal  injury  with  somebody outside  the  craft  -                                                                    
     coming in for a landing  you overshoot and hit somebody                                                                    
     on the side  of the road or the side  of the airport or                                                                    
     if  you're  on a  boat?  I'm  mainly looking  at  boats                                                                    
     because up  where I  come from  I can  almost guarantee                                                                    
     you that  somebody out in  Elim does not have  any boat                                                                    
     insurance on his boat.                                                                                                     
SENATOR  BUNDE  maintained that  SB  98  covers only  passengers.                                                               
Regarding Senator Therriault's earlier  question, if a person has                                                               
some  liability insurance,  that insurance  would not  only cover                                                               
passengers but  damage done to  others. Therefore,  the incentive                                                               
to continue to  have insurance coverage for those  who can afford                                                               
to remains because SB 98 does not cover all instances.                                                                          
SENATOR LINCOLN asked SB 98 places  a limit on what the passenger                                                               
can  collect  if  a  private  plane  is  landing  and  injures  a                                                               
passenger because of wind shear.                                                                                                
SENATOR BUNDE said  the passenger would be limited  to the amount                                                               
of  insurance coverage  or, if  the  owner has  no coverage,  the                                                               
passenger  could  not collect  anything.  However,  the pilot  is                                                               
liable for anyone  external to the aircraft or the  boat that was                                                               
injured. He  said the  likelihood of injury  to the  passenger is                                                               
much higher.                                                                                                                    
CHAIR COWDERY called for public testimony.                                                                                      
MR.  TOM GEORGE,  representing the  4,000 Alaska  members of  the                                                               
Aircraft  Owners and  Pilots Association,  stated support  for SB
98. He  said it goes  a long  way toward clarifying  and defining                                                               
the responsibilities of  pilots and owners of  aircraft and their                                                               
guests. SB  98 should  increase the number  of people  who insure                                                               
their aircraft  because one of  the insurance companies  he spoke                                                               
with  estimated  that  as  high  as 80  to  90  percent  of  non-                                                               
commercial operators in  Alaska do not carry  any insurance. Part                                                               
of their  rationale is this  [guest liability issue] is  a magnet                                                               
to attract  a lawsuit that will  go way beyond the  limits of the                                                               
insurance.  He said  this is  a  well-intended effort  to find  a                                                               
reasonable balance to  that problem. He urged  members to support                                                               
the legislation.                                                                                                                
MR. FELIX McGUIRE, President of  the Alaska Airmen's Association,                                                               
stated  wholehearted  support  for  SB 98.  He  offered  a  minor                                                               
clarification and asked that the  phrase "minor contribution from                                                               
the  passenger"  be  changed  to  "minor  compensation  from  the                                                               
passenger" so that it is the same as FAA language.                                                                              
MR. GEORGE  noted the  terminology was  already corrected  in the                                                               
CHAIR COWDERY  noted the  committee was working  on a  work draft                                                               
dated 4/02/03 and labeled version D.                                                                                            
MR. McGUIRE urged members to pass the bill.                                                                                     
SENATOR BUNDE pointed  out the CS is intended to  mirror what the                                                               
FAA allows regarding the reimbursement paid by a passenger.                                                                     
MS.  DAVIS stated  support for  the  CS because  ERA Aviation  is                                                               
clearly a common  carrier in the aircraft  aviation industry. ERA                                                               
owns a  boat located  in Seward  that it  uses for  internal team                                                               
building    for   employees    and   for    occasional   business                                                               
entertainment. ERA does not operate  the boat in common carriage.                                                               
The  original  version of  the  bill  purported to  include  such                                                               
boats, as though  ERA was operating the boat  in common carriage.                                                               
The CS clarifies that.                                                                                                          
MS. DAVIS also suggested, in  response to concerns expressed that                                                               
SB   98   might  encourage   people   to   buy  less   insurance,                                                               
incorporating   the  policy   limits   for   automobiles  in   AS                                                               
28.20.440(b)(2).  Those are  very minimal  and amount  to $50,000                                                               
for an individual, $100,000 for  more than one person and $25,000                                                               
for  property damage.  Doing so  would  not require  recreational                                                               
users to  have that insurance  but, if they  do not, that  is the                                                               
threshold  at which  they would  advise the  passenger they  have                                                               
limits below  and need to assume  the risk. She said  the concern                                                               
is  that if  a  person has  a limited  amount  of insurance,  for                                                               
example $5,000 coverage, according to  the way subsection (a) and                                                               
(b)  are written,  the  boat owner  would not  have  to make  any                                                               
disclosure  to the  passenger. She  said if  the Senate  wants to                                                               
establish a reasonable benchmark for  policy limits, it could use                                                               
the minimal motor vehicle liability coverage.                                                                                   
SENATOR BUNDE said  he would rather leave that  to the discretion                                                               
of the person  who is purchasing the insurance  because a minimum                                                               
tends  to also  become  a  maximum. He  then  said regarding  Ms.                                                               
Davis's  previous statement  about  common  carriers, a  proposed                                                               
amendment to address that concern  was distributed to members. He                                                               
said he has no objection to that amendment.                                                                                     
SENATOR WAGONER moved to adopt the amendment, which reads:                                                                      
     TO: CSSB 98( ), Draft Version "D"                                                                                          
     Page 2, line 12:                                                                                                           
          Delete "who is a common carrier"                                                                                      
         Insert "if the aircraft or watercraft is being                                                                         
          operated as a common carrier"                                                                                         
CHAIR  COWDERY   noted  without  objection,  the   amendment  was                                                               
MR. JOHN GEORGE told members  he was representing himself and was                                                               
there because Senator Bunde asked  him to provide some background                                                               
on  aviation  insurance.  He  said  aviation  insurance  is  much                                                               
different  than auto  and homeowner's  insurance. For  example, a                                                               
plane  owner  buys  hull  coverage  and  liability  coverage  for                                                               
incidents that occur  outside of the airplane and  then buys seat                                                               
liability to  cover passengers. A  plane owner could have  a six-                                                               
seat  plane  but  buy  seat   liability  coverage  for  only  one                                                               
passenger.  That coverage  can be  purchased at  different limits                                                               
and is extremely expensive. Plane  owners who opt not to purchase                                                               
that  insurance often  do not  carry passengers.  He pointed  out                                                               
that  many small  boats,  less than  16  feet, are  automatically                                                               
covered  under  homeowner  policies. Personal  umbrella  policies                                                               
also  cover  them. He  said  that  a  lot of  aircraft  insurance                                                               
policies  have  exclusions.  For  example,  one  requirement  for                                                               
passenger liability  coverage is  that the plane  land only  on a                                                               
paved airstrip  so a  pilot could  not land on  a gravel  spit to                                                               
fish with a passenger on board.  SB 98 would allow plane owners a                                                               
little more freedom.                                                                                                            
SENATOR  OLSON asked  if Alaskans  could  expect lower  insurance                                                               
premiums if the bill is enacted.                                                                                                
MR.  GEORGE  said  most  people are  not  currently  buying  seat                                                               
liability so  it would probably  cost the same.  This legislation                                                               
won't prevent accidents; it would  protect one's uninsured family                                                               
assets more than anything.                                                                                                      
SENATOR WAGONER moved to adopt CSSB 98(TRA) [version D as                                                                       
CHAIR COWDERY announced without objection, the motion carried.                                                                  
SENATOR WAGONER moved CSSB 98(TRA) from committee with the zero                                                                 
fiscal note and individual recommendations. There being no                                                                      
objection, the motion carried.                                                                                                  

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