Tort Reform Tops 2003 Idaho Legislative Session; State Fund Issue Remains Unresolved

Tort reform was reportedly the major accomplishment of the 2003 Idaho legislative session. The session lasted a record 118 days due to a standoff between the Governor and legislators over the raising of certain taxes to address the state’s budget deficit.

On March 26, Gov. Kempthorne signed major tort reform legislation that will reportedly help rein in jury awards by reducing the cap on awards for pain and suffering as well as instituting a cap on punitive damage awards. “Idaho has strengthened its laws and business climate through the enactment of this tort reform measure,” said Michael Harrold, senior director of state government affairs for the National Association of Independent Insurers (NAII). “Over time, the provisions of this law will have a positive impact on insurance costs by eliminating extreme jury settlements that contribute to increased costs for consumers.”

House Bill 92 reduces the cap on non-economic damages from $682,000 to $250,000. The bill lessens the scope of contributory negligence by further limiting the issues where joint and several liability apply. Exceptions for environmental damages and damages associated with medical devices and pharmaceutical products were repealed. The standard of evidence for the consideration of punitive damages was increased from the “preponderance of the evidence” to “clear and convincing.” In addition, the bill caps punitive damages at $250,000 or three times the amount of the economic damages.

Lawmakers reportedly failed to strengthen the state’s law prohibiting the operation of an entity within Idaho that is controlled by the government of another state.

In September of 2002, a special hearing officer of the Idaho Department of Insurance ruled that Advantage Workers’ Compensation Insurance Company should not be allowed to do business in the state because as a wholly-owned subsidiary of the Utah State Fund, it was considered controlled by the State of Utah. Rather than immediately requiring Advantage to stop its operations, the department gave lawmakers in Idaho and Utah this legislative session to address the issue.

Industry-supported House Bill 334 that sought to tighten Idaho’s statute was defeated on the House floor. An Advantage-supported bill, Senate Bill 1148, that sought to address the insurance department hearing officer’s ruling by changing the definition of control was amended to give the Utah Fund/Advantage until Nov. 1, 2003 to address its organizational problem per the Idaho Code.

“We were disappointed that House Bill 334 was not enacted this session. This bill would have considered any tax-exempt insurer or its affiliates as being a governmental agency. NAII is strongly opposed to the operations of Advantage in Idaho because its tax-exempt status provides the fund with an unfair advantage over other private insurers,” said Harrold. “With the passage of Senate Bill 1148, the ball is now back in Utah’s court, where the issue is expected to be addressed in an upcoming special session,” added Harrold.

A construction defect law (HB133) was enacted this session. The law
provides a contractor the opportunity to repair a defect before a lawsuit can be filed. The law limits damages in a construction defect suit to the actual cost to fix the defect and other closely related costs.

The legislature defeated a bill (HB380) that would have reportedly changed the state’s insurance rating law to prior approval.

Also defeated was House Bill 180, which sought to add clarity and limit insurer’s exposure to a recent Supreme Court ruling. House Bill 180 would have eliminated attorney fees in uninsured and underinsured motorists claims if an insurer made an offer within 60 days that turned out to be within 20 percent of what ultimately was awarded through arbitration or judgment.