Insurance & Commerce- House

Senator Rapert are you ready present SB two or three. Please come to the table introduce yourself and start with your testimony. Mr chairman would if it be okay with you this morning at like four a ID to be able to join me here stable. Yes fee would just enter so for the record please all right Senator Jason Rapert district thirty five. Got a generator general counsel with the Arkansas Insurance supporters thank you the member said thank you Mr chairman members I think that you may have got an email if you got to it over the weekend from Commissioner McLean on this this is an agreed to bill it was actually on the insurance department's agenda early in the session they did have someone that had to an issue that need to be addressed we pulled off and that's why we're so late in getting to you but at this point have no known opposition to the bill the bottom line is that over the last couple of years states in the country have been trying to position themselves to be able to take part in a four hundred billion dollar premium opportunity in what is called run off business in the insurance business transfer that's what this bill addresses and what this allows is their companies in the business of buying books of business that were there are no longer selling any new policies they serve the business and make sure to continue to meet the obligations of the policy holders Oklahoma is is been leading the country right now in putting themselves in position for this in a ideas been working on it over the last couple of years at the National Council of insurance legislators which some of you have been participants in over the past we have a model bill on that this bill incorporates some of the latest information on this and how this works is that not only do these companies make application to do business in the state of Arkansas but this This Is Your it very unique and that is the only insurance transaction that I know of that requires a court to be able to prove it in addition to that so you have not only the highest level of scrutiny from the insurance department itself but you also have a court that would give their stamp of approval to companies that do business in our state I'd be happy to defer and allow a couple comments from the. Small. Six six. I don't have any answers committee I don't know what's happening I'm sorry Okay everyone turned off. Okay going proceeds on the set thank you Mr I guess actually wait. Okay one percent thank you up what this bill does if you've had a chance to review it it basically sets up at a fundamental level away that creates a restructuring statute eight or nine states have chosen to do some sort of restructuring statute Arkansas would be the second to choose this particular method of of the business transfer it It establishes requirements for notice disclosures standards and procedures which the commissioner and an independent expert that's identified and described in the statute and ultimately a court would use to accomplish one of these transfers what it does is it helps ensure they they would come to Arkansas they want to shed business that they no longer want to service their companies out there that are interested in picking those kind of that legacy lines they call it picking the kind of business up you've got to be domiciled in Arkansas to actually come here and do this so we think that's part of how it will help business here in Arkansas and they can pass on some or all blocks of insurance and and at the end of the process and and as you it's kind of a link the bill but I think that speaks to the all the guard rails and and safeguards are put in there everything is done with an eye towards adverse material impacts on policy holders and those impacted if you look at there's three big rounds of notice including to all other states insurance commissioners guaranty associations all policy holders regardless of what state they live in so everyone has the opportunity to voice an opinion during this process and ultimately an independent expert identified by the commissioner that the parties recommended will have a set of criteria that he or she must look to. Not only for solvency but also adverse material impact to the policy holders policy holders in this bill includes reinsurance companies so with what's that for them through some of the amendments that we through our collective agreements over the last couple of weeks there was some concerns about the guarantee fund and and those associations and and they wanted standing we have given them kind of the opportunity to voice their concerns early on and throughout the process I don't think that the independence for the commission on the court would sign off on a transaction that was going to harm policyholders reinsurers that's guardrails are the notice the comprehensive plan that is submitted to the Commissioner once that's approved in this image of the court. All interested parties are permitted to come like a public comment notice at first as it's going through the commissioner's office but at when it gets to the court actually allowed to go in and present testimony and and present evidence so there's a lot of process here that a lot maybe more than is due but there's a lot of due process for all interested parties we feel like it'll be good for the state of Arkansas and be glad to answer any questions you got about the bill thank you for testimony representative Richardson you're recognized for a question thank you Mr chair just real quick of do you see I'm looking in the bill and it it talks about the venue being Pulaski County do you see that being a challenge for just everything going to serve the Pulaski County no Sir because these with this will not be a situation where you have a lot of of these cases coming before that this is this is a situation where you these are very large companies very large books of business and I think Oklahoma's had I believe two of these so what is significant for us though is that I'm just pulling up an article here that was a business insurance it's talked about states in addition changes to promote legacy bills for insurance sector the United States is the largest run off market with an estimated run off reserve three hundred and eighty five billion dollars in North America is the largest region at four hundred and two billion dollars Europe is only three hundred and two so what you have is when these transactions occur the very large transactions or dis Arkansas game the opportunity for those premiums to be subject to premium insurance tax obviously is great for the business of insurance in Arkansas and also for the insurance department and there will be some opportunity because they will have to domiciled here you actually have an opportunity for them to create some jobs will be at a situation created thousand jobs no but it will be it but Billy for the B. some jobs with the new domicile here and to have Arkansas being attractive venue for the. Is in the country a good question. Thank you for the response if any further questions by the committee. Saying that added one asking the OB I apologize I've been doing some other things up here is there anyone opposing this or we heard in any opposition to this this matter since we were able to handle the issue with the guarantee funds which took care of their issues and also licensing meaning that the licensing would be required in other states where their policy holders unless there's a compelling reason not to as we handle all that those people of all come and actually tell the previous committee they supported the bill so I'm not aware of any Sir thank you senator represent what you're recognized for a question. Mister chairman I have a motion at the appropriate time thank you will take that at the appropriate time. Any further questions. Seeing none represent what you're recognized. Mr chairman I recommend due pass thank you representive that is in a appropriate motion of a motion do pass on the floors any discussion on the motion. Saying none all in favor say aye. Any opposed no resolutions graduation center youth pastor bill thank you appreciate you Sir Richard's Committee. Two eighty five. Thank you committee were working there represent Allen is attempting to zoom in I'm not certain I guess it's listening I'm not sure but maybe that's causing some of our issues but reserve Alan or help your hearing hope you can get here so I believe represent Womack might have a fairly quick bill like to present our concurrence. You are recognized if you would introduce yourself and present your concurrence place yeah thank you Mr chair Richard Womack state representative the Arkansas District eighteen this is a one sentence amendments in or by the Senate that I'm in complete agreement with a simple clarifies some things that I told you in committee regarding the municipalities not. being limited by this bill to enforce safety and building codes so I would appreciate concurrence. Thank you I'm just I want to give the committee just a moment to look at the at this new language. But it certainly appears to do what he represented to us that it did representative so And are you closing your around close cooperation a good vote represents close first concurrence a reserve eleven you're recognized. Motion to approve do pass on the amendment. We have a motion do pass on the concurrence any discussion on time. Sing none all in favor say aye. Any opposed no graduations you've passed your bill thank you Mr Committee thank you. I guess I guess I'll wait which was. Allow result here. So this one. Committee I believe I'm going to present a bill briefly that I think is going to be fairly quick before we get to the last one Wrexham LUNDSTRUM would you like to come to the table. Representative Maddox you're recognized to run House bill or Senate bill six oh one. Thank you represent Lundstrum mascot a guest to join me at the table please yes of course. If you could state your name for the record please. My name is Carol go forth I'm a professor of law at the university of Arkansas in Fayetteville and I'm also here speaking on behalf of the Arkansas Bar Association thank you Mrs go forth. Thank you committee to be completely Frank with you I can I can go on and on about this bill and give you all the details but it's very lengthy so I think I'm just going to turn it over to the professor and allow her to to explain what it does this is a uniform law commission bill and I also have for explain to the committee exactly what the uniform law commission is so I'm going to turn over to her now professor go forth you're recognized thank you the uniform law commission is a group that spends a lot of time trying to promulgate the league draft legislation that promotes uniformity were uniformity is desirable and they've been particularly active in the business here so we have in Arkansas the uniform partnership act we have the uniform limited partnership act and this is a bill to have the state replace our current somewhat outdated LLC ACT with the uniform limited liability company act the reason I say that our current LLC Act is outdated is it was passed in nineteen ninety three it's been amended in various places a dozen times but it's kind of piecemeal. And it still contains what I would characterize as traps for the unwary small business owners in Arkansas are used a hand shake deals in our word is our bond and I think they would be disappointed and distressed to learn that an oral handshake agreement for Arkansas a little sis is not legally enforceable to have an agreement that changes the any of the default rules the statute currently requires a written agreement signed by all of the parties I think similarly there would be an expectation that the statute would have the full rules about what the minimum standard of care is that people over when they are managing the business even if that is the duty not to act in a manner that is grossly negligent or it knowingly illegal the same standard that we see in our partnership statutes I think they would be surprised to know that there is no standard at all set out in the yellow sea Act I also think they would be distressed to learn that if one of their co owners does something that makes it illegal to carry on business with such person there is no way to remove that person if they don't voluntarily go there even by unanimous agreement of all of the other owners they cannot be expelled you don't even have the right to go to court and forced the court or ask the court to remove them the only option would be dissolution of the LLC which is not really what you would expect not what you would want and really it's not ideal to have a business that is designed to be for informal small businesses requiring a lengthy legal document to operate effectively that's why I am in support of the uniform limited liability company act I know that it has a hundred and sixty pages in front of you. The first fifty pages are repealing the current statute the next ten pages are cross references and what is our current series LLC Act and the remainder is very closely modeled on the uniform limited liability company act this is been a bill that's been out for about a month we have had feedback from the Bar Association from business lawyers from the chamber of commerce from the secretary of state from the department of finance and we have made a few tweaks to the uniform legislation mostly to make them compatible and consistent with our other language for references to model agents registered agents and the kind of agreements that we expect to see among owners of businesses in all of the feedback and comments we have become aware of one potential concern that was expressed by an individual who is concerned about the taxes franchise taxation of series LLCs and the concern may in fact be legitimate but it's not one that is addressed by this bill this bill does not affect series LLCs this bill repeals. Chapter four title four chapter thirty two. Abbs cross references to. Title four chapter thirty seven which is the series LLC and then puts annual C. N. and chapter thirty eight the only other thing it does is in the franchise section it says that we're not going to cross reference the new will all see act rather than the old LLC Act I am aware that the current practice of our secretary of state is to impose franchise taxation on the series LLCs this bill does not change that this bill does not affect that one way or another and that's why there's nothing in this particular bill making it even longer than it already is addressing that issue. Thank you professor go forth any questions from the committee. The representative voice. Thank you madam chair is this so if I have an umbrella LLC and I have several LLCs and is this going to increase fees or somehow cause people to pay more for that that type scenario in this law no. Okay representative Richardson I believe you had your hand up as well thank you madam chair of the just to be clear so this one this bill affects or helps it easier so if me and representative eleven have a business and LLC it makes it easier for me to remove him without dissolving the LLC if it is illegal for you to carry on the business with him so if you were both lawyers Board if you have become a law partnership and I am sadly disbarred okay it is illegal to have a co owner of a law firm who's been disbarred Committee it's against the law and I fight refuse to quit you can't get rid of me under the current law so only if it is legal well there are there are three things that you can remove if you put something in your operating agreement you agree that I do that you can get rid of me or if I sell all of my economic interest so I have no economic stake left in the business I can be removed by unanimous agreement of the other members that also is a change from current law okay thank you. Yes representative wouldn't. Who who who makes of the Commission. I beg your pardon um um um that is a good the Commission consist of the commission that it consists of two. Individuals from every state they are appointed by the governor so they are appointed positions they have to be a lawyer licensed to practice law. That explains. Thank you. Or a law professor probably worse. Any other members. Okay we have some folks signed up to speak for and against. I believe we will go with the Russell Thomas leave signed up to speak against. Out in the waiting room Russell Thomas. Okay we'll give him just a minute to get here and then next was a four. just informational was Keith lender with the FNA. So if you could queue up will give Mister Thomas's second to get here and then there's. Keith lender with D. F. and I. Mr Thomas going once. Going twice all right maybe he's changed his mind D. FNA Mr Linder. Okay. Seeing neither. Any members. What is the pleasure of the Committee. indiscretion was a discussion among the committee I'm sorry. Plus to add did somebody have a motion well I was just sorry I was just gonna say I saw Mr Thomas outside I don't know if he heard you're not okay would somebody stepped on the hall and see if Mister Thomas would like to speak I don't want to overlook somebody. Are you Mr Thomas. Okay if you would like to come to the table and state your name. My name is Russell Thomas. And I'd like to speak to you about the or like to speak against the series LLC bill and. My main concern with this bill is a speed that is coming through. Of and the lack of discussion for such a very large bill we got a hundred sixty four pages when this went before the Senate committee. They spent less than ten minutes discussing it and in that time they may twenty amendments to the bill and they had to I think only one. Senator raise a question I just don't think that everybody really understands all the aspects of the bill. when the Senate FOR took up the issue they spent less than sixty seconds on those twenty amendments and on passing the bill unanimously in both areas and hundred sixty four page bill I think requires a little bit more deliberation and that. It's very unlikely that the the centers actually understood the bill The. An example of one problem I find within the bill. Is on page one sixty three line twelve section thirty three it changes the franchise tax. currently is charged against entities formed under section thirty two I am sorry under The chapter thirty two. Of title for. from that chapter to chapter thirty eight. Chapter thirty two only has one reference to the series will see it protect consumers L. C. and that is it calls it a person. chapter thirty eight has of two hundred and four references to series LLCs in it or or the this amendment has two hundred four in the new Of the terminology that brings these protected series LLCs into the franchise Rome were previously legislation did not. The. This is a quick description of what these protected series LLCs are basically it's an umbrella of one LLC they can have what I call a bunch of child LLC's within it that have protection from from the liabilities of each other it's it's a very good. Form of business for people owning multiple properties nationwide little over twenty states have have started doing these of. Arkansas has applied in my opinion on lawfully the hundred fifty dollar franchise tax to these at this point without any authority from the legislature. Of and I believe because of this we've only got sixteen. Of domestic series LLCs that have been formed in Arkansas because the the the taxation of these. Is is the highest in the nation that I can find I only find four states that authorize it to these protected series to be subject to of franchise taxes and the ones that do are much lower they It from memory I believe it's Virginia's fifty dollars. Illinois' is fifty dollars I believe Nebraska is ten dollars every two years and I know that Delaware has an option to pay no franchise tax for one type of Sears L. C. and pay seventy five dollars franchise tax for another. No that doesn't sound like a lot of money but you have to remember that you can have multiples of these child series and one example I saw a few years ago was a series L. C. that had six hundred child series underneath it if you look at the taxation of that. And around twenty states there will be is zero tax above just the regular franchise tax in the states to surround us Texas and Missouri would have Ed I'm sorry Texas has a three hundred dollar. Tax on the state's main LLC Tennessee has a three hundred dollar tax on the main hill C. of Oklahoma's twenty five dollars and Lucentis thirty five miseries zero that would be the only tax you would have on this that series will see if it has six hundred thousand members under six hundred thousand series underneath it in Arkansas the bill would be ninety million dollars. Now it would also be a little bit higher in Illinois and Virginia but this bill changes the franchise tax on LLCs from. The the old chapter thirty two to the new chapter thirty eight that has a lot of references and it to the series LLCs I think that. This is a a a really major issue for this one type of of taxation on this one type of series LLC and I think that we need to address that. And if you don't mind I think we have a question represented brown. Thank you madam chair I thought in the presentation of the bill. That It was stated that This legislation does not change the franchise tax game. Is that true or not no that's not true if you look at page one sixty three line twelve section thirty three. It changes it. From a chapter that does not have any rep only one reference to series LLCs. To two chapter that has two hundred and four references to. To the. Does it change anything I mean it just because there's a reference to well is yes it does it changes the the taxation from taxing entities or formed under chapter thirty two two entities that are under chapter thirty eight. In the series LLCs under chapter thirty seven but they're referred to. Two hundred forty pounds a chapter thirty eight so. As much as a much stronger argument that that that they would be taxed under the legally taxed under this. Representative would. I don't want to speak for but I think what she's after is it is there an increase in the franchise tax dollar wine. I think that the answer to that is there's a legitimization. Of what is in my opinion currently an illegal exaction but that's not what I ask is there a dollar value is it going to cost someone more money under this code versus the other one the current one that we're operating under which is a hundred and fifty dollars. Yes because the the whole. Yes well I want to know is how much yeah that in my opinion that the increase is from zero because there is no legislative authority to charge a protected series under Stephen even though it's of limited. Yes even though is the limited liability is still corporation and that's who pays the for a us taxes correct. It is not correct at that I believe not I believe that the current. Code only authorizes a tax under chapter thirty two. And and these protected series that I'm referring to are not under chapter thirty two. Well the. Let's one more and then we'll bring this answer thank you Mr So. We we can understand that there's not a dollar value you're not given us a dollar value and I realize as repetitive but are you saying if there's a number of a here and then there's thirty or forty under it each one of those as a hundred and fifty dollars. Is that correct that's what this authorizes and that is what I believe that the state is currently. A implemented without any legislative authority. Are you saying. Are you saying that the French us taxes sale is inherently wrong because of are you just talking about these new LLC no only in relationship to these protections so what you're. Are below the the are they not also other than being a limited liability and I've asked you this will being a limited liability or the in a still a corporation. That would not know how to answer the question of limited liability company they are a limited liability company Senate. Thank you I believe that's the end of the questions. About well we have a few more representative Richardson. Thank you madam chair so you reference section thirty three and I'm. Do you have do you have the bill in front of you by any chance do you know whatever I probably have it memorized this section okay so I'm so help me understand what I'm missing in section thirty three were you say that is going to increase the taxes because the way I read this it's I'm not reading that into it so can you help me shed some light on the okay so that basically the amendment and reference to line twelve is amending that the franchise tax is applicable to. Our entities under chapter thirty eight this new uniform. Limited liability company or law. Previously to it only applied to. Entities under chapter thirty two the small business A pass through act which it is basically the old LLC Act build LLC Act did not. It reference or incorporate protected series LLCs the new one does. representative Ferguson I believe you're next. Thank you madam chair my question is what the sponsors so I don't know if that's and over time or not all right I'll wait and representative Graham. Thank you madam chair so you your your objection is that this bill would put into. Statute what is actually being practiced. Yes thank you and at the highest rate in the country. Any any more questions for. This German. Thank you Sir thank you. I believe we had D. F. and a. This was the next on the list and Keith lender. All right Kate Linder. Hello thank you. And representative brown you have a question for representative Maddox. No. Okay all right. I'm sure it is there not anyone from DFA. Because I I I think we really need some clarification on this franchise fee issue. Okay thank you. If you could state your name for the committee please yes ma'am keep under Arkansas department finance administration. Thank you Mr Linder we've just we've just heard testimony that there could be a significant increase at and actually what what's been clarified is that there is something that is taking place in practice. that this legislation would codify could you clarify for us this issue of the hundred fifty dollar fee and whether that would apply to each of the entity that is under the umbrella LLC. Unfortunately I do not think that DFA can opine on the interpretation of the franchise tax act this point the administration of that act has been transferred back to the Secretary of State so I don't know that we are in a position to interpret that act. Okay now that is a recent transfer correct correct we so what will can you give us a historical perspective then about how that fee has been charged. The Department temporarily administered franchise tax over the course of I want to say three months earlier this year I just don't know the department is in a proper position to to opine at all on that issue. Okay. Thank you thank you. Mister chair of if I may I know there is someone here from secretary of state's office to address that issue because apparently has been transferred so that there's someone in the room to discuss the thank you representative Maddox if we could have them come to the table thank you as a member. If you could state your name for the record please. Morning committee my name is a Michael Hary. Thank you if you could shed some light on this would sure appreciate it. There we go the better okay yes The hundred fifty dollars is what is currently being charged to these on relev corporations so or LLC's I guess so the new bill that you have in front of you doesn't add anything new this is a fee that's already being paid okay. The argument is that our interpretation is incorrect that we shouldn't be charging a hundred fifty dollars for the umbrella companies underneath the LLC. Certification of the statute that that's a perfectly legal. Tax that's being charge them as being paid I'm not really sure the history of how long it's been going on but it's been going on for awhile so there's nothing new in this bill that affects that now if that's an issue that. You want to take up or fix I think that would be better served with amending the actual statute that. Covers that. All this does is bring these. I guess L. C.'s into the uniform code. So she's all the references that he was talking about earlier it's just to bring. That type LOC into the uniform code is not adding anything new. Members any questions representive Lowery say that hand up okay. So. We don't have to fear of this legislation is passed that later on entities are coming to us saying all of a sudden that every every. Corporation every element entity that is under an umbrella is being charged a hundred fifty dollars I mean the secretary of state's office is the one that's going to be administering this correct so you're you're telling us today not under oath but might as well be since it's live stream. that that is not going to change that it would be just the umbrella organization is paying the one that is correct whatever anybody paid previously is what they'll continue to pay there will be no new fees no new taxes now that it's all the same okay thank you I have a question along with that we have paid ridiculously high taxes I agree with the gentleman previously why is there so this is an opportunity we could also cut those taxes as well. I suppose so yes yes yes ma'am okay. Members represented Ferguson. Thank you madam chair the use the terminology interpretation to the your move from the secretary of state's office is it possible under this piece of legislation. The Secretary of State could possibly raise the franchise fee at a later date. Based on this legislation if they reported to if it was their interpretation. I would have to look specifically at I don't know if. If the at the I believe the hundred and fifty dollar fee set in statute so we would have to come in front of you ought to change it. Okay so fifty two one point last question madam chair so what you're saying is that if the secretary of state's office wanted to raise it you would come back to us yes Sir. All right thank you. Colleagues any further questions. All right thank you Sir thank you for your help. I believe we're a discussion among the members now. Our motion first I'm sorry. Rusty. Representative brown. The motion to pass we have a motion on the floor we have discussion. A representative Lundstrum a challenge from I would like to address just a couple things I know that may not be smart but I'm gonna go ahead and do that anyway so are your religion close we we won't we won't leave okay okay. I'll go ahead and close then the let's let's let members if there's any discussion anything well right represented Maddox I guess you're gonna close thank you so I want to dress a few things that the gentleman brought up number one he said he didn't he doesn't believe that the Senate understood what they were doing the bill passed thirty four zero Senator dismaying was the lead sponsor the bill I I totally believe that he understands what he's doing so to the other centers number two The Bar Association chamber of commerce secretary state if they have all that at this bill there's no objection to this bill but one thing I did want to bring up I ran the series LLC legislation last time that's now an act and I ran that to give it it's a good bill as he said it is a good bill because it allows people frankly there's not that many of but they have a lot of entities they put into the series LLC but we discussed with definite time because that was my question do they have to continue to pay a fee on everyone and the only way they would agree to the legislation was by having that fee charged so Lost my train of thought so so anyway the only way they would agree to allow that to. To move forward is if they charge that for every. Every entity within the series so nothing is changing here it's the same and we cannot raise the fee without changing the statute if we want to come back next session and reduce the fee for all of them are you know we can do that this doesn't change anything in the last thing I want to say is he believes it's being charged not in accordance with existing Arkansas law will if that's truly the case you can buy was calling the legal exaction lawsuit and make that claim so I'll close my bill. Representative Maddox is close for his bill. All those in favor. This against. Okay representative Maxey pastor Bill thank you may. Representive Lowery is gonna run nineteen oh seven for an concurrence. And it's going to be passed out to you so take just a second. Members while. While this is being passed out to you I'll I'll just a I'd I did give you a little bit the heads up in the last meeting that this is the amendment on the the card try build H. B. nineteen oh seven the request that was made to me when I left Committee last time. Was that. I'll stop and you can officially recognized me I guess. This is waiting for her to pass out that's fine good. Representive Lowery please present okay. In a Mark Lowery is HB nineteen oh seven we have tried our best to accommodate the wishes of the committee members have expressed their hopes that that this bill could allow for. A widen flexibility beyond oncology and hematology Services what we've done is we've we've written in that the insurance commissioner may promulgate rules for additional diagnoses but this would certainly have to go through the rules process and that has as far as we know satisfied every all the other entities hopefully it does satisfy you as well and so I'm ready for any questions. Members are there any questions from the committee. Representative flowers. Okay. Anyone wishing to speak for against. What is the will of the body. I'll make a do pass motion all right concurrence of we have a do pass for the concurrence of house bill nineteen oh seven. All those in favor hi all those opposed. Well represented Lowery it looks like you've bill is passed all right thank you. Again. Okay members glad to be with you we have one last bill we are running late in our times so as we have done on previous bills without objection I will make a motion to limit to that limit presentation of the bill to twenty minutes that will not include and the questions and answers if there's no objection we will. Take up that rule. Any objection. If not we will we will limit presentation to twenty minutes and at this point will recognize the co sponsors to present. Thank you Mr chair and committee had I've got another a bill running and state agencies on the fifth thought on so I won't be able stayed for the whole presentations I apologize for that So Senate bill six six six about fun you know that's what people expect that from Jeff Wardlaw but not necessarily from Mayo to. So anyway the bill is really a a fairly simple straightforward bill are an Arkansas Code we have a a provision that provides for this med pay and the provision the pride for subrogation which isn't so what this bill would do. At one point in the in the past we had a court that adopted a a doctrine called the made whole doctrine. This bill doesn't do away with the bait whole doctrine for anything safer one part that's the five thousand dollar met pay and what essentially what it does is it provides for the opportunity for the the insurer to subjugate the just like says and and all your agreements and all that stuff is that if the insurer. Takes the proof yet that is you will if the direct but you're with and there's any medical expenses insurer will get paid the five thousand dollars if you then go get your medical expenses paid for by the other side than that five thousand dollars gets paid back to your insurer. Cut and dry and pretty straightforward I colluded Legislative intent saying five thousand dollars to make sure everyone's clear it only applies to five thousand dollars if you end up with more med pay the code section itself says five thousand dollars the most that is at stake here is five thousand dollars. And and that's basically it I'm happy to answer any questions I know that there's more people in presentation that's that's you know pretty pretty straightforward cut and dry easy breezy thank. Okay we'll see of members are there any questions. Representive Clowney. Senator Ballinger is my understanding that these companies already have the opportunity to separate under current law so can you explain to me what is different about this bill. So into the current code section they they do but after the may hold achter and they they they can't subjugate so if it in the consummate whole doctrine is if you haven't been paid everything that you could be paid then you haven't been made whole and so that no we're not about minutes of your medical bills or ten thousand dollars you get ten thousand dollars from the other side your insurance company paid you five thousand dollars then then you would pay that five thousand dollars back but if you also had pain and suffering of two thousand dollars you had that didn't get all that covered by the insurance because limits or whatever then you wouldn't get your five thousand dollars a medical bill so this only applies if you get paid your so if you never get paid any medical bills back they're not insured you never recover it allows the opportunity for your insurance company to go after him but if for whatever reason they can't or don't then that money never gets paid back so it only applies to the money that you actually recover for the medical expenses. Follows yes you're recognized so once the policy holder recovers and they have the opportunity to recover under current law this puts the company's first in line in front of a policyholder than that well actually so the the. The attorney typically with would be first in line the trailer is bringing that but then after that they would get paid back but only if you got your medical bills covered so there's not there would be any any loss to the consumers of the that the consumer did get all the medical bills covered then that that five thousand dollars when applied to give them the opportunity to recover if the medical bills are covered thanks. Representive point you're recognized. Thank you Mr chair of Senator Ballinger I. I have some concerns about I think I understand the the policy and what this does so I feel pretty good about that I do have some concerns about what the consequences are that may be you know so we do this and then this changes something else so specifically could you address how this will impact the courts whether or not it's going to quote clog the courts or create inefficiencies in the course or do you think it will be more efficient for the court any any insight on that. Okay I think if there's any change of the court will make it more efficient because the it may just maybe give a little less place for litigation to happen so in this case it it it it will make a where it really can be more easily worked out between insurance companies but I but I honestly I I would say that benefit if there is any would be. Minimal probably not not the state I'm like probably another you're going to notice it but it should apply either way I mean it is simply this is basically a way Ark Code sections drafts of the work the way it was done for years before we have the mental doctrine adopted to apply to this construction so I don't I don't expect much for that goes and it really is fairly simple straightforward it's not like a lot of other more complicated legislation so I don't really see the the room for there to be unintended consequences it's pretty direct with the intentions of the bill and that's that's what to be applied. Okay represented Lundstrum and then representative Ken Ferguson. Okay So my understanding is first paid is the attorneys. Second paid is the insured. And then are they made whole. That's my question how is the how does the payment work and. How does that process work. So eight I think it's probably at some point to be good to get co counseling here and to do so he can handle some of those things but but in short the the question of being made whole it depends on exactly how you interpret it but in Arkansas it's if you haven't received everything so that that you could be due to pain and suffering all that then then the there's no room for the subrogation what this would do is this would say at least as to the five thousand dollars regarding medical bills then the main whole doctrine doesn't apply the five thousand dollars can be segregated and pay back to to your insurer the that makes sense. May I introduce myself yes please thank you Mr chairman members of the committee my name is Jay say's I'm here in support of Senate bill six six six representing the American property and casualty Association as well as the national association of mutual insurance companies I am an attorney a practice here in Little Rock have done so for over ten years and my practice of full disclosure does involve defending insureds and their insurance companies now when you get insurance the law requires every automobile owner have liability coverage and when you apply for liability coverage you must be offered an opportunity to purchase other certain coverages like you I am uninsured motorist or underinsured motorist coverage is as well as met pay or what's often referred to as personal injury protection coverage at a minimum of five thousand dollars in a typical motor vehicle accident claim for injuries the injured party obviously hires a lawyer first and the first thing that that lawyer requires the injured party to do is sign a fee agreement and those fee agreements include graduated fee structure so that if you settle your lawsuit on file you settle your claim that you don't have to file a lawsuit that attorneys fees thirty three percent. Tom is the longer that the claim lass the higher the Attorney the percentage goes so if you don't file a lawsuit but you have to mediated that the agreement if you percentage raises to thirty seven percent if you follow lawsuit it raises to forty percent and if you to file a lawsuit get a judgment then you have to do some post judgment it's of anywhere between forty five and forty eight percent so and anytime you get a settlement or judgment the first money that you get the insurance company right to check first money goes to the attorney to pay those fees and then you pay off the medical expenses and then whatever's left over he goes to the injured party. By contrast though the insurance company who has advanced medical payments has to wait sometimes three years or longer because you don't know whether or not the injured parties going to hire an attorney to file a lawsuit and the way that the statute is written initially you have two years to submit medical bill claims and then once you submit those medical bills to the insurance company insurance company has thirty days to pay those bills and then we got another year longer to wait before the injured party either suse gets a judgment because it takes sometimes years to try a case because you've got multiple attorneys involved and they're trying to coordinate their calendars wells the court so this takes a long time so the argument that the insurance company gets paid back first is fiction because the attorney is getting his money first based upon that featuring with that he has signed. Also the insured the insurance company's ability to separate gate under the statute does not attach until the injured party gets a settlement or gets a judgment in his favour from court assuming they go to trial and it it is at this point that the injured parties attorney then takes another cut for that fee agreement as always has already discussed. That said subrogation means at the met pay insurer steps into the shoes of the injured party in other words the met pay ensure. Yep works with hand in hand the injured party and his or her attorney to make sure that the at fault party pays as much as he or she is responsible for that's the way that the code was originally written and intended but now the Supreme Court has come in and although the whole mess the made whole doctrine is a centuries old common law doctrine they only recently started applying it to you Medpace several plains Missouri good again the board a Michael close so I can hear a little better for you. Thank you. And the reason that a injured party is arguably never made holes because they always have attorney's fees to pay back and since the Supreme Court has legislated from the bench this made whole doctrine to apply to serve broken lines they have signaled and a better price a word to use is probably invited. Congress. Two. Right out may hold the made whole doctrine from several claims they've done it on almost every single opinion for this issue has come up. And it is that what this bill Senate bill six six six does. So there's no problem with the legislature passing this bill removing made whole doctrine from several claims not made holes unintended consequences is as I said earlier the injured party is never made whole because he or she always has an attorney's fee to pay either out of a settlement or judgment. Also I mean I'm a defense attorney and I represent those at fault parties most often and I know that the injured party has been paid five to up to five thousand dollars of their medical expenses in other words that debt has been extinguished they no longer have that debt because the MedPage insurer has already made those payments to or on behalf of the injured party so I know as a defense attorney that the value of their claim is not necessarily always twenty five thousand dollars even though those are typically the types of cases that we see is that your regardless of if it's a side swipe or a bump or you know these minor impact soft tissue cases at. Now every case is a policy limits case was certainly not true but the met pay insurer pays regardless of fault in matter whose fault it is because the med pay insurer is advancing that money to the injured party. The times I'm sorry to interrupt you but we do have a long list of of questions coming up so if you want to go ahead and summarize a little more and then maybe in the question answers you'll I mean in summary. What was wrong with the way that the statute was originally written before the Supreme Court got involved nothing because the injured party and their insurance company were working together I'm not gonna make many friends on in on the plaintiff side but. This is really about you know attorney's fees. Well taking money the attorneys taking money or a percentage of that money first before the insured or the the insurance that gets paid. And so I you know. For move to the list of representative or skews me Senator Ballenger you made a reference and then there was also a reference from your witness about that it is optional to to buy original attached additional bad pay and you clarified senator that in the do not codified section it says five thousand dollar limit but since that is a do not codified section how do we know that it would be capped at five thousand dollars. Thank you for the question if you go to the code section that it references in the bill it is the five thousand dollars that day that is in that section so it is only applies to that section right there and and let me say this that you know that obviously we've got well qualified counsel here and they're about ready to vote on the bill that I've got to make it all the way over to the old Supreme Court so please don't be offended that it that I have to leave but if I if I don't get through this that bill will get out of committee and it's somewhat of a priority so but but it I hope that kind of answers the question obviously you can clarify further but but it only applies to the statutory five thousand dollars and not whatever you work out with your insurance company that would be it would be a separate issue and and they would still within the the the primers of your agreement probably have an opportunity for for subrogation but the made whole doctrine doesn't apply to that section okay thank you representative Kenneth Ferguson. I'm sorry Senator it is simple questions simple questions I understand the situation we're talking about low use but now my question is. It is happen to a member of my family. They're an accident medical bills. Miss for. The five thousand dollar limit pay. There's no attorney involved who gets that. Yeah. There goes so the answer to that is that if you get paid back your medical then that then the five thousand dollars eventually makes it back to your your insurance company but if you don't get paid the medical than that then they don't have opt to segregate you keep the five thousand dollars all right so it depends on whether or not you end up with a claim for whether they pursue a claim on it but if you get paid to medical back then they get the five at least a portion of they get five thousand dollars for the medical bills and I really like there is about ready to vote on I don't know how you guys feel about the Confederate flag day but if that if I'm not there to make it out of committee so just put me back in the. Put me back in the queue of got a follow the just to be back in the queue maybe somebody else can answer the following questions sure representative thank you many remote recognized. Representative ray. Okay thank you Mr chairman well I wanted to ask this of Senator Ballinger but yes representative Wardlaw or hi I'm sorry I didn't catch your name but whoever wants to answer I know we're going to hear testimony for and against but if I vote for this bill today and five constituents asked me how does this benefit them okay can either of you explain this in layman's terms why this bill is good for every day our cans so representative ray surrounding states Texas Louisiana Mississippi Tennessee Kentucky all have this law this bill their premiums are met face twenty three percent lower and the reason for that is is those people that were not at fault did not have a negative balance with their insurance company. Because what happens now is that attorney cages that percentage of those fees that's been said at the non fault person's insurance company is not paid for claims so therefore your fall by the insurance company if you claim anything on your car insurance and it doesn't get back to the insurance company. That's a claim on you so your premiums have to go up so the story is to your constituents is this bill will ultimately lower premiums for mid day. I thank is lame I know how to put it thank you okay. It is so represent Wardlaw you're you're guaranteeing on behalf of the insurance companies that will see a decrease in our. Okay I just curious of representive Clowney your next. Thank you Mr chair and actually this. Question kind of pay backs off a representative ray so um it's great if premiums go down my concern is what we see right now with this bill in my reading of it is that we were gonna have folks that are paying for benefits on top of their policy right they're paying for a benefit And then we are holding the insured's responsible for paying back a portion of the benefit that they've already paid for it feels to me like it would be like getting Hey Mara my homeowner's insurance for a hundred percent of a roof repair but that I'm expected to pay back whatever's between that eighty to one hundred percent it feels like we are even if premiums are going down not giving these insureds the benefits that they are paying for so I'm not sure that that's a benefit can you speak to that. Yes you're paying a premium for the benefit under med pay to have that first five thousand dollars a medical debt extinguished it is an advancement is not something that you necessarily are owed because the purpose of med pay was to get you off or out of dead initially while you decide or why you continue to treat and decide to follow lawsuit to retain an attorney the premium as defined by the legislative body here is defined as a payment for insurance as consideration any of the attorneys on this committee remember there law school one oh one classes and contracts that to form a contract of an off have to have an offer an acceptance and consideration the the premium that you pay is the consideration that you get for the risk that the insurance company is agreeing to assume on your behalf so you pay a premium and that insurance company earns that premium everyday that you get inside in your vehicle and drive from home to work take your kids to all practice or school. And the insurance company is happy to oblige and cover that risk should you be involved in an accident. that is the purpose of premiums and insurance law the you don't get your premium back because the insurance company is earning that premium by covering you should you be involved in an accident The premium of the the the med pay benefits is like I said earlier and advancement so that you don't have any personal responsibility for any medical that that you have because you were injured in an accident went so went to the emergency room had an ambulance bill I went to the chiropractor set and then. I don't know if that answers your question or not. But if but the problem that has arisen and I had an attorney in front of a circuit court judge on a motion for summary judgment on a med pay case admit. That you know they're taking not only fees but they're also double dipping I mean they're they're wanting the insurance company to pay. Five thousand dollars across the board regardless of whether or not their medical expenses or one thousand dollars because only went to a chiropractor a couple of times or they went to a chiropractor arms are emergency room and that emergency room bill ended up being a thousand dollars because that other person had insurance either through Medicare or Medicaid or private health insurance but at your the Supreme Court recently said that that's not what the statute is meant for. the statute specifically says we pay benefits to on behalf of an insured or a passenger a family member in the household absent from that statute is any reference. Of an attorney's fee. and the more that we. Keep. allowing this to happen the higher the premiums are going to get because if you own your own business the the cost of providing a good or service increases where does who who has to bear the brunt of that. Thank you members of engine I and I know this to be your last opportunity to question me to represent of Wardlaw or his witness but we do have a long list of we also have a long list of those who want to speak for against so I'll. I ask you to not replicate or duplicate questions but also ask that you be concise in your answers representative Richardson. Thank you Mr chair so I didn't want to clarify a couple statements that you made so if I understood you you said that when we pay premiums to an insurance company it is only for them to consider paying the out set out the outstanding debt in the event that we are injured. Because we're paying it back so. These clarify if I misunderstood you I thought I sure I understand your question I mean the the premium exists the Arkansas law requires you this body said that an insurance company has to be charged premium to provide an insurance policy and the person has to pay a premium to get insurance No matter what type of insurance you have the premium has to be paid somebody's got to pay it otherwise we're just assuming Bledsoe we don't have any money to cover up but each time that you enter your vehicle. The insurance company is covering for an eventual loss of risk. I want to involve the by somebody. I had somebody else that's the risk that that premium covers if you don't use it. If you're lucky enough to be involved in the accident you still have coverage but if you don't want benefit coverage and you want to pay those premiums then you have the right to cancel the policy and volunteers to share real quick. Yes we're we're trying to figure out what the interference is with the but represent bridges okay and in the other point that you made was that. The only the reason that people are not. Whole or not may hold is only because of the attorney's fees. That's the the big part of it yeah may you you're if you recall what I said earlier I mean you start off at thirty three to thirty percent but that of fee percentage graduates to over forty five percent in the Attorney always gets paid first thank you. And I'm just going back to the premiums I do want to quote justice brown in a case of where he said in a dissent he said by eliminating subrogation assignment and indemnification across the board absent full recovery insurance rates in Arkansas may very well increase for all insurance the way that the statute was originally written. The injured party and the insurance and his or her insurance company on the same side of and the attorney who is representing the injured party got paid by the injured party's insurance company to collect that five thousand dollar met pay back so they're already getting a fee under the old statute the way that was written and as again as a as I said a prevents double dipping it prevents getting of money that has already been paid to extinguish a debt and if we don't. and right out med the med made whole doctrine from. the way the subrogation is working now then the result is that people of the insurance companies going to have to pay out more losses without an Avenue to recoup that money and then as a result increase premiums and rates for all Arkansans thank you representive wouldn't and I'm everyone I'm going to have to hold you to a question. Several. Here we go. All right if you stay in. If under. I understand what you're saying are you saying that you're helping the consumer or you funding the attorneys and if you're filing the attorneys one of the legislation to control the are you blame in the high insurance costs in this state on the tourney's. Not necessarily blaming anyone no no no that's not what I ask you will garbage hello simple yes or no are you blaming the legal profession in this state for the high cost of insurance. We have some responsibility for that yes. That's not what I ask yes or no thank well thank you thank you. I think it's private as good as you gonna get on this to answer but maybe maybe another question will pull it represented Murdock. You're fine okay representative Kenneth Ferguson. Thank you Mr chair this record of the year the question I asked Senator Ballinger but on the flip side of this thing the five thousand dollar met pay coverage. it only it monies up water when there is a lawsuit or when I hire an attorney is is this is this what happens. Yes. Twelve I don't hire an attorney. If you don't hire an attorney then the insurance company hire somebody like me to go after the port fees are to recoup that five thousand dollar benefit thank you. Representative brown. Thank you Mr chair this is question before and I have not received an answer I have an ask you though. When you talk about the premiums going up. Are you talking about the premium for the med pay for the entire premium are you saying that. Not getting the med pay all that med pay back is going to cause all of our per if because because met pay for premium portion of the total premium is minuscule. Are you asked me that question earlier and I did the research and you were in committee so I didn't bother you but the answer to that is it's a med pay premium itself not the overall premium thank you yes ma'am. The representative Boyd I believe you're in the queue for questions. Thank you so I went back to my own policy this weekend and figured out what I was paying in med pay and a parent and it's labeled as personal injury protection which might or might not be med pay might be more broad but on average I was paying ten dollars forty five cents per vehicle so what I'm hearing from you is we might reduce our med pay by two sixty one on average or do I just have really good rates a may not help us understand what this means when we say twenty three percent reduction what is going to mean for our Kansans because it's a trade off thank you. I'm not sure you can equate what the other states reduction rate from Arkansas is to us but that's what it shows when you look at those other states is R. twenty three percent lower than what we are on May Day so yes if you're quite that out that's what the figure would be. Represent Lundstrum I believe you are in the queue for questions yes You had mentioned. That we burn that premium every day. Comments. And. I want to make sure that I understand completely we are in the premium at the insurance company or as a premium every day when you get in the car But they also are in the premium when they pay all the medical bills completely correct. What he was referring to by earning the premium is every day you get your car safely there's no accident that insurance company earned that premium that day but if you have an accent that premium is you that's the funds that they use. To pay those claims so if you go a year without an accident that's an awesome thing for you and the insurance company but if you have an accident they use those premiums to pay those fees right but the whole goal is to have those when you do get the accident to have the whole bill paid to me made whole. Completely that's why you mean it's a gamble every day we get the card to gamble that's right the insurance companies gambling you're gambling and they're supposed to be there for you when everything goes to hell in a handbasket sure enough so this five thousand dollars. The big argument is. The big the big argument is is who's going to get thirty three plus percent of that five thousand dollars that's the whole fight in this whole deal represent Boyd is right it's a very very small piece of the pie when it comes to premium is very small it comes over all five grand when you're in a extremely bad car wreck that's a very small piece of the pie but that small piece of the pie Quaid's to a lot of money over a number of accidents to an insurance company or the insured who's paying those premiums and the folks are going to hear speak against this bill today are gonna be speaking because they're losing a percent of this five thousand dollars okay thank you where's the flowers you're recognized. Thank you Mr earlier the med pay was described as an advance. And you know I think it represent Ferguson's question kind of spoke to a larger question but let's say in the example of someone who. Has an accident it's the other person's fault but that person is uninsured so we know that if the person isn't sure then you will the insurance company had but doesn't seek legal representation then the insurance company my insurance company could go back and recoup those funds from the person who had insurance and it was their fault. But what about the case when. I'm involved in an accident the other person who hits me and it's their fault their sided with the ticket but they don't have insurance. And so I use my med pay for immediate expenses do I have to pay that money back to my insurance company no ma'am your insurance company would just lose on that basis a but you would have a claim against you going forward every time your says for premiums just like you would if you had to reckon it was your fault. So even if it so in that case even if it wasn't my fault but I use my med pay for the premiums that I've been paying I basically would be paying the insurance company back because you raise my rates even not been paying my insurance and it wasn't my fault. That is true it's the same thing true is if I have a recognized hit someone who has a twenty five thousand dollar minimum liability insurance in my car sixty thousand dollars my insurance company would have to pick up that balance therefore my premiums will go up next time as well because that forty thousand dollars or thirty five thousand dollar balance would have to be paid for somewhere. Follow up you're recognized thank you. So without this change is what it is and you're saying that you know rates might go down. Is it the case now that. Insurance companies. Are able to recoup their money by increasing the insurance rates anyway as it as it happens for someone who gets hit by somebody who's uninsured. That is true but what this bill does is separates that five grand from that settlement it It allows that insurance company to collect that five grand free of those attorney fees does all this bill does that's as lame as easy as simple as I can explain and one more quick follow okay let's let's to try to move quickly if we can look at a lot and this is a question I had earlier in the case of settlements in let's say that same example but now I I have a lawyer the other person as an insurance company if I seek a lawyer they could make a settlement with the other insurance company. If I'm honest with this whole may hold action let's say I have an injury and I go to physical therapy and I'm pretty well okay I think when I had a conversation early let's say I'm a dancer break my toe in the accident I go to physical therapy I'm able to continue to dance and it's okay but in you know three years ago it starts hurting every time you know it rains and I can't dance so there is an economic issue there's also a physical issue. Under the case so in the case of a settlement am I allowed to go back to that other person's insurance company and say Hey I'm hurt again we need to re visit this or is it the case with the settlement I can never go back I'm done I settled I got my money and I'm done. No once you settle it's done because the settlement agreement would include release language which would mean that you're either agreeing not to sue that at fault party or if you've already sued you're dismissing that suit with prejudice which means that you can never bring your claim against that Russian again okay okay thank you thank you represent Gazaway you're recognized. Thank you Mr chairman I guess to begin with I'm having a hard time I mean it kind of seems like tortured logic to me. To say that a person pays a premium every month for five thousand dollars in protection. They paid faithfully every month. And go without having a wrecked four years. And they finally have a rack. And their insurance company pays out five thousand dollars in benefits. The third party is at fault the money gets paid in from the third party. And now this bill would say the insurance company gets their five thousand dollars back off the top. How is that not like having your cake and eating it too. Because I've heard a lot of talk but I haven't heard anybody explain it logically I mean I've heard a lot of tortured reasoning but you get paid every month for that. And then you want it back. Can somebody explain that logically to me how it's not having your cake and eating it too because. Sure seems that way to me. I guess the best way that I can put it is that the five thousand dollars has already been paid those expenses have arms are the the injured party has already been made whole as to those expenses so for going to leave that five thousand dollars out there without the ability to recoup that person then recovers let's say twenty five thousand dollars from the apple parties insurance company the part of the five thousand dollars goes to pay those medical expenses that have already been paid so we're double dipping which is the original purpose of subrogation anyway so as to prevent somebody from getting paid twice and that's kind of if you follow the the med pay cases that have come out here in the last two years that is what the Supreme Court is signaling is that you are no longer able to treat med pay as a bank you are you pay premiums. The insurance company pays off those debts but once that debt has been paid by the insurance company you no longer as the injured party have no debt as to those particular medical expenses and that's the purpose of subrogation this the way that it occasionally thank you what we'll find you you give extend the answers I but we're gonna try to move forward a lot of people signed up to have a follow up to do a follow recognized but and I understand segregation I know how it works but the but that's the whole purpose of the made whole doctrine is the the whole purposes civil justice system if we get down to it is to ensure that victims who through no fault of their own were injured and in this case are made whole that's what we have civil courts to begin with. And I understand the idea of subrogation but the best justification that I've heard. Is that attorneys take their fiat will attorneys do work for that fee I think you would agree with me on that and then my experience and understanding of it is is the attorneys. Who represent the injured person your policy holder in that instance because you're the you're the policy holders insurance company that attorney goes out and against the third party and makes the recovery and they bring all the money back so basically they've acted as a collection agency for years because they went and got your money back from you for the for the client for the injured party not typically my understanding that is the attorney who went and got your money for you takes a cost of collection three out of that because they just did your work for you. So they take a little fee out of that. And then they take their fee that they've contracted for with the injured party for the work they've done. So am I am I wrong about any of that about how this process works. I DO work. I'm trying to be nice The what. The plaintiffs attorneys have done for years is simply write a letter to the injured party's insurance company and demand med pay benefits and they cite a previous Supreme Court cases says you cannot pay anybody else but me and or my client and the Supreme Court in USA verses Norton. Recently said you can't do that anymore you're misusing misinterpreting that opinion in fact med pays purpose is to pay either the insured or other metal medical care providers on behalf of the insured again I'll go back okay I'm sorry to interrupt you but recognized would give any thought to have another follow up for you finished I'll get back in the queue okay well you are the key to. But let's to try and and and and I I know you're trying to explain it but please try to be succinct in ranchers we've got numerous people signed up and I'm within I will let him all speak so and and thank you Mr chairman I certainly appreciate the indulgence but. That what this appears to come down to me is whether or not you believe in the made whole doctrine or not. And you know you have the circumstances where someone is injured through no fault of their own and they may have a hundred thousand dollars in medical bills I mean I've seen these cases where someone has to have their spleen removed they have a huge scar down their stomach where they had to have emergency surgery they were airlifted to the med in Memphis for emergency surgery they've got over a hundred thousand dollars in bills in the person who hit on has twenty five thousand dollars in insurance meanwhile that injured person has paid your insurance company faithfully every month premiums for five thousand dollars in med pay. And now you want it back. Whether they're made whole or not. That's the way that I understand what you're wanting this why you want this bill to pass am I wrong about that. You're not wrong that this is the insurance company through its policy of insurance a contract that the injured party has paid premiums for is entitled to receive every insurance policy has a subrogation clause where the injured party agrees to pay back his or her insurer when that insurer makes payments we're only talking about five thousand dollars we're not talking about pain and suffering permanent injuries or the extent of injuries were talking about the initial treatment that the person gets up to five thousand dollars. Thank you I want to follow up briefly but I do have a quick question I think represent Gazaway touched on and I know you've you've gone over my my concern is the catastrophic case my concern is the hundred thousand dollars in medical bills they was talking about the tort fees only has twenty five. Under this bill the insurance company will be able to come back and take the five. And most of the seventy five an unpaid medical bills is that correct. They're getting the med pay back from the apple tort fees or and or his or her insurance company But in those cases. I don't know I don't know that I. In answer that it can have a fog couldn't be a more limited. Policy for to to make an exception for those egregious cases I mean you know I certainly stand the small ones but and you made you made some references to as the attorney's fees that you're after and I understand that. But you're not taking a third of the five thousand you're taking the five thousand is that correct. Whatever up to five thousand yes were asking that we be re recoup. That five thousand dollars that we advanced yet thank you. Okay what one more the real quickly got a letter fifth represent rich sent just do you know what the average liability insurance is in the State of Arkansas auto liability. The. The minimum is twenty five thousand I could tell you what the average person buys. Thank you okay represent wouldn't very quickly place. Are you considering the five thousand. Fans. Is that the way you look at. Yes that's the way the. I will quit this is a policy status of the Vance. No but it's true that way because you have a patient laws this the policy states that that is an advance to the one the censure. Yes or no it doesn't use the word advance notice at least of the insurance policies that I've seen now okay thank you. All right well we're moving on we are now going to go to the for and against and since we spent quite a bit of time on the four we're going to go to the against first. the first speak person speak against is Michael Boyd. At night I believe skews mean someone wishing to be recognized for motion I thank the mental make some kind of motion to limit debate not because I don't want to hear this but we're we finally are running on running out of time absolutely understand okay can we just limited debate the two minutes per person. About three okay okay I'm remain three minutes per person so we will be keeping the clock on that representative ray can I just ask how many people are in total or signed up. Looks like I've got one two three four five four eight against and six. I believe two four one may have already spoken I don't know but it's for at six in total. So it members we are we do have a motion of to limit debate of three minutes all those in favor say aye. Any opposed say no. The ayes have it. You're recognized for three minutes thank you Mr chairman committee could see this morning's identify yourself for the my name is Mike Boyd from magnolia from the city attorney in magnolia and also have a a private practice there. when people ask me what kind of law do is a little bit of everything because that's what you do in a small town just like the doctor and and the dentist you you try to help everyday people with everyday problems and help folks from across the spectrum all walks of life all kinds of problems I'm not here to tell you that specialize in any kind of injury law because I do not but I do have enough of these to know what this will do to folks back home and how the how it's unfair and a lot of that is our been brought at in your questions and so I hope not to be redundant but I want to make some some points about some the things that all of you have brought up first of all let me be very clear under current Arkansas law there is no double recovery. There is no double dip it does not exist. Each our cans and is entitled to one complete recovery. And then and only then if they've been completely. compensated for all of their harms and losses only then do you start reimbursing the insurance company. And that makes sense and this is been bought out by a couple of you. Like I'm sure you're like me you pay your premiums. Every month every year. And you glad to do it because something might happen tragedy may find you but you hope that it does. And is represented Lundstrum pointed out this is a wager that's what insurance is your wagering that something might happen to you and they're wagering that it won't and so each month you pay that premium. And then whenever something happens to you and they pay it out in here then they come before you today and say they want their money back. So they want your money on the front end to pay that premium for that wager then they want to step in line in front of you. Let me be clear they're stepping in front of your neighbor that's injured they're stepping in front of their lost wages they're stepping in front of their permanent injury or stepping in front of their lost relationships their pain and suffering everything that goes along now we just a major injury sometimes just the minor injuries it may take three four months to resolve. They want you to put them. In front of those injured are cans. They want you to give them their money back money that you pay that I've paid other or cans and people in your district have paid to them. And I don't care if it's ten dollars or a hundred dollars it means something to the people in your district and to the people in this state. And the nerve for them just to say today that by the way we've got that priced in whatever you make that claim. We're gonna raise your rate on you. Yes make that claim thank you I'm sorry your time's expired thank you appreciate it over. You are yes you we can ask you questions the and and members please be aware of our time very short grant. Mr Boyd have a question for you yes it it doesn't an Avenue exist under existing law for insurance companies to be repaid if they're if they pay out and there's there is excessive or there's money on the other side they can file probably declaratory judgment action and they can they can be compensated back for what they've paid is that correct yes in a quick point about that first of all yes they have the right to always challenge whether a person is been made hold if there actually do under the current law some reimbursement. But the gentleman in this chair Mr say's with all due respect admitted to you today that the Supreme Court AT our has already said that that attorneys can't do that is represented witness pointed out it sounds like the real problems with attorneys. I'm not sure how that should be held against our cans. Okay thank you thank you any other questions members. If not thank you very much for your testimony speaking for will be Brian Waller. Mister chair members of the committee my name is Brian Waller I'm the vice president of government relations for shelter insurance I just want to quickly go on the record and speak in favor of the bill we've already heard quite a bit of testimony I know Warner a time constraint the only one thing I would say is there is a I think maybe there's some confusion about being injured verse saying they're being a tort fuser what we're talking about is the ability to cybergate when there's a tort fees or when there's someone else at fault and so I want to make that clear I think that's getting confused. Okay. And any other testimony with that's it okay well thank you for being concise members you have any questions. If the thank you very much thank you speaking against and I know that I've I've received a note that several want to be crossed off but we are going to call Bob Sexton. Just and please identify yourself for the record I'm Bob Sexton attorney Little Rock. We'll talk real quick and I want to take any questions you have my phone been practice law about twenty five years in Arkansas my first for five years for working for the insurance company so I know how it works on that side my last twenty years with this rainwater home Sexton represent injured people all over the state I'm gonna give a couple examples everybody likes to be double lawyers I jokingly say my mom tells about him in prison so you don't have to or by a lawyer but. It represent Ferguson you hit it head on with your question we give you a real life example let's just say his sisters in a bad accident she's got fifty thousand dollars for the medical expenses there's only twenty five thousand dollars to recovery she didn't she didn't get a turn she has a five thousand dollars med pay pay they pay five thousand dollars expenses in that situation instead of her being able to recover twenty five thousand dollars to pay the bills that she still owes they're going to scrape that money off the top and she's only will have twenty thousand dollars available regardless of whether attorneys involved or regardless of how many bill she still owes. That's a real life example of how this bill what you didn't see anything in this bill talk about attorneys fees of a it only applies when there's attorney involved this bill applies with its attorney involved or not it also didn't take into any consideration to catastrophic case let's say somebody's dead let's say somebody gets hit by a driver and they are dead and there's only twenty five thousand dollars to get theirs med pay coverage may pay also covers your funeral expenses that counts as a medical bill under most policies there's only twenty five thousand med pay is going to reach out that insurance company the one that you pay premiums for they're on this great back that first five thousand dollars and the family members are have twenty thousand dollars to pay on that case the catastrophic case they talk about how it works in different states in almost every one of the states they have exceptions exclusions even Texas the most liberal for insurance company that is out there they have exclusions in their bills for when it's a policy limits case there's nothing about that in this bill if it's a policy limit case or credit catastrophic case they're just moving themselves to the front of the line whether there's an insurance or there's a lawyer involved or not whether there's enough money or to go around or not and I want to talk about who was testifying up here we had one of the representative saying there's no procedure in place in Arkansas but then you have attorney say say well let me talk about the case I was working on the other day about med pay had a summary judgment on the med pay case to start quote needs met pay cases there's a procedure available in Arkansas right now practically how it works is in a case where you go to the insurance company you've had a settlement offer I go back to the med pay carrier and say Hey I don't think my clients made whole sometimes we negotiate sometimes they agree with me but if they don't agree at that point they have the option to go out and filed a deck action and that a judge is going to decide for the my clients made holder not not under this bill and of this bill it Mr purse's sister is in this I. Accident and she owes fifty thousand dollars worth of bills there's no way she can get in front of a court and say this isn't fair fundamentals about fairness thank you Mr sex and we do have several questions for you a representative ray. Thank you Mr chairman Mr section it in your opinion is med pay basically designed to be a benefit to the person who's paying the premiums for that or is it more of like an advance on what would have otherwise been medical debt for someone who had to take a ride in the ambulance to the ER that you know I record a little bit you might see me on my seat over there which is a little bit when he said that med pay is an advancement and I think I and I quote not owed by the insurance companies this is insurance we're paying a premium for this insurance this in for free you can reject it a lot of people don't have made pay if you don't have made pay this never comes into place you only have med pay coverage in this statute only come to the place if you come out of your pocket and pager owned sure insurance company a premium I want to be clear on this situation everybody in this room if they're in a catastrophic situation they just have five thousand dollars less available to them or their families in this situation. Okay. Follow up for representative now. Representative Kenneth Ferguson and then representative brown. Thank you Mr just quickly and I'm sure you heard my question to us Senator Ballinger you did my question was concerning when there was is no attorney involved an accident course who was family member of mine who had an accident I don't think that to it was catastrophic but but my question is who gets that coverage at five thousand dollars what is not attorney in law. Same deal in this case the way this statute is written if it passes her insurance company is going to scrape that five thousand dollars back and then the she's going to be depending on the other guy's insurance company to try to treat her fairly and you know how that works so in that situation regarding for there's attorney involved or not attorney involved they have a absolute right to subjugate an absolute right to get paid back regardless if it's fair or not regardless if they're made whole there could be a situation where there's multiple cars in the accident one car had insurance it hit me in the other car didn't have insurance it hit me well I only get to recover half my damages well is there any thing in this statute where they only get half their money back on the med pay I'm obviously not made whole in that situation so I want to be clear this statute applies and they're scraping back of this five thousand dollars applies with your sister had attorney or didn't have an attorney. Thank you Mr thank you representative brown and then representative eleven thank you Mr chair of Mr Sexton I just want to ask a simple question because I think it helps put things in perspective if somebody has a minimum coverage twenty five thousand dollars we keep talking about medical payments but that twenty five thousand dollars has to cover everything not just medical bills you know exactly Arkansas is a poor state you know I grew up in lone oak lot of poor people on here if every case that I signed up even had any insurance I re reject probably one out of four cases when somebody tries to hire because there's no money to get but in a lot of those cases there's only twenty five thousand dollars so in the death case we got future lost wages you get huge medical bills a lot of times it's only twenty five thousand dollars in somebody has a hundred thousand dollars in medical expenses no health insurance there's a lot of times only twenty five thousand dollars because the and this has to cover everything their policy limits on the other side covers lost wages pain and suffering medical bills what they're trying to do basically is they're trying to by statute which the courts won't give a so they're trying to come in here get it they're trying to come to the front the line and say I automatically get paid back no matter what no matter if there's not enough money to go around and I put myself ahead of the citizen nothing in this bill helps the citizen other than their promise and what even a promise of lowering premiums some day. Thank you representive eleven the Mr this section I think there's some confusion a much better committee members about the five thousand so you see if I can just kind of simplify this. So if if if your policy states to twenty five thousand dollar benefit. And I do not have and I don't have them I don't have the med pay a. Section on the policy I'm only going to get twenty five thousand if that's all you have on your insurance correct correct I know it's not actually was my fault hedge yes Sir accident your fault you hit me you've got twenty five thousand dollar minimum that's all I'm going to get from your insurance exactly okay if I have the med pay. On my policy I'm going to get the five thousand dollars up front for my insurance to help me pay my bills you talk about the scraping away. And then there's only gonna be twenty thousand left. Correct because they're gonna take it's that with if this passes your interest rate that is not take the twenty yes right and so then I'm only going to collect twenty yes either way I'm going to get twenty five thousand dollars coverage correct. Know what you would have thirty thousand dollars in coverage on the other side is having made that but if I did have met only I would only get twenty five percent didn't have made pay then there's only twenty five if you did have been pay you to have the five thousand dollars amid paid plus the twenty five and you get thirty five so all this does is it puts the insurance company to the front of the line in front of the citizen on who gets paid back in that situation so when you're horribly injured let's say that let's take this accident you're horribly injured you've got you broke your leg she got cash going to miss a bunch of work you've got hundreds of thousands of dollars worth of medical expenses one of my relatives who wrote they probably don't have insurance no go ahead runs into you he only has twenty five but you were smart enough to by mid pay right now as it sets you would get your med pay they would pay your bills then you can collect the twenty five and then the made whole would come in because everybody would agree by two broken legs and arms that you're not made whole but if this law passes you get thirty thousand dollars to get the benchers you paid for post twenty five if this law passes you wouldn't get the you get your med pay they go here you go and what they call it a loan or advance and then they would take it back and then you would only have twenty thousand dollars in that situation to like to do is to in Cabot Lonoke mad because it seems like to me either way you're going to get twenty five thousand thank you for trying to clarify that thank you. Members any other questions representative board. Thank you Mr chair appreciate the opportunity as this question so if I understand you correctly this is really only an issue when there's not have quote adequate money to go around so if if that's the case then. The victim really is at the mercy of somebody else's choices to what he or she did like as far as having adequate coverage or ability to have adequate coverage is that does that make sense I think I understand yes that's the whole reason behind the made whole document yeah I made whole doctrine in situations where there's not enough money to go around well there's not no fault ground and where the injured victim is not made whole. Right now this insurance can't come scrape that money back because the injured victim would make whole if this passes regardless of whether that ended individuals made whole they're gonna scrape that five thousand off the top and again this is a premium that you paid for if they want to make it free and give it to everybody then I might be appear on the pro side because I would help so many of my clients to have this they don't buy this coverage but not this is something you paid for and they're now instead of calling it a premium and an insurance policy their call and advancement and something that's not of. That's cool. K. and M. on that line the an advancement you're paying premiums on that or almost like you're paying interest on the loan that you may or may not ever have to to use is that correct that's correct okay you're paying premiums I would imagine maybe paying that for years I would imagine yes yes. flower I would imagine everybody in here probably has full coverage and everybody nears paying that premium and very few people in here probably ever use that premium and if that has to be paid then it then it comes down to who gets paid back who goes to the front of the line. Okay members any other questions. If not thank you Mr secretary that is that's the end of the for and against speakers represented Wardlaw you're recognized to close. SIS also get six six six and then all this questioning back and forth and supposed to be an LC executive committee First off I want to go back to represent a gas waste questions about the process and how this paid is out so we've gotten kind of the water's really muddy about who's at fault who's not at fault how it pays and how to get it back to represent eleven on I want to say you did a really good job explaining that. But why do I need to hire an attorney if the Max is twenty five thousand dollars and I want to get that anyway. And if I hire that attorney I'm give them thirty three percent I mean we've established that that's the base pay for them so I'm going to lose thirty three percent of that twenty five grand right off the bat what he wants to do is he will stay thirty three percent of that five grand. He wants you to think there's thirty thousand dollars money here there's never thirty thousand dollars money here representive eleven explain that very well his question log what's always twenty five thousand dollars but they want to double dip that money for that person that's not at fault. We have to be very clear on which person we're talking about in this case yes I pay premiums for that med pay yes that's my med pay. My insurance company is not liable for me if it's not my fault. They're they're liable for me when it's my fault so yes that's when they would pay my med pay and all those things to me or whoever else I hit or people in my car as we've already established when it's my fault but they are very liable to recoup that money when it's not my fault otherwise my premiums are going to go up. Because I've paid for insurance and and no fault of mine my insurance companies had to pay out this is happened to me personally about a brand new car about eight years ago drove it off the lot it was about twenty feet from stardom office and I was T. boned by a car that had twenty five thousand dollar limit. My car was about forty five forty six thousand dollars remember exactly was Toyota Highlander is probably some other people in your drives a Toyota Highlander is about thirty one thousand dollars worth of damage farm bureau my insurance company I'm not talking about mid page here installment fixing my car they had to pay that balance that six thousand dollar balance to fix my brand new car that had eleven miles on it basically because I'd left the dealership eleven miles down the road and drove almost to my office. My premiums went up because that crashed because my insurance company had to pay the. So if we really want to get down to what we're in here fighting about today is that minimal and I'm minimums not enough is not enough to pay for the cars representative brown alluded to is not enough to pay for his medical damages isn't it's not enough but that's not what this bill is about this bill is about the med pay portion for the non at fault person. And it's about recouping that five grand for that person's insurance company not to have to raise those premiums on the person is not at fault at all let's keep it to what it is. All the folks came enters testify against this bill all make money off of this portion. Gaining their trust fund to save anybody five Graham because they had a catastrophic damage there in here because they make thirty three plus percent of that money. That's what's about. The reason they formed a Facebook page called protect Arkansas you may look like they were protecting families it was because they were making thirty three plus percent of this five grand and it was easy money for them as we've learned from the attorneys from insurance company today they try to justify everything amid paid to get that up. So with that Mister chairman I stand close and I appreciate a good vote thank you members to we have a a motion. Representive eleven motion to pass we have a motion do pass and now time for discussion. Anyone. L.. Okay well we have a motion of do pass on Senate bill six six six. I'm gonna be listening intently here all those in favor signify by saying aye. All those opposed say no no. The nose haven't. I see a hands for roll call no sorry. All right members thank you so much for hanging in there believe me I've been to other committees where only five or six people or making it most of it most of the reason because you're here so thank you very much appreciated.