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VII. Tort Reform

  1. Tort Reform Prior to 1997
  2. Tort Reform in 1997
    1. Statutes of Limitation
    2. Caps on Non-Economic Damages
    3. Caps on Punitive Damages
    4. Apportionment of Fault
    5. Offers of Judgment
    6. Prejudgment Interest
    7. Discovery Limitations

A. Tort Reform Prior to 1997

Alaska has passed three separate tort reform statutes. A 1986 statute partially modified joint and several liability, so that a defendant could be required to pay no more than twice his percentage of fault. For example, a defendant found to be 25% at fault could be liable for no more than 50% of the plaintiff's total damages. The 1986 statute also made a number of other changes limiting a plaintiff's recovery, such as requiring proof of punitive damages by clear and convincing evidence, allowing collateral benefits to offset a monetary award under certain circumstances, and reducing future economic losses to their present value using principles of safe investment. The 1986 Tort Reform statute applied to causes of action arising after June 11, 1986.

The 1986 statute was amended by initiative in 1989. The 1989 amendment eliminated contribution and introduced a statutory scheme of pure several liability which limited each tortfeasor's liability to his or her percentage of relative fault.

B. Tort Reform in 1997

In 1997 the Alaska legislature adopted another tort reform statute which was intended to further limit liability. This statute was generally upheld as constitutional in Evans v. State, 56 P.3d 1046 (Alaska 2002). As to the damages caps and the award of punitive damages to the state, the statute was upheld by a split 2-2 decision only.

The 1997 statute applied to causes of action accruing on or after August 7, 1997 and implemented a number of significant changes including the following:

1. Statutes of Limitation
The 1997 Tort Reform statute reduced the statute of limitation for injury to personal property from six years to two years; reduced the statute for contract actions from six years to three years; and set forth a ten year statute of repose.

2. Caps on Non-Economic Damages
The 1997 Tort Reform statute capped recovery for non-economic damages to the greater of $400,000 or $8,000 multiplied by the plaintiff's life expectancy. This cap applies to wrongful death claims, as well as other personal injury cases. In cases of severe, permanent physical impairment or severe disfigurement, the cap on non-economic damages was set at the greater of $1,000,000 or $25,000 multiplied by the plaintiff's life expectancy. ASĀ 09.17.010. The prior 1986 Tort Reform statute, which applies to causes of action accruing before August 7, 1997, capped non-economic losses in most personal injury/wrongful death cases at $500,000.

The cap on non-economic damages was recently reviewed by the Alaska Supreme Court for constitutionality. The Superior Court found the cap and other provisions of the tort reform statute constitutional. The Supreme Court upheld the Superior Court's ruling on a split 2-2 decision. Evans v. State, 56 P.3d 1046 (Alaska 2002).

3. Caps on Punitive Damages
The 1997 Tort Reform statute placed caps on punitive damages as well. The default cap for punitive damages under the 1997 Tort Reform statute is the greater of three times the amount of compensatory damages or $500,000. AS 09.17.020(f). In cases where the wrongful acts were motivated by financial gain, and where the "adverse consequences of the conduct were actually known by the defendant or the person responsible for making policy decisions on behalf of the defendant," punitive damages are capped at the greater of $7,000,000, four times compensatory damages, or four times the aggregate amount of financial gain received as a result of the misconduct.

It should be noted that the 1997 Tort Reform statute incorporates a lower cap for punitive damages where the action involves unlawful employment practices. The cap for punitive damages involving unlawful employment practices is based on the number of employees working in Alaska.

Employees in AlaskaPunitive Damage Cap
Fewer than 100 employees$200,000
100-200 employees$300,000
200-500 employees$400,000
Over 500 employees$500,000

Discovery regarding the defendant's assets is not allowed until the fact finder determines punitive damages are appropriate. Punitive damages are determined during a separate trial. Finally, 50% of a punitive damage award goes to the State of Alaska. AS 09.17.020(a), (e), (j). The statute awarding a portion of any punitive damages award to the state was upheld by a 2-2 split decision in Evans v. State, 56 P.3d 1046 (Alaska 2002). Justice Bryner stated in a subsequent opinion, however, that Evans stood for the proposition that the punitive damage caps are constitutional. Central Bering Sea Fisherman's Ass'n v. Anderson, 54 P.3d 271, 281 (Alaska 2002).

4. Apportionment of Fault
The 1997 Tort Reform statute amended provisions on apportionment of fault, as discussed above.

5. Offers of Judgment
The 1997 Tort Reform statute changed Alaska law with regard to offers of judgment. These changes have been incorporated into the court rules and allow enhanced attorney fees where a judgment is at least 5% less favorable to the offeree2 than the amount of the offer of judgment.

The amount of attorney fees allowed depends on the stage of litigation in which the offer of judgment is made. Where an offer of judgment is made within 60 days of the required initial disclosures, the offeror may be awarded 75% of reasonable, actual attorney fees. If the offer is made more than 60 days after the required initial disclosures, but more than 90 days before trial, the offeror is entitled to 50% of reasonable, actual attorney fees. On the other hand, where the offer is made 90 days or less before trial, but more than ten days before trial, an offeror is entitled to 30% of reasonable, actual attorney fees.

A successful offeror under new Alaska R. Civ. P. 68 is considered the "prevailing party" and is therefore entitled to elect attorney fees under either Alaska R. Civ. P. 82 or Alaska R. Civ. P. 68, whichever provides the greater recovery. The new Alaska R. Civ. P. 68 applies to all cases filed on or after August 7, 1997. See Alaska R. Civ. P. 68 (as amended). For earlier filed cases, the offer of judgment rule affects the prejudgment interest rate.

6. Prejudgment Interest
The 1997 Tort Reform statute lowered the rate of prejudgment and postjudgment interest in Alaska from 10.5% to 3 percentage points above the Federal Discount Rate on January 2 of the year in which the judgment is entered. See AS 09.30.070. The interest rate in calendar year 2014 is 3.75%. The interest rate changes the first of every year. The interest rate for cases that accrued prior to August 7, 1997 remains at 10.5%. For the current rate, see the state's web site at www.state.ak.us/courts/int.htm. The parties may contract for a different rate of interest to apply.

The Tort Reform statute codified current case law to assure that prejudgment interest is not allowed on future economic and non-economic damages or punitive damages. Navistar International Transportation Corp. v. Pleasant, 887 P.2d 951 (Alaska 1994) (no prejudgment interest on future damages); McConkey v. Hart, 930 P.2d 402 (Alaska 1996) (same); Bobich v. Stewart, 843 P.2d 1232 (Alaska 1993) (no prejudgment interest on punitive damages); Haskins v. Sheldon, 558 P.2d 487 (Alaska 1976) (no prejudgment interest on punitive damages); Anderson v. Edwards, 625 P.2d 282 (Alaska 1981) (same).

7. Discovery Limitations
The 1997 Tort Reform statute has significantly limited discovery in cases involving claims totaling less than $100,000. In such cases, the only discovery allowed is disclosures under Alaska R. Civ. P. 26, the depositions of the parties, and a deposition of one additional non-party witness. This change has been adopted by court rule and applies to all cases filed after August 7, 1997. See Alaska R. Civ. P. 26(a)(1) and Alaska Dist. Ct. R. Civ. P. 1(a)(1).

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Disclaimer


2 In other words, the party making an offer of judgment must now beat the offer by 5% to receive attorney fees under the rule. The party making an offer of judgment must beat the judgment by 10% where multiple defendants are involved.

 
 
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