HOUSE BILL REPORT

HB 1657

BYRepresentatives R. Fisher, McLean, H. Sommers, Locke, Dellwo, Appelwick, Belcher, Silver, Winsley and R. King; by request of  Department of General Administration and Office of Financial Management

Creating a risk management program and agency accountability.

House Committe on Judiciary

Majority Report:  Do pass.  (12)

      Signed by Representatives Appelwick, Chair; Crane, Vice Chair; Belcher, Brough, Dellwo, Hargrove, Locke, Moyer, Patrick, Scott, D. Sommers and Tate.

House Staff:Regina Jones (786-7191)

Rereferred House Committee on Appropriations

Majority Report:  Do pass.  (29)

      Signed by Representatives Locke, Chair; Grant, Vice Chair;H. Sommers, Vice Chair; Silver, Ranking Republican Member; Appelwick, Belcher, Bowman, Braddock, Brekke, Bristow, Brough, Dorn, Doty, Ebersole, Ferguson, Hine, Holland, May, McLean, Nealey, Padden, Peery, Rust, Sayan, Spanel, Sprenkle, Valle, Wang and Wineberry.

House Staff:      Randy Acker (786-7136)

AS PASSED HOUSE MARCH 15, 1989

BACKGROUND:

In 1977, the Legislature created an Office of Risk Management (ORM) within the Department of General Administration (GA).  The ORM was directed to develop policies and plans for self-insuring liabilities, funding tort claims on an actuarial basis, implementing a program of safety and loss control, and proposing legislative recommendations to carry out its mandate.

In 1986, the Office of Financial Management and the Office of the Attorney General contracted with Price Waterhouse to do a comprehensive study of legal services and risk management needs in the state.  In the spring of 1988, the Governor formed the Risk Management Advisory Committee to assist GA in restructuring the state's risk management program.  This bill incorporates the recommendation of the Risk Management Advisory Committee and the findings of Price Waterhouse in its legal services study.

SUMMARY:

The bill sets out the Legislature's intent to reduce tort claim costs by restructuring the state's risk management program.

All liability claims against state officers, employees and volunteers under federal civil rights law (42 U.S.C. 1981 et seq.) must be filed with the Office of Risk Management (ORM), unless the claim is specifically delegated to another agency by statute.  A centralized claim tracking system is created.  All records and communications related to claims are privileged and are not admissible in court.  The tracking system will have standardized procedures, and all claims will initially be reviewed by ORM.  Claims resulting in a lawsuit will be forwarded to the Attorney General. Settlements must be approved by the responsible agencies.

A nonappropriated liability fund is created in the custody of the treasurer. The fund is solely for the payment of tort claims and claims under federal civil rights law, and will not be used for legal defense costs and expenses. The liability fund will be financed through annual premiums assessed to agencies.  Premiums will be determined by the director of the ORM, an advisory committee and the Office of Financial Management (OFM). The liability fund will not exceed 50 percent of the actuarial value of the outstanding liability as determined by the ORM.

An appropriated risk management fund is created to be used exclusively for payment of administrative costs related to claims, and for the purchase of liability and property insurance.  The risk management fund is financed through a combination of appropriations and assessments to agencies.

The bill provides directives for the ORM in its establishment of a safety and loss control program.

The director of the Department of General Administration (GA) must establish a risk management advisory committee. The director of GA will serve as chair, and is given rulemaking authority.

This bill does not affect provisions governing liability coverage for the University of Washington, its students and personnel.

GA must conduct periodic actuarial studies to determine the amount needed to adequately fund the liability fund.

The tort claims revolving fund is abolished.

Fiscal Note:      Available.

Effective Date:The bill takes effect on July 1, 1989.

House Committee ‑ Testified For:    (Judiciary)  Wendy Holden, Department of General Administration; Skip Houser, Office of Financial Management; Gary Alexander, Office of Risk Management; Paul Conrad, Allied Daily Newspapers; Michael Stewart, Council of Presidents; Ben Jenness, Washington State University; Edith Rice, Department of Corrections; Angela Terry, Corroon & Black; Roberta McCreary, The Wyatt Company; Robert Darby, The Wyatt Company.

(Appropriations)  Wendy Holden, Department of General Administration; Skip Houser, Office of Financial Management.

House Committee - Testified Against:      (Judiciary)  None Presented.

(Appropriations)  None Presented.

House Committee - Testimony For:    (Judiciary)  Background was given on issues facing the state in the area of tort claims and risk management.  The state should move from the present tort claims revolving fund "pay-as-you-went" system to a "pay-as-you-go" risk management program.  A risk pool financed by agency assessments should replace the tort claims revolving fund.

(Appropriations)  This bill will improve the claims management process, improve agency accountability, and emphasize a cost avoidance policy.

House Committee - Testimony Against:      (Judiciary)  None Presented.

(Appropriations)  None Presented.