SENATE BILL REPORT

ESHB 1248

This analysis was prepared by non-partisan legislative staff for the use of legislative members in their deliberations. This analysis is not a part of the legislation nor does it constitute a statement of legislative intent.

As of March 1, 2016

Title: An act relating to court proceedings.

Brief Description: Concerning court proceedings.

Sponsors: House Committee on Judiciary (originally sponsored by Representatives Shea, Sawyer, Rodne, Jinkins, Walkinshaw, Fitzgibbon, Kilduff and Pollet).

Brief History: Passed House: 2/19/15, 78-19; 2/03/16, 85-12.

Committee Activity: Law & Justice: 2/18/16, 2/23/16 [DP-WM].

Ways & Means: 2/29/16.

SENATE COMMITTEE ON LAW & JUSTICE

Majority Report: Do pass and be referred to Committee on Ways & Means.

Signed by Senators Padden, Chair; O'Ban, Vice Chair; Pedersen, Ranking Minority Member; Darneille, Frockt and Pearson.

Staff: Melissa Burke-Cain (786-7755)

SENATE COMMITTEE ON WAYS & MEANS

Staff: Steve Jones (786-7440)

Background: The Legislature limits the district court's jurisdiction based on the case's value, or the amount at issue, in specific civil cases. The Legislature periodically adjusts this case value limit. In 2008, the most recent change, the Legislature raised the civil case jurisdiction from $50,000 per case to $75,000 per case exclusive of interest, costs, and attorneys' fees.

Mandatory superior court arbitration is required in counties with more than 100,000 persons, and voluntary for less-populous counties. Mandatory arbitration applies to all claims for money damages, except appeals from municipal and district courts, up to a case value limit of $15,000 per party. Currently, in counties where mandatory arbitration is required or authorized, a county's superior court judges may raise the mandatory arbitration limit up to $50,000 by a two-thirds vote.

A $25 fee must be charged for filing a water rights statement. Water rights statement is not a defined term or a term found in the water rights law.

Summary of Bill:

Appropriation: None.

Fiscal Note: Available.

Committee/Commission/Task Force Created: No.

Effective Date: The bill takes effect on January 1, 2017.

Staff Summary of Public Testimony (Law & Justice): PRO: Washington was the first state to have mandatory arbitration in 1981. $75,000 is a reasonable increase. Other counties are higher, for example Cook County Illinois is an upper mandatory arbitration limit of $250,000. Mandatory arbitration saves costs for the litigants and the courts. Not all Washington counties have adopted mandatory arbitration. Approximately 2% of mandatory arbitration cases go on to a trial de novo. If the mandatory arbitration is raised to $ 75,000 approximately 20% more cases would be eligible. Arbitration helps the parties work with an independent person to work through some of the emotional distress and allows attorneys for litigants to have a frank discussion about the value of the case, the risks of trial. The proposed $75 000 ceiling does not mean that cases are necessarily more complex. Instead it is more in keeping with increases in medical bills, cost of living, expert testimony, and discovery. The current $50,000 upper limit is too low. CON: The increase from $50,000 to $75,000 is a substantial jump. The last increase was in 2005. The proposed increase is far beyond inflation. If an increase is contemplated there should also be attention paid to who the arbitrators are. The current estimate is that 2/3 of the panel arbitrators are plaintiff counsel and 1/3 are defense counsel. It should be equally balanced. This measure will not just affect insurance companies, it will affect mom-and-pop businesses, school districts and other local government entities such as school districts, port districts, and municipalities. Arbitration is not a true evaluation of the case; it is a "split-the-baby" every time. The costs of the increase will translate into higher insurance premiums for consumers. Discovery prior to a mandatory arbitration is too limited given the proposed increase in the arbitration amount. More trial de novo actions will occur in order to have the opportunity for a summary judgment motion. Arbitrators come with a "split the difference" mentality that inflates the value of the claim in the defense's view. It is hard to go to trial de novo because if you do not improve your position on appeal, you end up paying your own costs and the other side's costs. Some defendants just pay the claim and not incur the risks, so defendants are not fairly treated based on the claim's actual value. For consumers who can only afford the minimum mandatory car insurance, there can be significant exposure, for example in an auto accident where a person with the minimum insurance is exposed to $25,000 of direct loss for an above limits decision. It adversely affects limited means consumers in another way because they often cannot afford to put on a robust defense .

Persons Testifying (Law & Justice): PRO: Representative Shea, prime sponsor; Larry Shannon, Wn State Assn for Justice; Celia Rivera, Wn. State Assn. for Justice; Marshall Casey, Wn State Assn for Justice; CON: James Skogman, Pemco Insurance; Maggie Sweeney, Washington Defense Trial Lawyers; Melissa Roeder, Washington Defense Trial Lawyers; Mel Sorenson, Property and Casualty Insurers Assn of America, Allstate, American Family Insurance; Brian Miller, Farmers Insurance; Cliff Webster, Liability Reform Coalition. Persons signing in to testify but not testifying: No one.

Persons Signed In To Testify But Not Testifying: No one

Staff Summary of Public Testimony (Ways & Means): PRO: This measure will reduce the clogged caseloads in the courts of the state. Savings will be produced for litigants and local courts. New revenue will be produced for the local courts system, resulting from higher arbitration fees and an increased number of arbitration cases. This bill will result in 700 to 800 new arbitration cases annually.

CON: Arbitrators have a clear bias toward plaintiffs; they take a "split-the-baby" approach to cases, which will increase the tort payouts by state and local government defendants. Low-income persons, who often have insurance policies that only cover the first $25,000 of liability, will be stuck with the extra costs that these arbitration cases will award. Mandatory arbitration is inherently unfair to defendants. The Attorney General estimates that 60 percent of tort claims result in zero payout by the state, but if arbitration is used, this percentage drops to 26 percent. Both public and private defendants oppose this bill.

Persons Testifying (Ways & Means): PRO: Larry Shannon, WA St Assoc. for Justice.

CON: Jean Leonard, WA Insurers; James Skogman, Pemco Mutual Insurance Co.; Mel Sorenson, WA Defense Trial Lawyers; Cliff Webster, WA Liability Reform Coalition.

Persons Signed In To Testify But Not Testifying: No one.