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You can search the entire site. or go to the recent opinions, or the chronological or subject indices. State, Dept. of Commerce, Community & Economic Development, Div. of Insurance v. Alyeska Pipeline Service Co. (1/21/2011) sp-6534
Notice: This opinion is subject to correction before publication in the PACIFIC REPORTER.
Readers are requested to bring errors to the attention of the Clerk of the Appellate Courts, 303
K Street, Anchorage, Alaska 99501, phone (907) 264-0608, fax (907) 264-0878, e-mail
corrections@appellate.courts.state.ak.us.
THE SUPREME COURT OF THE STATE OF ALASKA
STATE OF ALASKA, DEPARTMENT )
OF COMMERCE, COMMUNITY & )
ECONOMIC DEVELOPMENT, )
DIVISION OF INSURANCE, )
) Supreme Court Nos. S-13499/S-13520
Appellant/Cross-Appellee, )
) Superior Court No. 3AN-07-11593 CI
v. )
) O P I N I O N
)
ALYESKA PIPELINE SERVICE )
COMPANY, ) No. 6534 - January 21, 2011
)
Appellee/Cross-Appellant. )
)
Appeal from the Superior Court of the State of Alaska, Third
Judicial District, Anchorage, Peter A. Michalski, Judge.
Appearances: Signe P. Andersen, Chief Assistant Attorney
General, Anchorage, and Daniel S. Sullivan, Attorney
General, Juneau, for Appellant/Cross-Appellee. Kenneth P.
Eggers and Sarah A. Badten, Groh Eggers, LLC, Anchorage,
for Appellee/Cross-Appellant.
Before: Carpeneti, Chief Justice, Fabe, Winfree, Christen,
and Stowers, Justices.
WINFREE, Justice.
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I. INTRODUCTION
Alyeska Pipeline Service Company (Alyeska) contracted with the Liberty
Mutual Group (Liberty Mutual) to write an owner-controlled insurance program (OCIP).
The State of Alaska, Department of Commerce, Community and Economic
Development, Division of Insurance (Division), issued a cease and desist order stating
that Alyeska's OCIP was prohibited by statute. An administrative law judge determined
that "the Liberty Mutual program does not fit within the definition of an 'owner
controlled insurance program' that the statute supplies." The Division's deputy director,
acting as the final agency decision-maker, reversed the administrative law judge's
decision. On appeal the superior court reversed the deputy director's decision. Because
the superior court correctly ascertained the statute's limits, we affirm the superior court's
decision.
II. FACTS AND PROCEEDINGS
A. Facts
1. Alyeska's Non-Construction OCIP
Alyeska transports crude oil through the Trans-Alaska Pipeline System.
Alyeska contracted with Liberty Mutual to write an OCIP to "include[] workers
compensation and general liability coverages" for Alyeska and several contractors,1
1 Contractors typically acquire insurance to protect themselves and others
who might be injured while working on a project. Jacqueline P. Sirany & James Duffy
O'Connor, Controlled Construction Insurance Programs: Putting a Ribbon on Wrap-
ups, 22 CONSTRUCTION LAW. 30, 30 (2002). An OCIP "centralizes the insurance
program for all of the construction entities" and is "managed by one for the use and
benefit of all." Id. As the administrative law judge explained, the purpose of Alyeska's
OCIP "is to save contractor insurance costs that would otherwise be billed or passed
through to Alyeska. By purchasing coverage collectively, Alyeska achieves cost
savings."
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effective for three years beginning January 2002. Alyeska renewed the program for
another three years effective January 2005.
Six contractors enrolled in Alyeska's program. These contractors provided
a variety of services for Alyeska, including warehousing, mineral mining, security,
medical and emergency response, catering, oil spill prevention, and surveying. It is
undisputed that the contractors' work is properly characterized as maintenance and
support - not construction. For this reason, we refer to Alyeska's OCIP as a "non-
construction OCIP."
2. Alaska Statute 21.36.065
In 2005 the legislature enacted AS 21.36.065 which, in subsection (a), states
that "[a]n owner controlled insurance program or a contractor controlled insurance
program . . . shall be allowed only for a major construction project."2 The statute defines
"owner controlled insurance program" in relevant part as "an insurance program where
one or more insurance policies are procured on behalf of a project owner,"3 and in turn
defines "project owner" as "a person who, in the course of the person's business, engages
the service of a contractor for the purpose of working on a construction project."4 The
statute became effective on June 25, 2005.5
The legislative history of AS 21.36.065 is undisputed. In March 2005 the
House Labor and Commerce Committee met to discuss House Bill 147, a bill generally
2 AS 21.36.065(a); ch. 1, § 23, SLA 2005.
3 AS 21.36.065(c)(4).
4 AS 21.36.065(c)(5).
5 Ch. 1, SLA 2005.
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relating to insurance regulation.6 Mike Combs, a representative of Alaska Independent
Agents and Brokers, Inc., suggested that the Committee adopt his trade group's proposed
amendment "to clarify its position regarding [OCIPs]."7 According to the Committee
Minutes, Combs testified that "there are several problems with using [the OCIP]
insurance method for maintenance and repair programs" and that "[t]he [proposed]
amendment would limit [OCIPs] to construction projects in excess of $50 million only
and not include any repair or maintenance operations."8 Representative Tom Anderson,
Committee Chair, stated the Committee would consult with the Division's director and
consider Combs's proposal.9
When the House Labor and Commerce Committee met again, Chairperson
Anderson introduced a committee substitute for House Bill 147 containing the
amendment language Combs proposed.10 After explaining that the Division "is
ultimately the bill's sponsor" he asked the Division's director to "give . . . a closing with
this amendment, what it does and the change to the bill . . . ."11 The Division's director
testified with respect to OCIPs:
There have been times when that ability [to have an OCIP]
has been attempted to expand into other than construction
6 Committee Minutes, House Labor & Commerce Committee hearing on
House Bill (HB) 147 (Mar. 18, 2005).
7 Id. (testimony of Combs).
8 Id.
9 Id. (statement of Chairperson Anderson).
10 See Transcript of House Labor & Commerce Committee Meeting, at 1-2,
(Mar. 30, 2005) (statement of Chairperson Anderson).
11 Id. at 4.
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projects, for example, maintenance projects, ongoing things
that in our mind OCIPs were never intended to do, and our
concern with the ability to do that for things other than large,
one-time construction projects is that it takes one premium
out of an already fragile marketplace.[12]
The Committee approved the committee substitute.13
The Division's director also testified before the House Finance
Committee.14 The director stated that OCIPs "are designed for major construction
projects" and that the proposed amendment "is a prohibition against expanding them into
other types of things than large construction projects."15 The amendment was adopted
and the bill was moved out of committee.16
The Division's director made additional statements about OCIPs before two
Senate committees. The director expressed concern to the Senate Labor and Commerce
Committee about OCIPs expanding into non-construction projects.17 Similarly at the
Senate Finance Committee meeting the director testified that OCIPs were appropriate
only for large construction projects and not for non-constructionprojects.18 Senator Lyda
12 Id. at 7-8 (testimony of Division Director Linda Hall).
13 Committee Minutes, House Labor & Commerce Committee hearing on HB
147 (Mar. 30, 2005).
14 Transcript of House Finance Committee Meeting, at 1, 10 (Apr. 15, 2005).
15 Id. at 11-12 (testimony of Division Director Hall).
16 Id. at 12.
17 Committee Minutes, Senate Labor & Commerce Committee, at 7 (Apr. 12,
2005) (testimony of Division Director Hall).
18 Committee Minutes, Senate Finance Committee, at 26-27, (May 1, 2005)
(testimony of Division Director Hall).
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Green, the Committee co-chairperson, understood the director's testimony to mean that
an OCIP " 'should not morph' into an ongoing insurance program."19
The legislative history includes neither committee reports nor statements
by non-committee-member legislators indicating the full legislature's intent in passing
the final bill.
B. Proceedings
In November 2006 the Division issued Liberty Mutual a cease and desist
order listing seven compliance issues. Count One stated that Alyeska's OCIP was
prohibited under Alaska law because "[i]n its present form, the OCIP is designed to cover
on-going maintenance and is not restricted to a large construction project in violation of
AS 21.36.065." Liberty Mutual requested an administrative hearing. The administrative
law judge granted Alyeska's request to intervene.20
Alyeska filed a motion for partial summary adjudication arguing that (1) by
its express language AS 21.36.065 applies only to construction OCIPs and therefore does
not apply to its non-construction OCIP, and (2) even if AS 21.36.065 did govern non-
construction OCIPs, Alyeska's OCIP falls within a statutory exception.21
The administrative law judge granted Alyeska's motion, determining "the
Liberty Mutual program does not fit within the definition of an 'owner controlled
insurance program' that the statute supplies." Based on the statute's plain language, the
administrative law judge concluded AS 21.36.065 "addresses only construction OCIPs,"
and therefore does not govern Alyeska's non-construction OCIP. The administrative law
19 Id. at 27 (statement of Co-Chairperson Green).
20 The Division and Liberty Mutual subsequently entered into a stipulation
settling all compliance issues except those relating to Count One.
21 See AS 21.36.065(b)(2).
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judge was not persuaded that the statute's legislative history compelled a different
conclusion. According to the administrative law judge, the legislation proposed by the
trade group "was misdrafted. While the surrounding documentation makes perfectly
clear the group's intent to 'prohibit[] the use of OCIP[s] . . . outside the construction
industry,' the group's private attorney wrote language that instead defined non-
construction OCIPs out of the scope of the legislation, leaving them unregulated."
After the Division and Alyeska filed proposals for agency action,22 the
Division's deputy director, acting as the final agency decision-maker, issued a decision
and final order in October 2007. Determining that the statute is ambiguous and that the
legislative history supported the Division's position, the deputy director found that
Alyeska's OCIP is governed by and in violation of AS 21.36.065. The deputy director
reversed the administrative law judge's decision with respect to AS 21.36.065 and
affirmed Count One of the cease and desist order.
Alyeska then appealed to the superior court, which determined the deputy
director's decision was "contrary to the plain language of the statute." The superior court
reasoned that notwithstanding the legislative history, AS 21.36.065 restricts only
construction OCIPs. It stated that:
It [is] one thing to use legislative history to correct a drafting
error when that error is obvious or the error imposes a
restriction on the persons subject to the legislation that was
never intended by the legislature. It is another to expand a
restriction to persons plainly excluded by language of the
statute. In these instances, the remedy must lie with the
legislature, not the court.
The superior court also rejected Alyeska's argument that its OCIP falls within two
22 See AS 44.64.060(e) (outlining procedure for filing proposal for action with
agency after administrative law judge issues decision).
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exceptions under AS 21.36.065(b).
The Division appeals regarding the application of AS 21.36.065(a).
Alyeska cross-appeals regarding the application of an exception under AS 21.36.065(b).
III. STANDARD OF REVIEW
When a superior court acts as an intermediate appellate court in an
administrative matter, we review the merits of the agency's decision.23 The proper
interpretation of a statute presents a question of law that we review de novo, "adopting
the rule of law most persuasive in light of precedent, reason, and policy."24
IV. DISCUSSION
The Division claims the superior court erred because AS 21.36.065 applies
to non-construction OCIPs. The Division makes three arguments in support of its
position. First, the Division contends the court failed to interpret AS 21.36.065 in
conjunction with AS 21.36.190(f).25 Second, the Division claims the court failed to
interpret AS 21.36.065 in a manner consistent with the legislature's intent, as evidenced
by the statute's legislative history. Third, the Division argues the court's interpretation
23 Premera Blue Cross v. State, Dep't of Commerce, Cmty. & Econ. Dev., Div.
of Ins., 171 P.3d 1110, 1115 (Alaska 2007) (citing Alaska Trademark Shellfish, LLC v.
State, 91 P.3d 953, 956 (Alaska 2004)).
24 L.D.G., Inc. v. Brown, 211 P.3d 1110, 1118 (Alaska 2009) (citingAlaskans
for Efficient Gov't, Inc. v. Knowles , 91 P.3d 273, 275 (Alaska 2004)).
25 AS 21.36.190(f) states: "Except as provided in AS 21.36.065, an insurer,
whether authorized or unauthorized, may not underwrite an owner controlled insurance
program or contractor controlled insurance program. In this subsection, 'owner
controlled insurance program' and 'contractor controlled insurance program' have the
meanings given in AS 21.36.065."
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does not comply with the maxim expressio unius est exclusio alterius.26
In interpreting a statute we "look to the plain meaning of the statute, the
legislative purpose, and the intent of the statute."27 We have declined to mechanically
apply the plain meaning rule when interpreting statutes, adopting instead a sliding scale
approach: "The plainer the statutory language is, the more convincing the evidence of
contrary legislative purpose or intent must be."28 We apply this sliding scale approach
even if a statute is facially unambiguous.29 Canons of interpretation can also provide
useful aids in our efforts to interpret a statute.30
Based on its plain language, AS 21.36.065 does not govern non-
construction OCIPs such as Alyeska's. When the statutory definitions provided in AS
21.36.065(c) are substituted for the relevant terms in AS 21.36.065(a), the statute
provides:
An insurance program [where one or more insurance policies
are procured on behalf of a person who, in the course of the
26 Expressio unius is a doctrine of statutory construction, instructing "that
when the legislature expressly enumerates included terms, all others are impliedly
excluded." Vanvelzor v. Vanvelzor, 219 P.3d 184, 188 (Alaska 2009) (citing Ranney v.
Whitewater Eng'g, 122 P.3d 214, 218-19 (Alaska 2005)).
27 Premera Blue Cross, 171 P.3d at 1115 (citing W. Star Trucks, Inc. v. Big
Iron Equip. Serv., Inc., 101 P.3d 1047, 1050 (Alaska 2004)).
28 Gov't Emp. Ins. Co. v. Graham-Gonzalez, 107 P.3d 279, 284 (Alaska 2005)
(quoting Muller v. BP Exploration (Alaska) Inc., 923 P.2d 783, 787-88 (Alaska 1996)).
29 See Curran v. Progressive Nw. Ins. Co., 29 P.3d 829, 831-32 (Alaska 2001)
(citing Progressive Ins. Co. v. Simmons, 953 P.2d 510, 516 (Alaska 1998)). But see
Benavides v. State, 151 P.3d 332, 335 (Alaska 2006) (quoting Tesoro Petroleum Corp.
v. State, 42 P.3d 531, 537 (Alaska 2002)) ("If a statute is ambiguous 'we apply a sliding
scale of interpretation . . . .' ") (emphasis added).
30 See McKee v. Evans, 490 P.2d 1226, 1230 n.18 (Alaska 1971).
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person's business, engages the service of a contractor for the
purpose of working on a construction project . . . for the
purpose of insuring that person] . . . shall be allowed only for
a major construction project.
Through its incorporation of specifically defined terms, the statute simply
was not drafted to govern non-construction OCIPs.31 The Division argues that
extratextual sources or canons of interpretation reveal a legislative intent requiring us to
disregard the statute's plain language. Alyeska argues that the Division seeks to reform
the statute, not interpret it. We agree with Alyeska. On the record before us, including
the limited legislative committee history,32 we must conclude that the statute was either
(1) intended by the full legislature to govern only construction OCIPs,33 or (2) misdrafted
through reliance on the industry trade group's proposal. Even taking into account AS
21.36.190(f) and expressio unius, AS 21.36.065 remains unsusceptible to the Division's
interpretation.34 We will not invade the legislature's province by extending the plain
31 Cf. Anderson v. Alyeska Pipeline Serv. Co., 234 P.3d 1282, 1287-88 (Alaska
2010) (interpreting "project owner" under AS 23.30.045 and emphasizing we "look first
to see if the word or phrase to be construed has a specific definition") (citingRanney, 122
P.3d at 218).
32 See Seward Marine Servs., Inc. v. Anderson, 643 P.2d 493, 496 n.8 (Alaska
1982) (citing Alaska Pub. Emps. Ass'n v. State, 525 P.2d 12, 17-18 (Alaska 1974))
("[T]estimony before a committee is of little value in ascertaining legislative intent, at
least where the committee fails to prepare and distribute a report incorporating the
substance of the testimony."). But see Cook Schuhmann & Groseclose, Inc. v. Brown &
Root, Inc., 116 P.3d 592, 601 (Alaska 2005) (indicating we look to whether potential
source of legislative intent is reliable in determining how much weight to assign to it).
33 See State v. Campbell, 536 P.2d 105, 111 (Alaska 1975), overruled on other
grounds by Kimoktoak v. State, 584 P.2d 25, 31 (Alaska 1978) ("At some point, it must
be assumed that the legislature means what it says.").
34 We note that AS 21.36.190(f) states " 'owner controlled insurance program'
(continued...)
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language of AS 21.36.065 to govern non-construction OCIPs.35 The Division's remedy
lies with the legislature, not this court.36
V. CONCLUSION
We AFFIRM the superior court's decision.37
34 (...continued)
. . . ha[s] the meaning[] given in AS 21.36.065." Because AS 21.36.190(f) incorporates
the meaning given in AS 21.36.065 generally and not merely AS 21.36.065(a), we reject
the Division's argument that "[t]he definition of OCIP . . . do[es] not include any
reference to 'construction.' " Nor does expressio unis support the Division's position;
that maxim "expresses the concept that when people say one thing they do not mean
something else." 2A NORMAN J. SINGER & J.D. SHAMBIE SINGER, STATUTES AND
STATUTORY CONSTRUCTION § 47:25 (7th ed. 2007). For the reasons stated, the language
expressly adopted by the legislature does not support the Division's interpretation.
35 See Alaskans for a Common Language, Inc. v. Kritz, 170 P.3d 183, 192
(Alaska 2007) (quoting Campbell, 536 P.2d at 111) (noting that separation of powers
" 'prohibits this court from enacting legislation or redrafting defective statutes' ");
Gottschalk v. State, 575 P.2d 289, 296 (Alaska 1978) (declining to save overbroad statute
"because in doing so we would be stepping over the line of interpretation and engaging
in legislation"); see also 73 AM. JUR. 2D Statutes § 121 (2010) ("Generally, courts will
not undertake correction of legislative mistakes in statutes notwithstanding the fact that
the court may be convinced by extraneous circumstances that the legislature intended to
enact something very different from that which it did enact.") (citations omitted).
36 See Interior Cabaret, Hotel, Rest. & Retailers Ass'n v. Fairbanks N. Star
Borough, 135 P.3d 1000, 1006 (Alaska 2006) (observing legislature mistakenly deleted
statutory language, realized error, and enacted new language to correct it).
37 In light of our decision we decline to address Alyeska's cross-appeal.
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