Alaska Supreme Court Opinions made Available byTouch N' Go Systems and Bright Solutions

Touch N' Go
, the DeskTop In-and-Out Board makes your office run smoother.


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

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 


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. 

----------------------- Page 2-----------------------


                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 



        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 

                                                  -2-                                           6534

----------------------- Page 3-----------------------

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. 

                                                  -3-                                           6534

----------------------- Page 4-----------------------

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. 

                                                  -4-                                            6534

----------------------- Page 5-----------------------

               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). 

                                                -5-                                           6534

----------------------- Page 6-----------------------

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). 

                                                  -6-                                             6534

----------------------- Page 7-----------------------

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). 

                                                     -7-                                                 6534 

----------------------- Page 8-----------------------

 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). 


                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 


                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." 

                                                  -8-                                            6534

----------------------- Page 9-----------------------

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 


                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). 

                                                   -9-                                            6534

----------------------- Page 10-----------------------

                 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' 


                                                   -10-                                                 6534 

----------------------- Page 11-----------------------

language of AS 21.36.065 to govern non-construction OCIPs.35                The Division's remedy 

lies with the legislature, not this court.36 

                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. 

                                                  -11-                                              6534 
Case Law
Statutes, Regs & Rules

IT Advice, Support, Data Recovery & Computer Forensics.
(907) 338-8188

Please help us support these and other worthy organizations:
Law Project for Psychiatraic Rights