In the Supreme Court of the State of Alaska
State of Alaska, Department of
Commerce, Community & Economic
Development Division of Insurance
Alyeska Pipeline Service Company,
) Supreme Court No. S-13499/S-13520
Petition for Rehearing
Date of Order: 6110/2011
On consideration ofthe Petition for Rehearing filed on 113112011 and the response
filed on 2111111,
IT IS ORDERED:
The Petition for Rehearing is
Opinion No. 6534, issued on 1121111, is
GRANTED IN PART.
Opinion No. 6567, is issued on this date in its place. The text ofthe court's
opinion at page 10 has been modified and a footnote has been removed.
Entered by direction of the court.
Clerk of the Appellate Courts
Supreme Court Justices
Trial Court Appeals Clerk
Rev 05/13/2010 .. WP11
State of Alaska, et al.. v. Alyeska Pipeline Service Company
Supreme Court No. S-13499/S-13520
Order of 6/1 0111
Signe P Andersen
Attorney General's Office
1031 W 4th Ave Ste 200
Anchorage AK 9950 I
Kenneth P Eggers
Groh Eggers LLC
2600 Cordova St Ste 110
Anchorage AK 995032745
Order II s, wpt
I~ev 05/13/2010 "WPII
Notice: This opinion is subject to correction before publication in the PACIFIC REPORTER.
Readers are requested to bring errors to the attention ofthe Clerk ofthe Appellate Courts,
303 K Street, Anchorage, Alaska 99501, phone (907) 264-0608, fax (907) 264-0878, email
THE SUPREME COURT OF THE STATE OF ALASKA
STATE OF ALASKA, DEPARTMENT
OF COMMERCE, COMMUNITY &
DIVISION OF INSURANCE,
Supreme Court Nos. S-13499/S-13520
Superior Court No. 3AN-07-11593 CI
ALYESKA PIPELINE SERVICE
No. 6567 - June 10, 2011
Appeal from the Superior Court ofthe State ofAlaska, 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,
Before: Carpeneti, Chief Justice, Fabe, Winfree, Christen,
and Stowers, Justices.
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 ascertaLl1ed the statute's limits, we affirm the superior court's
FACTS AND PROCEEDINGS
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, I
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 ofall." Id. As the administrative law judge explained, the purpose ofAlyeska'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
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
not construction. For this reason, we refer to Alyeska's OCIP as a "non
Alaska Statute 21.36.065
In 2005 the legislature enacted AS 21.36.065 which, in subsection (a),
states that "(a]n owner controlled iIlsurance 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 tum
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
AS 21.36.065(a); ch. 1, § 23, SLA 2005.
Ch. 1, SLA 2005.
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."s Representative Tom Anderson,
Committee Chair, stated the Committee would consult with the Division's director and
consider Combs's proposa1. 9
When the House Labor and Commerce Committee met again, Chairperson
Anderson introduced a committee substitl.!te for House Rill 147 containing the
amendment language Combs proposed. to
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
Committee Minutes, House Labor & Commerce Committee hearing on
House Bill (HE) 147 (Mar. 18,2005).
Id. (testimony of Combs).
Id. (statement of Chairperson Anderson).
See Transcript of House Labor & Commerce Committee Meeting, at 1-2,
(Mar. 30, 2005) (statement of Chairperson Anderson).
Id. at 4.
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 marketplaceY2]
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-construction projects. 18 Senator
Id. at 7-8 (testimony of Division Director Linda Hall).
Committee Minutes, House Labor & Commerce Committee hearing on HB
147 (Mar. 30, 2005).
Transcript ofHouse Finance Committee Meeting, at 1, 10 (Apr. 15,2005).
Id. at 11-12 (testimony of Division Director Hall).
Id. at 12.
Committee Minutes, Senate Labor & Commerce Committee, at 7 (Apr. 12,
2005) (testimony of Division Director Hall).
Committee Minutes, Senate Finance Committee, at 26-27, (May 1,2005)
( continued ... )
Lyda 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.
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
(testimony of Division Director Hall).
Id. at 27 (statement of Co-Chairperson Green).
The Division and Liberty Mutual subsequently entered into a stipulation
settling all compliance issues except those relating to Count One.
See AS 21.36.065(b )(2).
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
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
See AS 44.64.060(e) (outlining procedure for filing proposal for action with
agency after administrative law judge issues decision).
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
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 ofan exception under AS 21.36.065(b).
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 oflaw 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(t).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
Premera Blue Cross v. State, Dep 't ofCommerce, Cmty. & Econ. Dev., Div.
ofIns., 171 P.3d 1110, 1115 (Alaska 2007) (citing Alaska Trademark Shellfish, LLC v.
State, 91 P.3d 953, 956 (Alaska 2004)).
L.D. G., Inc. v. Brown, 211 P.3d 1110, 1118 (Alaska 2009) (citing A laskans
for Efficient Gov't, Inc. v. Knowles, 91 P.3d 273,275 (Alaska 2004)).
AS 21.36.190(t) 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."
by the statute's legislative history. Third, the Division argues the court's interpretation
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 nonconstruction OCIPs such as .AJyeska'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
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)).
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)).
Gov'tEmp.lns. Co. v. Graham-Gonzalez, 107P.3d279, 284 (Alaska 2005)
(quoting Muller v. BP Exploration (Alaska) Inc., 923 P.2d 783, 787-88 (Alaska 1996)).
See Curranv. ProgressiveNw. Ins. Co., 29P.3d 829,831-32 (Alaska 200 1)
(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)) ("Ifa statute is ambiguous 'we apply a sliding
scale of interpretation .... ' ") (emphasis added).
See McKee v. Evans, 490 P.2d 1226,1230 n.18 (Alaska 1971).
An insurance program [where one or more insurance policies
are procured on behalf of 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 . . . 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?1
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.
Taking into account AS
21.36.190(f) and expressio unius, AS 21.36.065 remains unsusceptible to the Division's
interpretation. 32 On the record before us, including the iimited legislative committee
history, we must conclude that the statute was either (1) intended by the full legislature
Cj Anderson v. Alyeska Pipeline Servo 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") (citing
Ranney, 122 P.3d at 218).
We note that AS 21.36.190( f) states" 'owner controlled insurance program'
... 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 therefore incorporates all of the
definitions in subsections .065( c)( 1)-(6) and not merely subsections .065(c)(2) and (4),
we reject the Division's argument that "[t]he definition of OCIP ... do[ es] not include
any reference to 'construction.''' Nor does expressio unius 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. SHAMBlE 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.
to govern only construction OCIPs,33 or (2) misdrafted through reliance on the industry
trade group's proposal. Even if the latter, we will not invade the legislature's province
by extending the plain language of AS 21.36.065 to govern non-construction OCIPs. 34
The Division's remedy lies with the legislature, not this court. 35
We AFFIRM the superior court's decision. 36
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.").
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
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).
In light of our decision we decline to address Alyeska's cross-appeal.