MINUTES OF MEETING

ASSEMBLY COMMITTEE ON COMMERCE

Sixty-seventh Session

March 8, 1993

The Assembly Committee on Commerce was called to order by Chairman Gene T. Porter at 3:45 p.m., Monday, March 8, 1993, in Room 332 of the Legislative Building, Carson City, Nevada. Exhibit A is the Meeting Agenda, Exhibit B is the Attendance Roster.

COMMITTEE MEMBERS PRESENT:

Mr. Gene T. Porter, Chairman

Mr. Morse Arberry, Jr., Vice Chairman

Ms. Kathy M. Augustine

Mr. Rick C. Bennett

Mr. John Bonaventura

Mr. Val Z. Garner

Ms. Chris Giunchigliani

Mr. Dean A. Heller

Mr. David E. Humke

Ms. Erin Kenny

Mr. Richard Perkins

Mr. Scott Scherer

Ms. Myrna T. Williams

COMMITTEE MEMBERS ABSENT:

None

GUEST LEGISLATORS PRESENT:

None

STAFF MEMBERS PRESENT:

Paul Mouritsen, Senior Research Analyst, Legislative Counsel Bureau

OTHERS PRESENT:

Dr. Jo Briggs, D.C., Vice President of Nevada State Board of Chiropractic; Dr. Bill Bailey, D.C., Secretary of the Nevada State Board of Chiropractic; Ms. Stephanie Tyler, Nevada State Chiropractic Association; Dr. Lisa Bray, D.C., President of the Nevada State Chiropractic Association; Mr. Fred Hillerby, Nevada State Board of Pharmacy; Mr. Keith MacDonald, Executive Secretary of the Nevada State Board of Pharmacy; Ms. Helen Foley, Nevada Nurses Association; Mr. Peter Neumann; Don Springmeyer, Nevada Trial Lawyers Association; Florence McClure, Citizens Committee on Victim Rights; Mr. Robert A. Byrd, Nevada Medical Liability Insurance Company; Mr. William Prezant; Mr. Robert Crowell, Farmers Insurance Company; Mr. Jim Wadhams, American Insurance Association; Ms. Teresa Rankin, Insurance Commissioner. See also Exhibit B attached hereto.

ASSEMBLY BILL 237 - makes various changes to provisions governing practice of chiropractic.

Dr. Jo Briggs, D.C., Vice President of Nevada State Board of Chiropractic Examiners, testified. Ms. Briggs referred to a written summary of AB 237 (Exhibit C). She said all suggested changes contained in Exhibit C were reviewed and supported by both the Board of Chiropractic Examiners and the Nevada State Chiropractic Association. Dr. Briggs addressed section 1 of Exhibit C. She explained under present statutes, a chiropractic physician to a sporting group, team or individual athlete coming into Nevada from another state could not treat members of the group or team or the individual athlete while in Nevada. She said the proposed temporary license would allow the chiropractic physician for an out-of-state group, team or individual to treat those members or that individual while in the state of Nevada for a period up to ten days, with no more than two such periods in a given year. She stated the Board of Chiropractic Examiners would be required to verify the chiropractic physician was one in good standing in his/her own state. She said additional provisions of item 1 of Exhibit C covered information needed concerning the out-of-state chiropractic physician, fees and the time required to verify the chiropractic physician was licensed.

Dr. Briggs stated item 2 of Exhibit C covered terms of office for members of the board. She advised the board recommended a 4 year term of office and a limit of 2 terms. She said this was consistent with terms of office established for boards governing other types of physicians. She stated the changes in terms of office were recommended by the Reorganization Committee.

Dr. Bill Bailey, D.C., Secretary of the Nevada State Board of Chiropractic, testified. Dr. Bailey addressed the proposed change in the existing fee structure. He stated the rationale for the increase in fees was the fact the Board had not increased its fees since 1981, yet the number of chiropractors licensed each year had grown. He explained the increase in chiropractors resulted in a dramatic increase in inquiries, questions and complaints to the board. He stated the cost of disciplinary actions and the potential financial exposure from those actions had risen, which placed pressure on the board to increase the board's reserve fund. Dr. Bailey said further the permanent staff and offices of the board had grown. In summary, he said the cost of business had increased over the preceding 12 years, but the chiropractic board's fees had not increased. Dr. Bailey identified some items for which fees would be charged.

He said the new fees were based on fees charged by other boards pursuant to provisions of the NRS. He advised the board proposed to raise caps on current fees to reflect the increased services provided by the board. Dr. Bailey said a review of other states and other boards demonstrated the proposed caps were not unusual or high. He pointed out Exhibit C contained a chart which outlined the proposed caps. He stated the fee changes had been reviewed with the state chiropractic association and the association was in complete agreement with the changes. Dr. Bailey said the benefits expected from the fee increases would include: ability to hire a part-time investigator; a build-up of the board's reserve fund as recommended by the Governor's and Attorney General's offices; payment of increased assessments due to state reorganization; and the ability to respond quickly and efficiently to the increased number and complexity of complaints generated by the growth of both the chiropractic profession and the population.

Dr. Bailey spoke regarding Section 5 of AB 237. He stated Section 5 included a provision for the board to charge an agency or individual who requested a special board meeting. He said the provision was patterned after NRS 630.290(3). He cited as a hypothetical example an applicant who failed an examination by the state board, did not want to wait until the next regularly scheduled board meeting to have his test reviewed and requested a special meeting of the board. He said the provision being discussed would require the applicant to pay for the special meeting and thus the state would not bear that cost.

Mr. Scherer asked the anticipated cost of a special meeting and what expenses were included. Dr. Bailey replied expenses included in the cost of a special meeting were a per diem for the board, travel expenses and rental of a room. He said the anticipated cost would be $1,000 to $1,500.

Mr. Scherer inquired under what circumstances a state agency might request a special meeting. Dr. Bailey responded he had no knowledge of what such circumstances might be.

Mr. Scherer, using the Attorney General's Office as an example of a state agency, asked if the language in section 6, subsection 2 of AB 237 would prohibit the board from holding a special meeting at the request of the Attorney General's Office unless the Attorney General's Office first tendered the $1,000 to $1,500 fee. Mr. Bailey responded, "Well, that's the way it's worded in the bill." Chairman Porter said he shared Mr. Scherer's concern. He stated the board operated under a privilege of license granted by the state, and the state should be able to address the board without paying to do so. Mr. Bailey said he believed the section of AB 237 in question could be removed without damaging the intent of "the addition."

Ms. Giunchigliani asked if the board had use of the state's teleconferencing capabilities. Ms. Paula Berkley, lobbyist for the Nevada State Board of Chiropractic Examiners, responded to Ms. Giunchigliani's question. She said she did not believe the board had ever asked to use the state's teleconferencing capabilities and therefore she was unable to answer. Ms. Giunchigliani suggested use of the state's teleconferencing capabilities would assist state boards in hearing special requests without large costs. Dr. Briggs stated the board did utilize telephone conference calls which sometimes eliminated travel, but such calls resulted in significant costs.

Dr. Briggs discussed section 4 of Exhibit C, concerning section 4.14 of AB 237. She stated the purpose of the section was to discourage "ambulance chasing." She said it would prohibit solicitation of individuals who might be vulnerable to undue influence as new patients. Dr. Briggs cited as a hypothetical example of such solicitation a doctor who obtained copies of accident reports, then mailed letters only to individuals mentioned in those reports. She said the board had received numerous complaints from members of the public and chiropractic patients solicited in this manner.

Chairman Porter asked the board's definition of solicitation. Dr. Briggs responded "Well, this specific one is.......to use the language that the LCB came up with vulnerable to undue influence for any person who has been recently involved in an automobile accident, work injury or result of actions of another person. So I would interpret that to be where there is a report that's made, that someone can go down and purchase and then mail out, as opposed to the mailing to the general public. That's how the board is interpreting this." Chairman Porter asked if the board viewed solicitation in the same manner the Nevada Supreme Court viewed the guidelines concerned with solicitation by lawyers. Dr. Briggs replied she was unfamiliar with those quidelines. Chairman Porter said he appreciated the board's efforts to eradicate the activity being discussed. He stated he was interested in the standard the board would apply and whether the standard would be uniform. Chairman Porter asked if the board intended to establish guidelines. Dr. Briggs said she believed with the help of the Deputy Attorney General assigned to the board and the aid of further discussions the board would be able to establish policies. Chairman Porter said it would be beneficial to the board's licensees if the board provided direction concerning what was and was not acceptable professional conduct. Ms. Berkley suggested providing members of the chiropractic profession with letters exemplifying solicitation of the type the board wished to eliminate as a means of aiding those members to understand the intent of the law.

Ms. Giunchigliani pointed out the words contained on page 4, line 12 of AB 237, "any person known by the licensee" and referred to Dr. Briggs prior statements regarding purchase of lists of accident victims by a licensee. She said merely to have "known" seemed very broad. Colloquy ensued between Ms. Giunchigliani, Chairman Porter and Dr. Briggs regarding the purchase of lists of accident victims by licensees.

Dr. Briggs discussed section 6, subsection 15, of AB 237 concerned with employing chiropractic assistants. She advised this section would assist the board in ensuring doctors of chiropractic had their chiropractic assistants licensed. She stated the board had no present statutory authority to fine a doctor for failure to follow the law governing employment of chiropractic assistants.

Dr. Briggs stated the purpose of section 9, subsection 3 of AB 237 was to require a doctor of chiropractic to display his license in a manner which would ensure his patients could see the license.

Ms. Giunchigliani asked if a charge for the training required for a chiropractor to obtain a disability rating should be included in the schedule of fees contained in Exhibit C. Dr. Briggs replied the fee for such training would be a charge of the organization which provided the training and should not be included in the board's schedule of fees.

Mr. Bennett asked for clarification of the time requirements for making applications for licensure. He pointed out section 2 of AB 237 required application be made no less than 45 days before an applicant intended to practice and other sections contained a time requirement of no less than 60 days. Dr. Briggs explained the 60 day requirement pertained to a brand new applicant for licensure in the state, and much processing was required before the applicant could sit for the required examination. She stated in the case of an application for temporary license, the applicant was already licensed in another state and would be permitted to practice in Nevada for only a very limited period of time, therefore the board need only verify the doctor was licensed in the other state. Mr. Bennett inquired concerning the 10 day limit on practice imposed by a temporary license. Dr. Briggs explained the board anticipated most sporting events would not exceed 10 days.

Ms. Stephanie Tyler, Nevada State Chiropractic Association, introduced Dr. Lisa Bray, D.C., President of the Nevada State Chiropractic Association. Dr. Bray advised the Nevada State Chiropractic Association had worked closely with Ms. Berkley and the Nevada State Board of Chiropractic Examiners over the prior year with regard to AB 237. She stated AB 237 provided positive steps to protect public health and safety while maintaining the integrity of the chiropractic profession. She related the association supported the board's efforts to increase its reserves to provide necessary resources to legally defend and adequately police the chiropractors of Nevada.

Mr. Humke asked if Nevada had reciprocity of licensure for individuals licensed in other states. Dr. Bray replied in the negative.

Mr. Humke inquired if there was concern temporary licensure might serve as a "foot in the door" to reciprocity. Dr. Bray responded there was none. She explained the purpose of a temporary license was to permit a chiropractic doctor who accompanied a team of athletes or an individual athlete into Nevada from another state to treat the members of the team or the individual athlete while in Nevada. She said the temporary license would not provide a situation in which a doctor could set up practice and treat the general public. Mr. Humke said in his interpretation of the section concerned with temporary licensure, a doctor could treat anyone he wished for a period of ten days. Ms. Tyler responded the doctor applying for the temporary license had to provide the board with a list of those individuals he intended to treat, which requirement would address Mr. Humke's concern. Dr. Briggs added the list must provide the names and addresses of patients to be treated by the applicant or the name of the organization whose members the applicant intended to treat while in Nevada and therefore the list would be very specific.

Mr. Heller referred to the second sentence in section 3, subsection 2 of AB 237 and asked Ms. Tylor if the provision could be overturned by an opinion of the Attorney General. Ms. Tyler replied it was possible it could be overturned but no more so than other provisions of AB 237.

Chairman Porter closed the hearing on AB 237.

ASSEMBLY BILL 262 - Makes various changes to provisions governing sale and dispensing of hypodermic devices and prophylactic products.

Mr. Fred Hillerby, Nevada State Board of Pharmacy, introduced Mr. Keith MacDonald, Executive Secretary of the Nevada State Board of Pharmacy. Mr. MacDonald informed the committee the intent of AB 262 was to remove outdated and unenforceable requirements related to the sale of certain hypodermic and prophylactic devices. He emphasized the repeal of certain sections of statute as provided by AB 262 would not impact public health. Mr. MacDonald advised the subject hypodermic devices were those which could be used for self-administration of drugs. He said it was important to acknowledge many other types of hypodermic devices and appliances were restricted by federal law to sale by or on the prescription or order of a physician. He pointed out in nearly every instance in NRS 639 in which the term "hypodermic devices" appeared, AB 262 would amend the statute to specify devices restricted to sale by or on the order of a physician. He explained the provisions would not apply to products used in doctor's offices and hospitals.

Mr. MacDonald advised an additional intent of 262 was to repeal both NRS 454.490 which required a record of sales and NRS 454.510 concerned with unlawful possession of a hypodermic device. He said hypodermics used as drug paraphernalia for illegal use of controlled substances would continue to be illegal under the provisions of NRS 453.554. Mr. MacDonald stated AB 262 would affect purchase of hypodermic devices in drug stores.

Mr. MacDonald spoke regarding those provisions of AB 262 which would repeal portions of the NRS concerned with prophylactics. He said most such statutes contained in the NRS were obsolete and superseded by federal food and drug regulations, and he cited various examples of those statutes. Mr. MacDonald summarized by saying because prophylactics were sold in many places, through distributorships which the pharmaceutical board could not identify and license, the board considered the existing laws governing prophylactics outmoded and recommended those statutes be repealed.

Ms. Helen Foley, Nevada Nurses Association, testified. She said her purpose in addressing the committee was to present certain questions concerning AB 262. She stated the law often referred to "practitioner" rather than "physician." She advised nurses were unaware of the language "restricted by federal law" relating to hypodermic devices and stated Advanced Practitioners of Nursing (APN's) were authorized to prescribe hypodermic needles. Ms. Foley referred to section 10 of AB 262 which would permit sale of hypodermic devices not restricted by federal law by a person under the direction of a pharmacist. She advised such devices could be sold, at present, only by pharmacists, and the association was concerned about proliferation of hypodermic needles in the marketplace which did not belong there.

Mr. MacDonald confirmed the fact nurses can prescribe hypodermic devices and said any order from a nurse for those hypodermic devices which could be sold would be filled. He said the language employed in AB 262 (restricted by federal law) was the language of the federal law. He pointed out the subject language was printed on prescription drugs which nurse-practitioners ordered, and their orders were always filled. Mr. MacDonald observed hypodermic devices were available from many unrestricted sources, and he was not certain permitting a clerk or an assistant to a pharmacist to sell such devices, in a pharmacy, would increase the proliferation of those devices .

Ms. Foley said the nurses in the association would feel more comfortable if, throughout AB 262, the words "or on the order of a physician" were changed to "the order of a practitioner as defined by NRS 639.0125". She submitted if the language was limited to "physician" it would exclude dentists, veterinarians, podiatrists, APNs and some hospital personnel. Mr. MacDonald responded the board could not change language written as federal law but did not object if AB 262 was amended to say "practitioner."

Chairman Porter requested Mr. Paul Mouritsen, the committee's research analyst, to crossreference the Code of Federal Regulations and advise the committee what the code said concerning the definitions discussed by Ms. Foley and Mr. MacDonald.

Chairman Porter closed the hearing on AB 262.

ASSEMBLY BILL 240 - Prohibits certain policies of insurance from excluding coverage for intentional and unlawful sexual acts by insured.

Mr. Peter Neumann, attorney, testified. Mr. Nuemann called the committee's attention to a written opinion of the Nevada Supreme Court attached to a letter to Chairman Porter from Mr. Neumann in which Mr. Nuemann outlined the case which was the subject of the opinion (Exhibit D). Mr. Neumann described the basis for the lawsuit. He said when Dr. McNair, the defendant in the case, was sued, his insurance company brought an action for declaratory relief, asking to be relieved from coverage for the acts of Dr. McNair. Mr. Neumann advised the district court agreed with the insurance company's position, the plaintiff appealed and the Supreme Court of Nevada affirmed the decision of the district court. He said the court, in essence, held the insurance company did not have to cover the outrageous act of Dr. McNair as the insurance policy contained language which specifically excluded acts of sexual assault or criminal conduct. Mr. Neumann stated the legislature should correct the situation by statute, such as AB 240, by making it illegal for a medical policy which contained such an exclusion to be sold in the state of Nevada.

Don Springmeyer, Nevada Trial Lawyers Association, expressed the association's support for AB 240. Mr. Springmeyer offered another example of a member of the medical profession who sexually abused his patients, to wit an oral surgeon who repeatedly and over a long period of time sexually assaulted women under his care while those women were under anesthetic. Mr. Springmeyer advised every policy of liability insurance covering the medical profession issued in this state would exclude such acts. He stated it did not serve the public interest or the public good if individuals who were helpless under the control of a professional, as in the case of the oral surgeon, had no means to secure compensation which would enable them to deal with problems which arose from sexual assault or abuse.

Chairman Porter asked if either Mr. Neumann or Mr. Springmeyer was aware of any policy of insurance sold in the state of Nevada which contained coverage for an intentional act of one person against another. Mr. Neumann replied there were, in the past, no exclusions for intentional acts in medical malpractice policies. He said such exclusions were a recent development which resulted from the tremendous increase in cases of sexual assault.

Chairman Porter stated he knew of no homeowner's policy, no automobile liability policy, no policy of insurance of any kind, sold in the state of Nevada, that covered intentional acts of an insured against a third party. He advised AB 240 would create an exception for an intentional act involving sex as opposed to all other intentional acts. Mr. Neumann asserted such an exception should be created by the legislature. Mr. Neumann referred to the dissent by Justice Mowbray to the Supreme Court opinion in the McNair case (Exhibit D). He said a number of states, by judicial decree, had excepted out this kind of conduct (sexual assault and abuse) based on public policy. Mr. Neumann expressed his opinion it should be public policy in the state of Nevada that no professional person in a position of trust should be excepted from insurance coverage if acts such as those being discussed were committed. He said the average member of the public who went to a doctor believed there was insurance coverage for a mistake or wrongful act of the doctor. He stated the liability insurance industry which insured the medical profession had a great advantage, created by the legislature, in the medical-legal screening panel. He advised approximately 87 to 90 percent of legal actions brought for medical malpractice were screened out of the legal system. He asserted the industry which insured the medical profession could afford to pay for the damage when it occurred.

Mr. Springmeyer explained AB 240 did not apply only to doctors. He stated it was intended to protect the public no matter what professional was involved. Chairman Porter suggested AB 240 would also apply to attorneys, C.P.A.s and other professionals licensed by the state. Mr. Springmeyer said that suggestion was correct.

Mrs. Williams asked what would occur if the victim of sexual assault or abuse by a professional was a minor. Mr. Springmeyer replied there was no difference from a civil standpoint.

Mrs. Williams asked if a victim could obtain relief by means of a civil court action. Mr. Neumann replied a victim could if the professional involved had sufficient assets.

Mr. Neumann said another support for a legitimate public policy rationale was the ability of insurance companies to prevent or reduce risk of sexual assault or abuse by professionals. He stated a public policy such as AB 240 would create would encourage the companies which insured professionals to attempt to reduce those risks. He propounded as an example an insurance company requiring a medical professional, when examining a female patient, to have a third party present.

Chairman Porter said a professional was not required to maintain errors and omissions insurance coverage in order to retain a professional license or certificate, and only those victims raped or attacked by a doctor who happened to have malpractice insurance would be compensated. Mr. Neumann responded most doctors had such insurance coverage. Chairman Porter asserted if a public policy was created it must be a policy for everyone in the state. He asked what should be done concerning victims of medical professionals who had no malpractice insurance. Mr. Neumann replied a state compensation fund existed which could provide some compensation to those victims.

Mr. Nuemann opined a policy needed to be established prohibiting insurance carriers from excluding coverage for the kind of acts being discussed. Chairman Porter responded if he accepted Mr. Nuemann's logic, that logic should perhaps be extended to require all professionals to carry errors and omissions insurance coverage as a condition of maintaining their licenses. The Chairman said he believed such a requirement was the ultimate end if the purpose was victim compensation. Mr. Neumann said he believed many people shared the view such coverage should be required.

Mr. Springmeyer submitted sexual assault or abuse by a professional would constitute an error in judgment and as such should be included under a policy covering errors and omissions.

Florence McClure, Citizens Committee on Victim Rights, testified. She said she had met the victims in the court case which resulted in the writing of AB 240. She speculated some of those victims had selected the doctor in the case because his fees were lower than those of other doctors. She suggested many women were unable to exercise sufficient care in selecting a doctor or professional. Ms. McClure expressed support for AB 240. She stated many of the women she met who were victims in the case previously mentioned would require counseling. She proposed the insurance companies should bear the costs of such counseling; if they did not, the government would have to bear those costs.

Chairman Porter asked Ms. McClure what would be done for a victim of sexual assault or abuse by a doctor if the doctor had no insurance. Ms. McClure replied costs of counseling would be borne by the county where the crime occurred. She reiterated the insurance companies should bear the costs rather than county governments.

Chairman Porter asked Ms. McClure if every professional should be required to purchase malpractice insurance as a condition of retaining his license. Ms. McClure enumerated some of the professional fields in which she had noted the conduct in question and said she felt all professionals should be covered by such insurance.

Mr. Robert A. Byrd, Nevada Medical Liability Insurance Company, testified in opposition to AB 240. He said Nevada Medical Liability Insurance Company was the insurer of both Dr. McNair and Dr. Minton. Mr. Byrd said the doctor (in each case) bought the policy of professional liability insurance to indemnify him against injury caused by his fortuitous actions. He said there was never a presumption on the part of either the doctor or the insurance company the doctor would be compensated for or indemnified against his intentional acts.

Chairman Porter asked Mr. Byrd to address the public policy concern raised by Mr. Neumann and Ms. McClure. Mr. Byrd stated if insurance companies were required to provide coverage for intentional torts they could accomplish this only by charging a confiscatory price. He said such insurance coverage could not be provided for a premium approximating the premium currently charged. He conjectured it was possible the premium for such insurance might be in excess of the policy limit.

Chairman Porter asked what amount of premium Mr. Byrd was discussing. Mr. Byrd replied if a policy was for $1 million, the premium would need to be in excess of $1 million. He said obviously that was not possible. Chairman Porter asked if Mr. Byrd had any actuarial figures to support his position. Mr. Byrd replied he had no actuarial figures. He stated he had 37 years experience in the insurance business and had managed an insurance company for nearly 20 years. He said if the insurance company he represented was forced to provide coverage for intentional torts, the company would have to cease conducting business as it would be unable to provide such coverage.

Mr. William Prezant of the law firm of Prezant, Mollath and Costello, representing The Doctors' Company, testified. He asserted no professional should feel he has protection against his commission of an intentional act. He said medical malpractice policies issued in the state of Nevada excluded a number of intentional acts. He framed the issue of how to deter a professional from committing the grievous acts under discussion. He suggested one way was to create a criminal statute. He submitted exposure to loss of freedom and loss of professional license would be a substantial deterrent.

Mr. Prezant discussed how to compensate a victim of sexual assault or abuse by a professional. He suggested, as a matter of public policy, a victims' compensation fund should provide funds for care and rehabilitation of an injured patient or client of a professional. Mr. Prezant said his client, The Doctors' Company, had informed him if AB 240 was enacted, the company would be unable to write any coverage in the state of Nevada due to prohibitive cost.

Mrs. Williams asked how many states had insurance which included coverage for intentional acts. Mr. Prezant responded he had no knowledge of any state in which a professional liability insurance policy provided coverage for intentional or criminal acts.

Mrs. Williams requested Mr. Mouritsen, the committee's research analyst, to ascertain if sexual assault was specifically included in professional liability insurance coverage in any state.

Mrs. Williams inquired of Mr. Prezant what "malpractice" included in professional fields other than medicine. She also asked how a victim's compensation fund would be funded. Mr. Prezant responded no intentional tort is covered under a legal malpractice insurance policy. He said he had no knowledge as to C.P.A.'s. He stated there was no professional liability insurance policy that insured against intentional torts.

Colloquy ensued between Mrs. Williams and Mr. Prezant concerning whether acts of sexual assault or abuse by a professional constitute malpractice, the exclusion of those acts from insurance coverage and the recourse of victims of such acts.

Ms. Kenny posed a hypothetical situation in which a medical doctor consumed alcohol, performed a procedure and committed an error in the procedure. She indicated prior testimony led her to believe the doctor was not covered by malpractice insurance under the hypothetical postulated. Mr. Byrd responded there was no such exclusion in malpractice insurance policies issued by Nevada Medical Liability Insurance Company. Discussions ensued between Ms. Kenny and Mr. Byrd concerning intentional acts. Mr. Byrd drew a distinction between an intentional act which fortuitously caused injury and an act intended to cause an injury. Mr. Byrd said the Supreme Court stated "that the sexual assault was an intentional causing of injury."

Ms. Kenny referred to Mr. Byrd's earlier testimony that premiums for malpractice insurance would be extremely high if acts of sexual assault/sexual abuse were included in the coverage and asked how often such acts occurred. Mr. Byrd replied such acts would not need to occur often to cause his insurance company to go out of business. He said he knew of 3 instances of such acts in the past five years related to doctors. Further discussions followed between Ms. Kenny and Mr. Byrd concerning relative costs of insuring doctors against certain acts of malpractice.

Ms. Giunchigliani asked Mr. Prezant the definition of "intentional tort." Mr. Prezant answered intentional tort was an act which caused harm to another which was intended.

Ms. Giunchigliani asked why states did not (require insurance companies to) insure against intent. Mr. Prezant replied the principal reason was the insured would have a sense of comfort in the knowledge he had no personal liability for his acts and his assets were protected.

Ms. Giunchigliani inquired if there was such a thing as an unintentional tort. Mr. Prezant replied there was, and it was called "negligence."

Ms. Giunchigliani asked when punitive damages were applicable. Mr. Prezant responded punitive damages came into play when the standard was defined by statute or case law. He said punitive damages was a penalty applicable when a tort was committed with malice, oppression or fraud, in egregious cases when an individual had done something which gave rise to a penalty. Ms. Giunchigliani asked could it be argued sexual assault was egregious, and therefore, as a matter of public policy, there should be some provision for recovery of punitive damages. She further asked, if the provisions of AB 240 were not mandated for all licensed professionals, could the legislature require a percentage of any such punitive damage award be allocated to a fund to offset costs of counseling for victims of professionals who lacked applicable insurance coverage. Mr. Prezant responded anything which the legislature chose to do was possible.

Ms. Giunchigliani asked how exclusions from insurance policies were determined. Mr. Byrd explained determination of exclusions was an evolutionary process. Ms. Giunchigliani asked if the cost of paying claims was a factor considered by insurance companies in determining exclusions. Mr. Byrd replied the philosophical approach of a company would determine if that factor was considered.

Mr. Robert Crowell, Farmers Insurance Company, testified. In response to the Chair's earlier question concerning who would pay for a victims' security fund, Mr. Crowell explained the client security fund utilized by attorneys and suggested adoption of a similar system to establish a victims' security fund. He said AB 240 would require an insurance company to insure against acts which were both unlawful and intentional. He said all acts covered by AB 240 were unlawful, and passage of the bill would require the legislature to declare it was public policy for an insurance company to insure against crimes. He said such insurance would remove a deterrent for wrongful conduct. He quoted certain portions of the Supreme Court opinion in the McNair case (Exhibit D) concerned with public policy. He stated Farmers Insurance Company opposed passage of AB 240.

Chairman Porter called Mr. Crowell's attention to Justice Mowbray's dissent to the Supreme Court decision in the McNair case (Exhibit D) and the justice's use of the term "malpractice." Chairman Porter asked Mr. Crowell what Farmers Insurance Company considered a compensable malpractice claim. Mr. Crowell replied the company considered such a claim arose from an error in the treatment of a patient. Chairman Porter asked if such an error would constitute common law negligence as opposed to common law intent. Mr. Crowell replied affirmatively. Mr. Crowell drew a distinction between and intentional tort and an unintentional tort and explained an intentional tort was one which was wilful and deliberate.

Chairman Porter cited two court cases and asked if Mr. Crowell knew whether the decisions in those cases found coverage under the insurance policies involved despite exclusionary language contained in those policies. Mr. Crowell responded he did not know. Mr. Crowell directed Chairman Porter's attention to footnote 1 of the Supreme Court's opinion (Exhibit D) regarding conclusions of other courts that sexual misconduct did not arise out of professional services.

Mr. Jim Wadhams, American Insurance Association, testified. He said the American Insurance Association was involved in writing many professional and fiduciary insurance policies. He said the language of AB 240 was very broad and not limited to doctors and C.P.A.s, and he cited the language in AB 240 "a fiduciary or person providing professional services." He expressed additional concern with how broad the language in line 14 of AB 240 "Any other sexually related crime." might be. Mr. Wadhams spoke to the issue of public policy and said, historically, courts of law had been loathe to allow an individual to insulate himself from the consequences of his own intentional acts. He cited as an example intentional use of an automobile to inflict harm, and pointed out automobile insurance covered negligence but would not reimburse an individual for damage he intentionally caused another.

Mr. Wadhams stated compensation to victims of crimes was a valid public policy issue. He spoke regarding a victim compensation fund and expressed the opinion those who do not commit intentional wrongful acts should not be penalized by being made to bear part of the cost for the acts of those who do.

Mrs. Williams asked how Mr. Wadhams would suggest collecting funds to compensate victims. Mr. Wadhams suggested researching existing NRS statutes which concerned victim compensation funds to determine the source of those funds. Mrs. Williams stated she was concerned with establishing a new source of funds specifically for victims of sexual assaults by professionals and asked if Mr. Wadhams perceived a unique source of funding for this specific concern. Mr. Wadhams replied he did not.

Ms. Teresa Rankin, Insurance Commissioner, testified. She stated as AB 240 concerned liability coverage, the chapter of NRS to which AB 240 would apply was 690B rather than 687B. She said AB 240 would create an affordability and accessibility problem with regard to homeowner's insurance policies, the policies utilized for most day care conducted in the home in Nevada. She stated the Department of Insurance had located 2 carriers in the nationwide insurance group which offered an endorsement with a restricted limit for coverage of acts similar to those identified in AB 240. Ms. Rankin stated there was normally no coverage for intentional torts.

Mr. Byrd returned to the witness table. Mr. Perkins asked if Mr. Byrd could give an approximation of insurance premiums if compensation to victims was limited to compensation for counseling and similar assistance. Mr. Byrd said he had no idea what the premiums would be. He indicated the premiums would depend in great part on the amount of compensation payment contemplated. Mr. Byrd said he would be happy to pose Mr. Perkins questions to Nevada Medical Liability Insurance Company's actuaries, and Chairman Porter indicated it would be helpful to the committee if Mr. Byrd would do so.

Chairman Porter referred to the endorsements offered in other states to which Ms. Rankin had alluded in her comments and asked Ms. Rankin to provide the committee with information concerning what was covered under those endorsements and the premiums charged for them, with special regard to day care centers.

Mr. Neumann spoke again and stated he wished to address several questions asked by members of the committee. He asked the committee to bear in mind all insurance policies had a finite limit. He said he disagreed with Mr. Byrd's position payment of claims against malpractice liability policies of the kind being considered would bankrupt an insurance company. He stated an insurance company need never pay more than its policies' limits. Mr. Neumann referred to Ms. Kenny's questions regarding intoxication and pointed out the language on page 2 of the Supreme Court's opinion (Exhibit D) regarding exclusion of claims which resulted from a criminal act or services rendered while under the influence of any intoxicant. Mr. Neumann cited Ms. Giunchigliani's prior request for a definition of "intentional tort." He advised insurance matters often turned on the question of whether an insured individual intended the harm done. Mr. Neumann stated if not for the decision of the court in the McNair case, it could have been argued the doctor in the case committed an act which was intentional but did not intend the actual harm done. He said it then could have been argued the patient was entitled to compensation from the doctor's insurance carrier. Mr. Neumann suggested if there was a real question of the insurance carriers' ability to survive should the legislature pass AB 240, the legislature should hold a hearing to ascertain the actual earnings of medical liability carriers. He urged the committee to read Justice Mowbray's dissent to the Supreme Court opinion (Exhibit D). He said individuals who went to the office of a professional expected, if there was insurance, the insurance would cover a situation such as in the McNair case. He stated a number of states had held although an insurance policy contained language which excluded intentional harm, it did not necessarily mean there would be no coverage in a case such as the McNair case, unless it was shown the defendant intended the very harm done. Mr. Neumann referred to a letter he wrote to Assemblyman Robert Sader expressing his opinion as to the policy which the legislature should announce as the public policy of Nevada.

Chairman Porter closed the hearing on AB 240.

Chairman Porter called for motions for committee introduction of the following bill draft requests:

BDR 10-897 Prohibits harassment of tenant of mobile home park by landlord.

ASSEMBLYMAN GARNER MOVED FOR COMMITTEE INTRODUCTION OF

BDR 10-897.

ASSEMBLYMAN GIUNCHIGLIANI SECONDED THE MOTION.