MINUTES OF THE
ASSEMBLY COMMITTEE ON LABOR AND MANAGEMENT
Sixty-seventh Session
April 20, 1993
The Assembly Committee on Labor and Management was called to order by Chairman Christina R. Giunchigliani, at 3:30 p.m., on April 20, 1993, in Room 119 of the Legislative Building, Carson City, Nevada. Exhibit A is the Meeting Agenda. Exhibit B is the Attendance Roster.
COMMITTEE MEMBERS PRESENT:
Ms. Christina R. Giunchigliani, Chairman
Mr. Bernie Anderson, Vice Chairman
Mr. Douglas A. Bache
Mr. John C. Bonaventura
Mr. John C. Carpenter
Mr. Peter G. Ernaut
Mr. Lynn Hettrick
Ms. Erin Kenny
Mr. John B. Regan
Mr. Michael A. Schneider
COMMITTEE MEMBERS ABSENT:
Mr. Tom Collins, Jr., excused
GUEST LEGISLATORS PRESENT:
None
STAFF MEMBERS PRESENT:
Mr. Donald O. Williams, Principal Research Analyst
Mr. Frank Krajewski, Senior Research Analyst
OTHERS PRESENT:
Mr. Scott Young, General Counsel, State Industrial Insurance
System
Mr. George McNally, Nevada Trial Lawyers Association
Ms. Lynn Grandlund, Grandlund, Watson, Clark, EON, NAIB, AFA
Mr. Scott Craigie, Chief of Staff, Governor's Office
Mr. Larry Zimmerman, CDS of Nevada
Mr. Bryan Nix, Senior Appeals Officer, Department of
Administration
Mr. Phillip Dahn
Ms. Nancy Ann Leeder, Nevada Attorney For Injured Workers
Mr. Danny Thompson, Nevada State AFL-CIO
Mr. Jack Jeffrey, Southern Nevada Building and Construction
Trades Council
Mr. Ray Badger, Nevada Trial Lawyers Association
Mr. Dennis Nolan, Risk Manager and Safety Officer for Mercy Medical Services
Mr. Ray Bacon, Executive Director, Nevada Manufacturers
Association
Mr. Samuel McMullen
Chairman Giunchigliani stated the April 21st meeting would begin at 4:30 p.m. and conclude by 6:30 p.m.. She then mentioned The State Factor, distributed by Mr. Regan (Exhibit C) and handout from Ms. Grandlund which explained various sections of SB-316 (Exhibit D). Chairman Giunchigliani went over the various changes to the schedule and noted there would be updated calendars posted in her office. The meeting which was canceled on Saturday, April 17th in Las Vegas would now be held on Tuesday, May 4th from 4:30 p.m. to 7:30 p.m. in Las Vegas at Cashman Field.
Chairman Giunchigliani opened the hearing on SB-316, Subrogation, Sections 188 and 145.
SENATE BILL 316 - Makes various changes to provisions governing
industrial insurance. (BDR 53-1764)
Mr. Scott Young, General Counsel, State Industrial Insurance System (SIIS), testified. Mr. Young explained how subrogation worked and submitted proposed changes to SB-316, Section 145 (Exhibit E). He further explained if a worker was injured in the course or scope of his employment by somebody other than his employer, or certain people associated with his employer, the person had the ability to sue the third party. The money received was subject to a lien in favor of the insurer, if the insurer had paid for his medical and lost wages. For many years the law has said it would not be appropriate for the injured worker to have a double recovery. There had been several cases where the injured worker sued his employer and under NRS 616.370 the employer was supposed to be immune. This section was provided to prevent circumvention of an insurers lien and double recovery by the injured worker. Mr. Young noted Section 3 was designed to address a Supreme Court case, "The Truck Insurance Exchange" which was decided in December, 1991. Mr. Young pointed out, "The Truck Insurance Exchange" decision benefitted the employer and the legislature should consider overturning the decision. Many businesses carried uninsured motorist protection, and if a worker was injured in the course of his employment by someone who was uninsured, there were times when the worker could receive benefits under the employers uninsured motorist policy. Mr. Young stated if the injured worker had purchased the uninsured motorist policy and received a recovery there would be no lien in favor of the workers' compensation carrier. Whereas if the employer paid for the policy it was in the best interest of the employer if the workers' compensation carrier was reimbursed.
Mr. George McNally, Nevada Trial Lawyers Association, testified. Mr. McNally explained Section 145 would also apply to underinsured motorists.
Chairman Giunchigliani asked Mr. Young to explain Section 188, subsection b. Mr. Young explained when a worker sued his employer, in order to avoid the threat of the workers' compensation carrier coming in and asserting a lien, the parties characterized the payment as a gift. Mr. Bache questioned if the lien would be against the injured employee or the employer. Mr. Young responded the lien would be placed against the sum of money. Once the employer paid the injured worker the State Industrial Insurance System (SIIS) would not be able to get the money back from the injured worker, but the amount could be used as an offset against future benefits.
Chairman Giunchigliani asked Mr. Young to explain Section 145. Mr. Young explained currently Section 145 stated an injured worker who worked for an uninsured employer had two options, he could either elect to receive workers' compensation benefits through the unemployed insurers fund which was supervised by the Department of Industrial Relations (DIR) and DIR would assign the claim to the State Industrial Insurance System (SIIS), or he could sue the employer. He explained if the employer was wealthy and the employee had a good case, the employee might want to waive the workers' compensation claim in order to receive a larger recovery. However, the employee would not receive medical care or lost wage benefits. Mr. Young explained Section 145 allowed the injured worker to file a workers' compensation claim, receive benefits and still pursue the uninsured employer.
Chairman Giunchigliani suggested the Department of Industrial Relations (DIR) obtain a printout of licensed businesses to determine what employers had insurance and what employers did not. She also questioned if it was fraudulent for an employer not to carry insurance. Mr. McNally commented out-of-state employers sometimes came to Nevada with a policy which had an all-states endorsement in it, unaware Nevada was listed in the fine print of the policy as an exclusion. Mr. Young stated it was a crime for an employer not to carry workers' compensation insurance under NRS 616.630 either through self-insurance or SIIS.
Chairman Giunchigliani queried if the attorney general should also be notified of a claim along with the employer. Mr. Young replied the attorney general had no involvement in the workers' compensation system except in cases of fraud. He proposed adding a Section stating when there was an uninsured claim the Department of Industrial Relations (DIR) should notify the attorney general's fraud unit.
Chairman Giunchigliani asked Mr. Young to explain Section 145, subsection 5(a), (b), (c) and questioned why subsection 5(d) was needed. Mr. Young referred to proposed amendments to Section 145 (Exhibit E). He explained the division was the Department of Industrial Relations (DIR). Mr. Young explained if the injured worker decided to sue, he could file his claim with the State Industrial Insurance System (SIIS). SIIS paid the benefits under the claim and when the injured worker recovered, SIIS held a lien. There were times when the injured worker would not sue the uninsured employer. These cases would be handled by DIR and DIR would have the responsibility to seek reimbursement. The proposed changes (Exhibit E) placed the lien operating in favor of DIR. Mr. Young explained the purpose of subsection 5(d) and stated basically when the uninsured employers agreed they owed money, instead of suing them DIR would go to them directly to sign an agreement stating they would pay the applicable amount. This agreement would function like a judgment after a civil case. Chairman Giunchigliani stated she was not totally satisfied with the language in subsection 5(d) and noted some changes had to be made.
Ms. Lynn Grandlund, Grandlund, Watson, Clark, EON, NAIB, AFA, testified. Ms. Grandlund noted Section 145 was very important to all employers, especially smaller employers. She declared her support of Section 145 of SB-316 (Exhibit D). Mr. Regan questioned the $10,000 fine in subsection 11. Ms. Grandlund stated she believed in the severity of the fine, but each case was different and should be examined separately. She felt the wording "$10,000 may be imposed" left more flexibility than if the wording was changed to "10,000 shall be imposed."
Chairman Giunchigliani opened the hearing on Hearings and Appeals Sections 173-179, 79 and 182.
Mr. Scott Craigie, Chief of Staff, Governor's Office, testified. Mr. Craigie handed out a flow chart dealing with the hearings and appeals process and explained the process of the chart to the committee (Exhibit F). He also noted there was a hearing proposed allowing for threshold issues in SB-316 which could not be located in the bill. He stated the first set of hearings on the threshold issues was essential to the injured worker. Based on the proposed bill there were certain times a claim could be denied. This happened when a claim was denied because it was alleged the injury was not in the course of employment, but because the consumption of alcohol or a controlled substance was the cause or the claim was fraudulent. Mr. Craigie concluded when the insurer decided the claim should not be permitted for compensation, it was believed there must be an internal appeals process for the injured worker and this was proposed to the Senate Committee and should be outlined in SB-316.
Mr. Carpenter questioned if there was no managed care facility available, such as in the rural areas, how would a hearing be handled. Mr. Craigie commented it was likely there would not be a managed care facility in the rural areas, and in such cases the hearings would be handled the same as self-insureds. Mr. Craigie noted the hearing would be held by the State Industrial Insurance System (SIIS) and this was summarized in Section 79 of SB-316.
Chairman Giunchigliani questioned how the injured worker would be moved more properly and quickly through the system. Mr. Craigie explained the purpose of the mediation step was similar to the self-insureds and third party entities. It was to bring the two parties together; the person who made the decision and the injured worker would meet to discuss the issues before going to the appeals section. In many cases the matter could be resolved at that time. Ms. Giunchigliani queried how this would speed up the process and who made the decision on the case. Mr. Craigie noted the mediator would help bring the two parties together to come to some conclusion in the case. Chairman Giunchigliani referred to the flow chart (Exhibit F) and asked if the issue was in dispute resolution and was not resolved could they omit mediation and go directly to appeals. Mr. Craigie stated they could skip the mediation level if both parties were represented by counsel and they both agreed to skip mediation. Chairman Giunchigliani specified to move the process along quickly was not a monetary position, but a position of care. Mr. Craigie agreed the injured person's chance of being fully rehabilitated was greatly reduced when there was a delay in care.
Ms. Giunchigliani summarized the Hearings and Appeals sections and noted the appeals level had not changed in SB-316, the hearings level was now called a mediator and removed anyone having the ability to make a decision and became more of a settlement conference. Mr. Carpenter questioned if having the appeals situation within the managed care organization would make the doctors more responsible to get the injured worker back to work. Mr. Craigie responded medical issues were best reviewed by medical technicians, and if the injured worker did not agree he had the ability to take it out on appeal. Mr. Carpenter questioned who the mediators would report to. Mr. Craigie responded they would be in the Department of Administration where the present appeals office was located. Mr. Bryan Nix, Senior Appeals Officer, was presently the administrator of the Department of Administration and the mediators would be separate from the State Industrial Insurance System (SIIS) and independent of the Department of Industrial Relations (DIR). Mr. Craigie explained the mediators would be persons chosen with the expertise to be able to handle the assignment.
Mr. Larry Zimmerman, CDS of Nevada, testified. Mr. Zimmerman stated self-insured employers in many states had reduced the amount of hearings by explaining fully to the injured workers what their rights and benefits were, printing a brochure which explained the benefits and the law to the worker and encouraging a meeting between the injured worker and the insurer to explain the reason for the determination and to avoid hearings. Mr. Zimmerman noted he was not satisfied with Section 79. He stated there should only be one section relating to medical care benefits. He noted the self-insurer would not want to give up the right to make the determination of what was a legal liability and what they were liable for. The self-insurer did not want the managed care organization making this decision.
Mr. Anderson questioned if a closed panel group made the determination a claim was not valid, would the same group decide if the first determination was valid. Mr. Zimmerman stated he understood when a managed care organization denied certain treatment or procedure there was an internal, informal process which would bring quick resolution to the question; if the injured worker wanted a different physician or testing previously denied, then the case would go to mediation. He noted the managed care unit should be limited to medical questions and not to claims adjudication on whether it was an acceptable claim or not.
Chairman Giunchigliani stated the way the contracts were drafted had to be considered because if they had internal utilization review, which most managed care organizations did, based on capitated rates vs. other things, there was an automatic discouragement for continued care or different care which could lend itself to the issue of denial. This would not benefit the care section of SB-316 and would actually cause more dollars to be spent by the system.
Ms. Lynn Grandlund noted approval of Section 175 of SB-316. She outlined one proposed amendment (Exhibit D) as follows:
Section 175, subsection 6, page 74, line 39 - insert "or licensed representative" after "legal counsel."
Mr. Bryan Nix, Senior Appeals Officer, Department of Administration, testified. Mr. Nix summarized one proposed amendment to SB-316, Section 175, subsection 6, line 41. He stated if the parties involved decided not to go to mediation, the agreement should not have to be signed by both the parties involved and the attorneys. He noted this was an unnecessary step and wasted more time. Ms. Giunchigliani questioned if it was necessary for both parties to agree during the mediation process. Mr. Nix noted it was preferable because if one party wanted to go to court and was determined not to settle, it was a hopeless situation. After discussion among committee members and Mr. Nix it was decided some type of document should be signed to omit the mediator part of the process, but the wording in SB-316 addressing this issue needed to be less restrictive.
Mr. Nix noted Section 179, subsection 5(a) required less restrictive language. Mr. Nix suggested removing "and the parties to the dispute or their representatives;".
Mr. Nix also suggested proposed amendment to ection 180, subsection 2, line 38-39 as follows:
"if, at any time upon notice of hearing, all parties agree to the stay."
Mr. Anderson questioned if there was the opportunity for a second hearing to appeal the stay itself. Mr. Nix responded the stay was just a temporary action to maintain the status quo pending a final hearing. Mr. Bache questioned what happened if there were several issues involved in a case and all the issues were not resolved during the mediation process. Mr. Nix stated the unresolved issues would continue on to the appeals officer, but there would be a binding order resolving the settled issues. Mr. Hettrick suggested amendment to Section 179, page 76, lines 34, 36 and 39 as follows:
Change "the dispute" to "a dispute".
Chairman Giunchigliani noted agreement with this proposal.
Mr. Zimmerman addressed Section 182 of SB-316 and stressed if a stay was allowed at the request of one person, the possibility of double hearings could occur on just about every claim. The attorneys from both sides now had to prepare the information necessary for the appeals officer to make a ruling on.
Ms. Grandlund stated in Section 182, page 77, line 47 the following information should not be removed:
", including new evidence bearing on the matter."
Mr. Young noted the above language was dropped out in Section 182, because in the past there were two hearings; the hearing officer level and the appeals officer level. The statute had to make it clear the appeals officer was more than a judicial review type situation where they only looked at the record. Therefore, with only one hearing involved, this language was not needed.
Mr. Carpenter questioned what "any other agent" meant in Section 174, page 74, line 2. Mr. Young responded some employers chose to be represented at the appeals officer level by third party administrators who were non-lawyers. This language was established last session to guarantee an employer or insurer could continue to send a non-lawyer to the appeals officer level. There was certain protection for injured workers which stated non-lawyers could not represent them at the appeals level, but it was decided the employer should have the option of being represented by an attorney or non-attorney. Mr. Young stated he felt it was appropriate to have this language in the present scheme of SB-316.
Chairman Giunchigliani opened the hearing to Las Vegas via teleconference.
Mr. Phillip Dahn, an injured worker, testified. Mr. Dahn stated he was against the new language in the Hearings and Appeals sections of SB-316. He noted with the new language in SB-316 it would take 170 days to obtain a decision on a case. In the past it had taken about 45 days to get to the appeals officer. He noted Hearings and Appeals were the only sections in SB-316 that worked for the employee and now they were being taken away. Mr. Dahn noted the sections of SB-316 which he was referring to as follows:
1) Section 175, page 74, subsection b.
2) Section 79, page 31, subsection 2.
3) Section 179, page 75, subsection a.
Mr. Craigie noted his agreement with Mr. Dahn in terms of the time factor inside the Managed Care Organization. He further suggested the Governor's Office would like the opportunity to rework the wording in these sections. Chairman Giunchigliani suggested Mr. Dahn send in written proposed amendments to SB-316. Mr. Dahn stressed the current system was fine as it was and did not request any changes.
Ms. Nancy Ann Leeder, Nevada Attorney For Injured Workers, testified. Ms. Leeder noted her concern with Section 179, page 76, subsection 4, line 25 which stated, "Each party must be present at the proceeding." Ms. Leeder suggested new language as follows: "Each party must be present in person or by telephone at the proceeding." This would make it clear someone living out of state was not expected to fly in for a mediation. Mr. Bache questioned if the injured worker could skip the mediation. Ms. Leeder noted the employee himself could not skip the mediation because the party must be represented by legal counsel in order to bypass to the mediation.
Chairman Giunchigliani opened the hearing on Section 11, Plain Meaning of Laws.
Mr. Young stated plain meaning was currently a doctrine in the Nevada case law and in many others which described workers' compensation laws as being remedial in nature and should be liberally construed to grant benefits rather than deny them. This resulted in a built-in bias in favor of the injured worker. Mr. Young stated, initially workers' compensation benefits were meager and remained meager for many years. During that time period the courts felt compelled to broaden those benefits and make them more effective in terms of trying to keep the injured worker above the level of destitution. In the 1950's and 60's there was much concern about the low level of workers' compensation benefits, and in 1970 President Nixon appointed a commission to study state workers' compensation laws and to consider whether perhaps a federal legislation should be passed preempting the field. In 1972 the commission President Nixon appointed noted unless the individual states raised their workers' compensation, Congress would pass federal law. Therefore, during the 1970's there was a substantial increase in workers' compensation. Mr. Young noted many of the evolutionary expansions of the benefits were traced back to the liberal construction doctrine. Mr. Young defined the language in Section 11 as follows, "You don't start out with a bias in favor of one side or the other."
Chairman Giunchigliani questioned how many cases had actually gone beyond the expansion referenced. Mr. Young noted approximately one-third of the cases were affected by this doctrine. Mr. Young stated the court should not try to go beyond the legislative intent. Mr. Young recited, "In the Breen case the majority actually made a statement where they say it's the legislature's prerogative, not this court's to correct any injustice occasioned by a literal reading of the statute."
Chairman Giunchigliani questioned if the State Industrial Insurance System's (SIIS) position was to air on the side of the insurer. Mr. Young clarified if the courts could not decide the legislative intent, they should perhaps go into legislative history and try to determine what the legislature was attempting to accomplish, rather than assuming because this was a remedial statute they automatically decided to close the issue in favor of the claimant. Mr. Young further stated, "In the Harrison case that we discussed the other night, Mr. Harrison fell, injured his leg and about eight years later he developed an infection there and subsequently had his leg amputated. The statute that determined wage base was NRS 616.65. It said rather plainly 'the amount of your benefits are determined on the date of your injury.'" Mr. Young noted the injury was when Mr. Harrison fell. Mr. Young further stated, "The court, I believe ignored the language of the statute because it did not like the result that would have been compelled by that statute and they tried to limit that by saying in their footnote that this is a rare case. Unfortunately it has expanded beyond that. I think what the court should have said is, 'We don't like the outcome this statute mandates and we're going to ask the legislature to perhaps reconsider it, but it is pretty clear what this actual language says'. What I see is when they don't want to be bound by the language, they construct a way to get around it." Mr. Young clarified the State Industrial Insurance System (SIIS) was not trying to second guess the court. If the language was clear in SB-316, the court had to abide by it.
Ms. Grandlund stated Section 11 of SB-316 (Exhibit D) was possibly the most important relating to cost cutting and acknowledged her agreement with Mr. Young.
Mr. Danny Thompson, Nevada State AFL-CIO, testified. Mr. Thompson noted his organization did not support spas, health clubs, child care or such indulgent elements, and this was what could be written into this law. He clarified exclusive remedy for an injured worker was the compensation afforded him under the system. Mr. Thompson noted his opposition to changing this liberal construction of the law to Mr. Young's statement.
Mr. Jack Jeffrey, Southern Nevada Building and Construction Trades Council, testified. Mr. Jeffrey also expressed his opposition to the language in Section 11 of SB-316. Mr. Jeffrey noted he did not support including such indulgent elements as spas, babysitters, etc. and felt SB-316 addressed this matter appropriately. Mr. Carpenter queried where these items were addressed in SB-316. Mr. Jeffrey noted he did not know exactly, but they were dealt with in the bill. He stated there were exceptions and it was up to the insurer. If it was in the best interest of the injured worker to get back to work quicker if a car was furnished or if they had a spa, the insurer had the option to cover such items.
Mr. Ray Badger, Nevada Trial Lawyers Association, testified. He noted Section 86, page 33 specified items not to be considered as accident benefits. Mr. Badger also noted the claimant presently had the burden of proof on any benefit he claimed. After discussion Chairman Giunchigliani summarized where legislation and statutory language had been crafted which was left ambiguous, the the courts would always decide. If the language was crafted correctly, or at least clarified legislation, then there was no issue. Mr. Badger stated in the "Maxwell" case the Supreme Court said the statute was clear so it would be observed.
Mr. Hettrick questioned Mr. Badger's opposition to Section 11. Mr. Badger explained quick and efficient compensation was equally as important as a reasonable cost to the employer.
Mr. Dennis Nolan, Risk Manager and Safety Officer for Mercy Medical Services in Las Vegas and a member of the Nevada Unified Coalition, testified. On behalf of the coalition, Mr. Nolan stated their support of the language in Section 11 of SB-316. Mr. Nolan stated the liberal language which currently existed was used at all levels, the appeals and the hearing level, as well as during litigation and the court process. There were virtually thousands of case which were decided every year at the appeals and hearing level in which this very same liberal language was used, and not necessarily in decisions where there was no convincing evidence one way or the other and the case would be decided in favor of the employee. Quite often the decisions made at those levels were arbitrary decisions made by the appeals or hearing officer. This particular language providing for appeals and hearings officers to favor the employee was in many more cases than had been decided by the Supreme Court. Chairman Giunchigliani noted this would be a legitimate issue when dealing with the hearings training and the training of the appeals officers.
Mr. Carpenter declared he would like an example of a case outlined. Mr. Nolan explained there was an individual who claimed to have a back injury one week after being employed and went out on workers' compensation. This employee received benefits for approximately two years. During this two year period he underwent MRI's, physical therapy, cat scans and nerve analysis studies. Throughout all the testing process there was never any objective findings other than the subjective complaint of back pain. Following the two year period of being out of work due to injury it was finally decided he was stable and rateable. The employee was determined to have a 30 percent inability to flex forward, and subsequently ended up with a 3 percent disability and his award was close to $10,000. The claim was contested and taken to the fraud unit based upon information the employee had taken the check and was bragging to other employees he was never really hurt in the first place. The fraud unit videotaped the employee doing things showing he had no impairment at all, especially in the area he complained. Therefore, this claim went to the hearings level. At the hearings level the videotape was introduced and the individual had no comment at all. Before the employer got to the hearings level he received a letter from the State Industrial Insurance System (SIIS) which stated, "Lets not worry about it, he's already been paid off." This employee ended up with approximately $25,000 and never had any objective findings.
Mr. Ray Bacon, Executive Director, Nevada Manufacturers Association, testified. Mr. Bacon noted full support of the language in Section 11 (Exhibit G).
Mr. Samuel McMullen testified. Mr. McMullen noted his agreement with Mr. Young and Mr. Badger. He stated Section 11 was drafted by Legislative Counsel Bureau. Mr. McMullen pointed out Section 11 had balance for both the employer and the employee. Chairman Giunchigliani said she was pleased parties were looking at the issue of balance and fairness in Section 11.
Chairman Giunchigliani requested Mr. Zimmerman review AB-264 and compare it with language in SB-316.
Mr. Steve Stucker, Nevada Association of Independent Businesses, testified. Mr. Stucker noted the association would support the language in Section 11 of SB-316. He noted it should be the goal of the legislature to submit bills which were clear and unambiguous, although in a bill such as SB-316, which was 142 pages long, there was always some unclear language.
Chairman Giunchigliani submitted a memo from John Crossley, Director, Legislative Counsel Bureau regarding cancellation of the April 17th meeting in Las Vegas (Exhibit H).
There being no further business to come before committee, the meeting was adjourned at 6:45 p.m..
RESPECTFULLY SUBMITTED:
JEANNE PEYTON
Committee Secretary
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Assembly Committee on Labor and Management
April 20, 1993
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