MINUTES OF THE

      SENATE COMMITTEE ON COMMERCE AND LABOR

 

      Sixty-seventh Session

      April 26, 1993

 

 

 

The Senate Committee on Commerce and Labor was called to order by Chairman Randolph J. Townsend, at 10:00 a.m., on Monday, April 26, 1993, in Room 227 of the Legislative Building, Carson City, Nevada.  Exhibit A is the Meeting Agenda.  Exhibit B is the Attendance Roster.

 

 

COMMITTEE MEMBERS PRESENT:

 

Senator Randolph J. Townsend, Chairman

Senator Ann O'Connell

Senator Mike McGinness

Senator Leonard V. Nevin

Senator Lori L. Brown

 

COMMITTEE MEMBERS ABSENT:

 

Senator Sue Lowden, Vice Chairman  (Excused)

Senator Raymond C. Shaffer  (Excused)

 

GUEST LEGISLATORS PRESENT:

 

Senator Ernest E. Adler

 

STAFF MEMBERS PRESENT:

 

Denise Pinnock, Committee Secretary

Brian Davie, Senior Research Analyst

 

OTHERS PRESENT:

 

Bob Crowell, Farmer's Insurance Companies, Escrow 1 & Collections

Mike Griffin, Deputy Commissioner, Department of Insurance, State      of Nevada

Jim Smith, Deputy Attorney General, Department of Insurance, State      of Nevada

Chuck Knaus, Property/Casualty Actuary, Department of Insurance,        State of Nevada

Brenda Gulley-Chapman, Owner, Escrow 1 & Collections

Pat Coward, Lobbyist, Nevada Land Title Association

Ray Peterson, Nevada Land Title Association

Vicky Morrison, Marquis Escrow

Scott Walshaw, Commissioner, Financial Institutions Division,          Department of Commerce, State of Nevada

 

 

Chairman Townsend opened the hearing on Senate Bill (S.B.) 388.

 

S.B. 388:   Authorizes reciprocal insurer to own and hold real property.

 

Bob Crowell, Farmer's Insurance Companies, testified in support of the bill.  He defined reciprocal insurer as an insurance company where individual subscribers collectively join together to indemnify each other against certain described losses.  The bill would give the group's attorney the right to execute documents on behalf of the exchange, without the signatures of all the subscribers.

 

Senator Brown asked how an insurer entered into a reciprocal arrangement.  Mr. Crowell stated they joined an exchange.

 

Senator O'Connell asked why a power-of-attorney would not suffice.  Mr. Crowell said he did not know if a power-of-attorney would satisfy the title companies.

 

Mike Griffin, Deputy Commissioner, Department of Insurance, State  of Nevada, stated his department's support of the bill. 

 

Jim Smith, Deputy Attorney General, Department of Insurance, State  of Nevada, said the bill appeared to clarify the position of reciprocal insurers. 

 

Chuck Knaus, Property/Casualty Actuary, Department of Insurance,    State of Nevada, added that it would not take much for a group of policyholders to challenge a transaction which a reciprocal deemed in its best interest.

 

Senator Townsend closed the hearing on S.B. 388, and opened the hearing on S.B. 395.

 

S.B. 395:   Authorizes payment to licensed escrow agent for services rendered to title insurer.

 

Mr. Crowell, testifying on behalf of Escrow 1 & Collections, supported the bill.

 

Senator Ernest E. Adler, Carson City, endorsed both S.B. 388, and S.B. 395.

 

Mr. Griffin stated his department opposed the bill because of the language in section 6.  He said it could possibly be in direct conflict with the Real Estate Sales Practices Act (RESPA). 

 

 

Senator O'Connell asked why, if the escrow agents were licensed by the state, they should not be compensated.  Mr. Knaus said the way the bill was worded opened the door to escrow agents referring clients to property/casualty insurance companies, and receiving commissions. 

 

Senator Townsend announced that he and Senator Brown would be hearing arguments for and against the bill in subcommittee.

 

Brenda Gulley-Chapman, Owner, Escrow 1 & Collections, said her purpose in requesting the bill was to finally be compensated for work she was required to do.  She stated the title company provided her with a preliminary title report, and she cleaned up the title.  Ms. Chapman said she was doing a portion of the title company's job. 

 

Senator O'Connell asked when the insurance commissioner had declared the practice of compensating independent escrow agents illegal.  Ms. Chapman answered the official letter was dated January 28, 1992. 

 

Ms. Chapman asserted she did not use only one title company, and therefore could not be accused of taking kickbacks for referrals.

 

Pat Coward, Lobbyist, Nevada Land Title Association, stated his organization's opposition to the bill.

 

Ray Peterson, Nevada Land Title Association, explained escrow agents and title companies have totally different duties.  He said the RESPA regulations specifically stated, "Referral fees for referral of business incident to, or a part of settlement services, are prohibited."  He asked that the committee not pass the bill.

 

Senator McGinness asked how many private escrow companies there were in the area.  Mr. Peterson said there were four or five, locally. 

 

Senator McGinness clarified that those companies were sub-contractors, of a sort, who performed a portion of the title company's duties.  He asked when the title company's would use an escrow agent's services, and how the escrow agents would be compensated.  Mr. Peterson stated the escrow company was compensated through charging escrow fees.

 

Senator O'Connell wondered if Mr. Peterson's point was that the escrow agents were doing work that the title company would do in any case, and therefore, should not be reimbursed.  Mr. Peterson said the duties Ms. Chapman listed were done in his company's escrow department.  He explained the bill would take money from the title fees to reimburse escrow agents for performing escrow services.  Senator O'Connell said she did not believe that was the intent of the bill.  Mr. Crowell stated Senator O'Connell was correct.

 

Senator Brown asked why the commission needed to be paid from the title insurance, instead of from the escrow fee.  Ms. Chapman said the duties she listed were already being charged for in the title insurance, and should not be charged twice. 

 

Vicky Morrison, Marquis Escrow, stated her support of the bill.  She requested "agent" be changed to "agency," because agent refers to an individual, not a company.

 

Scott Walshaw, Commissioner, Financial Institutions Division, Department of Commerce, State of Nevada, commented on the RESPA issue.  He said:

 

      Specifically, if you take a policy decisions that somehow allows these fees to be charged, and paid, whatever the arrangement, you've got to make sure that RESPA is addressed in that the ultimate disclosure is given to the borrower.  That's what the requirement boils down to.  You probably need to look at some language which requires that whoever is charging that fee pass that information along to the person who is giving the good faith estimate to the prospective borrower.

 

Senator Townsend thanked all the witnesses, and closed the hearing on S.B. 395.

 

      SENATOR NEVIN MOVED TO DO PASS S.B. 388.

 

      SENATOR BROWN SECONDED THE MOTION.

 

      THE MOTION CARRIED.  (SENATORS SHAFFER AND LOWDEN WERE ABSENT FOR THE VOTE.)

 

      * * * * *

 

As there was no further business, the meeting was adjourned.

 

 

 

                  RESPECTFULLY SUBMITTED:

 

 

 

                                           

                  Denise Pinnock,

                  Committee Secretary

 

 

 

APPROVED BY:

 

 

 

 

                                     

Senator Randolph J. Townsend, Chairman

 

 

DATE:                                

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Senate Committee on Commerce and Labor

April 26, 1993

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