The Committee on Commerce and Labor and Labor was called to order at 3:50 p.m. on Wednesday, February 3, 1999. Chairman Barbara Buckley presided in Room 3142 of the Legislative Building, Carson City, Nevada. Exhibit A is the Agenda. Exhibit B is the Guest List. All Exhibits are available and on file at the Research Library of the Legislative Counsel Bureau.

COMMITTEE MEMBERS PRESENT:

Ms. Barbara Buckley, Chairman approved

Mr. Richard Perkins, Vice Chairman

Mr. Morse Arberry, Jr.

Mr. Bob Beers

Ms. Merle Berman

Mr. Joe Dini, Jr.

Mrs. Jan Evans

Ms. Chris Giunchigliani

Mr. David Goldwater

Mr. Lynn Hettrick

Mr. David Humke

Mr. Dennis Nolan

Mr. David Parks

Mrs. Gene Segerblom

GUEST LEGISLATORS PRESENT:

Assemblyman Mark Manedo, Assembly District 18

Assemblyman Tom Collins, Assembly District 1

STAFF MEMBERS PRESENT:

C.Joseph Guild III, Manufactured Home Community Owners State Farm Insurance

Andrew Thomas, Attorney, Burris and Thomas

Danny Lee, Consultant, John Vergiels Consulting

Robert L. Crowell, Attorney at Law, Farmers Insurance Company Jim Werbeckes, Government Affairs Representative, Farmers Insurance Group

Richard E. Shrader, Jr., Legislative Representative Governmental Affairs, American Automobile Association of Nevada

Following roll call, Chairman Buckley introduced herself and each of the committee members indicating the district they represented and provided a brief personal background on each. She introduced Committee staff members and noted the days and times the committee would meet (Exhibit C). She then provided a list of deadlines to the committee members (Exhibit D).

Chairman Buckley asked committee members to review the Standing Rules, and stated they were similar to the Standing Rules of the 1997 session (Exhibit E).

Vance Hughey, Principal Research Analyst, gave an overview (Exhibit F) of the Committee Brief (Exhibit G) for the Assembly Committee on Commerce and Labor.

Crystal Lesbo, Senior Research Analyst, spoke briefly about her role as the Workers Compensation Specialist for the committee (Exhibit H).

Chairman Buckley noted if any committee member wished to have more extensive overviews on a topic, they were to contact her and the information would be provided.

Mr. Hughey noted the bulletins for the workers compensation committee would be available by the end of the week. The bulletin for the Mortgage Investment Study would be available at the same time.

There being no questions from committee members, Chairman Buckley proceeded with committee introductions for the following Bill Draft Requests (BDRs):

• BDR 10-738- revises fees required to be paid by certain developers who will sell memberships in campgrounds. (A.B.104)

• BDR 10-741- revises fees that may be collected for regulation of persons who sell time-shares. (A.B.105)

• BDR 28-263- revises provisions concerning determination of the best bid submitted for award of contract for public work. (A.B.106)

• BDR 43-624- make various changes concerning manufactured housing.

• BDR 52-290- makes various changes regarding civil action relating to unfair trade practices. (A.B.108)

• BDR 52-292- makes various changes regarding deceptive trade practices.

• BDR 53-771- requires employees who work with explosives to be paid solely on basis of hours worked. (A.B.110)

• BDR 53-772- revises requirements for workplace safety programs. (A.B.111)

• BDR 53-780- requires establishment of standards and procedures for places of employment where explosives are produced, used, stored, or handled.

• BDR 54-605- expands circumstances under which provider of health care is required to make health care records available for inspection by investigator for the general or grand jury. (A.B.113)

• BDR 54-643- makes various changes to provisions governing practice of Oriental Medicine. (A.B.114)

• BDR 54-562- extends date of expiration of permit to operate as locksmith or safe mechanic. (A.B.115)

• BDR 54-655- prohibits persons from assisting others in unauthorized practice of architecture, interior design or residential design. (A.B.116)

Chairman Buckley opened the hearing on A.B. 8.

Assemblyman Richard Perkins noted one of the reasons he sponsored A.B. 8 was because of a telephone call he received from a constituent. His constituent applied for credit and was surprised to learn of a problem on his credit report. Knowing a credit check would be done when he applied for credit, the constituent had not wanted to pay for a separate one.

In addition, Mr. Perkins noted in his non-public professional capacity, he conducted background checks for privileged business license investigations, and during those investigations he conducted credit checks. In many cases there were pieces of erroneous information on the credit reports. He pointed out those items were generally negative and in dispute by the applicant.

Continuing, Mr. Perkins noted a credit applicant was most often unaware there was a problem with his/her credit until the report was shared with them. He expressed concern that put the applicant in an embarrassing position where he/she had to explain or defend themselves. He pointed out if the negative credit item was very old, it might not be possible to determine if the applicant was at fault or not.

Mr. Perkins indicated while the current law required credit reporting agencies to provide a credit report to an individual requesting a copy of his/her report; there was no provision that indicated the credit check was to be provided without a fee. It was the intent of A.B. 8 to provide credit reports once a year without a fee to individuals who requested one. Mr. Perkins said A.B. 8 allowed an individual to obtain a credit record before he/she applied for credit. He explained if a consumer had a copy of his/her credit report before they applied for credit, problematic elements on the report could be corrected in advance.

Mr. Perkins asserted a consumer’s credit report belonged to that individual; and he thought it was improper for the individual to pay for his/her own information.

Assemblywoman Giunchigliani explained she was aware of certain fraudulent groups who operated as brokerages and whose purpose was to improve credit records. She asked if Mr. Perkins’s constituent had encountered any such organizations. Mr. Perkins responded neither his constituent, nor any of the other persons with whom he had contact in the process of their background investigations had relayed any such information to him.

Ms. Giunchigliani further noted the value of warning the public about such fraudulent scams and said as A.B. 8 progressed, the committee might consider additional language to cover such an issue.

Assemblyman Beers mentioned one of his constituents was a re-seller of credit information from a well-known credit reporting bureau. As a small business owner the constituent was concerned A.B. 8 would put him out of business. Mr. Beers asked if there was any way the legislation could be targeted at larger companies, and small businesses excluded.

Mr. Perkins had concerns for small business owners as well and it was not the intention of A.B. 8 to regulate those people out of business. He reiterated credit information belonged to each individual, and having to pay for that information was a fundamental problem. Mr. Perkins also noted if it was possible, he had no qualms with directing A.B. 8 legislation toward the credit bureau rather than the credit reporting agencies.

Chairman Buckley commented reporting agencies were already defined in current law in Nevada Revised Statutes 598C.100

Assemblyman Hettrick referenced section 1, subsection 2 in A.B. 8, and noted the words "a copy of the consumer report in its files." He asked if a consumer report did not exist in an individual’s files, would it then be the responsibility of the individual to retrieve a credit report from the master credit agency and provide it for free.

Mr. Hettrick also remarked the way A.B. 8 was worded it appeared an individual would be able to obtain as many copies of his/her credit report from as many different agencies as he/she wanted anytime during the year. He then put forward the idea of defining words "in its files." Also ascertaining who would be in charge of keeping track of an individual’s requests for a credit report, and the associated cost. He agreed with the intent, but was concerned with the way the language read.

Mr. Perkins understood in A.B. 8 section 1, line 15, the language "in its files" referred to the master files in the credit bureau. In response to Mr. Hettrick’s second question, he noted the credit bureau generally kept a log in order to track requests. Adding if an individual requested more than one copy of their credit report in the same year, he assumed it would be the purview of the agency not to provide the individual with a free copy.

Mr. Humke asked if the number of inquiries a person made about his/her credit report affected the grading the credit reporting agency assigned to that individual.

Mr. Perkins responded he was not certain of the process of credit grading. The number of times a person made an inquiry about his/her credit did not necessarily affect the credit rating, because there were different reasons to inquire about one’s credit. He further stated that it depended from whom the inquiries came, and for what reason. There could be several inquiries from prospective employers, which he did not believe would seriously affect one’s credit rating. Mr. Perkins did, however, believe one’s credit rating could be affected if an individual was inquiring from several different credit issuing companies.

Ms. Giunchigliani noted A.B. 8 would be beneficial; however, she wanted to ensure the credit reports were upon request only, and not automatically mailed out once a year.

Mr. Perkins noted in response to Ms. Giunchigliani’s statement the phrase "upon request" in section 1, line 2, would not change the intent of A.B. 8, and added it may allay fears of people who were under the impression there was to be an automatic report. Mr. Perkins continued by stating he was not certain of the number of people who would request their credit reports; but having credit reports available without a fee allowed persons to clean up their credit rating before applying for credit.

Assemblywoman Segerblom asked if there was more than one consumer-reporting agency, and if so, how would a consumer choose which one to use.

Mr. Perkins said in accordance with the statutory definition of credit reporting agencies it was his understanding that credit reporting agencies were the small businesses that acted as brokers for larger companies, referred to as bureaus such as Southern Nevada Credit Bureau.

Pat Richardson, Bureau Manager, Regional Credit Association, Credit Bureau of Northern Nevada, testified briefly against A.B. 8 contending a free annual consumer file disclosure was not needed and was unfair to credit reporting agencies (Exhibit I). She added she provided free reports to any client of consumer credit counseling agencies that were attempting to regain good credit ratings, and to senior citizens.

Mr. Perkins asked Ms. Richardson why she was opposed to A.B. 8 if her organization already provided free credit reports to certain individuals.

Ms. Richardson indicated a large amount of money was needed in order to maintain the quality of large databases and the consumer relations department. Credit reporting agencies could not lose the money gained by charging for certain credit reports.

Mr. Perkins noted, citing Ms. Richardson’s written testimony (Exhibit I) that a death certificate did not belong to the individual because he/she was dead. He went on to note when paying for a driver’s license, an individual was paying for the privilege to drive, not for personal information. There was a difference in the type of items she presented in her testimony and the way he was viewing credit reports.

Chairman Buckley asked Ms. Richardson if the requirements to obtain a free credit report were set forth in federal law and if she knew the reference number. Ms. Richardson responded it was indeed federal law, and would provide the reference number at a later time as she did not have that information with her.

Assemblyman Nolan asked Ms. Richardson to provide the percentage of people who were provided the credit report free of charge verses those individuals to whom her agency was selling that information. Ms. Richardson indicated about 20 percent of their customers paid for the credit report, while the remainder of the customers were able to get their credit reports for free.

Assemblyman Parks informed the committee he had requested a similar bill, however his was focused more on inaccurate consumer information that might be contained in a credit report. He stated he would provide information on his Bill Draft Request, and indicated it could be an amendment to A.B. 8

Chairman Buckley noted Mr. Perkins’ interest in reviewing Mr. Parks’ legislation, and stated she wanted to review the federal legislation.

There being no further questions or comment on A.B. 8, Chairman Buckley closed the hearing.

Assemblyman Mark Manendo, testified in favor of A.B. 39 on behalf of manufactured home owners who felt their inability to express their political views was a freedom of speech issue, and that their rights had been taken away. The intent of A.B. 39 was to allow people to have the right to Exhibit political signs within the boundary of his/her rented lot.

Mr. Manendo noted he wanted clarification from the legal division as to whether the boundary of the tenant lot would include the home itself, or if specification of the home itself needed to be added. He cited an incident in which one person was not allowed to display a political sign, yet his/her neighbor was allowed to do so.

Mr. Manendo had no objections to adding limitations to the size of the political signs to be displayed. He noted time limitations could be added to A.B. 39 so signs could not be displayed throughout the year, but only during election cycles. He noted Clark County had ordinances when political signs could be displayed and added that he felt that it resulted in people being allowed to express their political views.

Assemblyman Goldwater asked if A.B. 39 affected common interest areas. If a particular homeowner’s association prohibited the posting of political signs, would a person who was renting a home in that association have special rights. Mr. Manendo responded by stating A.B. 39 only addressed manufactured homes in manufactured home communities, and would not be under the same guidelines.

C. Joseph Guild III, representing Manufactured Home Community Owners, stated that he was not opposed to A.B. 39, but only wanted to remind the committee that reasonable restrictions could be placed on the exercise of free speech. Reasonable restrictions were placed on people who exercised free speech in airports and shopping centers, and noted there were many Supreme Court cases on that issue. He suggested restrictions on free speech could be employed by contract as well, such as in common interest communities or mobile home parks.

Mr. Guild finished by saying he agreed with Mr. Manendo there needed to be restrictions. The restrictions he was proposing were to limit the size of the political signs, and the location of the sign within the mobile home park. He then noted he would collaborate with Mr. Manendo on those issues.

Mr. Humke noted local government agencies regulated the size of the signs and the amount of time a political sign could be displayed. He asked if it would be better public policy to allow local government to continue to carry out such regulation rather than regulate at the state level. Mr. Guild agreed with Mr.Humke, and explained he would not oppose the committee if it decided to impose state regulations.

Mrs. Segerblom informed the committee she was sponsoring a bill that would prohibit political signs from being displayed before July 1.

Teresa Maloney of the Lucky Lane Mobile Home Park, Reno, stated she did not oppose A.B. 39, but was concerned it singled out mobile home parks. She continued by saying she would completely support A.B. 39 if the legislation applied to every piece of privately owned land in the State of Nevada.

Mr. Hettrick noted he agreed with Ms. Maloney and wanted the issue to be addressed in total as a free speech issue including all privately own property, rather than singling out one type of privately owned property. Mr. Hettrick noted individuals were being restricted from displaying signs on the land that they owned, and an individual who rented a piece of land was able to display political signs.

Mr. Hettrick suggested A.B. 39 coordinate with other bills that were in intended to change primary election dates. He proposed, instead of naming a specific date after which a sign could be posted, to use a phrase similar to "30 days prior to an election".

There were no questions on A.B. 39 and Chairman Buckley concurred there were amendments to A.B. 39 on which they needed to work with interested parties. There was no further testimony on A.B. 39 and Chairman Buckley closed the hearing.

Chairman Buckley opened the hearing on A.B. 10.

Assemblyman Tom Collins stated he had requested A.B. 10 and had expert witnesses present to inform the committee completely on the proposed bill.

Andrew Thomas, Attorney, Burris and Thomas, spoke on behalf of the Nevada Trial Lawyers Association. He began by stating under current law, if an individual was in an automobile accident in which the other vehicle was not insured, medical bills, loss of wages, and general damages were covered under uninsured motorist’s coverage.

Mr. Thomas continued, in order for compensation to occur from an insurance company in a hit and run accident, physical contact was required between the vehicles involved. There was no coverage under the uninsured motorist coverage if avoiding another vehicle caused an accident, and there was no physical contact between the cars. Mr. Thomas believed that to be unfair.

The purpose for uninsured motorist coverage was to provide financial protection for victims of accidents in which they were not at fault, and uninsured or unidentified vehicles caused the accident. He noted the reason the physical contact requirement was in the statute was to prevent fraudulent claims. Mr. Thomas agreed it was a reasonable requirement if there were no witnesses to the accident. However, he believed it was an unfair requirement in cases where witnesses could verify the accident was caused by another vehicle.

Mr. Thomas noted when an accident was caused by an unidentified car, A.B. 10 would allow insurance companies to provide uninsured motorist coverage in those cases in which; there were valid witnesses, who corroborated the accident was caused by another car, and the accident was reported promptly to the authorities. He believed in those types of cases, the victim should be covered.

Mr. Thomas addressed possible concerns, the first concern the prevention of fraudulent claims. By requiring an independent witness, fraud would be avoided. The second concern was whether more claims would be filed causing an increase in insurance premiums. Mr. Thomas did not feel there would be an increase in premiums. Those types of cases represented a small percentage of accidents, and he did not believe A.B. 10 would lead to an increase in the number of claims.

Mr. Thomas finished by saying individuals who were involved in those types of accidents deserved to receive the benefits for which he/she paid under their policy.

Mr. Perkins asked what would be done with a situation in which the witness determined the accident was not caused by an unidentified driver, but by the person filing the claim. Mr. Thomas responded if the unidentified driver was not at fault, then no coverage would be provided under the uninsured motorist’s policy. He did not believe the wording in A.B. 10 altered that.

Mr. Perkins pointed out the way A.B. 10 was worded, the victim had to have a witness and he/she had to report the accident to the police in order to file a claim against an unidentified driver. He then asked how it would be determined if the witness was biased toward the claimant. He did not see a provision in A.B. 10 that would enable the insurance company to deny coverage in a case where the witness had falsely testified.

Mr. Thomas stated the only reason an individual would pursue such a claim would be because he/she had a credible witness. If the witness were not credible for any reason, the claim would be denied.

Mr. Perkins agreed with Mr. Thomas that it was unfair that victims of unidentified driver accidents would not be covered under the uninsured driver’s policy. However, he was concerned there was no wording in A.B. 10 that would enable the insurance company to deny coverage in cases where the witness was found to be biased toward the claimant.

Mr. Hettrick stated he shared several of the same concerns Mr. Perkins had. Premiums would not increase because of accidents, but rather it was due to exposure of the insurance company.

Mr. Hettrick surmised a single non-contact accident could have a very large claim amount. According to the language in A.B. 10, a corroborating passenger in the car, whom the insurance agent found credible, could justify this claim, resulting in a total fraud paid for by taxpayers. He voiced his concern there was nothing in A.B. 10 to stop an incident like that from happening. A.B. 10 would increase the exposure of the insurance company and he felt premiums would skyrocket. He stated that he had problems with the language in the A.B. 10.

Mr. Thomas addressed the points made by Mr. Perkins and Mr. Hettrick. He explained the amount of exposure to the insurance company would be limited to policy limits on the uninsured motorist’s coverage. Most individuals in Nevada had uninsured motorist coverage with limits of $15,000 per person, and $30,000 per accident. He explained in most cases that would be the upper limit of the exposure of the insurance companies.

Mr. Thomas went on to say if a very serious accident occurred, it would be likely every person in the vehicle would be injured. By being injured, the passengers would become claimants, thereby disqualifying them as independent witnesses. Mr. Thomas further noted under the terms of A.B. 10, in order for the claimants to collect from the insurance company, the claim would have to be corroborated by someone other than the claimants.

Chairman Buckley asked Mr. Thomas if any other state had adopted a provision similar to A.B. 10, and if so, had any other measures been included in order to deter fraudulent claims.

Mr. Thomas told Chairman Buckley there were six other states that had adopted statutes essentially the same as A.B. 10. The language was similar, including the requirement that an independent witness corroborate the accident.

Chairman Buckley asked Mr. Thomas if there were any additional fraud prevention measures taken in the six other states. He responded the requirement of an independent witness and the reporting of the accident to authorities seemed to be sufficient measures against fraud in those states.

Mr. Nolan announced he performed risk management for about 30 municipal transit operations around the country. Vehicles frequently caused accidents or sudden stops of transit buses, which usually resulted in multiple injuries of passengers on the bus. He said there were no provisions to enforce the subrogation of the individual driving the car, and A.B. 10 might help in that effort. He commented the fraud aspect to which Mr. Hettrick had referred to was very legitimate. The definition of who the witnesses were was essential to preventing fraud.

Chairman Buckley asked Mr. Thomas to provide Mr. Hughey the names of the other states that had adopted statutes similar to A.B. 10 so he could note that information for the record. Mr. Thomas agreed to do so.

Chairman Buckley asked if anyone wished to testify in favor of A.B. 10. There being none, Mr. Lee offered testimony in opposition to A.B. 10.

Danny Lee, consultant, John Vergiels Consulting, spoke on behalf of the Nevada General Insurance company. He stated there were many concerns about A.B. 10. An individual could buy limits much larger than the minimum, and in fact could buy limits up to and including the limits of his/her liability. He noted an individual could buy $100,000 to $300,000 worth of liability, and also buy 100,000 to $300,000 worth of uninsured motorist. He pointed out it could be profitable to file a claim under those circumstances.

Mr. Lee stated he was a State Farm agent for 34 years and explained uninsured motorist coverage was one of the most difficult on which to contain premiums. He said the company experienced very rapidly rising premiums. He added A.B. 10 only referenced one witness being required to file a claim on an unidentified driver.

New Mexico was one of the states that had a bill similar to A.B. 10 and there was a very large increase in premiums for uninsured motorist coverage in that State.

Mr. Lee continued that many fraud issues would be discussed during the 1999 Legislative Session, and he would be appearing in front of the committee on a great number of those issues. Fraud was of consequential concern for him. "Accident mills" could produce many different types of witnesses. He hypothesized there would be many claims of soft tissue injuries by counterfeit witnesses, and claims made when no damage was done to the vehicle if A.B. 10 was passed.

Mr. Lee was very concerned about the fact A.B. 10 could cost a great deal on insurance premiums.

Robert L. Crowell, Attorney at Law, representing Farmer’s Insurance Company, spoke next, and introduced Jim Werbeckes, Government Affairs Representative, Farmers Insurance Group, who was present to answer any technical questions from the committee.

Mr. Crowell stated he was not unsympathetic to the issues raised by Assemblyman Collins and Mr. Thomas; however, Assemblymen Perkins, Hettrick and Nolan had accurately described the problems with A.B. 10.

Mr. Crowell stated the risk of being the victim of an unidentified driver was not currently included in a customer’s automobile insurance rates. If A.B. 10 passed, that rate would have to be assessed and included. Mr. Crowell questioned how fraud was going to be prevented. He noted to specify the witness as an independent party might be considered. He inquired who would then make the judgment of whether or not the witness was independent.

Mr. Crowell noted even though statutes similar to A.B. 10 were in existence in six other states, he felt the potential for fraud overcame the salutary benefits that might be received if A.B. 10 passed. There would be no way to protect against fraudulent claims.

C. Joseph Guild, representative of State Farm Insurance stepped forward and testified in opposition of A.B. 10. Mr. Guild explained from a personal standpoint, he predicted an increase in litigation would result if A.B. 10 passed. He further predicted that more claims filed would result in higher premiums. Mr. Guild added there were no solutions for preventing fraud.

Richard E. Shrader, Jr., Legislative Representative Governmental Affairs, American Automobile Association of Nevada, offered testimony in opposition to A.B. 10. He explained the best evidence of a collision in an automobile accident was physical evidence. The requirement of physical contact was in place to protect automobile insurance policyholders. Mr. Shrader surmised fraudulent accidents could be more easily contrived without that specific requirement.

Mr. Shrader added auto insurance premiums would be impacted because non-contact accident claims had not been contemplated in the premiums. Auto insurance policyholders who were not involved in phony accident claims would end up subsidizing those who were.

Mr. Goldwater asked if an individual, who was in a non-contact accident, could make a claim on a policy outside of his/her uninsured motorist’s policy. Mr. Shrader responded that the individual could file a claim on his/her health insurance policy or medical payments coverage.

Mr. Collins and Mr. Andrew Thomas returned to speak in favor of A.B. 10. Mr. Thomas noted if an individual’s uninsured motorist’s policy did not cover

an accident, medical payments coverage could pay the medical bills, and collision coverage would cover damage to the vehicle. Mr. Thomas pointed out that an individual’s loss of income and general damages would not be covered.

In continuing, Mr. Thomas stated by eliminating the physical contact requirements, litigation might be reduced. By having an independent corroboration of the accident, there would be less litigation disputing if there was contact in an accident.

Assemblyman Collins noted Assemblyman Nolan had introduced a similar bill in 1997. It appeared to him the insurance companies were in the business to insure, and that was the risk they took. He agreed fraud was in Nevada, but contended it was not an issue. The issue was should the contact requirement be changed. He believed there would be more negotiations than arguments regarding whether there had been contact in an accident.

Mr. Collins mentioned he had witnessed non-contact accidents that resulted in injury and that was in part why he sponsored A.B. 10.

There was no further discussion on A.B. 10, and Chairman Buckley closed the hearing and adjourned the meeting at 5:20p.m.

RESPECTFULLY SUBMITTED:

Meagen Colard,

Committee Secretary

APPROVED BY:

Assemblywoman Barbara Buckley, Chairman

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