The Committee on Commerce and Labor was called to order at 3:45 p.m. on Monday, March 29, 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:

GUEST LEGISLATORS PRESENT:

STAFF MEMBERS PRESENT:

OTHERS PRESENT:

C. Joseph Guild III, Attorney at Law, International AntiCounterfeiting Coalition

John Bliss, President, International AntiCounterfeiting Coalition

Amy Halley Hill, Vice President, The McMullen Strategic Group

Tom Bath, Owner, Bath Lumber

Dean Stubbs, Partner, Epperson Construction

James Ramsey, Contractor, Ely, Nevada

Margi Grein, Executive Officer, Nevada State Contractors Board

Dennis R. Haney, Attorney at Law, Haney, Woloson & Mullins

Cheryl C. Blomstrom, Representing Nevada Association of Mechanical Contractors and Nevada Chapter of ASSC General Contractors

Richard Daly, Representing Laborers Union #169, Reno

Margaret Cavin, Representing J & J Mechanical, Inc.

Danny Thompson, Political Director, Nevada State American Federation

Of Labor – Congress of Industrial Organizations

Nick Wooldridge, Intern to Assemblywoman Buckley

Douglas W. Carson, President, Carson Construction, Las Vegas, Nevada

Ronald L. Lynn, Assistant Director, Inspections Division, Department of

Building, Las Vegas, Nevada

George J. Lyford, Director, Special Investigations, Nevada State

Contractors Board, Las Vegas, Nevada

Thomas J. Hall, Attorney at Law, Reno, Nevada

Thomas U. Knapp, Director of Investigations, Nevada State Contractors

Board, Las Vegas, Nevada

Clifford N. King, CPCU, Supervisor, Property and Casualty Section,

State of Nevada, Department of Business and Industry, Division of

Insurance

Thomas E. Canfield, Associate Actuary, Division of Insurance

James L. Wadhams, Representing Southern Nevada Homebuilders

Association (SNHBA)

Robert Cedar, Associate Actuary, State of Nevada Division of Insurance

C. Joseph Guild III, attorney at law, representing the International AntiCounterfeiting Coalition, introduced John Bliss, president of the International AntiCounterfeiting Coalition, to provide background information prior to Mr. Guild’s testimony and the introduction of a proposed amendment. Mr. Guild stated he had talked with lobbyists from Las Vegas Metropolitan Police Department (Metro) and Washoe County Sheriff Offices, and both offices supported the bill.

Mr. John Bliss, disclosed the coalition was a nonprofit trade association headquartered in Washington D.C., whose principal objective was to combat counterfeiting of U.S. manufactured products around the country. After lobbying in other states, Mr. Bliss came to Nevada in order to initiate felony statute for counterfeiting of goods. A felony statute was needed because current Nevada law required a counterfeiter to be subject only to a misdemeanor, and he said with the current level of counterfeiting, it was an inadequate deterrent. Mr. Guild presented samples of counterfeited items for the committee to inspect.

Mr. Bliss voiced strong support for A.B. 616 and elaborated on three major themes. In his opinion, most people associated counterfeiting with watches, handbags, and goods of that kind. He stated what one needed to appreciate was the same people who counterfeited compact disks (CDs) were also counterfeiting baby formula, prescription drugs, over-the-counter products, auto parts, and other things that presented significant health and safety risks. Those same individuals who engaged in counterfeiting were also engaged in other illicit criminal activities. In fact, the evidence around the country revealed that a number of counterfeit revenues were funding operations like money laundering, credit card fraud, extortion, and prostitution rings. In New York, evidence had been found that counterfeiting activities had funded terrorist operations. The World Trade Center bombing was committed by a group of terrorists who received some of their money from the sale of counterfeit items on the streets of New York. Not only was there a growing health and safety risk problem throughout the country, but also a growing role that organized crime played in the commission of these particular kinds of crimes.

Continuing, Mr. Bliss said the most obvious was the significant threat to the bottom line of corporations who worked hard and committed research and development to those products only to have them stolen by a counterfeiter. States were losing a significant amount of money to counterfeiting because counterfeiters were not in the business of paying state sales and excise taxes. If Nevada passed A.B. 616, then it would be the 21st state in the United States to enact a felony statute for the commission of counterfeiting.

Mr. Bliss noted that one particular product circulating in the room was baby formula. In 16 states a ring of counterfeiters were producing baby formula for sale at Safeway stores. The baby formula was substandard or had expired, and the counterfeiters simply changed the expiration date in order to make it appear the product was still viable. The problem was children who ingested baby formula for over a month, even if the product just expired and was not otherwise adulterated, could have significant developmental problems with their liver, kidneys, and brain. Unfortunately counterfeiters were not constrained by any morals and only cared about making a quick buck. The only way to turn that around was with a felony statute. Misdemeanor fines were simply the cost of doing business to the counterfeiter.

Mr. Guild presented an amendment to the bill. He referred to page 1 of the amendment to section 205.210 that began at line 14. There the misdemeanor reference was stricken. Beginning on line 15, there was a misdemeanor for certain classes. Beginning on line 17, and continuing over to page 2, the conclusion was when a counterfeiter made, sold, advertised, or affixed the mark on over 100, but less then1,000, saleable units, and there was more than $1,000, and less than $10,000 retail value, it became a category B felony. If the person had been convicted two or more times, it became a category B felony also. There was an intention clause beginning on line 17 page 2 that formed the criminal element necessary to make it a felony. He handed out a proposed amendment (Exhibit C).

Mr. Guild said in reviewing the bill it had been realized there was no definition of retail value defined in Nevada. The amendment added, on page 2 between lines 20 and 21, the definition of retail value. The counterfeit mark and the counterfeit regular selling price were components of counterfeit value to establish a measure by which there could be a calculation made to determine if enough of the goods had been sold to qualify as a felony. Twenty other states that had counterfeiting statutes calculated it in that manner.

A complete packet of information was given to each committee member including fact sheets, the profile of the International AntiCounterfeiting Coalition, news articles, written testimony of John Bliss, and a letter from Heather Holdridge, President of Brand Security Corporation (Exhibit D). Mrs. Holdridge had been involved in the arrest and conviction of nearly 200 counterfeiters and the seizure of millions of dollars of counterfeit goods on the West Coast. In her letter she revealed a large percentage of counterfeiters were illegal immigrants and many had migrated to Nevada in recent years creating a serious problem. Under the present misdemeanor statute there was little enforcement and consequence to the counterfeiter. Heather Holdridge considered one of the most important things to convey to the committee was the fact that it was estimated that $200 billion was lost to the United States due to counterfeiting. Ms. Holdridge regretted she was unable to testify in person due to other commitments. Mr. Guild then solicited questions from the committee.

Chairman Buckley commented on the many bills and issues involving violent felons. Murder, rape, and robbery created full prisons and resulted in the decision to make the consequences tougher and smarter, using restitution, community service, and house arrest. The part of the bill she liked most was trying to get at the operators who were doing that in large quantities. The way the legislation was drafted, it still became a category E felony if the retail value was at least $1,000. She asked whether other states had looked at alternative ways to get at the real producers rather than someone who was a swap-meet operator and happened to come into possession of one item. Mr. Bliss responded other states had the concern of the penal impact and the associated costs of any felony. In Florida, which had a separate budget scoring process for penal impact, scored the bill as revenue neutral. The theory was whatever associated costs there were to incarceration of some counterfeiters convicted under the felony statute, would have been outweighed by the additional revenue brought to the state in foregone taxes. They took evidence from the Director of Consumer Affairs in Manhattan, who had estimated in Manhattan alone, they had lost $350 million dollars per year in revenue. They were also cognizant of the fact it was more of a deterrent statute.

Mr. Bliss stressed it was not the intent, nor would it be the prosecutors objective, to put everyone in prison who had been engaged in counterfeiting but to prosecute some in order to send a message. The counterfeiters were organized criminals, and had a very elaborate communication network, and knew when a state passed a felony statute. The number of people who had gone to jail in the United States could probably be counted on the fingers of one hand even with the felony statutes. As a practical matter prosecutors executed prosecutorial discretion. It was very helpful to have the felony statute at the lower levels in order to coerce the vendors to give up the manufacturers and distributors.

Chairman Buckley thanked Mr. Bliss and asked if other states made it a felony based on what the item would have been worth had it not been counterfeit. For instance, a Rolex watch that had been counterfeited and worth a $100 but would have been worth over $1,000 if not counterfeited resulted in a felony impact.

Mr. Bliss answered the amendment tied retail value to the counterfeiters regular selling price and not the actual selling price; therefore, an individual would not go to jail for selling one Rolex at a legitimate retail price of $2,000, but rather 100 Rolexes at $20. That provision would be consistent with the other states. Other states determined punishment based on the number of items sold or the value in an effort to get at the potential inequities.

Chairman Buckley asked how one was made aware of the counterfeiters regular selling price. Mr. Bliss replied the typical practice in the industry was for trademark owners, the manufacturers of the product, to retain investigators like Ms. Holdridge. Those investigators went undercover and made covert buys of the product in order to identify the actual selling price of the product

Mr. Nolan remarked the manufacturers of those products had to be fairly sophisticated and he queried if they put the infrastructure in place solely to produce fraudulent goods.

In response to Mr. Nolan’s question, Mr. Bliss answered both circumstances applied. From 9 a.m. to 5 p.m. staff of a manufacturing plant were producing legitimate products. After hours, unbeknownst to manufacturing executives, the same employees were producing counterfeit knockoffs. It was also the case, and more likely the case in the United States, the entire manufacturing operation and its distribution were all criminal and there was nothing legitimate involved. The distribution and manufacturing facilities were very sophisticated.

Mr. Bliss explained the legitimate laboratory spent $250 to $300 million dollars per year performing research and development in order to bring a particular product to market. A counterfeiter only had to spend one-hundredth of that price to generate a product that would appear to be the real thing. Oftentimes they did not replicate the active ingredients, but put in materials that were harmful. At the very least, the ingredients were inert and they did not do the intended job. For example, a leukemia victim who needed a particular medicine to continue to live received the counterfeit leukemia medication that did not have any of the active curative ingredients. The critical care patient died and the doctors never knew the reason. They thought the patient died of leukemia when, in fact, it was later determined the patient died because of substandard medicine.

Mr. Nolan inquired what was the percentage manufactured in the United States and how many products came from outside the country. Mr. Bliss replied historically the problem had been one of importation of counterfeits in finished form. Laws were passed, particularly at the federal level to make it a significant felony if an individual trafficked those imported goods into the U.S. Counterfeiters retained good counsel and were advised one way to avoid that would be to import products in blank. For example, if an individual imported Levi jeans, the individual would import blank jeans. Then in the U.S. the Levi hang tag, Levi grommets, and Levi little red tags, all the minutia of the company would be applied so a prosecutor would have to prove conspiracy to traffic in counterfeit, not just counterfeit trafficking. That raised the barrier and with prosecutors already being out-manned and under-resourced, it might be a case they would not pursue. That was part of the strategy adopted by the counterfeiters.

Amy Hill, vice president of The McMullen Strategic Group, representing the Retail Association of Nevada, commended the testimony from Mr. Bliss and Mr. Guild and lent support to the legislation.

With no further testimony, Chairman Buckley closed the hearing on A.B. 616 and opened the hearing on A.B. 387.

Assembly Bill 387: Revises provisions governing general building contractors in certain counties. (BDR 54-1325)

Assemblyman Marcia de Braga, Representing District 35, briefly addressed the committee and mentioned the bill was a response to A.B. 458, which was a bill passed in the 1997 session. A.B. 458 had a provision whereby a general contractor would not practice a certain specialty such as plumbing, electrical, and others, without a license. The rural areas were now faced with the need to hire a contractor who had a license in a particular specialty whereby previously general contractors had performed that same work. Ultimately, the general contractor was responsible for all of those provisions. Frequently what happened in a rural area was the cost of hiring someone with that specialty was prohibitive and many times those people were not available, and it had crippled the construction industry in some of the rural areas.

Continuing, Mrs. de Braga said what was being requested in the bill was an experience exemption that would allow for those contractors to continue to do those subcategories. They must meet all building codes and standards and they were ultimately responsible. The contractor under the bill would be exempt if he was licensed as a general contractor in Nevada or another state for at least 5 years and had performed plumbing and electrical work in connection with his work as a general contractor. Ms. de Braga said she wanted the committee to hear from the people who could better explain what the problems were.

Tom Bath, owner, Bath Lumber, introduced himself as a contractor as well as owner of a building supply business for the Ely area. In a remote area it was necessary to be able to perform multiple functions. The first time the law was passed, the rule was that a contractor could perform all functions legally. A bond had originally been required and later that requirement was removed if the contractor maintained a good reputation. The next thing that happened was the person who could not be a general contractor, or was not interested in being a general contractor, became a specialty contractor. The general contractor was limited to only performing those functions engaging two or more specialty functions.

Continuing, Mr. Bath explained the legislature had passed A.B. 458 in 1997, which limited the functions of a contractor with regard to plumbing and electrical duties. The general contractor was the responsible party on the job who saw that the job was completed whether or not he had licensed subcontractors. He was also responsible for ensuring the Employers Insurance Company of Nevada (EIC), formerly State Industrial Insurance System (SIIS) was paid. If a dispute ensued between the subcontractor and the owner, the general contractor was the person who made the corrections. The general contractor was responsible for the work and the finances and was required to comply with new regulations requiring the use of certain specialty trade people.

Mr. Bath said the prevailing feeling was the general contractors had been injured. At one time the contractors licensing board demanded the use of a specialty carpenter although there was no specialty carpenter in the area. The loss of authority for the general contractor and the ability to make professional decisions resulted in high costs the consumer could not afford.

Dean Stubbs, partner with Epperson Construction in Ely, thanked Assemblywoman de Braga who provided a clear explanation of the problem. As a small contractor who built residences, Epperson Construction did the excavation, concrete, framing, roofing. They used to engineer the electrical and plumbing until August of 1998. A representative from the contractor’s board and the building inspector had informed them they could no longer execute the plumbing and electrical duties because of the bill the legislature passed requiring a specialty license. The law would be a good idea in areas of large construction like Reno and Las Vegas; however, it should not apply to contractors in rural areas. It was very difficult to get specialty contractors on the job and, when they were obtained at their convenience, they were not affordable.

Mr. Stubbs related he had done electrical wiring for Epperson for the last 20 years. Although he agreed with Assemblywoman de Braga’s bill almost entirely, he took issue with the requirement to apply for an exemption. There was traditionally a fee involved with an application for an exemption and that should be taken into consideration. The amendment to the bill solved the problems with that which they had expressed concern. In counties of less than 100,000, a general contractor was not required to have a specialty license to complete the specialties on a construction job.

James Ramsey of Ely, Nevada introduced himself as a small general contractor of residential and small commercial buildings. He carried out the work by himself, including all the trades, and it was not his practice to hire anyone. The bill required that he hire a subcontractor with a lesser license which resulted in a devaluation of his general contractor’s license.

Margi Grein, Executive Officer of the Nevada State Contractors Board, deferred the issue to Dennis Haney, attorney at law, who would provide testimony on her behalf.

Mr. Haney addressed two parts of the issue. The legislation passed in 1997 had exempted out health, safety, and welfare issues. The life of someone was equally valuable wherever they lived and did business. Those were extremely important issues to be considered. S.B. 397 did not prohibit contractors from obtaining the proper license and performing those same functions. He said if a contractor had been performing those functions for many years he should be able to pass the licensing exam and obtain a specialty license. It was important to understand that electricity, plumbing, air conditioning, and the fire alarm system, when dealing with commercial projects. Those were extremely important issues and it impacted everyone throughout the state. The integrity of the legislation passed in 1997 needed to be kept.

Chairman Buckley asked Mr. Haney to inform those committee members who were not on the committee in 1997 what was the public policy rationale and whether general contractors were sufficiently knowledgeable in the specialty areas such that an exemption should be considered. Mr. Haney replied generally a general building contractor was given an examination that dealt primarily with how to build the structure. Typically in the rural counties it applied to residential construction. Individuals would be given an examination on whether they could put the framing together and whether they could do the roofing. There was nothing in those examinations that referred to plumbing or dealt with the electrical or air-conditioning. Those were specialty trades and were separate and distinct.

Continuing, Mr. Haney said complaints had been received relating to general contractors that were not knowledgeable and skilled enough to deal with those specific trades. The rationale was that a general contractor must test separately and have separate licenses in order to perform those jobs. Alternately, a subcontractor could be hired to do those functions. Typically, general contractors did not understand all the ramifications of the specialty contracting fields. Those specific fields were called the life safety or risk areas. For example, one did not want to have wastewater combined with drinking water.

Ms. Cheryl Blomstrom, representing Nevada Association of Mechanical Contractors and General Contractors, requested Margaret Cavin, a licensed mechanical contractor, speak on behalf of the agency.

Chairman Buckley asked Richard Daly to proceed while they were waiting for Ms. Cavin.

Richard Daly, representing Labor Local 169 in Reno, echoed the sentiments expressed by Mr. Haney. It made more sense for the general contractors to pass the test and get the license to proceed with the work. Labor Local 169 opposed the exemption.

Margaret Cavin introduced herself to the committee as a licensed plumbing heating, ventilation, and air conditioning (HVAC) contractor, as well as a licensed plumber, in the state of Nevada. She was concerned that the language was also health and safety issue citing any contractor could take the licensing exam. Counties under 100,000 were being considered, but also White Pine County and counties close to Washoe where the specialty contractors performed a lot of work. If one of those contractors constructed a residential or small commercial building it would be defined as a structure under three stories. Those structures included a restaurant, apartment complex, or office building. She strongly opposed the bill.

Danny Thompson, representing the Nevada State American Federation of Labor – Congress of Industrial Organizations (AFL-CIO), testified the issue of construction defect was currently being heard in the Senate whereby they were examining strengthening licensure requirements for public health issues. He cited a case that occurred when he was president of the steelworkers association whereby an unqualified person hooked up a potable water line to a hydrogen blower and when the water was shut off, it fed hydrogen gas back into an 18-inch water main. When the water pressure was shut off, it resulted in added pressure on the pump which blew the hydrogen back into the water main resulting in an explosion. The individual responsible for the hazardous situation had been disciplined. The situation was an extreme case; however, it was a reason a person had to be qualified. The AFL-CIO opposed the bill.

Chairman Buckley noted the committee was also considering a number of construction defect type bills, as well as another bill in the Committee on Judiciary.

With no further testimony, Chairman Buckley closed the hearing on A.B. 387 and took the bill under advisement. The hearing was then opened on A.B. 636 and Chairman Buckley turned the meeting over to Vice Chairman Perkins.

Barbara Buckley, Assemblywoman, District 8, stated she requested the drafting of A.B. 636. Ms. Buckley introduced Nick Wooldridge, her intern, who would present the bill.

As a point of introduction, Ms. Buckley stated there had been a lot of discussion the entire legislative session about construction defects and ways in which to remedy those defects. There had not been as much time spent on the consumer and the consumer problem. A great deal of testimony had been heard from homebuilders and from lawyers; however, the people who could not be forgotten were those who had purchased a defective house. That was the focus of A.B. 636.

Mr. Wooldridge read from his prepared written testimony (Exhibit E). He addressed sections and subsections of the bill. Sections 3 through 8 revised the definition of particular terms such as "account," "injured person," "owner," "qualified services," "residential contractor," and "subsequent owner." Section 9 established the funding mechanism of the recovery fund. Section 10 designated the amount of time an individual could file claim on the recovery fund, and section 11 provided information relating to court proceedings. When a person was awarded judgment by the court he could then proceed to the contractors board and provide proof that he was awarded judgment. The contractors board would then allow that individual to recover funds up to $30,000.

Mr. Wooldridge stated section 12 explained the administrative process of collection on the recovery fund by injured persons, and section 13 explained eligibility of injured persons to collect on the recovery fund. In order to be eligible the individual must have gone through a licensed contractor. The contractor’s license must not have been suspended or revoked during the time the services were rendered. Section 14 provided the accounting and auditing information concerning the recovery fund. Section 15 provided information on the minimum balance of the account.

Ms. Sergerblom asked if the bill would prevent a subcontractor from putting a lien on a house, to which Mr. Wooldridge replied it would not.

Ms. Sergerblom questioned how a contractor could be prevented from placing a lien on the home. Ms. Buckley responded that another bill was required.

Ms. Sergerblom asked if there was a proposed bill. Ms. Buckley replied in 1995, Assemblyman Wendell Williams had such a bill. She was not aware of a bill coming to the committee, although there might be one on the Senate side.

Mr. Goldwater asked if the bill was an insurance concept and if it was insurance, would it be regulated like insurance. Ms. Buckley indicated it was similar to insurance since it was a resource for people who had been injured, but it was not like a business. It was a governmental recovery fund and similar to the bill she sponsored in 1995, which set up a tuition recovery fund for those who were victims of vocational schools. It was also very similar to recovery funds that had been set up, as Mr. Wooldridge mentioned, in 13 other states.

Mr. Goldwater interjected that was not his real question. That was the function of insurance and the only problem he could see was the consumer might have a false sense of security, as well as the people in the industry. If it was a government function was it a "de facto" tax and would the state be accountable for all the money. Mr. Wooldridge said it was equivalent to an additional bond for the consumer only. Suppliers and employees would not be entitled to it.

Ms. Buckley stated currently there was a system for trying to protect the consumer in the surety bond system that did not work. In the past year in her legal services capacity, she worked with an 82-year-old constituent who had done everything right. He had checked to make sure they were licensed, tried to work everything out, went to the contractor’s board, and as a result of his work the contractor got shut down. He sued in small claims court and got a judgment. He had then approached Ms. Buckley because he was sued. The system did not help the consumer who could not afford an attorney in a situation like that.

Mr. Humke remarked he was not sure he had found the provision that went with section 8, the definition of "subsequent owner." Apparently the intent was to pass on the right to tap into the recovery fund to someone who had acquired possession of the house within 180 days after completion of the work. Nick Wooldridge responded in the affirmative.

Mr. Humke queried why that was so, to which Ms. Buckley replied in some cases one might not be aware of a construction defect for 1 to 3 years. The intent was to allow an additional remedy to also be available.

Mr. Humke wondered whether section 11 mandated a court proceeding. Ms. Buckley remarked that was not correct. Section 11 had been debated during the drafting of the legislation. Consideration had been given as to whether the supplemental remedy should be available to those individuals who went to court as well. It had been determined the fund would be available for someone who went to court. There were two ways someone could apply to the recovery fund. First, that individual could file a complaint with the contractors board, and the contractors board could then try to get the contractor to fix it. If the contractor refused, and the complaint was found to be valid, the individual could be awarded the money. The second way was for an individual to go to court and get a judgment. The individual should be able to go to the contractor’s board with that judgment subject to the same $30,000 cap. Upon obtaining payment, the person assigned their rights in order to enforce the judgment to allow the board to continue the collection. The provision was not that the person must go to court to get a judgment first, but rather to allow the individual who chose to go to court to also apply for the proceeds of the fund. Margi Grein had a couple of additional amendments to the bill that had been reviewed. Ms. Buckley agreed with further clarification of the subrogation rights of the board in those instances.

Mr. Humke referred to section 15 regarding depletion of the $200,000 fund. He said that when the $200,000 fund was depleted, it appeared there was a tax upon contractors. Mr. Wooldridge replied that if it fell below $200,000 that the contractors board were going to reassess the fee on the contractors to bring the level back up to $200,000.

Chairman Buckley remarked the $600 contractors fee was based on the experience in Arizona and was believed to be sufficient. It was possible the item might be amended or deleted because unnamed amounts were of great concern to the committee and the entire legislature. The goal was to maintain the minimum balance. Considering the number of contractors and the number of people building new homes, the result of that number divided into $200,000 would be a small amount. However, that could be tightened.

Mr. Beers asked if that was an alternative to small claims court. Mr. Wooldridge answered it was not an alternative to small claims court but almost an alternative to the surety bond.

Mr. Beers thought the example that had been provided involved going to small claims court. Mr. Wooldridge reiterated if the individual went to small claims court and obtained a judgment, the contractor still would not pay. If the case proceeded to go to the surety bond funds which had already been depleted, the individual would be able to collect from the recovery fund. Only the consumer could recover from that fund.

Ms. Buckley elaborated if the contractor was not out of business, the consumer might elect to go to small claims court, get a judgment, and collect the fee from the contractor. There was no way to collect a small claims court judgment from a contractor that went out of business if the surety bond was depleted by earlier claimants. In order to collect further, the consumer had to get sued by the bonding company in an interpleader action and then the attorney for the bonding company received all their costs first. By the time that was finished there was no money left for the consumer. The bill was a supplemental remedy that was invaluable in situations where the contractor went bankrupt and it was a simple way to avoid having to go to court. Small claims court generally took about 6 months, but then one must collect on the judgment. It was extremely difficult for a senior citizen to learn how to collect a judgment in small claims court, to do writs of garnishment, writs of execution and locate bank account numbers of the company.

Mr. Beers referred to the past action of the subsidization of mobile home rents whereby dollars were assessed from mobile home parks and used to subsidize the rent of low-income mobile home renters. In the process, 22 percent of the money was skimmed off every year for the costs of helping. There appeared to be some parallels in the general intent of the program.

Chairman Buckley noted administrative costs could be discussed with Margi Grein of the Nevada State Contractors Board. Currently the system of helping consumers with a surety bond, where the contractors paid a premium for the bond, ended up having no money left for the consumer. The consumers were not getting any help now from the system the legislators had set up to help them.

Mr. Beers questioned if it would be more efficient to increase the surety bond requirements. Mr. Wooldridge replied to increase the surety bond did not provide consumer protection. A separate fund was needed for the consumer.

Mr. Hettrick asked how many residential contractors were there and if the bond referred to the general contractor only or would it also apply to the specialty contractors who performed residential work. Mr. Wooldridge deferred these questions to Margi Grein.

Mr. Hettrick questioned whether the provisions could be accomplished with insurance instead of a bond. He asked if it would be cheaper to use an insurance policy that could be offered in the construction of a home. Ms. Buckley related builders got insurance to cover their errors and omissions. If a homeowner had a serious construction defect and made a claim against the builder that could not be fixed, the homeowner then sued. The builder got a defense lawyer from their insurance to handle a construction defect lawsuit. It would take 4 years before any help was available. The builders insurance would kick in in order to pay off a judgment. By creating a recovery fund, that was the system was avoided. The intent of the bill was to avoid the expense of litigation, to avoid the legal expense to the builder, and spending 4 years and $200,000 in order to defend the construction defect lawsuit. The homeowner did not want to sue the builder, they just wanted their home fixed.

Mr. Hettrick remarked the bill still allowed for lawsuits. He wanted to know if the surety bond would be released or eliminated. Ms. Buckley replied the surety bond would be kept just for material men, employees, and subcontractors. The premium should decrease by having an alternative remedy for the residential homeowner.

Mr. Hettrick opined that a $15,000 or $20,000 bond would not result in a decrease in premiums because the risk was obviously higher if they built anything. Ms. Buckley agreed that was probably true especially when the amount of the surety bond was not covering anything. An example was provided of a constituent of Mr. Beers who lived in Sun City. There were multiple claimants on a $5,000 bond that covered nothing.

Mr. Hettrick’s commented the surety bond that currently existed did not require new administrative procedures. If one raised the value of the surety bond, the single advantage that a person got was that the contractor must have some assets, and the assets were in serious jeopardy if the bonding company was doing its job right. The contractor would perform a lot better when they were at risk of losing something besides the premium on a $15,000 bond. He thought that was still a viable remedy and needed to be considered.

Ms. Grein informed the committee there were approximately 4,500 state residential contractors. The bill applied only to residential contractors because that was with whom the homeowner dealt.

Mr. Hettrick questioned whether the bill would apply to specialty contractors such as the plumbers and electricians. Learning it would not apply, he wondered what happened if the problem was with the specialty contractors. In one area the specialty contractor was required to have a license and stand behind his work, and the general contractor was also required to be the responsible party. Mr. Haney repeated, as the bill was currently drafted, it dealt only with the residential general contractor. In order to solve the problem, he suggested the language stated any contractor who had a contract with a homeowner regarding a residential property was responsible. He stated the insurance generally covered resultant damage. If a falling roof injured a person the insurance would cover the person but not cover the repair of the roof. The purpose of the recovery fund was to cover the repair of the work that was not done.

Mr. Hettrick wondered if errors and omissions insurance covered issues like repairs.

Mr. Heney replied that errors and omissions (E & O) were traditionally for the architects and engineers. A contractor got a general liability policy (GLP) which covered both property damage and liability; however, that was property damage to others, and it was not for the work itself. During the course of construction they got a property or course of construction policy that would cover while the structure was under construction. Upon the structures completion, some policies would cover under completed operations. A general contractor generally covered the work of the subcontractors. In the case of a broken plumbing pipe, the general contractor’s policy, if they had completed operations insurance, would cover the burst pipe. If the pipe was not covered under the plumbing contractor’s policy, the policy covered the resulting water damage. What was being proposed was a recovery fund where the small homeowner simply could not afford to go to court. They were not prohibited from going to court but it was a fund to provide some other avenue of remedy.

Mr. Hettrick remarked the committee was still working on some of the numbers for contractors but they could be handled according to the wishes of the Chairman. He wanted to know how many electrical and plumbing specialty contractors there were currently, and what was the cost to get a residential contractor’s license. Margi Grein, representing Nevada State Contractors Board, responded she would obtain and provide the information regarding the number of specialty contractors currently. The fee for a residential contractor’s license was going to $600. It was $300 for the application fee and $300 for the license fee. The license fee was refundable if the applicant did not get the license.

Mr. Hettrick said it would effectively double the cost for the contractor to go from $600 a year to $1,200 a year, to which Ms. Grein agreed.

Mr. Beers proclaimed by limiting the nature of the damages to $30,000, any transaction involving a general contractor would be effectively precluded. He said the examples that had been provided sounded as if they applied to a subcontractor with regard a specific repair, and asked if it was geared more to subcontractors than general contractors. Ms. Buckley explained it was to general contractors, and not specialty contractors, both examples applied. In both instances, the board had suspended the contractors and revoked their licenses when they refused to make good; therefore, there was no recourse to recover anything.

Ms. Grein stated the board supported A.B. 636 with a few amendments (Exhibit F). In contractual relationships there was a balance of sophistication between the parties problems and those problems were resolved in an orderly fashion, which was demonstrated in the commercial contracting versus residential contracting. Ninety-seven percent of complaints regarded residential construction and the number of commercial complaints was relatively low.

Ms. Grein said when there was an imbalance between the parties with the construction contract, potential problems usually developed rapidly and were due to a misunderstanding, lack of communication, poorly written contracts, unreasonable expectations, and so on, and was the normal imbalance prevalent in residential construction projects. All of the states had been examining the recovery fund concept, and currently there were 13 states that had a recovery fund.

Mr. James Ball, chief investigator from the Arizona Registrar of Contractor’s Board, said the state of Arizona had maintained a recovery fund since 1981, and it had worked extremely well. He read a statement from Michael Goldwater, Director of the Arizona Registrar of Contractors. Mr. Goldwater had apologized for not being able to attend the committee meeting. In his statement he said that he was not trying to advise Nevada on how to proceed; however, he had been invited at the request of the Nevada Contractors Board to testify on what had worked in the state of Arizona.

Mr. Ball went on to testify Arizona’s recovery fund came about as a sunset review of the agency, and the legislature had felt a need for the contractor’s recovery fund to protect the consumer. The recovery fund was only for the consumer. There were no material men, contractors, workmen, or anyone else allowed to make application to the recovery fund. The contractors solely financed the fund, and they paid an initial fee of $300 when obtaining their license. The registrar set the $130 per-year renewal cost.

Continuing, Mr. Ball stated currently the receipts for the fiscal year 1998 were approximately $3,468,533, the judgments were approximately $2,721,944, and the expense to operate the fund ran around $331,791. About 10 percent of the fund was utilized for operating expenditures. They were allowed by statute to use $60,000 of the fund for public awareness announcements, and $10,000 of the fund for outside audits and other services. Currently there were approximately 42,000 licenses in the State of Arizona. The breakdown of the numbers between residential and commercial was not available.

Vice Chairman Perkins asked Mr. Ball if they registered or collected a fee from all the contractors in Arizona or just the general contractors. Mr. Ball replied they collected it from all contractors, both general and specialty, who performed work in the residential sector.

Mr. Humke queried if A.B. 636 had been patterned after the recovery fund legislation they had in Arizona, to which Mr. Ball responded he believed it had been.

Mr. Humke asked if there were more contractors in Arizona than in Nevada. Mr. Ball replied affirmatively and stated additionally, many contractors held dual licenses. They held licenses in the specialty trades as well as general contractors licenses. The contractor was charged $300 for each license he held in the residential sector regardless of volume. The surety bond was based on volume of work. Persons who claimed against the contractors recovery fund were only homeowners who could approach the fund in two ways. One was through a civil action in court, or if the contractor’s license had been revoked or suspended through an administrative function, then they could apply directly to the registrar for payment out of the fund. The limit on the fund was $100,000 per contractor, $20,000 per homeowner. Exhibit G was provided in order to answer pertinent details regarding the Arizona fund.

Mr. Hettrick’s main concern was whether the program would pay for itself since it appeared from the material provided, the recovery fund spent almost everything they had received. He inquired how many building permits were issued for residences in Arizona on an annual basis. Mr. Ball offered to develop those figures and provide them to the committee.

Ms. Grein interjected there were approximately 15,000 licensees in the State of Nevada. Arizona had about three times more contractors than Nevada.

Mr. Ball reported in 1998, the registrar’s office instituted a dual license for those contractors who had applied for, and obtained, one license that allowed them perform both commercial and residential work. Those fees paid for the recovery fund for residential projects.

Mr. Hettrick requested the number of contractors who held multiple licenses in each state, as it impacted the amount of money on the fees paid. James Ramsey, contractor from Ely, Nevada asserted that was a tax against the builders.

Vice Chairman Perkins articulated even if everyone did their job, that did not insure that the person who performed the actual construction did the work correctly. The builder might or might not have followed the plans. In the southern part of the state it was almost impossible for the building inspectors to keep up with the inspections.

With no further testimony, Vice Chairman Perkins closed the hearing on A.B. 636 and turned the meeting back over to Chairman Buckley.

Chairman Buckley provided copies of a letter from the Department of Building in southern Nevada (Exhibit H) to committee members. The letter detailed how much was charged per house for a building permit, the revenue generated, the budget of the department conducting residential inspections, how much of the fees collected for residential building was used in the budget, how many individuals were assigned to residential inspections, the average time spent per house, and what was inspected. Many inspectors had revealed they were only performing spot checks regarding health and safety. All of that was interrelated to the current and future bills, and became relevant. A lot of people relied on inspections that were not done.

Ms. Grein asked for consideration of the bill in order to address some administrative issues faced. Sections 2, and 3 established a program for the issuance of an expedited license. Oftentimes, on a commercial project when a license was needed immediately, a fee needed to be established so it did not hold up any other applications being processed. Section 4 allowed the board to establish a category of licensees for an inactive status. Currently there was no category for an inactive status and an applicant was required to reapply after being out of business. The majority of the states had an inactive status. Section 5 addressed the bond issue.

Ms. Grein referred to a letter received from the Schmidts who were homeowners at Lake Las Vegas, and who were in a bad financial situation because of their contractor. The Schmidts had worked with a contractor who had a bond of $20,000. They had submitted a claim against the bond, won a judgment of 60 percent of the bond after costs of legal administration, in the amount of $5,000, had been deducted from the bond. The legal firm hired by the bonding agency was allowed the $5,000 for administering a very simple effort, which was addressed in the section 5.

Mr. Haney, Nevada State Contractors’ Board, requested the bond amount that had been set by the board be the bond amount recoverable by the claimant less the actual cost incurred by the bonding company, but not attorneys fees. There had been instances where there was a $20,000-$25,000 bond, of which, the attorneys collected $11-$12,000 in fees which left virtually nothing for the owners or subcontractors. That was the main thrust of the changes requested.

Additionally, the surety was required to notify the contractors’ board when they had paid money out. As it stood, that was not done and it was important for the board to know if there was a contractor that had a problem, in order for the board to take action in order to protect other potential homeowners and consumers.

Douglas W. Carson, Carson Construction of Las Vegas, Nevada, stated the proposed bill was needed, would give the board latitude, and would be positive for the industry.

Ms. Segerblom asked if the homeowner sued the county or city if the surety bond had all been used. Mr. Haney replied the homeowner had a right to sue the contractor or anyone involved in the building process they felt was responsible. Presently the status of case law was that a city or county inspecting the project was only responsible if they knew there was a defect and passed the building anyway. Generally speaking, the city or county were protected from actions.

Referring to the fees on page 4, Speaker Dini questioned if the fees were higher than what was currently charged. Ms. Grein replied fees were established through regulation. The amount shown was the maximum that could be charged. Currently it was $300 for the license fee and $300 for the application fee. Administrative public hearings were held to increase fees.

Mr. Hettrick referred to sections 4 and 5 regarding an inactive license, and questioned if the fees could be refunded to the contractor or some credit given for the inactive status when renewed. Ms. Grein replied other states had the same language. The fee had not been established and public hearings must be held to determine that figure. Mr. Hettrick reiterated the contractor should be entitled to some refund of fees because there was no cost to the board.

Mr. Haney suggested regulations could be adopted to address those issues. There was no prohibition of refunding partial fees upon renewal.

Mr. Hettrick understood the fees could be refunded, but sought to have the language reflect the fees would be addressed so the contractor received a refund.

Chairman Buckley asked why they wanted to have the ability to raise the fees. Ms. Grein replied the workload had increased along with the growth of the construction industry. Nothing had been paid to the board for conducting an investigation and very little of the cost of the investigation was recovered, and it was not sufficient to handle the approximately 4,000 investigations that were conducted every year. She stressed more money was needed for operations if a better job was to be done regulating, enforcing, and processing applications.

Ronald L. Lynn, Assistant Director of the Inspectors Division, Clark County Building Department, provided additional information. Clark County inspected 100 percent of the single-family residences, which were permitted. Between 6 and 8 hours were spent on a typical 2,000 square foot tract home. Some custom homes took many more hours and required specialty inspectors. It took over 1,000 man-hours to build a home. Therefore, in contact time, compared to the manpower of the contractor, the inspector was there between 1 and 2 percent of the time. All homes were inspected.

With respect to the liability of the cities and counties Mr. Lynn disclosed they did have immunity from design defects. If there was maliciousness or malfeasance involved that was a different situation. Strictly interpreted if the inspector did not observe the defect or recognize it they were not liable. It did not prevent claims being made against them.

With no further testimony, Chairman Buckley closed the hearing on A.B. 633.

George J. Lyford, Director, Special Investigations for Nevada State Contractors Board, read from prepared text (Exhibit I). He revealed the department had been formed in August 1998 with the responsibilities of conducting investigations in construction fraud, unlicensed construction activities, and background investigations of applicants and licensees. Since that time, approximately 170 individuals throughout the state had been charged with contracting without a license. Approximately 12 individuals had been charged with felony charges of theft or obtaining money under false pretenses, in connection with illegal contract activities in southern Nevada. If the contractor’s bid was in excess of $100,000, it was now a felony.

Ms. Grein indicated she saw no need for the background information and fingerprinting until she visited the State of Arizona. At that time, James Ball, Chief of Investigators for the State of Arizona Registrar of Contractors, had related to her a story that she requested he share with the committee.

Mr. Ball detailed the case to which Ms. Grein referred. An individual had arrived in Arizona as an escapee from a state prison in Indiana. He applied for, and obtained, a license at the agency. In the process of having his background information checked, which took a considerable length of time, the applicant had teamed up with another man. Together they committed 10 murders between the State of Arizona and California. The applicant was currently on death row in California and his cohort in Arizona had been sentenced to 25 years-to-life in prison. Most of the homicides were the result of his painting contracting business.

Thomas U. Knapp, Director of Compliance Investigations of the Nevada State Contractors Board in Las Vegas, provided additional information. His background was 25 years in law enforcement and he had been in his current position for almost 2 years. The members of the public contacted him on a daily basis questioning how a particular individual had obtained a contractors license. The board had expressed strong concern and he felt the bill would provide the tools necessary in executing proper background investigations, which would aid in protecting the public. Most contractors in the state were upstanding, honest, hard working individuals and it was unfortunate a small percentage always drove that type of legislation.

Chairman Buckley questioned how many people would be excluded if the screening process were intact. Mr. Lyford, who came to the position with a 28-year history in law enforcement, began his work by requesting the next 40 applications. He conducted research with available resources, and found that 30 percent were less than honest about liens, judgments, criminal convictions, and criminal histories. The board needed the information when they were going to issue a license. Several licenses in 1998 had not been issued based on the backgrounds developed on individuals and there were more pending in that particular category.

Chairman Buckley wondered why they needed that portion of the bill if they had the ability to conduct criminal checks. Mr. Lyford noted he had the ability to go to local courts and check local records. He did not have the ability to check law enforcement records and criminal records in other states. Most of the applicants were coming from other states and he was restricted to what the individual had written on the application. A policy had been established that required an individual who had informed them of a problem, they would require the individual to provide a scope printout. A current applicant had listed a misdemeanor conviction for recordkeeping. That misdemeanor conviction equated to 280 counts of construction fraud in another state. One individual indicated he had a conviction in 1954 in Michigan; however, those records no longer existed and he had neglected to mention the other 10 or 15 convictions he possessed for assault, burglary, robbery, and the fact that he had chased another person with a hammer. It took weeks to find that information.

Ms. Berman inquired about the length of time it took the repository to conduct a check, and she asked would the license be issued and revoked. Mr. Lyford responded the State of Nevada replied back in about 2 weeks and the Federal Bureau of Investigation (FBI) returned the information in about 6 to 8 weeks. The licensing process currently required 60 to 120 days. The information would be back in time unless there was an arrest warrant. There were several individuals who had applied for licenses who had active warrants out for their arrests.

Mr. Perkins commented in section 2, the board examined limiting peace officer powers for issuing citations. He remarked if that was the extent of the peace officer powers anticipated to be needed for the enforcement of the act. Mr. Lyford divulged the Legislative Counsel Bureau (LCB) developed the wording, and he was unsure exactly what it entailed. The contractors board wanted the ability to enforce A.B. 634.

Mr. Perkins hypothesized warrants of arrest for a class E felony and the limited powers discussed in section 2, subsection 3, would not allow the authority to do that. The provision in subsection 4 that allowed a special investigator to request any constable, sheriff, or other peace offer, to assist him in the issuance of the citation, appeared to be unnecessary. Mr. Lyford replied they were not asking for the power of harassment; however, they wanted the ability to call local law enforcement.

Mr. Perkins opined subsection 3 was the level of peace officer powers sought in order to issue the citation. It was not necessary to set into statute the power to call the police once as an investigative unit became established. Section 3 stated an executive officer could authorize a citation, and he questioned whether that would be workable. Page 4, section 10, subsection 2, regarding records, and paragraphs (A) and (J), caused him to experience some concern. Investigations, when ongoing by a law enforcement agency, were generally off-limits. Therefore, investigations as a broad category needed to be tightened. Database searches were also a broad category in itself, and other agencies might not want to make their databases available to the investigative unit. Mr. Lyford responded the database search was a scope database search, which was the general arrest and conviction information maintained by the police departments as the criminal history data.

Mr. Lyford said the intent was to be able to go to the department and ask if there was any information on the database regarding a particular individual. Regarding the citation issue, two different types were being discussed. One was the administrative citation brought before the board. The other citations went before the justice courts. Currently citations were issued to bring individuals before the justice court for contracting without a license.

Mr. Perkins said that cleared up the questions for him. The last subject was in section 11, subsections 2 and 4. Subsection 2 referred to obtaining fingerprint cards from local law enforcement agencies. Subsection 4 stated the board should establish, by regulation, the fee for processing. Local law enforcement agencies were not able to fingerprint the contractors without cost. It would require personnel time, as well as costs to cover the service. Mr. Lyford stated the section was put there specifically because the State of Nevada was going to charge a fee for the submission of fingerprints in the amount of approximately $39.00 for state and federal fees. The board could do the fingerprinting but were attempting to make it more convenient for the individual.

Mr. Perkins remarked broadening of the language was needed in order to accomplish their desired objective.

With regard to what constituted construction fraud, as had been indicated on page 4, lines 27 and 28, Mr. Hettrick expressed concern because a person could be guilty of a crime for giving a wrong telephone number. He recommended the word "knowingly" needed to remain in the statute so people would not become criminals for making a mistake. Ms. Grein pointed out to establish those terms, the individual must be convicted. The bill could be amended so it applied only if they were convicted.

Chairman Buckley called attention to the fact that "convicted of" would not apply, but "knowingly" would apply to be an element of the crime in order to obtain a conviction. She suggested the contractor’s board review that with a lawyer and consider restating the language.

Mr. Hettrick thanked the Chairwoman for clarifying his concerns. He stated page 4, line 38, "acts as a contractor without obtaining a contractors license pursuant to this chapter" makes the contractors from White Pine County guilty of constructional fraud. He voiced his concerns over the issue and suggested those two bills be tied together to make sure a criminal category was not created.

Chairman Buckley suggested that Ms. Grein should take those things back and tighten or expand the issues discussed.

Ms. Grein offered to go through other sections of the bill. There were two separate divisions of investigation and the ability to issue a citation was requested for licensed, as well as unlicensed contractors, in order to expedite the complaint resolution process. Somehow the two got commingled and did not emerge as clearly as had been desired. She announced there would be an amendment.

Chairman Buckley said she intended to schedule all the contractors board bills for a work session on the same day including Assemblyman Lee’s bill and her recovery fund bill. The committee would consider them all as a package and would consider any amendments.

Mr. Carson thanked the committee and reiterated better tools were needed to screen the applicants. The desire was to speed up the process. The goal was to protect the public and increase the quality of the construction industry.

Chairman Buckley stated everyone agreed with those goals.

Thomas Hall, attorney at law, and licensed contractor, appeared on behalf of a client, and in response to an invitation by the State Contractors Board. Several years ago, a client negotiated a contract to have a large barn built in the Carson Valley in the amount of $453,000. Because the contractor’s limit was $250,000, it was necessary to break the contract into two parts. As a result, two contracts had been signed. His client posted a cash deposit of $68,000. After the contract was signed, a disagreement between the client and the contractor broke out with regard to finishing the structure.

Mr. Hall was retained to recover the $68,000. He contacted the state contractors board and anticipated that a bond, or some financial security, would be posted there. Mr. Hall filed a complaint with the state contractors board which stated the contractor had filed for an amount over his license. That matter was set for hearing and the contractor, Kevin Clark, showed up at the hearing and revealed he had been involved in a partnership earlier when he had applied for his license. After 5 years his partner had decided to withdraw from the partnership, and Kelvin Clark then commenced forging the renewal application for the license keeping the $250,000 license in his name for a period of about 12 years.

The board conducted a second hearing whereby the other half of the partnership was brought forward. It was confirmed there had been a forgery and based on that testimony, the board had suspended the license and ultimately revoked it. His client saw another barn under construction by Kevin Clark, which Mr. Hall had photographed and reported to the State Contractors Board. It had been determined that he was still contracting in Nevada without a license. Mr. Clark was investigated and fined $500 for that violation. A.B. 634 set up a meaningful fine, which revised the $500 to $1,000, and increased the infraction to a felony. The builder did not stop then and began building another barn in Carson Valley. Further investigation confirmed he was still building without a license. Mr. Hall then went back to the State Contractors Board and found that Mr. Clark had been investigated a total of four times. He did not believe that his client would recover his $68,000 for the deposit or the $15,000 in fees paid for legal services to Mr. Hall.

Mr. Hall said the problem was that Mr. Clark kept coming back to Nevada from California and contracting without a license. He was not paying Employers Insurance Company of Nevada (EICN). If he was caught, he would pay the $500 fine as a cost of doing business. The fines needed to be effective to keep that type of person out of the business to protect the citizens of Nevada.

Assemblyman Tom Collins, Representing District 1, introduced himself as the Quality Engineer for Collins Power Services. Collins Power Services had been in business slightly less than 4 years, and in that time he had been to the contractors board for one license and then expanded to a second license to qualify for work he was currently performing. Following that, he had to go back before the board in order to qualify to bid on projects then back again in order to expand the bonding capacity to bid on larger jobs. Twice he had requested letters of clarification for what the license covered for bidding purposes. He had also filed one complaint against general contractors, which amounted to $1,600 for which he had not been paid.

Mr. Collins related he learned the process of how receive payment although he did not receive remuneration for that particular job. He remarked the board had vastly improved in the last few months. The investigation the board conducted for his small complaint probably cost more than the return. They did an excellent job and needed the funding. He spoke highly in favor of giving them more support in A.B. 634.

With no further testimony, Chairman Buckley closed hearing on A.B. 634.

The committee then turned to the work session document (Exhibit J). Chairman Buckley determined that a quorum was present

The committee began with A.B. 108, which they had previously rescinded on March 25 (Exhibit K). Chairman Buckley informed the committee the governor had concerns of a technical nature to reinstate some of the deleted lines to have a cap on the attorney general’s settlement powers. In consultation with the Speaker it was decided the committee would look at the bill again that was passed unanimously by the House and Senate. Scott Scherer, General Counsel, Office of the Governor, had met with the Attorney General’s Office Special Unit of Consumer Protection. Together they suggested the deleted lines on page 3, lines 7 through 9, be reinstated. They wanted to change the amount on line 7 from $30,000 to $200,000. In addition, they proposed a new subsection to provide any amount in excess of $250,000 in the attorney general’s special fund immediately reverted to the state general fund.

Chairman Buckley said past testimony did not show any large consumer protection settlements which was the indirect damage sustained in antitrust cases because the proper language was not in the statute and no lawsuits had been recovered. There was little or no concern about the fines, fees, or the amounts of the recovery issue as a result. The governor and attorney general expected to receive millions of dollars from settlements of future lawsuits and wanted to have the protection. The issue resulted from antitrust cases because the language in the statutes was not clear. If there was no direct harm element to the consumer, the state was not allowed to participate in the suits. It was now reasonable and consistent with the original action.

Chairman Buckley informed the committee the bill was on the chief clerk’s desk and requested there be a committee amendment in order to add the section so that it could be adopted in an Assembly floor session, and continue processing the bill to the Senate side.

Crystal Lesbo, Senior Research Analyst, summarized A.B. 334. Cliff King, Division of Insurance, had worked closely with staff, as well as with Mr. Hettrick, and proposed the following amendments to A.B. 334. Each of the amendments had been written as a mock bill that was included under tab H of the work session document (Exhibit J). The first amendment was to section 2 of the bill and allowed the system or private carrier to provide workers compensation coverage to a homeowner who employed a person engaged in household domestic services. Line 27 of the mockup was applicable to a homeowner policy or a comprehensive personal liability policy. Under tab I of the work session document, was an example of what the actual endorsement looked like. On page 3 of the endorsement, note 2 stated that the endorsement was designed to be used with a homeowners policy, comprehensive personal liability policy, or other policy that provided similar personal liability coverage.

The second amendment provided a definition for "domestic worker" as the bill had originally applied to casual laborer.

Ms. Lesbo said the third amendment provided the exclusive remedy provisions of Nevada Revised Statutes (NRS) 616A, section 20, were applicable to the worker’s compensation coverage provided by such an endorsement. Amendment 4 deemed wage of $150 per month for a part-time domestic worker.

Chairman Buckley solicited Mr. King’s clarification on the measure. She was also willing to hold the bill. Her understanding regarding the amendment was a domestic worker in a private home that was injured could make a claim against the homeowner policy and that would put them in the worker’s compensation program that offered a rider to the homeowners policy.

Mr. King testified the coverage outlined would mirror what was done in California and a number of other states using National Council on Compensation Insurance (NCCI) policy forms. It provided workers compensation to a limited type of employment. The bill’s original intent was to be able to cover a child mowing the lawn, shoveling snow, or even a worker living with an elderly resident providing assistance. It provided worker’s compensation coverage to those limited employments involved with the household.

Mr. Goldwater asked if the exclusive remedy portion of that coverage applied.. Mr. King responded affirmatively. The provision was needed because the standard homeowner’s or comprehensive personal liability policy in Nevada did not exclude employees for medical payments or personal liability. If the sole remedy language was not present, homeowners would have the potential of both suing and collecting under medical payments then suing under the personal liability and collecting under the worker’s compensation.

Mr. Goldwater remarked the exclusive remedy portion caused him a great amount of concern and he would have trouble supporting the bill with the provision included.

Speaker Dini inquired with regard to the $150 a day deemed wage, if there was an amount that required reporting social security at a certain level. The domestic requirement was $50.

Mr. King replied the intent of arriving at the $150 deemed wage was to identify some kind of dollars in the event of a permanent or partial injury there would be a basis for settlement to determine the amount of indemnity. Worker’s compensation covered unlimited medical expenses. The indemnifications were limited to an as needed basis. In order to arrive at that particular dollar amount, a group of people got together and examined the various deemed wages throughout Nevada Revised Statute (NRS) chapter 616 and arrived at what appeared to be a compromise. That particular amount applied to people engaged in work fairs and apprentice type programs.

Chairman Buckley asked would a person not paying minimum wage and not reporting it to social security still be covered by worker’s compensation. Mr. King replied the coverage would be provided by endorsement. He explained a payment of a premium was determined by classification. Nowhere in the policy was there an exclusion if one failed to pay social security, report it to income taxes, or anything else. There were no provisions in the policy to exclude coverage for that type of occurrence.

Mr. Beers commented the $150 deemed wage would actually translate into $1500 per month income. He wanted to know how that would be handled. Mr. King observed when one considered the deemed wage, it became a function in determining a settlement. The $150 would be the means of determining the ultimate amount paid to a claimant. It did not mean that the claimant actually made $150 a month, but merely provided a supplemental amount to possibly provide training for another type of occupation or supplemental income.

Vance Hughey, Principal Research Analyst, referred to page 4 of the mockup in the new subsection 3, and pointed out the deemed wage was only for an occasional domestic worker. The occasional domestic worker was defined as one who worked less than 20 hours per week at a single employment.

Mr. Hettrick explained the $150 deemed wages applied to many different types of employment. A volunteer fireman with a deemed wage of $2,000 would be someone who could be making $200,000 per year. Pay was based on a deemed wage basis whereby there was no actual payment, and it applied to the part-time worker because the full-time domestic had the computation based on their actual wage paid, which was fully reportable and taxable. It only guaranteed the person who received $10 for doing 20 minutes work did not get deemed as receiving $10 a month because he mowed the lawn one time and got hurt.

Continuing, Mr. Hettick said part-time, young workers were discussed by a number of people. While the amount of money, per se, was not a large amount of money, it was paid until age 70 in a lump sum benefit award. Employers Insurance Company of Nevada (EICN) settlement would be a very significant amount of money.

Chairman Buckley suggested the alternative would be to do nothing. In the current system, the injured party could make a claim against the homeowner’s policy. If there was no homeowners policy, and the person had assets, the injured party could pursue the issue in that fashion.

Chairman Buckley said generally if the person did not have assets, the claimant was out of luck and could do nothing. The other side was the concern about two-thirds wages and whether that was beneficial.

Mr. Hettrick pointed out the policy was by endorsement, and the homeowner chose to buy the endorsement. The coverage had not been eliminated through the homeowner’s policy if there was no endorsement, which allowed the homeowner to buy full coverage for medical, vocational rehabilitation, and a deemed wage benefit, and it was up to the homeowner to provide it.

With no further testimony, Chairman Buckley closed the hearing on A.B. 334 and then introduced A.B.1 (Exhibit L).

Mr. Hughey introduced A.B.1. Ms. Giunchigliani proposed an amendment to A.B.1 that deleted lines 22 and 23 on page 2. Those lines indicated no licensee may lend money upon security of a certificate of title to a motor vehicle except to a bonafide dealer in motor vehicles. The provision was being removed and a new provision would be added stating a licensee may charge and receive interest at the rate of 10 percent per month for money loaned or secured by the acceptance of the certificate of title to a motor vehicle. For any loan made, a licensee may make an initial charge of $5 in addition to interest at the authorized rate. The wording essentially matched existing provisions in NRS chapter 646, which was the pawnbroker statute. A mockup of the bill was included as attachment A.

Ms. Giunchigliani remarked that went back to the original drafting. She never intended to place the businesses under NRS 675. She merely tried to deal with car title loans. There were large dollar amounts charged to those individuals. Twenty five percent to 40 per cent and up, was currently charged per month on a very simple car loan on vehicles which were generally older vehicles. She worked with groups who were not in support of that. She had considered increasing the surety bonds, but it got to the point where the charge would have been determined by location. That appeared to get close to restriction of trade. There was no desire to put anyone out of business. She wanted to place a cap on the percentages that were charged for a car title loan. That was for the committee to consider, and it was modeled after the cap of the pawnbrokers of 10 percent. The bill would stipulate anyone who chose to participate in that particular business would be limited to the capped amount.

Chairman Buckley inquired as to whether that included purchase money, security interests, and first position on title, at time of purchase for financing. Ms. Giunchigliani replied that would not apply.

Chairman Buckley requested clarification if the committee was inclined to proceed on the bill, it would not cover purchase money security interest which was something different.

Mr. Goldwater referred back to the rate of 10 percent a month, and questioned whether that applied to a compound rate that would, in effect, be over 120 percent annually, or a total of a 10 percent annualized percentage rate (APR). Ms. Giunchigliani responded that was considered during the hearing. She had attempted to model the provision in the exact same manner as another business that participated in offering car title loans. Since those businesses were at a monthly 10 percent rate, she felt it only fair to allow other businesses to charge the same amount rather than get into the compounding issue.

Chairman Buckley inquired whether there had been concerns expressed by those who were not in support that they did not want to be brought under the pawnbrokers’ statute. Ms. Giunchigliani replied those in opposition did not want to have a cap. There was no intention to have them be licensed or register as a pawnbroker. Anyone else who did business under NRS 675 that issued car title loans would be subject to the same 10 percent rather than making them a pawnbroker which was the original objection.

Chairman Buckley wondered if Ms. Giunchigliani considered making that activity classified as "pawnbrokers" as opposed to clarifying it in NRS 675. Ms. Giunchigliani stated the original had classified them as pawnbrokers, which was the original objection. She preferred to let those pawnbrokers continue under NRS 675 but only in the areas in which they dealt in the business of car title loans were they subject to the 10 percent cap. It was not the intent to have a different license or to come under the pawnbroker statute.

Speaker Dini asked why the bill was needed. He remarked there were a lot of costs involved in repossession and it appeared the bill would compound problems for small business people.

Ms. Giunchigliani commented it was something for the committee to consider; however, she thought it was a consumer issue based on the charge of 20, 30, to 40 percent and up for a loan on cars that were worth a few thousand dollars. She felt the committee should consider the consumer protection issue because there were those individuals who could not go to a bank because they did not have the resources. It was different than being in the pawnbroker business because when a person hocked a ring or piece of jewelry they were not dependent on it.

With no further testimony, Chairman Buckley closed the hearing on A.B. 1.

Mr. Hughey related that Ms. Giunchigliani proposed a number of amendments. Some of the amendments were fairly technical and there was a mockup of the bill with the amendments included as attachment B (Exhibits M and N). The first proposed change was essentially the same change that affected four different sections 2, 6, 9, and 12. It changed the words "any type of contraceptive" to "any type of prescriptive contraceptive drug or device." The intent was to limit the types of devices or drugs that would be included.

Mr. Hughey said the second amendment affected the same sections and clarified that nothing in the section would require coverage of infertility drugs. The third amendment changed provisions to sections 2, 6, 9, and 12 to clarify that hormone replacement therapy provided by a policy must be approved by The Food and Drug Administration (FDA). The fourth change affected sections 2, 3, 6, 7, 9, 10, 12, and 13, and clarified nothing in those sections would prohibit an insurance company from charging the same co-payment or deductible as was required for all other prescriptions. The fifth amendment changed provisions in sections 3, 7, 10, and 13 that referred to reproductive health care, and changed it to contraceptives or hormone replacement therapy.

In addition, there was a deletion of references in the same sections to "including without limitation a health care service related to contraception, emergency contraception, or hormone replacement therapy." The sixth amendment replaced the phrase "pursuant to a contract with the Welfare Division of the Department of Human Resources" with the phrase "under the state plan." He preferred to defer the rationale to Ms. Giunchigliani. Number seven deleted some sections of the bill that were no longer necessary and included removing from the bill the any willing provider provision and the essential community provider provision.

Included was a conscience clause under which an insurer affiliated with a religious organization whose tenets prohibited the use of contraceptives, was not required to provide contraceptives pursuant to the provisions of the bill. Some liberties had been taken in placing those conscience clause sections where it was thought they would be appropriate, but it was preferred the bill drafters place it where appropriate.

Ms. Giunchigliani testified after the initial hearing she had attempted to get together with as many groups as possible in order to narrow the verbiage of the bill and still accomplish correcting the inequity regarding prescriptive coverage. The group focused solely on the issue of providing the five major contraceptives and hormone replacement therapy approved by the food and drug administration. After reviewing it she offered an additional change that restricted the bill even further.

Ms. Giunchigliani said if the committee wanted to consider it, a period would be placed after "therapy" in sections 3, 7, 10, and 13. It was already known who provided therapy in Nevada and it was not necessary to mention it throughout the bill. She asked the committee to entertain that as part of the motion. In addition, the conscience clause had been added as Reverend Bretner had requested. Item 6, mentioned by Mr. Hughey, which fell under the state plan, was added at the request of the administration and Medicaid. She said Mr. Hettrick had many concerns addressed by the verbiage the insurance company would not be prohibited from charging the same co-pay or deductible as they would for any other prescription.

Speaker Dini inquired if that would take care of the problem with St. Mary’s Hospital. Ms. Giunchigliani replied no, it would not. It took care of the other religious organizations, but St. Mary’s was still the only one that was an employer as well as an insurer. Because they were collecting premiums, St. Mary’s was allowed to go to a third party and have that coverage so that they were not violating their tenants. They were the only group that was known to perform both functions, and unfortunately, they were not satisfied with the language.

Chairman Buckley requested a survey be conducted on a number of issues while processing many managed care bills. In particular, she had requested a survey with regard to alcohol and drug abuse treatment, coverage of osteoporosis, coverage of mammograms of women under 40 years of age, and contraceptives.

Tom Canfield, Division of Insurance, provided a preliminary report to Mr. Hughey and a final report completed on March 26, 1999 (Exhibit O). The list represented about 80 percent of the market share of 19 insurers. Of the 19 insurers that had been contacted, 15 had responded. The results were divided between Health Maintenance Organizations (HMO) and Planned Provider Organizations (PPO). Oral contraceptives were covered by eight of the nine HMOs, diaphragms and cervical caps were provided by six of the nine providers, Intrauterine Devices (IUD) were provided by six of the nine providers, Depro-Provera was made available by six out of seven, and Norplant was provided by five of those providers. PPO plans responded that oral contraceptives were provided by five out of six plans, diaphragms and cervical caps were provided by three of the six plans, IUD’s were provided by four out of the six plans. Depro-Provera was covered by four of the six plans and Norplant was available from three of the six providers.

Chairman Buckley summarized the findings and concluded under the HMO category, more plans covered the oral contraceptives than did not. Mr. Canfield reiterated the insurers that had not responded represented only about 6 to 7 percent of the total market share of the state, which was not a significant amount; however, even without those results, the coverage currently existing had been represented.

Mr. Beers questioned the terminology "of the market" and wondered if that meant "of the market that we can influence." Mr. Canfield responded affirmatively, it was based on premium dollars.

Mr. Beers followed by concluding that only one-third of the market could be influenced. Chairman Buckley agreed that was generally correct.

Mr. Beers continued with regard to a percentage increase in premium and stated the figure was considered in A.B. 60. Mr. Canfield replied two surveys had been sent out separately. One survey was specifically looking for information on the effect on premiums. The information regarding contraceptives was not requested at the same time.

Mr. Hettrick questioned the typical situation where the insurance was covering a family. A family policy covered everyone in the family, which meant any teenage daughter in the family would be equally covered. His concern was nothing in the bill prohibited an insurance company from providing contraceptives or anything else to a minor without permission of the parent. He had hoped to see that provision added.

Ms. Giunchigliani’s argument was the bill simply stated if the insurance provider covered prescriptions for other areas, then they would cover it for contraceptives for those narrowly defined ones. A business decision had to be made by the companies for the cost issue based on which prescriptions they had already decided to cover.

Ms. Giunchigliani stated those companies could eliminate prescriptions that were not as effective or did not impact a woman’s health care needs for the years she was of childbearing age. By eliminating other prescriptions, it resulted in a no cost impact to the state. She said it would not have a fiscal impact because it was the insurers’ decision on what to cover. It would simply revisit what they had considered to be of health care need.

Continuing, Ms. Giunchigliani said the bill did not deal with the plan selected by the family. It was a choice between them and their provider. Birth control was a medical care for women who are not regular in their menstrual cycles. The medicine could also be prescribed for severe menstrual cramps and was a health care issue, not just an issue of contraceptives. Birth control was one small facet, but concerned health care overall. The bill was never intended to dictate what plan the family chose.

Chairman Buckley added it did not disturb the law currently with regard to whether a medical provider needed to get consent to treat a 17-year-old girl. A minor generally did not have access to the insurance card. If the minor did have access, the parent would receive the explanation of benefits and had better informed access to what was going on with their child.

Mr. Hettrick agreed the billing might provide information to the parents, and he had no problem with the treatment of the health care issues mentioned. The issue was one of parental consent and currently, under existing law, the state and county health departments could treat routinely without informing parents. There was no parental consent required and he did not feel that was appropriate.

Chairman Buckley suggested that issue might be for a different bill at a different time.

Mr. Goldwater observed those were big philosophical issues but did not really deal with the bill. The problem of health care was so big that small, incremental steps needed to be taken.

ASSEMBLYWOMAN SEGERBLOM SECONDED THE MOTION.

Ms. Berman announced she would vote in favor of A.B. 60 primarily to support women’s issues.

Mr. Beers raised the rationing concept regarding the increasing costs of health care. He stated he would be voting in favor of the bill. The whole issue, as well as the other mandates that would be approached, begged a serious public policy discussion about exactly what direction health care was going in Nevada as well as the rest of the country.

Mr. Nolan pronounced he never had a dispute with the hormonal replacement portion of the bill. The issue of contraceptives was a very weighty issue and he had received a number of calls from constituents who wanted the issue included. He stated he did not agree with everything in the bill, but a lot of the issues he formerly questioned had been moderated, and he would vote in favor of the bill.

THE MOTION CARRIED UNANIMOUSLY.

Mr. Hughey stated several amendments had been proposed by the Board of Oriental Medicine. The amendments were included in attachment C in the form of a memo from Lewis Ling, Senior Deputy Attorney General. There were two categories of proposed amendments. The first proposed amendment changed some of the proposed definitions, removing the definition of gross malpractice and negligence, and changed the definition of malpractice to apply to an acupuncturist and a licensed assistant in addition to the application for a doctor of oriental medicine. There was also a proposal to change the malpractice standard in line 26 on page 2. The change would be in the language from "exercise a degree of care, diligence, and skill" to "use the reasonable care skill and knowledge."

Mr. Ling indicated the board, pursuant to an agreement with the Nevada Trial Lawyers Association, acceded to those changes and intended to bring the standards for malpractice for oriental medicine practitioners in line with standards applicable to other medical practitioners. The second category of proposed amendments related to the licensure scheme. The chart included in the work session document depicted the proposed amendments to the licensing standards for practice of oriental medicine, acupuncture, and licensed assistant. The chart was developed by staff and included the current licensing standards in statute, the changes A. B. 114 made, and what the proposed amendments were from the board. In addition, information provided by the Executive Director of the Board of Oriental Medicine regarding applicants who had taken the exams was included. Other questions were answered in the document.

Chairman Buckley called attention to the fact the committee meeting had been a little confusing. Therefore, she tried to put the burden on Mr. Ling as counsel for the board, and on the board themselves, to provide the information that clarified the committee questions and provided a comfort level with the bill. The information provided might not answer all the questions.

Ms. Giunchigliani responded she did not believe the information captured what the discussion had been. It was too restrictive for individuals to participate in the area of acupuncture. Although the board said they wanted to loosen some standards, it was not apparent they had done so in the material. It appeared it was actually tightening the regulations so there might only be 4 to 5 people who could qualify for acupuncture on a yearly basis. She did not believe that was what the board intended.

Chairman Buckley remarked she did not see Mr. Ling or anyone from the board present. They had been informed of the work session and were not in attendance. There were a few bills presented once and unless at least 8 people requested it be heard again it would never be presented again. The bill could fall into that category unless committee members felt strongly one way or the other. Unless there was further clarification and committee members requested another hearing the bill died.

Mr. Hughey introduced the bill and stated currently Nevada Revised Statutes (NRS) 687b.385 prohibited an insurer from canceling, refusing to renew, or increasing the premium for renewal of a policy of motor vehicle insurance as a result of any claims made under the policy with respect to which the insured was as not at fault. A.B. 338 extended the prohibition to policies of casualty and property insurance.

Mr. Hughey said during the hearing on A.B. 338, James L. Wadhams, Lobbyist, had testified that while the provision was not restricted to policies of motor vehicle insurance until passage of A.B. 598 of the 1997 session, the provision was originally intended to apply only to motor vehicle insurance. There were several amendments proposed. The first one had been submitted by from Jack Kim, representing Sierra Insurance Group. He said Mr. Kim had proposed clarification that the bill did not apply to worker’s compensation insurance. The second amendment was received in a letter from Matthew Sharp, Attorney, Laverty and Associates, which proposed replacing the phrase "casualty or property insurance" with "homeowners insurance." The result would limit the applicability to homeowners insurance or motor vehicle insurance. Mr. Sharp also proposed adding a provision to the end of the last sentence of the bill on line 6 "Unless the insurer can demonstrate a substantial and material increase in the risk insured against beyond that contemplated at the time the policy was issued or last renewed." That specific wording was based on the midterm cancellation provisions currently found in NRS 687b.320.

Chairman Buckley commented she did not think there was support from the committee; however, Mr. Collins stated he had worked with others and had presented some amendments. As a courtesy, Chairman Buckley had brought it back.

Mr. Collins identified opposition to the broad coverage of casualty insurance and repeated claims by an individual who was not at fault. Matthew Sharp and Mr. Kim were in attendance. No opposition to the bill remained because of the limited scope. There would now be general rate increases for all homeowners or all car insurers. The statute would continue to state an individual could not have a rate increase and would expand the scope back, but not as far as it was before 1997, and would now be a fair, consumer friendly bill.

Chairman Buckley indicated there had been opposition on behalf of Farmers Insurance by Bob Crowell, and Allstate Insurance. She asked if the amendments had been shared with them.

Mr. Collins related that Jim Warnacky of Allstate and Mr. Crowell also agreed with the language. The only difference raised was they wanted a "may" instead of a "shall" in line 3 or 4. They understood the final language indicated they would have some opportunities.

Mr. Goldwater mused he was trying to understand the amendment. He wanted to know if that was to prohibit an insurer from refusing people auto insurance or if it was all property and casualty.

Chairman Buckley indicated it was changed to number 2, to homeowners insurance. The bill was further modified by the wording "that unless the insurer can demonstrate" in paragraph 3.

Assembly Bill 477: Makes various changes concerning mobile home parks. (BDR 10-1290)

Mr. Hughey divulged several amendments were proposed to the bill and stated Chairman Buckley had proposed the first two. The first change was a proposal to add a provision to amend NRS 118b.170 by adding a new subsection 4. If the landlord required approval of a prospective buyer or tenant, one of the factors that needed to be considered was the tenant rental history on his immediate prior tenancy. The second amendment proposed was to add a provision to the bill to amend subsection 1 of NRS 118b.190 to include a 10-day notice of termination of a rental or lease agreement if a tenant failed to comply with a landlords pre-tenancy approval procedures or subsequently refuses to sign a landlord’s rental agreement. The third amendment was proposed by Marshall Schultz, private citizen, to reduce the rental late charge from $5, as was specified in the bill, down to $2.

Chairman Buckley reminded the committee that was the consensus mobile home park bill discussed for the past year and a half by the tenants and the buyers. In drafting things that were wanted by tenants and park owners were left out. Joseph Guild, attorney at law, drafted attachment K that was inadvertently left out of the first version. Marshall Schultz’s recommendation addressed the complaints that the late fee increase was too high, which was done in negotiations between the tenants and park owners. She stated she felt it was not appropriate even though the tenants wanted to keep it lower.

ASSEMBLYWOMAN BERMAN SECONDED THE MOTION.

MOTION PASSED UNANIMOUSLY.

Mr. Hughey announced the bill had been heard in work session on March 24, 1999. There were four amendments discussed at that time, but no action had been taken.

Chairman Buckley reiterated the concerns of the 1997 session. Ms. Giunchigliani had suggested a copy of the English and Spanish contract be provided at the same time. The question arose as to what would happen if the salesperson spoke Spanish and said the contract contained something different and under the provision the English prevailed.

Mr. Beers mentioned he had previously suggested the non-English version of the contract began with, "The English version of this contract is the binding document."

Chairman Buckley reminded the committee they had received a memo prepared by the research department. Robert Cedar, Associate Actuary, State of Nevada Division of Insurance, confirmed there were no statutory provisions that specifically prohibited an insurer from doing that. The testimony of Mr. Guild, who appeared with Ms. Chowning, with additional protection they would authorize it. He also stated that he was not aware of any policies in the state that had been translated.

Speaker Dini inquired if it was too complicated with 25 different languages in the state. He wondered aloud if many people would be placed in a position of having to spend a lot of money in order to comply.

Chairman Buckley replied it was permissive. The testimony was it might be used as a marketing tool. The discussion began to bog down a little when English was considered the sole source of rights and obligations, but the Spanish version did not match up. Additionally, one must consider if the Spanish version hurt the consumer. The consumer could probably go to court and claim fraud, but it would not matter because the English version would be considered sole source.

Ms. Chowning reminded the committee the contract was aimed at consumer protection while being a method of marketing business. There was a proposed amendment that took out the language "a copy of a policy or contract of insurance and substitutes that with a summary or synopsis." If the language "a summary or synopsis" was substituted it was less cumbersome and less worrisome because a summary or synopsis was not an exact translation of a policy; however, it did a lot more for the consumer than presently existed. What currently existed was a multi-page document in a language other than their primary language. Having a summary provided more than what was currently available and it gave the businesses the right to include the summary if they so desired. If that was done, the policy written in English was the sole source of the rights. If there was a dispute then the terms of the policy that were in English were controlling.

Ms. Giunchigliani questioned the benefit to the consumer other than getting the synopsis in Spanish. The guiding document was in English whether they understood what they signed or not. Part of what was discussed at the earlier committee meeting was the question of what if someone literally translated everything in Spanish. Would that cause them to be able to argue the English contract was not the sole contract.

Ms. Chowning replied she took the responsibility and translated for people all the time because there were no mortgage documents, escrow documents, or even a brief explanation in another language. The consumers took a chance if they did not speak English; however, no one was forced to purchase a home, the law required people to purchase insurance.

Ms. Giunchigliani acknowledged she understood what Ms. Chowning tried to accomplish, but she was not sure the bill actually did that.

Mr. Hughey articulated during the hearing on the bill Chairman Buckley had asked Ms. Chowning to work with the interested parties and come up with proposed amendments. Ms. Chowning had done that and the amendments were included in the work session document.

Ms. Chowning directed everyone’s attention to the proposed sign (Exhibit P). The proposed sign included the customer bill of rights. The language in the committee work document had been worked out with the Consumer Affairs Division, the Department of Motor Vehicles and Public Safety, both the new car dealers, and others involved in the repair business. The first amendment included one had the right to receive repairs from a business that was registered with the Nevada Department of Motor Vehicles and Public Safety so it included the requirement that consumers were aware garages must be registered with the State of Nevada.

In the second proposed amendment, the amount of money was changed from $25 to $50, in order to eliminate having to write a work order on every tiny repair. The industry was agreeable to that change.

Chairman Buckley allowed the committee members to read through all the amendments and ask questions to minimize the amount of time required. She asked why the amount of the bond was being reduced in section 7.

Ms. Chowning responded the bond required in salvage and automobile wreckers was $10,000 while automobile repairs rarely reached $5,000. The industry, especially the new car dealers, felt the $5,000 was more than ample and everyone else in the group and on the board agreed $5,000 was enough. In salvage and wreckers it would be $10,000. That was not in the original bill but in the amendments.

Mr. Hettrick questioned if the proposed amendment to section 1 was really desired. The new language said one had a right to receive repairs from a business registered with the Department of Nevada Motor Vehicles and Public Safety and would insure the proper repair of your vehicle. It sounded like the Department of Motor Vehicles and Public Safety guaranteed to every person they were going to get good repairs. That was not the intent and the issue was whether or not they would do a proper repair and not whether or not they were registered.

Chairman Buckley stated the sentence needed to have the verb and modifier reversed. As a customer of Nevada one had the right to receive repairs to their vehicles by a business that was registered with the Nevada Department of Motor Vehicles. She suggested the committee pass the bill in concept and take the time to refine it so it was clear. Ms. Chowning responded it was a late amendment submitted by the Consumers Affairs Division and was grammatically difficult.

Chairman Buckley suggested to make it easier to read. "As a business must be registered with The Nevada Department of Motor Vehicles and Public Safety.".

Mr. Hettrick wondered if the real intent was to receive the repairs properly done. That was what one really had a right to receive. He said the issue was not to register everyone, but to get a proper repair done to the vehicle. He suggested language that stated: "You have a right to the repair that you paid for and that it be properly done."

Chairman Buckley responded the intent was probably to inform consumers there was an agency where businesses were registered and the consumer could follow-up and file a complaint if needed.

Ms. Chowning identified the problem was it did not say "in statute" that the notification had to be at the top of the sign. That was very important when educating the consumers. They needed to be sure to go into a garage that was registered and had some link with the State of Nevada. The intent was to have one sign and not two signs, to make it as easy as possible to do business, and for the consumer to know they were in a business that was registered with the State of Nevada.

Ms. Giunchigliani clarified the intent encouraged the consumer to select a registered business. If they were not registered, there were no guarantees under state statute. The right to receive a written estimate was a part of those benefits.

ASSEMBLYWOMAN GIUNCHIGLIANI MOVED TO AMEND AND DO PASS A.B. 258.

ASSEMBLYMAN DINI SECONDED THE MOTION.

MOTION CARRIED UNANIMOUSLY.

There being no further business, Chairman Buckley adjourned the meeting at 8:20 p.m.

RESPECTFULLY SUBMITTED:

Cleone Bujalski,

Committee Secretary

APPROVED BY:

Assemblywoman Barbara Buckley, Chairman

DATE:

A.B.616 Increases penalty for certain crimes involving unauthorized, forged or counterfeit trade-mark or design. (BDR 15-1114)

A.B.387 Revises provisions governing general building contractors in certain counties. (BDR 54-1325)

A.B.633 Makes various changes to provisions concerning contractors. (BDR 54-761)

A.B.634 Makes various changes to provisions governing contractors. (BDR 54-762)

A.B.636 Establishes account from which certain owners of single-family residences may recover actual damages suffered as result of inadequate service by licensed contractor. (BDR 54-1404)

A.B.1 Limits circumstances under which person licensed to engage in business of lending may lend money secured by certificate of title to motor vehicle. (BDR 54-283)

A.B.60 Makes various changes concerning health care services related to reproductive health care and Medicaid managed care. (BDR 57-181)

A.B.114 Makes various changes to provisions governing practice of Oriental medicine. (BDR 54-643)

A.B.248 Authorizes insurer to provide copy of policy or contract of insurance in languages other than English. (BDR 57-1314)

A.B.258 Revises provisions concerning automotive repairs. (BDR 52-1232)

A.B.334 Provides for industrial insurance coverage for persons employed in casual employment. (BDR 53-86)

A.B.338 Prohibits insurer from taking certain actions regarding policy of casualty or property insurance. (BDR 57-1432)

A.B.477 Makes various changes concerning mobile home parks. (BDR 10-1290)