The Committee on Judiciary was called to order at 9:14 a.m., on Monday, May 3, 1999. Chairman Bernie Anderson presided in Room 3138 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:

Mr. Bernie Anderson, Chairman

Mr. Mark Manendo, Vice Chairman

Ms. Sharron Angle

Mr. Greg Brower

Mr. John Carpenter

Mr. Jerry Claborn

Mr. Tom Collins

Mr. Don Gustavson

Mrs. Ellen Koivisto

Ms. Sheila Leslie

Ms. Kathy McClain

Ms. Genie Ohrenschall

COMMITTEE MEMBERS ABSENT:

Mr. Dennis Nolan

Ms. Barbara Buckley

STAFF MEMBERS PRESENT:

OTHERS PRESENT:

Bill Bradley, Representative, Nevada Trial Lawyers Association

Alice Molasky-Arman, Commissioner of Insurance, Department of Business and Industry

James Wadhams, Representative, Southern Nevada Home Builders

Scott Canepa, Representative, Nevada Trial Lawyers Association

Bob Maddox, Representative, Nevada Trial Lawyers Association

Scott Rasmussen, Representative, Plumbers and Mechanical Contractors Network

Following roll call, Chairman Anderson opened the hearing on S.B. 479.

Bill Bradley, representative, Nevada Trial Lawyers Association, testified in support of S.B. 479. Mr. Bradley told the committee S.B. 479 addressed two problems with the legislative intent of the Medical Legal Screening Panel which dated back to 1985.

Mr. Bradley explained the Medical Legal Screening Panel was brought as a means to screen frivolous cases and settle meritorious cases at an early stage. In some aspects that endeavor had been very successful, and in others it had not.

Mr. Bradley explained section 1 of S.B. 479 gave preference in the setting of a screening panel hearing to anyone aged 70 or older, or who had a serious illness that might prevent them from surviving the length of time it might take for the panel to hear the case. Currently once all documents were filed with the Medical Legal Screening Panel until the case was heard could take from 6 months to 1 year. Consequently that delay was particularly troublesome to some people with terminal diagnoses who did not expect to survive for that length of time. S.B. 479 asked that such cases be expedited.

Section 3, said Mr. Bradley, was the other substantive change in the Medical Legal Screening Panel. When the Medical Legal Screening Panel was designed in 1985 there was a particular reason for making the findings of the panel admissible when there was a probability of medical malpractice, and when there was no probability. Both of those were intended to put teeth into the panel decision.

The panel had three possible findings available to it: there was a reasonable probability of negligence, there was no reasonable probability of negligence, or the panel was unable to decide whether there was a probability one way or the other. Starting in 1985, legislative intent was, when there was no ability of the panel to decide a case, to proceed as though nothing happened.

Unfortunately, Mr. Bradley continued, some defense lawyers for companies that insured doctors wished to admit the finding that the panel was unable to decide into evidence. The purpose of the panel was not to decide the case, but to screen the cases with merit from those without merit and let a jury decide meritorious cases. When the defense wanted to admit a finding of "unable to decide," they intended to place the idea in the minds of the jury that if three doctors and three lawyers could not decide, it was not possible for a jury to do so. Such was clearly beyond the legislative intent of the Medical Legal Screening Panel. The intent was to state when a case survived the screening process, it should go forward as if nothing happened. The second purpose for S.B. 479 was to make it clear the "unable to decide" finding was not admissible in a court of law.

Chairman Anderson asked if the Medical Legal Screening Panel was a unique process in 1985. Mr. Bradley said Nevada was the first in the nation to create a Medical Legal Screening Panel, but he did not know what other states had done since that time. The Medical Legal Screening Panel was in response to California legislation which was not only unfair but had not had the desired result of lowering premiums. Rather than follow that example, Nevada decided the Medical Legal Screening Panel was a much better solution.

Assemblyman Brower asked if the inability on the part of the panel to make a decision on negligence was arguably admissible, or if it came in when the defense sought to bring it in. Mr. Bradley replied some judges would let it in, some defense lawyers did not try to have it admitted. Assemblyman Brower responded the committee had dealt with the difficulty between practice of law in the northern and southern part of the state. Mr. Bradley responded in the north, defense lawyers for the most part did not like to admit a finding of "unable to decide," while the south did. The judges in the south were more inclined to allow the findings in. Because the statute was silent on the issue, it was felt S.B. 479 was necessary.

Assemblyman Brower asked who had testified in the Senate from the perspective of the physician. Mr. Bradley said Larry Mathias, on behalf of the Nevada State Medical Association, had testified.

Mr. Bradley said he discussed the concepts advanced in S.B. 479 with two defense attorneys who handled medical malpractice issues in the northern part of Nevada. Those attorneys indicated they did not have a problem with the bill. He did not discuss it with Mr. Mathias. Before the hearing in the Senate, Mr. Mathias expressed concerns only because of a lack of communication. Two lobbyists who had participated in the hearings in 1985 assured Mr. Mathias that S.B. 479 was consistent with legislative intent, as did Senator Dina Titus. Senator Titus had participated in the original Medical Legal Screening Panel bill.

Assemblyman Brower asked if that vote was unanimous, and Mr. Bradley said he believed such was the case.

Assemblyman Brower asked for an explanation of the preferential setting which already existed for persons 70 years or older and how it fit into the change in section 1 of S.B. 479. Mr. Bradley replied a trial preference had been given to those persons, but S.B. 479 addressed the same issue at the screening process. S.B. 479 had originally contained a reference to trial setting, but more and more cases were getting preferential trial setting, it was decided not to include that aspect. Southern Nevada had more difficulty in getting their cases to trial because they had a 2 to 3 year wait in comparison with northern Nevada, where the wait was only between 9 and 12 months.

Assemblyman Manendo commented S.B. 479 had passed in the Senate with a 21-0 vote.

Assemblywoman Leslie asked what percentage of the cases before the Medical Legal Screening Panel involved people over 70 years of age or who had a terminal illness. Mr. Bradley responded he felt there were between 1 percent and 8 percent of cases with those circumstances. People who specialized in medical negligence work were contacted a lot by elderly people who got what they believed to be bad care. There was a tremendous difference in medical negligence between good care with a bad outcome and bad care with a bad outcome. It became more difficult to represent elderly cases because those people became less healthy as they got older. The cases were very expensive to pursue. It was not unusual for a firm to spend from $50,000 to $100,000 to prepare for trial. Senior citizens tended to be retired, with medical expenses paid through Medicare or another source. The Medical Legal Screening Panel doubled the cost. Damages tended not to justify the financial commitment.

Assemblywoman Leslie was concerned if it took 2 years to be heard in Las Vegas, without the amendment to prioritize S.B. 479 would make the process take even longer. Mr. Bradley agreed that was the case.

Alice Molasky-Arman, commissioner of insurance, Department of Business and Industry, spoke in support of S.B. 479. Ms. Molasky-Arman said she wished to address only section 1 of S.B. 479. She said the Division of Insurance currently had a procedure in place as was identified in subsection 1, which was adopted in 1993 because it was in accord with the Rules of Civil Procedure. Her experience had been there were only three or four cases to which the amendment applied in the past 6 years. She felt S.B. 479 would let everyone recognize that claimants who were in peril had an opportunity to expedite their cases through the Medical Legal Screening Panel.

ASSEMBLYMAN CARPENTER MOVED TO DO PASS S.B. 479 AND PLACE IT ON THE CONSENT CALENDAR.

ASSEMBLYWOMAN LESLIE SECONDED THE MOTION.

THE MOTION PASSED.

Chairman Anderson closed the hearing on S.B. 479, and opened the hearing on S.B. 32.

James Wadhams, representative, Southern Nevada Home Builders, testified in support of S.B. 32. He told the committee the bill was the product of intense discussions about problems in the construction field, particularly those which resulted from the application of a bill passed in 1995. S.B. 32 represented modifications to that bill. The 1995 legislation was specifically designed to improve and enhance the opportunity for repair of construction defects which might occur in houses in Nevada.

Mr. Wadhams explained the intent of section 2 was to accelerate and facilitate complex matters, which were defined as matters that involved more than four units of housing, such as multi-unit subdivisions or properties represented by homeowners associations, with the same defects.

Scott Canepa, representative, Nevada Trial Lawyers Association, inserted his belief that Mr. Wadhams’ statement was close, but the statute actually delineated between the noncomplex and the complex matter. The noncomplex matter was defined as cases where four or fewer homeowners had construction defects, though not necessarily the same defects. Construction defects affecting five or more homeowners would be considered complex.

Mr. Wadhams elaborated that the defect was not required to be a common one, although that would be typical in many subdivision cases in southern Nevada. The purpose of section 2 of S.B. 32 was to facilitate multiple unit or complex cases so they could be processed sooner. What was changed from the 1995 statute was that in complex cases the actions or lawsuits would be filed immediately.

Chairman Anderson asked if it was possible to move from a single litigant case of four or fewer cases to a complex case by the addition of one more case, and whether it would change the status if that happened. Mr. Canepa replied that would depend on when the actions commenced. If a case which involved four or fewer homes was to proceed at one time, the intent was not to change the status because another entity wished to add to the case.

Chairman Anderson asked how the homeowner benefited from S.B. 32.

Bob Maddox, representative, Nevada Trial Lawyers Association, responded the provisions regarding complex cases greatly benefited the homeowner because the time period for bringing about resolution of a claim was shortened by approximately 6 months to 1 year. Even though a lawsuit might be filed right away, it did not become outright litigation until certain steps to mediation were completed. In a complex case, that requirement was in the context of litigation.

Chairman Anderson asked how the interests of subcontractors with problems such as getting insurance were represented. Mr. Maddox replied the provisions of S.B. 32 dealt with subcontractors. The claimant served the summons and complaint on the developer. A meeting then took place within 30 days after an answer was filed. At that meeting there would be a determination of other responsible parties. Those parties would be brought into the litigation in a timely manner. Presumably, before investigation took place the subcontractor would be involved. S.B. 32 did not address such things as insurance problems of subcontractors.

Mr. Wadhams interjected one of the difficult issues had been the lack of effectiveness of the 1995 law in complex cases. The decision was made to recommend to the committee that in those cases which would end up in litigation anyway, if the action could be started sooner there would be more of a referee process. Subcontractors experienced problems because they got involved in that process and could not effectively deal with it. Section 13 of S.B. 32 required that a contractor named in an action bring all the parties to the table which would facilitate early identification of all problems involved in the case.

Mr. Bradley told the committee in the context of construction defect litigation, all testimony in a single home problem, Nevada Revised Statute 40.600 worked fairly well as it was. The major problem was with the multiple homes process. S.B. 32 made it necessary for the contractor to have reasonable basis to name all parties within a certain length of time. During a meeting overseen by a special master, that master could determine a subcontractor who was not involved should remove himself from the proceedings.

Mr. Maddox stated Nevada law currently stated a homeowner’s direct claim was filed against a developer and the developer could not just pass it off to the contractor. Nothing in S.B. 32 would change that law. The homeowner’s rights against the developer were therefore preserved.

Scott Canepa added under the old chapter 40 of the Nevada Revised Statutes, a lot of insurance carriers did not recognize their contractual obligations to bear the expense of defending a subcontractor. Many insurers required that their insureds be sued in order to trigger their contractual obligations under the insurance policy. Further, subcontractors who might have committed negligence in the course of their construction practices could get their insurance company involved sooner, which would benefit both the homeowner and the subcontractor.

Scott Rasmussen, representative, Plumbers and Mechanical Contractors Network, said he did not find language in section 4, page 2 of S.B. 32, which addressed timeliness of filing against subcontractors by a developer. Mr. Rasmussen felt 30 to 60 days to bring subcontractors into an action might be appropriate. The bill also did not address protection of subcontractors by separate liability claims. There was no reason to bring in plumbers if a homeowner had a roofing problem.

Mr. Maddox said the word timeliness was not in S.B. 32. That was addressed in negotiations with developers, who did not want the word included. There was a process spelled out in the bill for things to proceed in an orderly fashion. Mr. Rasmussen might wish to take the issue up with representatives of developers.

Assemblyman Carpenter said he noticed while Mr. Maddox kept referring to developers, the first part of the bill spoke only to contractors. Mr. Maddox explained the definition of contractor included developers. A contractor was not necessarily a licensed general contractor. That term could also include someone who developed and sold real property. Such a person might not have done physical work on the construction of the home and would not necessarily be licensed. Mr. Maddox used the word "developer" as one who put the entire package together and sold the home.

Mr. Bradley explained the basic premise of S.B. 32 was that Nevada law currently allowed a homeowner to bring an action only against the contractor. The reason for that was the homeowner did not pick the subcontractors; the contractor selected them. The contractor was therefore responsible for the work of all the subcontractors. Because the contractors could not get subcontractors involved at an early stage, they did not want to pay to fix a problem that might have been caused by a subcontractor. It was important to remember that the homeowners did not bring lawsuits against subcontractors. That action was filed against the general contractor. The general contractor then had contractual rights against the subcontractor.

Assemblyman Carpenter asked if there was a difference between a developer and a contractor, and asked what a master developer was. Mr. Maddox said the definition of a contractor in Nevada Revised Statute 40.600 was so broad it included a subcontractor, a licensed contractor, and a developer who was not a licensed contractor. Since contractual rights were with the contractor who sold the home, that was the entity against whom the claim was initiated. A master developer did not sell homes but might have put together a huge subdivision and then sold off sections of that subdivision.

Assemblyman Collins asked if all subcontractors would automatically be brought into an action, and if retention money would be affected. Mr. Canepa replied there was no requirement that any and all subcontractors on a job be named in an action. Mr. Wadhams explained S.B. 32 would have no effect on contracts between contractors and subcontractors.

Chairman Anderson told the committee he wished to be sure all parties who would be affected by S.B. 32 had an opportunity to present their testimony because of the enormity of the issue. He stated his intention was to take no action on the bill until everyone was comfortable that all sides had been heard.

Chairman Anderson closed the hearing on S.B. 32.

There being no further business before the committee, Chairman Anderson adjourned the meeting at 11:10 a.m.

RESPECTFULLY SUBMITTED:

Lois McDonald,

Transcription Secretary

______________________________

Novella Watson-Lee,

Committee Secretary

APPROVED BY:

Assemblyman Bernie Anderson, Chairman

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