The Senate Committee on Commerce and Labor was called to order by Chairman Randolph J. Townsend, at 9:45 a.m., on Wednesday, February 17, 1999, in Room 2135 of the Legislative Building, Carson City, Nevada. Exhibit A is the Agenda. Exhibit B is the Attendance Roster. All exhibits are available and on file at the Research Library of the Legislative Counsel Bureau.

COMMITTEE MEMBERS PRESENT:

Senator Randolph J. Townsend, Chairman

Senator Ann O’Connell, Vice Chairman

Senator Mark Amodei

Senator Dean A. Rhoads

Senator Raymond C. Shaffer

Senator Michael A. (Mike) Schneider

Senator Maggie Carlton

STAFF MEMBERS PRESENT:

Scott Young, Committee Policy Analyst

OTHERS PRESENT:

Dino DiCianno, Deputy Executive Director, Department of Taxation

Patricia R. Walquist, President, Self-Insurers Association

Chairman Townsend introduced Senate Bill (S.B.) 133.

L. Tom Czehowski, Lobbyist, Associated General Contractors (AGC), Las Vegas Chapter, stated AGC offered two amendments to S.B. 133 (Exhibit C). Chairman Townsend asked if all the parties who had been working on this bill were aware of these amendments. Mr. Czehowski stated yes, they were.

Samuel P. McMullen, Lobbyist, Nevada Self-Insurers Association, pointed out section 11, page 3, stating there is a requirement that a copy of the industrial insurance contract be filed 60 days before the construction project is scheduled to begin. He stated this gives a 60-day period for review, disapproval, or approval by the insurance commissioner. He expressed he wanted to make some clarifying points. His intention is to try and get the contract in its basic form which relates to the items that the insurance commissioner has to review such as section 12, subsection 2. He stated the insurance commissioner will have a sufficient amount of time to review those things that are statutory qualifications for that contract. He explained this contract will have some contingencies that will be filed before the contract becomes effective.

Lenard T. Ormsby, General Counsel, Employers Insurance Company of Nevada (EICON), stated EICON is not required to file explicit contracts currently with the insurance commissioner. The labor commissioner has the ability, under the law, to request one contract. He asserted any other carrier under the law would have to file with the commissioner before the implementation of the contract. He stated the requirement that the person must be an employee of the owner causes concern.

Scott M. Craigie, Lobbyist, Liberty Mutual Insurance Group, explained a person can refer to an individual or an entity. He pointed out all requirements are clearly explained in the bill and everyone can gain from their experience. He stated the owner who ultimately accepts the responsibility is the centralizing of that safety program into one person on the site at all times.

Mr. McMullen stated the safety person must be on-site at all times. Mr. Czehowski stated that is correct; the intent is that it would be someone full-time on the site anytime construction activity is happening.

Mr. McMullen stated the Nevada Self-Insurers Association would draft an amendment that adds either the owner or the carrier. He asserted the appointing authority is the person who is ultimately responsible for maintaining the safety program on the construction site.

Mr. Ormsby stated the law requires these two individuals to be appointed and be on-site physically at any time construction is being performed. He said he had been advised that one of the projects in Clark County is operating 24 hours a day. He stressed if you have two people working 12-hour shifts, 7 days a week, there is no ability to delegate any of the responsibilities of these two individuals to a third person.

Chairman Townsend reiterated no matter how many hours a company operates, there is a requirement to have a full-time on-site person. Mr. Ormsby stated the intent is a qualified safety coordinator on-site.

Mr. Craigie stated his association interpreted the safety person is likely to be a group that is certified, experienced, and works on the site. Chairman Townsend stated projects in southern Nevada will be 24-hour projects. Chairman Townsend also emphasized these contracts have penalty clauses that are substantial if not finished on schedule.

Mr. Ormsby said the next issue, section 13, subsection 2, evolves around the appointment of one person; requiring the owner to appoint an administrator of claims. He stated he did not find the same language that this person has to be an employee of the entity that appointed the person, but on page 6, line 24, this one person must be physically present at the site anytime construction activity is taking place.

Mr. Craigie emphasized this is an accountability section. He stated that once a subcontractor bids on a particular project, the subcontractor pulls all of their workers’ compensation costs out of the bid and that is what encourages the price benefit of this program. He pointed out at the same time, the subcontractors turn their workers over to the owners’ loss control program and the owner is the one who is going to be responsible for the safety program, aggressively pursuing the safety program, and making sure that everybody is within the tenets of that safety program. Mr. Craigie stated it is the same with the claims management that is no longer handled by the subcontractor. He asserted that claims management is handled by the insurance entity that is insuring the whole entity for the owner and, therefore, the subcontractor should not be held responsible for issues over which she or he has no control. He explained the control for safety and claims management resides with the owner through that period of time while they are working on that project.

Mr. Ormsby expressed a desire to have some of the owners present to testify. He stated if a subcontractor has no vested interest in safety because the losses do not go with that subcontractor, part of the partnership between the owner, contractor, and the subcontractor disappears. He stated he understands that the owner is providing workers’ compensation insurance but from an insurers standpoint if all the losses go to that owner on a particular project, the loss is vaporized. Explaining from an insurer’s standpoint, and from his understanding of the testimony of the subcommittee, Mr. Ormsby stated he is more comfortable with the employee on the Occupational Safety Insurance Program (OSIP) as an employee of the subcontractor. He remarked the subcontractor is the employer who has the right to hire, fire, or discipline. He stated the contractor on the site has no such ability; the only thing the contractor or owner has is a contract with the subcontractor. Mr. Ormsby stated if he were advising the contractors who have a subcontractor with employees who are not operating safely or following safety guidelines, he would advise terminating the contract. Chairman Townsend inquired if the owner is no longer the responsible party once the project has started and Mr. Ormsby agreed.

Mr. Czehowski stated it is the insurance carriers and the owners who desire to have consolidated insurance programs; therefore, they are writing the workers’ compensation policies and are assuming the risk. He stated there are statutes within the state, Nevada Revised Statutes (NRS), chapter 618, and the Occupational Safety and Health Administration (OSHA) workers’ law, which put the responsibility on every employer. Mr. McMullen stated safety is a compromise.

Mr. Ormsby stated safety-related duties and responsibilities under OSHA can not be delegated to relieve the employer’s obligation, so those remain with the employer no matter what contractual situation exists for the employer. He declared the next item on page 8, starting with line 18, " . . . is liable to pay each claim for industrial insurance that is covered by the program, regardless of whether: 1. The claim is filed after the completion of the construction project;". He expressed concern that the language reads to remove the ability to perform claims acceptance, whether or not it is a work-related injury that has been filed on the site, or occurs off-site at a location that is not covered.

Mr. Ormsby said his understanding was if you insure OSIP, you will accept and be liable for every claim that is filed. He explained on page 8, line 20, whether "The claim is filed after the completion of the construction project;" there are current laws stating that claims must be filed within 90 days and he queried the effect of this language on that requirement. He insisted if a project is completed, an injury under the current law can be filed up to 90 days thereafter and upon good-cause longer than that. Mr. Ormsby stated this language seems very broad and leads him to believe 3 years after the completion of the project, if an employee comes in and files a claim, the industrial insurance must accept that claim; and it removes all other criteria that must be present for every other workers’ compensation claim.

Chairman Townsend reiterated this language needs to be consistent with normal workers’ compensation claim practices. Mr. Ormsby questioned if it is the intent of the committee to make the insurer the enforcer because the contract language can be changed to read, "a company must have a safety coordinator, there must be one or more administrators, and the safety administrator must be physically present on-site." He clarified the intent of the committee and the proponents is, for example, if one of our control people goes to the site and they do not find the administrator, because the administrator went in the ambulance with the person to the hospital, this law would say that is a breach of contract.

Mr. Craigie stated the insurance entity is viewed as the one who is responsible for the safety and claims program in coordination with the owner who is insured. He stated most people when accepting bids take into account their own ability to build a safety program which keeps the losses at a minimum; and they are the ones who have an entity on-line because they are the ones who have the investment in it. He explained if a company bids too low, and does not have a good safety program in place, it could lose millions of dollars; but if there is a good safety program, money can be made. Mr. Craigie stated the desire is for the owner to be responsible for the flexibility and to write their contract accordingly. He stated he had no difficulty in adding the language because the contracts are going to be what determines the rules, the line of authority, and the responsibility in this process.

Mr. Ormsby stated he will add those provisions in the contract, but was curious as to the legal effect because of the active involvement in the safety on these sites. He declared the projects are competitively bid, but if there is a need to have trigger notices of default every time a safety coordinator is not on-site, it makes things very unworkable.

Chairman Townsend addressed Sue S. Matuska, Senior Deputy Legislative Counsel, Legal Division, Legislative Counsel Bureau, to consult with Crystal Lesbo, Committee Policy Analyst, Research Division, Legislative Counsel Bureau, to give the committee a single sheet with all the changes.

Senator Schneider inquired what size of construction project required a full-time person on-site and if this included the small home builders. Mr. Ormsby stated it is an option. He justified the subcommittee surveyed all 50 states and many of the states have minimums, and he thought the lowest was $50 million. He asserted the marketplace really is going to drive what size project will qualify for an OSIP.

Mr. Ormsby said from an insurers standpoint, is there enough premium dollar to take on the additional responsibility and price it so that it is attractive to the owner, and how will that affect competition. He stated in his survey of the various insurance companies with whom EINCO works, $50 million-$125 million is the minimum size project considered seriously, and below that there is not enough for the carrier to take on the burden and provide the pricing.

John E. Jeffrey, Lobbyist, Southern Nevada Building and Construction Trades Council, questioned why the use of an administrator full-time, and he stated he was not sure that is going to solve the problem. He pointed out the problem that he sees is whose claim it is when somebody is injured. He explained part of that problem relates to the definition of a job or a project; because it is not unusual on a large project to have a remote laydown yard, a prefab yard, and a panel yard where they make the prefab or the concrete that goes into the structure. He pointed out that he was very concerned about the injured worker that is awaiting treatment. He stated there is a need for a mechanism in this process so if there is an injury, it is not contested that it is an on-the-job injury. He concluded the injured worker must be taken care of and then negotiate about responsibility later.

Mr. Jeffrey stated that his concern is with a full-time administrator, pointing out the administrator’s job is to reduce costs, and to determine the easiest way to do it. Senator O’Connell stated on-site workers are the workers covered by OSIP, and anybody who does work off-site is covered by whomever they are employed. Mr. Jeffrey stated he understood that information in the bill, but he thought it sets up a situation where the argument is still going to be who accepts the responsibility. Senator O’Connell stated that was debated in the committee with assurance if the person was not an on-site employee, they were strictly insured by the person they were employed by initially. Mr. Jeffrey stated it is simple until the claim is filed, then everybody wants to deny the claim. Senator O’Connell stated if the man works for you, how can you deny the claim. Mr. Jeffrey stated this problem still exists.

Mr. Jeffrey explained that another concern he has with the bill is defined to the site; i.e., a public works project like the Southern Nevada Water Authority. He stated the water authority segments the jobs such as doing a pipeline in Henderson today that will tie into a new part of the valley later on through the project. Mr. Jeffrey thought they already have 200 individual contracts on this particular job, with 200 individual contractors and at that rate, you may be talking about 1,000 contractors, 1,000 different jobs, all on one project. He stated in most of these jobs, there is going to be a problem with the boundaries of the job because in many cases, there are panel yards and so forth that are a part of the project. He pointed out in some cases it is the only work the contractor has in the area and is not like an air conditioning shop that prefabs the metal and their shop downtown delivers it to the project. He stated there are cases where these prefab yards are set up strictly for that project and when the project is gone, they are gone. He maintained the problem is to make sure when somebody is injured, they are taken care of as soon as possible without an argument as to who claims responsibility.

Daryl E. Capurro, Lobbyist, Nevada Motor Transport Association, stated he wanted to apologize to the chairman because of the need to speak to the issues during the interim committee hearings. He explained the association tried to gather information to figure out exactly how the association fit in with respect to self-insured groups (SIGs) and to the people represented by the transport association. Mr. Capurro expressed concerns from a standpoint of whether or not the regulatory agencies will have to deal with the insurance commissioner’s office and the Division of Industrial Relations (DRI). He acknowledged that the state is going from an environment that does not allow for competition other than SIGs, and then the system goes to a three-way environment as of July 1, 1999.

Mr. Capurro stated he had some concerns about the individuals he represents in the Nevada Transportation Network Self-Insured Group and their impact on the financial health of self-insured groups. He pointed out during the period of time these individuals are on those projects, they do not pay assessments to the SIGs. He stated if this becomes a widespread situation, there will be concerns about the impact on self-insured groups. He stated a good way to handle this is to evaluate how OSIPs are operating next session and then take up the question about whether to expand to rolling OSIPs. He asserted section 9 should stay in effect until such time people return to the Legislature with a report and some review about how well OSIPs have done in the last 2-year period.

Mr. Capurro stated in order to protect that program which is already authorized in this state, the SIGs, there should be consideration of some provisions that would allow section 11 to preclude SIGs from participating in OSIPs. He mentioned while there are potential areas where SIGs could operate in the OSIP atmosphere, they could not operate if there was a cap of $100 million. He explained there is no ceiling on this; a $25-million mall issue could very well be handled by a SIG because many of these projects are now being done by people who are members of EICON. He mentioned by the present language the small contractors would be precluded from operating in their own SIG and would have to operate under a contract outside of that which makes no sense. He proposed in sections 11 and 18, adding, "or a private self-insured group" because it allows someone who is a self-insured group to bid a project and to have an opportunity to participate in that project. He explained it saves OSIP money and stated if rates under SIG are less than what the contractual rates would be from an insurance company, why would anybody object to saving additional money by allowing that contractor or transportation company to participate in the project, as well as providing his expertise and his program. He stated an example would be the State of Kansas that has an opt-out provision. Mr. Capurro asked the committee to seriously consider eliminating rolling OSIPs from this bill until it can be discussed next session. He stated his request would be included in section 8, which was excluded under section 11 and 18.

Mr. Capurro indicated if a company has a dedicated off-site area that is dedicated for the purpose of the project only, there will be some concern about who is going to be picking up the cost of that claim. He stated under the concept of this bill, the owner has the loss, and it is in his interest the off-site go against the loss modification factor of the subcontractor. He insisted that is a policy decision that has to be made whether that is right or wrong, and if that project site was dedicated to building that project only, that should be included in the project parameter.

Chairman Townsend read NRS 616C.165, to which the Legislature in 1995 added:

Mr. Jeffrey stated he was aware of that wording and affirmed that it is not happening.

Gail F. Gibson, Lobbyist, Construction Industry Workers’ Compensation Group, introduced Ray O’Donnell and stated he would like him to assist the commissioner in forming a working group to write the regulations to control these OSIPs.

Raymond O’Donnell, Lobbyist, Construction Industry Workers’ Compensation Group, thanked Senator O’Connell for her efforts. He stated for the record, he did not have a comment for S.B. 133. He pointed out when a form of this bill is passed, the contractors are going to have to take this and make it work in the field where there are real-life problems including heavy loads of steel and vehicles, and workers coming in and out of gates and projects. He suggested adding to the language of the bill, "the commissioner may enact regulations." He stated that his group was very impressed with the emphasis on this bill draft and life safety. He noted in the bill, there is a requirement for a full-time qualified safety professional to be on-site at all times, but there is absolutely nothing that says who is going to enforce that requirement and how it is going to be enforced. He remarked from a regulatory standpoint, the bill requires that any proposed OSIP be filed with the commissioner 60 days prior; but there is no criteria established for the commissioner’s approval, which could cause an absurd situation. He stated there needs to be a distinction made between public and private works.

Len Nevin, Interstate Plumbing, stated he had some questions for clarification in section 9, "A consolidated insurance program must not cover more than one construction project." He inquired if this would mean if a builder figured they wanted to cover one project under consolidated insurance, and release the others, that would be their choice. He stated these builders are in the valley on separate projects and his concern is safety. He stated it is important for one project not to be more important than the others, and proper attention not be given to all of the other projects.

Mr. Czehowski stated he is also in the safety field and sometimes covers 28-30 different job sites across southern Nevada. He explained we are looking at a very large project, where the owner is going to designate a safety person who is going to be on-site 24 hours a day while that construction project is active. He stated that is not taking into account the safety people and responsibility of the subcontractors and the general contractors; but, because of the size of the project, they are dedicating a safety person for that project. Mr. Nevin stated in section 14 it makes reference to residential construction projects. Mr. Czehowski stated that section 14 is going to be eliminated.

Mr. Nevin stated he has been on many job sites that are very dangerous, for example open trenches, levels of second stories which have no fall protection, no toe guards, and stairs with no railings. He claimed on one site there was a power pole laying on the ground, with the power lines going up to the next level where the pole was standing upright. He explained he has gone on-site of some of these projects and told the contractor their work was unsafe and to correct the problem, but was told they were too busy. He stated there needs to be some authority to get the safety problem corrected immediately. He commented he understood the contractor needs to get the job completed, but safety should be a priority.

Mr. Czehowski stated he had never personally been on a job site where he did not have the authority to pull his employees off that site. He declared all contractors have a responsibility under the OSHA codes for safety in this state. He claimed he had never found where he could not negotiate and get the safety standards met, and has found the owners and the prime contractors are very cooperative in safety. Mr. Nevin stated he agreed, but it is not a perfect world, and there are people out there who will fight you "tooth and nail." He stated he has had situations where he has tried to contact different people to have something done immediately, and the end result is not accomplished because nobody could do anything. He emphasized there is a need for some enforcement where contractors can get something done immediately when a problem occurs. He mentioned he had seen photographs and some of these conditions are deplorable.

Roger Bremner, Administrator, Division of Industrial Relations (DIR), Department of Business & Industry, offered to arrange a meeting between Mr. Nevin and the chief administrative officer of OSHA in Las Vegas, and stated DIR wants to be part of the regulation development team. Chairman Townsend stated if there are safety problems, the committee wants the agency to take control immediately.

Alice A. Molasky-Arman, Commissioner, Division of Insurance, Department of Business and Industry, stated violations of the safety measures would not necessarily be under the jurisdiction of the Division of Industrial Relations (DIR).

Chairman Townsend inquired if the committee could tour one of these large projects to see how this process functions. Mr. Bremner stated arrangements would be made for a field trip to the Atlantis Casino Resort for the committee. The chairman agreed and asked Mr. Bremner to contact Crystal Lesbo, Committee Policy Analyst, to help make the visitation arrangements.

Mr. Chairman asked Ms. Molasky-Arman if there is a new current statute and ability to draft any kind of regulation for implementation of these processes and if there is a coordinated effort between her division and Mr. Bremner’s division. Ms. Molasky-Arman responded the commissioner does not appear to have general authority under chapters 616 and 617 of NRS to establish regulations. She explained there is authority under the insurance codes with respect to any insurance law. She stated she has requested the proponents of this bill to include in the proposed amendment authority for the commissioner to adopt regulations.

Chairman Townsend asked Mr. Bremner if he had enough authority under the general statute to deal with any safety issues; no matter who the insurer is, or how it is insured. Mr. Bremner stated he would have to look at that, and he thought it would not do any harm to include DIR. Chairman Townsend stated the need for no duplication and to make sure the issue of safety is covered.

Robert A. Ostrovsky, Lobbyist, Nevada Resort Association (NRA), stated the NRA are the owners for a large number of these projects and there is obviously an enormous amount of insurance coverage. He stated as the owners we encourage passage of this bill. He stated the owners also want safety on these projects and to seek out the cheapest way of doing that, whether it is through a self-insured basis or through an insured product. He asked the committee to be very careful to give authority to the appropriate divisions within government to adopt regulations, to monitor these jobs, and to give structure to be able to proceed.

J. Michael McGroarty, Attorney, Construction Industry Workers’ Compensation Group (CIWCG), stated section 11 was agreed upon with the basis that a real live qualified individual expert would be hired and put on the project. He expounded CIWCG was concerned that over the period of time that this matter appeared in front of the interim committee, the size should not be limited, and this was the mechanism that could limit the size. He expressed from what he understood, a corporation could hire an entity. He expounded that was not the intent and should not be read into the statute.

Mr. McGroarty questioned after the application process if there is nothing that can be done by anybody in this state, if somebody does not have a safety expert on the job site. He stated you can speak to the people on these projects, but you cannot enforce the safety issue; it is up to the contractor at that point and time. He stated he thought the oversight should continue after the 60 days, and there should be a clear delineation between the Division of Insurance and the DIR as to their jobs. He commented DIR has demonstrated in the past that they can regulate and enforce policies. He stated DIR should be given specific power to do so here. Chairman Townsend stated Mr. McGroarty had some very good points, and thought the committee wanted the same goal.

Mr. Craigie stated whether it is a corporate entity, a consulting group, or individual, the law specifically spells out certain requirements for the person who serves in that safety office position. He drew attention to page 4, subsection 3 of section 12, which states those qualifications are necessary. He emphasized the years of experience is a good idea to take advantage of people who have experience in the State of Nevada. He stated on the issue of size and the issue of regulatory oversight, obviously contracts and contract negotiations will decide those sizes; they will not be on small projects. He pointed out there is not enough margin for a healthy bidding process for someone to have the advantage in a small contract. He stated he has agreed with the insurance commissioner that the 60-day filing will go in and will be subject to review and acceptance. He stated all the amendments will be filed with the insurance commissioner so she and her staff can monitor what is happening with these contracts.

Chairman Townsend closed the hearing on S.B. 133 and opened the hearing on S.B. 42.

Mr. McMullen stated he would like to respectfully request to defer consideration of this bill because he had a few proposed additions that will make it more effective.

A written statement (Exhibit D) was submitted to the committee by Susan Dunt, with no testimony ensuing.

Chairman Townsend stated S.B. 42 was deferred, and opened the hearing on S.B. 54.

Mr. Bremner stated he was in support of this bill. He wanted to go on record saying this bill should not interfere in any way with the effort to obtain information from an individual entity that might be uninsured; to help determine the amount of premium owed to the uninsured fund.

Dino DiCianno, Deputy Executive Director, Department of Taxation, stated the Department of Taxation has no position concerning this particular bill except to administer the business tax. He noted that as part of the administration of the business tax, the need for certain information to verify the reporting requires two pieces of information deemed necessary, which are the number of employers and the number of employees. He pointed out the tax department is not concerned with the amount of wages being paid, stating, "We are not the Internal Revenue Service (IRS), nor do we wish to become the IRS." He acknowledged for clarification purposes the need to know as to whom or what agency is going to be receiving this sort of information. He stated having no problem working with Mr. Bremner, the DIR, Employment Security Division (ESD), or Employers Insurance Company of Nevada in order to acquire this information.

Senator O’Connell stated the commissioner of insurance had appointed the National Council on Compensation Insurance, Incorporated (NCCI), to be the statistical agent to collect data for rate making. She stressed after going through a great deal of testimony on this issue, the committee discussed the alternative of having DIR collecting the claims data rather than NCCI, and it was due to the cost. She pointed out the committee did not think that there was going to be an extra charge, plus the fact that the information they could collect could be used in other ways. She stated the testimony the committee heard was the concern that statistical information would be in somebody else’s hands, so there was a need to keep it localized; and since DIR needed the information, there was not a need to have NCCI do it.

Mr. Ostrovsky stated he made the proposal originally and this language was originally put into statute in 1993. He pointed out that at that time there was an effort on the part of the state to do a combined audit on the business tax. He pointed out this would have included information that would have been received from the program of Unemployment Security, the Department of Taxation, and from sources including workmen’s compensation. He explained this law required the department to collect information about the number of employees and the total wages paid to each of those employees. He stated the Department of Industrial Relations did not, never has, and still does not collect that information, but it will collect the information regarding employers and their insurers. He stated that information comes from Employers Insurance Company of Nevada (EICON) which does collect some information regarding its individual policyholders. He stated he did not know if they collect total wage information. He maintained the Department of Employment, Training and Rehabilitation has that information.

Mr. Ostrovsky stated this bill removes from law the requirement to collect information about the employees and total wages paid, but does not stop the Department of Industrial Relations from collecting any information it feels is necessary for the administration of chapters 616 or 617 of NRS. He declared this includes collecting information about the number of employers and wages, particularly in those cases where employers are uninsured. He pointed out the department frequently collects information so it can determine the appropriate premium and the appropriate penalty. He explained this bill allows the Department of Taxation access to any information retained in the records of the DIR for its effort in the enforcement of the collection of business statistics. He stated this bill would be used as a cleanup of the statute.

Mr. Ostrovsky stated in discussing the need for regulations, one of the regulations was a system for collecting this data for more employers which would have been a redo of a very complicated, very complex reporting and record-keeping system that exists in employment security now. He stated the department does not need to invest that kind of money for requiring employers to make those kind of reports and urged the passage of S.B. 54.

Mr. DiCianno reiterated having no problem associated with the bill and the responsibilities of DIR or with the combined audit program no longer existing. He stated the Department of Taxation does not need to keep track of wages and are only attempting to keep a reliable source for the information, in order to administer the business tax.

Chairman Townsend closed the hearing on S.B. 54 and opened the hearing on S.B. 55.

Mr. McMullen stated there are provisions in this bill that are directed to the operation and conduct of field and hearing officers. He stated, for the record, self-insurers are in a very interesting and unique position requiring they administer their own industrial insurance, but that means that they are dealing directly with the employees themselves. He pointed out there has to be some direction given relating to how the employees are guided, such as moral issues and communication issues throughout the employee ranks. He stressed the conduct of appeals and the time it takes is very hard on the employee in getting them treated medically.

Mr. McMullen pointed out the employee is usually very involved in the legal issues and their medical treatment tends to be put on hold. He stated on page 3, section 6, there was discussion in the subcommittee regarding finalizing the decision, explaining the reasons and giving people guidance to the decision, what facts were important, and what areas of the law were reviewed. He stated section 6, paragraph (a) addresses the issue because one of the suggestions thought to be very important was there be authoring of the decisions by that individual who heard the evidence and ruled on it, as hearing or appeals officers, and that it be accurate. He explained paragraph (b) addresses the issue that the prevailing party submit their version of what they think the decision should be. He stressed section 6, subsection 2, does not mean that someone cannot help them produce the decision, but the appeals officers should author it themselves.

Mr. McMullen stated section 7 had a broad genesis all the way across the board in evaluating the performance and making sure there were some standards of conduct and performance for hearing and appeals officers. He explained on top of page 4, lines 3-4, state the senior appeals officer shall determine whether those standards are being met, how they will be evaluated, and whether their decisions are rendered in a timely manner. He stated in section 7, subsection 2, line 7, the senior appeals officer may choose to have the decisions forwarded on to the chief of the hearings division. Mr. McMullen stressed subsection 3, line 11, is referring to there being training and performance standards. He stressed there should be training and obligations of that individual, and they would also be upheld in subsection 3. He stated section 14 would require the chief of the hearing division prescribe by regulation the qualifications and training required of each person employed by the hearings division, and in paragraph (c), line 37, the "Standards for the performance for appeals officers in handling appeals and contested claims . . . ."

Chairman Townsend stressed many companies and professions have continuing education and when people are on an hourly-based pay or get paid by the job, this needs to be training that can be utilized by that individual. Mr. McMullen stated that was important to all concerned. He stressed the obligation should be with the senior appeals officer and the supervision provided for training with respect to procedures and precedents. He explained in section 14, subsection 3, paragraph (a), referring to the number of hearings on merits, questioned the workload and production. He also stressed, in paragraph (b), the number of final decisions that are subject to judicial review and the results of the judicial review.

Mr. McMullen emphasized on page 11, pay particular attention to the appointment and term of the appeals officer because there was a need to make sure that they served for a substantial period of time (2 years), but then be reviewed. He explained this would give some opportunity for the evaluations and the obligation to supervise and evaluate. He stressed section 17, subsection 2, makes sure that the people that are deciding these cases have some serious and substantial experience with respect to workers’ compensation and industrial insurance law. He stressed in section 37, page 21, only the general rules of the judicial code of conduct ought to apply. He pointed out we did not mandate those rules as they appear in part 6 of the Nevada Supreme Court rules where they are graphically and fully set forth, because they adopt the standards which are no less stringent than those standards set forth in the Nevada Code of Judicial Conduct. He stated in section 37, subsection 2, line 3, on page 22, is basically a procedure to make sure that anyone who sees a violation of standards for conduct can make a complaint. He went on to read, "3. Rules of practice pursuant to which the director will hear complaints made pursuant to subsection 2."

Senator Amodei asked why not make the appeals officers subject to the rules that apply under the judicial discipline commission. Mr. McMullen stated the Nevada Supreme Court has the jurisdiction for the rules of discipline, and there is a separation of power, which is a similar issue with respect to the Administrative Branch and its employees, as opposed to the Judicial Branch. He stated it seemed to be the appropriate way for the supervisors in the department to set the standards and relate them specifically to that department.

Senator Amodei stated he thought Mr. McMullen had combined the legislative function and the judicial function for that employee as the same person. The Senator stressed there is a need to separate the process of someone making the rules and sitting in judgement at the same time. He stated true objectivity could not be obtained.

Senator Shaffer stated in the last 15 years he has always tried to put himself in the position of an injured worker. He asked if there is a pattern of inconsistency with the appeals officer and what prompted this bill to be drafted. Mr. McMullen stated one reason was inconsistency and there seemed to be impartial decisions based on relationships with practitioners.

Patricia R. Walquist, President, Self-Insurers Association, stated in answer to Senator Schaffer’s question, that there have been inconsistencies in the decisions coming out of the appeals office, to the point where the association has come before the workers’ compensation legislative committee to ask for relief. She stated she believed there are friendships among everyone because it is such a small community and there need to be some rules that everyone has to follow. Senator Shaffer asked if the rulings come out in the majority of the time on the side of the injured worker or just the opposite. Ms. Walquist stated she only brings cases before the appeals officers when she thinks she is right, and she usually prevails. She stated it would be a good idea to consider having the Governor appoint appeals officers. She thought there would be a broader range of people looking towards the job and then a larger group of people looking at the applicants. She felt the appeals panel is not necessary and only costs the insurer more money.

Mr. Ostrovsky agreed there have been problems with inconsistencies, timeliness and in how well reports are written. He stated NRA urges the committee to give consideration to this bill.

Senator O’Connell stated to the chairman if the committee would try to determine the original intent of the statutes, she could help with minutes of previous sessions.

Amy Halley Hill, Lobbyist, Retail Association of Nevada, stated she wanted to go on record supporting this legislation and echoing the comments of the Nevada Self-Insured Association, as well as the Nevada Resort Association. She stated it is very important to the hearings if the appeals division has the consistency and the responsibility over these very important areas.

Barbara Gruenewald, Attorney, Nevada Trial Lawyers’ Association, stated they are opposed to the bill. She stated this bill is another barrier to the claimant to gain benefits that have been awarded by an appeals officer and ordered by a judge. Ms. Gruenewald stated this bill creates a third level of appeal. There already are two, and this is just another way to delay and deny benefits to a claimant after a decision has been rendered in that claimants favor. She explained the appeals officer listens to the facts and the law, and many times the attorneys will write the decisions for the appeals officer. Chairman Townsend stated he did not understand the concept of the appeals officers having the attorneys write the decisions and wondered on what grounds the appeals officers received a paycheck. Ms. Gruenewald stated it is only on 5 percent of the cases the attorneys write the decisions; maybe when they are complex issues.

Brian A. Nix, Senior Appeals Officer, Hearings Division, Department of Administration, stated workers’ compensation is a result of the reforms and cases are litigated much more aggressively today than they were 5 or 10 years ago. He stated there are more cases going to district court and these cases represent large amounts of money to an employer.

Mr. Jeffrey stated he has been informed the problem is the "primary cause language." He explained a case used to be settled at the hearings level; now they have come in with medical evidence and whatever it takes to prove a case. He went on to say it is much, much tougher to prove a case and that it has to be proved at a hearings level; otherwise, it drags that claimant through the time period about which Ms. Gruenewald was speaking.

Mr. Nix stated that more cases are won by the injured worker but the employers can hold the case in court longer. Chairman Townsend said he wanted the rulings to be consistent with the law. Mr. Nix stressed sometimes there are inconsistencies for all different reasons. Chairman Townsend stated he had attended a few appeal hearings and was very impressed with the promptness. He encouraged all the members of the committee to attend a few hearings.

Senator Schneider asked if an injured worker needs to hire an attorney, and if the case is held up in court, how does the injured worker pay? Mr. Jeffrey stated that is a real problem. He explained one man who lives in Pahrump was literally hunting rabbits to eat. He emphasized the case lasted 6 months before settlement was reached. Chairman Townsend stated the main point is that the injured worker be taken care of quickly.

Ms. Guenewald stated on page 11, section 17, that it was not necessary for an appeals officer to have 2 years of experience.

Mr. Thompson stated this bill could prolong the injured worker receiving payment and therefore opposed it.

Kim Wanker, Attorney, representing Pete White Concrete, EICON, and Appliance People, stated in section 6 she thought it was a good idea for the appeals officers to draft their own opinions. She agreed the staff should be doing the drafting, copying, printing and typing. She suggested section 17 should involve a panel appointed by the Governor, consisting of representatives from labor; and employers represented through EICON, private insurance, SIGs and self-insured employers; with perhaps a need for an oversight committee.

Nancyann Leeder, Nevada Attorney for Injured Workers (NAIW), Department of Business and Industry, stated her department asks for a vote against the appeals panel. She pointed out it would cost more money, NAIW would have to have more staff, and would increase delays. She stated there cannot be total uniformity because the purpose of having a judicial proceeding is to particularize an application of the law to the particular facts.

Charles R. Nort, Lobbyist, Union Plaza, stated this bill is another administrative level which would create the burden in terms of the costs involved and the time delays. He stated the appeals officers should write their own decisions.

Mr. McMullen stated he thought the substance of this decision should be determined by, written by, and expressed by the hearing or appeals officer. Chairman Townsend said if the point is to make them write it, then make them write it, make them type it, and make them send it out. He stated not to add more wording in the bill than necessary.

Chairman Townsend recessed the meeting at 11:00 a.m. and reconvened the meeting at 5:00 p.m. Chairman Townsend closed the hearing on S.B. 55 and opened the meeting for S.B. 64.

Mr. Ormsby pointed out this bill deals with the subrogation of recovery issues such as page 3, line 28, where an injured worker retains an attorney and files a tort claim against the tort-feasor causing the accident or injuries. He stressed the injured worker must notify the insurance company or the workers’ compensation carrier; or the injured worker’s attorney must notify the insurance company that they are initiating a lawsuit. He stated there is a statutory lien, which gives the insurer a right to some of the proceeds if not all of the proceeds, depending upon the situation. He explained if a tort action has been filed, that makes it very difficult to pursue lien rights. He stressed if the tort action is after the case is settled, it makes it even more difficult to try and undo a settlement between a tort-feasor’s general liability carrier, the plaintiff’s attorney and the injured worker, because the funds are already disbursed. He urged this language is an attempt to try and have either the plaintiff’s attorney or the injured worker contact the insurer of the worker’s compensation carrier to stress the initiation of a suit. He stated on page 3, line 33, a proposal by Assemblyman Dennis Nolan, Clark County Assembly District No. 13, which voiced concern about who is going to explain the lien, or the effect of the lien, on any recovery that the plaintiff’s attorney is able to obtain for the injured worker.

Mr. Ormsby stated Assemblyman Nolan proposed a requirement that before the attorney or representative initiates a proceeding or action, the attorney must sit down and work through a settlement amount. He stated the proposal would be a statutory requirement that the attorney, before initiating any lawsuit, let the injured worker know what he/she could retain depending upon the success of the personal injury lawsuit. Chairman Townsend inquired of the procedure in this bill and how it works.

Bill Bradley, Lobbyist, Nevada Trial Lawyers’ Association, stated good practice is for the attorney to explain to the client the procedures, in the order they are going to occur, with respect to EICON’s right, or under the statute, to recover their lien. He stated when the injured worker fills out their claim form, they should be notified if there is going to be a lien, and if the injured worker brings a third-party action, they are going to have to pay back to the system. He stated the plaintiff’s lawyer should be required to notify EICON when initiating an action.

Chairman Townsend asked Mr. Bradley if the bill as written was OK. Mr. Bradley disagreed. Chairman Townsend pointed out the concern with subsection 8 that there should be some sort of notification when filling out the claim, that there may be a subrogation right. Mr. Bradley answered that is correct, and the word subrogation is on one of the insurance agreements and no one understands it. Chairman Townsend understood it to be bad usage. Mr. Bradley stated the probable amount of the settlement concerned him because an attorney cannot look at a case and state their client will receive "x" amount of dollars. Chairman Townsend said one of the concerns he had on behalf of a claimant, on line 39 of page 3, would be raising an expectation level that really is not a controllable issue. He stated it would put the professional in jeopardy, because if you tell somebody they are likely to get $1,000,000 and they only get $950,000, they are livid because they did not get the other $50,000. He pointed out that is a normal human reaction. Mr. Bradley stated the chairman was correct; that it really works both ways. He stated if a lawyer advises her/his client that there is an expectation of $1,000,000 that is bad advice. He urged if a client comes in with prejudgment expectations, a good lawyer is going to sit down with the person to advise them not to build false hopes.

Chairman Townsend remarked he understood the concept to try to get as much information to the claimant as possible. Mr. Bradley stated good practice is to try and give your client as much education at the beginning of the case as possible to make sure everybody is on the same page throughout the proceedings. Chairman Townsend said he had always received good counsel and his attorneys told him to stay out of court. Mr. Bradley stated there is no better area than applies to the workers’ compensation arena.

Donald Jayne, Lobbyist, C D S of Nevada Incorporated, stated support of subsection 7. He stressed there has been a problem to have proper notification given to the insurers that there is third-party action happening, and with this bill we could intervene and participate. He stated they have no real position on subsection 8.

Chairman Townsend closed the hearing on S.B. 64 and opened the hearing on S.B. 92.

There being no testimony, Chairman Townsend closed the hearing on S.B. 92 and opened the hearing on S.B. 175.

Kevin Higgins, Chief Deputy Attorney General, Fraud Control Unit for Industrial Insurance, Office of the Attorney General, stated that currently the statutory scheme for uninsured employers if caught the first time, is a misdemeanor; if they are caught the second time within 7 years, it is a felony. He emphasized there are some circumstances of which it would be appropriate for a first-time employer without insurance to be charged with a felony, and that is where an uninsured employer has an employee who is either killed on the job (Exhibit E) or suffers substantial bodily harm. He pointed out this language would not only make it a lot easier to prosecute these people, but also to locate them. He pointed out a first offense would still be a misdemeanor. He stressed unless an employee is killed on the job with an insured employer, it would be a Category C felony which is the same penalty for a second offense. He stated it would also include the possibility of being fined up to $50,000 payment of restitution to the insurer, for any amount they can recover, as well as reimbursement of the uninsured employer’s fund.

Chairman Townsend closed the hearing on S.B. 175.

Ms. Hill explained she wanted to address the proposed amendment to S.B. 53, which is the one regarding the information that insurers are to provide to the Division of Industrial Relations. She pointed out she had met yesterday with Mr. Wiles of the Division of Industrial Relations. She stated she hoped they had been able to address their concerns with the original bill yet still putting forth some pretty stringent guidelines.

John Wiles, Division Counsel, Division of Industrial Relations, Department of Business and Industry, urged the amendment (Exhibit F) replaces section 1 of S.B. 53 in its entirety, and replaces that with an amendment to NRS 616B.018, that is the claims indexing statute. He stated in reference to section 2, the bill currently provides an effective date of July 1, 1999. He requested if this date could be made effective upon passage and approval, therefore allowing regulatory response without the necessary forms, and be ready by July 1, 1999.

Senator Townsend inquired of Ms. Matuska if the committee could amend an entire bill as long as it is in the same section of NRS chapter 616B. Ms. Matuska stated yes.

Ms. Hill pointed out that RAN also has some amendments that have been discussed and agreed upon for S.B. 44, which is the bill regarding the self- insured groups.

There being no further testimony, the meeting was adjourned at 5:35 p.m.

RESPECTFULLY SUBMITTED:

Kathryn Lawrence,

Committee Secretary

APPROVED BY:

Senator Randolph J. Townsend, Chairman

DATE: