The Senate Committee on Judiciary was called to order by Chairman Mark A. James, at 8:45 a.m., on Thursday, March 11, 1999, in Room 2149 of the Legislative Building, Carson City, Nevada. The meeting was videoconferenced to the Grant Sawyer State Office Building, Room 4412, Las Vegas, 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 Mark A. James, Chairman

Senator Jon C. Porter, Vice Chairman

Senator Mike McGinness

Senator Maurice Washington

Senator Dina Titus

Senator Valerie Wiener

Senator Terry Care

STAFF MEMBERS PRESENT:

Jo Greenslate, Committee Secretary

OTHERS PRESENT:

Mark W. Gibbons, District Court Judge, Department 7, Eighth Judicial District, testified from Las Vegas. He stated there is a companion bill, S.B. 195, introduced by Senator Titus, that is similar to S.B. 315. He explained the reason for introduction of S.B. 315 is that when the Nevada Arbitration Rules were adopted in 1992, the intent of those rules as set forth in Rule 2A is to provide simplified procedures for obtaining a prompt and equitable resolution of certain civil matters. Continuing, Judge Gibbons said Nevada Arbitration Rule 18 provides that any party could request a trial de novo provided there is good-faith participation in the arbitration. He maintained that over the years many people have not taken the arbitration process seriously, and have the intent to participate minimally, knowing they can request a trial de novo and start over again at the time of trial. Therefore, according to Judge Gibbons, the Nevada Arbitration Rules have created an additional obstacle to speedy trials and increased the expenses to various parties. He suggested to ensure compliance with arbitration rules, particularly Rule 2A, Nevada needs to add stronger language to its statutes.

Judge Gibbons advised parties opposed to S.B. 315 are of the opinion the bill will cause arbitration proceedings to be drawn out and taken too seriously by the parties involved. He said the point of the arbitration program is to take it seriously and resolve disputes as much as possible at arbitration. He mentioned this legislation is similar to Nevada Revised Statutes (NRS) 41A.069 in which the jury is given an instruction in medical or dental malpractice cases of the findings of the medical/dental screening panel, and the language parallels that particular statute. Judge Gibbons remarked it is his understanding the Nevada Supreme Court has ruled the Nevada medical malpractice statute is constitutional, which gives a precedent. He surmised the adoption of this legislation would significantly improve the arbitration program and make it more effective and compliant with the intent of Nevada Arbitration Rule 2A.

Senator Titus expressed her appreciation to Judge Gibbons for being at the meeting, and advised the companion bill is exactly the same as S.B. 315. She explained she submitted the bill quite a while ago, and it was introduced before Judge Gibbons requested S.B. 315. Senator Titus agreed with Judge Gibbons' comments regarding S.B. 315. Judge Gibbons remarked the courts were not aware of Senator Titus’s bill, and that is why they drafted S.B. 315.

Senator Care inquired whether there is a provision in the arbitration rules to file an objection to a request for trial de novo. Judge Gibbons replied the procedure, under Rule 18, is that a request for trial de novo can be made. A party may then file a motion to strike the request for trial de novo and argue that there is not in good-faith participation in the arbitration proceedings. He advised the district court handles such matters on a regular basis. Senator Care mentioned a study conducted a year or two ago by the Arbitration Commissioner’s office that named particular insurance companies and the percentage of times they sought a trial de novo, what happened at trial, and that sort of thing. He asked whether Judge Gibbons had any figures from that study or a similar study. Judge Gibbons replied the Discovery Commissioner in Clark County conducted a study naming particular insurance companies that were requesting excessive trials de novo. He commented he did not know the details, but people testifying from Las Vegas would probably have more information.

Gene T. Porter, District Court Judge, Department 1, Eighth Judicial District, testified from Las Vegas that he is in support of S.B. 195 and S.B. 315. He confirmed that the Discovery Commissioner, Tom Biggar, compiled arbitration statistics from May 17, 1995 through April 18, 1997. He distributed a copy of those statistics (Exhibit C). Judge Porter explained that at the bottom of the two-page compilation, the trial de novo rate is broken down by insurance carrier as follows: Allstate Insurance Company (Allstate), 52 percent; Automobile Association of America (AAA), 57 percent; Farmers Insurance Group, 45 percent; State Farm Insurance, 34 percent; and Nevada General Insurance Company (NGIC), 87 percent. Judge Porter gave a brief historical background, saying the first arbitration bill passed by the Legislature was in 1989. It bore Senator Raggio’s name and created a threshold of $15,000. He continued, the 1993 Legislature raised the threshold from $15,000 to $25,000, and in 1995 it was raised to $40,000. He informed the committee the objective was to move personal injury automobile cases from district court into an arbitration system where there could be limited discovery, and the parties could reach an agreement. Judge Porter remarked the theory worked well for a few years. Subsequently, the percentage of individuals requesting trials de novo has increased to the point that, from a judicial perspective, the arbitration system is not working. He said the judges discussed amongst themselves a mechanism to improve the system.

Judge Porter stated the Seventh Amendment of the U.S. Constitution guarantees an individual the right to a trial by jury. He said the judges were not advocating abolishing that or in any way restricting a party’s right to a jury trial; they were merely looking for a mechanism to "put some teeth" into the arbitration system. Judge Porter mentioned Senator Care’s earlier question regarding a motion to strike a request for trial de novo. He advised the leading case from the Nevada Supreme Court on that issue is the Chamberlain decision. That decision was several years old before the arbitration system reached its current volume level. Judge Porter explained the court said that as long as there was "meaningful participation," which is the supreme court’s standard, judges are prohibited from striking a request for a trial de novo. Continuing, Judge Porter stated due to the age of that case and the turnover in the judiciary since that case was handed down, a number of judges have interpreted that provision in a different fashion. He asserted what is occurring in the Eighth Judicial District Court is the lack of a true standard between the civil division for what is and is not meaningful participation. Judges have tried to find a mechanism to discourage both plaintiffs and defendants from arbitrarily invoking the right to trial de novo in an effort to gain what they can through discovery just to go to district court where the case is tried all over again.

Judge Porter advised approximately 70 percent of the district court’s dockets are based on trial de novo cases. He remarked he makes a point of talking to jurors after a trial to ask what they thought about the process, and in each and every case, the jurors have asked him why the case was not handled through arbitration. He maintained there have been situations in which they have spent 3 to 4 days in trial for a $1,500 case. Judge Porter said that both Judge Gibbons and he have presided over medical legal cases, and in 1995 Nevada enacted the Medical Screening Panel. The panel requires a claim to be submitted to an independent review group consisting of doctors, lawyers, and a few lay individuals to determine whether or not there is probable cause to believe the conduct of a medical provider fell below the ethical standard of care. Further, the panel issues a finding that it either did or did not, or that it could not reach an agreement one way or the other. That information is currently allowed by statute to be presented to the jury. Judge Porter advised he has not seen a medical malpractice case differ from the finding of the screening panel at the conclusion of the trial.

Senator Care inquired how long parties could expect to wait before going to trial once the request for trial de novo has been made. Judge Porter replied that in Department 1 an ordinary trial setting is early in year 2001. Senator Care asked how often in a request for trial de novo the award was higher than the figure in Rule 3 when the cap was $25,000. Judge Porter answered he did not have that information, but he could give Senator Care his observations from that time as a practicing attorney and as a judge. He remarked there are a number of factors at work, not the least of which is the change in the outlook of society as a whole toward lawyers, litigants, and so forth.

Michael A. Cherry, District Court Judge, Department 17, Eighth Judicial District, stated he was at the hearing to echo his colleagues’ "call for help." He advised he is setting trials for the fall of year 2000, and requests for trials de novo would be late in year 2000 or early in year 2001. Judge Cherry said he is the case manager for the MGM Grand Hotel/Casino fire litigation and the Las Vegas Hilton fire litigation. He was of the opinion he could make an impact right away by bringing various insurance adjusters, defense attorneys, and plaintiffs’ attorneys into his chambers right after the de novo was filed to see if he could resolve the case. He commented that he was unsuccessful, because some of the insurance adjusters have said if they owe money, they will have to go to trial to get the verdict. Additionally, some of the verdicts on the de novo cases have been meager lately. In Judge Cherry’s opinion, the verdicts would be more favorable for the plaintiffs if the jury was instructed there had been a previous arbitration, and the outcome of the arbitration.

Steve Burris, Nevada Trial Lawyers’ Association, remarked his law firm has had a lot of experience with the kind of cases that end up in the arbitration system. He stated the arbitration system was adopted to give common citizens good access to a justice system where they could get a quick result without having to spend an undue amount of money. Mr. Burris stated it worked for awhile, but under the current system where either side can file for a new trial without penalty, certain insurance companies figured out that through a "war of attrition" they could use their superior resources to "beat down" plaintiffs. As an example, Mr. Burris mentioned a client who was hit by a drunk driver, suffered a fractured bone in his neck, and was out of work for many weeks. The drunk driver ran away from the scene of the accident. Mr. Burris said his client went up against the insurance company with an 87 percent de novo rate, and the arbitrator awarded his client the policy limits of the drunk driver, who filed a request for trial de novo. He said after waiting many months, the drunk driver’s insurance company agreed to the original arbitration decision. Mr. Burris asserted there are many cases in which the defendant’s attorney will wait months hoping the plaintiff will be willing to take a smaller award. In his opinion, S.B. 315 will make the playing field more level for the common person. Mr. Burris suggested the committee consider striking the language in section 1, subsection 2, paragraph (b), starting on line 22 with "However . . . " to the end of the paragraph and replacing it with language that has been approved by the Nevada Supreme Court in the case of Barrett v. Baird, 111 Nev. 1496, 908 P.2d 705 (1995).

Chairman James asked if Mr. Burris was submitting an amendment or if he just wanted to strike the language mentioned above. Brad Wilkinson, Committee Counsel, Legal Division, Legislative Counsel Bureau, noted the language referenced by Mr. Burris was added due to the decision of the Ninth Circuit in Wray v. Gregory, 61 F.3d 1414 (9^th Cir. 1995) where it was suggested language should be added regarding not giving undue weight to a panel’s findings.

Senator Care inquired what the lowest award has been to any of Mr. Burris’s clients that was de novoed by the opposing party. Mr. Burris replied that in his opinion, if a case is worth less than $7,500, it should be filed in justice court, which would take it out of the arbitration system. He added occasionally he gets a case that in his opinion is worth more than $7,500, but in the arbitrator’s opinion, it is not. He told of having cases ranging from $3,500 to $7,000 that were de novoed. Mr. Burris remarked there are a couple of insurance companies that basically de novo everything for no apparent reason, including the smallest of cases.

Rich Myers, Nevada Trial Lawyers’ Association, testified from Las Vegas that he has been practicing law for nearly 30 years on both the plaintiffs’ and defense sides in personal injury and wrongful death cases. He offered his overall perspective that from a socioeconomic viewpoint, the passing of time and the expenditure of money always benefits the insurance company representing the defendant and always works to the disadvantage of the injured person. Mr. Myers stated those in the plaintiffs’ personal injury field saw a change in corporate policy in some of the insurance companies that were mentioned by Judge Porter as having high de novo rates. He asserted that change came about a decade ago. It was led by AAA, and he is certain they made a conscious, deliberate decision at a board meeting in San Francisco that AAA was no longer going to pay the kind of money they had been paying for personal injury cases. Further, AAA was going to take advantage of the socioeconomic factor that he mentioned, hold out on a broad, system-wide basis, and keep the money out of the hands of deserving plaintiffs. He stated AAA led that change of policy and Allstate, as well as several other carriers, joined in the policy change. He maintained most carriers are now following that practice, including NGIC, which is statistically the worst offender.

Mr. Myers mentioned the statistics referred to by Judge Porter and Judge Cherry, and pointed out that currently, a trial de novo by the defense insurance company will not go to trial for 18 months to 2 years. Many plaintiffs drop out of the system over that period of time and take less than the arbitration award because of financial difficulties caused by the accident. He said this system is futile for the arbitrators. Mr. Myers reported he was an arbitrator when the system first came into being, but after being told by an insurance company representative that they routinely filed requests for trials de novo, he requested his name be removed from the list. In Mr. Myers’ opinion, if S.B. 315 or S.B. 195 passes, it will have a positive effect, because the same rule applies to medical malpractice cases. According to Mr. Myers, in medical malpractice cases, the attorneys make a strong case for the screening panel since they know information from the panel will be presented at a subsequent trial, and more cases are settled by the screening panel as a result.

Senator Care inquired whether Mr. Myers knew of any other jurisdictions with jury instructions similar to those proposed in the bill. Mr. Myers replied negatively. He did say, however, California has some sort of mandatory binding arbitration for smaller cases.

George Bochanis, Concerned Citizen, testified that he has been an attorney in Las Vegas since 1982. His practice is devoted exclusively to representing victims in automobile accident cases. He has witnessed the arbitration program since its inception in 1989 with its various jurisdictional limits and the trial de novo process. Mr. Bochanis asserted the statistics compiled by Commissioner Biggar (Exhibit C) understate to a considerable degree the number of trials de novo being filed by certain insurance companies. He reiterated that trials de novo are being filed indiscriminately and that some insurance companies use the trial de novo process as a form of economic extortion against victims in automobile accident cases. Mr. Bochanis claimed the insurance companies consistently bring in the same experts from California who call themselves "biomechanical engineers," and hire local "traffic reconstructionists" who perform flawed studies regarding the speed or angle of vehicles and so forth. He referred to his handout titled "Trials de novo filed by Allstate Insurance Company since October 1997-100% TDN rate" (Exhibit D), and explained the list consists of every arbitration award his office has had with Allstate since October 1997. Since preparation of the list, Mr. Bochanis reported his office has received three additional requests for trial de novo. He pointed out that with a 100-percent trial de novo rate, one would think the award would be in the $30,000 to $40,000 range. However, the last five awards on the list are under $10,000. Mr. Bochanis commented that the jurors are surprised when small award cases go to trial de novo rather than being settled by arbitration. In his opinion, a solution to trial de novo "abuse" is to pass S.B. 315 or S.B. 195.

Senator Care referred to three cases on Exhibit D that were settled for under $5,000, and inquired whether opposing counsel ever offers an explanation for the basis for such requests. Mr. Bochanis replied the explanation he receives is that opposing counsel was instructed to file a trial de novo. He mentioned that a week ago an insurance adjuster told members of his staff regarding a few pending cases that his firm had better accept the insurance company’s settlement offers or expect a jury trial in 2 to 3 years.

Chairman James remarked that after reviewing NRS 41A.069, the committee should consider the change to the jury instructions as set out in the two bills. He also noted it appears the appellant in the Barrett v. Baird case was an allegedly injured claimant who was saying his right to a trial by jury had been deprived by virtue of the instruction that told the results of the screening panel. Chairman James pointed out that it works both ways; the jury instruction telling the outcome of arbitration can help the defendant as well as the plaintiff. He noted the wording should be drafted in a way so as not to be partial to either side. Additionally, Chairman James said the additional language beginning at line 21, "The findings of the arbitrator . . . " has been stated in the previous sentence, and the remaining language is already included in standard jury instructions.

Mr. Wilkinson read from the Barrett v. Baird case, and surmised the jury was given supplemental instruction. He noted the Nevada Supreme Court appeared to support doing that. Mr. Wilkinson explained that is why the additional language was included in S.B. 315 and S.B. 195.

Ivan R. Ashleman II, Lobbyist, Concerned Citizen, stated he was cochairperson of the supreme court committee to implement these rules. He remarked the committee has not yet met, and he was appearing on his own behalf and offering his personal opinion. Mr. Ashleman testified that as an arbitrator, he has observed that very few of his nonpersonal injury cases are appealed; however, all of his personal injury cases have been appealed. He agreed with previous speakers that there is a "knee-jerk" process of appeal on personal injury cases. Mr. Ashleman advised the supreme court committee is having difficulty recruiting members because it is a futility. In his opinion, passage of S.B. 315 or S.B. 195 is worth a try and will not hurt anybody.

Chairman James remarked that lest anyone believes arbitrators take such cases to make money, a former partner in his law firm that handled personal injury arbitration in the past considered such cases his pro bono contribution to the firm. Mr. Ashleman added there is a $300 cap for each arbitrated case, and they sometimes last 2 or 3 days.

Bill Bradley, Lobbyist, Nevada Trial Lawyers’ Association, remarked he was at the hearing to reiterate the testimony of the judges and lawyers from Las Vegas.

Clark (Danny) Lee, Lobbyist, Nevada General Insurance Company, testified his background is not in law, but rather in insurance. It was his understanding, after reading a definition of "trial de novo" (Exhibit E), bringing information about a prior arbitration award to a trial de novo is contrary to the definition. Further, in his opinion, the amount of the arbitration award is not as important as whether it was a just arbitration. He also mentioned that he has not seen statistics indicating that certain attorneys are challenged more than others, which is the case with his company. Mr. Lee stated NGIC takes arbitration seriously. He suggested perhaps the Legislature should address how arbitration is conducted for an answer to reducing the number of trials de novo. In Mr. Lee’s opinion, S.B. 315 or S.B. 195 would jeopardize and prejudice a jury in a trial de novo.

Chairman James called Mr. Lee’s attention to the second page of Exhibit C and indicated that in approximately 71 percent of small automobile accident cases the defendant requested a trial de novo, whereas in the miscellaneous tort cases, the plaintiff requested most trials de novo. Mr. Lee maintained that in the past, insurance companies would "buy" claims because it was simpler. He said normally in arbitration the award is three times "specials," the lost wages, medical bills, and so forth. Additionally, NGIC is of the opinion that every $1 that may be wrong up front, is $3 more later on. Mr. Lee asserted insurance companies currently, instead of buying the smaller claims with which they do not agree, are challenging those claims.

Senator Care queried how NGIC determines for which cases to seek trials de novo. Mr. Lee replied NGIC has in-house counsel, who as far as he knows, influences that decision. He also advised he has more recent statistics regarding the trial de novo rate for NGIC that he will provide to the committee. Chairman James remarked that would be helpful, because according to the statistics in Exhibit C, of all the cases NGIC lost in arbitration, only seven did not result in a request for trial de novo.

Wesley M. Ayres, Discovery Commissioner, and Arbitration Commissioner, Second Judicial District Court, remarked that as the Arbitration Commissioner, he is responsible for administering the arbitration program in that district. Mr. Ayres stated in addition to the Second Judicial District Court, he was representing the arbitration commissioners in the First and Ninth Judicial Districts. He advised that all are opposed to both S.B. 315 and S.B. 195 in their current form. Further, Mr. Ayres testified that if the bill were changed in some way so that it applied strictly to the Eighth Judicial District, Clark County, there would be no opposition from the First, Second, or Ninth Judicial Districts. The primary reason given by Mr. Ayres for opposition to these bills is the negative impact they will have on the arbitration program. He explained the current program greatly reduces the cost to litigants by eliminating two of the most costly aspects of litigation: 1) the discovery process of the trial and investigation; and 2) motion practice, which is litigation of various side issues apart from the merits. Mr. Ayres remarked, as the keeper of the second district’s statistics, less than 1 percent of all cases assigned to the arbitration program in his district go to a trial de novo.

Continuing, Mr. Ayres remarked as the importance of the arbitration decision is increased, the time, effort, energy, and money that both sides pour into the arbitration will increase as well. He asserted if these bills are passed in their current form, attorneys will be forced to put on the best possible arbitration case. Chairman James requested Mr. Ayres provide a copy of the statistics to which he referred to the committee for the record.

Senator Titus asked how Mr. Ayres accounts for the difference between the trial de novo rate in northern and southern Nevada. Mr. Ayres replied he does not know. His educated guess is that Clark County has four times the caseload of the Second Judicial District. Another possible reason mentioned by Mr. Ayres is that Clark County takes a different approach to the arbitration program than northern Nevada. In northern Nevada, if both sides agree the case should not be arbitrated, in other words, if both sides agree the case has a probable jury award value of in excess of $40,000, Mr. Ayres lets the case out of the arbitration process.

Chairman James expressed doubt that the second reason Mr. Ayres offered would explain the difference. He pointed out that the average award is $11,000, and 70 percent are defendant-requested trials de novo. Chairman James said he would like to see statistics that show the results of the trials de novo compared to the results of arbitration. Additionally, Chairman James questioned Mr. Ayres’ comment that attorneys do not put on their best case to the arbitrators and are satisfied by a less than full effort. Mr. Ayres explained that the intent behind alternative dispute resolution (ADR), is to give the parties a "gentle nudge" toward settlement without litigation. He commented that in northern Nevada the parties, with good counsel, go into the program recognizing that. He said nobody wants to litigate small cases because it costs too much money. Mr. Ayres added an attorney that does not put forward the best possible case in litigation is setting himself up for a potential malpractice suit. Conversely, in arbitration an attorney can put on a case that is "good enough," and if the result is unreasonable, the attorney may then request a trial de novo.

Chairman James remarked, in his opinion, attorneys can and should put on their best case in arbitration. He opined the reason arbitration costs less is because it is a less formal procedure, but the attorney still has to discover the evidence. Further, he asserted the defendant’s viewpoint that he does not care about his case in arbitration because if the outcome is not what he wants, he can go to court, is the abuse to which Clark County witnesses have testified. In response, Mr. Ayres stated the view that the parties should put on their best case in arbitration is absolutely a legitimate viewpoint; however, it increases the costs to the people in the arbitration program. He said currently those costs can be deferred to a later time. As an example, Mr. Ayres advised if he is the defense counsel, he can go talk to a witness and see what the witness has to say. He may or may not think it is worth taking a deposition, and he can save money by not taking a deposition. He said he does not need the deposition because he knows what the facts show, and he does not have to incur the process-related costs. On the other hand, if he goes to trial, he had better get the deposition to prevent a malpractice claim later if the results are not in the defendant’s favor. Mr. Ayres agreed attorneys do have to conduct a fact finding, but it may be done in a less-expensive manner than for a jury trial.

Mr. Ayres mentioned testimony regarding the futility of the arbitration program driving some arbitrators out, and stated he has heard far more complaints from arbitrators about the burden imposed by the length of arbitration cases. He asserted if the significance of the arbitrators’ decisions is increased, they will be spending far more time on arbitration cases. Chairman James asked why the jury should not know that a case was arbitrated and the arbitrator’s findings. Mr. Ayres replied that was the next point he planned to address. However, the main point he wished to address is the negative impact of the bill on the arbitration program. In his opinion as the Arbitration Commissioner, there are good reasons not to inform the jury of the arbitrator’s findings. Mr. Ayres commented that jurors make decisions based on evidence, and the arbitrator’s findings are not evidence of anything, but simply one person’s opinion. Chairman James inquired what evidence the medical malpractice screening panel has. Mr. Ayres stated there has been a good deal of discussion about the Barrett v. Baird case, in which the Nevada Supreme Court has placed strong, consistent evidence on the nature of the panel, which the supreme court characterizes as no more than an expert opinion. One difference is that it is a panel rather than an individual making the decision. Another key difference mentioned by Mr. Ayres is that with a medical panel, the panel gives an opinion; the arbitrator does not give an opinion that there is a reasonable likelihood the defendant was negligent, for instance.

After listening to Mr. Ayres’ explanation of the way arbitration works, Senator Titus asked why arbitration is mandatory rather than voluntary. Mr. Ayres remarked that Senator Titus made an excellent point. He advised that different jurisdictions handle it in different ways. He said some jurisdictions do not have mandatory, nonbinding arbitration, but rather voluntary, binding arbitration. In other words, if the parties can agree to go into arbitration, it is binding and they cannot request a trial de novo at the end. Mr. Ayres pointed out that arbitration is only one ADR solution. There are others such as summary jury trials, mini trials, and so forth. The federal court in Nevada recently adopted a program called "early neutral evaluation," in that the magistrate judges try to settle the case before trial costs are incurred. Northern California has a great deal of success with this program. In Mr. Ayres’ opinion, the answer is to provide as many different kinds of ADR techniques as possible.

Referring to Chairman James’ earlier question as to why withhold the arbitrator’s decision from the jury, Mr. Ayres stated arbitrators make mistakes. He asserted there is no reason why the jury must be told about a result that is legally incorrect. In conclusion, Mr. Ayres said the only decision the arbitrator makes is a bottom-line decision. For example, the arbitrator may award the plaintiff $18,000 in a case, when in fact the damages were $30,000, but he found the plaintiff 40-percent negligent. The jury will never hear any explanation of how the arbitrator came to his or her decision, and that can mislead and improperly skew the results.

Theresa Badoy, Government Relations Manager, Allstate Insurance Company, testified that it was her understanding Allstate was accused earlier in the meeting of a 100-percent de novo rate. She maintained that was not accurate. Ms. Badoy explained that approximately 1 year ago it was brought to her company’s attention that the number of trials de novo being requested in the arbitration process was excessive in Las Vegas. She said it appeared to Allstate that there was an imbalance between the arbitration award and the jury award when going to trial. Ms. Badoy stated Allstate had started working with the trial bar to find a solution to the overloaded judges’ docket. She advised they have been working over the last 8 months on improving the process and shortening trials de novo. Ms. Badoy pointed out Allstate is the same insurance company in Reno as it is in Las Vegas, and she cannot recall the last trial de novo they held in Reno. She asserted their problem is in the Eighth Judicial District. Chairman James mentioned that it would be helpful to have a copy of the statistics referred to by Ms. Badoy, particularly the ones showing the jury awards were less compared to the arbitration awards. Ms. Badoy stated she brought a sample of the award amounts for arbitration and jury trials (Exhibit F). The exhibit is a sample of 15 cases from 1997 and 1998. In four of the cases there was a zero defense verdict after Allstate had made an offer.

Chairman James inquired how Allstate chose the sample cases. Ms. Badoy advised out of a total of 30 cases, the results of which were tracked after she was made aware of the problem, the sample 15 had the most complete information. Chairman James asked if there was only one case where the jury agreed with the arbitration award rather than the defense’s offer. Ms. Badoy replied negatively and repeated this is a sample of 15 of the last 30 cases. Chairman James advised that the committee needs a more inclusive sample, because if the cases are "cherry-picked," the results could be skewed. Ms. Badoy replied that she did not "cherry-pick" the cases. She said the files on the 15 excluded cases were incomplete. Chairman James pointed out that Allstate must have the information in the case files for all of its cases. He told Ms. Badoy that in order to make a decision, the committee needs more facts than a sample of 15 cases. He said in the case of medical malpractice, an actuary examined all the case files and then noted all the verdicts. Ms. Badoy commented that she gathered the sample data in a week, and that the committee was welcome to bring an independent auditing firm into her office to gather the information. Chairman James requested Ms. Badoy prepare an analysis of all the cases in her office for the committee. Ms. Badoy agreed to provide the committee with a reasonable sample from 1998.

Senator Titus pointed out that the numbers that show victories for Allstate do not necessarily mean that Allstate is always right. She referred to what Mr. Burris had mentioned about the resources that are available to major insurance companies that are not available to an individual who was involved in an automobile accident. Senator Titus asserted the win rate has to do with what the party can bring to the court as well as the merits of the case.

Senator Care asked whether Allstate has a policy to seek a trial de novo in those cases in the Eighth Judicial District where the plaintiff has been given an arbitration award. Ms. Badoy answered that she does not know if Allstate has such a policy. Chairman James inquired whether there is anybody from Ms. Badoy’s office that does have that information. Ms. Badoy replied the claims manager from her office has been working directly with Bill Bradley on Allstate’s short-trial proposal, and if the committee wished, she could bring him before the committee.

Robert B. Feldman, Lobbyist, Nevada General Insurance Company (NGIC), explained the handout that Mr. Lee distributed titled "Summary of De Novo Jury Awards (as of January 29, 1999)" (Exhibit G). He remarked the seven cases on the handout include six from district court and one from justice court, and include all of the cases NGIC has tried from an appeal on arbitration awards. He added they do have approximately 40 cases coming up for trial this year. Mr. Feldman advised NGIC is a small company without a lot of resources, and they take each case on an individual basis. He said NGIC has a committee that reviews each case, and they have accepted a few arbitration awards. Mr. Feldman referred to a report compiled by Commissioner Biggar (Exhibit H) which shows the insurance companies winning 82 percent of the last 50 jury trials. In Mr. Feldman’s opinion, this shows the arbitrators are awarding too much money. He added in the case on the list that had an arbitration award of $33,648 reduced to $13,733, NGIC offered $12,700, and the judge made NGIC pay $9,000 in legal fees for the other party because they missed their offer of judgment by $200. He asserted that is the only case they have missed, and they are very careful in their offers due to the penalty of underestimating the offer of judgment.

Continuing, Mr. Feldman advised his company has been working with the court system, where he has learned that other states also have a high trial de novo appeal rate. He maintained the only reason they are doing this is to keep insurance rates down for the consumer. Senator Titus inquired whether that means NGIC plans to decrease their rates. Mr. Feldman answered affirmatively, and mentioned he has recently filed a 6.1-percent rate decrease, and he plans to file another rate decrease. He added that in the past 5 years, NGIC has had a minus 1.7 rate factor in Nevada.

Richard E. Shrader Jr., Lobbyist, AAA Nevada Insurance Bureau, California State Automobile Association, suggested perhaps his company could provide information for a particular time frame regarding arbitration cases that ultimately went to trial and the results of those trials. He stated his industry is opposed to the bill. In his opinion it jeopardizes the trial by jury system, and it is prejudicial on one of the key points the insurance company is trying to determine; what the case is worth. Mr. Shrader maintained his company’s policy is to pay no more or no less than what the case is worth. He stated they do not automatically appeal any case, and they take the arbitration system seriously. However, Mr. Shrader added they have an obligation to their motorists to pay only what the case is worth, and he urged non-passage of the bill.

Senator Care asked Mr. Shrader if he heard Mr. Myer’s comments earlier in the meeting regarding an AAA meeting in San Francisco where the company’s strategy for handling case settlements was discussed. Mr. Shrader answered he did hear Mr. Myer’s comments but disagreed with what was said. He asserted his company’s policy is to evaluate each case carefully and to pay what is reasonable on each case. Chairman James mentioned earlier testimony regarding preparation for arbitration, and queried whether Mr. Shrader’s company prepares carefully and participates meaningfully in arbitration. Mr. Shrader replied affirmatively and stated there is no incentive to drag out the proceedings.

Chairman James expressed his concern that companies do not prepare thoroughly for arbitration, and then go to trial well prepared and have a higher success rate. He questioned whether the statistics indicated more successes for jury trials due to a lack of preparation for arbitration. Mr. Shrader responded by reiterating his company does prepare fully for arbitration, and they are interested in settling cases as timely as possible. He continued they compare reasonable arbitration awards to what, in their opinion, the jury would agree to, and they do not automatically appeal cases.

Bill Bradley, Lobbyist, Nevada Trial Lawyers’ Association, advised his association is working on a 1-day jury process, in which each side will be given 3 hours to present evidence. He emphasized, however, that he does not want anyone to be of the opinion the Nevada Trial Lawyers’ Association sees this as a cure for the current problems. Mr. Bradley said the best they can get from the industry is that it will be voluntary. The Nevada Trial Lawyers’ Association would like to have a 1-day jury trial in lieu of arbitration and in lieu of trial de novo. However, he remarked, because they are not able to get a mandatory 1-day trial instead of arbitration or trial de novo, he fears they will have the same problem and be back in front of the committee 2 years from now.

Mr. Feldman pointed out that lawyers, judges, and arbitrators, live in a "$200- an-hour world," and jurors live in a "$10- to $20-an-hour world;" and the awards that are coming from juries are based on what juries believe they are worth, whereas lawyers, judges, and arbitrators have a different perspective. He maintained his company has been accused of doing too much work for arbitration cases. Mr. Feldman also pointed out with the rapid growth in Las Vegas, one to two judges need to be added each year.

Chairman James stated, with his experience as a trial lawyer, there is no predictability that juries award more money than judges or arbitrators. Additionally, he made the point that plaintiffs most often request jury trials.

There being no further business to come before the committee, Chairman James adjourned the meeting at 10:58 a.m.

RESPECTFULLY SUBMITTED:

Jo Greenslate,

Committee Secretary

APPROVED BY:

Senator Mark A. James, Chairman

DATE: