MINUTES OF THE meeting
of the
ASSEMBLY Committee on Commerce and Labor
Seventy-First Session
May 14, 2001
The Committee on Commerce and Labor was called to order at 4:10 p.m., on Monday, May 14, 2001. Chairman Joseph Dini, Jr. presided in Room 4100 of the Legislative Building, Carson City, Nevada. Exhibit A is the Agenda. Exhibit B is the Guest List. All exhibits are available and on file at the Research Library of the Legislative Counsel Bureau.
COMMITTEE MEMBERS PRESENT:
Mr. Joseph Dini, Jr., Chairman
Ms. Barbara Buckley, Vice Chairwoman
Mr. Morse Arberry Jr.
Mr. Bob Beers
Mrs. Dawn Gibbons
Ms. Chris Giunchigliani
Mr. David Goldwater
Mr. Lynn Hettrick
Mr. David Humke
Ms. Sheila Leslie
Mr. Dennis Nolan
Mr. John Oceguera
Mr. David Parks
Mr. Richard D. Perkins
GUEST LEGISLATORS PRESENT:
Senator Mark Amodei, Capital Senatorial District
Senator Ann O’Connell, District 5, Clark County
STAFF MEMBERS PRESENT:
Vance Hughey, Committee Policy Analyst
Crystal McGee, Committee Policy Analyst
Rebekah Langhoff, Committee Secretary
OTHERS PRESENT:
Daryl Capurro, Legislative Representative, Nevada Motor Transport Association, Sparks, Nevada
Alice Molasky-Arman, Commissioner of Insurance, Department of Business and Industry, State of Nevada, Carson City, Nevada
Gary Milliken, Legislative Representative, Associated General Contractors, Las Vegas Chapter, Las Vegas, Nevada
Lawrence P. Matheis, Executive Director, Nevada State Medical Association, Las Vegas, Nevada
Marietta Nelson, M.D., President, Nevada State Medical Association, Las Vegas, Nevada
Gary Lenkeit, Ph.D., President, Nevada State Psychological Association, Las Vegas, Nevada
Dr. Frank Nemec, Member, Nevada State Medical Association, Las Vegas, Nevada
John Nowins, M.D., President, Clark County OB/GYN Society, Las Vegas, Nevada
Robert Ostrovsky, Legislative Representative, Nevada Resort Association, Employers Insurance Company of Nevada, Las Vegas, Nevada
Donald Jayne, Legislative Representative, Nevada Self-Insured Association #200, Gardnerville, Nevada
Janice Pine, Legislative Representative, Saint Mary’s Health Network, Reno, Nevada
Phillip Nowak, Chief, Managed Care and Nevada Check Up, Division of Health Care Policy and Financing, Carson City, Nevada
Barbara Gruenewald, Legislative Representative, Nevada Trial Lawyers Association, Reno, Nevada
Danny Thompson, Legislative Representative, Nevada State AFL-CIO, Carson City, Nevada
Jack Jeffrey, Legislative Representative, Southern Nevada Building & Construction Trades Council, Henderson, Nevada
Nancyann Leeder, Nevada Attorney for Injured Workers, State of Nevada, Carson City, Nevada
Lindagay Gutierrez, Representative, Glassman, Kramer & Scarff, Las Vegas, Nevada
Donna Bybee, Medical Group Administrator, Pulmonary Medicine Associates, Reno, Nevada
Pat Coward, Legislative Representative, Nevada Association of Realtors, Reno, Nevada
Melody Luetkehans, General Counsel, Nevada Association of Realtors, Reno, Nevada
Don Neibaur, Member, Nevada Association of Realtors, Carson City, Nevada
Robert C. Maddox, Legislative Representative, Nevada Trial Lawyers Association, Reno, Nevada
Pat Phillips, Deputy Chief of Staff, Lieutenant Governor Lorraine Hunt, Carson City, Nevada
Terrence McMillin, Intellectual Property Counsel, International Game Technology, Reno, Nevada
Kenneth D’Alessandro, Attorney, Sierra Patent Group, Ltd., Stateline, Nevada
Gil Hyatt, Private Citizen, Las Vegas, Nevada
Mark G. Tratos, Intellectual Property Attorney, Quint & Tratos, Las Vegas, Nevada
Michael Kern, CPA, Piercy, Bowler, Taylor & Kern, Las Vegas, Nevada
Ray Bacon, Legislative Representative, Nevada Manufacturers Association, Carson City, Nevada
Echo Penrose, Private Citizen, Reno, Nevada
Dennis Flannigan, Executive Vice President, Great Basin Federal Credit Union, Reno, Nevada
Marsha Burgess, Chair, Nevada Credit Union Advisory Council, Carson City, Nevada
A quorum was not present and Chairman Dini opened the hearing on S.B. 28 as a subcommittee.
Senate Bill 28: Authorizes formation of associations of self-insured private employers to provide health coverage. (BDR 57-590)
Senator Mark Amodei, Capital Senatorial District, indicated he served on the Governor’s Task Force for Access to Public Health Care and noted one problem dealt with by the task force was the cost of health care insurance for small businesses. Senator Amodei stated S.B. 28 took the successes experienced in allowing self-insurance for industrial insurance and made them available to small business groups. He noted current statute provided that only larger employers could take advantage of self-insurance for health insurance purposes. Senator Amodei indicated the current version of the bill was a result of coordination with the insurance commissioner and provided for two pilot programs in an attempt to lower health insurance costs for smaller businesses in the state. He stated the content of the bill was technical language that put in place the safeguards required by the insurance commissioner in terms of reserves, operations, and licensing. Senator Amodei noted the bill required a two-thirds majority vote due to the fees involved.
Daryl Capurro, Legislative Representative, Nevada Motor Transport Association, Sparks, indicated support for S.B. 28 and stated his belief that the bill was a good step forward in providing medical coverage for small business in the state of Nevada.
Assemblyman Goldwater asked whether the witness foresaw associations being able to offer a 24-hour benefits package. Mr. Capurro presumed that Mr. Goldwater was referring to combining worker’s compensation and regular health care coverage. He stated he did not know whether associations would offer a combined coverage, noting the two types of coverage were very different and felt it was highly unlikely that one organization would perform both functions.
Mr. Goldwater wondered whether combining the two different types of coverage would be prohibited.
Alice Molasky-Arman, Commissioner of Insurance, Department of Business and Industry, State of Nevada, Carson City, indicated 24-hour coverage was not currently permitted in Nevada. She noted an insurance company could be licensed for both worker’s compensation and health insurance, and the failure to combine the coverages did not prohibit the insurance company from contracting with networks of physicians who addressed both kinds of patients. Ms. Molasky-Arman indicated her department had never favored 24-hour coverage because of the vast differences in the types of coverage.
Mr. Goldwater noted his opinion that combination of coverage was potentially dangerous when association members were jointly and severally liable, and he felt 24-hour coverage should be prevented.
Senator Amodei indicated the bill was not intended to be a vehicle for 24-hour coverage and stated he had no objection to making that abundantly clear in the bill. Mr. Capurro indicated his agreement with Senator Amodei.
Chairman Dini determined a quorum was now present and called the full committee to order.
Gary Milliken, Legislative Representative, Associated General Contractors, Las Vegas Chapter, indicated support for S.B. 28 due to the rising cost of health care. He stated the association planned to form a separate association from the worker’s compensation group.
There were no others to testify and Chairman Dini closed the hearing on S.B. 28 and opened the hearing on S.B. 99.
Senate Bill 99: Makes various changes to provisions relating to prompt payment of claims to providers of health care. (BDR 57-132)
Senator Ann O’Connell, District 5, Clark County, stated S.B. 99 dealt with prompt payment to doctors and noted the Senate heard from almost 50 doctors who raised concerns about late payments. Senator O’Connell indicated there were numerous problems with third party providers and the issue had been a difficult matter to address. She believed the only remaining contentious area of the bill involved worker’s compensation, which she indicated was included because of the problems created when doctors no longer contracted to care for injured workers.
Ms. Buckley indicated she had received a great number of complaints during the interim about the Medicaid program and delays in payments, and indicated she understood the reason for the late payments was the withdrawal of necessary medical providers from the program. Ms. Buckley asked whether the Senate heard testimony similar to Ms. Buckley’s comments and asked Senator O’Connell to comment on how S.B. 99 would address the problem. Senator O’Connell indicated the Senate did not hear specifically about the issue brought up by Ms. Buckley, however, she indicated she had been personally contacted by doctors who were concerned about the issue. Senator O’Connell felt the bill provided the insurance commissioner with an ability she did not previously have to assess fines and conduct uniform reports.
Chairman Dini asked whether the legislation included a provision that prohibited contracts that did not provide for interest. Senator O’Connell indicated the bill contained such a provision.
Lawrence P. Matheis, Executive Director, Nevada State Medical Association, Las Vegas, reviewed S.B. 99, noting all of the provisions contained in the bill addressed specific issues that were raised during the interim. Mr. Matheis noted Section 1 provided that the commissioner of insurance was to adopt a single form for filing claims. He noted current law required approved claims for medical services to be paid within 30 days of receipt. Health plans that needed additional information had 20 days to request the information, and upon receipt of the requested information, the health plan had 30 days to pay the claim. Mr. Matheis stated a penalty interest rate was imposed for failure to meet the above time requirements. Additionally, any costs incurred in a legal action brought for failure to meet the requirements were to be paid by the non-prevailing party. Mr. Matheis indicated a large number of payments did not meet the time requirements and many complaints had been filed with the insurance commission. He stated it was clear that the interest penalty alone was not sufficient to get the attention of all health plans at all times and resulted in difficulty for many physicians and their practices. Mr. Matheis pointed out Section 1.5 increased the penalty interest rate for failure to pay according to statutory requirements to prime rate plus 6 percent, and required the insurance commissioner to follow up when there were complaints regarding compliance and to sanction a health plan for violations.
Mr. Matheis explained several health plans tried to avoid the interest payment provisions of the current law by including contract amendments to their providers requiring that the providers waive interest on late payments. Section 2 prohibited such a practice.
Mr. Matheis continued by indicating Sections 17, 18, and 19, simply applied basic standards to workers’ compensation plans. Section 16 addressed the issue of charging physicians and other providers to be listed on a panel. Mr. Matheis noted some plans charged egregiously for the service based on the claim they were not subject to regulation. The bill simply eliminated that practice, which Mr. Matheis noted did not exist in most parts of the country.
Senator O’Connell excused herself to return to her committee but indicated prior to leaving that she was agreeable to a friendly amendment proposed by Mr. Thomas. The amendment covered a worker who was not currently working in the state but was hired to go out of state working through a business owner in the state.
As to the concern raised by Ms. Buckley, Mr. Matheis stated the issues involved in the contracted Medicaid managed care program were a special set of problems, which required 30 days turnaround pursuant to contract.
Mr. Hettrick confirmed the penalty rate was an annual rate and not a charge on the balance. He wondered whether there could ever be a justifiable reason to waive the interest penalty, noting the bill provided interest could never be waived and he was concerned about the use of the word “never.” Mr. Matheis indicated he could not contemplate under what circumstances a delay in payment of more than 30 days could be justifiable for a clean claim for a service that was provided and was covered under the plan. He noted the intent of the provision was to discourage plans from viewing unpaid claims as low interest loans. Mr. Hettrick agreed with Mr. Matheis but reiterated his concern over the use of the word “never” and offered an instance in which waiving interest might be reasonable. Mr. Matheis responded previous language allowed for reasonableness, but he felt that some plans abused the reasonableness provisions, which necessitated the current language. Mr. Hettrick asked, if previous language allowed for reasonableness, why that language did not appear in the bill as language which was being removed. Mr. Matheis indicated reasonableness was assumed and specific language was not contained in the current statute. Mr. Hettrick indicated he had a problem with the section and believed there could be a reason or need to waive interest. Mr. Matheis noted the provision protected the provider who had provided service, submitted a claim, had the claim approved, and then was not paid within the required period of time. Mr. Hettrick agreed with Mr. Matheis, but indicated he did not read the language to only apply to the contract. Mr. Hettrick advised the bill indicated if there was interest provided for by late payment, the interest could not be waived, and wondered whether the words “without cause” should be included in the provision. Mr. Hettrick agreed interest should not be waived in the contract, but he felt there might be a need for flexibility in other instances. Mr. Matheis stated the issue was one of coercion perpetrated by forcing providers to waive a right previously provided by the Legislature.
Marietta Nelson, M.D., President, Nevada State Medical Association, Las Vegas, stated insurance companies ignored the provisions of current law and S.B. 99 was necessary to force insurance companies to comply with the law. She testified panel fees had increased and prompt payment had become even less prompt. Dr. Nelson indicated it was routine for doctors to wait many months for insurance payments.
Gary Lenkeit, Ph.D., President, Nevada State Psychological Association, Las Vegas, reviewed with the committee three unpaid invoices for services he provided in 1999. He indicated it was hard to stay in business when you did not get paid for services provided two years ago and urged the committee’s support for S.B. 99.
Chairman Dini asked what percentage of claims was paid promptly. Dr. Lenkeit noted a fairly high percentage of his claims were paid promptly because he would no longer accept certain payment plans that did not pay promptly.
Dr. Frank Nemec, Member, Nevada State Medical Association, Las Vegas, indicated his support for S.B. 99 and reminded the committee managed care organizations restricted patients’ visits to a closed panel of physicians, and in order for a physician to be on the panel he was required to pay a fee. Dr. Nemec reviewed a letter that he received from a managed care organization requiring “annual maintenance fees” ranging from $150 to $300 per provider, and noted the fees from one managed care organization for a practice with four doctors amounted to $2,800. Dr. Nemec objected to the fees as bad public policy and contrary to the public interest because (1) the amount of the fees was unreasonable; (2) it was inappropriate for a managed care organization to shift its financial burdens onto providers while continuing to collect premiums and third party administrative fees; (3) the fees raised ethical concerns; (4) the fees were exacerbating a local shortage of doctors; (5) fees were designed to restrict the number of doctors on a provider panel serving to decrease patient choice and further exacerbated the deterioration of continuity of care so often seen in managed care settings; and (6) the provider fee was ultimately a tax on illness. Dr. Nemec urged the committee to pass S.B. 99 as written.
John Nowins, M.D., President, Clark County OB/GYN Society, Las Vegas, stated he was testifying on behalf of more than 200 OB/GYN physicians in Clark County, all of whom had noted a tremendous burden in trying to get paid by insurance companies. Dr. Nowins indicated insurance companies took as long as they wanted to pay providers while requiring patients to pay premiums on time, and he wondered why insurance companies could not pay their bills on time. He asserted insurance companies had the power to pick a patient’s hospital, doctor, medication, and often delayed the prior authorization process because it was not in the insurance company’s interest to expeditiously authorize procedures it would ultimately have to pay for. Dr. Nowins noted in obstetrics every delivery had to have prior authorization despite the fact that it was obvious that a pregnant patient was going to deliver a baby, and, in spite of the prior authorization, insurance companies still did not pay the bill for the delivery within 30 days. Dr. Nowins told the committee he experienced the problem of delayed payments with most insurance companies in the state, not just a few.
A letter in support of S.B. 99 from Steven M. Sanders, M.D., was provided for the record without comment (Exhibit C).
Vice Chairwoman Buckley, who was temporarily chairing the meeting, advised the committee was very familiar with the issue and noted her belief that the position of the proponents of the bill had been clearly made. Ms. Buckley suggested that the committee hear testimony in opposition to the bill and then allow time for rebuttal by the proponents.
Robert Ostrovsky, Legislative Representative, Nevada Resort Association, Las Vegas, addressed Sections 18 and 19 of the bill which pertained to workers’ compensation, and noted those sections constituted a prompt payment requirement for workers’ compensation insurance. He advised there was no testimony in the Senate regarding slow payment in the workers’ compensation arena. Mr. Ostrovsky stated three or four parties were involved in the payment of workers’ compensation claims and the issues involved often stretched out the time for the payment of a claim. He noted the current statute contained specific language that gave the Nevada State Department of Industrial Relations the authority to fine insurers if they failed to follow the regulations of the division and properly administer the claims for benefits under workers’ compensation. Mr. Ostrovsky indicated he was not sure how to reconcile the requirement of the 30-day pay with the original requirement in workers’ compensation law to determine the compensibility of a claim. He strongly suggested the committee take a closer look at Sections 18 and 19 to determine if a problem existed which justified the inclusion of those sections.
Ms. Buckley confirmed that Mr. Ostrovsky presented similar testimony in the Senate.
Donald Jayne, Legislative Representative, Nevada Self-Insured Association #200 (NSIA), Gardnerville, indicated he testified before the Senate and his testimony was relevant to only the sections of the bill pertaining to workers’ compensation. He stated NSIA did not believe a payment problem existed for workers’ compensation purposes, and he concurred with the testimony given by Mr. Ostrovsky regarding the remedies currently available in statute.
Janice Pine, Legislative Representative, Saint Mary’s Health Network, Reno, told the committee the Saint Mary’s health plan experienced a total crash of its computer systems, a flood and a fire, and all records were destroyed or damaged. Ms. Pine suggested, as she did before the Senate, that language be added on page 2, lines 36 and 37, to allow the commissioner of insurance to provide for emergency situations. She believed if a health plan was using its best good faith efforts to provide payment, there should be some means in the bill to allow the fine to be waived.
Phillip Nowak, Chief, Managed Care and Nevada Check Up, Division of Health Care Policy and Financing, Carson City, indicated his frame of reference was limited to the conduct of the Medicaid and Nevada Check Up programs under contracts which were in place between managed care plans and the division. Mr. Nowak provided his written testimony for the record (Exhibit D), and requested the Medicaid and Nevada Check Up programs be exempted from the provisions of the bill for the following reasons:
Mr. Nowak asserted the situation as it pertained to Medicaid and Nevada Check Up was somewhat different due to the oversight provided by the division and he stated 95 percent of claims were being paid within a 30-day time frame.
Ms. Buckley noted she had received a large number of complaints regarding managed care organizations under Medicaid and indicated doctors, particularly in the field of OB/GYN, were considering no longer providing services to patients on Medicaid because of the time to process claims. Mr. Nowak indicated he had heard some of the same concerns identified by Ms. Buckley. He stated he met with the directors of OB/GYN programs at certain hospitals, and it was his opinion that the panel of doctors providing OB/GYN services had been quite stable and doctors were not withdrawing from participation.
Barbara Gruenewald, Legislative Representative, Nevada Trial Lawyers Association, Reno, asked for clarification as to how paragraph 2 continued to apply in Section 20, page 11, lines 44 and 45.
Crystal McGee, Committee Policy Analyst, stated subsection 2 of Nevada Revised Statutes (NRS) 616C.065 provided for a three times penalty if an insurer unreasonably delayed or refused to pay a claim for compensation. She noted compensation under the Nevada Industrial Insurance Act was essentially defined as the indemnity portion of a workers’ compensation claim and accident benefits. Ms. McGee indicated to the extent that Section 18 of the bill addressed accident benefits, subsection 2 provided that if an insurer unreasonably delayed or refused to pay the indemnity portion of a claim within 30 days after the insurer had been notified, the three times penalty would apply.
Danny Thompson, Legislative Representative, Nevada State AFL-CIO, Carson City, indicated support for S.B. 99 as written.
Jack Jeffrey, Legislative Representative, Southern Nevada Building & Construction Trades Council, Henderson, told the committee of a situation in which a Nevada worker was hired by a Nevada business and sent to a neighboring state to work. The business was uninsured and the worker was injured outside the state of Nevada and, accordingly, there was no coverage for the worker in the neighboring state or in Nevada. Mr. Jeffrey proposed an amendment which provided that when a worker was hired in Nevada, or regularly employed in Nevada, and was sent out of state by an uninsured employer, the worker would be covered by the Uninsured Employers Fund should the worker be injured, and the employer would be treated the same as any other uninsured employer.
Chairman Dini asked whether Mr. Jeffrey prepared the amendment in writing and Mr. Jeffrey replied the amendment was contained in Section 2 of S.B. 209.
Chairman Dini asked whether there was any cost implied in the amendment and Mr. Jeffrey replied he did not believe there was.
Mr. Thompson indicated there currently were only two cases pending that would be affected by the amendment, and he asserted the problem was an oversight that needed to be corrected.
Mr. Ostrovsky indicated he was representing both the Nevada Resort Association and Employers Insurance Company of Nevada in the current instance. He expressed concern about the proposed amendment and the removal of the words “in this state,” and noted his concern was focused on the situation in which an employee was sent out of state permanently. He suggested the amendment be modified with the addition of the words “subject to the limitations of NRS 616C.190,” which was the statute that dealt with compensation for employees who were injured out of the state. Mr. Ostrovsky indicated there was no problem with covering an employee who worked out of state as long as the coverage was limited to six months, and he stated with that change he would accept the proposal offered by Mr. Jeffrey.
Mr. Jeffrey responded to Mr. Ostrovsky’s amendment by stating he did not think the amendment worked and offered an example in which a Nevada employee could work more than six months on a job in another state. Mr. Jeffrey reiterated his concern that the injured worker’s only recourse was the Uninsured Employers Fund and if there was no fund, there was no place for the injured worker to seek help.
Chairman Dini observed that the penalty would be placed on the Nevada employer and not the employer in the state that hired the Nevada employer to perform the work.
Nancyann Leeder, Nevada Attorney for Injured Workers, State of Nevada, Carson City, indicated there were currently two cases pending which involved Nevada employees working out of state. She discussed both cases and indicated in one case a man was hired in Las Vegas to work for a Nevada employer who was insured at the time the man was hired. The employee was asked to go to Pahrump and then Arizona to set up offices, and was expected to return to Pahrump after the office in Arizona was completed. However, the employer let the insurance lapse and the employee was injured in Arizona. The employee was not covered in Arizona because he was a Nevada employee hired by a Nevada employer, and he was not covered under the Nevada Uninsured Employers Fund because he was injured out of state. Ms. Leeder said she would like to see employees who found themselves in these types of situations covered under the Uninsured Employers Fund.
Mr. Jeffrey added there was no way for the injured worker to know that the employer let the insurance lapse, and he believed that whether or not a Nevada employee was working in the state, the Nevada employee should be covered by the Uninsured Employers Fund.
Mr. Ostrovsky asserted that both cases discussed by Ms. Leeder would be covered under the modified language he proposed.
Mr. Matheis took the opportunity to respond to several issues raised, and indicated in regard to Medicaid, the time for payment after there had been a request for information had not been shortened and remained at 30 days from receipt. As to changing Section 12 to clearly exempt HMOs licensed in Nevada that have a contract relationship with Medicaid and do not pay their bills on time, Mr. Matheis pointed out it was not Medicaid who owed the provider but the Nevada licensed HMO, and the HMO should not be “let off the hook.” Mr. Matheis felt providers were entitled to interest penalties and that provision should be included in the bill to provide a disincentive for insurance companies to delay payment.
Mr. Hettrick asked whether the insurance commissioner believed she had the authority to waive the interest penalties set forth in statute.
Mr. Matheis indicated there were two parts to the penalty issue, one was what was owed to the provider and required interest on late payments, and the other was whether or not insurance companies met a minimum pattern of behavior regarding prompt payment. If insurance companies did not meet a minimum standard for prompt payment, the insurance commissioner had the authority to impose a fine, in addition to the mandated interest owed the provider.
Alice Molasky-Arman, Commissioner of Insurance, Department of Business and Industry, State of Nevada, Carson City, responded to Mr. Hettrick’s question by indicating the insurance commissioner did have the discretion to determine whether an appropriate level of prompt payment had been met by an insurance company and statutes further allowed the commissioner to impose a penalty for failure to meet the appropriate level of prompt payment. She noted the original bill had a cap on the amount of penalties that could be imposed by the insurance commissioner, but the cap was removed in order to allow the insurance commissioner to impose a greater penalty when circumstances dictated.
Dr. Nelson responded to several issues raised by stating in response to a catastrophic problem, such as described by Ms. Pine of St. Mary’s Health Network, she felt insurance companies would find doctors to be very reasonable. Dr. Nelson felt the proposal to exempt workers’ compensation from the bill should be applicable to workers’ compensation because the process was already untimely and workers were going without treatment while waiting for their claim to be acted upon. She noted she was in favor of an amendment to cover Nevada employees who were injured out of state, but did not want the issue to “bog down” the bill.
Lindagay Gutierrez, Representative, Glassman, Kramer & Scarff, Las Vegas, noted the interest penalty provision of the bill only applied to clean claims, which were already acknowledged and approved by the insurance company, and were still not paid promptly.
Donna Bybee, Medical Group Administrator, Pulmonary Medicine Associates, Reno, provided an outline of her testimony for the record (Exhibit E). She stated a group of administrators in both northern and southern Nevada discussed many of the issues in detail related to the bill and she pointed out administrators were not asking for more money but were simply asking to receive the money they were entitled to in a prompt manner. Ms. Bybee did not believe insurance companies would experience increased costs if they paid their bills on time.
Chairman Dini closed the hearing on S.B. 99 and appointed a subcommittee consisting of Mr. Parks, Mr. Hettrick, and Mr. Goldwater. Chairman Dini then opened the hearing on S.B. 418.
Senate Bill 418: Makes various changes to provisions governing sale of real property. (BDR 54-159)
Pat Coward, Legislative Representative, Nevada Association of Realtors, Reno, indicated Melody Luetkehans would review the bill with the committee and propose amendments.
Melody Luetkehans, General Counsel, Nevada Association of Realtors, Reno, provided the committee with a copy of the proposed amendments to S.B. 418 (Exhibit F). Ms. Luetkehans stated the purpose of the bill was to clean up existing statutes to reflect changes in the industry; to statutorily establish representation parameters in Nevada; and to modify some of the real estate agent’s educational requirements to raise the bar and make the industry more professional.
Ms. Luetkehans indicated the first section of the bill amended existing statutory duties of a real estate licensee which provided that unless a client and an agent agreed in writing, the agent was not responsible for independently verifying the accuracy of statements made by third parties such as home inspectors, lenders, or the client’s financial condition. She noted the amendment, as agreed with the Nevada Trial Lawyers Association (NTLA), would modify the existing language to provide for independent verification of the accuracy of a statement made by an inspector.
Ms. Luetkehans stated Section 2 established the minimum standard of care, which a real estate licensee must adhere to in dealing with the public, and statutorily, terminated the legal relationship between a client and a licensee. She noted there was a proposed amendment to Section 2 as identified on Exhibit F that had not been agreed to by the NTLA. She argued the amendment was necessary because currently all the duties of a real estate licensee were statutory duties and not general, common law, fiduciary duties.
Ms. Luetkehans indicated Section 3 amended the license law to correspond to current NRS 113.130 by ensuring it was the seller’s duty, and not the agent’s duty, to fill in the standard mandatory seller’s real property disclosure. Ms. Luetkehans emphasized that nowhere in statute was an agent relieved from his duty for nondisclosure and non-misrepresentation and she believed the proposed provisions established boundaries of a real estate licensee’s expertise.
Ms. Luetkehans noted Section 4 implemented a shortened renewal period for first-time Nevada licensees and required 30 hours of real estate education to be obtained by the licensee during the first year of licensing. Section 5 changed the initial education requirements to conform to Section 4.
Ms. Luetkehans stated the amendment for Section 6 was housekeeping in nature and reflected the understanding that buyers could be exclusively represented and a seller’s agent’s interference between a buyer and a buyer’s agent was subject to the Real Estate Division’s principals.
Ms. Luetkehans noted Section 7 amended NRS 113 by deleting unnecessary language, and indicated the amendment, as identified on Exhibit F, had been agreed to by the NTLA. She also noted an amendment in Section 8 would make Sections 4 and 5 effective on July 1, 2002, and modified the fees charged for the first year renewal.
Mr. Coward observed there was not a fiscal note on the bill, however, the bill required a two-thirds majority vote because the bill as currently written would require a new agent to pay a $210 fee after the first year.
Assemblyman Arberry inquired whether an ex-felon was permitted to obtain a real estate license. Ms. Luetkehans indicated an ex-felon could obtain a real estate license depending on the nature of the felony and when the felony occurred.
Don Neibaur, Member, Nevada Association of Realtors, Carson City, provided written testimony in support of S.B. 418 for the record (Exhibit G). He addressed Section 2, paragraph 4 of the bill, and told the committee that in addition to being involved in all aspects of the real estate industry over the last 28 years, he taught in the area of disclosure laws, agency duties, professional standards, etc. He stated it was his experience that problems related to disclosure, agency, or duty usually occurred within the first two years following the close of a transaction. Mr. Neibaur felt a reasonable time frame was needed to protect the former client, public, and other parties to a transaction, and he felt a two-year maximum time period was reasonable and fair both to the public and the real estate licensee.
Robert C. Maddox, Legislative Representative, Nevada Trial Lawyers Association, Reno, indicated the NTLA opposed S.B. 418 in the Senate and continued to oppose the bill. However, Mr. Maddox stated he had negotiated a proposed amendment with the proponents of the bill, which was provided to the committee for review (Exhibit H). Mr. Maddox indicated amendment Nos. 1 and 4, as identified on Exhibit H, were agreed upon; however, amendment Nos. 2 and 3 still met with disagreement.
Mr. Maddox noted amendment No. 2 was based on the fact the bill, as written, would cut off an innocent person’s rights potentially before the person even knew he had a claim. He noted the amendment language was “statute of limitations” language taken directly from NRS 113.150.4. Mr. Maddox provided the committee with several situations in which a buyer might not be aware of wrongful conduct or a failure to disclose for a period of time longer than two years. He noted the Nevada Supreme Court repeatedly took the position that, for purposes of statute of limitations, the time period runs from when the person knew, or should have known, of the wrongful conduct or failure to disclose. Mr. Maddox indicated amendment No. 3 was disputed by the Nevada Association of Realtors. He stated the problem with Section 3, as currently proposed, was the provisions would enable an unscrupulous real estate licensee, who knew of a defect, to be “off the hook” simply because the buyer hired an inspector to inspect the property. He suggested the entire section be eliminated from the bill or the proposed language offered in Exhibit H be added to the provision.
Assemblyman Nolan indicated an expert typically provided a list of what items were inspected and what was found, and wondered whether there would be a problem with exempting the items that were inspected by a licensed expert. Mr. Maddox felt Mr. Nolan’s suggestion was reasonable as to particular items that were inspected.
Ms. Luetkehans stated in Section 3 there was no problem amending the section as to intentional misrepresentation and to provide that when a licensee knew of a defect, and chose not to disclose the defect, the licensee would still be liable. As to the statute of limitations, Ms. Luetkehans felt the legal representation of a real estate licensee should be limited to the real estate transaction and not building liability or construction defects.
Ms. Buckley asked the witness to assume someone was buying an older home in which paint discoloration and rotted cabinets were visible and represented evidence of a serious roof leak to an experienced broker. Ms. Buckley wondered whether, under current law, the broker owed a duty of care to point out the potential roof leak. Ms. Luetkehans confirmed the broker absolutely had a duty to point out the roof leak. Ms. Buckley continued with her example and wondered whether a broker would have a duty to point out the roof leak under the same circumstances if an inspection was performed and the inspector somehow missed the roof leak. Ms. Luetkehans indicated the broker would still have a duty to point out the potential defect if the agent was aware of it, or should have been aware of it.
Ms. Buckley asked Mr. Maddox what the current law was with regard to the discovery rule. Mr. Maddox indicated the current law, contained in NRS 11.190, was three years from the date that the injured party knew or should have known that a claim existed against the real estate licensee.
Mr. Maddox stated he was agreeable to an amendment to Section 3, subsection 2(a), which provided that if the licensee actually knew or should have known of a defect, the exclusion to liability would not apply.
Chairman Dini closed the hearing on S.B. 418 and appointed a subcommittee of Ms. Leslie, Mr. Humke, and Ms. Giunchigliani. Chairman Dini then opened the hearing on S.B. 558.
Senate Bill 558: Strengthens protection of patents and trade secrets. (BDR 52-1480)
Pat Phillips, Deputy Chief of Staff for Lieutenant Governor Lorraine Hunt, Carson City, conveyed the Lieutenant Governor’s support for S.B. 558, indicating the Lieutenant Governor saw the bill as a way of improving the environment in Nevada to attract new business. Ms. Phillips provided the committee with an informational document entitled “Patent Amendment to S.B. 558” (Exhibit I).
Terrence McMillin, Intellectual Property Counsel, International Game Technology (IGT), Reno, believed IGT was the holder of the largest number of patents and patent applications in Nevada and supported the bill as written.
Kenneth D’Alessandro, Attorney, Sierra Patent Group, Ltd., Stateline, Nevada, indicated his law firm specialized in intellectual property practice and provided a letter in support of the bill for the record (Exhibit J). Mr. D’Alessandro supported S.B. 558 as written from the perspective of the patent practitioner and believed the bill would entice high tech businesses to establish or relocate into the state of Nevada.
Assemblyman Nolan related he was contracted to consult with a casino that no longer existed on why the change girls were having lower back pain. An analysis was conducted and it was discovered the problems experienced were due to the change belt. Design recommendations were made, including the design of a small type of pushcart to carry change, and the chief engineer took the design, quit, and used the design as his own. Mr. Nolan wondered whether S.B. 558 would apply to those things developed by a company on behalf of consultants who were hired to work with the company’s employees. Mr. D’Alessandro responded the bill as currently written was restricted to employer/employee relationships and the consultant situation would presumably be addressed by written agreement.
Gil Hyatt, private citizen, Las Vegas, indicated he assisted in the drafting of the bill in order to attract high tech businesses into Nevada. He stated patent provisions previously contained in the bill were removed in the Senate; however, he noted his support for the bill as it was presently written. Mr. Hyatt indicated the Nevada Development Association was also supportive of S.B. 558.
Mark G. Tratos, Intellectual Property Attorney, Quint & Tratos, Las Vegas, expressed concern with Section 1 and offered an example for analysis in which a janitor working for a high tech company invented a better broom while sweeping the floors of the high tech company. Mr. Tratos stated under S.B. 558, as currently written, the new broom would be owned by the high tech company. He suggested the section be narrowed to relate only to employees working within the scope of their employment and related to the business of the employer. Additionally, he pointed out there was no requirement of notice contained in the bill. He felt that without a notice provision requiring the employer to disclose to the employee that the employer would own all patents, the very people the bill attempted to entice into moving to the state would be discouraged from doing so. Mr. Tratos suggested the inclusion of an amendment that provided for reasonable notice to the employee that the employer would own all patents, inventions, etc. Mr. Tratos believed that the lack of such a notice provision would give rise to a significant amount of litigation in the future.
Assemblyman Hettrick asked how the bill could be limited to the business of the employer, and noted a company that made toolboxes could be anticipating getting into the broom business. Mr. Tratos responded the bill could be limited to the business of the employer by including language stating “actual or demonstratively anticipated by the employer.” He noted the employer would be required to demonstrate that it anticipated getting into the new field, and commented that an employer that had no interest in getting into a new field would waste patents because the employer did not know how to exploit that particular patent. Mr. Hettrick asked, with the Chairman’s permission, whether Mr. Tratos would be willing to provide appropriate amendment language that would cover the situation discussed.
Mr. Nolan indicated his interpretation of the bill as written was that the bill already addressed the concern raised by Mr. Tratos. Mr. Tratos felt the language could be interpreted to mean the development of a broom by a janitor was within the scope of the janitor’s employment at a high tech company, even though the high tech company invented computer software.
Mr. D’Alessandro felt Mr. Tratos offered an extreme hypothetical case, and pointed out the normal application of laws looked at employees whose job it was to invent things. Mr. D’Alessandro offered his opinion that it was not within the scope of the janitor’s employment to invent a broom.
Mr. Tratos suggested it would be beneficial to use the amendment language he suggested if the intent of the bill was to apply only to employees who were paid to invent, and noted the bill as written was so broad it would be all-inclusive. Additionally, Mr. Tratos reiterated his concern regarding the lack of a notice provision within the bill.
Michael Kern, CPA, Piercy, Bowler, Taylor & Kern, Las Vegas, indicated his firm represented a number of clients in the high tech industry and he was very much in favor of S.B. 558 both as written, and with the amendment language proposed by Mr. Tratos.
Mr. D’Alessandro addressed the notice issue raised by Mr. Tratos by asserting that a notice provision would make the state of Nevada like every other state, where the issue was in doubt unless the employer took action. He felt the intent of the bill was to create, by operation of law, ownership in the employer, and to prevent an employee who was paid to invent from walking away with ownership of an invention because the employer inadvertently forgot to provide notice.
Mr. McMillin offered his opinion that the example of the janitor posed by Mr. Tratos was a harsh example, and he could not imagine any circumstances in which a high tech company would claim the janitor’s invention because inventing was not within the scope of the janitor’s employment. He did not favor Mr. Tratos’ suggestion to narrow the provision to the related business of a company and noted companies fund research in areas in which they do not conduct business. In theory, Mr. McMillin did not object to specific notice provisions but indicated he would have to look at the notice provisions to ensure the provisions were not a “trap” for the employer. He was not in favor of changes he could not see in writing.
Ray Bacon, Legislative Representative, Nevada Manufacturers Association, Carson City, indicated support for the bill as written and told the committee of a company that invented a technology to patch leaks in airplane wing tanks which expanded into a complete series of fasteners to hold things in place in airplanes without drilling new holes. He stated the nature of the business expanded into different areas that were not initially anticipated.
Mr. Hyatt concluded the testimony on the bill by indicating Summer Hollingsworth of the Nevada Development Association, Bob Shriver, Executive Director of the Commission on Economic Development, Chuck Alvey of the Economic Development Authority of Western Nevada, and Michael Thomas of the Nevada Technical Alliance all supported S.B. 558.
Chairman Dini closed the hearing on S.B. 558 and opened the hearing on S.B. 566.
Senate Bill 566: Requires release of certain liens created by former state industrial insurance system. (BDR S-1478)
Echo Penrose, private citizen, Reno, provided her written testimony (Exhibit K), a packet of exhibits that supported her testimony (Exhibit L), and a printout identifying expired liens filed by the former State Industrial Insurance System (SIIS) in Washoe County (Exhibit M). Ms. Penrose told the committee the issue arose for her when a lien was filed against her property by SIIS pursuant to NRS 616B.251. She stated her research revealed over 900 liens filed by SIIS which were recorded, never perfected, and had expired. Ms. Penrose noted the intent of S.B. 566 was to release expired liens filed by SIIS, and noted she was unable to obtain a loan for her business because of the expired lien.
Chairman Dini asked whether the bill as written adequately addressed the problem she experienced.
Ms. Penrose indicated the bill as currently written addressed her problem; however, she noted there were many other liens on record that would not be resolved by the bill without an amendment and suggested the word “expired” be added to the language in Section 1, subsection 2(a).
Ms. Buckley inquired whether the premiums were paid when SIIS refused to release the lien filed against Ms. Penrose. Ms. Penrose indicated the premiums were not paid. Ms. Buckley noted that when a lien was satisfied, the lien should be released promptly.
Robert Ostrovsky, Legislative Representative, Employers Insurance Company of Nevada (EICON), Las Vegas, advised that the business operated by Ms. Penrose was determined by SIIS to be an uninsured employer. Mr. Ostrovsky stated the business did not purchase a policy of insurance because Ms. Penrose believed she was not required to purchase insurance and indicated litigation on the issue had been ongoing and was still pending. He indicated the lien could not be perfected until the Supreme Court ruled that the lien was appropriate and EICON believed that the lien was still good. Mr. Ostrovsky stated he did not believe S.B. 566 would solve Ms. Penrose’s problem.
Ms. Buckley asked whether there was any exemption to mandatory insurance for which Ms. Penrose might have qualified. Mr. Ostrovsky responded there was not an exemption because there were employees of the company, and explained the issue being litigated was whether those people were employees or independent contractors.
Ms. Buckley asked if liens automatically expired under existing law whether they were paid or unpaid. Mr. Ostrovsky indicated his understanding that liens, in the case of SIIS, did automatically expire after three years whether they were paid or unpaid. Ms. Buckley asked whether liens were renewable and Mr. Ostrovsky did not know.
Ms. Penrose responded to statements made by Mr. Ostrovsky by reviewing the lien found at Exhibit L, page 7, with the committee. Ms. Penrose believed SIIS was required, pursuant to NRS 616B.251, to perfect their lien within three years of the date the premium became due, and she noted the lien filed against her by SIIS indicated a due date of August 25, 1995. Accordingly, it was Ms. Penrose’s position that the lien filed against her was expired.
Ms. Penrose stated the pending litigation referred to by Mr. Ostrovsky was simply a judicial review and the Supreme Court ruled the review was late and remanded the issue back to the district court. She noted the issue of whether the people performing work for her were employees or independent contractors had not been ruled on by any court.
Mr. Ostrovsky asserted EICON clearly was involved in a very complicated legal matter with Ms. Penrose. He indicated the bill as written was acceptable to EICON, and urged the committee to pass S.B. 566 in its first reprint version.
Chairman Dini closed the hearing on S.B. 566 and turned the committee’s attention to the scheduled work session. Chairman Dini suggested the committee consider S.B. 28, heard earlier in the meeting.
Senate Bill 28: Authorizes formation of associations of self-insured private employers to provide health coverage. (BDR 57-590)
Chairman Dini noted there was no opposition to the bill.
ASSEMBLYWOMAN GIBBONS MOVED TO DO PASS S.B. 28.
ASSEMBLYMAN HETTRICK SECONDED THE MOTION.
THE MOTION PASSED UNANIMOUSLY BY THOSE PRESENT. SPEAKER PERKINS, ASSEMBLYWOMAN BUCKLEY, ASSEMBLYMAN ARBERRY, ASSEMBLYMAN GOLDWATER AND ASSEMBLYMAN NOLAN WERE NOT PRESENT FOR THE VOTE.
Chairman Dini suggested the committee consider S.B. 558.
Senate Bill 558: Strengthens protection of patents and trade secrets. (BDR 52-1480)
Chairman Dini offered his opinion that the bill was in good shape, had the right kind of support from good companies, and was not in need of an amendment.
ASSEMBLYWOMAN LESLIE MOVED TO DO PASS S.B. 558.
ASSEMBLYMAN PARKS SECONDED THE MOTION.
Mr. Beers abstained from the vote.
THE MOTION PASSED UNANIMOUSLY BY THOSE PRESENT. SPEAKER PERKINS, ASSEMBLYWOMAN BUCKLEY, ASSEMBLYMAN ARBERRY, ASSEMBLYMAN GOLDWATER, AND ASSEMBLYMAN NOLAN WERE NOT PRESENT FOR THE VOTE. ASSEMBLYMAN BEERS ABSTAINED FROM THE VOTE.
A work session document was provided for reference (Exhibit N) and Chairman Dini asked the committee to consider S.B. 2.
Senate Bill 2: Requires provider of insurance coverage for prescription drugs to disclose certain information regarding use of formulary and to continue coverage for prescribed drug under certain circumstances. (BDR 57-597)
ASSEMBLYWOMAN GIUNCHIGLIANI MOVED TO DO PASS S.B. 2.
ASSEMBLYWOMAN GIBBONS SECONDED THE MOTION.
THE MOTION PASSED UNANIMOUSLY BY THOSE PRESENT. SPEAKER PERKINS, ASSEMBLYMAN ARBERRY, ASSEMBLYMAN GOLDWATER, AND ASSEMBLYMAN NOLAN WERE NOT PRESENT FOR THE VOTE.
Chairman Dini directed the committee’s attention to S.B. 330.
Senate Bill 330: Makes various changes relating to financial businesses. (BDR 54-748)
Dennis Flannigan, Executive Vice President, Great Basin Federal Credit Union, Reno, provided the committee with an amendment to S.B. 330 (Exhibit O) and requested the amendment be substituted for the amendment he proposed earlier. Mr. Flannigan reviewed the amendment with the committee and introduced Marsha Burgess, who was the author of the initial amendment.
Marsha Burgess, Chair, Nevada Credit Union Advisory Council, Carson City, indicated she submitted the original amendment to S.B. 330; however, she stated she was in agreement to the substitution of the amendment provided by Mr. Flannigan which she felt would simplify the bill.
Ms. Buckley wondered why it was beneficial to pass a law indicating that a mortgage company conducting business in Nevada would lose its license if it changed its address to an address outside of the state.
Vance Hughey, Committee Policy Analyst, indicated his recollection of the testimony was mortgage companies operating outside of the state, which would not be required to be regulated, would only be those that did not conduct business in Nevada and did not conduct business with people within the state.
Chairman Dini asked whether any of the witnesses present could clarify the provision and no one could.
Mr. Hughey clarified the correct placement of introductory wording in the proposed amendment with Mr. Flannigan.
Chairman Dini confirmed there were provisions contained within the bill that allowed the division to charge $40 per hour to conduct audits and provided for availability of books and accounts. He further noted there was not testimony in opposition to the bill.
Ms. Buckley expressed concern with Section 2, subsections 4 and 5. Mr. Hughey indicated subsection 4 could be interpreted as an exclusion, however, the use of the word “or” prior to subsection 5 was designed to ensure that if the transaction was exclusively between a licensee, who was located outside of the state, and a person who was located outside of the state, the chapter would not apply to that transaction.
Ms. Buckley noted Section 3 indicated a person could apply for a license for an office outside of the state from which the applicant would conduct business and she did not want to create a loophole in the law.
Chairman Dini suggested the committee delay action on the bill until the insurance commissioner could appear and provide further explanation.
Chairman Dini directed the committee’s attention to S.B. 378.
Senate Bill 378: Revises provisions relating to dentistry and dental hygiene. (BDR 54-1230)
Chairman Dini noted there was no testimony in opposition to the bill and no amendments were proposed.
ASSEMBLYWOMAN GIUNCHIGLIANI MOVED TO DO PASS S.B. 378.
ASSEMBLYMAN HETTRICK SECONDED THE MOTION.
THE MOTION PASSED UNANIMOUSLY BY THOSE PRESENT. SPEAKER PERKINS, ASSEMBLYMAN ARBERRY, ASSEMBLYMAN GOLDWATER, AND ASSEMBLYMAN NOLAN WERE NOT PRESENT FOR THE VOTE.
Chairman Dini requested the committee to consider S.B. 420.
Senate Bill 420: Requires occupational licensing boards to submit quarterly summaries of disciplinary actions and biennial reports of activities to director of legislative counsel bureau. (BDR 54-451)
ASSEMBLYWOMAN GIUNCHIGLIANI MOVED TO DO PASS S.B. 420.
ASSEMBLYMAN HETTRICK SECONDED THE MOTION.
THE MOTION PASSED UNANIMOUSLY BY THOSE PRESENT. SPEAKER PERKINS, ASSEMBLYMAN ARBERRY, ASSEMBLYMAN GOLDWATER, AND ASSEMBLYMAN NOLAN WERE NOT PRESENT FOR THE VOTE.
There being no further business to come before the committee, Chairman Dini adjourned the meeting at 7:23 p.m.
RESPECTFULLY SUBMITTED:
Rebekah Langhoff
Committee Secretary
APPROVED BY:
Assemblyman Joseph Dini, Jr., Chairman
DATE: