MINUTES OF THE meeting

of the

ASSEMBLY Subcommittee on Commerce and Labor

 

Seventy-First Session

April 10, 2001

 

 

The Subcommittee on Commerce and Labor was called to order at 12:42 p.m., on Tuesday, April 10, 2001.  Chairman Barbara Buckley presided in Room 3161 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.

 

 

SUBCOMMITTEE MEMBERS PRESENT:

 

Ms.                     Barbara Buckley, Chairwoman

Mr.                     Bob Beers

Ms.                     Sheila Leslie

 

SUBCOMMITTEE MEMBERS ABSENT:

 

Mr.                     David Goldwater (Excused)

Mr.                     Lynn Hettrick (Excused)

 

 

STAFF MEMBERS PRESENT:

 

Vance Hughey, Committee Policy Analyst

Cheryl Meyers, Committee Secretary

 

OTHERS PRESENT:

 

Mr. Russ Benzler, Administrator, Compliance Enforcement Division, Department of Motor Vehicles and Public Safety, State of Nevada, Carson City, Nevada

John P. Sande III, Representative, Nevada Franchise Automobile Dealers Association, Reno, Nevada

Lisa Foster, Legislative Analyst, American Automobile Association (AAA), Reno, Nevada

Joe McDermott, Owner, The Auto Inspector, Las Vegas, Nevada

Jim Werbeckes, Government Affairs Representative, Farmers Insurance, Reno, Nevada

Dan Wulz, Citizen, Las Vegas, Nevada

 

Chairwoman Buckley called the meeting to order.  She dispensed with the roll call, noting that Mr. Beers and Ms. Leslie were present, in addition to herself.  Mr. Hettrick and Mr. Goldwater were excused.  She acknowledged the individuals present in Las Vegas via videoconference and opened the hearing on A.B. 207.

 

Assembly Bill 207:  Imposes certain restrictions and requirements upon transfer and titling of, and requires certain notices and disclosures regarding, motor vehicles that have sustained certain damages. (BDR 43-441)

 

Chairwoman Buckley stated she wanted to address some of the concerns raised in the initial hearing before the full committee.  She wanted to explore better definitions and clarity of the language.  She had made a list of some of the issues she felt needed to be addressed in the subcommittee.  The list included addressing the major damage and the $3,000 threshold.  She questioned if there were any good alternatives to that so it would not include damage that did not affect the safety of the vehicle.  There were also questions about whether antique cars, private sales, and commercial vehicles should be exempted.  Additionally, there were some proposed amendments before the subcommittee from the Department of Motor Vehicles and Public Safety (DMV&PS).  Accordingly, she then recognized Mr. Russ Benzler, Administrator, Compliance Enforcement Division, Department of Motor Vehicles and Public Safety.

 

Mr. Benzler began by stating he had provided the subcommittee with a list of proposed amendments to A.B. 207 (Exhibit C).  He continued by explaining the amendments incorporated the definitions contained in the original version of A.B. 207.  The substantive recommendations were on page 2 of Exhibit C, starting at Section 14.  The amendments attempted to address the fraud and misrepresentation aspects of the bill by making it a requirement that any transfer of a vehicle where there was knowledge the vehicle had sustained flood damage, was a salvage vehicle, or a nonrepairable vehicle, would require a written disclosure of such damage.  In Section 15, if a transferor who was a dealer or a lessor had knowledge of any of the defects he had just described, they would have to make a disclosure in writing as part of the contract of sale.  Section 16 would require any written disclosures made be submitted to the DMV along with the application for title.  The disclosure would then become part of the vehicle’s title history.  Continuing on to Section 17, the DMV wanted to insert a recommendation stating the DMV would, by regulation, adopt a method by which “title brands” (the disclosure information) would be adopted and applied to vehicle titles.  Finally, Sections 18 and 19 would provide stiffer penalties for a willful failure to disclose vehicular damage with the intent to defraud.  The punishment would be the same as it was for obtainment of monies under false pretenses, which was essentially what misrepresentation of vehicular damage, or the lack thereof, would be.  Additionally, the civil fraud damages would consist of three times the damages incurred by the injured party, along with any court fees or attorney’s costs awarded to the prevailing party by the court.  He thought the amendments assisted in accomplishing the intent of A.B. 207, which was to prevent fraud and misrepresentation and to compel individuals to disclose known damage.

 

Chairwoman Buckley asked if the amendment would make the law applicable to private party sales.  Mr. Benzler replied it was applicable to anybody who transferred a vehicle.  The difference was the amendment did not require people to make a disclosure if they were unaware of damage to a vehicle.  The law would require everyone who transferred a vehicle to make disclosures they were aware of to the transferee.

 

Chairwoman Buckley called attention to Section 14 of A.B. 207 and the language “any known information.”  In many cases, dealers might have access to more knowledge than a private individual.  For example, many dealers inspected cars and were able to tell it had sustained major damage.  The dealer might not know the specifics about the damage as to the cost of repairs or where the damage occurred on the vehicle, but they might have knowledge from their mechanic.  She asked how that situation was addressed under the proposed amendments.

 

Mr. Benzler stated it came down to known damage and it would be the facts of the case.  He stated the typical language throughout the statutes to address that concern was “known or should have known.” 

 

Chairwoman Buckley wanted to address the issue of major damage, as that seemed to have drawn the most concern in the initial hearing.  She asked Mr. Benzler if the DMV had any additional thoughts on how to handle that particular issue.  She wanted to know if they had defined cosmetic damage.

 

Mr. Benzler directed the subcommittee’s attention to the proposed changes to Section 7 in Exhibit C.  The only change they had made was to place a percentage of the vehicle’s manufacturers suggested retail price or its fair market value, whichever was less.  He thought with the language “fair market value,” there were a number of sources that could be utilized to determine the value.  They could further specify it would have to be some sort of industry standard or published standard.

 

Chairwoman Buckley inquired whether there had been an opportunity to share the proposed amendments in Exhibit C with anyone that worked in the industry or had some of the concerns at the first hearing before the full committee.

 

Mr. Benzler stated he had not had a chance to talk with anybody regarding the proposed amendments.

 

Assemblyman Beers asked Mr. Benzler if the proposed amendments to A.B. 207 were the only way he could see to have the provision for disclosure cover all vehicles in the state.  One of the problems he noted was covering sales of commercial dealers.  Vehicles went back and forth between commercial concerns and private individuals.  He believed half the transactions that occurred might not become subject to the provision for disclosure of damage.  He wondered if the proposed amendments by the DMV would ensure everyone was subject to the provision for disclosure.

 

Mr. Benzler replied it was certainly the best way he could think of to make it apply.  If it was specified what was required to be disclosed and placed into law so everyone understood the requirements, the law would provide the penalties to ensure there was a deterrent to violation.

 

Mr. Beers asked Mr. Benzler if he foresaw the necessity of changing the DMV’s computer system to comply with the strictures set forth in A.B. 207.

 

Mr. Benzler stated he did foresee the necessity of making some changes to the DMV computer system to incorporate the “title brands.”

 

Chairwoman Buckley mentioned it would be a shame to halt consumer protection because of a computer.  She thought the past problems with the DMV computer system were the reason behind the push for the exemption of private sales and she asked if that position had changed.

 

Mr. Benzler commented the concern had to do with requiring citizens to fill out a form on every transfer and having to appear at the DMV to register their vehicle.  In such a case, there would be masses of people who would go to the DMV to have their vehicles registered, only to be turned away to obtain yet another form and that was the big concern.

 

Chairwoman Buckley called for further questions.  Seeing none, she thanked Mr. Benzler for his testimony.  Mr. Benzler added the proposed amendments eliminated any fiscal note the DMV had associated with A.B. 207.

 

Mr. Beers wondered how there could be no fiscal note when modifications to the DMV computer system would have to be made to comply with A.B. 207.  Mr. Benzler replied the DMV did not believe there would be additional costs.  Mr. Beers asked if the cost would be built into the staff costs, and received an affirmative reply from Mr. Benzler.

 

Chairwoman Buckley again thanked Mr. Benzler for his testimony and asked those attending the hearing in Las Vegas if they would like more time to review the proposed amendments before issuing comments.  Las Vegas indicated they would appreciate more time.  Chairwoman Buckley inquired if there were others present in Carson City who would like to testify.

 

John Sande, Representative, Nevada Franchise Automobile Dealers Association, stated the proposed amendments did address the concern that all transfers of motor vehicles be covered under the bill.  There were still concerns with the concept.  If there was a violation with intent to defraud they could be liable for three times the actual damages sustained by the person harmed or $5,000, whichever was greater, as well as reasonable attorney’s fees.  The concern was whether or not the legislation was really in the best interests of the residents of the state of Nevada.  Under existing law, if someone had a car and sold it to someone else and there was a material misrepresentation of fact, then the case could be taken to court and damages awarded.  A.B. 207 would set up an arbitrary amount of the percentage of the motor vehicle’s suggested retail price.  It would be somewhat difficult for someone transferring a vehicle to determine whether the amount was high or low using the Kelly Blue Book.  If someone transferred a vehicle and there was something that should have been disclosed but not known, the person could be held responsible.  Mr. Sande stated if the law was going to work it needed to apply to everyone.  As an industry they would want to know about damage to an automobile that was traded-in.  Mr. Sande stated the proposed amendments did guarantee results for everyone; however, he felt there might be individuals in the future that might be upset over making a transfer without designating there had been repairs, even if those repairs did not affect the car and its ability to be driven. 

 

Lisa Foster, Legislative Analyst, American Automobile Association (AAA), wanted to address Section 12 and suggested an amendment (Exhibit D) that included a formula to address salvage values under the definition of salvaged vehicles.  Rather than using the definition “the cost of repair exceeded 65 percent of the fair retail market value of the vehicle” perhaps the term “actual cash value” could be used as in the Nevada Administrative Code.  Essentially if it cost more to fix the car than the car was worth then looking at the cash value minus the verifiable salvage value might be a more workable formula.  Ms. Buckley read the amendment to the audience and had it faxed to Las Vegas.  She asked if Ms. Foster had any comments on Mr. Benzler’s proposed amendments.  She stated she would review the amendments and report back to the committee. 

 

Joe McDermott, Owner, The Auto Inspector, stated he was concerned about the proposal suggesting 65 percent of the fair retail market value.  He wanted to know who would be recommended to establish the actual cash value of the vehicle.  He had witnessed many cases where the actual cash value placed by a dealer would be different than the retail market would be in the private sector. 

 

Ms. Buckley asked Ms. Foster to answer the question.  Ms. Foster stated in the Nevada Administrative Code the language was used for insurance claim purposes.  A claimant would know the true actual designation of the actual value of the car as opposed to looking at the Kelly Blue Book figure.  There were less reliable figures and that was why the code clarified the language.  Ms. Buckley asked if anyone had a better understanding of what “actual cash value” was and how the figure was derived. 

 

Jim Werbeckes, Government Affairs Representative, Farmers Insurance, stated the Department of Insurance required the insurance companies to look at comparable vehicles and then compare miles, etc., to determine the actual cash value.  They were prohibited from using Kelly Blue Book to determine actual cash value when settling an insurance claim. 

 

Mr. McDermott stated Mr. Werbeckes did answer his question.  He knew the term was referred to in the insurance industry; however, as noted, there was no exact standard or guideline as to where the figure was derived and it was subjective.  “Actual cash value” and “fair market value” were almost the same term to him.  He believed there needed to be more guidelines for the basis of the figure.

 

Chairwoman Buckley asked if there were any other comments on the DMV suggestions.

 

Dan Wulz, citizen, stated he had noted the DMV amendment had changed the definition of flood damage to take out the words “or doorsill.”  A.B. 207 stated flood damaged meant if the water reached not only over the engine but also the doorsill.  He believed Mr. McDermott could speak to the importance of that issue.  There were important components on a car at or about the doorsill.  That was the reason A.B. 207 was written the way it was.  Section 7 had totally changed the definition of major damage.  He suggested using the percentage of a manufacturer suggested retail price (MSRP) rather than using $3000, $4000 or $5000.  Mr. Wulz stated the DMV had completely changed the definition of salvaged vehicle.  A.B. 207 had 65 percent of the fair market value and the DMV returned to “total loss” language.  Section 14 in A.B. 207 stated the disclosure should be made before the execution of any documents or transfers.  He believed that to be a very important provision because the disclosure needed to be made before the contract of sale.  He did not know if that was the intent of the DMV or not. 

 

Ms. Buckley stated Section 15 mentioned disclosure before finalizing a contract of sale for the dealer and did not mention a private party.  She stated there might have to be a change in that language.  Mr. Wulz mentioned he had not noted the DMV’s changes in Section 19 with respect to the remedies for damages.  However, in A.B. 207 they were nonexclusive and he felt that was an important issue to carry forward in the bill.

 

Ms. Buckley asked Mr. Benzler to return to the witness table to comment about the points made.  She recalled from the original hearing that “doorsill” was considered to be important because computer components were in the door panel.  Mr. Benzler stated for him it was important if the water entered the passenger’s compartment.  He did not have strong feelings about the “doorsill” one way or the other.  Ms. Buckley asked if by entering the passenger compartment he was thinking it would be the same concept as the “doorsill.”  Mr. Benzler indicated the water was getting into the vehicle itself and that was important. 

 

Ms. Buckley referred to Section 10 and the salvage in regard to total loss as in NRS 487.045 versus the 65 percent level of salvage value.  She asked if he would like to comment on that section.  Mr. Benzler wanted to keep it consistent with what was already in statute for a salvage vehicle. 

 

Ms. Buckley asked for comments on Section 14, which explained the disclosure before someone actually signed a contract of sale.  Mr. Benzler stated he did not have any real concerns.  He looked at the transfer as including any documents and there was no transfer until there was a signature.  Ms. Buckley commented it would be important to her to have the disclosure before the sale documents rather than after the fact.

 

Chairman Buckley asked if there were any other witnesses in Carson City.  She decided she would give the various parties some time to read the amendments and asked if they would give any comments to her so she could incorporate the suggestions.  She indicated she would pull the subcommittee behind the Bar to vote on any proposed suggestions because of the impending deadlines in the Assembly.

 

Mr. Wulz from Las Vegas asked if the changes he had suggested on classic cars was received by the committee.  Ms. Buckley indicated she was not sure and asked if the suggestion was an exemption for classic cars.  Mr. Wulz divulged he had come up with some definitions that included “antique vehicle, a collector, a parts car and a special interest vehicle (classic car),” and he had suggested exempting those from Section 22 that dealt with a nonrepairable vehicle.  The suggestion allowed someone who had a classic car that was involved in a collision the ability to repair the vehicle.  If the car met the definition of nonrepairable car having 90 percent of its value the owner would not have to have it crushed but could repair it.  He understood that was a concern at the regular committee hearing.  He also had a suggestion of amending the definition of cosmetic in A.B. 207.  He understood the definition was criticized for being circular because the definition used the word “cosmetic.”  His suggestion was to state, “cosmetic damage meant damage to paint, glass, trim, tires or any other component of a motor vehicle that was intended to beautify the motor vehicle.”  He had also heard there was a criticism the bill would prevent dealers from going out of state and purchasing cars at auctions because they would not receive a disclosure in another state.  He suggested in Section 17 the words “in this state” be added to the definition.  In Section 19, subsection 2, after the word “transfer” the words “in this state” could be added also.  If someone bought a car in another state where there would be no disclosure it would be covered in the law if those words were added to the bill. 

 

Ms. Buckley stated she would get the exemption for classic cars and she would circulate the amendments.  She would like to have any comments so she could prepare a comprehensive list of the amendments proposed.

 

Mr. Werbeckes had a question about the DMV’s proposed amendments.  In Section 7 he noticed there was no percentage listed.  He wondered if the committee had any thoughts about the percentage they would use.  Ms. Buckley asked him what he would suggest.  Mr. Werbeckes stated he did not have a suggestion on that section.  He did, however, mention that NRS 482.098 defined rebuilt vehicles.  The chapter spoke about the major components of a vehicle that were damaged and if someone replaced those parts the car would be considered a rebuilt vehicle.  The chapter could help define a damaged vehicle instead of using a dollar figure.  If any of the components discussed in the chapter needed to be replaced there would be major damage to a vehicle.  He wanted to suggest the chapter for the committee’s consideration.  Ms. Buckley commented she believed the committee liked the concept and wanted it to be workable.  The more ideas suggested the better the issue could be defined.

 

Ms. Buckley noted if any witnesses had any other comments after they had an opportunity to review the suggestions she would appreciate it if they would contact her. 

 

Seeing no other business before the committee Chairman Buckley adjourned the meeting at 1:18 p.m.

 

RESPECTFULLY SUBMITTED:

 

 

 

Cheryl Meyers

Committee Secretary

 

 

APPROVED BY:

 

 

 

                       

Assemblyman Barbara Buckley, Chairwoman

 

 

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