MINUTES OF THE

SENATE Committee on Commerce and Labor

 

Seventy-First Session

May 10, 2001

 

 

The Senate Committee on Commerce and Laborwas called to order by Chairman Randolph J. Townsend, at 7:13 a.m., on Thursday, May 10, 2001, in Room 2135 of the Legislative Building, Carson City, Nevada.  Exhibit A is the Agenda.  Exhibit B is the Attendance Roster.  All exhibits are available and on file at the Research Library of the Legislative Counsel Bureau.

 

COMMITTEE MEMBERS PRESENT:

 

Senator Randolph J. Townsend, Chairman

Senator Ann O’Connell, Vice Chairman

Senator Dean A. Rhoads

Senator Mark Amodei

Senator Raymond C. Shaffer

Senator Michael A. (Mike) Schneider

Senator Maggie Carlton

 

STAFF MEMBERS PRESENT:

 

Scott Young, Committee Policy Analyst

Lydia Lee, Committee Secretary

 

OTHERS PRESENT:

 

Leo N. Durant, Nevada Subcontractors Association

R. Scott Rasmussen, Lobbyist, Nevada Subcontractors Association 

James L. Wadhams, Lobbyist, Southern Nevada Homebuilders Association

Ronald L. Lynn, Lobbyist, Nevada Organization of Building Officials

Margi A. Grein, Lobbyist, State Contractors’ Board

Robert L. Crowell, Lobbyist, Nevada Trial Lawyers Association

Fred L. Hillerby, Lobbyist, State Contractors Board

Robert Barengo, Lobbyist, State Contractors Board

Scott M. Craigie, Lobbyist, Southern Nevada Subcontractors Association

 

Chairman Townsend stated at 7:00 a.m., on Tuesday, May 15, 2001,the parties involved in the construction issue would arrive with a printed agreement,   

 

and should that not occur, he, as Chairman, would submit amendments to the Senate Committee on Commerce and Labor for a vote. 

 

Chairman Townsend opened the hearing on Assembly Bill (A.B.) 133, and called attention to sections 5 through 11 of the bill, which he explained were different from the language proposed in Senate Bill (S.B.) 516. 

 

ASSEMBLY BILL 133:  Makes various changes concerning construction, constructional defects and common-interest communities.   (BDR 3-667)

 

SENATE BILL 516:  Makes various changes conderning contractors and constructional defects. (BDR 3-1452)

 

Chairman Townsend commented the language in A.B. 133 would establish the relationship between the claimant and the contractor.  He drew attention to page 1, lines 12 through 18, and page 2, lines 1 through 11 of A.B. 133, and stated the language establishes the procedure for constructional defect claims; and lines 12 through 18, on page 2 of A.B. 133, address the issue of the notification of each subcontractor.  Chairman Townsend said the premises access issue is addressed in lines 19 through 24, on page 2 of A.B. 133.       He explained lines 25 through 35, on page 2 of A.B. 133, specify the willingness of the subcontractor, supplier, or design professional to repair the defect, and the time necessary to complete the repair. 

 

Chairman Townsend told the committee lines 35 through 48 on page 2, and lines 1 through 4 on page 3 of A.B. 133 cover the time limits specified for completion of repairs.  Continuing to outline the contents of A.B. 133, he said lines 5 through 21 outline the responsibilities and requirements of the person making the repairs. 

 

Chairman Townsend pointed out lines 22 through 36 address the claimant’s responsibilities.  He said section 7, on pages 3 and 4, of A. B. 133 covers the contractor’s responsibilities of notification to the subcontractor, supplier, or design professional, and reimbursement of legal fees.

 

Chairman Townsend said the language contained in section 8, on page 4 of   A.B. 133, allowed for the notification of an insurer by a contractor, subcontractor, supplier or design professional.  He explained section 9, on pages 4 and 5 of A.B. 133, states the claimant is not responsible for              notifying the contractor if threats of violence have occurred.  Continuing, Chairman Townsend noted, “Nothing in sections 5 to 9 affects the ability of claimants to file a class action for constructional defects against a contractor, or a claimant, contractor, subcontractor, supplier, or design professional to pursue remedy available through the State Contractors’ Board.” And, Chairman Townsend remarked, section 10 on pages 5 and 6 of A.B. 133 addresses the responsibilities and procedures of the complainant’s attorney. 

 

Chairman Townsend outlined the various similarities in language and intent in the following portions of the two bills: on page 9, section 24 of S.B. 516, and section 13 on page 6 of A.B. 133; section 14 on page 8 of A.B. 133, and section 25 on page 11 of S.B. 516; section 16 on page 9 of A.B. 133, and section 30 on page 15 of S.B. 516; section 17 on page 11 of A.B. 133, and on pages 18 and 19, section 31 of A.B. 133 has clarifying language.  Continuing, he pointed out section 18 on page 11 of A.B. 133, and section 34 on pages    19 and 20 of S.B. 516 also had the same intent.

 

Chairman Townsend stated the language concerning the statute of limitations and repose applicable to a claim based on construction defect is in section 19 on page 12 of A.B. 133, and in S.B. 516 on page 4, section 11, the language is comparable.  He said the language in section 21 on pages 12 and 13 of       A.B. 133 and section 37 on page 21 of S.B. 516 address the offering or acceptance of money or anything of value to the parties. 

 

Chairman Townsend invited the testimony of Leo N. Durant, Nevada Subcontractors Association, and R. Scott Rasmussen, Lobbyist, Nevada Subcontractors Association on A.B. 133. 

 

Mr. Durant voiced support of A.B. 133 on behalf of the Nevada Subcontractors Association because the bill would assist homeowners and subcontractors to resolve construction problems. 

 

Mr. Rasmussen submitted and reviewed for the committee’s information a document titled “(Reprinted with Adopted Amendments) Second Reprint Assembly Bill 133” (Exhibit C), which contained proposed amendments to Assembly Bill 133.  He proposed sections 19 and 20 of Senate Bill 516 be added to A.B. 133 to provide language addressing proper licensure, and to address the issue of attorneys employing relatives as witnesses, or anyone having a financial interest in the case.  Mr. Rasmussen said section 5, on page 4 of Exhibit C, modifies the intent of notification by the claimant concerning reporting defects.  He noted sections 7 and 8 on pages 4 and 5, and section 9 on pages 6, 7 and 8 of Exhibit C, place the State Contractors’ Board back into the process.  Continuing, Mr. Rasmussen explained in section 6 on pages 8, and 9 of Exhibit C, the language referencing “complex and non-complex matters” has been removed from A.B. 133. 

 

Mr. Rasmussen pointed out on page 10 of the suggested amendments, the time limits proposed are not in a specific number of days but as “. . . in good faith in setting a reasonable time . . . .”  He said the language, “nothing in sections 5 to 9, inclusive, of this act affects the ability of claimants to maintain a class action for constructional defects against a contractor.”  He noted section 9 on page 14 of Exhibit C is ambiguous; therefore, it has been removed.  Mr. Rasmussen told the committee, until the intent of the language is made clear, the association could not support the existing language concerning “class action.” 

 

Referring to item number 9 on page 15 of Exhibit C, Mr. Rasmussen stated the language addresses the consequences to the claimant for not permitting a contractor access to the property to make repairs. 

 

Mr. Rasmussen proposed to include section 22 of S.B. 516 in A.B. 133, which clarifies and describes a “constructional defect.”  He noted the language in section 13, page 18 of Exhibit C, encourages the contractor to make, or attempt to make, repairs at least 60 days before a claimant commences action against the contractor.

 

Mr. Rasmussen called the attention of the committee to section 30 of S.B. 516, on page 23 of Exhibit C, concerning the issue of bringing a subcontractor into a lawsuit, in a timely manner, to enable the subcontractor to participate in inspections, case management order decisions, and special master decisions.  Chairman Townsend questioned, how often a case goes to a special master decision.  Mr. Rasmussen replied approximately 95 percent of the time a case would go to a special master decision.  Chairman Townsend asked what degree of authority a special master would have in a case.  Mr. Rasmussen replied a special master could make a recommendation but does not have “decision-making” power.  He explained the special master is involved in discovery, depositions, testing, and all procedural matters.  Chairman Townsend asked how often a special master makes recommendations concerning the parties in a lawsuit.  Mr. Rasmussen answered, from his experience a special master, rarely has he recommended a party be removed from a lawsuit.  Chairman Townsend queried Mr. Rasmussen as to why special masters are not making the recommendations.  Mr. Rasmussen opined the opposing side in the case could state the party does have liability, or the parties involved are handling the matter. 

 

Chairman Townsend theorized a landscape person could not be                   held accountable for a cabinet problem.  Mr. Rasmussen agreed.                 Chairman Townsend and Mr. Rasmussen continued the dialog concerning the depth of responsibilities of various parties in a lawsuit. 

 

Continuing with an explanation of section 30 of S.B. 516, on pages 23 through 31 of Exhibit C, Mr. Rasmussen emphasized the importance of having a mechanism to address the issues-involving contractors notifying subcontractors and shortening the time frames for bringing the subcontractors into the case.

 

Mr. Rasmussen pointed out section 20 (originally section 13 in S.B. 516) on page 32 of Exhibit C has been included to provide every new homeowner a list of every subcontractor involved in the construction of their house.  He said section 21 was adopted from section 37 of S.B. 516, which clarifies the intent of the language, “A person shall not provide or offer to provide anything of monetary value . . . .”  Chairman Townsend commented on the issue of accepting gifts and other accommodations in the business environment. 

 

Mr. Rasmussen told the committee section 41 on page 42 of Exhibit C addresses the requirements of a homeowners association involved in a class action suit.  Chairman Townsend asked Mr. Rasmussen whether he had reviewed the language in S.B. 421.

 

SENATE BILL 421:  Makes various changes to provisions governing common-            interest communities. (BDR 10-446)

 

Mr. Rasmussen stated the Nevada Subcontractors Association supports       S.B. 421.   He told the committee his sole responsibility was to take applicable parts of S.B. 516 and amend A.B. 133 with language, which directly affects the subcontractors because of current litigation practices, and implement those areas of concern. 

 

James L. Wadhams, Lobbyist, Southern Nevada Homebuilders Association, stated the association would review the proposed amendments with the attorneys and respond to the committee.

 

Ronald L. Lynn, Lobbyist, Nevada Organization of Building Officials, submitted an amendment (Exhibit D), containing a new paragraph 2 (e) to be included in section 6 on page 3, which states “obtain necessary permits and required inspections.”  He clarified the burden is on the contractor and subcontractor; therefore, it would be necessary to obtain such requirements. 

 

Margi A. Grein, Lobbyist, State Contractors’ Board, addressed the issues affecting the State Contractors’ Board.  She said the board determines whether a defect exists, whether damage has occurred, and, to some extent, the amount of the damages.  Ms. Grein stated many functions are judicial in nature and not the responsibility of a licensing board.  Chairman Townsend questioned whether the board had the responsibility to hold a licensee to a standard.  Ms. Grein responded in the affirmative.  Chairman Townsend asked whether the issue could be accommodated in the proposed amendments.  Ms. Grein replied a more in-depth review was needed.  Continuing, she said the amendments proposed are “complex and intrusive procedures that would require the complainant to hire an attorney and an expert, and do not seem to be based on common sense; in addition, there are no considerations [given] to the administrative costs of A.B. 133, as amended.” 

 

Ms. Grein claimed the proposed amendments set in place a sophisticated process which requires the board to exercise judicial functions.  She declared the functions might not be constitutional.  Ms. Grein stated the proposed amendments would precipitate additional costs and there had been no provisions made for this expense. 

 

Chairman Townsend asked Ms. Grein whether the board would agree with any of the proposed amendments.  Ms Grein replied the board agreed with A.B. 133 before the proposed amendments. 

 

Chairman Townsend stated Ms. Grein does not see a role for the contractors’ board under A.B. 133 with the proposed amendments.  In addition, if the board is required to perform the specified functions, then funding would be necessary to perform the operations.  He mentioned the State Contractors’ Board would be functioning in a similar manner as the malpractice screening panels.

Robert L. Crowell, Lobbyist, Nevada Trial Lawyers Association, stated his agreement with the testimony of Mr. Wadhams.  He told Chairman Townsend the goal of A.B. 133 is to reconnect the homeowner and the contractor without the expenses and requirements the proposed amendments entail. 

 

Chairman Townsend stated his concern was to enable the committee to be consistent with making commercial and labor policies and providing a mechanism for resolution. 

 

Fred L. Hillerby, Lobbyist, State Contractors’ Board, pointed out the amended language does not address what happens when the State Contractors’ Board decides a problem does not exist.  He said there are no further remedies identified or procedures outlined.  Mr. Hillerby stated the State Contractors’ Board does not function in the same capacity as a malpractice screening panel.  Chairman Townsend opined, when the malpractice screening panel rules against a claimant, the claimant still has the right to pursue the issue in court. 

 

Chairman Townsend stated a decision as to the responsibilities of the State Contractors’ Board to the State of Nevada must be decided before the meeting on Tuesday, May 15, 2001. 

 

Senator Shaffer commented when a complaint is filed and the contractor agrees there is a problem, the permit is pulled; then, a series of inspections are required.  He pointed out when issues in the complaint are satisfied in the contractor’s opinion and the final inspection is made by Nevada Organization of Building Officials, that should suffice. 

 

Robert Barengo, Lobbyist, State Contractors’ Board, opined the proposed amendments are suggesting a “summary proceeding,” which is a body to make the determination which “fixes” the homeowner’s problem.  He stated, “There is no such animal,” because once there are “summary proceedings” dealing with people’s rights, then there must be other recourses.  Mr. Barengo pointed out language had been deleted from S.B. 516, but other language has been added; therefore, a close review is necessary, and the decision needs to be made as to the expense of the “summary proceedings.” 

 

Chairman Townsend remarked hiring an independent inspector who does a          “5000-point inspection” can be a very constructive move for a homeowner.  Chairman Townsend asked Mr. Lynn whether there was a board which certified such inspectors.  Mr. Lynn answered in the affirmative and said, in Nevada, the real estate board licenses building inspectors.  Chairman Townsend opined many of the problems or defects would be discovered during the inspection. 

 

Chairman Townsend queried whether the consumer could be alerted to certain conditions or be made aware of these professional inspectors through an informational program.  Mr. Crowell said, in his experience, there could be problems for the unwary seller of a property.  Chairman Townsend reiterated the consumer needs to be educated in this area. 

 

Scott M. Craigie, Lobbyist, Southern Nevada Subcontractors Association, testified, in Nevada, there is a graduated role for various entities which look at controversial situations such as are addressed in the amendments proposed to A.B. 133.  He said, frequently, regulators are used between the commercial activity and the courts.  Mr. Craigie stated Mr. Barengo proposed a good idea concerning using summary proceedings to determine the validity of the complaints, but noted there is already a regulatory structure in place which oversees contractors and subcontractors. 

 

Mr. Craigie suggested the State Contractors’ Board give guidance on these issues, because the numbers of cases going to court are excessive and are growing.  He stated, “This regulatory entity oversees the construction industry and does have standards . . . the role is to hold them to the same standards in this part of the business as when when they first construct.”  Mr. Craigie urged all the parties to find a “middle ground,” and emphasized the State Contractors’ Board is willing to work toward that end.  Chairman Townsend commented all parties will have the opportunity to give input. 

 

Mr. Barengo reiterated, “A licensing board is just that, a licensing board.”       He stressed the suggestions of Mr. Craigie “would be analogous to having the State of Nevada’s Board of Medical Examiners try doctors for medical malpractice.”  Mr. Barengo said the case goes to the malpractice screening panel and then to a court for determination.  He noted the Board of Medical Examiners can discipline doctors for not performing according to the standards, but the board does not interact between the patient and the doctor.              Mr. Barengo stated this would be “building malpractice“ and should be outside of the State Contractors’ Board purview. 

 

 

Mr. Craigie responded this entity should not be punitive, but should give guidance.  He stressed what is needed is “to find what is practical at a regulatory level, to avoid having this huge and growing number of cases going to court.”  Mr. Craigie stated, in Nevada, contractors and subcontractors have tried to avoid the expense of litigation by using regulators in a conservative and judicious way. 

 

Chairman Townsend listed a number of key issues such as: soil testing; a better relationship with the inspection side of construction; counties and cities having a better understanding of the site before authorizing construction; higher standards of licensing, and the insurance issue.  He pointed out resolution needs to be reached before the construction industry is faced with the same crises as the medical profession has faced, which was doctors practicing without malpractice insurance because of the cost, resulting in patients having to accept responsibility.

 

Ms. Grein added, when construction problems occur, the general contractor needs to file a complaint with the subcontractors who did the work, because a homeowner contracts with the general contractor.  She said, usually, the complaint is made against the general contractor when a subcontractor is responsible for the faulty work.  Ms. Grein emphasized the need to have all responsible parties involved. 

 

Chairman Townsend asked whether there were representatives in the audience from the Associated General Contractors (AGC) of America.  He questioned whether there was a reason the general contractors were not bringing subcontractors who do not appropriately respond to complaints to the attention of the State Contractors’ Board.  Ms. Grein stated complaints the AGC has reported are minimal.  She stressed there needs to be an accountability on the part of the subcontractors when they fail to respond to complaints. 

 

Senator Shaffer concurred with the remarks of Ms. Grein.  He said the general contractor is responsible for the entire project, including paying the subcontractors, therefore, the control is in the hands of the general contractors.  Senator Shaffer reiterated there needs to be more emphasis on the inspectors and the building departments, because once the certificate for occupancy is issued, the responsibility rests with the building department of the jurisdiction where the construction took place.  He opined there were not many members of

 

the State Contractors’ Board who would have the credentials to testify as expert witnesses in court. 

 

Chairman Townsend asked whether S.B. 516 needs to be reviewed.  Mr. Lynn stated the building department is part of the “proactive issues.”  He continued, there are tools in existence not being used to assist with these circumstances.  Mr. Lynn opined there should be a philosophy, not a law, concerning cooperation between the building department and the State Contractors’ Board.

 

Mr. Rasmussen agreed the inspections should be increased, but said the claimants are not using the correct inspectors.  He told the committee inspectors from California are telling subcontractors in Nevada how houses should be built in Nevada.  Mr. Rasmussen stressed there is no inspector or member of the State Contractors’ Board to defend the work as being done appropriately according to Nevada standards.  He emphasized the Nevada Subcontractors Association is asking for someone from Nevada to be the authority on whether the work was appropriately done according to Nevada, not California, standards. 

 

Chairman Townsend suggested the work should be reinspected to see if it comes up to code.  Mr. Rasmussen agreed.

 

Mr. Lynn told the committee what is required is a permit; otherwise, it is a violation of the law.  He explained, after the Nevada Organization of Building Officials issues the certificate of occupancy and leaves the project, there is no longer a direct interaction in the project, and then it would be necessary for the State Contractors’ Board to again activate the Nevada Organization of Building Officials.  Chairman Townsend commented the State Contractors’ Board’s responsibility would be to notify the Nevada Organization of Building Officials to have the project reinspected by a different inspector.

 

Ms. Grein asked Chairman Townsend’s permission to discuss a list of items and solutions concerning construction issues not related to S.B. 516 and A.B. 133.  Chairman Townsend suggested Ms. Grein submit a copy to all committee members for review before the meeting on Tuesday, May 15, 2001.

 

 

 

 

Chairman Townsend adjourned the meeting at 8:56 a.m.

 

 

RESPECTFULLY SUBMITTED:

 

 

 

Patricia Vardakis,

Committee Secretary

 

 

APPROVED BY:

 

 

 

                       

Senator Randolph J. Townsend, Chairman

 

 

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