Senate Bill No. 122–Senators Titus and Wiener

 

February 13, 2003

____________

 

Referred to Committee on Commerce and Labor

 

SUMMARY—Makes various changes regarding malpractice insurance and actions. (BDR 57‑265)

 

FISCAL NOTE:  Effect on Local Government: Yes.

                           Effect on the State: Yes.

 

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EXPLANATION – Matter in bolded italics is new; matter between brackets [omitted material] is material to be omitted.

 

AN ACT relating to malpractice; authorizing intervention in certain proceedings regarding rates for certain malpractice insurance; limiting rates and proposed increases in rates for certain malpractice insurance; requiring certain insurers to offer tail coverage; prohibiting confidentiality in certain malpractice settlement agreements; prescribing procedures for withdrawal of certain insurers from the malpractice market in this state; providing for certain defendants in malpractice actions to receive specified information and independent counsel; requiring the reduction of premiums for certain policies of malpractice insurance; providing a penalty; and providing other matters properly relating thereto.

 

THE PEOPLE OF THE STATE OF NEVADA, REPRESENTED IN

SENATE AND ASSEMBLY, DO ENACT AS FOLLOWS:

 

1-1  Section 1.  Chapter 686B of NRS is hereby amended by adding

1-2  thereto a new section to read as follows:

1-3  If a filing made with the Commissioner pursuant to subsection

1-4  1 of NRS 686B.070 pertains to insurance covering the liability of a

1-5  practitioner licensed pursuant to chapter 630, 631, 632 or 633 of

1-6  NRS for a breach of his professional duty toward a patient, any

1-7  interested person or entity may intervene as a matter of right in

1-8  any hearing or other proceeding conducted to determine whether

1-9  the applicable rate or proposed increase thereto:

2-1  1.  Complies with the standards set forth in NRS 686B.050.

2-2  2.  Should be approved or disapproved.

2-3  Sec. 2.  NRS 686B.020 is hereby amended to read as follows:

2-4  686B.020  As used in NRS 686B.010 to 686B.1799, inclusive,

2-5  and section 1 of this act, unless the context otherwise requires:

2-6  1.  “Advisory organization,” except as limited by NRS

2-7  686B.1752, means any person or organization which is controlled

2-8  by or composed of two or more insurers and which engages in

2-9  activities related to rate making. For the purposes of this subsection,

2-10  two or more insurers with common ownership or operating in this

2-11  state under common ownership constitute a single insurer. An

2-12  advisory organization does not include:

2-13      (a) A joint underwriting association;

2-14      (b) An actuarial or legal consultant; or

2-15      (c) An employee or manager of an insurer.

2-16      2.  “Market segment” means any line or kind of insurance or, if

2-17  it is described in general terms, any subdivision thereof or any class

2-18  of risks or combination of classes.

2-19      3.  “Rate service organization” means any person, other than an

2-20  employee of an insurer, who assists insurers in rate making or filing

2-21  by:

2-22      (a) Collecting, compiling and furnishing loss or expense

2-23  statistics;

2-24      (b) Recommending, making or filing rates or supplementary rate

2-25  information; or

2-26      (c) Advising about rate questions, except as an attorney giving

2-27  legal advice.

2-28      4.  “Supplementary rate information” includes any manual or

2-29  plan of rates, statistical plan, classification, rating schedule,

2-30  minimum premium, policy fee, rating rule, rule of underwriting

2-31  relating to rates and any other information prescribed by regulation

2-32  of the Commissioner.

2-33      Sec. 3.  NRS 686B.040 is hereby amended to read as follows:

2-34      686B.040  [The]

2-35      1.  Except as otherwise provided in subsection 2, the

2-36  Commissioner may by rule exempt any person or class of persons or

2-37  any market segment from any or all of the provisions of NRS

2-38  686B.010 to 686B.1799, inclusive, and section 1 of this act, if and

2-39  to the extent that he finds their application unnecessary to achieve

2-40  the purposes of those sections.

2-41      2.  The Commissioner may not, by rule or otherwise, exempt

2-42  an insurer from the provisions of NRS 686B.010 to 686B.1799,

2-43  inclusive, and section 1 of this act, with regard to insurance

2-44  covering the liability of a practitioner licensed pursuant to chapter

3-1  630, 631, 632 or 633 of NRS for a breach of his professional duty

3-2  toward a patient.

3-3  Sec. 4.  NRS 686B.110 is hereby amended to read as follows:

3-4  686B.110  1.  The Commissioner shall consider each proposed

3-5  increase or decrease in the rate of any kind or line of insurance or

3-6  subdivision thereof that is filed with [him] the Commissioner

3-7  pursuant to NRS 686B.070. [If]

3-8  2.  The Commissioner shall disapprove the proposal if the

3-9  Commissioner finds that [a proposed increase] the proposal will

3-10  result in a rate which is not in compliance with NRS 686B.050 . [,

3-11  he shall disapprove the proposal.]

3-12      3.  In addition to the grounds for disapproval set forth in

3-13  subsection 2, if the proposal will increase the rate of insurance

3-14  covering the liability of a practitioner licensed pursuant to chapter

3-15  630, 631, 632 or 633 of NRS for a breach of his professional duty

3-16  toward a patient, the Commissioner shall disapprove the proposal,

3-17  or any constituent part thereof, if the Commissioner finds that the

3-18  proposal, or the constituent part thereof, has been proposed or is

3-19  necessitated because:

3-20      (a) The insurer has experienced or is reasonably likely to

3-21  experience capital losses, or diminished dividends, returns or

3-22  income or any other financial loss as a result of the imprudent

3-23  investment of money;

3-24      (b) The insurer or any director, partner, officer, employee,

3-25  agent or contactor of the insurer has engaged in:

3-26          (1) Any fraudulent accounting practice;

3-27          (2) Any form of corporate fraud or securities fraud; or

3-28          (3) Any willful misconduct or wrongdoing that violates the

3-29  laws or regulations of the United States, this state or any other

3-30  state; or

3-31      (c) The insurer has experienced or is reasonably likely to

3-32  experience losses or expenses as a result of the insurer or any

3-33  director, partner, officer, employee, agent or contractor of the

3-34  insurer having engaged in litigation unreasonably or vexatiously

3-35  after one or more opposing parties have made a reasonable offer

3-36  of settlement.

3-37      4.  The Commissioner shall approve or disapprove each

3-38  proposal no later than 60 days after it is determined by him to be

3-39  complete pursuant to subsection [4.] 7. If the Commissioner fails to

3-40  approve or disapprove the proposal within that period, the proposal

3-41  shall be deemed approved.

3-42      [2.] 5.  Whenever an insurer has no legally effective rates as a

3-43  result of the Commissioner’s disapproval of rates or other act, the

3-44  Commissioner shall , on request , specify interim rates for the

3-45  insurer that are high enough to protect the interests of all parties and

4-1  may order that a specified portion of the premiums be placed in an

4-2  escrow account approved by him. When new rates become legally

4-3  effective, the Commissioner shall order the escrowed funds or any

4-4  overcharge in the interim rates to be distributed appropriately,

4-5  except that refunds to policyholders that are de minimis must not be

4-6  required.

4-7  [3.] 6.  If the Commissioner disapproves a proposed rate and an

4-8  insurer requests a hearing to determine the validity of his action, the

4-9  insurer has the burden of showing compliance with the applicable

4-10  standards for rates established in NRS 686B.010 to 686B.1799,

4-11  inclusive[.] , and section 1 of this act. Any such hearing must be

4-12  held:

4-13      (a) Within 30 days after the request for a hearing has been

4-14  submitted to the Commissioner; or

4-15      (b) Within a period agreed upon by the insurer and the

4-16  Commissioner.

4-17  If the hearing is not held within the period specified in paragraph (a)

4-18  or (b), or if the Commissioner fails to issue an order concerning the

4-19  proposed rate for which the hearing is held within 45 days after the

4-20  hearing, the proposed rate shall be deemed approved.

4-21      [4.] 7.  The Commissioner shall [by regulation] specify the

4-22  documents or any other information which must be included in a

4-23  proposal to increase or decrease a rate submitted to him pursuant to

4-24  [subsection 1.] this section. Each such proposal shall be deemed

4-25  complete upon its filing with the Commissioner, unless the

4-26  Commissioner, within 15 business days after the proposal is filed

4-27  with him, determines that the proposal is incomplete because the

4-28  proposal does not comply with the regulations adopted by him

4-29  pursuant to this [subsection.] section.

4-30      8.  The Commissioner shall adopt any regulations that are

4-31  necessary to carry out the provisions of this section, including,

4-32  without limitation, regulations which define words and terms used

4-33  in this section.

4-34      Sec. 5.  Chapter 690B of NRS is hereby amended by adding

4-35  thereto the provisions set forth as sections 6 to 13, inclusive, of this

4-36  act.

4-37      Sec. 6.  As used in NRS 690B.045, 690B.050 and sections 6 to

4-38  13, inclusive, of this act, unless the context otherwise requires, the

4-39  words and terms defined in sections 7, 8 and 9 of this act have the

4-40  meanings ascribed to them in those sections.

4-41      Sec. 7.  “Claim” means a demand for compensation that is:

4-42      1.  Delivered to an insurer; and

4-43      2.  Payable pursuant to the terms of a policy of insurance

4-44  issued by the insurer.

5-1  Sec. 8.  “Claims-made insurance” means insurance that

5-2  provides coverage only for a claim that:

5-3  1.  Arises from an incident that occurs while the policy of

5-4  claims-made insurance is in force; and

5-5  2.  Is delivered to the insurer who issued the policy of claims-

5-6  made insurance while the policy of claims-made insurance is in

5-7  force.

5-8  Sec. 9.  “Tail coverage” means a supplement to a policy of

5-9  claims-made insurance that provides coverage for a claim that:

5-10      1.  Arises from an incident that occurs while the policy of

5-11  claims-made insurance is in force; and

5-12      2.  Is not delivered to the insurer who issued the policy of

5-13  claims-made insurance while the policy of claims-made insurance

5-14  is in force.

5-15      Sec. 10.  If an insurer offers to issue to a practitioner licensed

5-16  pursuant to chapter 630, 631, 632 or 633 of NRS a policy of

5-17  claims-made insurance covering the liability of the practitioner for

5-18  a breach of his professional duty toward a patient, the insurer

5-19  shall offer to issue the policy with tail coverage. The insurer may

5-20  also offer to issue the policy without tail coverage. If the insurer

5-21  offers to issue the policy without tail coverage, the cost of the

5-22  policy with tail coverage may not exceed twice the cost of the

5-23  policy without tail coverage.

5-24      Sec. 11. 1.  For a policy of insurance covering the liability

5-25  of a practitioner licensed pursuant to chapter 630, 632 or 633 of

5-26  NRS for a breach of his professional duty toward a patient:

5-27      (a) Except as otherwise provided in this section, the insurer

5-28  who issues the policy shall not set the premium for the policy for a

5-29  practitioner who delivers one or more babies per year at a rate that

5-30  is different from the rate set for a policy of insurance issued by the

5-31  insurer for any other practitioner who delivers one or more babies

5-32  per year if the difference in rates is based in whole or in part upon

5-33  the number of babies delivered per year by the practitioner.

5-34      (b) The insurer who issues the policy may set the premium for

5-35  the policy for a practitioner who delivers one or more babies per

5-36  year at a rate that is different, based in whole or in part upon the

5-37  number of babies delivered per year by the practitioner, from the

5-38  rate set for a policy of insurance issued by the insurer for any

5-39  other practitioner who delivers one or more babies per year if the

5-40  insurer:

5-41          (1) Bases the difference upon actuarial and loss experience

5-42  data available to the insurer; and

5-43          (2) Obtains the approval of the Commissioner for the

5-44  difference in rates.

6-1  2.  This section does not prohibit an insurer, for a policy of

6-2  insurance covering the liability of a practitioner licensed pursuant

6-3  to chapter 630, 632 or 633 of NRS for a breach of his professional

6-4  duty toward a patient, from setting the premium for the policy for

6-5  a practitioner who delivers one or more babies per year at a rate

6-6  that is different from the rate set for a policy of insurance issued

6-7  by the insurer for any other practitioner who delivers one or more

6-8  babies per year if the difference in rates is based solely upon

6-9  factors other than the number of babies delivered per year by the

6-10  practitioner.

6-11      Sec. 12.  1.  If an agreement settles a claim or action

6-12  alleging a breach of professional duty toward a patient by a

6-13  practitioner licensed pursuant to chapter 630, 631, 632 or 633 of

6-14  NRS, the agreement must not provide that any of the terms of the

6-15  agreement are confidential.

6-16      2.  Any provision of an agreement to settle a claim or action

6-17  that conflicts with this section is void.

6-18      Sec. 13.  1.  The Commissioner shall, on or before April 1 of

6-19  each year:

6-20      (a) Specify for the purposes of this section, by regulation,

6-21  categories of practitioners licensed pursuant to chapter 630, 631,

6-22  632 or 633 of NRS;

6-23      (b) Determine for each category of practitioner specified

6-24  pursuant to paragraph (a), using data applicable to the previous

6-25  calendar year, the relative market share in this state among

6-26  insurers with respect to policies of insurance issued to cover the

6-27  liability of the practitioners within the category for breach of

6-28  professional duty toward a patient; and

6-29      (c) Provide notice of the applicability of this section to each

6-30  insurer who the Commissioner determines, pursuant to paragraph

6-31  (b), possesses more than 40 percent of the market in this state

6-32  within a category of practitioner.

6-33      2.  A determination by the Commissioner pursuant to

6-34  subsection 1 that an insurer possesses more than 40 percent of the

6-35  market in this state within a category of practitioner is valid for

6-36  the period beginning on April 1 of the year in which the

6-37  determination is made and ending on March 31 of the following

6-38  year, without regard to any actual change in market share during

6-39  that period.

6-40      3.  During any period specified in subsection 2 for which an

6-41  insurer is determined by the Commissioner pursuant to subsection

6-42  1 to possess more than 40 percent of the market in this state within

6-43  a category of practitioner, the insurer shall, before withdrawing

6-44  from that market, comply with the provisions of subsections 4

6-45  and 5.

7-1  4.  An insurer described in subsection 3 shall, at least 120

7-2  days before withdrawing:

7-3  (a) Give written notice of its intent to withdraw to the

7-4  Commissioner and to each practitioner within the applicable

7-5  category whom the insurer insures against liability for a breach of

7-6  his professional duty toward a patient; and

7-7  (b) Submit to the Commissioner a written plan providing for

7-8  the insurer’s orderly withdrawal from the market so as to

7-9  minimize the effect of the withdrawal on the public generally and

7-10  on the practitioners within the applicable category whom the

7-11  insurer insures against liability for a breach of professional duty

7-12  toward a patient.

7-13      5.  After complying with the requirements set forth in

7-14  subsection 4, an insurer described in subsection 3:

7-15      (a) Shall not take any action toward withdrawal until the

7-16  Commissioner determines that the written plan required pursuant

7-17  to paragraph (b) of subsection 4 complies with the regulations

7-18  adopted pursuant to paragraph (a) of subsection 7.

7-19      (b) Shall ensure that any action it takes toward withdrawal is

7-20  in compliance with the written plan required pursuant to

7-21  paragraph (b) of subsection 4.

7-22      6.  The Commissioner has the final authority to determine

7-23  whether a particular action taken by an insurer is in compliance

7-24  with the written plan required pursuant to paragraph (b) of

7-25  subsection 4.

7-26      7.  The Commissioner shall adopt regulations:

7-27      (a) Prescribing the form, content and method of submission of

7-28  a written plan required pursuant to paragraph (b) of subsection 4.

7-29      (b) For determining, pursuant to subsection 1, the relative

7-30  market share in this state among insurers with respect to policies

7-31  of insurance issued to cover the liability of a practitioner licensed

7-32  pursuant to chapter 630, 631, 632 or 633 of NRS for a breach of

7-33  his professional duty toward a patient.

7-34      Sec. 14.  Chapter 41A of NRS is hereby amended by adding

7-35  thereto a new section to read as follows:

7-36      1.  In an action for medical malpractice or dental malpractice,

7-37  if the defendant:

7-38      (a) Receives a settlement demand that is equal to the limits of

7-39  the insurance policy of the defendant, the insurer shall, upon

7-40  receipt of a copy of the demand, inform the defendant of any

7-41  applicable rights and obligations possessed by the defendant,

7-42  whether derived from statute or the common law, including,

7-43  without limitation, the right of the defendant to obtain

7-44  independent counsel at the expense of the insurer and the method,

8-1  described in this section, by which the defendant may obtain

8-2  independent counsel.

8-3  (b) Notifies the judge not later than 15 days after receiving a

8-4  settlement demand described in this section that the defendant

8-5  wishes to have independent counsel, the judge shall, not later than

8-6  15 days after receiving such notice, appoint independent counsel

8-7  to represent the defendant. The fees for any independent counsel

8-8  appointed pursuant to this section must be paid by the insurer.

8-9  2.  The Commissioner of Insurance shall prescribe a form

8-10  that may be used by an insurer to fulfill the requirements of

8-11  paragraph (a) of subsection 1.

8-12      Sec. 15.  1.  For a policy of insurance covering the liability of

8-13  a practitioner licensed pursuant to chapter 630, 631, 632 or 633 of

8-14  NRS for a breach of his professional duty toward a patient that is

8-15  issued or renewed on or after the effective date of this section the

8-16  insurer shall reduce the premium for the policy to an amount that is

8-17  at least 25 percent less than the premium for the same coverage

8-18  which was in effect on July 1, 2002. If, on or after the effective date

8-19  of this section, a practitioner licensed pursuant to chapter 630, 631,

8-20  632 or 633 of NRS applies for the first time for a policy of insurance

8-21  covering the liability of the practitioner for a breach of his

8-22  professional duty toward a patient, the premium for the policy must

8-23  be at least 25 percent less than the premium which was in effect on

8-24  July 1, 2002, for similarly situated risks.

8-25      2.  Any separate affiliate of an insurer, established after July 1,

8-26  2002, is subject to the provisions of this section and shall reduce its

8-27  premiums to amounts which are at least 25 percent less than the

8-28  insurer’s premiums in effect on July 1, 2002.

8-29      3.  During the period beginning on the effective date of this

8-30  section and ending on June 30, 2004:

8-31      (a) Premiums reduced pursuant to subsection 1 may be

8-32  increased only in accordance with the provisions of chapter 686B of

8-33  NRS or this subsection.

8-34      (b) An insurer subject to the provisions of this section may

8-35  apply to the Commissioner of Insurance to increase a premium set

8-36  pursuant to this section if that premium fails to provide a fair and

8-37  reasonable return to the insurer or is otherwise confiscatory.

8-38      (c) An insurer who submits an application pursuant to this

8-39  subsection may charge the unreduced premium until the

8-40  Commissioner of Insurance approves or disapproves the application.

8-41  If the application is disapproved, the insurer shall immediately

8-42  reduce the premium according to the Commissioner’s decision and

8-43  refund the disallowed portion of the previously paid premiums, with

8-44  interest, to the person who paid the premiums.

9-1  4.  Notwithstanding any previous notice of cancelation or

9-2  renewal, an insurer who has issued a policy of insurance covering

9-3  the liability of a practitioner licensed pursuant to chapter 630, 631,

9-4  632 or 633 of NRS for a breach of his professional duty toward a

9-5  patient that is in effect on the effective date of this section and has a

9-6  scheduled date for termination of the policy before July 1, 2004,

9-7  shall not terminate or cancel that policy before July 1, 2004, or

9-8  refuse to renew or extend that policy through June 30, 2004, for the

9-9  purpose of avoiding the reduction on premiums required by this

9-10  section.

9-11      5.  An insurer who cancels or fails to renew policies of

9-12  insurance covering the liability of practitioners licensed pursuant to

9-13  chapter 630, 631, 632 or 633 of NRS for a breach of their

9-14  professional duty toward patients at a rate that exceeds the insurer’s

9-15  average monthly rate of cancelation or failure to renew,

9-16  respectively, for the 24 months preceding the effective date of this

9-17  section by more than 10 percent during any 30-day period occurring

9-18  during the period beginning on the effective date of this section and

9-19  ending on June 30, 2004, is required to show cause immediately to

9-20  the Commissioner of Insurance why the insurer is not in violation of

9-21  this section. Any violation of this section is a violation of the

9-22  Nevada Insurance Code. If the Commissioner of Insurance

9-23  determines that the reason for the increase in the rate of cancelation

9-24  of or failure to renew policies is an attempt to circumvent the

9-25  reduction in premiums required by this section, the Commissioner

9-26  may take appropriate disciplinary action.

9-27      6.  For the purposes of this section:

9-28      (a) “Insurer” has the meaning ascribed to it in NRS 679A.100.

9-29      (b) “Premium” has the meaning ascribed to it in NRS 679A.115.

9-30      Sec. 16.  1. The provisions of section 10 of this act apply

9-31  only to:

9-32      (a) A policy of insurance covering the liability of a practitioner

9-33  licensed pursuant to chapter 630, 631, 632 or 633 of NRS which is

9-34  issued or renewed on or after October 1, 2003.

9-35      (b) An offer to issue a policy of insurance covering the liability

9-36  of a practitioner licensed pursuant to chapter 630, 631, 632 or 633 of

9-37  NRS communicated to the applicant for the policy on or after

9-38  October 1, 2003.

9-39      2. The provisions of section 11 of this act apply only to:

9-40      (a) A policy of insurance covering the liability of a practitioner

9-41  licensed pursuant to chapter 630, 632 or 633 of NRS which is issued

9-42  or renewed on or after October 1, 2003.

9-43      (b) An offer to issue a policy of insurance covering the liability

9-44  of a practitioner licensed pursuant to chapter 630, 632 or 633 of

10-1  NRS communicated to the applicant for the policy on or after

10-2  October 1, 2003.

10-3      3.  The amendatory provisions of sections 12 and 14 of this act

10-4  apply only to a cause of action that accrues on or after October 1,

10-5  2003.

10-6      Sec. 17.  1.  This section and section 15 of this act become

10-7  effective upon passage and approval.

10-8      2.  Sections 1 to 12, inclusive, 14 and 16 of this act become

10-9  effective:

10-10     (a) Upon passage and approval for the purposes of adopting

10-11  regulations and performing any other preparatory administrative

10-12  tasks that are necessary to carry out the provisions of this act; and

10-13     (b) On October 1, 2003, for all other purposes.

10-14     3.  Section 13 of this act becomes effective:

10-15     (a) Upon passage and approval for the purposes of adopting

10-16  regulations and performing any other preparatory administrative

10-17  tasks that are necessary to carry out the provisions of this act; and

10-18     (b) On April 1, 2004, for all other purposes.

 

10-19  H