(Reprinted with amendments adopted on April 21, 2003)

 

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.

 

~

 

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

 

AN ACT relating to malpractice; revising various provisions relating to filings and rates for certain insurers that issue policies of malpractice insurance; providing persons with the right to provide testimony at certain hearings before the Commissioner of Insurance under certain circumstances; establishing various requirements relating to policies of malpractice insurance; authorizing the Commissioner to protect essential medical specialties from certain adverse actions regarding policies of malpractice insurance; requiring the Commissioner to collect certain information and to conduct certain studies relating to policies of malpractice insurance; providing that certain information in certain settlement agreements must not be made confidential; providing certain defendants in malpractice actions with the right to obtain independent counsel at the expense of the insurer under certain circumstances; providing penalties; 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.  NRS 686B.040 is hereby amended to read as

1-2  follows:

1-3  686B.040  [The]

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

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

2-3  any market segment from any or all of the provisions of NRS

2-4  686B.010 to 686B.1799, inclusive, if and to the extent that he finds

2-5  their application unnecessary to achieve the purposes of those

2-6  sections.

2-7  2.  The Commissioner may not, by rule or otherwise, exempt

2-8  an insurer from the provisions of NRS 686B.010 to 686B.1799,

2-9  inclusive, with regard to insurance covering the liability of a

2-10  practitioner licensed pursuant to chapter 630, 631, 632 or 633 of

2-11  NRS for a breach of his professional duty toward a patient.

2-12      Sec. 2.  NRS 686B.070 is hereby amended to read as follows:

2-13      686B.070  1.  Every authorized insurer and every rate service

2-14  organization licensed under NRS [686B.130] 686B.140 which has

2-15  been designated by any insurer for the filing of rates under

2-16  subsection 2 of NRS 686B.090 shall file with the Commissioner all:

2-17      [1.] (a) Rates and proposed increases thereto;

2-18      [2.] (b) Forms of policies to which the rates apply;

2-19      [3.] (c) Supplementary rate information; and

2-20      [4.] (d) Changes and amendments thereof,

2-21  made by it for use in this state.

2-22      2.  If an insurer makes a filing for a proposed increase in a

2-23  rate for insurance covering the liability of a practitioner licensed

2-24  pursuant to chapter 630, 631, 632 or 633 of NRS for a breach of

2-25  his professional duty toward a patient, the insurer shall not

2-26  include in the filing any component that is directly or indirectly

2-27  related to the following:

2-28      (a) Capital losses, diminished cash flow from any dividends,

2-29  interest or other investment returns, or any other financial loss

2-30  that is materially outside of the claims experience of the

2-31  professional liability insurance industry, as determined by the

2-32  Commissioner.

2-33      (b) Losses that are the result of any criminal or fraudulent

2-34  activities of a director, officer or employee of the insurer.

2-35  If the Commissioner determines that a filing includes any such

2-36  component, the Commissioner shall, pursuant to NRS 686B.110,

2-37  disapprove the proposed increase, in whole or in part, to the extent

2-38  that the proposed increase relies upon such a component.

2-39      Sec. 3.  NRS 686B.090 is hereby amended to read as follows:

2-40      686B.090  1.  An insurer shall establish rates and

2-41  supplementary rate information for any market segment based on

2-42  the factors in NRS 686B.060. If an insurer has insufficient

2-43  creditable loss experience, it may use rates and supplementary rate

2-44  information prepared by a rate service organization, with

2-45  modification for its own expense and loss experience.

3-1  2.  An insurer may discharge its obligation under subsection 1

3-2  of NRS 686B.070 by giving notice to the Commissioner that it uses

3-3  rates and supplementary rate information prepared by a designated

3-4  rate service organization, with such information about modifications

3-5  thereof as are necessary fully to inform the Commissioner. The

3-6  insurer’s rates and supplementary rate information shall be deemed

3-7  those filed from time to time by the rate service organization,

3-8  including any amendments thereto as filed, subject [, however,] to

3-9  the modifications filed by the insurer.

3-10      Sec. 4.  NRS 686B.110 is hereby amended to read as follows:

3-11      686B.110  1.  The Commissioner shall consider each proposed

3-12  increase or decrease in the rate of any kind or line of insurance or

3-13  subdivision thereof filed with him pursuant to subsection 1 of NRS

3-14  686B.070. If the Commissioner finds that a proposed increase will

3-15  result in a rate which is not in compliance with NRS 686B.050 [,] or

3-16  subsection 2 of NRS 686B.070, he shall disapprove the proposal.

3-17  The Commissioner shall approve or disapprove each proposal no

3-18  later than 60 days after it is determined by him to be complete

3-19  pursuant to subsection 4. If the Commissioner fails to approve or

3-20  disapprove the proposal within that period, the proposal shall be

3-21  deemed approved.

3-22      2.  Whenever an insurer has no legally effective rates as a result

3-23  of the Commissioner’s disapproval of rates or other act, the

3-24  Commissioner shall on request specify interim rates for the insurer

3-25  that are high enough to protect the interests of all parties and may

3-26  order that a specified portion of the premiums be placed in an

3-27  escrow account approved by him. When new rates become legally

3-28  effective, the Commissioner shall order the escrowed funds or any

3-29  overcharge in the interim rates to be distributed appropriately,

3-30  except that refunds to policyholders that are de minimis must not be

3-31  required.

3-32      3.  If the Commissioner disapproves a proposed rate and an

3-33  insurer requests a hearing to determine the validity of his action, the

3-34  insurer has the burden of showing compliance with the applicable

3-35  standards for rates established in NRS 686B.010 to 686B.1799,

3-36  inclusive. Any such hearing must be held:

3-37      (a) Within 30 days after the request for a hearing has been

3-38  submitted to the Commissioner; or

3-39      (b) Within a period agreed upon by the insurer and the

3-40  Commissioner.

3-41  If the hearing is not held within the period specified in paragraph (a)

3-42  or (b), or if the Commissioner fails to issue an order concerning the

3-43  proposed rate for which the hearing is held within 45 days after the

3-44  hearing, the proposed rate shall be deemed approved.

4-1  4.  The Commissioner shall by regulation specify the

4-2  documents or any other information which must be included in a

4-3  proposal to increase or decrease a rate submitted to him pursuant to

4-4  subsection 1. Each such proposal shall be deemed complete upon its

4-5  filing with the Commissioner, unless the Commissioner, within 15

4-6  business days after the proposal is filed with him, determines that

4-7  the proposal is incomplete because the proposal does not comply

4-8  with the regulations adopted by him pursuant to this subsection.

4-9  Sec. 5.  NRS 686B.115 is hereby amended to read as follows:

4-10      686B.115  1.  Any hearing held by the Commissioner to

4-11  determine whether rates comply with the provisions of NRS

4-12  686B.010 to 686B.1799, inclusive, must be open to members of the

4-13  public.

4-14      2.  All costs for transcripts prepared pursuant to such a hearing

4-15  must be paid by the insurer requesting the hearing.

4-16      3.  At any hearing which is held by the Commissioner to

4-17  determine whether rates comply with the provisions of NRS

4-18  686B.010 to 686B.1799, inclusive, and which involves rates for

4-19  insurance covering the liability of a practitioner licensed pursuant

4-20  to chapter 630, 631, 632 or 633 of NRS for a breach of his

4-21  professional duty toward a patient, if a person is not otherwise

4-22  authorized pursuant to this title to become a party to the hearing

4-23  by intervention, the person is entitled to provide testimony at the

4-24  hearing if, not later than 2 days before the date set for the hearing,

4-25  the person files with the Commissioner a written statement which

4-26  states:

4-27      (a) The name and title of the person;

4-28      (b) The interest of the person in the hearing; and

4-29      (c) A brief summary describing the purpose of the testimony

4-30  the person will offer at the hearing.

4-31      4.  If a person provides testimony at a hearing in accordance

4-32  with subsection 3:

4-33      (a) The Commissioner may, if he finds it necessary to preserve

4-34  order, prevent inordinate delay or protect the rights of the parties

4-35  at the hearing, place reasonable limitations on the duration of the

4-36  testimony and prohibit the person from providing testimony that is

4-37  not relevant to the issues raised at the hearing.

4-38      (b) The Commissioner shall consider all relevant testimony

4-39  provided by the person at the hearing in determining whether the

4-40  rates comply with the provisions of NRS 686B.010 to 686B.1799,

4-41  inclusive.

 

 

5-1  Sec. 6.  Chapter 690B of NRS is hereby amended by adding

5-2  thereto the provisions set forth as sections 7 to 16, inclusive, of this

5-3  act.

5-4  Sec. 7.  As used in sections 7 to 16, inclusive, of this act,

5-5  unless the context otherwise requires, the words and terms defined

5-6  in sections 8 to 11, inclusive, of this act have the meanings

5-7  ascribed to them in those sections.

5-8  Sec. 8.  “Claims-made policy” means a policy of professional

5-9  liability insurance that provides coverage only for claims that arise

5-10  from incidents or events which occur while the policy is in force

5-11  and which are reported to the insurer while the policy is in force.

5-12      Sec. 9.  “Extended reporting endorsement” means an

5-13  endorsement to a claims-made policy which requires the payment

5-14  of a separate premium and which provides coverage for claims

5-15  that arise from incidents or events which occur while the claims-

5-16  made policy is in force but which are reported to the insurer after

5-17  the claims-made policy is terminated.

5-18      Sec. 10.  “Practitioner” means a practitioner who provides

5-19  health care and who is licensed pursuant to chapter 630, 631, 632

5-20  or 633 of NRS.

5-21      Sec. 11.  “Professional liability insurance” means a policy of

5-22  insurance covering the liability of a practitioner for a breach of

5-23  his professional duty toward a patient.

5-24      Sec. 12.  If an insurer offers to issue a claims-made policy to

5-25  a practitioner, the insurer shall:

5-26      1.  Offer to issue an extended reporting endorsement to the

5-27  practitioner; and

5-28      2.  Disclose to the practitioner the cost formula that the

5-29  insurer uses to determine the premium for the extended reporting

5-30  endorsement. The cost formula must be based on:

5-31      (a) An amount that is not more than twice the amount of the

5-32  premium for the claims-made policy at the time of the termination

5-33  of that policy; and

5-34      (b) The rates filed by the insurer and approved by the

5-35  Commissioner.

5-36      Sec. 13.  1.  Except as otherwise provided in this section, if

5-37  an insurer issues a policy of professional liability insurance to a

5-38  practitioner who delivers one or more babies per year, the insurer

5-39  shall not set the premium for the policy at a rate that is different

5-40  from the rate set for such a policy issued by the insurer to any

5-41  other practitioner who delivers one or more babies per year if the

5-42  difference in rates is based in whole or in part upon the number of

5-43  babies delivered per year by the practitioner.

5-44      2.  If an insurer issues a policy of professional liability

5-45  insurance to a practitioner who delivers one or more babies per

6-1  year, the insurer may set the premium for the policy at a rate that

6-2  is different, based in whole or in part upon the number of babies

6-3  delivered per year by the practitioner, from the rate set for such a

6-4  policy issued by the insurer to any other practitioner who delivers

6-5  one or more babies per year if the insurer:

6-6  (a) Bases the difference upon actuarial and loss experience

6-7  data available to the insurer; and

6-8  (b) Obtains the approval of the Commissioner for the

6-9  difference in rates.

6-10      3.  The provisions of this section do not prohibit an insurer

6-11  from setting the premium for a policy of professional liability

6-12  insurance issued to a practitioner who delivers one or more babies

6-13  per year at a rate that is different from the rate set for such a

6-14  policy issued by the insurer to any other practitioner who delivers

6-15  one or more babies per year if the difference in rates is based

6-16  solely upon factors other than the number of babies delivered per

6-17  year by the practitioner.

6-18      Sec. 14.  1.  On or before April 1 of each year, the

6-19  Commissioner shall:

6-20      (a) Determine whether there are any medical specialties in this

6-21  state which are essential as a matter of public policy and which

6-22  must be protected pursuant to this section from certain adverse

6-23  actions relating to professional liability insurance that may impair

6-24  the availability of those essential medical specialties to the

6-25  residents of this state; and

6-26      (b) Make a list containing the essential medical specialties

6-27  designated by the Commissioner and provide the list to each

6-28  insurer that issues policies of professional liability insurance to

6-29  practitioners who are practicing in one or more of the essential

6-30  medical specialties.

6-31      2.  If an insurer intends to cancel, terminate or otherwise not

6-32  renew a specific policy of professional liability insurance that it

6-33  has issued to a practitioner who is practicing in one or more of the

6-34  essential medical specialties designated by the Commissioner:

6-35      (a) The insurer must provide 120 days’ notice to the

6-36  practitioner before its intended action becomes effective; and

6-37      (b) The Commissioner may require the insurer to delay its

6-38  intended action for a period of not more than 60 days if the

6-39  Commissioner determines that a replacement policy is not readily

6-40  available to the practitioner.

6-41      3.  If an insurer intends to cancel, terminate or otherwise not

6-42  renew all policies of professional liability insurance that it has

6-43  issued to practitioners who are practicing in one or more of the

6-44  essential medical specialties designated by the Commissioner:

7-1  (a) The insurer must provide 120 days’ notice of its intended

7-2  action to the Commissioner and the practitioners before its

7-3  intended action becomes effective; and

7-4  (b) The Commissioner may require the insurer to delay its

7-5  intended action for a period of not more than 60 days if the

7-6  Commissioner determines that replacement policies are not readily

7-7  available to the practitioners.

7-8  4.  The Commissioner may adopt any regulations that are

7-9  necessary to carry out the provisions of this section.

7-10      5.  Until the Commissioner determines which, if any, medical

7-11  specialties are to be designated as essential medical specialties, the

7-12  following medical specialties shall be deemed to be essential

7-13  medical specialties for the purposes of this section:

7-14      (a) Emergency medicine.

7-15      (b) Neurosurgery.

7-16      (c) Obstetrics and gynecology.

7-17      (d) Orthopedic surgery.

7-18      (e) Pediatrics.

7-19      (f) Trauma surgery.

7-20      Sec. 15.  1.  The Commissioner shall collect all information

7-21  which is pertinent to monitoring whether an insurer that issues

7-22  professional liability insurance is complying with the applicable

7-23  standards for rates established in NRS 686B.010 to 686B.1799,

7-24  inclusive. Such information must include, without limitation:

7-25      (a) The amount of gross premiums collected with regard to

7-26  each medical specialty;

7-27      (b) Information relating to loss ratios;

7-28      (c) Information reported pursuant to NRS 690B.045; and

7-29      (d) Information reported pursuant to NRS 679B.430 and

7-30  679B.440.

7-31      2.  In addition to the information collected pursuant to

7-32  subsection 1, the Commissioner may request any additional

7-33  information from an insurer:

7-34      (a) Whose rates and credit utilization are materially different

7-35  from other insurers in the market for professional liability

7-36  insurance in this state;

7-37      (b) Whose credit utilization shows a substantial change from

7-38  the previous year; or

7-39      (c) Whose information collected pursuant to subsection 1

7-40  indicates a potentially adverse trend.

7-41      3.  If the Commissioner requests additional information from

7-42  an insurer pursuant to subsection 2, the Commissioner shall:

7-43      (a) Determine whether the additional information offers a

7-44  reasonable explanation for the results described in paragraphs (a),

7-45  (b) or (c) of subsection 2; and

8-1  (b) Take any steps permitted by law that are necessary and

8-2  appropriate to assure the ongoing stability of the market for

8-3  professional liability insurance in this state.

8-4  4.  On an ongoing basis, the Commissioner shall:

8-5  (a) Analyze and evaluate the information collected pursuant to

8-6  this section to determine trends in and measure the health of the

8-7  market for professional liability insurance in this state; and

8-8  (b) Prepare and submit a report of his findings and

8-9  recommendations to the Director of the Legislative Counsel

8-10  Bureau for transmittal to members of the Legislature on or before

8-11  November 15 of each year.

8-12      Sec. 16.  1.  If an agreement settles a claim or action against

8-13  a practitioner for a breach of his professional duty toward a

8-14  patient, the following terms of the agreement must not be made

8-15  confidential:

8-16      (a) The names of the parties;

8-17      (b) The date of the incidents or events giving rise to the claim

8-18  or action;

8-19      (c) The nature of the claim or action as set forth in the

8-20  complaint and the answer that is filed with the district court; and

8-21      (d) The effective date of the agreement.

8-22      2.  Any provision of an agreement to settle a claim or action

8-23  that conflicts with this section is void.

8-24      Sec. 17.  Chapter 41A of NRS is hereby amended by adding

8-25  thereto a new section to read as follows:

8-26      1.  In an action for medical malpractice or dental malpractice,

8-27  if the defendant receives a settlement demand that is equal to the

8-28  limits of the insurance policy of the defendant, the insurer shall,

8-29  upon receipt of a copy of the demand, inform the defendant of any

8-30  applicable rights and obligations possessed by the defendant,

8-31  whether derived from statute or the common law, including,

8-32  without limitation, the right of the defendant to obtain

8-33  independent counsel at the expense of the insurer pursuant to this

8-34  section.

8-35      2.  If the defendant obtains independent counsel after being

8-36  informed of his rights and obligations by the insurer pursuant to

8-37  subsection 1, the insurer shall pay the reasonable attorney’s fees

8-38  incurred by the defendant to be represented by independent

8-39  counsel.

8-40      3.  The Commissioner of Insurance shall prescribe a form

8-41  that may be used by an insurer to fulfill the requirements of

8-42  subsection 1.

8-43      Sec. 18.  1.  The Commissioner of Insurance shall conduct a

8-44  study to determine whether legislation enacting tort reform has

8-45  benefited or will benefit the market for professional liability

9-1  insurance in this state. On or before February 1, 2005, the

9-2  Commissioner shall prepare a report that contains the findings of the

9-3  study and submit the report to the Director of the Legislative

9-4  Counsel Bureau for transmittal to the 73rd Session of the Nevada

9-5  Legislature.

9-6  2.  If the constitutionality of any legislation enacting tort reform

9-7  is upheld by the Nevada Supreme Court, the Commissioner shall:

9-8  (a) Not later than 60 days after the date of the decision of the

9-9  Nevada Supreme Court, obtain from each insurer that is offering

9-10  professional liability insurance in this state a rating plan that

9-11  describes the extent to which the insurer will incorporate the

9-12  expected decrease in loss costs into its premiums for professional

9-13  liability insurance;

9-14      (b) Review and evaluate each such rating plan to determine

9-15  whether the rating plan is reasonable;

9-16      (c) Prepare a report which summarizes the rating plans and the

9-17  evaluations made by the Commissioner and which contains

9-18  recommendations as to whether the rating plans should be

9-19  implemented; and

9-20      (d) Submit the report to the Director of the Legislative Counsel

9-21  Bureau for transmittal to the next regular session of the Nevada

9-22  Legislature following submission of the report.

9-23      3.  As used in this section, “professional liability insurance”

9-24  means a policy of insurance covering the liability of a practitioner

9-25  who provides health care for a breach of his professional duty

9-26  toward a patient.

9-27      Sec. 19.  1. The provisions of sections 12 and 13 of this act

9-28  apply only to a policy of professional liability insurance, as defined

9-29  in section 11 of this act, which is offered, issued or renewed on or

9-30  after October 1, 2003.

9-31      2.  The provisions of sections and 16 and 17 of this act apply

9-32  only to a cause of action which accrues on or after October 1, 2003.

9-33      Sec. 20.  This act becomes effective:

9-34      1.  Upon passage and approval for the purposes of adopting

9-35  regulations and performing any other preparatory administrative

9-36  tasks that are necessary to carry out the provisions of this act; and

9-37      2.  On October 1, 2003, for all other purposes.

 

9-38  H