(Reprinted with amendments adopted on April 22, 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 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]

1-4  1.  Except as otherwise provided in subsection 2, the

1-5  Commissioner may by rule exempt any person or class of persons or

1-6  any market segment from any or all of the provisions of NRS

1-7  686B.010 to 686B.1799, inclusive, if and to the extent that he finds

2-1  their application unnecessary to achieve the purposes of those

2-2  sections.

2-3  2.  The Commissioner may not, by rule or otherwise, exempt

2-4  an insurer from the provisions of NRS 686B.010 to 686B.1799,

2-5  inclusive, with regard to insurance covering the liability of a

2-6  practitioner licensed pursuant to chapter 630, 631, 632 or 633 of

2-7  NRS for a breach of his professional duty toward a patient.

2-8  Sec. 2.  NRS 686B.070 is hereby amended to read as follows:

2-9  686B.070  1.  Every authorized insurer and every rate service

2-10  organization licensed under NRS [686B.130] 686B.140 which has

2-11  been designated by any insurer for the filing of rates under

2-12  subsection 2 of NRS 686B.090 shall file with the Commissioner all:

2-13      [1.] (a) Rates and proposed increases thereto;

2-14      [2.] (b) Forms of policies to which the rates apply;

2-15      [3.] (c) Supplementary rate information; and

2-16      [4.] (d) Changes and amendments thereof,

2-17  made by it for use in this state.

2-18      2.  If an insurer makes a filing for a proposed increase in a

2-19  rate for insurance covering the liability of a practitioner licensed

2-20  pursuant to chapter 630, 631, 632 or 633 of NRS for a breach of

2-21  his professional duty toward a patient, the insurer shall not

2-22  include in the filing any component that is directly or indirectly

2-23  related to the following:

2-24      (a) Capital losses, diminished cash flow from any dividends,

2-25  interest or other investment returns, or any other financial loss

2-26  that is materially outside of the claims experience of the

2-27  professional liability insurance industry, as determined by the

2-28  Commissioner.

2-29      (b) Losses that are the result of any criminal or fraudulent

2-30  activities of a director, officer or employee of the insurer.

2-31  If the Commissioner determines that a filing includes any such

2-32  component, the Commissioner shall, pursuant to NRS 686B.110,

2-33  disapprove the proposed increase, in whole or in part, to the extent

2-34  that the proposed increase relies upon such a component.

2-35      Sec. 3.  NRS 686B.090 is hereby amended to read as follows:

2-36      686B.090  1.  An insurer shall establish rates and

2-37  supplementary rate information for any market segment based on

2-38  the factors in NRS 686B.060. If an insurer has insufficient

2-39  creditable loss experience, it may use rates and supplementary rate

2-40  information prepared by a rate service organization, with

2-41  modification for its own expense and loss experience.

2-42      2.  An insurer may discharge its obligation under subsection 1

2-43  of NRS 686B.070 by giving notice to the Commissioner that it uses

2-44  rates and supplementary rate information prepared by a designated

2-45  rate service organization, with such information about modifications

3-1  thereof as are necessary fully to inform the Commissioner. The

3-2  insurer’s rates and supplementary rate information shall be deemed

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

3-4  including any amendments thereto as filed, subject [, however,] to

3-5  the modifications filed by the insurer.

3-6  Sec. 4.  NRS 686B.110 is hereby amended to read as follows:

3-7  686B.110  1.  The Commissioner shall consider each proposed

3-8  increase or decrease in the rate of any kind or line of insurance or

3-9  subdivision thereof filed with him pursuant to subsection 1 of NRS

3-10  686B.070. If the Commissioner finds that a proposed increase will

3-11  result in a rate which is not in compliance with NRS 686B.050 [,] or

3-12  subsection 2 of NRS 686B.070, he shall disapprove the proposal.

3-13  The Commissioner shall approve or disapprove each proposal no

3-14  later than 60 days after it is determined by him to be complete

3-15  pursuant to subsection 4. If the Commissioner fails to approve or

3-16  disapprove the proposal within that period, the proposal shall be

3-17  deemed approved.

3-18      2.  Whenever an insurer has no legally effective rates as a result

3-19  of the Commissioner’s disapproval of rates or other act, the

3-20  Commissioner shall on request specify interim rates for the insurer

3-21  that are high enough to protect the interests of all parties and may

3-22  order that a specified portion of the premiums be placed in an

3-23  escrow account approved by him. When new rates become legally

3-24  effective, the Commissioner shall order the escrowed funds or any

3-25  overcharge in the interim rates to be distributed appropriately,

3-26  except that refunds to policyholders that are de minimis must not be

3-27  required.

3-28      3.  If the Commissioner disapproves a proposed rate and an

3-29  insurer requests a hearing to determine the validity of his action, the

3-30  insurer has the burden of showing compliance with the applicable

3-31  standards for rates established in NRS 686B.010 to 686B.1799,

3-32  inclusive. Any such hearing must be held:

3-33      (a) Within 30 days after the request for a hearing has been

3-34  submitted to the Commissioner; or

3-35      (b) Within a period agreed upon by the insurer and the

3-36  Commissioner.

3-37  If the hearing is not held within the period specified in paragraph (a)

3-38  or (b), or if the Commissioner fails to issue an order concerning the

3-39  proposed rate for which the hearing is held within 45 days after the

3-40  hearing, the proposed rate shall be deemed approved.

3-41      4.  The Commissioner shall by regulation specify the

3-42  documents or any other information which must be included in a

3-43  proposal to increase or decrease a rate submitted to him pursuant to

3-44  subsection 1. Each such proposal shall be deemed complete upon its

3-45  filing with the Commissioner, unless the Commissioner, within 15

4-1  business days after the proposal is filed with him, determines that

4-2  the proposal is incomplete because the proposal does not comply

4-3  with the regulations adopted by him pursuant to this subsection.

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

4-5  686B.115  1.  Any hearing held by the Commissioner to

4-6  determine whether rates comply with the provisions of NRS

4-7  686B.010 to 686B.1799, inclusive, must be open to members of the

4-8  public.

4-9  2.  All costs for transcripts prepared pursuant to such a hearing

4-10  must be paid by the insurer requesting the hearing.

4-11      3.  At any hearing which is held by the Commissioner to

4-12  determine whether rates comply with the provisions of NRS

4-13  686B.010 to 686B.1799, inclusive, and which involves rates for

4-14  insurance covering the liability of a practitioner licensed pursuant

4-15  to chapter 630, 631, 632 or 633 of NRS for a breach of his

4-16  professional duty toward a patient, if a person is not otherwise

4-17  authorized pursuant to this title to become a party to the hearing

4-18  by intervention, the person is entitled to provide testimony at the

4-19  hearing if, not later than 2 days before the date set for the hearing,

4-20  the person files with the Commissioner a written statement which

4-21  states:

4-22      (a) The name and title of the person;

4-23      (b) The interest of the person in the hearing; and

4-24      (c) A brief summary describing the purpose of the testimony

4-25  the person will offer at the hearing.

4-26      4.  If a person provides testimony at a hearing in accordance

4-27  with subsection 3:

4-28      (a) The Commissioner may, if he finds it necessary to preserve

4-29  order, prevent inordinate delay or protect the rights of the parties

4-30  at the hearing, place reasonable limitations on the duration of the

4-31  testimony and prohibit the person from providing testimony that is

4-32  not relevant to the issues raised at the hearing.

4-33      (b) The Commissioner shall consider all relevant testimony

4-34  provided by the person at the hearing in determining whether the

4-35  rates comply with the provisions of NRS 686B.010 to 686B.1799,

4-36  inclusive.

4-37      Sec. 6.  Chapter 690B of NRS is hereby amended by adding

4-38  thereto the provisions set forth as sections 7 to 16, inclusive, of this

4-39  act.

4-40      Sec. 7.  As used in sections 7 to 16, inclusive, of this act,

4-41  unless the context otherwise requires, the words and terms defined

4-42  in sections 8 to 11, inclusive, of this act have the meanings

4-43  ascribed to them in those sections.

4-44      Sec. 8.  “Claims-made policy” means a policy of professional

4-45  liability insurance that provides coverage only for claims that arise

5-1  from incidents or events which occur while the policy is in force

5-2  and which are reported to the insurer while the policy is in force.

5-3  Sec. 9.  “Extended reporting endorsement” means an

5-4  endorsement to a claims-made policy which requires the payment

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

5-6  that arise from incidents or events which occur while the claims-

5-7  made policy is in force but which are reported to the insurer after

5-8  the claims-made policy is terminated.

5-9  Sec. 10.  “Practitioner” means a practitioner who provides

5-10  health care and who is licensed pursuant to chapter 630, 631, 632

5-11  or 633 of NRS.

5-12      Sec. 11.  “Professional liability insurance” means a policy of

5-13  insurance covering the liability of a practitioner for a breach of

5-14  his professional duty toward a patient.

5-15      Sec. 12.  If an insurer offers to issue a claims-made policy to

5-16  a practitioner, the insurer shall:

5-17      1.  Offer to issue an extended reporting endorsement to the

5-18  practitioner; and

5-19      2.  Disclose to the practitioner the cost formula that the

5-20  insurer uses to determine the premium for the extended reporting

5-21  endorsement. The cost formula must be based on:

5-22      (a) An amount that is not more than twice the amount of the

5-23  premium for the claims-made policy at the time of the termination

5-24  of that policy; and

5-25      (b) The rates filed by the insurer and approved by the

5-26  Commissioner.

5-27      Sec. 13.  1.  Except as otherwise provided in this section, if

5-28  an insurer issues a policy of professional liability insurance to a

5-29  practitioner who delivers one or more babies per year, the insurer

5-30  shall not set the premium for the policy at a rate that is different

5-31  from the rate set for such a policy issued by the insurer to any

5-32  other practitioner who delivers one or more babies per year if the

5-33  difference in rates is based in whole or in part upon the number of

5-34  babies delivered per year by the practitioner.

5-35      2.  If an insurer issues a policy of professional liability

5-36  insurance to a practitioner who delivers one or more babies per

5-37  year, the insurer may set the premium for the policy at a rate that

5-38  is different, based in whole or in part upon the number of babies

5-39  delivered per year by the practitioner, from the rate set for such a

5-40  policy issued by the insurer to any other practitioner who delivers

5-41  one or more babies per year if the insurer:

5-42      (a) Bases the difference upon actuarial and loss experience

5-43  data available to the insurer; and

5-44      (b) Obtains the approval of the Commissioner for the

5-45  difference in rates.

6-1  3.  The provisions of this section do not prohibit an insurer

6-2  from setting the premium for a policy of professional liability

6-3  insurance issued to a practitioner who delivers one or more babies

6-4  per year at a rate that is different from the rate set for such a

6-5  policy issued by the insurer to any other practitioner who delivers

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

6-7  solely upon factors other than the number of babies delivered per

6-8  year by the practitioner.

6-9  Sec. 14.  1.  On or before April 1 of each year, the

6-10  Commissioner shall:

6-11      (a) Determine whether there are any medical specialties in this

6-12  state which are essential as a matter of public policy and which

6-13  must be protected pursuant to this section from certain adverse

6-14  actions relating to professional liability insurance that may impair

6-15  the availability of those essential medical specialties to the

6-16  residents of this state; and

6-17      (b) Make a list containing the essential medical specialties

6-18  designated by the Commissioner and provide the list to each

6-19  insurer that issues policies of professional liability insurance to

6-20  practitioners who are practicing in one or more of the essential

6-21  medical specialties.

6-22      2.  If an insurer intends to cancel, terminate or otherwise not

6-23  renew a specific policy of professional liability insurance that it

6-24  has issued to a practitioner who is practicing in one or more of the

6-25  essential medical specialties designated by the Commissioner:

6-26      (a) The insurer must provide 120 days’ notice to the

6-27  practitioner before its intended action becomes effective; and

6-28      (b) The Commissioner may require the insurer to delay its

6-29  intended action for a period of not more than 60 days if the

6-30  Commissioner determines that a replacement policy is not readily

6-31  available to the practitioner.

6-32      3.  If an insurer intends to cancel, terminate or otherwise not

6-33  renew all policies of professional liability insurance that it has

6-34  issued to practitioners who are practicing in one or more of the

6-35  essential medical specialties designated by the Commissioner:

6-36      (a) The insurer must provide 120 days’ notice of its intended

6-37  action to the Commissioner and the practitioners before its

6-38  intended action becomes effective; and

6-39      (b) The Commissioner may require the insurer to delay its

6-40  intended action for a period of not more than 60 days if the

6-41  Commissioner determines that replacement policies are not readily

6-42  available to the practitioners.

6-43      4.  The Commissioner may adopt any regulations that are

6-44  necessary to carry out the provisions of this section.

7-1  5.  Until the Commissioner determines which, if any, medical

7-2  specialties are to be designated as essential medical specialties, the

7-3  following medical specialties shall be deemed to be essential

7-4  medical specialties for the purposes of this section:

7-5  (a) Emergency medicine.

7-6  (b) Neurosurgery.

7-7  (c) Obstetrics and gynecology.

7-8  (d) Orthopedic surgery.

7-9  (e) Pediatrics.

7-10      (f) Trauma surgery.

7-11      Sec. 15.  1.  The Commissioner shall collect all information

7-12  which is pertinent to monitoring whether an insurer that issues

7-13  professional liability insurance is complying with the applicable

7-14  standards for rates established in NRS 686B.010 to 686B.1799,

7-15  inclusive. Such information must include, without limitation:

7-16      (a) The amount of gross premiums collected with regard to

7-17  each medical specialty;

7-18      (b) Information relating to loss ratios;

7-19      (c) Information reported pursuant to NRS 690B.045; and

7-20      (d) Information reported pursuant to NRS 679B.430 and

7-21  679B.440.

7-22      2.  In addition to the information collected pursuant to

7-23  subsection 1, the Commissioner may request any additional

7-24  information from an insurer:

7-25      (a) Whose rates and credit utilization are materially different

7-26  from other insurers in the market for professional liability

7-27  insurance in this state;

7-28      (b) Whose credit utilization shows a substantial change from

7-29  the previous year; or

7-30      (c) Whose information collected pursuant to subsection 1

7-31  indicates a potentially adverse trend.

7-32      3.  If the Commissioner requests additional information from

7-33  an insurer pursuant to subsection 2, the Commissioner shall:

7-34      (a) Determine whether the additional information offers a

7-35  reasonable explanation for the results described in paragraphs (a),

7-36  (b) or (c) of subsection 2; and

7-37      (b) Take any steps permitted by law that are necessary and

7-38  appropriate to assure the ongoing stability of the market for

7-39  professional liability insurance in this state.

7-40      4.  On an ongoing basis, the Commissioner shall:

7-41      (a) Analyze and evaluate the information collected pursuant to

7-42  this section to determine trends in and measure the health of the

7-43  market for professional liability insurance in this state; and

7-44      (b) Prepare and submit a report of his findings and

7-45  recommendations to the Director of the Legislative Counsel

8-1  Bureau for transmittal to members of the Legislature on or before

8-2  November 15 of each year.

8-3  Sec. 16.  1.  If an agreement settles a claim or action against

8-4  a practitioner for a breach of his professional duty toward a

8-5  patient, the following terms of the agreement must not be made

8-6  confidential:

8-7  (a) The names of the parties;

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

8-9  or action;

8-10      (c) The nature of the claim or action as set forth in the

8-11  complaint and the answer that is filed with the district court; and

8-12      (d) The effective date of the agreement.

8-13      2.  Any provision of an agreement to settle a claim or action

8-14  that conflicts with this section is void.

8-15      Sec. 17.  1.  The Commissioner of Insurance shall conduct a

8-16  study to determine whether legislation enacting tort reform has

8-17  benefited or will benefit the market for professional liability

8-18  insurance in this state. On or before February 1, 2005, the

8-19  Commissioner shall prepare a report that contains the findings of the

8-20  study and submit the report to the Director of the Legislative

8-21  Counsel Bureau for transmittal to the 73rd Session of the Nevada

8-22  Legislature.

8-23      2.  If the constitutionality of any legislation enacting tort reform

8-24  is upheld by the Nevada Supreme Court, the Commissioner shall:

8-25      (a) Not later than 60 days after the date of the decision of the

8-26  Nevada Supreme Court, obtain from each insurer that is offering

8-27  professional liability insurance in this state a rating plan that

8-28  describes the extent to which the insurer will incorporate the

8-29  expected decrease in loss costs into its premiums for professional

8-30  liability insurance;

8-31      (b) Review and evaluate each such rating plan to determine

8-32  whether the rating plan is reasonable;

8-33      (c) Prepare a report which summarizes the rating plans and the

8-34  evaluations made by the Commissioner and which contains

8-35  recommendations as to whether the rating plans should be

8-36  implemented; and

8-37      (d) Submit the report to the Director of the Legislative Counsel

8-38  Bureau for transmittal to the next regular session of the Nevada

8-39  Legislature following submission of the report.

8-40      3.  As used in this section, “professional liability insurance”

8-41  means a policy of insurance covering the liability of a practitioner

8-42  who provides health care for a breach of his professional duty

8-43  toward a patient.

 

 

9-1  Sec. 18.  1. The provisions of sections 12 and 13 of this act

9-2  apply only to a policy of professional liability insurance, as defined

9-3  in section 11 of this act, which is offered, issued or renewed on or

9-4  after October 1, 2003.

9-5  2.  The provisions of section 16 of this act apply only to a cause

9-6  of action which accrues on or after October 1, 2003.

9-7  Sec. 19.  This act becomes effective:

9-8  1.  Upon passage and approval for the purposes of adopting

9-9  regulations and performing any other preparatory administrative

9-10  tasks that are necessary to carry out the provisions of this act; and

9-11      2.  On October 1, 2003, for all other purposes.

 

9-12  H