MINUTES OF THE ASSEMBLY COMMITTEE ON COMMERCE Sixty-eighth Session May 8, 1995 The Committee on Commerce was called to order at 3:30 p.m., on Monday, May 8, 1995, Chairman Larry Spitler presiding in Room 332 of the Legislative Building, Carson City, Nevada. Exhibit A is the Agenda. Exhibit B is the Attendance Roster. COMMITTEE MEMBERS PRESENT: Mr. Larry L. Spitler, Chairman Ms. Sandra Tiffany, Chairman Mrs. Maureen E. Brower, Vice Chairman Mr. Richard Perkins, Vice Chairman Mr. Dennis L. Allard Mr. Morse Arberry, Jr. Ms. Barbara E. Buckley Mr. Thomas A. Fettic Ms. Chris Giunchigliani Mr. Lynn Hettrick Mr. David E. Humke Mr. Michael A. (Mike) Schneider COMMITTEE MEMBERS EXCUSED: Assemblyman Joan Lambert, District 29 GUEST LEGISLATORS PRESENT: None STAFF MEMBERS PRESENT: Paul Mouritsen, Research Analyst Barbara Moss, Committee Secretary OTHERS PRESENT: Denis Austin, Department of Motor Vehicles Phyllis Young, Nevada Independent Insurance Agents Ross Whitacre, DETR-UI Benn Wiseman, Washoe County Mary Henderson, Washoe County Janice Wright, Department of Taxation Bob Crowell, Farmers Insurance Greg Harwell, Nevada AAA Steve Burris, NTLA Mr. Knaus, Insurance Commission Jim Wadhams, Nevada Industrial Insurance Agents Following roll call, Chairman Spitler asked the committee to take action to introduce Bill Draft 18-886, which made various changes concerning the Department of Business and Industry. An act relating to business and industry creating an account in the state general fund for special projects of the department. Authorizing the creation within the department of an office of industrial development and planning and an office of business development. Authorizing the use within the department of alternative means of dispute resolution under certain circumstances. Transferring the office for hospital patients from the Division of Insurance to the Consumer Affairs Division of the department. Clarifying the authority of the director of the department. Authorizing the establishment of a trust account for the deposit of certain money relating to bond programs administered by the director and providing other matters related thereto. ASSEMBLYMAN TIFFANY MOVED TO INTRODUCE BDR 18-886. ASSEMBLYMAN ALLARD SECONDED THE MOTION. THE MOTION CARRIED. The Chairman asked the committee to introduce Bill Draft Request 52-1820 which was an act relating to the right of publicity, allowing a governmental agency to use without obtaining consent, the name, likeness or other personal characteristic of a person for the purpose of promoting tourism or commemorating a historical figure or event in this state and providing other matters properly related thereto. ASSEMBLYMAN TIFFANY MOVED TO INTRODUCE BDR 52- 1820. ASSEMBLYMAN ARBERRY SECONDED THE MOTION. THE MOTION CARRIED. The Chairman updated the committee on the status of various bills and after some committee housekeeping the hearing was opened on A.B. 437. ASSEMBLY BILL 437 - Allows certain state agencies to share their records with local governments. Mary Henderson, Government Affairs Director with Washoe County, introduced Bill Wiseman, Director of the Collections Division with Washoe County, which was a function within the manager's office. She characterized their collections operation as a very successful enterprise for the county. They brought in three to four times what they spent in terms of monies owed the county and the tax- payers of Washoe County. Mr. Wiseman had been responsible for getting the program off-the-ground and administering it. They were branching out to work with state government on a collection task force. One of the reasons the bill was brought to the Board of County Commissioners was because there was information held by other governmental entities, including their own. When Mr. Wiseman was attempting to collect monies due from court fines, library books, attorney fees, or whatever it might be, he was unable on occasion to obtain access to information on how to contact individuals owing the money. In effect there was one branch of government, even within the county family, holding information confidential that would allow them to collect monies due the tax- payers. Mr. Wiseman indicated the first time he became aware of the problem was when he was attempting to locate a debtor who had been ordered to pay a court fine. He had been unsuccessful and someone suggested he contact the Nevada Employment Security Division, which he did. He wrote them a letter which was referred to the legal department. The legal department wrote him back saying it was confidential information and could not be released. He began to realize there were a number of statutes preventing him from getting the information necessary to collect public monies, even within the county. If he were collecting a juvenile probation account, for example, and the individual was a client of social service, sometimes he was unable to obtain that information. For that reason he had asked for the bill. Ms. Henderson stated a key point of the bill was in section 1 where it said, ". . may share information . .", and the fact they were restricted under statute to keep information confidential to all except local government collection agencies. It was designed to allow them, internally, to share that type of information, either from the state-to-the-county, or the cities-to-the-county, or the county-to-the-county. Ms. Giunchigliani reflected back to the original hearing. Someone had recommended to add the word "written" on subsection 4. She asked the Committee if anyone remembered where that position had orginated. Mr. Spitler indicated Ross Whitacre had testified on A.B. 417, and the Department of Taxation had also made the same suggestion. Ms. Giunchigliani added Mr. Whitacre's suggestion had been "upon written request" in subsection 4. Mr. Arberry asked how abuse would be controlled? How would they control an unauthorized person requesting information? Ms. Henderson's understanding was they would be under the same confidentiality restrictions internally that they were under at the present time with any other agency within the county. They handled tremendous volumes of information within county government, as well as the state. It was a check and balance required by statute to retain confidentiality of records required of any state or county agency. If they did not it would be in violation of statute. Mr. Ross Whitacre, Assistant Chief of Benefits with the Department of Employment Training and Rehabilitation for Unemployment and Insurance, submitted an amendment to A.B. 437 (Exhibit C). He indicated one change to the original amendment had been submitted, in addition to the one previously addressed about including the word "written" on line 37. As a result of the conversation between he and Mr. Hettrick, the language on line 42 was strengthened to restrict release of that information and picked up on line 42 after where it said the request was made. In italics at the bottom, ". . for purposes necessary . . . " was the verbiage to strengthen it to restrict the release of information except for purpose intended by law. Mr. Spitler asked if that was the only amendment offered. He answered yes. Ms. Brower expressed concerns similar to Mr. Arberry regarding abuse. She felt it would best be clarified by explaining who was considered a public official. The written request should state a department head, agency head, or someone in authority. Mr. Whitacre stated there was a current section in their confidentiality statutes that allowed law enforcement agencies to request information when they were in the process of investigation. That section of the law stated the request must be made by the head of that law enforcement department. The verbiage of the bill could be changed to further restrict or define public officials. Ms. Brower said it would help to alleviate her concerns. Mr. Whitacre agreed he would work on it. Mr. Hettrick stated on page 6, line 46, he thought it should say "upon written request" as well. To protect confidentiality a written request should be on file in order to trace back in the event it was used improperly. Mr. Arberry asked if the information could be obtained by E- Mail? Mr. Whitacre responded yes, as the agencies came on-line with E-Mail the potential would exist. Mr. Arberry asserted, in that event, the wording really needed to be tightened up. Ms. Janice Wright, Department of Taxation, stated she had reviewed the bill and noticed in sections 4, 5 and 6 it dealt with property and business taxes, and senior citizens. She noted specifically it did not include sales and use tax information. Therefore, she had an opportunity prior to the hearing to discuss it with Washoe County. Washoe County said they would like to have access to the sales and use tax information. If that were the intention of the Committee it would require the same language that appeared at the top of page 3; and also placed into a section of Nevada Revised Statutes (NRS) 372.750, which stated it a misdemeanor for the Department of Taxation to release sales and use tax information unless through a governor's special order. If this type language was placed in that section it would also grant authority to release sales and use tax information. Confidentiality statutes would then be on the local government and become a misdemeanor were they to be released improperly. Chairman Spitler clarified if that was accomplished the Department of Taxation would have no problem with it. Ms. Wright said it would be viewed by them as giving them authority to release sales and use tax information to the local governments attempting to collect debts. Mr. Whitacre, after reflecting upon the E-Mail question, stated as the amendment was presently constituted it said "upon written request", which would exclude E-Mail. Mr. Spitler said he was unsure if the state had regulations on E-Mail but asserted it was not a confidential communication source. Many people had access to E-Mail messages. Mr. Whitacre agreed, and changed his previous answer. Ms. Henderson said Washoe County would have concerns about E- Mail being included as part of the bill. This was based on the fact they have extensive E-Mail network within Washoe County. When her computer was changed recently, she pulled up four years of E-Mail that she thought was lost somewhere in the system. She felt there was an obligation to the public to maintain confidential records. She was not convinced, with file-servers and the way E-Mail flowed through organizations, that E-Mail was the appropriate method of communication in this case. Mr. Whitacre was concerned that they not preclude the ability to fax information for communication from agency-to- agency. She suggested the language would have to be studied whether it be United States mail or fax transmission written request. Mr. Spitler said it was an issue that would fall to a broader perspective and not isolated to this particular case. He stated no one should be using E-Mail for confidential transmittal of documents. Fax, on the other hand, would be considered because it was a line-to-line transmittal. Chairman Spitler requested Ms. Henderson and Mr. Whitacre to interface with Paul Mouritsen to firm up the forthcoming suggestions of the committee. The Chair asked if there were any more questions on A.B. 437. There being none the hearing was closed on A.B. 437. The hearing was opened on A.B. 474. ASSEMBLY BILL 474 - Requires evidence of insurance issued by insurer to include period of which premium for policy of insurance has been paid. Mr. Steven Burris, an attorney from Las Vegas residing in Henderson, Nevada, stated his law firm specialized in personal injury work. They did many automobile accident cases. He said A.B. 474 dealt with the insurance cards provided by insurance companies that indicated how much and what type of insurance a person carried. A problem had arisen and was happening more and more frequently. Mr. Burris gave a scenario: An individual called him up and told him they had experienced an accident a couple of weeks ago. At the scene the policeman informed him the other person had insurance and showed him the insurance card. On that information he rented a car while his car was being repaired. His car was now repaired and ready for payment. Now he discovered the other person's insurance was no good. Why did that person have a card stating he had valid insurance? Mr. Burris explained the current version of the statute was loosely worded enough to allow insurance companies to issue cards stating there was six months of coverage when only one or two months were paid on a payment plan. When the payments were not made the insurance was not valid, however, the card still indicated it was valid. Sometimes it was innocent error, however, a more sinister side arose when some insurance companies issued coverage to sub-standard risk drivers. Those individuals were offered a payment plan in which they would pay for one or two months but be given documentation indicating it was paid for six months. It was basically a scam! The victim of this was the innocent person whose car was damaged and needed to know if they could get it repaired and rent another vehicle during the repair time. He maintained there was a system through the Department of Motor Vehicles that alerted when insurance was invalid, but in his practice in the "real world" he did not see the system working. He felt an "idiot proof" system would be to distribute cards that stated the date insurance was paid for. Moreover, it served as a "stick" to those individuals who were negligent about keeping their insurance current. Mr. Dennis Austin, Assistant Chief of Registration for the Department of Motor Vehicles (DMV), expressed opposition to the bill because they believed the insurance revocation program provided for protection of the public. The bill also added another piece of paper to the process and implemented new programs that might cause them problems. He felt they were already doing what was necessary. Ms. Giunchigliani asked what the penetration was on their insurance revocation? Mr. Austin indicated he did not have that information but he could obtain it. Ms. Giunchigliani queried how it was tracked at the present time? Mr. Austin replied it was done by tape and was received by the seventh of each month. She asked if they were small, medium and large insurance companies? He responded it was about 280 companies. Ms. Giunchigliani asked if the insurance companies provided them with the information provided for in the bill, how and why would it create more paperwork for the DMV? Mr. Austin said it would not create more paperwork in that instance, but they were looking at doing a registration-by-phone process which would require another piece of paper to be produced in order to register a vehicle. She asked if that was part of the five- point plan? He answered no it was not. He indicated the five- point plan was an attempt to make transactions available by telephone in order to eliminate long lines at the DMV. They were trying to develop a system whereby vehicles could be registered by telephone. She maintained they would be required to have proof of insurance. He answered, not necessarily, with the insurance verification program it could be tracked by computer. Ms. Giunchigliani asserted there would still be a time problem. If an individual telephoned the DMV, registered their vehicle and indicated they had valid insurance; the next month the DMV did a track, therefore, for one month the person could be driving on invalid insurance. Mr. Austin agreed and expressed understanding for Mr. Burris' point of view. The issue with the DMV, however, was they were tracking that information at the present time and were linking those files on a continuing basis. Ms. Giunchigliani stated their numbers had not been good, therefore, although it was being tracked they were not finding the perpetrators. She pointed out the statistics said there were 70 percent uninsured motorists on the streets in Nevada. He was not sure of the percentage. She felt something could be made to work. Mr. Austin declared if that was the Committee's pleasure but felt he had to indicate the system was up and running and they were linking the records on an on-going basis with more success in finding perpetrators. At the subcommittee meeting, Ms. Giunchigliani indicated one of her constituents had expressed the lunacy of an officer pulling someone over who did not have insurance verification in the car, citing them and allowing them to drive away. Therefore, an uninsured person was still on the street and it would take another month or two to find them. She felt if they could mesh all these points together there might be a workable bill. Mr. Perkins questioned how changing the date on the card reflected upon how the DMV did business or created difficulty in tracking the insurance? Mr. Austin said it would not change the way they did business at the present time. He drew attention to A.B. 485 which would go hand-in-hand with A.B. 474. Basically, A.B. 485 required that renewals had proof-of-insurance provided at the time of renewal, as well as vehicles registered for the first time. Mr. Perkins reiterated, did or did it not create an additional burden for the DMV? Mr. Austin answered, no it did not. Mr. Spitler asked if the passage of A.B. 474 would create more money needs for the DMV? Should it have a fiscal note? Mr. Austin responded he did not believe it would have a fiscal note. Mr. Robert Crowell, attorney-at-law appearing on behalf of Farmer's Insurance Company, expressed opposition to A.B. 474. He concurred with the remarks of Mr. Austin that the insurance verification program should be designed to catch individuals driving without insurance on a real time daily basis. That law was embodied in NRS 45.312, which basically required insurance companies to submit, on a real time basis every month, the name and number of each insured named in a policy of insurance; the make, year and vehicle identification number of each motor vehicle included in the policy of insurance; and the number, effective date and expiration of the policy of insurance. Therefore, from that perspective, they believed the goal sought by the proponent of the bill was being accomplished, or should be accomplished, by the vehicle insurance verification program enacted by the last legislature. Mr. Crowell continued to state some of the problems associated in terms of inconvenience to the insured as well as to the insurance company, independent of the insurance verification program previously described. First of all, it was Farmer's, as well as most other major companies', practice to issue notices of insurance renewal approximately 20 days in advance of when the policy was to be renewed. Therefore, if the policy was going to be renewed on June 1, the next policy would be received on May 8. If it was renewed on a six month basis, the renewal policy for six months, along with the insurance verification cards for six months, would be received. Those documents would indicate coverage was for six months. A bill for services would also be sent. The check would then be written, returned and processed. If A.B. 474 were to pass, the insurance company would be required to wait until the check cleared the bank to actually verify the premium had been paid for the six month period of time. This might inconvenience the insured in the following manner. Suppose a person waited until the next to the last day before June 1 to send in the check. Giving timing of mail it could be up to ten days before the check was cleared and cashed. Up to June 10 a person could be driving their car without benefit of insurance verification documentation for which he/she could be legally cited. On the insurance side, suppose a person paid for six months and the insurance verification cards were sent out. Three months into the policy period the insured cancelled the policy for some reason. If the policy was cancelled, the unearned portion of the premium had to be refunded. At that time the question would be begged, what was to be done with the card in possession of the no longer insured? Although unintended, the bill would require someone to physically collect the card. He did not believe it was a convenient method of enforcing the insurance verification laws in the state, or a convenience to the insured and/or the insurance company. Ms. Giunchigliani stated if a person cancelled their insurance, the DMV would not know. She asked if the insurance verification card was required to be turned in upon cancellation at the present time? Mr. Crowell answered, no it was not required to be turned in. She observed that should the DMV program get up and running, they would know of insurance cancellations on a monthly basis. Mr. Crowell reiterated if the bill passed it would require insurance companies to collect the cards from the cancellers. He went on to say that if the computer on-line insurance verification program did what it was designed to do, the use of cards would be outdated. There would no longer be a need for a card because there would be real time access to current data bases of insurance in effect in the police car. Ms. Giunchigliani appreciated that would streamline the process but she did not see where the bill repealed requirement of the card in the vehicle. Pending that occurrence she did not understand his concern in regard to changing anything in the way business was done, at least on the isolated matter of cancelling in between time. Mr. Crowell said theoretically the insurance would have to wait until the check cleared the bank in order to issue the card. She asked what the grace period was at the present time? He answered ten days. She felt that would be ample time, therefore, she did not see much change there. Ms. Giunchigliani asked Mr. Crowell to define "real time". He explained they did tape-to-tape insurance correlation with the DMV on a monthly basis and he referred to that as "real time". She clarified, in any event and under all circumstances, the DMV would not be informed of changes for one month. Mr. Crowell believed the answer was yes. Mr. Greg Harwell, representing the Nevada Division of AAA, indicated opposition of A.B. 474 for the same reasons cited by the DMV and Farmers Insurance. He felt the bill would be most cumbersome upon legitimate policy holders who took responsible care of their insurance. He said AAA insured approximately 76,000 cars in the state of Nevada on about 44,000 policies. The month of March they had processed over 6,000 endorsements which affected the dollar value of the policy. It did not include address or bank changes, or that type of thing. The 6,000 endorsements were on 2,400 policies. Many of those were cases of putting a car on, taking a car off, which would require, under A.B. 474, the generation of a new insurance card. It would be roughly 29,000 changes per year. He had been told by the actuarial and payment processing department that approximately one-third to three-quarters of their policy holders paid their bills monthly or in increments of the full policy term. Therefore, it would require 80,000 cards to be mailed out every year to policy holders. They would receive a card each month for each car and they would have 12 or more cards by the end of the year. They could become confused about which card was which and they could ultimately end up with the wrong card, with the wrong time, in the wrong car. They could not verify insurance because the card would show the wrong information. The AAA renewal and payment plan was similar to that described by Mr. Crowell. They also sent out renewal notices somewhat before the policy became effective along with the insurance cards for that policy period, which was one year. Their payment plan was not one requiring a monthly payment for one month of insurance, but was more of a revolving account arrangement. If the policy became effective January 1, the first bill would be sent approximately February 1, and the first payment was not due until March 1. Minimum payments were on a percentage basis until the end of the year. Therefore, even though a monthly payment was sent, it was not for one month's worth of insurance, but a few days more or less, depending upon where it fell in the policy. The insured could not count on knowing when it was time for a new card and time to switch the one in the glove compartment of the car. The biggest difficulty would be on the legitimate policy holders, and multiplied by all the other carriers and insured vehicles in the state it would be a large problem indeed. In addition, the cost of mailing and processing cards would be factored into the rates and passed on in increased premiums to the consumers. The AAA cards were generated on a high-speed laser printer making them difficult to "idiot proof", because any idiot who could run a laser printer would be able to reproduce another card with any expiration date they chose. Therefore, possessing that type of card did not appear to be the answer. Mr. Harwell indicated they had worked closely on the insurance verification plan and when it was fine tuned it would help to resolve the problem. Mr. Perkins indicated the legislators preceding him, in their wisdom at the time, said there had to be proof of insurance. The industry had evolved to the point where whether a person bought 30 days or six months, he/she received a six month card. To some degree that circumvented the original intent of showing that one had insurance, not that one might have wanted six months, or that a partial payment was made toward six months, but that one actually had car insurance! He, personally, had investigated hundreds of traffic accidents and many of them listed possession of insurance, and it was later discovered the person was not insured. What was the answer? Mr. Harwell responded the bill addressed people with insurance by providing them an adequate card with the information on it. The problems cited by Mr. Perkins were people who did not have insurance at all, or had found a way to get around it by purchasing a policy for a certain period and then cancelling it, either to get a refund or not pay the bill in order to circumvent the plan. Mr. Perkins noted the card was supposed to be a proof of insurance. It was more and more becoming a symbol by which to avoid a citation by law enforcement. It did not necessarily indemnify anyone. A discussion ensued. Ms. Tiffany called Dennis Austin back to the testimony table. She indicated the legislature was probably going to approve a business process reengineering (BPR). She was fairly certain the verification program was not ready to be put on-line for a registration system for patrolmen. How long would it be until the automation plan was approved and the registration system on- line? Would the time frame be as long as the BPR? Mr. Austin responded they were on-line at the present time but officers in the field were unable to access it. He was unable to say when that would take place. However, the system was up and working with capacity to suspend people for being uninsured. They were working closely with the insurance industry to get the information on-line. Obviously they would like to move it forward from tape-to-tape to electronic transfer where it would provide immediate access. Ms. Tiffany said they would consider putting it into the BPR which would give the most current updated information from the insurance companies. It could be done daily, however, weekly, biweekly, or monthly would be more cost effective. She agreed with Mr. Perkins that this was in the future. Was the bill a stop gap measure? Mr. Austin stated regardless of whatever method was used, a person could still cancel their insurance the day after obtaining the verification card, and the card would give wrong information. Ms. Tiffany said the least expensive and closest solution might be the on- line approach and automation but would probably be done on the BPR. She asked if he was aware of the BPR? He answered he had been in the department four months, was somewhat aware of the BPR but not familiar with the intricacies. She indicated it was about to be approved. Ms. Giunchigliani asked Mr. Austin what the process was when suspending people? He answered their registration was suspended. She asked how they were notified? He said they were notified by certified mail. She asked how that affected them? He stated if they were stopped by a law enforcement officer their license plates would be removed, their car would be towed, and the insurance card would be taken away. She asked why their driver's license was not suspended rather than the registration? He indicated the system was linked vehicle-to-person and not to the driver's license. Ms. Giunchigliani asked Mr. Harwell if endorsement was as simple as putting a car on the policy as well as taking one off the policy? Was a new card issued at that point? Mr. Harwell said if a new car was added to the policy a card showing the information on that particular vehicle was provided. She asked what happened if she had five vehicles? Mr. Harwell said she would be provided with five cards. If A.B. 474 passed, when payment was made every month five more cards would be issued. This would go on month-after-month. She asked how a pre-pay would affect it? He responded a pre-pay would reverse the scenario. She felt Mr. Perkins' comment was well taken in that the intent was not to purchase insurance -- it was that insurance had been purchased! It was no different than if she had intended to pay her home mortgage -- she did not own it until she had paid for it. She suggested there might be an alternative mechanism in how policies were written to address the issue. He felt the big roadblock to the issue were those who did pay in full. She responded, true, but if they later cancelled nothing was changed whether or not the bill passed, by virtue of previous testimony. Mr. Harwell said the point of the argument was the value of the card became questionable if it was easily circumvented on the expiration dates, not that it corrected any problems. Ms. Giunchigliani stated the card alluded to the fact that insurance was purchased when there was only intention to do so. It was not being forthright and, in her opinion, that was what the legislation was attempting to clean up. Mr. Hettrick indicated payment method was a problem because insurance was many times packaged to include home owners and car insurance together. He stated he received one bill per year and it paid for everything. He observed if the card stated insurance was paid he would not have proof of insurance for many months of the year. The reason for this was he did not pay on an annual date or any other logical method. He paid when the bill arrived which did not necessarily match the insurance time frame. He expressed concerns about it. He asked, would it be possible to arrange the system so cards could only be sent out once? If the information was at the DMV, not necessarily electronically available to the police officer, but available, would it be possible to mark the card with the payment plan or form of payment? Therefore, if an officer stopped a perpetrator he would be able to ascertain if it were a monthly pay which would trigger a call to the DMV to determine if payment was current. Maybe the card could state how long the customer had been with the insurance company. If it was a 26 year customer of the company the likelihood was this was not a person who did not make their payment, however, if it were a one month customer there might be a chance they were a company-jumper. He asserted the issue needed to be worked out for both sides. He also agreed with Mr. Perkins in that the law stated proof of insurance -- that was what it said and that was what it should mean! He was not sure of the right answer but felt there should be some way to accomplish it without producing "80,000 cards". Mr. Fettic declared he was attempting to figure out what the bill would do! At the present time when registering his car, he promised he had insurance. He then went to his insurance agent, wrote him a check and got the card which said his insurance was good for six months. If he cancelled, he would still have the card. He saw no difference between the way it was done presently and how it would be done upon passage of the bill. He did not see that anything would be solved or accomplished. That was his problem with the bill! In looking for ways to get proof of insurance -- this was not the way to do it! Mr. Knaus, who worked at the Insurance Commissioner's office, indicated he would give a 30-second definition of "real time". His experience was the term "real time" evolved from putting satellites into orbit where a thruster would burn for two-tenths of a second or more to correct the flight path when the missile was off course. Therefore, "real time" meant it was being done now, as opposed to having done it in the past or in the future. He stated they opposed A.B. 474 as written because of all the difficulty it would put on insurance companies and on insureds who did what was expected. The majority of Nevada insureds did what they were expected to do -- paid their premium relatively close to when it came due and made a sincere effort to pay their insurance. He thought an alternative to be explored would be to put extra wording on the card that the policy was issued subject to paying premium in installments. He felt the questions asked by the Committee covered all the bases which he found refreshing. In his job he received complaints from people who paid their premiums and then had problems with insurance verification. He also had complaints from the people who had been hit by the person who showed evidence of insurance and did not have it. The insurance verification program through DMV had been operational long enough to provide his office feedback on some of the problems. Many agents were frustrated because they had insureds who had done the correct thing. The agent received a call from the insured stating they had a letter from the DMV telling them their registration was about to be suspended. What could the agent do to help them? The agent had to inform them he was limited on turning it in to the company. There was no procedure for a person who had valid insurance to go to the DMV on an individual basis, show evidence of insurance, and have it done. They could not even do it through Mr. Knaus' office. They were geared up tape-to-tape and that was all they could do. Some of the circumstances happening were mechanical problems with the scanner at the DMV. It was unable to tell the difference between the symbol for the letter "O" and the symbol for the number "0", therefore, it generated a notice to a person their insurance was about to be suspended. The person would call their agent for help and the only method he/she had for reporting it was tape-to-tape. This was a problem for Nevada residents who were doing the best they could to pay and keep their insurance current. He suggested there be a notice placed on the card for companies typically issuing short-term policies. He agreed with Mr. Hettrick there could be alternative methods to help everybody. Mr. Steve Burris, who testified earlier, wanted to respond to a couple of points. He had never come across the hypothetical person who paid six months or one year's worth of insurance in advance and then cancelled. The cases he dealt with were the ones who paid for one month and obtained a six month card. Insofar as extra paperwork was concerned, only one extra piece of paper would be added to the bill. Chairman Spitler suggested the bill might be amended to issue a monthly card when insurance was paid month-by-month. Mr. Burris said 99 percent of the problems were people who paid month-by- month. Chairman Spitler asked if there was any more testimony. There being none he closed the hearing on A.B. 474. The hearing was opened on A.B. 475. ASSEMBLY BILL 475 - Makes various changes to provisions governing insurance. Alice Molasky, Commissioner of Insurance, stated A.B. 475 was what the Division called their miscellaneous bill because it ran the gamut of Title 57 of the Nevada Revised Statutes (NRS). Exhibit D was an outline of the existing bill, Exhibit E were proposed amendments submitted to the Chair by letter on May 4, l995, and Exhibit F were amendments submitted to the Chair by letter on May 8, 1995. She indicated there should be additional amendments to it in order to affect the intent of the bill. Therefore, that caused the amendment proposal by the division, dated May 8, l995 (Exhibit F). There were asterisks on the outline by each section where an amendment had been proposed. It took it up to those proposals for May 4, 1995. Mr. Spitler interjected a question for clarification asking if the May 4 amendment was still valid. Ms. Molasky stated it was still valid with a couple of exceptions. Mr. Spitler stressed the Committee be given the correct amendments because it appeared one superceded the other. He pointed out they needed the amendments on May 4 and May 8. Ms. Molasky indicated the amendment proposal for May 8 had a recommendation that one of the amendments on the list for May 4 be deleted. Ms. Tiffany requested Ms. Molasky to do a quick overview of the bill. It seemed to Ms. Tiffany the bill and amendments were attempting better bankruptcy handling. She requested the five things Ms. Molasky was trying to accomplish. Ms. Molasky stated it was an "every session clean-up bill". It addressed situations that had arisen during the past two years wherein authority was found missing and should have been there. That was represented by amendments proposed to Chapter 686A of the NRS with reference to premium finance companies. Other provisions were those addressed in situations when the language of the statute was not what it should have been initially. There was a filing provision whereby in the 1993 legislature the statutes were perused in order to make all filing provisions consistent and clear, words were added for each act and violation. Unfortunately, however, it omitted NRS 680A.200 which was the oldest, and probably broadest, filing provision. It had not been corrected at that time. Therefore, much of it was for corrective purposes and to address circumstances that had arisen since that time. Ms. Tiffany asked if it could be defined a little tighter. Ms. Molasky said it ran the gamut of Title 57. Ms. Tiffany said when she looked at the bill she saw the leaves on the tree and she only wanted to see the tree. Ms. Molasky stated it addressed insurers generally, premium finance companies, form filings, surplus lines brokers, and banks. Ms. Tiffany asked what was being done on Health Maintenance Organizations (HMO's) -- just clarity of language? Ms. Molasky said, yes. Ms. Molasky stated she would walk through the bill and relate each section to the proposed amendments. - Section 1 Would amend NRS 679B.190 to provide for confidentiality of all information and documents possessed by the Division related to cases or matters under investigation or examination by the Commissioner or the Commissioner's staff. On the proposed amendments of May 4, 1995, in amendments 1 and 2, a portion of the language they wanted to maintain was deleted in the bill. A new subsection was proposed to specifically address investigations and examinations. They, in practice, made those files confidential and wanted a statutory basis for doing so. They believed they had the basis by an order of a prior Commissioner, however, when they were working on the regulation last fall they were advised by the Legislative Counsel Bureau (LCB) that perhaps the effect they believed was in the statute was not there. They did need to keep the examination and investigation papers confidential and did not feel it was fair to the persons examined or investigated to have those documents open to the public. Chairman Spitler announced, since the bill was lengthy, he would allow questions between each section. Ms. Buckley, referencing the May 4, 1995 document, asked if they were proposing deletion of the sentence in paragraph 1 that said, "No filing required to be made with the Commissioner under this code shall be deemed confidential". Ms. Molasky answered no, that was in existing law. Ms. Buckley was unsure what the brackets meant. Ms. Molasky said what they were proposing to do was delete it in what was subsection 5 of the bill where it currently existed, and place it instead in subsection 6. Ms. Buckley asked if they were proposing from the original language only deletion of ". . or to be deemed confidential by the commissioner . ." language? Ms. Molasky answered that also appeared in subsection 6. It was deleted in the bill and was part of the language in the bill they did not want deleted because they did have confidential informants and there was another provision stating that information shall remain confidential. This particular language meshed with that. - Section 2 Would amend NRS 679B.290 to clarify that an insurer must bear the expenses of an examination by the Commissioner of agents or brokers and required the Commissioner to adopt regulations governing the billings of those expenses. It was proposed primarily to clarify that they did, in practice, bill the insurance company when they examined an agent in relationship to an examination of an insurer. Ms. Tiffany, recalling during the general subcommittee, one of the concerns about examination was they were only focusing on domestics from where much of their revenue was coming. Ms. Molasky recalled it. Ms. Tiffany asked if that problem had been solved, or was this giving them more authority? Ms. Molasky said it did not give them any more authority, in fact, most of the cases that would arise under this statute would come under insurance companies domiciled elsewhere. An example: an embezzlement occurred a month or two ago of $40,000 and an agent was arrested and charged. Upon learning of the arrest they immediately went to the premises of the agent and conducted an examination. The examination expense was borne by the insurance company. Ms. Tiffany remembered the insurance companies complaining that was a captured source of revenue and felt the focus was on certain agencies. It seemed to her that was not being changed and still could occur. Ms. Molasky said the examination referred to in the subcommittee was primarily their regular, anticipated and calendared examinations of insurers. Those types of examinations were typically investigations. Ms. Tiffany wanted to be certain they were looking at internal audits in the Ways and Means Committee out of the Department of Administration. One of the concerns about that particular group was what would trigger an incident for them to charge back. She wanted to make sure it was not some kind of "hit squad", "witch hunt", or arbitrary. If they were scheduled, that was fine, normal and regular, but there was question about it in the industry. Did it explain the "unusual" circumstances in which they could go in? Ms. Molasky indicated they would go in when they anticipated a serious violation of statutes. They frequently received information that certain agents had mishandled or misappropriated trust accounts. It was in the best interest of the public that they immediately go in. Ms. Tiffany asked how they found out about it? Ms. Molasky said it could arise from a consumer complaint, a confidential informant, a company had raised the issue, and many other things. Mr. Spitler pointed out it said they shall adopt regulations and it had to be done in a public forum. Ms. Molasky said that was correct. - Section 3 Had two amendments, the first one amended paragraph d of subsection 1 of NRS 688.200 to clarify the administrative fine of $2,000 may be imposed on insurers for each act or violation. One of the proposed amendments was on the proposed amendment list of May 4, 1995 (Exhibit E), and one was on the list of May 8, 1995 (Exhibit F). The one for May 8 requested the language be stated as $2,000 for each act or violation because they believed it made a difference and was consistent with other filing provisions. On the proposed amendment for May 8 it was being proposed to add subsection 4 to increase the statute of limitations to five years for suspension limitation of revocation of a certificate of authority. The purpose of the provision was to enable the state to recover premium taxes and seek enforcement of violations which, under the general statute of limitations, would be barred under the division's triannual examination process. In their agreement with the Department of Taxation, for example, they were obliged in their triannual examinations of insurers to investigate whether the premium taxes had been appropriately allocated and paid to the state of Nevada. However, the general statute of limitations on the payment of taxes was three years. Therefore, by the time they had gone into a company they were already into the fourth year and even if they did find the taxes had not been appropriately paid they did not have ability to enforce collection. - Section 4 It would amend NRS 683A.110 to provide that a subsidiary, an affiliate or a holding company of a bank would be licensed to sell annuities. In 1993 the legislature enacted legislation in that provision that stated the bank could sell an annuity. That language, however, did not apply to the bank holding company, a parent, a subsidiary or an affiliate. The Chairman interrupted testimony indicating the Committee had lost its quorum and would continue as a subcommittee. Ms. Molasky indicated she would address the major changes in the bill. The first one appeared in sections 11, 12 and 13, which were initially proposed because it was learned they did not have express authority to an insolvent premium finance company, which they had licensed, into receivership. They did have a case a year or so ago at an office in Las Vegas and what action they could take was questionable. Consequently, they cooperated with the state of Texas because the company was domiciled there and they effectively took over as receiver. That caused the request for express authority in the bill. The proposed language was not in harmony with the purpose. Instead of subjecting the premium finance companies to the provisions of NRS Chapter 696B, they requested in their Bill Draft Request (BDR) they be subjected to Chapter 697B but referred LCB to the provisions of title insurance agents, which was the only chapter in Title 57 that was different. There was a reason for that difference. Addressed in the amendments of May 8, 1995 (Exhibit F), was a proposal to amend Chapter 686A of the NRS by adding the provisions set forth as section 11; delete all the language for sections 12, 13 and 15 and include only section 11, provision number 1, the premium finance companies were subject to Chapter 696B of the NRS. That would take them under the same receivership liquidation rehabilitation provisions as all other licensees. Chairman Spitler noted there was, once again, a quorum present. Ms. Molasky indicated all the other amendments were clean-up language. Mr. Hettrick had suggested she move on to a major change. On the proposed amendments list of May 4 (Exhibit E), number 15, a new section was being proposed to amend Chapter 696B of the NRS. By those provisions they were proposing what, in effect, they had been doing when there was a receivership of rehabilitation or a liquidation. It stated responsibility for the expenses of receivership and were charged against the company under receivership, however, it stated the insurance division may advance the money for expenses out of any appropriation for the maintenance of the department, found in subsection 2 of the proposal. It also stated the amounts advanced must be repaid to the Commissioner for use of the department out of the first available money of the insurer. It would set up a superceding priority in the distribution of any assets of an insolvent insurer. Mr. Hettrick wondered, in the case of receivership, was it possible to establish first available right? Would the federal government have a hold on the money? Ms. Molasky did not believe it would supercede the United States government. Ms. Molasky stated the remaining sections were clean-up and were not intended to have any major effect. Section 32, not in their original BDR request, would abolish their advisory committee on insurance covering the treatment of alcohol and drug abuse. It was her understanding the committee had not met for a period of five years. Ms. Tiffany expressed being on the Ways and Means Committee created a certain state of mind and she wondered what the fiscal impact would be on A.B. 475. She saw filings, investigations, confiscations -- what did it mean fiscally? Ms. Molasky indicated there was no fiscal impact. The collection of premium tax had a fiscal effect but did not have a fiscal impact upon the duties or the programs of the division. Ms. Tiffany asked if they anticipated collecting more revenue by any of the changes? Ms. Molasky said nothing more than what was done currently or what was projected for the next biennium. Their BDR was reviewed to ensure it did not have a fiscal effect. Ms. Tiffany said on the front of the bill under fiscal note it stated there was an effect on state or industrial insurance. Ms. Molasky reiterated they had not done a fiscal note on the bill and the only thing she could anticipate in that regard would be collection of premium taxes. Ms. Tiffany queried, would that be on industrial insurance? Ms. Molasky answered, no, it would not have any effect on industrial insurance. There was nothing in the bill addressing industrial insurance. Chairman Spitler stated when they had requested the fiscal note it was "0" and it said the fiscal impact of the bill would have little or no impact upon the division. It had been signed off, not only by the Deputy Commissioner, but by the budget office. Ms. Tiffany asked about the premium finance company that became insolvent, which had been described to the Committee about four weeks prior. Ms. Molasky indicated that was a different company. Ms. Tiffany asked if it were similar circumstances. Ms. Molasky replied it was not. Ms. Tiffany asked how the circumstances were different? Ms. Molasky indicated the circumstances of the one referred to before the subcommittee was a domestic insurance company for home protection which was a different type of licensee. Ms. Tiffany wondered if that experience helped them write the bill because they probably did not have many insolvencies before. Ms. Molasky liked to think they did not have a lot of insolvencies, however, it was not to say there were no circumstances where there was an appropriation of the division, which was what she had testified before the subcommittee. They had always used the examination fund to advance expenses for the receivership. The bill would express by statute and endorse what had been their procedure for as long as they had been doing receiverships under the law. Normally, they were reimbursed. The situation addressed in the subcommittee was their anticipation it was a case where there was a good possibility they would not be able to achieve reimbursement. Chairman Spitler clarified with Ms. Molasky that the Committee had all the amendments to be considered in the two sections. Ms. Molasky indicated that Mr. Perkins, with the Division's life and health section, had pointed out there was a typographical error. Mr. Perkins said it was in the May 4, 1995 (Exhibit E) amendment, last page, section 14, and should have read, "NRS 695C.210" instead of "120". Mr. Spitler thanked him for catching the error. Assemblyman Joan Lambert, District 29, indicated she had a "friendly" amendment to A.B. 475 (Exhibit G). It dealt with two new sections, was very simple, she had permission from Commissioner Molasky and had worked with Debbie Thurner on it. Ms. Lambert indicated they had done something in a clean-up bill in the 1993 session that was pointless. It required resident auto adjusters, who were employees of licensed insurance companies, to hold their own license. It did not serve any real purpose because they were working for a licensed insurance company, therefore, if a consumer had a problem he/she could go through the insurance company to address the problem. It might create the following scenario: An insurance company was sued. The insurance company, licensees, and a host of other individuals were named. A judgement was rendered against the insurance company and the adjuster for one million dollars. The insurance company, because the adjuster was an employee, paid the million dollars. This was considered income to the employee and he was required to pay income tax on it. The insurance company would pay the income tax for the employee. That tax payment was income to the employee. There were different legal opinions on whether or not this could happen, but counsel for the insurance company for which Ms. Lambert's constituent worked had given that advice. Since the statute was pointless and caused a lot of red tape for the insurance commissioner's office and everyone else involved, Ms. Lambert wondered if they could undo what had been done in A.B. 569 during the last session by adding the amendment to this bill. Mr. Spitler declared the Committee would be happy to accept the amendment in their deliberation. Ms. Buckley indicated the example given sounded absurd and wondered if Ms. Lambert had a copy of the legal opinion from the employee. She was curious to understand the reasoning behind it. Ms. Lambert was unsure whether it was ever in written form. To her knowledge the person had not been sued. Paul Mouritsen had done some research for her and she had some of the IRS codes. Be that as it may, what was in the statute was unnecessary red tape that did not serve the purpose intended. Mr. Jim Wadhams, representing the Nevada independent insurance agents, appeared in support of the bill. He had read it and supported the amendments offered by the Commissioner. He agreed it was a housekeeping bill and clarified some issues that could become problems left to the devices of clever lawyers. He wished to address three issues he had discussed with Commissioner Molasky that, subject to the Committee's discretion, were worth considering in the context of the bill. The first issue changed a practice that had been going on in the administration of the agency for time immemorial, including back in the days when he was the Commissioner. Each insurance company was required to file a written piece of paper called an appointment. It was, in effect, a statement that there was a contract between the insurance company and its agent. He was prepared to be corrected by the Insurance Division, but there were probably 6,000 to 10,000 licensees and combinations of appointments by those agents. For example, one of his independent insurance agents may have appointments with 150 companies. They may have in a normal agency office anywhere from eight to ten licensees. Therefore, the numbers of pieces of paper became exponential. There were full-time people at the Insurance Division who did nothing but process these relatively small pieces of paper with a relatively small filing fee. One amendment he wished to offer was a process by which, on an annual basis, each insurance company would file a complete list of those persons who had appointments and paid the fees they would have paid for the processing of each piece of paper during the course of the year. He thought it accomplished two things. One it simplified paperwork for the companies and agents. Perhaps, more importantly, it eliminated a lot of paperwork in the agency itself. It would need to be audited to make sure the dollars added up. If they could work with the bill drafter to draft the language, the revenue would be neutral to the current process. Time would be freed up in the agency to work on items, not purely paper pushing, and more resolution of consumer complaints. That was the first concept they wished to offer. Chairman Spitler clarified it had been discussed with the Insurance Commissioner and they were all right with it. Mr. Wadhams answered, yes, his impression was she was very excited about it. It would free up some personnel to do other things rather than just push paper. Mr. Hettrick asked what section it was in. Mr. Wadhams indicated it would be a new section but would follow after what was currently section 4 because it would be an amendment to NRS 683A. The bill drafter would put it into numerical sequence. Mr. Wadhams apologized for not having the amendments written, however, with the Committee's permission they would see Kim Morgan to prepare the language. Ms. Molasky indicated there were 18,000 broker licensees at the present time. When she discussed the issue initially with Mr. Wadhams she had asked the people in the licensing section what they could accomplish if they were not required to do the repetitive task of inserting on the computer. The employees indicated hope that one day the information could be received from insurance companies by tape or diskette so they would not be required to manually insert it on the computer. These employees received notice of numerous violations of agents from other states who were unlicensed and doing business in Nevada. A typical month was studied and it was determined in the time spent inputting on the computer the personnel could have been sending notices to unlicensed or unappointed agents of their violation of Nevada law and be assessed a $100 fine. It was determined in excess of a quarter-of-a-million dollars could be sought out in enforcement measures if the employees were not preoccupied on the detail tasks. Mr. Wadhams indicated the second one would be an amendment, not necessarily attached to section 9, but in that area, dealing with surplus lines. For a number of years, many years ago, the Commissioner was authorized to appoint an independent organization basically to take care of reviewing companies eligible for surplus lines. There were generally two ways an insurance company could do business in the state of Nevada. One was by being licensed which was the most typical way. Most companies were directly licensed and authorized to do business. The second way they could do business was in certain areas of very hard to place risks of specialty kinds of problems. The Commissioner maintained a list of approved insurers to write business on an unauthorized basis. In other words, they were approved but unauthorized, they did not have a license. Companies falling under that category were reasonably well known, such as Lloyds of London and others. They would do the hard to place and the difficult and unusual. It was an important market for citizens and businesses to have in a state such as Nevada where there were a number of unusual risks. He was recommending, and it had been discussed with the Commissioner, reinstating her authority to create an entity to assist the division in reviewing the marketplace, assisting in approving those kinds of insurance eligible for export, which was term- of-art meaning "can go into the speciality market". The legislative policy had been those companies willing to get licensed should be the preferred place to shop and one should not go to the nonadmitted surplus lines market unless there was a problem. Finding the distinction in those companies and identifying the kinds of problems it justified was a function that would be performed. He admitted it was being vague but the bill drafter would bring back specific language for the Committee to review. He would then go over it in detail. It worked very successfully for a number of years and was repealed for reasons that were not necessary to go into at this hearing. Given the pressures on the agency to do a variety of things it would be valuable. He had discussed it with the Commissioner and she was willing to entertain that amendment. The final item would also be to Chapter 683A. Basically what they were going to propose was language that would plug a loop- hole in the agents' and brokers' licensing law. Chapter 683A required people who dealt with the public professing to have expertise in matters pertaining to insurance for a fee, to be licensed. There were people who escaped licensure, regulation, education and testing and yet held themselves out to the public as being experts and charged fees, sometimes calling themselves consultants, advisors or any number of things. The language on agents and brokers was perhaps a bit too narrow, therefore, that language would be brought back for the Committee's review. Mr. Wadhams concluded his statement and indicated they supported the bill but offered those three amendments for review. Chairman Spitler asked at the conclusion of the hearing that the Commissioner put the amendments together in one document, and if compatible, include them. They would be asked to return to go over those particular sections and it would be easier to look at only one document. Paul Mouritsen was requested to work with them in order to include Assemblyman Lambert's recommendation as well. Chairman Spitler asked if there was any more testimony on A.B. 475. There being none the hearing was closed on A.B. 475. The hearing was adjourned at 5:45 p.m. RESPECTFULLY SUBMITTED: Barbara Moss, Committee Secretary APPROVED BY: Assemblyman Larry L. Spitler, Chairman Assemblyman Sandra Tiffany, Chairman Assembly Committee on Commerce May 8, 1995 Page