MINUTES OF THE ASSEMBLY COMMITTEE ON COMMERCE Sixty-eighth Session June 26, 1995 The Committee on Commerce was called to order at 3:30 p.m., on Monday, June 26, 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 STAFF MEMBERS PRESENT: Mr. Paul Mouritsen, Senior Research Analyst OTHERS PRESENT: Ken Scruggs, Household Financial Group F. Fuller Royal, M.D., Homeopathic Medical Board Bob Martin, NAHP, Homeopathic Board Chester Chin, HMD, Nevada Homeopathic Medical Association Moreen Scully, Deputy Attorney General, Marriage and Family Therapy Board Valerie Cooney, Nevada Trial Lawyers' Association Pat Coward, Nevada Association of Realtors Patsy Redmond, Nevada Association of Realtors Darrell Clark, Nevada Association of Realtors Bruce Goff, Interior Designer, Domus Design Bob Crowell, Farmers Insurance Greg Salter, Attorney General's Office John Sande, Nevada Bankers' Association I. R. Ashleman, Southern Nevada Homebuilders' Association Daryl Capurro, Nevada Franchised Auto Dealers' Association Mike Hillerby, American Institute of Architects Frank Shallenberger, Homeopathic Medical Board Bob Maddox, Nevada Trial Lawyers Larry Struve, Department of Business and Industry Joan Buchanan, Real Estate Board Nancy Wolff, Interior Designers Institute Doreen Mack, Bristlecone Designs, Interior Designer Juanita Cox, People to Protect America Morgan Baumgartner, Board of Medical Examiners Mary Santina-Lau, Retail Association of Nevada Tricia Lincoln, A Very Fine House - Interior Design Following roll call, Chairman Spitler opened the hearing on S.B. 70. SENATE BILL 70 - Makes various changes to provisions governing occupational licensing boards. Moreen Scully, Deputy Attorney General representing the Marriage and Family Therapy Board, explained there were approximately 80 Boards or Commissions, and only two, to her knowledge, had no subpoena power. In her representation of the Board, and in the prosecution of licensees, it was very important for her to have the authority to subpoena someone to appear before hearings when licenses were in jeopardy. Ms. Tiffany asked if there was a particular incident or practice which had created the impetus for S.B. 70. Ms. Scully gave an example of a licensee who had been having sexual relations with two of his patients. One of the patients had given a detailed report of the inside of the licensee's house. If Ms. Scully had been able to obtain evidence, such as a photograph, it would have helped corroborate or discredit the person's story. Ms. Tiffany asked if this situation represented a chronic problem or whether it was a single incident. Ms. Scully replied most people came forward willingly, but sometimes she had to dismiss a case when the complainant was reluctant to appear. It was important at those times to obtain the documents people were unwilling to submit. SENATE BILL 516 - Revises provisions governing credit cards issued by financial institutions. Mr. John Sande, representing the Nevada Bankers' Association, indicated S.B. 516 was the companion bill to S.B. 517 (Exhibit C), which the Committee had heard the week previous. He understood the bills were awaiting amendments, and they had to be passed together since they referred to one another. S.B. 516 dealt with credit cards, and would probably become a model credit card bill other states would copy. Many of the provisions were in existing law but some of these had been redefined in the present bill. Although there were a few new definitions, the bill served mainly to clarify the operations of credit card companies. SENATE BILL 491 - Provides for binding arbitration of disputes arising under certain contracts relating to insurance or construction. Marie Soldo, representing Sierra Health Services, offered a section-by-section review of the bill, as well as suggested amendments (Exhibit D). She pointed out there was language which spoke to "new" members, and it was not the intent to limit this to only new members, so they were trying to remove those words from the bill. In response to Ms. Tiffany's question regarding the difference between "policy" and "contract," Valerie Cooney, representing the Nevada Trial Lawyers' Association, opined the policy reflected the terms of the contract and they were, indeed, one and the same. Mr. Renee Ashleman, Southern Nevada Home Builders, said there were health policies mixed in with policies that concerned home builders, and those were ordinarily called contracts. Referring to page 3, lines 32 and 33, Ms. Tiffany wondered if this meant that at the time of enrollment an individual had to choose whether they would accept binding arbitration, or whether this was a decision which could be made at any time. Ms. Soldo said the intent was when an individual enrolled they could either decline or accept binding arbitration when and if it was needed. Mr. Ashleman clarified this applied to an annual enrollment, however, it was not forever. Mr. Spitler noted this was standard for all Health Maintenance Organizations (HMO). Referring to Section 6, Mr. Ashleman requested this be deleted from the bill. Although it had been included for some fairly complex legal reasons, events taking place which concerned other legislation led them to believe the Section was not important enough to retain. Discussion followed regarding denied care in emergency situations, the arbitration process and declaratory relief in court. Referring to Section 1, Ms. Buckley asked what types of issues they anticipated would go to binding arbitration. Ms. Soldo believed these could involve such things as benefits for experimental procedures. Ms. Buckley expressed concern that having to make a decision before there was even a genuine controversy, might lead a person to believe they had not received the information they needed to make an informed decision. The intent was to have a full and fair disclosure provision in the certificate of coverage contained in the member handbook, Ms. Soldo said. As to why the binding arbitration provision could not be offered at the time a controversy arose, Ms. Soldo did not believe a person would probably choose to go to binding arbitration in the middle of a dispute. Offering the provision at the outset would just allow the individual to know what he was getting from the beginning. Mr. Ashleman pointed out he was on the permanent panel for Blue Cross/Blue Shield of Nevada, and there were probably no more than 12 arbitrations conducted during a year. Fred Hillerby, representing Hospital Health Plan and Coordinated Care Options Insurance Company, as well as the Nevada Association of HMO's, indicated support of the bill for the following reasons: 1) It was permissive, allowing the companies to decide whether it was important to them and the people they insured; and 2) the provisions agreed to between the sponsor of the bill and the trial lawyers, which made it the individual decision of the enrollee, provided very good safeguards. When asked by Ms. Brower whether it was the employer's or the employee's choice to arbitrate, Mr. Hillerby said the employer could choose it as part of a policy he wished to purchase, but the employee was free to make that selection for himself/herself. SENATE BILL 537 - 2nd Reprint - Makes various changes to provisions relating to physicians. Bob Martin, representing the Nevada Association of Homeopathic Physicians, appeared in support of S.B. 537. This bill, he explained, would make minor changes in the Homeopathic Practice Act. The major provision empowered the Nevada Board of Homeopathic Medical Examiners to determine the authority of each homeopathic medical doctor licensed by the Board, to prescribe controlled substances and dangerous drugs. It also removed a restriction in the definition of homeopathy that stated, "utilizing only homeopathic medicines," and changed it to emphasize "the use of homeopathic medicines." Also, there were minor changes to the licensure of foreign medical graduates to give the Board a little more authority in that area. Also speaking in favor of the bill, F. Fuller Royal, M.D., President of the Nevada Homeopathic Medical Board, indicated prior to 1987, physicians licensed under NRS 630A had the privilege of prescribing controlled substances and dangerous drugs. However, in 1987, the Legislature withdrew this privilege. This created an awkward situation regarding homeopathic medicines which could only be prescribed by someone who had the privilege to write prescriptions for controlled substances. Homeopathic opium was one of these useful medications, and Dr. Royal said as far as he knew, homeopathic opium could not be obtained from homeopathic pharmaceutical companies in the United States. While this medicine could be obtained in Europe, it could not be brought into the United States. He said he had discussed the matter two years ago with the Nevada State Board of Pharmacy who had agreed it was an awkward situation, and the physicians who were singly licensed should either be given the privilege to have prescription rights or have them totally removed. Chester Chin, H.M.D., President of the Nevada Homeopathic Medical Association, expressed some puzzlement that physicians' assistants and optometrists were allowed prescription rights for controlled substances while homeopathic medical doctors were not given the same privilege. He stated homeopathic medical doctors were medical graduates with a minimum of seven years education in the study of medicine, pathology, pharmacology, toxicology and hospital training. Doctors of homeopathy were as qualified to prescribe controlled substances, if not more so, than the aforementioned groups. Ms. Giunchigliani questioned the difference between the language of the original bill and the language amended in the Senate. Mr. Martin answered the original bill contained another provision entitled the "innovative medicine provision." That provision provided that if a patient was fully informed of the risks inherent in a given treatment, and gave their informed consent for that treatment, regardless whether the it was approved or disapproved, a physician could proceed with administering the treatment without risk of an attack on their license. That provision had been stricken from the bill. Ms. Giunchigliani asked if a practitioner of homeopathy could also be a medical doctor licensed by the Board of Medical Examiners as well as the Homeopathy Board. Mr. Martin said not necessarily, one-third of the current practicing homeopathic physicians were not licensed in Nevada. The statute required they be licensed somewhere, either by a medical board or an osteopathic board. Ms. Brower commented that Mr. Martin had referred to a few minor changes in the bill; however, after reading it she felt the changes were quite major, and asked what brought them about, particularly regarding drugs. Citing the typical situation, Mr. Martin told her an out-of-state patient or a patient from another country, often came for evaluation and were usually prescribed a series of treatments lasting from four to six weeks. Many of these people took conventional controlled substances absolutely necessary to maintain life, and during that period would frequently run out of their medication. In order to refill the prescription, the person would have to contact another physician just for the purpose of obtaining a maintenance prescription. Supporting testimony was also taken from Frank Shallenberger, M.D., and H.M.D. Dr. Shallenberger submitted his testimony (Exhibit E) and read his remarks into the record. Mr. Schneider mentioned Dr. Royal had talked about homeopathic opium, and asked how it was different from regular opium. Dr. Shallenberger replied homeopathic substances were considerably different due to the way they were diluted. For instance, if a person took an opium tablet it would be a medical application. If that opium tablet was thrown into a swimming pool and dissolved, and some of that water was taken, it would be a homeopathic medication. As an immensely diluted substance, it had different properties in the human body. Mr. Allard asked if Dr. Shallenberger envisioned the homeopathic physician being able to prescribe the whole range of medications. Dr. Shallenberger replied, "yes," the bill would allow homeopathic physicians, at their discretion, to prescribe any controlled substance. Noting that the bill stated the Board would determine the extent of the authority of each homeopathic physician licensed by the Board, Mr. Allard asked if there would be different determinations for each homeopathic physician. In response, Dr. Shallenberger said each case would be taken separately with the main goal being to ensure the safety of Nevadans. The Board would only issue certificates for controlled substances to physicians who had demonstrated the ability to use them. Mr. Allard wondered if a physician who had lost his license in another state would be given a license to practice in Nevada. Dr. Shallenberger stated the Board would establish the criteria, but the Board was always concerned if a doctor lost his license. Since a person could not get a homeopathic physician's license in the state of Nevada unless they had an active license in another state, the scenario described by Mr. Allard could not happen. Also responding to Mr. Allard's concerns, Mr. Martin indicated one of the provisions in the bill was a change to NRS 630A.225 wherein the language was the same as NRS 630, the Medical Board's language. They had changed the provision regarding a physician losing his license for gross medical negligence, to a standard of misconduct. Therefore, any physician who lost his license for any misconduct, whether it was gross medical negligence or not, was not eligible for licensure. Ms. Tiffany called attention to the statement that in order to be a homeopath, a person had to at least be a doctor of osteopathy or a medical doctor. She questioned how many such doctors there were in the state of Nevada. Dr. Shallenberger answered there were 19 at the present time, of which eight were not licensed with the Board of Medical Examiners. Although the bill would only impact eight people, Dr. Shallenberger maintained when it was taken into account that each physician had probably 8,000 patients, this amounted to 64,000 people in the state who would be inconvenienced. Also, he believed the committee should keep in mind the expense to the insurance industry. David Horton of the Alternative Therapy Support Group, observed there was a general trend for HMO's to recruit homeopathic doctors in order to broaden the mix of services offered; and this particular piece of legislation was necessary to recruit more homeopathic doctors into Nevada. Regarding the question on controlled substances, there were three points to consider: 1) Homeopathic physicians were less inclined to prescribe controlled substances; 2) there were more alternatives available to them because they had more modest ways of handling most cases; and 3) it was more closely regulated under the bill than any other administration of controlled substances. Specific authorization had to be obtained to administer each particular controlled substance. The four professional members of the present Homeopathic Board, Mr. Horton pointed out, were dually licensed, which meant they had full prescription rights, as well as the right to decide which doctors would be able to administer certain substances. Regarding the situation in rural Nevada, Mr. Horton commented, more homeopathic practitioners were needed to write prescriptions. A "Newsweek" magazine article entitled "Going Mainstream" (Exhibit F), was offered by Mr. Horton. This compared the health care costs of traditional and homeopathic therapy. Juanita Cox, representing the People to Protect America offered a short message of her group's support (Exhibit G), and expressed support of S.B. 537. Representing the Nevada State Board of Pharmacy, Mike Hillerby indicated the Board was taking no position on the bill. The Board simply regulated whoever the Legislature designated. Mr. Hillerby agreed the individuals would be required to receive State Board of Pharmacy and Drug Enforcement Administration (DEA) registration. Opposing testimony was offered by Morgan Baumgartner, representing the Nevada State Board of Medical Examiners. She said it was the Board's position that homeopaths, in order to prescribe controlled substances, should be required to have a medical doctor's license. In 1993 the licensing procedure for medical doctors was revised, however, she did not believe the licensing procedures for homeopaths had been revised for some time. Ms. Baumgartner pointed out the Legislature had spent a considerable amount of time bringing Nevada to its present high standard. Circumventing this licensing procedure would be detrimental to the citizens of Nevada, she opined. SENATE BILL 541 - Provides confidentiality for certain documents of financial institutions. John Sande, representing Nevada Bankers' Association, indicated S.B. 541 would provide for committees to review compliance by financial institutions with all safety and soundness provisions of state and federal law, including such acts as fair lending practices, community reinvestment practices, flood zone protection, etc. If a financial institution set up one of these committees it was important they be encouraged to do a full and fair evaluation of their operation. S.B. 541 allowed for a limited privilege so anything prepared by one of the committees would not be subject to discovery or admissible into evidence in any civil action within the state, even if it was turned over to a regulator. Furthermore, no member of a committee could be forced to testify as to what went on in the committee meetings. The legislation was supported by Scott Walshaw, the Financial Commissioner of the state of Nevada, Mr. Sande said. Ms. Tiffany wondered if compliance reviews were not already done in financial audits. Mr. Sande said currently, federal regulators could periodically audit and criticize what the financial institution was doing. S.B. 541 would encourage financial institutions to evaluate themselves during the interim, reducing the possibility of wrongdoing which would only be discovered with a federal audit. Ms. Tiffany perceived it as a cross-over between a financial and a performance audit. Mr. Sande agreed and added it was a performance evaluation, for example, to ascertain if all customers were being treated equally, where loans were being made and the types of transactions the financial institution was undertaking. In response to Ms. Tiffany's question whether this had been initiated by federal request, Mr. Sande said it was not a federal request but something the financial institutions across the country were seeking on their own. Ms. Buckley expressed some concern with the broadness of the bill. If, for example, a bank was not loaning to minority or women-headed small businesses, and a compliance committee noted this, the bank would be isolated from the small business person bringing an action. Mr. Sande opined this bill applied only to documents prepared by the compliance review committee. It did not apply to any documents the financial institution had that would show a pattern of conduct. Therefore, if the committee prepared a document which indicated they had reviewed other documents and concluded there was a problem which could be solved in a certain way, it would only be the document prepared to solve the problem that would be subject to confidentiality -- not the underlying documents which the committee relied on to reach its assessment. SENATE BILL 300 - Makes various changes concerning insurance. Bob Crowell, representing Farmers' Insurance, submitted his written remarks (Exhibit H), and read his testimony into the record. Ms. Tiffany questioned language in Section 1 which Mr. Crowell pointed out was addressed in the bill. She also questioned the benefit for mandating insurance education along with drivers' education. This was an attempt, Mr. Crowell said, to educate young drivers in a rudimentary understanding of insurance buying and what it meant. Ms. Tiffany was not entirely convinced that mandating insurance education was meritorious. Mr. Crowell said it was not intended to give an exam on what insurance costs were about, it was an education tool. Joe Guild, on behalf of State Farm Insurance, also indicated support of the bill. He believed it was necessary to teach young people that Nevada was a mandatory insurance state, and therefore, an ongoing requirement for every driver. Referring to language on page 3, Ms. Giunchigliani suggested perhaps this provision was already in the curriculum. Speaking to the issue of unfunded mandates, Mr. Crowell said there was no time line and he had been told by representatives of the Insurance Division and members of the Senate committee there was no financial or fiscal impact with respect to that particular provision. Ms. Giunchigliani commented she liked the idea and felt it should be incorporated into the curriculum, but believed the way the bill was written there might be a fiscal impact. Reporting for the Division of Insurance, Glen Shippey, stated the Division had educational materials available to schools, free of charge and upon request. They had not only been supplying these materials to high schools, but also, members of the Division lectured on insurance-related matters from time-to- time. Ms. Giunchigliani indicated if the State Board of Education did not have it in the course of study, the local school boards were not required nor did they have to include it in the curriculum. She offered to contact the Department of Education to discover what was in the course of study and what existed in the current curriculum. Concluding, Mr. Shippey indicated the support for S.B. 300 of the Division of Insurance. The bill was consumer favorable, he stated, and the Division had worked very closely with the insurance industry on the language, especially that of Section 1. SENATE BILL 506 - Provides for registration and regulation of registered interior designers. Bryan Gresh, representing the Legislative Coalition of Interior Designers (LCID) in Nevada, provided a copy of his remarks (Exhibit I) and read his testimony into the record. Mr. Gresh indicated tremendous support had been garnered for S.B. 506 to provide for the licensing of interior designers. The President of LCID and an interior designer in Reno, Bruce Goff explained over the past several years there had been a question of what was interior design and what was architecture. During the 1993 Session the issue had come to a head and the industry had been told work out appropriate language. Under present Nevada law, only a member of the profession of architecture could perform work governed by a code. The question was how to separate the act of interior design from the act of architecture, and Mr. Goff believed S.B. 506 would answer that question by creating an additional practice termed "registered interior designer," and would allow those interior designers who wished to, to work in areas previously regulated under the practice of architecture. Mr. Goff explained the bill not only created the new profession entitled "registered interior design," but also created the same type of regulation governing an architect. Mr. Goff went on to review the language in Section 32 which dealt with exemptions. He said they had worked with the retailers to create exemptions that would allow anyone to deal with decorative accessories, wall coverings, linoleum, carpet, tile, floor coverings, drapery, blinds, lighting (not part of a structure), plumbing fixtures (not part of a structure) and furniture and equipment (not part of a structure). Mr. Allard asked if there was anything in the bill prohibiting a contractor from using a non-registered interior designer. Mr. Goff answered this would be an issue of liability. If a contractor used a non-registered interior designer, the contractor accepted liability. Through a recent court battle, Judge Nancy Becker had issued an opinion that an interior designer, or anyone, could create concept designs, but it was the act of actually drawing and telling someone how to build a structure which violated the architectural statute. Interior designers were unable to do this at the present time, and they would not be able to do it in the future. Only registered interior designers would be able to make drawings showing construction. The test was to determine if something was covered under a code or was a requirement of a code. Coming forward to offer testimony in opposition, Doreen Mack stated she was an interior designer who did not have a degree, but who had been doing interior design work for a number of years. She told the committee she had not been aware of the bill until recently, and therefore, asked that it be postponed until the next Session in order to organize a group of people. Ms. Mack submitted a copy of some of her remarks (Exhibit J), and indicated for committee information, just what her goals would be during the interim. Discussion followed. Mr. Goff reiterated what they were attempting to do was create an avenue for those designers who wished to work in codes to do so. They had agreed to an amendment placed in the bill in the Senate. Subsequent to that they had worked with Nancy Wolff, who was the owner of the Interior Design Institute in Las Vegas, to request a time extension. The time line for the bill would allow someone wishing to become a registered interior designer, until December 31, 1997 to register and start the process, and then it would give them until 2004 to complete the process. Mr. Geoff said in their agreement with Ms. Wolff they had extended the date for request to become a registered interior designer until December 31, 1999. Nancy Wolff, the owner of the Interior Design Institute (IDI) in Las Vegas, stated they had been working diligently on S.B. 506 to ensure no one had been eliminated and people would be able to continue their activities. Ms. Wolff indicated she had requested the extension date in order to accommodate her two- year education curriculum. Originally, the date was set at January 1, 1998, and she had requested an extension to December 31, 1999. To become Foundation for Interior Design Education Research (FIDER) accredited was not an easy process due to the fact two-year schools were not accredited at the present time. FIDER accreditation was the basis of the entire bill and there were no FIDER accredited schools in Nevada. She explained the two-year study course was taken in 95.5 quarter credit hours in interior design study which was equivalent to the four year degree. However, the architects had requested a four-year educational requirement. In order to attain some harmony, Ms. Wolff said she had asked for the extension to work out the necessary details. Ms. Wolff stressed that basically, she did not want to go out of business. Also, she explained that over 1,500 people had been trained by her throughout the years, and she wanted them to be able to continue to work and call themselves interior designers. Ms. Wolff reviewed the other goals she hoped to meet during the interim, and stated she would have to work fast to bring her organization up-to-speed. Ms. Wolff submitted a letter from John Griffin (Exhibit K), an expert with the Commission on Post Secondary Education, which offered commendatory language regarding Ms. Wolff and her school. Tricia Lincoln, an interior designer, said her business would not be negatively effected by S.B. 506. Ms. Lincoln asked if there was anything in the language which would prohibit her from incorporating and opening retail locations to sell the products excluded in Section 32. Chairman Spitler explained in Section 35 the word "interior design" was being added, therefore, it would not impact what Ms. Lincoln was doing at present. Ms. Lincoln believed there was a conflict in the definition of interior design in the first page of the amendment. Discussion followed. Ms. Mack questioned whether an amendment could be added which would address the certification for codes and regulations to allow designers who did not wish to do structural or architectural work to do commercial decorating. Chairman Spitler said if she had a proposal she wished the Committee to consider, she should submit it to the committee for consideration. After some amount of discussion, Ms. Brower asked for a definitive answer whether S.B. 506 would prohibit an interior designer from doing commercial work. Mr. Goff said if the work was not covered by a code, they could do it. If the work was covered by a code, not only would the bill prohibit them from doing that work, indeed, they could not do it at the present time. Kathi Giurlani had concerns about the impact of S.B. 506 on rural areas of Nevada. She requested the bill be postponed until the next legislative session to give the opponents time to prepare. Jim Wadhams, representing the Nevada Board of Architecture, offered supporting testimony on S.B. 506. Referring to some of Mr. Allard's concerns regarding contractors, Mr. Wadhams said, "yes," a contractor could go anyplace, and approach anyone he/she wished to, at any time, irrespective of whether or not the bill passed. There was an unequivocal exemption in the law for contractors. Noting previous testimony, Mr. Wadhams pointed out a contractor, an architect, or an engineer, had liability for any of the ancillary or support people used. Explaining the background of the bill, Mr. Wadhams indicated S.B. 506 presented an issue which had been developing for over two years. In the Senate, the Chairman had taken a group consisting of interior designers, the State Board of Architecture, the State Board of Engineering, the State Contractor's Board, the American Institute of Architects, the Nevada Society of Professional Engineers, the Association of Landscape Architects, and the local building officials, and told them to find a compromise and a way to make it work. This group had come together, with no lobbyists or attorneys involved, and met for many weeks, both in the north and south, to work out a compromise for the creation of what literally was a new profession. Shortly after the bill was introduced and was being processed in the Senate, it was discovered perhaps the interior designers who had been working on the process did not represent the full range of interior designers. Mr. Wadhams explained they met Ms. Wolff, who had presented a compelling case about her school. An amendment had been written to allow the present practice of interior design to remain untouched by the bill. Whatever an interior designer could presently do legally, they would be able to legally do tomorrow if the bill passed. Representing the American Institute of Architects, Mike Hillerby traced his involvement with this issue, and stated the American Institute of Architects supported S.B. 506. (NOTE: Included for the record, is a copy of amendments finally proposed and accepted for S.B. 506 (Exhibit L).) SENATE BILL 403 - 2nd Reprint - Revises duties of certain persons who are acting in capacity of agent to parties to real estate transaction. Opening testimony in support was offered by Pat Coward, representing the Nevada Association of Realtors. Mr. Coward offered background remarks saying the bill had come about basically because of one large class-action lawsuit in the area of disclosure. The national organization had recommended all states consider their agency law for revision, reorganization and update. Explaining the specifics of S.B. 403, Patsy Redmond, National Association of Realtors, reviewed the bill section-by-section, stressing that one important aim of the bill would be to provide the licensees with a clear direction as to what they needed to reveal as far as agency relationships were concerned. Referring specifically to Section 5, Ms. Redmond said this addressed and clarified "dual agency," which was somewhat different from other disclosure language. Due to some concerns expressed by the Attorney General's Office, they had added a third form, which had been amended into the bill as Section 8, in the Senate. This explained the designated agents' relationships, and how they were represented within one brokerage office. The main thrust of the bill, Mr. Coward said, was: 1) Clarification of a complex subject within the industry; and 2) to set standards of what had to be disclosed, and how a broker/agent would deal with an agency relationship. He believed there was a great deal of consumer benefit presented by the bill, as the relationships would now have to be explained to the customer. Ms. Giunchigliani questioned the rationale of the language in Section 4. Ms. Redmond said this was because they had included in the statutes a much more comprehensive disclosure requirement than would presently be in common law. By specifying what an agent had to reveal in his relationship with the consumer, she believed they were protecting not only the public, but also protecting the licensee. If the agent followed the law, they would not have to face a court for other items they had not revealed. Mr. Coward described the Adina case which had precipitated much of the attention now being placed on agency relationships. Ms. Tiffany questioned the language dealing with the disclosure of confidential information when a person was terminated, and asked for examples of this situation. Presently, Ms. Redmond said, there was no end date as to when an agency relationship was over. As a representative of a seller a person could not disclose confidential information; however, once a listing agreement was over there still appeared to be some sort of confidential relationship. This language merely clarified that issue. Answering Ms. Tiffany's question regarding the collection of advance fees shown on page 5, Darrell Clark, from the Nevada Association of Realtors, said an advance fee listing was one in which a payment was made prior to the sale, for example for advertising. Mr. Clark said advance fees were rare among contractual relationships. Ms. Tiffany wished to remove the advance fee language. She was assured by Ms. Redmond this was already in law, but it continued to trouble Ms. Tiffany. The Administrator of the Real Estate Division, Joan Buchanan, said other examples of advance fees would be for rental agencies who collected an up-front fee and buyer's agents who collected an advance fee before looking for commercial property. Referring to Ms. Tiffany's concerns, Mr. Schneider opined this was not a serious issue since many sellers of property often offered a vacation trip, or a bonus to a selling agent. Ms. Buckley noted the bill appeared to be very comprehensive, and she was well pleased with the language presented in S.B. 403. Greg Salter, Deputy Attorney General, indicated he had for some time in the past worked with the Division and the industry on this bill, and all differences had been resolved except one. This was a consumer right provision which the Attorney General feared would be given up if S.B. 403 was enacted, and the language was presented on page 2, lines 27 through 29. Mr. Salter said there was a real danger to the consumer in the words, "... the licensees are not required to obtain written consent required to paragraph (d) of subsection 1 of section 5 of this act. ...". Mr. Salter described the situation in which a seller was represented by a real estate salesman who was employed by the same broker as the salesman representing the buyer. Depending on the situation, of course, Mr. Salter said the exchange of information between the buyer's salesman and the seller's salesman, in other industries, represented "insider dealing," which was generally, either unethical or illegal. He conveyed the request from the Attorney General, that if such a transfer of information was to be made legal, that as a consumer protection there should be a requirement for all the consumers to consent to the arrangement. Mr. Spitler questioned whether Mr. Salter had testified on this matter when the bill was heard in the Senate. In response, Mr. Salter said, "no," although he had long been involved with this matter. Mr. Spitler asked Mr. Salter to convey to the Attorney General he would have appreciated this testimony when the bill was heard in the Senate. Mr. Salter told the committee that for him to comment further regarding this question, would require breaking a confidence Mr. Coward interjected there had been testimony heard in the Senate from the Attorney General's Office in support of the bill. As for certain concerns voiced by the Attorney General, Mr. Coward said an amendment adding another form had been crafted to address those concerns. Discussion followed. In regard to negotiations with the trial bar, Mr. Clark said he believed the Legislative intent needed to be made very clear. The trial bar was concerned the way the actual damages provision was written in the bill, it would preclude the levying of punitive damages in event of a tort violation. Thus, Section 11 had been created. The actual damages addressed by the language dealt only with the agency and disclosure duties of Sections 5 through 7. Ms. Buchanan brought committee attention to a copy of Agency Task Force Report/Recommendations, dated March 23, 1994 (Exhibit M). She said if there were problems regarding Section 6, they could be addressed in the regulation. She said the Utah Legislature had just passed language posed in Section 6, almost word-for-word. Bob Maddox, speaking on his own behalf and on behalf of the Nevada Trial Lawyers' Association, indicated concern that the bill limited damages for a real estate licensee who engaged in deceitful, fraudulent or dishonest conduct. This took place by virtue of the statement in Section 4, "Activities governed by 5, 6 and 7 are removed from common law;" Section 5, "The real estate licensee has a duty to disclose any material and relevant facts, data or information which he knows, or which by the exercise of reasonable care and diligence he should have known relating to the property which is the subject of the transaction;" and in Section 9, "Damages are limited to actual damages for any violation of Sections 5, 6 and 7." He believed the language of the bill relating to dual agency provisions was very good, but by including under Section 5 the duty to disclose, the failure to disclose a material fact was a form of deceit. Mr. Maddox acknowledged this was not the intent of the language, however, he did not believe it was relieved by the language of Section 11. This needed to be corrected, or at least the record made clear there was no intention, as had been stated by Mr. Clark, to limit liability for engaging in deceitful, fraudulent or dishonest conduct. Mr. Spitler asked if Mr. Maddox was, indeed, representing the Nevada Trial Lawyers, and Mr. Maddox said, "yes." Also, when asked, Mr. Maddox said he had not testified when the bill was heard in the Senate. SENATE BILL 479 - 1st Reprint - Makes various changes to provisions governing deceptive trade practices. Larry Struve, on behalf of the Consumer Affairs Division and the Department of Business and Industry, and Ray Trease, Consumer Services Officer for the Consumer Affairs Division, came forward to explain this bill was proposed by the Division, and the first reprint was the result of Senate Commerce Committee subcommittee work. This committee had been made up of Daryl Capurro, representing the Nevada Franchise Auto Dealers Association, Mary Santina-Lau, the Attorney General's Office and the Department of Business and Industry. The intent of the bill was to strengthen the tools available to the Consumer Affairs Division in dealing with deceptive trade practices. Mr. Struve then reviewed the three significant sections of the bill and the amendments which had been written into the text. Section 3 was the most significant, he pointed out. What was being requested for the Commissioner paralleled existing law available to other officials in the Department of Business and Industry. Basically, Section 3 provided for a due process order to show cause hearing in which, if the Commissioner had reason to believe that a deceptive trade practice was occurring and an adequate resolution had not been reached through existing means, there could be an order to show cause issued. At this point, a specification of the charges had to be set forth, a hearing had to be provided, and only after the hearing would the Commissioner be allowed to order a cease and desist order to stop the practice. There was a right of review by any aggrieved person in a court of law, and there was a right of appeal if anyone was aggrieved by an order of the court. Section 7 was the third major section, and this dealt with the current law providing confidentiality of complaints filed with the Consumer Affairs Division. Mr. Struve explained why this had always been a sensitive issue. The Commissioner was seeking the same authority a Better Business Bureau had to at least inform the public if they had, in fact, received complaints. In the Senate there was concern expressed that misinformation might be released, and just because a complaint was filed, it did not necessarily follow anything wrong had been done. Mr. Struve said they had attempted to reach a compromise in Section 7 by language allowing the Commissioner to disclose the number of written complaints received during the current or immediately preceding fiscal year. However, if such a disclosure was made, the disposition of the complaints had to also be disclosed. Mr. Struve continued with a review of the language regarding the other disclosures of information and which would require the adoption of regulations. Mary Santina-Lau, representing the Retail Association of Nevada, and standing in for Daryl Capurro who represented the Nevada Franchise Automobile Dealers Association, said originally both organizations had looked at this bill indifferently. However, the Retail Association had worked very cooperatively with the Department of Consumer Affairs until both organizations were comfortable with the changes being proposed. Thus, Ms. Santina- Lau urged passage of the bill. In response to Ms. Tiffany's question regarding the complaint system, Mr. Struve pointed out the Division had adopted forms for a complaint system, and when these were filed with the Division, they were processed to determine if there was any reasonable cause to go into a more extensive investigation based on an allegation of the violation of a deceptive trade practice. Ms. Tiffany believed not only a more extensive complaint system should be developed, somewhat like that used by the State Contractors' Board, but also believed some regulations were necessary. Offering clarifying testimony, Ray Trease said they had a complaint tracking system at this time. When a telephone call was received, the individual was asked to place this in written form. An effort was made to track and mediate these complaints, and if any penalty was collected, these fees went into the General Fund. This was further discussed. Chairman Spitler commended the committee for their work on such a long agenda, and with no further testimony, the hearing was adjourned at 6:47 p.m. RESPECTFULLY SUBMITTED: ________________________ Iris Bellinger, Committee Secretary Assembly Committee on Commerce June 26, 1995 Page