MINUTES OF THE ASSEMBLY COMMITTEE ON LABOR AND MANAGEMENT Sixty-eighth Session May 11, 1995 The Committee on Labor and Management was called to order at 3:30 p.m., on Thursday, May 11, 1995, Chairman Dennis Nolan presiding in Room 321 of the Legislative Building, Carson City, Nevada. Exhibit A is the Agenda. Exhibit B is the Attendance Roster. COMMITTEE MEMBERS PRESENT: Ms. Saundra (Sandi) Krenzer, Chairman Mr. Dennis Nolan, Chairman Mr. David Goldwater, Vice Chairman Mr. Lynn Hettrick, Vice Chairman Mr. Bernie Anderson Mr. Douglas A. Bache Mr. John C. Carpenter Mr. Pete Ernaut Mr. Mark Manendo Mr. Brian Sandoval GUEST LEGISLATORS PRESENT: Assemblyman Max Bennett, Assembly District No. 14 STAFF MEMBERS PRESENT: Mr. Vance A. Hughey, Senior Research Analyst Mr. Fred W. Welden, Chief Deputy Research Director OTHERS PRESENT: Mr. Thomas McManus, Senior Industrial Hygienist, EG&G Energy Measurements Mr. David Going, Deputy Chief, Occupational Safety and Health Enforcement (OSHE) Mr. Steven Matles, Corporate Safety Officer, St. Mary's Health Network Mr. Gary Brown, Supervisor, Division of Industrial Relations, Safety Consultation and Training Section Mr. George Butler, George Butler Associates, Occupational Health & Safety Consultants Mr. David Rinaldi, Rinaldi Environmental Consultants Chairman Nolan began the meeting by apologizing to those parties in attendance, because Assembly Bill 552 would not be addressed in work session today. The bill would be rescheduled for a later date. The next order of business was a committee introduction of bill draft request (BDR) 53-1992. This was requested by the committee and deals with managed care organizations. ASSEMBLYMAN ERNAUT MOVED TO INTRODUCE BDR 53-1992. ASSEMBLYMAN HETTRICK SECONDED THE MOTION. THE MOTION CARRIED. Chairman Nolan explained prior to addressing A.B. 498, the committee will hear A.B. 554. ASSEMBLY BILL NO. 554 - Prohibits use of certain titles relating to professions in industrial hygiene without national certification. Assemblyman Max Bennett, Assembly District No. 14, testified. He explained A.B. 554 is an attempt to tighten the requirements for the occupational safety professions by amending chapter 618 of the Nevada Revised Statutes (NRS). The amendment requires all safety professionals be certified by their national boards. Mr. Bennett clarified the bill, itself, does not set up a state board. It does have a small fiscal note attached to cover the cost of enforcing the misdemeanor penalties for passing oneself off as a safety professional without the certification. Chairman Nolan disclosed he is an occupational health and safety technologist (OHST). It is one of the classifications included in this bill but it will not affect him any differently than it would any other OHST. He will be voting on this bill. Thomas McManus, EG&G Energy Measurements and Vice-President of the Nevada Industrial Hygiene Association, testified. He reiterated the concern stems from people misrepresenting themselves as either certified industrial hygienists or certified safety professionals. He declared this has caused some problems for the industries which use these people, as well as the general public. Mr. McManus stated the only restriction of A.B. 554, is to ensure people do not misrepresent themselves. As the bill stands currently, he does have a couple amendments he would like to propose. First, he would like to see the summary changed to include the safety profession. He would like the brief synopsis following the summary, to read the same; after "occupational hygiene", add "and safety". Assemblyman Bennett also proposed in section 1, subsection 1e, line 4, ",or OHST" be added. Assemblyman Hettrick referring to page 2, beginning on line 11, stated there is a problem being there is no state board to revoke the licenses. Mr. McManus explained this refers to their business license to conduct business in a governmental entity in Nevada. Mr. Hettrick apologized for not reading the section more carefully. However, he pointed out business licenses are not issued in Douglas County. Mr. McManus said they would then go through the district attorney's office and seek a misdemeanor penalty against the individual. Assemblyman Goldwater inquired if national boards are recognized within the industry. Mr. McManus replied there is very little controversy over these boards. Many have been in effect since the mid 1960's and they are the preeminent recognition for industrial hygienists and safety professionals. They require an educational requirement depending on the requested grade of certification and at least five years of professional experience before being able to sit for an examination. They are asked to "re-license" every six years. Assemblyman Sandoval asked why a violation of this bill is being deemed a misdemeanor. Mr. Bennett responded this is the only way "they can put some teeth into it" being these people do not have licenses to revoke. David Going, Deputy Chief of OSHE, testified in support of this bill. He explained OSHE is ready to assume the responsibilities provided for in the bill. "It is a pro- active measure... to keep dishonest people out of the state of Nevada." Mr. Going explained he has some reservations about sending white collar criminals to the district attorney being that office is usually very busy, but he is willing to give it a try. Steven Matles, Corporate Safety Officer for Saint Mary's Health Network, testified. He pointed out the legal name of the entity which grants his OHST designation is called the American Board of Industrial Hygiene/Board of Certified Safety Professionals Joint Committee. Referring to page 2, line 7, he suggested this be corrected. See (Exhibit C). Gary Brown, supervisor for the Safety Consultation and Training Section of the Division of Industrial Relations, and David Rinaldi, Rinaldi Environmental Consultants, were present but stated they had nothing to add to the previous testimony. George Butler, George Butler Associates, testified. He stated to the best of his knowledge, this piece of legislation is the first in the history of this nation which addresses all of the safety professional credentials. He supports A.B. 554. Chairman Nolan asked if there were any further questions on A.B. 554. There were none. ASSEMBLYMAN KRENZER MOVED AMEND AND DO PASS ON A.B. 554. ASSEMBLYMAN ERNAUT SECONDED THE MOTION. THE MOTION CARRIED. Chairman Nolan closed the hearing on A.B. 554. The committee then began a work session on A.B. 498. See (Exhibit D). ASSEMBLY BILL NO. 498 - Makes various changes related to industrial insurance. Mr. Nolan explained the committee will only be addressing those sections which contain substantive changes. Beginning with section 2, he stated the proposal is to delete section 2. Mr. Ernaut recalled Mr. Hettrick's suggestions concerning bonding, found in section 6, take out the necessity for section 2. He believes the solvency of each company will be a moot point if they were bonded. Ms. Krenzer inquired is it the intent of the committee to require bonding only or will it be an either/or requirement. Mr. Hettrick replied his initial feeling was just to require bonding but it was brought to his attention later, there are certain scenarios under which either/or should be allowed. He stated as an example, a very large company that is a member of the New York Stock Exchange with a net worth of $2.4 million. They would like to use their audited financial statement rather than bond because they had the assets and the net worth to support all but $100,000. Mr. Hettrick explained they could join with one or two small companies. His concern rests with the intent not to limit companies from being able to go with group self-insurance. Mr. Ernaut agreed with Mr. Hettrick's exception but expressed concern with previous testimony stressing an audited financial statement is not necessarily a proper barometer of the actual worth of a company. It could be inflated very easily. He also drew attention to the fact, a company can easily hide assets in anticipation or because of direct knowledge of a catastrophic loss. The burden would then be placed on the other members of the group. With the bond, all of the risk would be deleted. Mr. Ernaut summarized if either a bond or an audited financial statement is allowed, he is concerned the people who choose the financial statement will do so because they can not qualify for the bond. A discussion developed among the members of the committee concerning the consequences of not having a bond and a company becoming insolvent. Alice Molasky, Commissioner of Insurance, commented if an individual self-insurer becomes insolvent, the security deposit stands as the first level of payment for its liabilities. The insolvency fund would be a last resort to ensure compensation will be paid. Charles Knaus, property and casualty actuary for the insurance commissioner's office, testified. He explained if the insolvency fund is insufficient, there is an assessment provision against the self-insured employers as a group. In the fifteen years his office has been dealing with individual self-insured employers, they have had one bankruptcy in which the security deposit has been more than sufficient to run off the claims. Mr. Knaus summarized first they would use the security deposit, then the insolvency fund, and if there were still claims uncovered, they would use the assessment provision. Ms. Krenzer expressed concurrence with requiring a bond without the option of a financial statement. Chairman Nolan said the committee would move on to section 3. Referring to (Exhibit D), he pointed out the underlined language being added to this section based on the committee's recommendations from last week. Mr. Hettrick asked if the committee should state somewhere a company may voluntarily withdraw on their anniversary date with 120 days notice. He explained this would cover them to the extent a dividend might be issued. Vance Hughey, senior research analyst, explained according to what Ms. Molasky indicated, if a company is a member on the date a dividend is declared, they would be eligible for the dividend. If the company left the association prior to the declaration date of the dividend, they would not be eligible. This proposed language follows the same idea. Ms. Molasky explained existing statute requires even before the declaration of a dividend, the board of trustees seek approval for the declaration from the commissioner. In corporate law, a dividend is declared and it is on that date of declaration that it is determined which shareholders of the corporation are entitled to receive a dividend, regardless of the date of distribution. Ms. Molasky said as far as insurance law is concerned, which these associations appear to simulate with respect to a mutual insurance company, it is similar whereby they must be a policy holder or subscriber to that insurer on the date of declaration. She pointed out the statute already says the member, in order to receive a dividend, must have been a member for the entire fiscal year. This language states a member must also be a member on the date of declaration. It exists to encourage a member to maintain his membership. Assemblyman Bache suggested like many insurance plans, establishing a "window period" each year for withdrawal. Ms. Molasky replied she would not like to see this section of A.B. 498 require membership for a year. This could be required in order to receive a dividend but to require or prohibit membership for any length of time might be constitutionally impaired. Mr. Bache pointed out union memberships do this all the time. He explained to have members constantly joining and then withdrawing will result in chaos. He does not believe this would be a constitutional problem. Ms. Molasky stated their rights can be set under the by-laws. Ms. Molasky stated the committee is setting parameters and guidelines but she disagrees with "micro managing". She expressed 120 days prior notice to the other members of the group is appropriate. The committee and Ms. Molasky engaged in a colloquy focusing on the requirements for withdrawal from an association and to receive a dividend. Mr. Hettrick, having been advised by Mr. Hughey, pointed out this issue about dividends is addressed in NRS chapter 616.3796. "The board of trustees of an association after obtaining approval from the commissioner may declare and distribute dividends... They must be distributed within twelve months... The dividend can only be paid to members who were members for the entire fiscal year and that payment can not be conditioned upon a member continuing his membership after the fiscal year." Mr. Hettrick stated this would cover section 20 of the proposed amendments for A.B. 498, being it is already in statute therefore, the committee can delete this section. Mr. Carpenter asked for clarification in regard to a member leaving an association. Mr. Nolan explained it is covered in statute. He expounded as long as an association can maintain their net worth it is not a problem. If an association has exactly five members and one leaves, they will have to find another member. This is one of the reasons 120 days notice is being requested. This would entitle the administrator of the association to look for another member. Mr. Nolan stated if another member could not be found, then the association would disband. Mr. Carpenter feels a larger window should be provided for the association to find another member. Mr. Nolan inquired if there was any type of grace period which could be extended to an association in order for them to find another member. Ms. Molasky responded no, but in order to decertify them as an association there is a period of time under the hearing process, NRS chapter 616.3798. She explained the commissioner must first arrange for an informal meeting to determine whether the certificate should be withdrawn or not. It requires a 10 day notice subsequent to the meeting. Then the association may request a hearing for which a 30 day notice is required. This allows for 40 days from the notice of the commissioner, of the intention to withdraw the certificate. During that particular time, if an association found another member, it would eliminate the basis for the withdrawal of the certificate. Mr. Nolan clarified this, basically, allows for 160 days to find a member. Mr. Carpenter and Mr. Ernaut discussed Mr. Carpenter's concern of 120 days not being long enough. Mr. Ernaut questioned if a member leaves, what remains with the association and for how long. Ms. Molasky explained they would have their portion of the assessments they have paid. Mr. Knaus elucidated in the previous draft of A.B. 498, it talked about the association continuing to hold the security deposit. He suggests rather than holding the security deposit, it should read all assessments paid by the members. He does not recall anything in the law as written which says how long the association can continue to hold the security deposit and therefore, would like to see something put in. Mr. Ernaut justified this would be further disincentive for a member to leave because they would leave a portion of their assets with the group for a period of time. Mr. Knaus stressed they may have to leave the entire assessment depending on how claims have been reported up until that point. He stated it is conceivable the amount of assessments collected through a certain date would not be sufficient to handle the incurred liability projected for all the claims reported up to that point. This is why, he feels, there needs to be something in the law as to how long the association can hold an assessment. Mr. Ernaut concurred with Mr. Knaus' statements. Referring back to Mr. Carpenter's concern with the 120 days, Mr. Anderson reiterated Mr. Ernaut's reasoning and stated he believes this to be an adequate amount of time. Mr. Nolan reiterated following that period of time, the organization has a number of options. They can find another member, the individual members can join other associations, or the remaining parties can enter into a contract with another association, being absorbed. The worse case scenario would be the association dissolves and the individual companies would return to the SIIS. After taking a 30 minute recess for dinner, Chairman Nolan called the meeting back to order. Returning to section 3 of A.B. 498, Mr. Carpenter suggested as an amendment, stating after 120 days, an extension may be granted at the commissioner's discretion. Ms. Molasky suggested when considering this as an amendment, also consider placing it in NRS chapter 616.3798, concerning the procedure for withdrawal of certification. She stressed the clear opportunity for the commissioner to consider whether the extension should even be granted is necessary. Moving on to sections 4 and 5, Mr. Nolan explained they deal with the "same or similar" classifications of employment. He recalled the committee's last discussion resulted in a proposal to use the broadest classifications contained within the Standard Industrial Classification (SIC) codes. He also recalled Mr. Anderson expressing some concerns with this subject and asked if he would like to comment. Mr. Anderson stated he has had an opportunity to review the document submitted by Mr. Hughey, dated May 9, which tried to address some of his questions. See (Exhibit E). While he still has some concerns, such as nonclassifiable establishments, if the committee could come up with a compromise relative to "homogeneous" and not "heterogeneous", he will be happy to support it. Mr. Bache explained it is his understanding, "same and similar classifications of employment", clearly means homogeneous grouping. In order to avoid arguments about the SIC codes, he suggests adding a sentence to state, "The Division shall establish regulations defining what the same and similar classifications of employment are." Mr. Ernaut stated he does not see the concern over heterogeneous versus homogeneous grouping assuming all of these groups will be bonded. Eloise Koenig, Division of Insurance, came forward to explain the existing statutes require they be the same or similar classifications of employment in order to merge. Therefore, this is a subject the Division has already discussed. They use the SIC codes and the broad classification of employment. She pointed out the Division requires companies to have their primary business activity in these major classifications. Daryl Capurro, Nevada Motor Transport Association and the Nevada Franchised Auto Dealers Associations, testified. He explained these are two trade associations which, respectively, represent the trucking industry and new car dealers in the state of Nevada. His concern with the issue of, "five or more employers engaged in same or similar classifications", is definitions will differ among people unless there is more specificity as to what is involved in the law itself. He pointed out, as an example, one of his members in the trade association has both construction activity and trucking, within the same umbrella company. He operates on a for hire basis with his trucks and also leases those same trucks and drivers to his construction company. Under the language proposed, he inquired if it would force him to have his trucking company in one group and his construction company in another or is there enough flexibility to allow him to use the SIC codes for both construction and trucking. Ms. Krenzer pointed out the classifications really are broad. She explained within each of these classifications there are a variety of different positions. Mr. Capurro stressed within an auto dealership they may still spread into four of those major classifications; retail, wholesale trade, finance and insurance, and transportation. He noted determining what their primary classification is would be difficult. Ms. Koenig stated the primary classification of employment would be used to determine eligibility to join an association. It would not determine the rates that will be assessed per member, per dollar of payroll, in each classification code. Mr. Capurro asked if his primary classification is transportation, but 40 percent of his business is in construction, can he insure both parts of his company all under one group. Ms. Koenig replied they would be insured under the primary business of the umbrella company. In this case, it would be transportation but they would be paying the rates according to the construction company for those employees. Mr. Bache commented the committee might want to consider using the term "business" rather than "employment". Chairman Nolan inquired if there were any more questions on sections 4 and 5. There were none. The committee moved on to address section 6. Mr. Ernaut stated the only problem he has with this section is subsection 4h, lines 72 through 75. He stated his desire to see the underlined language become subsection 4h and all the other language regarding an audited financial statement deleted. Mr. Hettrick explained the intent of this subsection is to require a financial statement for the association, not the individual members. The reason it is audited is for protection of the members to assure that the administrator is handling the association's finances properly. Mr. Hettrick stated in this case, the bond language should probably be deleted. He pointed out, on line 73, the language, "for each proposed member of the association", is incorrect. Mr. Nolan clarified subsection 4g, provides for the financial statement and covers the committee's intent. Subsection 4h could be deleted in its entirety, in light of the fact the bonding statements are covered in section 7 of A.B. 498. Attempting to clear up the confusion, Ms. Molasky declared subsection 4g does apply to the association as a whole, but it is to demonstrate they have the ability to form the group. It is more of a proforma financial statement. Subsection 4h is in regard to each individual member. It is to demonstrate solvency for each member at the time the application is received. Mr. Nolan clarified subsection 4h allows for in lieu of a bond, an audited financial statement to be submitted. Ms. Molasky stated she is comfortable with this. A discussion unfolded concerning whether to require a bond or an audited financial statement. Mr. Hettrick commented section 4 states, "The application must be accompanied by". He stressed the association has not been approved yet. He inquired how can we have a financial statement for an organization that does not exist. Proof that they can form is what is being sought. Therefore, cash or a bond should be presented. Ms. Koenig explained the statement required in subsection 4g, is a proforma financial statement or a business plan. It is to show what the association expects to do. Mr. Nolan asked if she would be comfortable with putting the word, "proforma" into this section. Ms. Koenig replied she would be comfortable with this. She also pointed out currently, this is what is stated in the regulations. Referring to subsection 4h, Ms. Koenig explained for the individual self-insured employers the procedure is to submit an application. She will then determine the amount of security deposit she will require from them. She then notifies the applicant they have been approved but she will not issue the certificate until the other things are in place, such as the bond. Mr. Anderson asked if this language reflects this procedure. Ms. Koenig replied she would not ask for the bond before she is ready to give them the certificate but she would not be opposed to changing the law to read, "evidence that it is available". Mr. Knaus expressed his concern with the language, "evidence of a bond", because someone may be able to provide evidence of the potential ability to get a bond and yet may not be able to deliver. After more discussion, the committee agreed to amend subsection 4h, to read, "Evidence of the ability to provide a bond pursuant to subsection 2 of section 7, of this act." The committee moved on to section 7 of A.B. 498. Mr. Nolan explained this section discusses the net worth of the association. Referring to (Exhibit D), he pointed out the language change beginning on line 101. The intent is to address those associations who may have losses less than the aggregate amount of the assessment. The committee expressed no concerns with this language. Mr. Nolan then drew attention to the next change in section 7, subsection 2a. Doug Dirks, general manager of SIIS, testified. He noted the $2.5 million net worth requirement was placed in the law when self-insurance was authorized in 1979. SIIS has done a calculation of the inflation rates from 1979 through 1994 and in applying the inflationary factor to that number, he comes up with $2.5 million in 1979 dollars or $5.2 million in 1994 dollars. Mr. Dirks suggested if $2.5 million was the appropriate amount of net worth in 1979, it is not the appropriate amount in 1994. Mr. Hettrick stated he was going to suggest this requirement be lowered because an insurance company, in the state of Nevada, could go to work with $1.5 million in assets. If it was to be lowered he stated the association would be required to provide excess insurance in an amount satisfactory to the commissioner. He pointed out the association will also be bonded. Mr. Knaus explained the purpose of the net worth requirement is to make sure these organizations will survive over time because self-insurance is a long term venture. It is the best guaranty an association will be viable over a long period of time and claims will be paid. The net worth requirement is picked to be consistent with this concept. He stated if the $2.5 million requirement is to be lowered, it should be done so only at the discretion of the commissioner. Mr. Hettrick reiterated his previous comments, stressing the question, why is it that a long term relationship of more than $1.5 million is necessary for these groups but an insurance company does not have to have it. Mr. Knaus replied there are other regulatory controls on insurance companies. Ms. Krenzer asked if $2.5 million is the absolute minimum, aggregate amount, based on all the claims one could conceivably incur, that an association would need to bond for. She declared she could not support anything lower. Mr. Hettrick pointed out in lines 120, 122, and 126, it says "at least". This would artificially limit a company with two people, lots of assets, and very low claims. He feels this is punitive. Mr. Nolan stated he did not concur with Mr. Hettrick because $2.5 million is an aggregate amount and therefore, the addition of a few more companies as members is all that is necessary. Mr. Knaus reviewed the different levels of insurance, required by an association, available to pay claims, pointing out the net worth is the last level. He stressed, "If we ever get there, we are in real trouble." The committee engaged in more discussion concerning the $2.5 million requirement. Mr. Carpenter expressed $2.5 million is adequate and fair. Ms. Krenzer concurred but stated she would not be opposed to increasing it. Ray Bacon, Nevada Manufacturing Association, testified. He drew attention to testimony which had occurred in the Senate committee, explaining there was a strong recommendation this topic be reviewed by the interim committee. Mr. Bacon pointed out there has never been a single claim that has reached the level of using net worth to cover costs. Mr. Capurro expressed agreement with Mr. Bacon's comments. Chairman Nolan informed the committee of his intention to keep the required aggregate amount at $2.5 million. In regard to subsection 2b of section 7, he referred to Mr. Hettrick. Mr. Hettrick opined this subsection is in the wrong place. It addresses secondary excess insurance which is not part of the net worth requirement. Mr. Hughey clarified the committee's intention is to have section 7, subsection 2a read, "In addition to complying with the requirements of subsection 1, an association of self-insured public or private employers, or its members, shall deposit with the commissioner solvency bonds in a form prescribed by the commissioner in an aggregate amount of at least $2,500,000." Subsection 2b of this section will be deleted. The committee agreed. Being the committee would not be discussing sections 8 through 15 tonight, Chairman Nolan moved on to section 16. He asked Ms. Molasky to review section 16. Ms. Molasky explained it is a request of the Division of Insurance (DOI). She reiterated her testimony from a previous meeting whereby she stated as a regulatory agency, this agency is constantly seeking enforcement action against fraudulent companies offering an assortment of insurance schemes. Chairman Nolan apologized for interrupting Ms. Molasky but stated the committee would take a five minute recess. After calling the meeting back to order, Chairman Nolan formed a subcommittee composed of Mr. Hettrick and Ms. Krenzer to address section 7. Ms. Molasky continued with her testimony. She pointed out some of the misrepresentations she knows to exist. She proceeded to explain section 16 is modeled after the same type of solicitation permit that she requires of any insurer who is forming in the state. Having spoken earlier with Mr. Capurro about his concerns with this section, Ms. Molasky stated she would have no objection to an additional provision being put in which states, "a solicitation permit is not required of a bona fide trade association which has been in existence for five or more years." Mr. Capurro expressed his support for the insurance commissioner's reasoning for wanting to do this because he is also concerned with this issue. He explained he will be pooled with other people within the groups of self-funded and he is just as interested in making sure they survive as he is in his own survival. He is aware of some of the schemes companies coming into Nevada are trying to pull off. Mr. Capurro also expressed support for Ms. Molasky's suggestion of trade associations soliciting its own membership for their program being exempted as well as the five year requirement. In response to Mr. Carpenter's request for clarification, Mr. Nolan explained a solicitor is not required to form an association. A third-party administrator or whomever is going to function as the executive director might put the association together. If there is an individual presenting himself as somebody whose purpose is forming associations, this is whom the section is to be applied. Ms. Molasky reiterated it applies to anyone; any employer, any individual, any partnership, who solicits. She believes it is an important safeguard. It will also inform her of who these people are. Chairman Nolan inquired is the association manager who solicits organizations for the purpose of maintaining their membership or enhancing their membership considered a solicitor. Ms. Molasky explained this would apply to someone who solicited during the formation or the recruitment of members of an association. This would not apply to, for example, the association administrator. Mr. Hettrick stressed he feels an exception is needed because, "if I own a plumbing company and I call another plumbing company and say do you and I want to get together and see if someone else wants to go with us, we have to buy a solicitor's license." He stressed it needs to say somewhere in this section, this does not apply to who will be or is a member of an association. He does not feel someone can be prohibited from talking with his neighbor in a like business about joining together in an association. Ms. Molasky stated this is designed for the professional promoter. Mr. Hettrick emphasized he agrees with this but an exception is needed which allows members or would be members of a group to discuss the formation of an association without having to buy a solicitor's license. He commented bill draft can work on the language. Ms. Molasky agreed to this. Proceeding with section 17, Mr. Hettrick inquired if line 289 should read, "Any company...", rather than "Any surety...". Ms. Molasky replied her division usually call insurance companies a surety. She said it could state, "Any insurer...". The committee had no problems with using the word, "surety" and therefore, moved on to section 18. Mr. Anderson asked for clarification regarding an entity's change in type of business, being it would no longer be a homogeneous group. Mr. Hettrick explained if entity is a corporation one day, and a partnership the next, they would not be relieved of their responsibilities. "Type" does not refer to classification. Chairman Nolan expressed it was the committee's intention to vote on this bill tonight. He recognized there are still some questions in regard to section 7 and asked if Mr. Knaus would attempt to clarify this issue for the committee. Mr. Knaus explained, referring to page 3 of (Exhibit D), his interpretation is the $100,000 is the security deposit. The security deposit for individual employers is a minimum of $100,000 and it follows the actual estimated liability that has been incurred for their claims. Currently, there exists security deposits as big as $5 million or $6 million for some of the individual employers. Mr. Knaus reiterated the very first payment of claims would come from the assessments. If the assessments are not enough or if the characteristics of the claim require excess insurance to contribute, then the excess insurance contribution would be paid by the insurance company. For the part the association is responsible for, the next line, after assessments, is the security deposit. This is followed by the insolvency fund or the division might have the association make another assessment of its members. He explained there is also a provision which provides for an assessment of all of the self-insured associations if one association can meet its responsibilities. Mr. Knaus stated hopefully, they would be able to make another assessment of their members and this would be the end of it. If this option was available, it would be done before the insolvency fund was touched. Mr. Carpenter inquired why an assessment would be made on all the other self- insureds when excess insurance exists. Mr. Knaus explained the excess insurance may not be responsible for a claim. Theoretically, there could be several thousands or even millions of dollars in claims incurred over a twenty year period with the excess insurance not being responsible for any of it. He stressed the excess insurance is first by claim and then aggregrate by year. Mr. Carpenter further inquired why is excess insurance even required if it is not able to be utilized. Mr. Knaus responded he has had a lot of claims that have gone into the excess insurance. He reiterated the excess insurance would pay the part of any claim that it is responsible for. Chairman Nolan justified the committee attempted to revisit section 7 in hopes it could be clarified enough in order for a vote to be taken but he recognizes it still needs review. He stated he will keep it in subcommittee. He stated his intention for the committee to conditionally vote on everything except section 7, which will be addressed in the next meeting and voted on then. Mr. Hughey stated the only point of clarification he needed was to know the committee's recommendation for section 6, subsection 4h. He inquired should it read, "Evidence of ability to provide a bond pursuant to subsection 2 of section 7 of this act." Mr. Hettrick replied this is correct. Being the committee was clear on the other amendments suggested, Chairman Nolan stated he would take a motion. ASSEMBLYMAN HETTRICK MOVED AMEND AND DO PASS ON THE SECTIONS OF A.B. 498, AS PROPOSED IN TONIGHT'S DISCUSSION, EXCEPT SECTION 7, WITH THE UNDERSTANDING THE COMMITTEE WILL REVIEW IT ALL WHEN IT COMES BACK FOR APPROVAL OF SECTION 7. ASSEMBLYMAN CARPENTER SECONDED THE MOTION. THE MOTION CARRIED. ASSEMBLYMAN BACHE VOTED NO. ASSEMBLYMAN KRENZER ABSTAINED. Being there was no further business to come before the committee, Chairman Nolan adjourned the meeting at 8:00 p.m. RESPECTFULLY SUBMITTED: Jennifer Carnahan, Committee Secretary Assembly Committee on Labor and Management May 11, 1995 Page