MINUTES OF THE SENATE COMMITTEE ON COMMERCE AND LABOR Sixty-eighth Session May 1, 1995 The Senate Committee on Commerce and Labor was called to order by Chairman Randolph J. Townsend, at 9:30 a.m., on Monday, May 1, 1995, in Room 227 of the Legislative Building, Carson City, Nevada. Exhibit A is the Agenda. Exhibit B is the Attendance Roster. COMMITTEE MEMBERS PRESENT: Senator Randolph J. Townsend, Chairman Senator Ann O'Connell, Vice Chairman Senator Sue Lowden Senator Kathy M. Augustine Senator Raymond C. Shaffer Senator John B. (Jack) Regan Senator Joseph M. Neal, Jr. STAFF MEMBERS PRESENT: Beverly Willis, Committee Secretary Scott Young, Senior Research Analyst Vance Hughey, Senior Research Analyst OTHERS PRESENT: Ellis, Antunez, Member, State of Nevada, Board of Landscape Architecture Douglas Dirks, General Manager, State Industrial Insurance System (SIIS) Lenard Ormsby, General Counsel, State Industrial Insurance System (SIIS) Cecilia Colling, Assistant General Manager, State Industrial Insurance System (SIIS) Jan Needham, Principal Deputy Legislative Counsel, Legal Division, Legislative Counsel Bureau Donna Sweger, Supervising Deputy Attorney, Nevada Attorney for Injured Workers Senator Townsend opened the meeting with the hearing on Bill Draft Request (BDR) 54-1320. BILL DRAFT REQUEST 54-1320: Makes various changes relating to landscape architects. First to testify was Ellis Antunez, Member, State of Nevada, Board of Landscape Architecture. Mr. Antunez maintained this BDR is needed to revamp policing powers, to increase fees, and to clarify the scope of work. SENATOR O'CONNELL MOVED TO INTRODUCE BILL DRAFT REQUEST 54- 1320. SENATOR REGAN SECONDED THE MOTION. THE MOTION CARRIED. (SENATORS NEAL AND SHAFFER WERE ABSENT FOR THE VOTE. * * * * * Answering questions posed by Senator Townsend regarding temporary total disability (TTD) rating, Douglas Dirks, General Manager, State Industrial Insurance System (SIIS), entered his testimony. Mr. Dirks noted often TTD cases need to be rated on a case by case analysis. Mr. Dirks went on to state he feels if a clear rule is not drawn, SIIS will be subject to challenge. Next to offer comment was Lenard Ormsby, General Counsel, State Industrial Insurance System (SIIS). Mr. Ormsby and Cecilia Colling, Assistant General Manager, State Industrial Insurance System (SIIS), gave their views on what is needed in order to shift a claimant from TTD to permanent partial disability (PPD). Senator Townsend and Mr. Dirks continued with their discussion concerning various ways to facilitate possible ways of enabling TTD claimants to transfer to a PPD status. Referring to Exhibit C, Legal Draft II of proposed SIIS legislation, (The original is on file in the Research Library.), Senator Townsend addressed section 119, concerning the possibility of assessing a solvency surcharge against employers who have been insured by SIIS since July 1, 1981 to the present. This will involve the establishment of a formula for calculating the solvency surcharge. Senator Townsend went on to state: The key, there is this formula is .....the reason it's July, 1981 and it's a solvency surcharge, is that is a formula that must be developed to recapture the uncharged premium from 1981 to the present. ......That has nothing to do with the tail, that is uncharged premium. That includes everyone who left the system early, everyone who is currently in the system, anyone who may leave the system. There are two things that must be considered for language in this bill so that it is perfectly clear. First, how are we going to make sure that anyone who is currently in the system who has left the system and who may leave the system; make sure they fully understand their responsibilities under that surcharge. That includes name changes, company reorganizations, and particularly with regard to group self (insured), the joint and several responsibility of those who would leave as a group. That everyone who was in the system for 1 day from July 1, 1981 has a responsibility because there was premium that was not collected. Everyone will be included as we develop that solvency surcharge. ..... That must be perfectly clear that it's everyone who was in the system for at least 1 day during the time frame. Second, what is the threshold for triggering this if it needs to happen. Obviously it doesn't need to happen if we are solvent or on our way to solvency or accelerating in a way that is acceptable. ......But if by chance something happens and the system is threatened, it would be my recommendation the general manager, after the surcharge formula is developed, if in fact the insurance commissioner determines there is need for additional cash flow, based on solvency......... That will protect us in a solvency issue with all parties whether they be self-insured and went out in the first year and remained with the system the whole time, or are thinking about leaving. That protects the system. Mr. Dirks and Senator Townsend reviewed the issue of solvency and what will trigger the use of a surcharge. Senator Townsend continued, "The goal is to meet all the obligations which the system has and return you to solvency." Senator O'Connell then noted: Indeed we do not know that not enough premium was collected. What we do know is that more was spent than was collected, but we are not sure as to the efficiency as to how the money was spent. Something else, I think, in view of the press release, recently released, I think it is very important as to the audit reports and how long, perhaps, the pot calling the kettle black, knew about the insolvency. I think that would be extremely important to this committee and their deliberations. Senator Townsend asked Mr. Dirks for a definition of "solvency," and went on to note this item will be addressed at the next meeting of the committee. At Senator Townsend's request, Jan Needham, Principal Deputy Legislative Counsel, Legal Division, Legislative Counsel Bureau, gave an explanation of new language of section 5 of Exhibit C. Ms. Needham interpreted the new language, stating: It doesn't matter what your intention is when you have bad faith, whether you are negligent, any violation of any kind, will not result in a cause of action. Mr. Ormsby stated the language in Exhibit C is very broad and would prevent any type of cause of action. Donna Sweger, Supervising Deputy Attorney, Nevada Attorney for Injured Workers, came forward noting she will need a chance to review this particular language of Exhibit C and will comment at a later date. Ms. Sweger, Ms. Needham, Senator Townsend and Senator Neal continued their dialog regarding this section. The next item to be addressed (Exhibit D), was presented by Senator Townsend. Exhibit D is language from Mr. Dirks regarding reclassification of SIIS employees. Senator Townsend continued, stating: I want everybody to understand what Mr. Dirks is attempting to do in protecting his employees, because he is in the unenviable position of having to deal with a large work force that as things change, perhaps could become a smaller work force. I think it was not clear you are attempting to do the right thing for your employees and I want to make sure that is on the record, but it's on the record in print, that you are tying to protect employees that are there and are working hard, trying to do a job......... I have a high regard for those folks and I want them to know that you are trying to do the right thing on their behalf. Senator Neal voiced concerns with Exhibit D and continued a discussion with Mr. Dirks. Mr. Ormsby, Senator Townsend, Senator Shaffer and Senator Neal proceeded to voice concerns and solutions pertaining to Exhibit D. SENATOR NEAL MOVED TO EXCLUDE A PROPOSAL FOR RECLASSIFICATION OF EMPLOYEES. SENATOR LOWDEN SECONDED THE MOTION. THE MOTION CARRIED UNANIMOUSLY. * * * * * Exhibit E was presented to the committee, however, there was no testimony given. There being no further business, the meeting was adjourned at 10:55 a.m. RESPECTFULLY SUBMITTED: Beverly Willis, Committee Secretary APPROVED BY: Senator Randolph J. Townsend, Chairman DATE: Senate Committee on Commerce and Labor May 1, 1995 Page