MINUTES OF THE meeting
of the
ASSEMBLY Committee on Judiciary
Seventy-Second Session
May 16, 2003
The Committee on Judiciarywas called to order at 7:50 a.m., on Friday, May 16, 2003. Chairman Bernie Anderson presided in Room 3138 of the Legislative Building, Carson City, Nevada, and, via simultaneous videoconference, in Room 4401 of the Grant Sawyer State Office Building, Las Vegas, Nevada. Exhibit A is the Agenda. Exhibit B is the Guest List. All exhibits are available and on file at the Research Library of the Legislative Counsel Bureau.
Note: These minutes are compiled in the modified verbatim style. Bracketed material indicates language used to clarify and further describe testimony. Actions of the Committee are presented in the traditional legislative style.
COMMITTEE MEMBERS PRESENT:
Mr. Bernie Anderson, Chairman
Mrs. Sharron Angle
Mr. David Brown
Ms. Barbara Buckley
Mr. John C. Carpenter
Mr. Jerry D. Claborn
Mr. Marcus Conklin
Mr. Jason Geddes
Mr. Don Gustavson
Mr. William Horne
Mr. Garn Mabey
Mr. Harry Mortenson
Ms. Genie Ohrenschall
Mr. Rod Sherer
COMMITTEE MEMBERS ABSENT:
Mr. John Oceguera, Vice Chairman (excused)
STAFF MEMBERS PRESENT:
Allison Combs, Committee Policy Analyst
Risa B. Lang, Committee Counsel
Deborah Rengler, Committee Secretary
OTHERS PRESENT:
Bill Bradley, representing Nevada Trial Lawyers Association
Scott Craigie, representing Keep Our Doctors In Nevada
Jan Gilbert, representing Nevadans for Quality Health Care
John P. Sande, Attorney, representing the Nevada Bankers Association
Scott Canepa, representing Nevada Trial Lawyers Association
James L. Wadhams, representing the Coalition for Fairness in Construction
William Vassiliadis, representing Southern Nevada Home Builders Association
Robert Crowell, representing Nevada Trial Lawyers Association
Mark Fiorentino, Attorney, representing the Howard Hughes Corporation and the Focus Property Group
Chairman Anderson:
[The Chair reminded the Committee members and those present in the audience of the Standing Rules and appropriate meeting etiquette. Roll called.]
Fourteen of 15 members are present, a quorum is 8, we have a quorum present.
We have a Work Session Document (Exhibit C) that we need to deal with. Let’s turn to Senate Bill 97.
Senate Bill 97: Makes various changes concerning actions for malpractice against providers of health care, removes certain restrictions by insurers on providers of health care and makes various other changes concerning providers of health care. (BDR 1-248)
Allison Combs, Committee Policy Analyst:
Senate Bill 97 is a measure making changes involving medical malpractice by providers of health care. The measure mirrors the initiative petition regarding medical malpractice and tort reform that will appear on the 2004 ballot. The measure was heard earlier this week with discussion on the bill as well as Assembly Bill 1 of the 18th Special Session. There was a comprehensive amendment submitted by Jan Gilbert with the Nevadans for Quality Health Care; that’s the amendment attached to the Work Session Document (Exhibit C). I would be glad to go through the provisions of that amendment if you would like. Essentially this would replace Senate Bill 97 as it is currently and it would appear as the legislative alternative to the initiative petition on the 2004 ballot. The amendment would put back into the bill the provisions of A.B. 1 of the 18th Special Session, which include what exists now, listed for your review in the Work Session Document.
There are two suggested additions:
1. Increase the cap on non-economic damages from $350,000 to $500,000 for seniors and children.
2. In regard to settlement conferences, specify that the doctor who wants to settle a case can convey his opinion without fear of reprisal under his contract with an insurance company.
The next provision that is part of the proposed amendment would be insurance premium rollbacks, which would require reductions in premiums for medical malpractice policies based upon the savings achieved through the enactment of the reforms set forth in A.B. 1 of the 18th Special Session or S.B. 97 as amended. The premiums would be reduced in an amount determined by the Insurance Commissioner.
Next, it is proposed to reinstate the [Medical Malpractice] Screening Panel with a couple of changes to address efficiency issues.
· The composition of the panel would be two physicians and two attorneys instead of three respectively that were on the panel previously.
· Limit the panel’s review to the medical record. If there is difficulty in reading the record, the plaintiff can request that it be deciphered. Expert testimony would only be allowed with regard to the medical records. No pleadings by attorneys would be allowed. No affidavits from anyone other than an expert would be allowed. For purposes of the screening panel, the defendant is not considered an expert.
The next component of the amendment would be mandatory investigations for multiple cases of medical malpractice, which would require a physician to report to the licensing board any action for medical malpractice within 45 days after receiving a summons and complaint. The State Board of Medical Examiners or the State Board of Osteopathic Medicine would be required to investigate the physician with three or more actions filed. If the physician were found to be unfit, the board would be required to revoke the physician’s license.
Finally, there is a provision for an “any willing provider” law, which would prohibit health insurers from excluding any provider within the coverage boundaries when the provider is willing, qualified, and able to meet the plan’s conditions for participation. Providers would include hospitals, physicians, pharmacists, optometrists, and nurses.
Assemblyman Horne:
I am looking at these proposed amendments, and I know that this Committee worked really hard on A.B. 1 of the 18th Special Session to be amended into S.B. 97; I like that. I like the provisions in here; particularly the caps that we were looking for. It provides for raising that cap for seniors who don’t have economic damages; I think that is wise. Dr. Mabey expressed his frustration relating to an inability to get rid of bad doctors; the amendment has mandatory investigations for multiple cases. When we were talking about additional or total caps, we had concerns about constitutionality and I would not want to do anything that might cause a constitutional challenge. With this, it solves that problem. I think this is constitutional, there are limited caps, and I would move we Amend and Do Pass, if you would entertain such a motion.
Chairman Anderson:
I see my board starting to light; let me indicate how we can proceed. We can take an Amend and Do Pass motion and then have the discussion, which would cut off the opportunity for me to bring forth anybody else to speak, and I would really like to try to leave that open. Let me indicate to you that I called on you first, but I want to make sure that I have everybody speak, so I am not going to take a motion at this time, to keep our options open. I will come back to you for the purpose of the motion when we are ready to make a motion.
Assemblyman Geddes:
I have questions on the proposed amendments. In Amendment 2, there is a suggested addition of an increased cap on non-economic damages. My first question is, if the seniors and children are covered under the exceptional circumstances provision, would there be a need for that? If not, what definitions for seniors and children would we use? I noticed that in several of the bills we had this session, a “child” is anywhere from 12 to 18 years of age, depending on which law we are looking at. It is a curiosity thing . . . the same with the seniors.
The second question is related to Amendment 3, how does that work? I would like a more detailed explanation on that particular point; I don’t see Ms. Gilbert here, but maybe somebody could address that. I am not sure how the decreased rates would be linked to reforms. If the reforms are working and there are decreases, I would expect the rates to go down. I am not sure what Amendment 3 does and I would like a better explanation of that.
On Amendment 5, except for the case of the “three or more actions,” I think that is current regulation as far as getting your license. I know doctors who had a malpractice case served on them, they had to notify the State Board and their insurance company. I don’t know about the “three or more,” but whenever the Board finds a physician unfit, they must revoke the license, that’s the current law. I am not sure Amendment 5 adds anything other than changing the amount of time in which they have to report and making the State Board take action.
Chairman Anderson:
One of the things that occurred in the 18th Special Session . . . Let me defer to Assemblywoman Buckley who was the chairwoman of the 2002 interim Legislative Subcommittee to Study Medical Malpractice that was going on just immediately preceding the 18th Special Session. That subcommittee dealt with this in order to bring issues to this session of the Legislature.
Assemblywoman Buckley:
Starting first with the insurance rollback, because we did talk about that both at the interim subcommittee and briefly at the Legislature’s 18th Special Session, basically what this would do, in my opinion, is require the Insurance Commissioner to study the connection between the reforms of A.B. 1 of the 18th Special Session and what savings they might yield. It would require the insurance companies to provide actuarial data, their actual claims experience, and to prove that to the Insurance Commissioner. If she can attribute that savings were tied to the reforms, they would be required to pass that on in premium savings. There are some people who believe that insurance companies may want to keep that profit themselves and not pass on those savings.
There was a question as to whether this would be constitutional. I believe it was in 1987 that then Assemblyman Gene Porter passed an automatic insurance rollback rate, which was later found to be unconstitutional by the Nevada Supreme Court. The Legal Division explained to us during the interim subcommittee that this approach would be constitutional because you are not automatically rolling rates back, you are tying it to the reforms and that would be constitutional.
On the current regulation of the boards and with regard to investigations, I believe it was clearly the testimony that the boards are letting us all down. They are not doing mandatory investigations even when there have been numerous complaints. While we tightened up the reports to be given at settlements and verdicts, I think what this does is it gets it clearer on the front end and requires the mandatory investigation. I think that is the reasoning for that.
Chairman Anderson:
Let me add one thing relative to the last point. When we did the investigation [study] we saw that there was a particular doctor in Clark County who had exorbitantly high problems that had been identified yet he was allowed to leave Nevada without any kind of a trail being created. It was such a glaring example, it was so out of the norm, which frustrated us, and that provision is, in part, the reaction from that. But there were several other kinds of cases where there weren’t such glaring examples of doctors, in all fairness to the physicians in this state who are doing a marvelous job, there are a few people who are doing some glaringly bad things. Those are the people who are causing good doctors to pay high premiums. That’s tragically wrong.
Assemblyman Geddes:
The boards are required, when they receive this notice, to follow up on the action; they weren’t doing it. Is that correct? Right now they are supposed to be doing it, they weren’t doing it, and so we are stating that they have to do it, or they were not required to do it?
Assemblywoman Buckley:
They are not required on the filing of a malpractice case to do an investigation.
Assemblyman Geddes:
So it is only on the filing of a complaint to the board?
Assemblywoman Buckley:
Correct, or they could do it on their own, but they don’t.
The last issue with regard to the age, none was suggested to the interim subcommittee for seniors and children. We could craft our own. I think the ordinary meaning of children is under 18 years of age. There is always a debate about seniors as to whether it is 60 or 65 years of age.
Assemblyman Geddes:
During testimony, Bill Bradley mentioned that we couldn’t put in caps and the screening panel, but this looks like we do that—to reinstate the screening panels as well as have the caps. Can we or can’t we? He said there was no state that had stood up where they could have both. Sounds like we are putting it in, can we do it?
My second question is, if we pass this with the changes, would A.B. 1 of the 18th Special Session and S.B. 97 both be on the ballot? If that were the case, if they both passed, what would we do?
Chairman Anderson:
If they are both on the ballot, Ms. Combs is looking up the exact citation, I am of the belief that the legislative one would take priority. [After consultation with Ms. Combs] it is the one with the highest vote; high vote wins, whichever has the highest number. If “Keep Our Doctors In Nevada” has 240,000 votes and “Keep Quality Medical Care in Nevada” has 240,042 votes, then it beats it by 42.
Assemblywoman Buckley:
On the other issues, on the caps and screening panel, I think Mr. Bradley does not want to see the “wall” be caps and the screening panel. I think the legal question becomes, at what point are barriers held unconstitutional because you have put too many barriers in front of victims. If you have a screening panel and hard caps on damages as barriers, the more barriers the more likely it will be seen as unfair and unconstitutional, violating your right to redress and a trial by jury. That’s why we have to weigh it and get everything as a package because if you don’t, you risk saying we will have no reforms in Nevada, which is why the initiative petition is so risky. If that becomes law, wipes out our other law, and then is held to be unconstitutional, we have nothing—we have just taken steps backwards.
Assemblyman Brown:
Since I was not present during the hearing for S.B. 97, I wanted to confirm that the bullet points at the bottom of the first page and top of the second page [of the Work Session Document (Exhibit C)] are identical provisions of A.B. 1 of the 18th Special Session. Is that correct? . . . with the exception of the suggested additions. I did not know if we were enhancing the [existing] language or if we were lifting it directly out of A.B. 1 of the 18th Special Session. That’s my first question.
Allison Combs:
The intent, as expressed by Ms. Gilbert with regard to Amendment 2, was to remove the existing provisions of S.B. 97 and replace those provisions with all of A.B. 1 of the 18th Special Session, which included the bullet points. Thus, the intent was that it would be A.B. 1 of the 18th Special Session without the changes except for the two additions noted.
Assemblyman Brown:
I had similar questions as Mr. Geddes on the premium rollbacks. It sounds like it could have some problems, but it’s a nice thing if we can get it going.
The other thing I struggle with is Amendment 5 on page 2 [of the Work Session Document (Exhibit C)], “Mandatory Investigation for Multiple Cases.” We have heard from Dr. Mabey that he has had multiple cases [filed] against him. As a legal practitioner, probably the easiest thing to do in a case is file a complaint. I am not opposed to this provision; are we giving the board some parameters? In some instances it may be very clear with the three actions that they are so egregious that actions need to be taken. But over 15 years, there are probably quite a few physicians who have had actions filed against them and perhaps settlements entered for nuisance value alone. I would hate to see good physicians penalized under this provision. Would we be giving the state boards any guidance on that? Do they have rules for penalizing their own members?
Assemblywoman Buckley:
We discussed this at length in the interim subcommittee and I think what the board said . . . When we said, “How does someone have 40 lawsuits against them and you do nothing,” they said, “We didn’t get notice of them until the verdict.” That can be a five-year lag. I think that the intent was to let them know earlier so that they can’t rely on that excuse anymore. Assembly Bill 1 of the 18th Special Session also had a provision that the insurance company had to let the boards know. What this is saying is if there are three [complaints], look into it. If there are three frivolous cases and there is nothing there, then under their existing rules, they take no action. But to just let these things go for years and then say they did not get a complaint when there are three, see if they are serious. A lot of the multiple malpractice cases could be attributed to alcohol, drugs, or divorce, and yet the board on its own is not looking into it. I think we could set any parameters we want, but during the interim those were the issues that were discussed.
Assemblyman Brown:
There can be three cases of serious malpractice and I would not “bat an eye.” Three seems like a low number until you have three serious cases of malpractice. It seems low; I guess I will have my personal struggle with trying to figure out where I am at on that.
Assemblywoman Angle:
I thought the immunity under Amendment 2 was already in place for most governmental agencies; I thought there was a $50,000 cap for governmental agencies. I found that to be something that did not need to be mentioned.
I do like the idea of reinstating the Medical Malpractice Screening Panel.
I, too, have concerns about malpractice cases being filed. Just because a suit has been filed doesn’t mean you’re guilty, and doesn’t mean you have done anything wrong. I am not sure that should be the line where we say it must be looked into on cases filed. If cases have been settled, I would want to know about those cases, why they were settled, and those kinds of issues.
In Amendment 6 where it says, “the willing provider,” my personal experience is that my provider is the one that usually initiates, not the insurance company. We change insurances almost every year because of different things going on at my husband’s workplace as far as different deals offered for insurance. I often have to change providers every year because my provider doesn’t want to work with the insurance company that is chosen. These are issues for the provider rather than with the insurance company.
My final concern is that we have not addressed the difference between true medical malpractice and adverse outcomes. We need to have a definition.
As to the constitutionality, that’s why I asked those questions. California’s MICRA (Medical Injury Compensation Reform Act) has been constitutionally tested. Senate Bill 97 follows so closely to MICRA that I don’t think there will be constitutional challenges if we stick with what’s in S.B. 97.
Chairman Anderson:
The only observation from the Chair would be that even A.B. 1 of the 18th Special Session would have to be tested eventually in the court of the state of Nevada. The MICRA law, if it comes, will have to be tested in the courts of the state of Nevada. If “Keep Quality Medical Care In Nevada” becomes the initiative, it also will need to be tested. The stressful part of this, either of those initiative questions, which are definitely now going to be voted on, will have to be tested. There is a disadvantage in terms of Nevada’s test. Of course, we can always believe that Nevada’s courts will do exactly as the California courts have done, but generally speaking, Nevada doesn’t see itself quite the same way as California sees itself. Nevada has a tendency to reject most things from California rather than accept them. We like to do our own thing over here; in fact, we almost take pride in it.
Assemblyman Claborn:
This looks like an improvement to A.B. 1 of the 18th Special Session. I like the suggested amendments and additions. I can support this bill as it is. I think it is an improvement and whoever put this together did a very fine job.
Assemblyman Mabey:
I am a little disappointed. I was hoping that we would do something this session, especially with the Medical Legal Screening Panel. We are just going to put this off for another couple of years and I don’t think that will help the physicians, at least in southern Nevada.
In going through the amendments, Amendment 2 with the $50,000 cap, we already have. Immunity for treatment in governmental or nonprofit facilities, we already have. There is a $350,000 cap, so we raise it to $500,000; I could support that. The mandatory pretrial settlement, I think that already happens except the physician doesn’t have to go, his attorney can go. I guess I could always go, but I never did. Statutes of limitations, that’s OK.
Amendment 3, the insurance rollbacks, I just don’t know how you are going to do that.
Amendment 4, reinstating the Medical Malpractice Screening Panel, if we do it just the way it was, that was the problem, it wasn’t working—it was broken. The way I would like the panel to work is it would speed up the process. That was part of the problem; when you got into a lawsuit, you could sit in the panel for a couple of years, while the liability insurance companies were raising your premium or placing a surcharge on it. I think that would be bad. If we put the panel back in and didn’t make it work better, it would be worse.
Amendment 5, investigations for multiple cases, we do have to report now within a certain time frame as soon as we are sued. I don’t know the dates; it’s 45 or 90 days, whatever. There are certain high-risk doctors that are more likely to be sued. If you are a dermatologist, it’s not as likely that you will be sued as if you are an obstetrician or a neurosurgeon. I understand where we are trying to go there.
And then Amendment 6, enact an “any willing provider” law, I support this. However, in reality, in Las Vegas, I think there is already almost an “any willing provider” law. There isn’t any insurance company that I can’t go to right now and get on their panel. There are a few [doctors] that have been kicked off because of things they have said or done. But the premium reimbursement is so low that if you are willing to get on any provider panel, you can. There is not one insurance company in Las Vegas that I can’t go to right now and say, “I want to be on your panel.” They would sign me up in a heartbeat. In reality, physicians can be on any panel they want. So I like this. There are instances where it doesn’t work that way and somebody had testified that her doctor had been kicked off the plan or removed for reasons. I guess I can’t support this just because . . .
One other thing, and I talked to Ms. Buckley about this yesterday. I agreed with Mr. Horne on the collateral source, which made sense. Restricting fees, I think the attorneys are right; I am not going to tell them how much they can make.
But I feel strongly about the joint and several liability. There is a physician in Las Vegas, I have told this to Ms. Buckley, who set up the rules or the protocol for a birthing center; that’s what he did. I am not telling you this story perfectly because I don’t know it; whatever I say is not the gospel, but it’s close. He helped set up the protocol and that’s all he did. A patient went into the birthing center, experienced complications, and the nurse-midwife called the physician that was backing her up. The physician arrived, there was a bad outcome, and so there was a lawsuit. They sued the doctor that set up the protocol and it was determined that he was 10 percent liable, something like that.
The birthing center paid its insurance, which was minimal, filed for bankruptcy, and it is closed. The doctor that was covering [for the nurse-midwife] had $1 million coverage and settled. The other doctor who just wrote the protocol did not agree to settle, so now he has the $4 million or $5 million on his back. To me, that’s not fair. A doctor should have to pay for the part that he is responsible for and not the whole suit. I understand the other side—that of the patient. If the other doctors couldn’t pay and the person needs to be made whole, I honestly can see that, too. It seemed so unfair that the one doctor who only set up the protocol was liable for $5 million.
Bill Bradley, representing Nevada Trial Lawyers Association (NTLA):
The only issue that I wanted to point out was that the noneconomic cap being increased to $500,000 was meant to apply to non-wage earners. Senior citizens and children, people who lose a child, those are examples of cases where a non-wage earner is unfortunately very seriously injured or killed but because they don’t have any wage loss, the only claim they would have is for a noneconomic claim. In our discussions under A.B. 1 of the 18th Special Session, the non-wage earner included stay-at-home spouses. The amendment only mentions children and seniors. I don’t think that, in response to Mr. Geddes’ question, it’s the age of the person, whether it is a senior or a child; the defining characteristic is whether they are earning wages.
I would be happy to answer any questions involving the screening panel because I was one of the original drafters of the screening panel and I am Chairman of the Lawyers Provision of the Northern Nevada Screening Panel. I just wanted to make that one point on the record with respect to the non-wage earners.
Assemblyman Gustavson:
I do have concerns with Amendment 3 regarding insurance rollbacks. How is this going to affect insurance companies that are forced to . . . If we force them to say what their premiums are going to be, are they going to stay in Nevada? Yes, we need to control our—try to keep our insurance companies here, but we don’t want to force them out of the state either, by mandatory rollbacks that they cannot afford to handle.
Regarding Amendment 5, I have a concern with that also—if you have three or more actions filed against you. An action filed against you is not a conviction or [evidence] that you have actually done anything. I would like to see something changed related to the number of convictions possibly, not just accusations.
Assemblyman Brown:
Of a more technical nature, I am wondering if the only alternative relative to S.B. 97 is, whatever comes out or if something goes out, that it goes on the ballot? Or is it possible that through this we can immediately recreate the screening panel? Would the creation of the screening panel only be the result of this being on the ballot?
Assemblywoman Buckley:
The screening panel is a tough issue. In the 18th Special Session the physicians came forward and said, “Eliminate it.” Many of us said that was foolish, let’s improve it and fix the problems. They said, “No, we don’t want it.” So we eliminated the screening panel and we eliminated the budget positions—we dismantled it. The problem now for passing a bill on the screening panel is that it wasn’t in The Executive Budget, the money’s not there, no one submitted a bill, and no one went to the Governor, which is the process to say, “We made a mistake, could you include this in your budget?” No one did the legwork and I think it reinforces the position that we should be thinking about these things carefully and doing what we think is right. The problem with doing that now is that it would probably kill the bill because the money is not there, the positions are not there, and it’s very late in the game. I think it is a good idea to reconsider it and to have it be an alternative to some of the other reforms to put back in the ability to weed out frivolous lawsuits as a statement that this Legislature supports.
Assemblyman Conklin:
There have been quite a few comments that I would remark upon. First, the original Senate Bill 97, I absolutely cannot support. I was a little taken aback by the bill itself. By their own admission, the medical society indicated that MICRA took seven years to stabilize the marketplace in California and after less than nine months, here we are again trying to tweak something that we haven’t even given the opportunity to work. I am concerned that no matter what this body does, they are not going to be happy with it.
Aside from that, I do support the proposed amendment. There were a couple of things mentioned, particularly with respect to the joint and several liability. I am concerned for my colleague. While on the one hand I agree that doctors should be accountable for their portion of a medical malpractice suit, the biggest problem we have is the cost of insurance. The insurance that pays the most, most likely, is the facility or hospital insurance, as I understand the testimony on this bill. If we made every doctor carry enough insurance to be accountable for their portion of the liability, wouldn’t insurance rates just continue to go up even faster? That would be my analysis of economics and supply and demand on insurance. I am concerned, I do agree, but I don’t think that solves our problem; I think it simply makes it worse. For that reason, I am going to disagree with my doctor friend, and support the amendment to S.B. 97.
Assemblyman Mortenson:
Several people have mentioned problems with Amendment 5; I see no problem at all. It requires only that if three actions are taken, the State Board of Medical Examiners will look into the situation. It doesn’t say that they will take any kind of action. If they see that a physician is unfit, they can revoke his license. It doesn’t require any action if there are just three actions against a doctor; it just requires them to look. The faster you look at a problem, the better off you are.
Assemblyman Geddes:
As far as the cap for seniors and children that was included in A.B. 1 of the 18th Special Session, would that be argued under the exceptional circumstances in the current situation if we did not have a separate $500,000 cap?
Bill Bradley:
No. The exceptional circumstances are those which give rise to a judge deciding, based on clear and convincing evidence, that the cap is insufficient. There would be a $350,000 cap for wage earners and a $500,000 cap for non-wage earners, but under exceptional circumstances and with a jury’s verdict, a judge would have the ability to look at the award and see if the award, higher than the cap, met the legal standard to justify it.
Assemblyman Geddes:
In the “any willing provider” section, I agree with Dr. Mabey. We don’t have nearly the choices in northern Nevada as you do in Clark County, especially on the state insurance plan. Part of that choice is the rates that are paid under the state insurance plan. Any doctor is eligible to get into a program; they just choose not to service us at those rates. I am concerned that if we pass the “any willing provider” law, if my increasingly decreasing benefits program lists that they are only willing to pay $20 for a medical visit, but another doctor charges $50 for a medical visit, the insurance company won’t put him on the list because he doesn’t want to reduce his rates that much. I am not sure about the “any willing provider” provision being in this at all.
The last comment addresses Mr. Conklin’s questions as well as Dr. Mabey’s. Frankly, I am not sure that anything we could do would make these insurance rates go up any faster than they are. I don’t think the changes to joint and several liability would affect the rates that are going up; they are just staggering. I think that is one provision that is in S.B. 97 that, unless we can find a way to incorporate it into these amendments, I think would be troublesome. I would have trouble supporting this amendment unless we brought in some joint and several liability.
One of the options I was discussing with Mr. Horne was a possibility to separate it for economic and noneconomic, so that when we are talking about a patient getting all the medical bills paid for, we are not going to split it, and we make sure that everything is paid regardless of the level of guilt. But when we are talking about awards beyond that, where you are liable for a portion of that award and the percentage that is determined, I don’t know if there is a way to split those by economic and noneconomic.
Bill Bradley:
Under both California’s MICRA law and Nevada’s A.B. 1 of the 18th Special Session, current Nevada law, we have exactly what Mr. Geddes just said. We have joint liability for the economic damages to ensure that the injured victim of medical malpractice is going to get his or her economic damages paid. But on noneconomic damages, that is several liability; each person is only responsible for his or her percentage of fault with respect to the noneconomical award. I would be happy to step up to the easel and show you how that works in reality, if that would help. [Mr. Geddes said he remembered it from previous testimony.]
Assemblyman Geddes:
It looks like we are stripping S.B. 97 and inserting these provisions that were in A.B. 1 of the 18th Special Session, but that’s not one of the provisions on this list. You are saying that is in current law or we just didn’t include it in the list of A.B. 1 of the 18th Special Session that we are attempting to put in here.
Bill Bradley:
Current law, under A.B. 1 of the 18th Special Session, is exactly what you indicated earlier that you would like to follow, and that is to make sure that the economic damages are paid, but on noneconomic damages make each person responsible for his share. That is existing current law under A.B. 1 of the 18th Special Session and, for that matter, it is existing current law under every other tort in the state of Nevada, if the plaintiff is at fault.
Assemblyman Geddes:
That needs to be on the list of amendments we are considering so that it goes onto the ballot that way or not.
Bill Bradley:
As I understand the amendment, A.B. 1 of the 18th Special Session would be substituted for S.B. 97. That would then make what you were looking for in the provision of the new S.B. 97. That would be joint liability for economic damages and several liability for noneconomic damages. Under S.B. 97, if that were to pass unamended, it would be several liability for all damages and that would do two things:
Scott Craigie, representing Keep Our Doctors In Nevada:
I agree with the summary that Mr. Bradley gave and that there is joint liability on economic damages and several liability on noneconomic damages. I also agree with Mr. Bradley’s last statement that when we start to sue and assign costs to physicians that go beyond their insurance limits, that’s when we do great damage.
In the case that Dr. Mabey described of Dr. Adam Levy, that’s precisely what happened to him. Dr. Levy was found to be 5 percent liable and because the economic damages are the ones that are the large piece, he ended up with $5 million of liability even though his 5 percent of the $6 million total award was far less than that. He was not given several liability, he was stuck with having to share when the others dropped out. He now has won the opportunity for a retrial and I hope that goes successfully for him.
The way the system is right now, the way it continues under A.B. 1 of the 18th Special Session, those physicians end up liable for a much larger piece in some cases than their responsibility and far larger than they have in insurance coverage. That’s what leads them to be liable for their own costs. We have broken through that threshold that both Mr. Bradley and I agree is a problem. We are going after doctors for personal assets and that’s what drives them out of the state. I recognize the fact that sometimes you have to go to a person’s personal assets in order to fully compensate the injured party. That’s the tough part but to do that consistently on the back of that physician, it will drive physicians out of town.
Jan Gilbert, representing Nevadans for Quality Health Care:
I apologize if my writing of the amendments confused people. What I intended on Amendment 2 was to put all of A.B. 1 of the 18th Special Session into S.B. 97. I listed only the ones that I thought were the high points and I apologize for not listing every single piece of A.B. 1 of the 18th Special Session. When I heard Mr. Bradley talking about non-wage earners on the suggested addition of the $500,000 cap, we would really appreciate changing that to non-wage earners if you wouldn’t mind; that was our intent. It is people who are truly disadvantaged by the cap at $350,000.
Assemblywoman Buckley:
I wanted to make a comment on the issue of joint and several liability. I realize that it’s hard to philosophically say, “Why should you be responsible for something that isn’t your fault?” That kind of philosophically feels wrong. There are reasons why states don’t ban several liability for economic damages, and I think they are important to be considered.
There is the occasional case that cries out, “It is wrong,” but for most of the cases, if you have a true victim of negligence where someone is brain damaged, they can’t get their medical bills paid.
If we did this, we would be hurting physicians. In 80 percent of the cases, the medical malpractice happens in a hospital. If a doctor is 40 percent liable, the hospital is 60 percent liable, and what will happen is that the doctor is going to end up footing the hospital’s share. That will happen because everybody has that cap. Suddenly you are going to have a brain damaged person and the lawyer is not going to say to that person, “Don’t go after the doctor’s personal assets, because it’s just not fair,” because we have passed this law. So more lawyers are going to go after a doctor’s personal assets, which is wrong. That’s why we have insurance, to stop that from happening.
So we screw up the law in every state of the nation. If we care about the medical bills of someone with brain damage or paralysis, we set up a system by which we now have an incentive to go after personal assets, and then we have more people getting sued because you want the possibility of getting everybody’s 1 percent. We don’t need more people being sued. We don’t need every nurse who saw the patient being sued. We just need the couple of folks who have the insurance policies that are going to make the victims whole.
Up until now, we have not had a situation where lawyers have gone after a doctor’s personal assets. They take the insurance policies—we need to keep that. That makes sense, that’s why we get insurance is to pay for these things. People shouldn’t have to put their personal assets at risk. If we meddle with this system, which is like a house of cards, if you pull out the philosophical issue of only paying for your percentage, you end up hurting someone’s ability to get their medical bills paid, causing them to sue more people, and giving a hospital a cap when they were the source. We will have done more harm to physicians.
Assemblyman Sherer:
I really like a lot of the provisions, but I agree with Dr. Mabey, if there is another way to fund the Medical Screening Panel, I think it would be worthwhile to take care of the issue. We have to do something, whatever we have going right now, as Mr. Conklin said, we haven’t given it enough time. But at the same time I don’t know if we have time. That’s where we are coming from. Shortly when our hospital is built, we are going to be needing some doctors and I would like there to be some.
Assemblyman Mabey:
I just want to talk about the [Medical Screening] Panel for a second. I don’t know exactly what happened in the 18th Special Session but I would think that if you asked most doctors in the state, they would like the panel and would want the panel. I know there are some physicians here that asked for it to be taken off but I think the reason why they asked for it to be taken off is because it wasn’t working and if they got what they were hoping for in the 18th Special Session, they wouldn’t need the panel. We said it was too late because we have to deal with funding. Well, we are still trying to find $1 billion and we have two weeks and a day, so I think we could work on a panel this time if we really wanted to. I would even propose that we charge a doctor $100 every time he got his license; there’s 5,000 doctors, that would be $500,000 that would go into [funding] a panel. You would then charge for filing and you could probably come close to $1 million per year just to fund the panel. I am not sure how much it cost last time the panel was running; it was probably around that. I don’t think we could be that far from self-funding a panel.
Chairman Anderson:
I can recall in the interim study, the cost of operating the panel as being one of the critical issues. It seems to me that the delay was the question, the frustration that came from the delay, and the number of times the actions went in and out of the smaller panel.
Assemblywoman Buckley:
I would like to see the Medical Legal Screening Panel come back, too. I just don’t want to send this bill to the Assembly Committee on Ways and Means; it’s not exempt and it’s the last day. I just sent an e-mail to the Speaker and asked if we could have an emergency bill draft to do a Medical Legal Screening Panel that we could start in the Assembly Committee on Ways and Means. I am waiting for a response. I sense the frustration and I am supportive of it, but I don’t want to kill this bill on this topic if we get delayed by the Assembly Committee on Ways and Means, which unfortunately sometimes does not share the priorities of this Committee. Some of us don’t seem to have any headway in getting them to support our views of the world. That’s what I am struggling with right now. I would be willing to work on that and see if I could convince the Speaker. Do we have any other bill drafts that we could put that into and keep it alive and rolling whether self-funded or General Fund or a combination of both?
Chairman Anderson:
There is S.B. 250, which is held up in the Senate Committee on Finance currently, NRS Title 57, which would either send it to the Assembly Committee on Commerce and Labor, revising various provisions related to business and professions that deals with medical malpractice.
Assemblywoman Buckley:
You already have an emergency bill draft request for your own construction defects (CD) bill. If we use the “CD” bill as it is and put in what we want, you won’t need that emergency bill and you could use it for that [Medical Screening Panel]. I sense that people want to do more on the screening panel and since we all think it is a good idea, why not?
Chairman Anderson:
I am not entirely willing to turn my back on the construction defect issue. I really would like to try to come up with a solution to that issue.
Assemblywoman Buckley:
I totally agree. All I was going to say is that we will tackle that next. We’ll write our own construction defects solution if they still are squabbling and we will use their bill jacket, so then we free up your emergency bill draft. We would still do it because if they can’t agree, we’ll just do it for them.
Chairman Anderson:
[Considering bills left on the board], I don’t see one that we could use. Ms. Buckley, am I to take your suggestion that . . . OK, I understand.
Is there anybody else that needs to get any other questions or feelings out about S.B. 97 itself? [No response from audience.] It seems to me that what we should do is move the Nevadans for Quality Health Care amendments into S.B. 97, if we can get them in place. If we need to start a bill on its own for the Medical Screening Panel, then we would need to deal with that by itself.
We need to figure out what we are doing with the construction defect guys because they are a “no show.” We saw the documents that they gave us last night. I surely did not find a road map there of any kind.
Is there anybody else who wishes to testify on S.B. 97? Any other questions from members of the Committee?
I need to take a short break to talk directly with the Speaker to find out what my options are and to make sure I understand where I am going.
[Recess called at 9:06 a.m. Committee reconvened at 9:21 a.m.]
I checked with the Speaker and he will allow us to move the emergency bill draft to a different topic. I wanted to make sure that it was mine to use as I desired and was not restricted; he did not place any restriction on the use of the bill draft. He has indicated to me that he will allow me to use it anyway that I choose. That being the case, I indicated to Mr. Horne that I was going to recognize him for the purpose of making the motion.
It was my intention to use the Speaker’s bill for a new construction defect bill, that’s what I had requested at the end of the first deadline. I asked for it at that time and the Speaker gave it to me; he had five bill drafts at that time, he gave me one. I checked to see if I could change it from being a construction defect bill to a different topic; he said I could. That means I can play it as I want and Ms. Buckley has called my bluff, so to speak, and Dr. Mabey has backed up her, which in this particular case is sufficient.
It would appear to me that what we are going to do is move with S.B. 97 and we are probably going to take the recommendations from Ms. Gilbert’s group relative to the suggestions for the bill. We would expand the number of people, not to just children and senior citizens, but to . . .
Assemblywoman Buckley:
. . . non-wage earners, which would also include housewives.
I would also ask that the motion include some language on the mandatory investigation to make it very clear that there has to actually be fault, true negligence, some actual finding, not just three and you’re out. Obviously, the Legal Division would do that. [It should] ensure that this is to have [the board] check, but it must meet the same standards of fault, guilt, and the like.
Also, on the insurance premium rollbacks, that there is additional language that the insurance company must be guaranteed a just and reasonable rate of return and make sure that it is expanded a bit to ensure that it is not just a guaranteed rollback. It must be tied to A.B. 1 of the 18th Special Session premium savings.
Chairman Anderson:
Seniors, children, and non-wage earners. And by seniors we are talking . . . do we need to be specific there?
Assemblyman Horne:
The [reference to] seniors and children was language used to illustrate the type of people that were non-wage earners. You could have a senior who is a wage earner and then they would not fall into this category. I could be 70 years old and still be the president of my corporation, and then the $500,000 cap would not apply to me.
Assemblyman Mabey:
Then how would Amendment 4 work? Would that still be in the initiative and another bill that hopefully will pass? We will have the panel? How would we work out those differences?
Chairman Anderson:
We will take this one up and then the Speaker is going to give us a bill draft. We are going to draft a conceptual piece of legislation, have Ms. Lang do that for us, since it will not be under today’s deadline. It will be drafted at the request of the Speaker. Then this Committee will get to deal with it and it will go to the Assembly Committee on Ways and Means.
Assemblyman Mabey:
I appreciate the way this has gone.
On the “any willing provider” law, I was reminded by someone in the audience that I might be OK since I am an obstetrician/gynecologist and I can join any plan. But there may be a podiatrist or a family practitioner that really would like to get on a plan and can’t. For those reasons, I think that provision makes sense.
I talked to Mr. Brown and Mr. Bradley and I think they have convinced me on the joint and several liability provision. I will still have to study that, but I trust the legal minds.
If we do this panel, I don’t want it to start in two years; it needs to start reasonably soon and get going, not put a date on it as if it were in the initiative. I want it in October [2003] when the law normally would be enacted. I will be glad to vote “yes.”
One other thing, I am not the physicians’ spokesman. I am me, the Assemblyman from District 2, and whether the doctors kill me or not, that’s up to them. I am doing what I think is the right thing.
Chairman Anderson:
I know it is little consolation, but I often have that feeling when I have to walk back to my colleagues in education and explain to them, “No, we didn’t do that the way you would have done it, but I was the guy sitting in the chair.”
Assemblyman Carpenter:
Just so I am clear on the screening panel, the screening panel will also be part of the amendment that we are talking about here that would go to the voters, and we will be coming up with a separate screening panel bill that would go into effect in October [2003]?
Chairman Anderson:
Let me tell you what I envision will happen. If we pass this [S.B. 97], it goes to the ballot initiative and it would appear as “Keep Quality Medical Care in Nevada.” We have A.B. 1 of the 18th Special Session, which has been the law since October [2002]. We would have the new Medical Screening Panel that hopefully we will be able to get through both houses, assuming that it gets out of here, and over to the Governor’s desk.
If neither initiative passes, neither the “Keep Our Doctors in Nevada” or “Keep Quality Medical Care in Nevada” receives a majority of positive votes, they will die and the current statute we had written in the 18th Special Session and the Medical Screening Panel will be the continuing law for medical malpractice. If the highest number of votes goes to the “Keep Our Doctors in Nevada” bill, which is the initiative that the physicians have put in place, it will become the new medical malpractice law for Nevada. If “Keep Quality Medical Care in Nevada” goes forward, which has the Medical Screening Panel in it, it will become the new model.
There are three potentials depending on whether both initiatives were to die, or if one is to pass. Is that your understanding, Ms. Buckley? [Ms. Buckley concurred.] Of course, the Nevada Supreme Court gets to “row its boat” as only it can.
Assemblyman Carpenter:
If we call this bill [S.B. 97] the “Keep Quality Medical Care in Nevada,” the screening panel is in there.
Chairman Anderson:
It includes a different screening panel than existed in the previous law to a certain extent.
Assemblyman Carpenter:
But we will get to look at that. We are going to do conceptual amendments today, right? And then we will look at that and Dr. Mabey will include his input into that screening panel legislation?
Chairman Anderson:
When we see the amendment that is going to come forward, yes. We will review that amendment in Committee, although the Committee will not be able to take action as a Committee on that bill after today. If it doesn’t reflect what we want, we will be able to get it redone before it is submitted to the Floor.
Assemblyman Carpenter:
Speaking for myself, I think that it is most important that we be able to review that before any final action is taken.
Assemblyman Brown:
I stated before that I was absent for the hearing [on S.B. 97]. My decision is to abstain at this time just because I want to . . . I think I am familiar with the proposed amendments, however, because I missed the hearing on the initial S.B. 97, I have some particular questions for each of the parties.
[Chairman Anderson entertained a motion on S.B. 97.]
ASSEMBLYMAN HORNE MOVED TO AMEND AND DO PASS S.B. 97 WITH THE AMENDMENTS 1 THROUGH 6 AS STATED IN THE WORK SESSION DOCUMENT AND THE SUGGESTED ADDITIONS.
ASSEMBLYMAN CLABORN SECONDED THE MOTION.
Assemblyman Carpenter:
I would like to emphasize, regarding mandatory pretrial conferences, I have suggested that where a doctor wants to settle a case, it seemed to me that in the testimony we heard that was really a sticking point. Even though the doctors wanted to settle and get out of the case, the insurance companies dragged the doctors through the trial. I think that should be emphasized; it is an important point.
Chairman Anderson:
Any other comments?
Assemblywoman Angle:
I still have some concerns with this mandatory investigation situation on the suit that is filed rather than on something that really shows guilt. It takes the physician out of a place where he can defend himself in a courtroom. Once you revoke someone’s license, the stigma is there. You are tried without a trial. I have some real concerns with that piece, even with some of the language we’re going to conceptually put in on that part. I guess I will be abstaining until I see exactly how it looks.
Assemblyman Horne:
As to Mrs. Angle’s concerns, I don’t think that is a problem. I think that this provision [in S.B. 97] is providing for oversight. This provision—if we wait for findings of malpractice in a court of law, theoretically, you could have a physician who has settled 20 cases but there has never been an investigation, no one ever knows. This only says that you look into it when you have multiple showings of complaints to see if we have a problem. Do we have a problem here with three different complaints? [The board] will look into it. If there is no merit [to the complaint], you don’t have to proceed. This is not calling for taking any doctor’s practice away without due process. In Dr. Mabey’s explanation regarding what happened to him, I think that very investigation on the facts that Dr. Mabey gave would eliminate any possibility of Dr. Mabey’s license being jeopardized. That’s all this does; it asks, “Do we have a problem?” We have maybe a problem by the reports [complaints] given to us; let’s see if it is true. That’s all it does.
Assemblyman Carpenter:
Maybe there should be a time factor included also, three complaints within three years? Maybe our Committee counsel could look into that.
Chairman Anderson:
A time factor related to the number of cases?
Assemblywoman Buckley:
I think we need to be careful there because what if a doctor is drinking, there is a really bad case. In four years, there is another really bad case. I think that everybody wants the same thing, and that is, innocent until proven guilty. All this says is that “Hey, there might be a problem, look into it.” If there is nothing there, it should be dismissed right away, not [become] a full-blown deal. The boards don’t seem to be looking at the signals, the red flags. All this asks is to look at the red flags, if there is nothing there, there is nothing there, but look at it. I don’t think that we should artificially limit it but we should make sure that it’s innocent until proven guilty. Do an investigation; don’t yank somebody’s license without due process.
Assemblyman Conklin:
I agree with Ms. Buckley. I am concerned for the doctor but I am more concerned for the patient. With most of our criminal statutes, when people come to testify, they have a lot of statistics. I know when I testified for felony DUI (driving under the influence), there were statistics that a person commits a DUI many times before they get caught the first time. We are processing a poaching bill in the Assembly Committee on Natural Resources, Agriculture, and Mining. A person commits 99 poaching offenses before he gets caught the first time. How many have to get hurt before the doctor gets his first claim? My point is that I don’t think this is an unreasonable expectation; we are not taking anyone’s rights away. We are saying that when the signals go up, somebody needs to be watching and take a look at it. I think that is all this really says.
Assemblyman Mortenson:
I agree with Mr. Conklin and Ms. Buckley. Keep it as flexible as possible. It is important to find a problem as fast as possible and act on it as quickly as possible.
Assemblywoman Angle:
I guess this gets down to the nitty-gritty of defining. I still have a problem with what’s the difference between medical malpractice and adverse outcomes. Sometimes stuff happens and it wasn’t the doctor’s fault, it was that way in the beginning. Not all birth defects are preventable, not all birth defects are the doctor’s fault. I want some clarity on that. What’s the difference between an adverse outcome and true medical malpractice.
There is also a difference between a civil suit and a criminal suit. We never addressed the criminal side of this; always it goes to the civil. I have heard in discussions in my office that the reason we don’t see criminal suits is because once a criminal charge is brought the insurance company is off the hook; no money is paid. So now we get back to the money.
I guess that’s my whole problem with this. When we have criminal actions going on, that should be dealt with in the criminal realm. I think that a doctor that does something criminal needs to have his license revoked. A lot of this is related to how do we get some doctor’s bills paid. I have such a difficult time with these definitions. I don’t see any place that we have addressed those things.
Assemblyman Mabey:
It seems that over time you would get over three cases in some specialties. I am wondering if you put in ten years, just so it would not automatically fall out. Overall, I agree with Mr. Conklin and Ms. Buckley. We need to protect the patients. Personally, I was investigated in the lawsuits; I sent in the information and they said, “OK, you didn’t do it. You are right, no big deal.” I don’t have a problem with being investigated, but it seems like in some fields you may have that many lawsuits.
Assemblywoman Buckley:
I was going to comment on Assemblywoman Angle’s questions about the definitions. Criminal cases involving a physician are very rare; I think there have been one or two cases where a physician did something when a patient was under anesthesia. What we are talking about here are mistakes; that’s what negligence is. In the law already, there are the definitions and the differences between adverse outcome and negligence. Adverse outcomes are not medical negligence. If a baby has a birth defect and it was not due to any mistake of a physician, that physician cannot be held liable. That’s the law now. Negligence is defined as duty to someone and a breach of that duty actually caused the damages—duty, breach, causation, and damages. Right now under the law, if there was an adverse outcome and it’s not due to negligence, they cannot be held liable civilly. I wanted to state that for the record. If I am wrong, Mr. Brown, Ms. Lang, or Ms. Ohrenschall will hit me.
Assemblywoman Ohrenschall:
You are right.
Assemblyman Gustavson:
I am still not comfortable with the amendment, but I do agree with Dr. Mabey that putting in some time limit would make me feel more comfortable. Otherwise, I may be abstaining.
Chairman Anderson:
We are moving with S.B. 97 without any further amendment. We will further amend the bill within the time factors between the medical reporting in Amendment 5 in terms of length of time, “require a physician to report to the licensing board any actions of malpractice within 45 days, summons 3 or more, actions filed in court against a physician for malpractice, within . . . ” You want a 10-year time period instead of 7 years? Seven years is what we do for DUI. Within a 7-year time frame, OK, Ms. Lang?
THE MOTION CARRIED WITH ASSEMBLYWOMAN ANGLE, ASSEMBLYMAN BROWN, AND ASSEMBLYMAN GUSTAVSON ABSTAINING. (Mr. Oceguera was not present for the vote.)
Eleven affirmative votes, the bill having passed, it’s an Amend and Do Pass. Ms. Buckley, I am going to allow you to deal with that issue on the Floor.
On behalf of the Committee we will formally ask for a bill draft request (BDR) from the Speaker. The nature of the BDR will be for a Medical Screening Panel bill. The nature of the Medical Screening Panel to be similar to the Medical Screening Panel as it previously was. I will need Ms. Buckley and Dr. Mabey to help so we can have the bill drafters conceptually put together what we want put into the bill, or do you want to do that separately?
Assemblywoman Buckley:
Let’s do it separately away from here so that we can get along with construction defects. I think we want to improve [the screening panel] from last time. We will group and work on it.
Chairman Anderson:
But we will ask for a formal bill draft.
Assemblyman Sherer:
I have a question about possibly looking into something else before we take up construction defects. [Chairman Anderson agreed.] I have a question on—since we discussed having to raise taxes this year, we have an opportunity with S.B. 298. If we take out what bothers everybody, the fee for the independent workers, possibly we would be able to help ourselves out with a bill that doesn’t affect any taxpayers locally. Hopefully we could raise between $40 million and $50 million without taking that up. I was wondering if we could possibly take a look at that.
Chairman Anderson:
This is the resident agent bill? [Assemblyman Sherer agreed.]
Assemblywoman Buckley:
In my discussion with Chairman David Parks of the Assembly Committee on Taxation, he has those chapters in his committee and he is planning on raising those fees so that the ordinary citizen pays as little as possible. I think it is on the list.
Chairman Anderson:
I think it is being taken care of in the Assembly Committee on Taxation. Plus, I think it is in a couple of other bills that are being worked on. It is one of the reasons I did not think we were going to have to work on it.
Assemblyman Geddes:
Is it all the portions of the bill or just the fee portions? There are a lot of provisions in the bill that were not fee related dealing with LLPs, LLCs, and all that.
Chairman Anderson:
I think that is probably part of the problem with the bill that we couldn’t find a clear . . . nobody wanted to work on it and work out any of the differences on LLPs and all the rest of those things. The money question, as I understand it, is in the Assembly Committee on Taxation. To answer your question, it’s not exactly the same duplicate bill.
Assemblyman Gustavson:
The problem I had with S.B. 298 was the fee structure, but I really liked the bill otherwise. I would like to see us proceed with that if at all possible. I think it would be a good bill. Without the fees, I could support it.
Chairman Anderson:
That’s your choice, Mr. Gustavson. If we can do it without it [the fee structure], since we had so much fun last night being here until 9:30 p.m. or 10 p.m. for nothing. I don’t mind sticking around doing things, to do the people’s business is why we came here. Right now, Mr. Gustavson, I don’t think you have the votes. To be blunt about it, I wouldn’t vote for it in that format. I will be voting for the parts that are going to come out of the Assembly Committee on Taxation where we can try to take care of some of the other problems. We will see what compromises need to be made over there, and I don’t want to tie the Chairman of the Assembly Committee on Taxation’s hands by what we do over here.
Assemblyman Gustavson:
I would not want to keep the Committee here any longer than absolutely necessary. If you feel that we do not have the votes, you have that prerogative as Chairman. If there are irreconcilable differences with the bill that you don’t feel could be worked out, then I guess . . .
Chairman Anderson:
I do not want to tie the hands of the Chairman of the Assembly Committee on Taxation. He has to deal with the bill and any compromises he has to make to work that part of the bill. I want to make sure he has as many opportunities to work the bill as he can.
Let’s turn to our other favorite topic—construction defects. Let’s take a short break to obtain the handouts from last night that I was provided at 9 p.m. or 9:30 p.m., so that all of you have what I was given.
[Recess called.]
The Assembly Committee on Judiciary is back together again [at 4:28 p.m.]. Let me call our attention to S.B. 55.
Senate Bill 55: Revises provisions governing power of settlor and beneficiary of trust to alter certain statutory duties, liabilities, privileges and powers of trustee. (BDR 13-874)
On May 9, 2003, I received a letter directed to one of the Committee members, copied to me, on how we might be able to proceed [with Senate Bill 55]. Mr. Sande followed up with a memorandum, which was directed to Ms. Buckley, that might bring this issue to completion. Mr. Sande, would you explain to the Committee where we are at, what we are going to do, and what the net outcome of this would be.
John P. Sande, Attorney, representing the Nevada Bankers Association:
[Introduced himself and submitted Exhibit D.] Senate Bill 55 dealt with a trustee buying or selling property from the trust. During the hearing there was concern primarily about individual trustees being able to buy or sell [property] and whether it could be abused. I have come up with a proposal (Exhibit D) that basically sets forth a proposed amendment to NRS 163.050, which would limit this ability only if the trust instrument says you can do this or if it is consented to by all beneficiaries of the trust. It would only apply to a corporate trustee, somebody regulated by the state of Nevada, either a trust company or a bank. It would exclude the ability to buy or sell real property, only personal property. That’s the proposal I am making today for your consideration.
Chairman Anderson:
This is going to replace the bill itself?
John Sande:
Yes, this would replace the bill because you would not need to make reference to later sections. This is much stricter than [what was originally] proposed and what the National Conference of Commissioners on Uniform State Laws (NCCUSL) recommends in this area. Nevada will be actually stricter than almost any state in the United States if you adopt this.
Assemblywoman Buckley:
I met with Mr. Sande and I think these proposals alleviate my concerns.
ASSEMBLYWOMAN BUCKLEY MOVED TO AMEND AND DO PASS S.B. 55 WITH THE AMENDMENT PROPOSED BY MR. SANDE.
Chairman Anderson:
We would not be dealing with S.B. 55 as it is here, which was merely striking NRS 163.040 and NRS 163.050, but rather we would be keeping NRS 163.040 and we would be changing the existing law (NRS 163.050) to read, “a corporate trustee may buy or sell property, except real property . . . ”
John Sande:
That’s correct.
ASSEMBLYWOMAN ANGLE SECONDED THE MOTION.
THE MOTION PASSED. (Mr. Oceguera was not present for the vote.)
Chairman Anderson:
I will assign that bill to myself.
Let’s see if we can get the gentlemen together to discuss construction defects. [Documents were distributed to Committee members as requested by Chairman Anderson.] I hope everybody brought with them the previous materials that had been distributed.
Senate Bill 241 (1st Reprint): Makes various changes to provisions governing certain claims for constructional defects. ( (BDR 3-156)
Scott Canepa, representing Nevada Trial Lawyers Association:
[Introduced himself and acknowledged submission of Exhibit E.] We distributed our exhibit, which identifies what we believe to be the impediments to getting this deal closed. The problems are related to three sections of NRS 40.645 that were appended to the memorandum. The chief objection, with respect to NRS 40.645, based on a document provided to us by the Coalition for Fairness in Construction (Exhibit G) about an hour ago, may be resolved in looking at the language. It related to the use of extrapolative evidence in presenting notice of a defect to a home builder, so that they would then be able to exercise the right to repair. The language that was omitted has now been put back in this document that has been provided to us, so we may have common ground there.
The second issue related to NRS 40.650 and the penalties that would accrue to contractors. Again, it looks like they have moved in our direction on that, although I must confess there are some questions about the nature of the language they put in the document they gave us this morning that I don’t fully appreciate or understand. We are going to need some clarification.
Chairman Anderson:
We still do not have the basic things on what you do agree to. [Mr. Canepa agreed.] With all due respect, gentlemen, we were hopeful to be able to hear where we are going today, because today is the last day we can do this.
Scott Canepa:
I think we have fundamental agreement that there should be a mandatory repair right. That was expressed in writing that we sent to the Committee members via e-mail. We put that into existing law, which would become an amendment to existing NRS 40.645. Essentially it would eliminate the homeowners’ right to reject a repair offer by a builder whether that repair was a faulty one or not. We perceive that to be a major compromise on our part to give the builder the right to make whatever repair they want. That is the essential ingredient in what was the predicate for change regarding the developer or builder’s right for a mandatory repair right. I think we have been there now for some time. I think that remains the issue.
Where we have gotten astray here, without accusing anybody or anything or getting into any commentary, we have had problems with the concept of how we work with common problems that may extend or exist in a number of homes throughout any given community. What we perceive to be is an effort to block the court’s discretion to join numerous claims in the form of a class action whether there is demonstrable proof that a common defect exists throughout the community, and we may be moving further down that road in terms of resolving that.
Chairman Anderson:
Have you drafted language for us to look at specifically?
Scott Canepa:
There was a proposal (Exhibit G) made this morning to deal with the common defect situation that I just described. We have looked at it. Could we accept it as it is right now? No, there are a couple of problems with it. There is a proposal called “a special written notice requirement for construction defects common in residences in a community.” This document was provided to us recently. One of the initial things that occurs to us is what happens if the contractor doesn’t do that, in other words, how does that translate into . . . If a home builder has five people come forward and say that they have missing firewalls in their attics, we believe at that point in time, not only is it incumbent on the home builder to fix those five missing firewalls, but then also to take the additional step of notifying any other customers that they have of the potential for missing firewalls and taking affirmative steps to fix those problems. In the event that they don’t take that affirmative step and avail themselves of the opportunity to go and repair those problems before those homeowners seek the advice of counsel, or their house burns down, then, when those homeowners find out they have that problem, they should not have to go through this 150-, 200-, 220-day process, they should be able to avail themselves of their rights under the court system because the builder has already had the opportunity to fix that problem. That’s the crux of where we are.
James L. Wadhams, representing the Coalition for Fairness in Construction:
[Introduced himself and submitted Exhibit F and Exhibit G.] I want to apologize for any and all the inconvenience we have caused this Committee. This is a difficult and complex problem, as the Committee is well aware, because you are dedicated to looking at this.
We have [conceptual] language in a handout (Exhibit G). Let me address the question that Mr. Canepa asked. Quite frankly, in our view, the sticking point was how do we manage the common notices so that you don’t have to get 500 notices of the same problem. There is a certain common sense to that compelling statement, but responding to it from a lawyer’s standpoint is not always easy. We think we have tried to accommodate that. What we have in this is a section on page 4, Exhibit G. I will walk through this and then explain my answer to Mr. Canepa’s question. In the normal process when an engineering or common problem is found, an expert will attach a report that says he has analyzed whatever the appropriate number of houses and done a statistical sampling. The representative sampling and statistical data suggests that this problem will occur either in all of the houses or in 60 percent of the houses. That is not an issue of debate between Mr. Canepa and I.
Once that notice is provided to the contractor, he has, under this new approach, an opportunity to make a business decision. Is he going to let it ride? What if the contractor does nothing? The attorney representing the group will pursue it. If [the contractor] doesn’t avail himself of the opportunity to notify all the other homeowners who could have this problem, according to the expert’s report, and deal with them directly, you will be back to where we didn’t want to be. The only people left facing that lawsuit for not responding will be the contractors who chose not to respond. They will have a right to notify everybody who might have that problem, based upon the expert’s report, and deal with it.
In our view, very simply, that area has been the sticking point. We feel that, while there may be some drafting corrections required, conceptually we think it addresses the problem. Although we have not had the opportunity to hear directly [from the NTLA] because they have just been looking at this recently, we feel that could bring us to a place where a solution could be . . . We could represent to you that we think that would accomplish the goals that we have set out to accomplish—an opportunity to repair without delay and yet retain the rights of the individual homeowner and present a bill that you could pass with some confidence that would have the effect that we think is appropriate.
Scott Canepa:
We are looking at this document (Exhibit G), which was just recently provided to us. It appears to us that paragraph 3 of the special written notice requirement takes away what Mr. Wadhams just described as the benefits of the statute. Fundamentally, the Committee is faced with the question that if a builder has reason to believe that there is a common construction defect in a number of homes that it sold to consumers, and it is a defect that the consumers may know about but in many cases quite possibly couldn’t know about until something untoward happens, whose fundamental obligation is it to go to get the problem fixed? Should the home builder as a matter of law be entitled to sit and wait and force the homeowners to come to them? Should that home builder have an affirmative obligation to go to those homeowners, irrespective of what they might want to do as a moral obligation, to try to correct those problems?
The next step is what happens in the event that a builder is given five notices of a common defect, a life-safety defect, and that builder does nothing to take affirmative steps on its own to see to it that other customers that are similarly situated get redress? What we are seeing in paragraph 3 is that the builder is saying that the other consumers need to come to him; that invites shark practices that we don’t want as a matter of policy. The worst part about it is that homeowners are confronted with latent defects that they couldn’t possibly know about. How does a homeowner affirmatively avail himself of the law on a defect that the builder knows about, but he couldn’t know about? We think the equities lie clearly in favor of imposing the requirement on the builder to go forward and fix those problems. To the extent that they don’t, then they should be hauled into court.
Jim Wadhams:
With your indulgence, I realize this is a bit unusual; I would offer to not try to argue against what Mr. Canepa is saying, but to try and explain how we have addressed that issue and let the Committee . . . I will await your direction.
Chairman Anderson:
I want to see what the Committee is willing to do with the document now that we have a document.
Scott Canepa:
For the record, there were other changes made to this document that we have not had a chance to review.
Chairman Anderson:
How long will it take you to review it?
Scott Canepa:
It probably won’t take long, maybe a matter of 20 minutes. We have some questions. The documents that were given to us yesterday and today, there were numerous changes made in the document and they weren’t red lined, so we are on a fishing expedition to see where the changes were made and whether that effectively negates the conceptual agreements that we reached. I don’t think that’s the case, but the devil is in the details. That may be something that we can work out in bill drafting. In terms of a conceptual agreement, the one I identified for you is the sticking point. Unless this section says something different than I just described . . . I don’t know if it does or doesn’t.
Assemblyman Mortenson:
Do you believe if a common defect like missing firewalls is determined, that the contractor should notify everyone that the defect exists and then start repairing those defects?
Jim Wadhams:
That is very clearly the question that Mr. Canepa is asking. The answer is as follows. This section says that if I, the contractor, have been apprised of a common problem, quite frankly it doesn’t matter if it is workmanship or design but we will use the firewall, if I have been apprised of that, an expert’s report has come to me from the homeowner that says this is statistically likely to be missing in every house, the language I have put in here says the contractor may provide—there is a reason for that, we want to give a positive opportunity to the contractors to do exactly what Mr. Canepa suggests we ought to do, and that is to notify every homeowner and say, “It has been represented to us that you may be missing a firewall. Please call us and we will come out, inspect, repair, or replace.” So the answer is a good contractor should do it, this language puts that burden on the good contractor. The next concern is that if they don’t do that, if they don’t avail themselves of that opportunity, I suggest to you that the lawsuit will proceed and the court will exact the appropriate penalty.
Assemblyman Mortenson:
Did you say that the homeowner had to do the inspection to find out if it is missing?
Jim Wadhams:
No, sir. This is a very important piece. If a hypothetical 15 people, for one reason or another, find out they are missing a firewall, an expert comes and does some sampling, and attaches a report stating, “Missing firewall is a construction defect. The statistical sampling indicates that will be present in 60 percent of the houses in this community.” The homeowner does not have to do anything other than allow the plaintiff’s expert to do that. The contractor then has the opportunity, and that’s all we are asking for, to notify every homeowner.
Assemblyman Mortenson:
Why not an obligation?
Jim Wadhams:
Because we are trying to separate the good contractors from the bad contractors. The good contractor will notify every homeowner that there is a problem and the contractor will cause the inspection, repair, and replacement.
Assemblyman Mortenson:
Doesn’t seem to me that you should be testing contractors, you ought to be fixing the situation. You should require every contractor to notify the people.
Jim Wadhams:
The notification, what it is designed to do, is preserve the right for that homeowner to have the opportunity to say, “No, stay away from my house.” It puts the contractor in the position to go out and inspect and do the repair or replacement if that’s what the homeowner wants.
Assemblyman Mortenson:
I guess I thought it was your position that you wanted the contractors to have the opportunity to repair before lawsuits start, and now you seem to be saying, “Let’s separate the good ones from the bad ones, and let the bad ones get sued, and the good ones fix.”
Jim Wadhams:
Quite frankly, we think the good ones will fix and if they have an opportunity to notify those people and fix their houses, they will do so. If they don’t, the homeowner can still sue. The homeowners will be notified by the contractor who is apprised of the defect.
Assemblyman Mortenson:
But you want to let bad contractors not notify the homeowners. How do the homeowners know to sue if they don’t know they have a defect?
Jim Wadhams:
The attorney that has filed this notice on behalf of the representative sample will make sure that the others are covered.
Assemblywoman Buckley:
I want to follow up on paragraph 3 and I think it dovetails directly with Assemblyman Mortenson’s questions as well. Is what you are suggesting in this language is that someone cannot file a lawsuit if they were sent a letter about a defect and did not request the right to repair? Is that what you are saying?
Jim Wadhams:
What I am saying is that the contractor, because of a notice from a group of homeowners within that subdivision stating that these houses may be missing firewalls, sends a notice to the other 97 homeowners that they may be missing a firewall, please schedule an inspection, we will repair and replace. If [the contractor] has sent that letter to the homeowners, they can’t sue [the contractor] unless they [permit the contractor to] come out and inspect, repair and replace. We have preserved two things: the homeowners are still in control; they know that there may be a problem in their house and that the contractor will come out and fix it if they schedule it at their convenience and it can be done.
Assemblywoman Buckley:
Let’s say the homeowner does not respond. The letter says that it has been alleged that there are leaky windows, and he or she has never had a leaky window. Then six months later, there is a leaky window. Is it your intent that at that point the homeowner would have to say, “Oops, my window now leaks, and I want you to come fix it.” If they did that and the builder did not fix it, they could then file suit.
Jim Wadhams:
If they discover a leaky window and send us the notice, which is the case in today’s law without this even being adopted, that triggers the entire process. The fuse is lit; I have to come out to inspect, repair, or replace, or they can sue me.
Assemblywoman Buckley:
Is it also your intent that if the defect was there but they blew off the letter, it got lost in the mail, they did not respond, and yet six months later they say, “Wow, I do have a defect, I need it repaired”; is the answer the same? Could they still recontact and have a right to repair and then if it is not done, sue?
Jim Wadhams:
Yes, that is correct.
Assemblywoman Buckley:
So what is wrong with that, Mr. Canepa?
Scott Canepa:
I am not sure there is anything wrong with those two scenarios except in the first example, the bigger issue is what happens if the contractor receives notice that there is a common defect throughout and because this is permissive, he decides, for whatever business reasons, he is not going to send a notice to other homeowners telling them about the problem.
Assemblywoman Buckley:
What if it is “shall”? Then are there any problems with it?
Scott Canepa:
I guess it becomes two sides of the same coin. If it is “shall” and they don’t do it, what is the penalty? From my perspective . . .
Assemblywoman Buckley:
The penalty is that the person can sue.
Scott Canepa:
That may work. The way I read paragraph 3, I think paragraph 3 takes that away. What I think paragraph 3 says is that if the builder doesn’t send the notice to the homeowners and the builder has clearly been given the opportunity to fix it, but they have elected not to, whether it is a “shall” or a “may” it’s the same issue. When the builder doesn’t do that, then every one of those homeowners, where the builder had an opportunity to fix it, must follow this notice requirement and go through the 200-day program with the builder. We don’t think that’s fair.
Assemblywoman Buckley:
So if the builder is required to do a letter and then these rules apply, is that OK with you?
Scott Canepa:
And if the penalty to the builder is that the homeowner doesn’t have to jump through these new hoops that we have established, they can immediately go to suit, then I think we have reached the objective.
Jim Wadhams:
The existing language, which is in NRS 40.645 that says, “if a contractor fails to . . . ” that language takes away the limitation on damages. The specific answer to Mr. Canepa’s question is that if the home builder has the expert’s opinion from the representative sampling and chooses to ignore that, they have lost the limitation on damages and arguably, under the language of NRS 40.645, lost their opportunity to assert defenses. The mechanics of this really solves two problems: it allows the group of plaintiffs to take immediately to the court anybody who does not respond, and yet those contractors who do respond and take the responsibility to put the homeowners on notice, the homeowners do not lose their right to later come and say, “Now I want it fixed because it leaks more than I ever thought it did.” The way it is phrased now accomplishes both purposes: I could be sued if I don’t respond and I know; and I have notified those and they have an opportunity.
Assemblywoman Buckley:
This all has to be drafted by the Legal Division anyway. The argument about words is getting us nowhere. I think this was helpful for me to understand because there still has to be a procedure. You want the obligation for them to fix the rest, but they have to inform everybody in some manner.
Chairman Anderson:
Are there other points that you need to make sure were there since we are close to 11 a.m. and we have an 11 a.m. Floor Session?
Scott Canepa:
Listening to the dialog, I think the issue can be crystallized by asking, “Is any further notice required from homeowners who have a common problem when the home builder was given a notice and opportunity to fix the problem but didn’t?” In our view, the answer to that is, “No.” The builder was given what they have been asking for—the opportunity to fix it—they passed on the opportunity. Those homeowners, whether in a class action device, an individual, or a group, should be able to proceed since the builder passed on the opportunity. That’s where we are at on the issue.
Jim Wadhams:
Our response to that is, we have satisfied the obligation by telling . . . The responsible contractor has told every homeowner that they may have a problem. Every homeowner now knows and they have the choice.
Chairman Anderson:
I don’t want us to be delayed getting to the Floor. Ms. Buckley and Mr. Brown are both on the Assembly Committee on Commerce and Labor. Having watched this process in the past, while we are on the Floor, I will ask our Committee counsel and policy analyst to look at S.B. 241 in comparison to my preamble concept document so I can see for myself whether it meets my criteria. I want to know that I am doing the right thing for the homeowner. I am concerned about the subcontractors, and I want to make sure that those things are specifically shown to me.
Scott Canepa:
[Regarding Exhibit G], please recognize that this document was given to us today and there were other changes made. If we could have an opportunity to go through the document and provide to your staff where we think there were material changes from yesterday.
Chairman Anderson:
That’s fine, I appreciate that. I am trying to set up a time line about where I can reasonably expect us all to be. I would suggest that two hours after the adjournment of Floor Session that we continue, close to 4 p.m.
Assemblyman Claborn:
There is an Assembly Committee on Natural Resources, Agriculture, and Mining meeting also.
Chairman Anderson:
I have a meeting of the Assembly Committee on Taxation.
We are in recess [at 10:57 a.m.] until 4 p.m. this afternoon.
[The Assembly Committee on Judiciary reconvened at 4:28 p.m.]
Chairman Anderson:
I have been given a document (Exhibit H) that includes suggested amendments to Senate Bill 241 as agreed in principle by the Coalition for Fairness in Construction and the Nevada Trial Lawyers Association.
[The Chairman noted that Vice Chairman Oceguera and Assemblywoman Ohrenschall are excused. Assemblyman Mortenson should be marked present when he arrives.]
The document that is being distributed now [to the Committee members] is one that I had prepared for the Committee relative to the comparisons of the documents given to us earlier and some of the ideas of Assembly Bill 133 of the Seventy-first Legislative Session. This document includes a comparison and proposal of key points of construction defects and right to repair that I consider to be important. It is the template idea that I talked about earlier; we will see how S.B. 241 does in comparison to that.
William Vassiliadis, representing Southern Nevada Home Builders Association:
After many months with the help of you, Assemblywoman Buckley, Vice Chairman Oceguera, and the Speaker, we believe that we have been able to reach a compromise. I feel it is important for both Mr. Crowell and I to apologize for taking the Committee through the tortuous process we did, not just this session but last session as well. It speaks of the difficulty and the complexity of the issue more than it does of the participants. What Mr. Crowell is going to do is walk you through, as you requested, a bulleted outline of the agreement and the critical points of the proposed legislation amendment. We are going to get a copy of the actual language that we have worked on, but clearly it will need the bill drafter to clean it up. If Mr. Crowell has not already sent it, it should be over there this afternoon. Pending review of that draft, we feel comfortable that we are ready to go home.
Robert Crowell, representing Nevada Trial Lawyers Association:
I would like to echo the comments made by Mr. Vassiliadis and particularly add our thanks to the Committee, the leadership, and all the Assembly people who have been gracious enough to afford us the time to bring this document to you. What we have for you is a statement (Exhibit H) in terms of bullet points and goals that we have tried to achieve. Attached to that is a fairly lengthy document that has our suggested method of carrying into law those goals. You and the bill drafter will note that in numerous places we have indicated conceptual ideas that will require help from the bill drafters. With that said, I would like to read into the record the goals that we have agreed upon. We would suggest an amendment to Senate Bill 241 that would amend NRS Chapter 40, as opposed to creating a new chapter in construction defect legislation, that would accomplish the following:
A. Establishes a mandatory pre-litigation opportunity to repair for contractors and subcontractors.
B. Preserves the right of an unsatisfied or ignored homeowner to access the legal system.
C. Removes the procedural distinction between complex and non-complex cases.
D. Provides for a repair in 105 days for 4 homes or less cases and 150 days for 5 or more homes.
E. Refines and clarifies the definition of a construction defect.
F. Allows access to the [State] Contractor’s Board for advice for those who choose to use that board but without making it mandatory.
G. Preserves the court’s discretion to determine class actions in construction defect cases.
H. Clarifies that offers of judgment are acceptable in construction defect cases if they include all of the damages recoverable by the claimant under NRS 40.655.
I. Clarifies that a homeowner who has been sued by a builder for any reason, including defamation, is not required to provide notice to a contractor in order to commence an action.
J. Provides that contractors and subcontractors maintain their right to repair after the commencement of litigation as long as the new defect is separate and unrelated from the initial defect. This notice doesn’t abate or slow down the underlying case.
K. Pre-litigation mediation is maintained and refined.
We have some suggested language attached. We ask that you adopt that in your policy-making role. I would be happy to answer any questions.
Chairman Anderson:
Does anyone have any questions about the major conceptual points, things that need to be clarified?
I know that both of you have relatively difficult clients with many different points of view. I appreciate the difficulty in trying to represent their interests. They feel very passionately about their concepts and their process; and they should. They take pride in what they do and I believe it is because of that pride that it becomes difficult for them not to want it to go their particular way.
Do you believe that you are going to be able to support this piece of legislation on the Senate side if we were to pass it?
William Vassiliadis:
Yes, I do. I think one thing that might hearten the Committee in its decision is that several hours ago in a meeting with Scott Canepa, Bob Maddox, Robert Crowell, Jim Wadhams, Steven Hill, and I, none of us were very happy. I have to believe that you are making some pretty good policy. Yes, our clients are going to support this. Again, this isn’t a condition kind of thing; we want to see the draft. I have been trained very well by my 3,200 legal advisers to say that. Pending a review of the drafting, we are ready to support it.
Assemblywoman Angle:
Looking through your most recent draft (Exhibit H), on the bottom of page 1, there is a phrase that’s deleted that refers to the master developer or subdivider, and on the next page, it defines the master developer. Is the master developer “in” or “out”?
William Vassiliadis:
It is “in” as a definition. What happened is that we got some language—we were trying to accommodate several people and for some reason they wanted that master developer or subdivider written in throughout the amendment to the bill. This morning we realized that it didn’t make sense since they are defined in the bill.
Chairman Anderson:
Are we retaining the definition but removing them from the bill?
Robert Crowell:
That’s correct. This is where we need bill drafter help. These are all existing statutory definitions. To the extent that the definition is not required in order to carry out the bill, the definitions could be deleted. But it does not come out of the underlying law; it just comes out of this recommendation.
Chairman Anderson:
Because the master developer is mentioned in other parts of the law, such as the fact that they are putting together the pieces and parcels initially, and the recognition of their existence.
Assemblyman Mortenson:
I am curious what takes 150 days? The homeowner is going to be sitting there wringing his hands, especially if there are leaks in the house, the roof, or something like that. They could sustain a lot of extra damage and so on. Why does it take 150 days for 5 or more houses?
Robert Crowell:
For 5 houses, the 150 days is an outside limit. It doesn’t preclude doing it earlier. You will find in other places in this bill where we talk about an imminent threat, it’s to be done on shorter notice.
Assemblyman Brown:
I think in litigation years, 105 days is about 5 nanoseconds. In getting your home repaired, that’s a pretty quick response. There are some types of defects dealing with soils and things like that where you need to get experts to conduct studies and calculations, so it can take a little bit of time.
I have a question regarding the offer of judgment issue, bullet point H. Do you anticipate the homeowners breaking out the particular damages or is it a general contractor offering for all damages? Does it allow a subcontractor to make any kind of offer specific to the elements of repair that they may be responsible for?
Robert Crowell:
There is some confusion as to what an offer of judgment in a construction defect case should include in terms of the damage figure to trigger the rule. What we have tried to provide is the damage limitation as set forth in NRS 40.655. I guess it is not designed to restrict or enable offers of judgment other than what the common practice is right now. There is no other ulterior purpose there that I know of that we are talking about.
Assemblyman Brown:
I think I understand . . . if it correlates to that section where the damages are listed.
William Vassiliadis:
There were two concerns. One is that it was unclear as to whether offers of judgment could be offered and accepted by the court in construction defect cases, and we wanted to restate that. The concern by our friends in the NTLA was that offers made for the cost of repair only may not include expert fees, et cetera. We agreed that we could clarify that offers of judgment will be accepted in construction defect cases and we also thought it was fair that the offers be all-inclusive.
Assemblyman Brown:
As I think it should be the case.
Chairman Anderson:
Anybody else have questions?
Referring to page 6 (Exhibit H), the only question that I have from time to time relates to one of the big complaints that we have heard in the past, and I don’t know whether your group took up this particular question, so I am raising it again. In the past the person whose home has been damaged asked for repair, the contractor came back with the subcontractor trying to fix that repair, the person was unhappy or dissatisfied with the repair, he contacted an attorney, the attorney and he went to court, they went through the court process, and when it was concluded there was not enough money to fix the problem because out of the proceeds he had to pay his attorney. Can we give the judge the ability to make sure that the construction part of that is taken care of?
I know that getting into an automobile accident is not like having a construction defect problem, but you get three estimates, take the car to the auto shop, pay your deductible, the insurance guy cuts the check, and the car is repaired. If you are not happy, you still have a car that was in an accident, the car looks cool, and it drives OK. Unless you are a picky person, you might drive the car for a few more years . . . or forever for that matter, depending on your feelings about it. Anybody talk about that?
Robert Crowell:
Yes, we did. The answer to that is the law—current law and as structured in this document—allows the court, if it sees fit, to award reasonable attorney’s fees, which are in addition to the cost of repair. To that extent, the court can see that the homeowner is made whole. Beyond that, I am not certain where you go because somebody may be dissatisfied with the result again. The law does allow them in a claim action to recover attorney’s fees and costs.
Chairman Anderson:
Do you think that we need to strengthen that statement in the law so that the court may take greater strength in that ability? [The Chair acknowledged the presence of Judge Nancy Saitta in the audience.] There are a few judges who specialize in this particular area of the law merely because of volume. How are we going to make sure the rest of these folks get a clue?
Robert Crowell:
With due respect, we did not talk about the specifics of that law. Without our clients present, we are a little uncomfortable doing that. I will rest on my prior statement.
Assemblywoman Buckley:
I like these bullet points very much and I guess the only thing I wanted to say is that if this doesn’t do it, if this doesn’t stop the issues, then I think next session we should completely redo the front-end, such as requiring building inspectors to really inspect as opposed to doing 2,500 homes a day and looking at only 10 of them. They are not doing a very good job. We would completely “front-end” the system to prevent lawsuits in the first place. I know that home builders are doing a great quality improvement program and there are other things that are going on, so maybe it is not necessary. That thought has remained with me throughout this entire session.
Assemblyman Conklin:
I have a question of a more practical matter. I am looking at the first page, under NRS 40.615 where it defines the term “constructional defect.” In the second sentence it says “the term includes a violation of applicable law including applicable code requirements.” I am curious as to whether a person can have a construction defect suit simply because I used a 16-penny nail instead of a 14‑penny nail? Or if I nailed in the Sheetrock every 24 inches instead of 12 inches? Something that is not a functional defect of the house, it simply isn’t to code? Some codes are very good and if we don’t do them right, they have a negative impact on the home. Some are just codes as a matter of standard, but if it’s off a little bit, it doesn’t change the value of the home. That’s the only thing I see in here that raises a question. I am not suggesting that I have a problem with it, but I guess I would like to hear from one of our attorneys or legal counsel that that’s not the case.
Chairman Anderson:
Let me indicate that there is a very good piece of legislation that was placed on the Chief Clerk’s Desk in the Senate, being held there by a member who is dissatisfied with a certain chairman, on that very issue of an international code of building standards, which has reached an agreement in the state of Nevada and throughout the United States, and we are trying to get that in place. It came from the Earthquake Safety Council of which I happen to be a member; it happens to be my piece of legislation.
William Vassiliadis:
Two points, very quickly. The definition comes basically out of the Governor’s Liability Insurance Task Force. We wrestled with this for quite a while. There is no question that many of my clients believe that some things like that will not violate the integrity of the home. At the end of the day we all came down to the fact that we can’t pick and choose what does or doesn’t. The consumer, the homeowner, needs to have a level of confidence that there is someplace they can go and verify that their house was built to that standard. We looked at a lot of ways of handling that issue. It is true as we look at some of the codes, as we look at the standards we have to follow, one of the questions asked was related to nailing patterns. Has a home ever fallen down in Las Vegas? [Considering] even before this code was put in place, no one could think of one. The fact is there does need to be standards. The best answer of all, referring back to Ms. Buckley, is we need to do better work on the front-end of this. We can’t ask you to go sideways on what is either a code or a standard of construction; that needs to be done at a different level.
Assemblywoman Angle:
One of my original concerns about Senate Bill 241 is, as a seller of my home, I have to disclose anything that has to do with construction defects about my home to any potential buyer. I asked the question then, if I did not want to be part of one of those suits, is there any way for me to get out? Can I opt-out or do I opt-in? How is that done? I couldn’t find it in the new proposal how that would be done. Did you just not put that piece in there? It’s not in there anymore. Are we going to continue doing it the same way?
Robert Crowell:
It is existing law, which is opt-out. It is current court rule, also.
Assemblywoman Angle:
That piece is not there, so when I said I couldn’t find it, it’s truly not there.
On page 10, we are still making references to the master developer. We still have him in there?
Robert Crowell:
There is nothing . . . that’s current law.
Mark Fiorentino, Attorney, representing the Howard Hughes Corporation and the Focus Property Group:
That section that you just referred to is existing law. Master developers under existing law do have certain responsibilities that would not be changed by this bill. On the first page, the first question about master developers, that revision would have changed their responsibilities under existing law. The intent of the amendment before you is to leave the responsibility of master developers where it stands today in existing law. That’s why you still need a definition and you still need that section on page 10.
[Chairman Anderson entertained a motion on S.B. 241.]
ASSEMBLYMAN CARPENTER MOVED TO AMEND AND DO PASS S.B. 241 WITH THE AMENDMENTS AS OUTLINED IN EXHIBIT H.
ASSEMBLYMAN HORNE SECONDED THE MOTION.
THE MOTION CARRIED. (Mr. Oceguera and Ms. Ohrenschall were not present for the vote.)
Chairman Anderson:
We are not meeting on Monday [May 19, 2003]. We are meeting on Tuesday [May 20, 2003]; I have posted a bill for 8 a.m. Tuesday morning. Anything else? We are adjourned [at 5 p.m.].
RESPECTFULLY SUBMITTED:
Deborah Rengler
Committee Secretary
APPROVED BY:
Assemblyman Bernie Anderson, Chairman
DATE: