MINUTES OF THE
SENATE Committee on Commerce and Labor
Seventy-second Session
May 1, 2003
The Senate Committee on Commerce and Labor was called to order by Chairman Randolph J. Townsend, at 7:02 a.m., on Thursday, May 1, 2003, in Room 2135 of the Legislative Building, Carson City, Nevada. The meeting was videoconferenced to the Grant Sawyer State Office Building, Room 4401, 555 East Washington Avenue, Las Vegas, Nevada. Exhibit A is the Agenda. Exhibit B is the Attendance Roster. All exhibits are available and on file at the Research Library of the Legislative Counsel Bureau.
COMMITTEE MEMBERS PRESENT:
Senator Randolph J. Townsend, Chairman
Senator Warren B. Hardy II, Vice Chairman
Senator Ann O'Connell
Senator Raymond C. Shaffer
Senator Joseph Neal
Senator Michael Schneider
Senator Maggie Carlton
GUEST LEGISLATORS PRESENT:
Assemblyman John Oceguera, Assembly District No. 16
Assemblyman David F. Brown, Assembly District No. 22
STAFF MEMBERS PRESENT:
Scott Young, Committee Policy Analyst
Courtney Wise, Committee Policy Analyst
Kevin Powers, Committee Counsel
Laura Adler, Committee Secretary
Makita Schichtel, Committee Secretary
OTHERS PRESENT:
Mark Tratos
Mary LaFrance, Professor of Law, Associate Dean for Academic Affairs, William S. Boyd School of Law, University of Nevada, Las Vegas
Michael Alonso, Lobbyist, International Game Technology
Michael Rounds
Larry Hickman, Deputy Commissioner, Division of Financial Institutions, Department of Business and Industry
Doug Walther, Chief, Office of Business Finance and Planning, Department of Business and Industry
John Sande III, Lobbyist, Nevada Bankers Association, International Game Technology
Alfredo Alonso, Lobbyist, Money Tree, Incorporated
Jim Marchesi, President, Nevada Financial Services Association
John M. Vergiels, Lobbyist, Nevada Financial Services Association
Bonnie L. Parnell, Lobbyist
Alice A. Molasky-Arman, Commissioner, Division of Insurance, Department of Business and Industry
Fred L. Hillerby, Lobbyist, American Council of Life Insurers
Don Jayne, Lobbyist, Nevada Self Insured Association
James L. Wadhams, Lobbyist, American Insurance Association
Jack Kim, Lobbyist, Sierra Health and Life Insurance Company, Sierra Health Services, Incorporated, and Sierra Healthcare Options
Robert A. Ostrovsky, Lobbyist, Employers Insurance Company of Nevada
Gary Deacon, Lobbyist, Nevada State Bail Agents Association
Chairman Townsend:
We will open the hearing on Assembly Bill (A.B.) 2.
ASSEMBLY BILL 2 (1st Reprint): Limits right of employer to own certain intellectual property developed by employee. (BDR 52-365)
Assemblyman John Oceguera, Assembly District No. 16:
I have a handout for the committee (Exhibit C). Some of you may be unaware of Nevada Revised Statutes (NRS) 600.500, which A.B. 2 amends. Nevada Revised Statutes 600.500 was intended to attract high-technology employees to our State. They would be paid to invent new technology, which would belong to the employer. It was not meant to give ownership of any idea or invention from any employee to the employer. If a left-handed McDonald’s fry cook invents a spatula that would better serve his needs, he should have ownership of his invention. I suggest the amendment passed by the Assembly would clarify the meaning and discourage litigation over interpretation.
Some companies encourage inventiveness but protect themselves by having the employee sign a written agreement. I want to ensure the employee’s intellectual property is protected, when not covered by written agreement or when he was not hired to invent.
Senator Neal:
The phrase, “in the course of the employment” seems to be the key wording. Would the McDonald’s employee have developed the spatula if McDonald’s had not employed him? He invented something during the course of employment at the job site, which he never may have invented at home.
Assemblyman Oceguera:
I will answer your question with one of my own. What if I, as a janitor for McDonald’s as well as for other business, invent a better broom? Would the broom become property of McDonald’s even though I could have invented it at any of my jobs?
Mark Tratos:
I am an intellectual property attorney with Quirk and Tratos. I support the amendment. The original bill S.B. No. 558 of the 71st Session granted exclusive ownership of a trade secret or patent to the employer without giving the employee notice. Employment contracts should expressly state ownership of an intellectual property by the employer. This amendment limits employer ownership unless the employee is specifically hired to invent, or directed to invent by the employer.
The amendment allows creative and inventive employees who may work at a minimum-wage position to create an invention that may benefit themselves, their families, and their employers. This amendment puts us in line with most other States, whereas S.B. No. 558 of the 71st Session keeps us separate from other states in this issue.
Professor Mary LaFrance, Professor of Law, Associate Dean for Academic Affairs, William S. Boyd School of Law, University of Nevada, Las Vegas:
I am a professor of law at the William S. Boyd School of Law. My specialty is intellectual property. I have a handout for the committee (Exhibit D. Original is on file in the Research Library.). I was disturbed by S.B. No. 558 of the 71st Session, which puts our State out of compliance with the rest of the country. No other state makes it so easy for an employer to claim ownership of an employee’s inventions, with no notice or negotiated agreement to the employee.
Some states, which are actually enhancing the employee’s rights of ownership, are among the most competitive in the high-technology industry. The states of Washington and California are two examples.
The amendment would remedy this situation. I do not believe NRS 600.500 will succeed in attracting major high-tech industries. By being the least employee‑friendly State, we will lose the highly skilled, well-informed employee who would choose a state which at least offers common law protection if not more protections for him.
Senator Neal:
I see mention of an express written agreement in your handout. If an employment contract does not specify the employee is hired to invent, then the employee would own any patent he may invent?
Professor LaFrance:
If the employee is not hired for, or directed to, invent then the employee would own their invention and any rights associated with it. There is nothing in the statute to indicate whether or not this right would be overridden by a written contract specifying the employer would own the invention. In the states that follow the common law rule, an express contract overrides the common law rule.
If the employee is not hired to invent, there are two possible scenarios. First, the invention could be the sole property of the employee or second, the invention could be the property of the employee, but the employer could have a shop right, which is a royalty free, nonexclusive license to exploit the invention.
Mr. Tratos:
The parties of employment can modify their relationship by written contract. A contract would control ownership, depending on how it is written. This bill would not override a written contract. This statute comes into play only when there is no written contract.
Senator Neal:
What if an employer discovers an idea that may be a patented invention by reading a suggestion put into a suggestion box by an employee?
Professor LaFrance:
A mere suggestion is not an invention, which must be a complete and operative conception. Unless the employee wrote an enabling disclosure providing all functioning details of the idea on his suggestion, his idea is not an invention.
Senator Neal:
Many companies have benefited by employee suggestions. It seems an idea which improves a process or product, which is marketable to the public, could be a patentable idea.
Professor LaFrance:
Your example would not be patentable by the employer. Under the federal patent law, you cannot patent an idea you derived from another person.
Michael Alonso, Lobbyist, International Game Technology (IGT):
We are in opposition to A.B. 2. As we have heard, NRS 600.500 was enacted last session to eliminate the ambiguity related to ownership of inventions and to strengthen our commitment to high-tech companies. The statute makes it clear inventions developed by an employee during the scope of their employment, which is directly related to employment, is owned by the employer. If an employee is being paid to perform certain work duties, his work belongs to the employer. In the McDonald’s example, the restaurant is not in the business of research and development, but merely of serving fast food. A fry cook inventing a spatula in his own time is not acting in the scope of his employment.
At International Game Technology (IGT), the entire thrust of the business is to design, invent, create, manufacture, and sell gaming equipment. The invention department employees are under contract. However, all employee inventions belong to the company because inventing is the goal of the company.
The amendment makes the statute more ambiguous. I am not sure what “directed to invent” means. If a software engineer for IGT, hired to write software for one specific gaming device and completes the project but is paid to remain in employment, would the person now be entitled to ownership if they invented something during another project not specifically covered under contract?
International Game Technology has programs in place to motivate employees to create novel ideas. They reward creative employees.
I have not heard of one claim under NRS 600.500 in our State between an employee and employer since it was enacted in 2001. There are no court cases to determine how the language would be interpreted. Regarding an employer posting a notice to employees informing them of NRS 600.500, we agree to this provision.
In response to Professor LaFrance’s concern about our State not attracting well‑informed employees, I disagree. The well-informed employee would enter into an agreeable contract.
I do not believe NRS 600.500 would apply to Mr. Oceguera’s hypothetical example of the McDonald’s fry cook’s invention, which he created at home on his own time. It did not fall under the scope of his job.
Senator Hardy:
I am comfortable with the language, if NRS 600.500 does not apply to the McDonald’s scenario, then I believe an employee who invented something at work that has nothing to do with the company’s goal should own that invention. For example, an employee working for IGT who had access to confidential information which triggered an idea for his own invention should not own the invention. This is a threshold issue.
Senator O’Connell:
How is the wording “trade secret” interpreted? Say an employee streamlines a process, to the benefit of higher efficiency of the company. The employee later changes employment and takes his streamlining ideas to a new job. Is this considered a trade secret of the first employer?
Kevin Powers, Committee Counsel:
On this issue I am going to have to defer to the experts in the area of intellectual property. I do not have experience in this area of the law to give an answer on whether the scenario you present would produce a trade secret or not.
Mr. Alonso:
I am not a trademark expert, but I think there is an issue of confidentiality. A company such as IGT would have all staff sign a confidentiality agreement to protect trade secrets. They utilize security measures such as badge identification tags to protect their secrets. I think IGT is an unusual case. The McDonald’s example is more of an issue. I think the McDonald’s scenario would have a case just because the employee was not doing the job duties, but instead created something. If the employee invented something at home, then I am not sure the statute would favor the employer.
Senator Hardy:
I do not believe the issue is this clear-cut. McDonald’s main business is selling hamburgers, not flipping hamburgers. The spatula used by the fry cook is directly related to work performed during the course of employment. It is not directly related to the work of McDonald’s, but to the work of the fry cook.
Professor LaFrance:
I noticed Mr. Alonso referenced scope of employment in his testimony. The statute only referenced course of employment, which includes the period of time of employment, not the purpose or expectation of the parties.
I think if the minimum-wage fry cook had known the invention of something of value during employment would then belong to the employer would hold out for a higher wage, or some type of compensation for the true value of his invention.
The course of employment language is inadequate to define the nature of the invention. Scope of employment is addressed by the wording, “hired to invent” or “directed to invent.” Any invention resulting from these would be considered to be within the scope of employment.
Senator Hardy:
I think if a person is hired or directed to invent, it constitutes a contract. But what about a janitor at IGT, who, while sweeping the floor comes up with an idea? That person was hired to sweep the floor, not to invent, but has access to information which might have initiated an idea.
Professor LaFrance:
In your example of IGT, an employer with valuable trade secrets should take measures to protect those secrets. An employer with a trade secret is required to take reasonable measures to preserve the secrecy of those materials. One reasonable measure would be employee-confidentiality agreements.
Senator Hardy:
I am not as concerned about the employee’s actions, but those of the employer. If the employer is in the business of making a better mousetrap, anything their employees do should belong to the company. If a fry cook at McDonald’s comes up with a better Big Mac hamburger, the idea belongs to the company. However, if the employee creates a better spatula, it should belong to the employee. I think the language is too broad.
Mr. Tratos:
The existing law has another problem. It was designed to bring in high-tech companies to the State. I would like to remind the committee the purpose of the bill, and how it is falling short. The Silicon Valley, Seattle, and other high-tech areas have state laws that protect the individual inventor. These laws attract talented workers.
This statute is a “gotcha” statute, often surprising the employee who had never been warned that inventions do not belong to that particular person.
Let us return to the McDonald’s employee who invented a spatula. Even if that fry cook thought about and created the spatula in the off time, it would belong to McDonald’s. McDonald’s would benefit by using it for all left-handed employees. Under existing common law rules in most other states, McDonald’s would have the opportunity under shop rights. Nevada law takes it further. The law allows the employer to patent, license, sell, and economically benefit from the spatula. This is contrary to a sense of fair play the rest of the nation shows in their statutes. Instead of attracting talented workers, this statute is making every employee in every business less motivated to invent something which might have benefited his employer.
Senator Neal:
Prior to S.B. No. 558 of the 71st Session, did common law govern this type of situation?
Professor LaFrance:
Yes.
Senator Neal:
It seems as if S.B. No. 558 of the 71st Session repeals the common law. Any existing rights of an employee with a patented creation within the scope of employment are unclear.
Professor LaFrance:
The result of NRS 600.500 was that it departed from common law rule, and now sweeps all employee inventions into ownership of the employer.
Senator Neal:
Where does this leave a State employee who may have invented something during the scope of employment that the employee wanted to patent?
Professor LaFrance:
Current law would make it difficult for a court to determine who owns the invention in the example of the spatula. The course of employment language is ambiguous and difficult to interpret.
Senator Neal:
Are you proposing, through A.B. 2, to protect employees who are not hired or directed to invent?
Professor LaFrance:
Yes.
Senator Neal:
Under A.B. 2, if an employer expressed in the hiring contract any invention developed within the course of employment belonged to the company, would this be a legally binding contract?
Professor LaFrance:
In Nevada, I would say yes. I do not see any indication in the bill the statute would override the provisions of a private employment contract. Some states, such as California, have laws overriding an express written contract specifying ownership of employee inventions. This bill is in direct contrast to those states.
Chairman Townsend:
At some point, Professor LaFrance, I would like your input on copyright laws pertaining to music and video. We will now open the hearing on A.B. 81.
ASSEMBLY BILL 81 (1st Reprint): Providing for certain civil actions and remedies related to intellectual property. (BDR 52-366)
Assemblyman Oceguera:
This bill seeks to amend NRS 600.430 to include an award of treble or three times the damages suffered by the owner of a trademark. It also amends the statute to authorize an award of costs and attorney fees to the prevailing party. These amendments will align NRS 600 with the trademark infringement statutes in other states including California, Florida, Kentucky, and Utah. The intellectual property chapters in NRS were amended to include a uniform definition of the term “intellectual property.” There is a civil remedy within this chapter to authorize the court to make an award of treble damages.
Professor LaFrance:
I have not had a lot of time to study it, because I just received the most recent revision. Section 4 does align our State with others to award treble damages. Section 4, subsection 2, paragraphs (b) and (c) addresses profits and damages. This may be a double award. If a defendant’s use of a counterfeit trademark diverted sales from the plaintiff, the lost sales would be the profits derived by the defendant. To award both could be a double recovery. The language could be tighter to preclude double awards.
I have a problem with section 2, subsections 1, 2, and 3, which deal with patents and copyrights. Patents and copyrights are areas of law exclusively the province of federal statutes. There is a huge body of case law from the U.S. Supreme Court, which precludes states from defining patents. There is also case law preventing states from creating their own copyright laws. Since 1978, there has been a federal statute that expressly precludes states from legislating in copyright laws. There is also a field preemption under which a state is precluded from enacting laws which would interfere with a comprehensive statutory scheme enacted by Congress.
Only a common law copyright, which is referred to in section 2, subsection 3, would not be the exclusive province of the federal government.
Senator O’Connell:
On page 2, line 30, do we need both “willful” and “wrongful” when defining defendant acts?
Professor LaFrance:
I believe “wrongful” is any act infringing on the rights of the owner, even an inadvertent act. In contrast, “willful” means the defendant purposely infringed the rights. It is the willful provision that has justified the punitive award of treble damages.
Mr. Powers:
I agree with Professor LaFrance. The burden-of-proof issue, the evidentiary standard, is separate from the elements of the cause of action. What this establishes is a civil cause of action, and a civil cause-of-action standard, unless expressly stated otherwise, is preponderance of the evidence … . The plaintiff whose mark is infringed would have to prove by a preponderance of the evidence either two things. In subsection 2 paragraph (b), the thing the plaintiff would have to prove by a preponderance of the evidence is that the defendant committed a wrongful act that violated the mark. The reason paragraph (b) of subsection 2 only says the wrongful act, is that it does not provide for treble damages. So in other words, if the wrongful act as mentioned by Professor LaFrance, was merely inadvertent or did not rise to the level of a willful violation, then the plaintiff would only be entitled to their normal damages. There would be no treble damages. What paragraph (c) does is that if your wrongful act, your violation of the mark, also was done willfully, and that means knowingly and intentionally, then the defendant is subject to treble damages. So, the reason we have two standards is that the first standard for normal damages is any wrongful act. But, if you can prove that additional element of knowingly and intentionally violating, then the defendant would be subject to the treble damages.
Assemblyman Oceguera:
The original intention of the bill was to authorize awards for treble damages. Opponents to A.B. 2 asked me to add intellectual property to the bill. Perhaps adding this section has caused some problems.
Mr. Tratos:
There is a way to do this successfully. Intellectual property includes many areas, only some of which are regulated by federal law. In this State, there are others that could be included in this bill. Trademarks and trade secrets, for instance, are covered by NRS 600. Intellectual property also includes rights of publicity found in NRS 597. This bill can be specifically modified to include those references to intellectual properties not governed by federal law.
I suggest leaving in the language of a copyright being recognized by common law. This would include creations prior to January 1, 1978, after which federal preemption occurs.
Mr. Powers:
Let me just respond to some of those statements. It is true, State law covers the other types of intellectual property that were mentioned in previous comments and there are already remedies in the State law for violations of those intellectual property rights. Adding them into this portion of the bill would create an additional remedy and may create some confusion. Then you have different statutory causes of action to pursue your remedies under. I am not sure it is necessary. I will have to investigate and look at the remedies that are in those particular sections and with that type of intellectual property. I think the goal of sections 2 and 3 of the bill appear to … provide a State cause of action with certain types of intellectual property that are not covered by State law. Of course, that could raise a preemption issue. I agree with the general preemption concepts mentioned by the professor and the attorney who deal with intellectual property on a daily basis. However, this office would need to investigate further whether that preemption extends as far … as preventing any type of State causes of action with regards to these types of intellectual property, and that is copyrights and patents.
Senator Neal:
Do you disagree with the professor and the attorney’s testimony?
Mr. Powers:
By no means am I disagreeing. What I am saying is that I would have to do further research to conclude convincingly that the preemption does occur here. And again, all preemption does would make the State causes of actions unenforceable. It does not prevent the Legislature from delving into this area. It just … there are some aspects of this that are preempted, then those aspects will be unenforceable.
Senator Neal:
We do not want to put into statute something unenforceable.
Mr. Powers:
True, but when it comes to federal preemption, federal law could always change. If the federal law were to change and the State causes of action were still there, then what was once unenforceable would become enforceable at the time that the federal law changed …. . Preemption is a definite possibility. Patent and copyright laws are comprehensively covered in federal law. But, just because there is comprehensive federal law, does not mean there is preemption of every State cause of action.
Professor LaFrance:
Federal law does preempt the vast majority of State causes of action that would involve federal copyrights. Federal law would preclude all causes of action with respect to State copyrights and patents, with the exception of contract claims and true common law copyrights. However, federal law does not preempt State trademark actions.
Senator Neal:
If we deleted section 2, subsections 1, 2 and 3, where would that leave us?
Mr. Powers:
If … subsections 1, 2, and 3 were removed, as mentioned, federal patent and copyright law would provide the remedies that are available that exist now. Their removal would have no impact on those federal remedies available. … As far as other types of intellectual property that Mr. Tratos testified to, to the extent that they are already covered by State law, those causes of actions would still be available. So, if … subsections 1, 2, and 3 were removed, there would be no change in existing law and there would still be remedies under federal law and certain remedies under State law with certain types of intellectual property.
Mr. Alonso:
We did not create the language in sections 2 and 3. We do support section 4 of the original bill. If the other sections were deleted, it would probably be an improvement.
Michael Rounds:
I am with the law firm of Skinner, Watson and Rounds. I agree with the preemption comments made on A.B. 81. Sections 2, 3 and 4 are preempted under federal law. I do not think it is possible the State could enact this legislation based on federal patent and copyright law.
Mr. Powers:
Mr. Chairman, may I clarify for the record, I am not saying that I believe that there is no preemption. All I am saying is that this office has not given an independent opinion whether or not there is preemption … . There is a possibility I could agree after research with the opinions given so far on the preemption issue. All I am saying, this office has not done that research and could not give that opinion one way or another at this time.
Mr. Rounds:
I believe A.B. No. 558 of the 71st Session covered similar matters. I wrote a paper on this issue, and I feel confident patent and copyright laws are preempted, and it would be a bad idea to try to enact by this bill.
Chairman Townsend:
We will close the hearing on A.B. 81 and open the hearing on A.B. 493.
ASSEMBLY BILL 493: Provides for money collected by Commissioner of Financial Institutions and Division of Financial Institutions of Department of Business and Industry to be deposited to and expended from the Fund for Financial Institutions. (BDR 55-463)
Larry Hickman, Deputy Commissioner, Division of Financial Institutions, Department of Business and Industry:
We were asked to relieve the short-term, cash-flow problem within the budget General Fund. My handout, “Self Funding Proposal” (Exhibit E), does not include the legislative technical adjustment from the attorney general’s office, which would increase our costs by $400,000.
Chairman Townsend:
I understand you have a cash-flow issue with your collections, and you are trying to level out the cash so you do not have to borrow from the General Fund. What is the $400,000 technical adjustment?
Mr. Hickman:
The attorney general’s office estimated our usage for their services. They have not provided us a breakdown of those costs. If A.B. 493 were passed as drafted, we would need the additional $400,000. There is no provision within the spending authority for attorney general’s services.
Chairman Townsend:
The bill says it is on behalf of the Department of Business and Industry, financial institutions division, so are the Governor and the administration fully aware of this bill, including the $400, 000 technical adjustment?
Mr. Hickman:
I would assume so, since it came from the budget office.
Senator O’Connell:
I need to declare my husband is a chairman of a board with a bank. Are you saying the $400,000 is needed as a shortfall for the attorney general services your office receives?
Mr. Hickman:
Yes. The fee was called a legislative technical adjustment, and I understand it is for additional services provided us. Traditionally, we receive a General Fund appropriation at the beginning of the fiscal year. During the year, we repay 100 percent of it. Our General Fund appropriation is like a line of credit. During the first quarter, we generate sufficient cash flow from license renewals to meet our operating requirements. The General Fund covers the period between licensing when cash is short, or events that do not function around licensing or renewal fees. For example, if we are in a receivership, there are no revenues attached. Acting in receiverships and an attempt to balance our cash flow over the fiscal year without borrowing from the General Fund is what initiated this bill.
Senator O’Connell:
Did you have some extraordinary experience this year requiring you to need the $400,000?
Mr. Hickman:
No. We did not receive a specific breakdown of costs. We have two and one‑half, full-time deputy attorney generals assigned to the division. We work with them extensively on declaratory rulings. I believe the bill would include these hours, rather than one large event.
Senator O’Connell:
Mr. Chairman, may we ask a representative from the attorney general’s office testify on this issue before we vote?
Chairman Townsend:
Mr. Hickman is the messenger. We can pass this bill. However, the $400,000 technical fee is another matter.
Doug Walther, Chief, Office of Business Finance and Planning, Department of Business and Industry:
The technical adjustment is an allocation based on the attorney general’s office time assigned to the division. The office recently conducted a study to determine hours of time spent helping this client over the past 2 years. The amount does not relate to a bill so much as it does the division’s budget.
Chairman Townsend:
Are you saying the technical adjustment will be enforced whether or not this bill passes?
Mr. Walther:
I believe so.
Chairman Townsend:
Is this the amount of time spent by the attorney general’s office helping the division, which has not been collected?
The billing is based on historical billing. The attorney general’s office keeps track, and 2 years later when they are itemizing a budget, they look at those records to determine how many hours to bill.
Senator O’Connell:
In the past this money had gone into a General Fund. And now, do you want to set aside a fund for this specific purpose?
Mr. Walther:
Correct.
Senator O’Connell:
Have we increased our fees from the attorney general’s office that would account for this increase? Or, had the money sent to the General Fund been spent in another manner so it is not available to pay back the attorney general’s office?
Mr. Walther:
I believe the attorney general’s office or the budget office hired a consultant to look at the time spent in all the departments. I am seeing technical adjustments pop up in all department budgets, and they seem higher than in past years. I do not know why they are higher.
John Sande III, Lobbyist, Nevada Bankers Association, International Game Technology:
This bill surprises me. It seems to be an attempt to divert the budgetary process, perhaps to avoid an oversight. It seems odd a financial institution’s division would create a separate fund that would be unrelated to the budgetary process. The problem is the financial institutions division paying fees at the end of the fiscal year. At the beginning of the year, funds are available. By the middle of the year, the money is gone and they had to borrow from the General Fund until the fees came in from the financial institutions. We would like to fix this problem. We feel it would be a burden on financial institutions to double their fees in 1 year. I am not sure why we would treat financial institutions differently. We think any technical adjustments should go through the normal process. We are willing to correct any deficiencies, and to pay more quickly so it is not necessary to borrow from the General Fund.
Chairman Townsend:
I need to disclose I am a shareholder and board member of a bank. Did the governor request this bill? If the only problem is dealing with a cash-flow problem, then good communication between you and the people you regulate is more important than passing this bill. If we take you out of the budget act and treat you as a self-funded agency, does that give you sole rights to raise fees or assign technical adjustments?
Mr. Walther:
The ability to assess the banks is presently in the law. The attorney general’s assessment is a budget issue that is present whether or not this bill is passed. The bill does not take the division out of the budget act; it is merely creating a different funding mechanism. They must still come before the Legislature and submit their budget for approval.
Chairman Townsend:
You can find a mechanism for payment without this bill.
Mr. Walther:
I am not sure I agree.
Chairman Townsend:
If we pass this bill, do you have a tentative payment schedule to get the cash‑flow shortage solved?
Mr. Walther:
When we worked with the Legislative Counsel Bureau drafter, we asked for language to allow maximum flexibility to soften the impact of this double payment of the banking industry. The funds could be paid in installments, or anytime before next year. The commissioner has the flexibility to solve this problem within the industry.
Chairman Townsend:
Mr. Walther, you are no longer with financial institutions, but you are now with the Department of Business and Industry?
Mr. Walther:
I was with the attorney general’s office, and now I am with the Department of Business and Industry.
Chairman Townsend:
Is this a traditional method of budget to assess fines at the end of the 2-year budget cycle? Why do we have this technical adjustment? Is it a one-time adjustment?
Mr. Walther:
I am not completely abreast of the allocations of these funds. However, my understanding is the attorney general’s office went to an allocation system in the early 1990s. Since then, they have been tracking their hours in order to allocate a cost to their clients at the time of budget. It is based on actual time served, but it is also time skewed by billing for time spent 2 years ago. The process is used throughout the department.
Senator O’Connell:
Mr. Walther is correct. The system he refers to came through the Senate Committee on Government Affairs, I believe in 1993. It was said to be necessary because a federal law had been passed. I thought banks were billed at the time of the audit. I know agents must keep records of their time. I repeat my question of what has changed in the past 2 years? Has the fee increased? This is why I requested a representative from the attorney general’s office testify.
Chairman Townsend:
Is this technical adjustment a standard allocation of money owed to the attorney general’s office every 2 years, or is this $400,000 additional money owed?
Mr. Walther:
This is a bill for the attorney general’s services. It came after the budget during the session. It is not additional money owed, but just our portion of money owed their office for services.
Senator O’Connell:
Could this be the 3 percent cutback from the department?
Chairman Townsend:
That is an excellent question. I think the important thing is the technical adjustment was not built into the department’s budget in time for some unknown reason. I am not comfortable processing a bill in which there are so many unanswered questions. We need to come up with information before we could pass this onto the Senate Committee on Finance.
Will these technical adjustments be assessed to all departments? Are they all aware of these costs? Is this an additional assessment, or was it built into the budget? These are finance questions. If this bill passes the Senate Committee on Finance, the bill will come to us to discuss the fees raised and where they will go. I asked Mike Hillerby if the Governor requested the bill, and if he felt comfortable with it. He answered yes. This was before the issue of a technical adjustment came up.
As our tax concerns are substantial, we are especially sensitive to money issues. We can readdress this bill after we get more information.
Senator Carlton:
Are the initial fees and renewal fees the same as in the bill under section 7, or are there other fees involved?
Mr. Sande:
I have no clue, as I was unaware of this bill. I will try to find answers to your questions.
Senator Carlton:
Are the fees discussed in section 7 the only fees applied to a trust company. If so, the numbers seem low to me. I need an aggregate number to evaluate the situation.
Mr. Sande:
I know during Federal Deposit Insurance Corporation (FDIC) investigation, the State is involved. We paid for costs the State incurred during this process.
Mr. Hickman:
Over the past 15 years, we have assessed banks by the same process. The division receives a General Fund appropriation at the beginning of the year. During the course of the year, we would repay that money from various licensing fees. We regulate around 14 industries, and have in excess of 1700 active licensees. Towards the end of April, we estimated what was needed to balance the budget. The banks were then assessed to determine their share of the remaining costs.
The issue of revenues is really about timing. By statute, mortgage brokers and loan agents renew by July 1. Our agency has an influx of revenue for the following fiscal year, which carries us through September. Because there are no license renewals from September through December, we go into a negative cash-flow position. At this time we rely on the line of credit afforded us by the General Fund. Renewals from exempt companies who renewed at the end of the calendar year came in and provided us with cash. We have traditionally assessed the banks at the end of the year to balance the budget account for the spending authority.
Senator Hardy:
We will close the hearing on A.B. 493, and open the hearing on A.B. 433.
ASSEMBLY BILL 433: Makes various changes to provisions regulating persons providing check-cashing and deferred deposit services. (BDR 52-935)
Assemblyman David F. Brown, Assembly District No. 22:
This bill deals with check-cashing and deferred-deposit services. There is a problem coming before some courts of default judgments for $2000 for $200 loans. A justice of the peace told me when these cases come to his court, he would not uphold the judgments, which he calls unconscionable contracts.
When a person drafts a check for $125 and takes it to a payday-loan institution, and authorizes that institution to deposit the check 2 weeks later, he receives $100 cash that day.
I support free enterprise, but I also believe it is good to protect the consumer who may not understand the technical provisions of a contract. My concern is these institutions exploit the customer defaults, and turn them into a profit‑making business. There are responsible companies in this industry. There are new businesses popping up which are less reliable. These are a detriment to the less-sophisticated people in our society.
Allow me to highlight some portions of the bill. Sections 2 and 3 provide for rights of the customer to cancel the transaction for a small fee. Section 5, subsection 3 addresses a one-time insufficient funds fee of $25. Section 6, subsection 6 requires the disclosure to the borrower about his right to rescind the transaction. Section 7, subsection 2 prohibits the lender from threatening criminal process. Section 7, subsection 6 prohibits the lending institution from accepting more than one check for deferred deposit per deferred-deposit transaction. Some lenders may loan $300, and require the borrower to write three $100 checks for payment. If the checks bounce, the institution can collect treble damages per check, which costs the customer much more than if he had written one check for $300. Section 7, subsections 10 and 11 prohibit the lender from engaging in deceptive trade practices in advertising. Lastly, section 8, subsection 1, paragraph (b), deals with the State’s bad-check law, allowing treble damages.
When I call a default situation a profit center, I mean the company is awarded often far above the overhead cost, which might average around $30. For them to get a $1500 default judgment was like taking candy from a child. My goal is to remove treble damages, and limit the institution’s ability to make a customer write multiple checks for one loan.
Senator Shaffer:
Are the customers not astute enough to understand they must pay back a loan?
There are laws to protect the lender as well as the borrower. We cannot legislate intelligence.
Assemblyman Brown:
I believe these loans take advantage of customers some of whom are not fluent in English. Some companies charge exorbitant interest rates of up to 33 percent on a 2-week loan. As an attorney, it takes me time to fully understand a contract. The average customer, lacking legal training, is at a disadvantage to understand contractual nuances such as the possibility of treble damages if they default.
Senator Neal:
Although I agree we cannot legislate intelligence, we can legislate a framework in which intelligent decisions can be made. In the 1970s we repealed the usury laws. I argued against these laws. This was legalized robbery for unsuspecting customers to get charged escalating interest rates. These companies take advantage of the Hispanic population and other people from poorer communities, and in the process they become rich. I support legislation to stop this type of extortion.
Assemblyman. Brown:
I want to point out this bill does not make any attempts to put fee caps on the front end of the transactions.
Senator Carlton:
It has been my experience this industry works largely with the Hispanic population, and yet they do not provide the paperwork in Spanish. I believe in some cases, the customers sign a document that states something different than what was represented to them. It is difficult for someone from another culture to understand the full contract written in English, which does not always translate the same in Spanish. If all costs were explained in the beginning, people would have a better understanding of their end of the agreement.
Alfredo Alonso, Lobbyist, Money Tree, Incorporated:
The Money Tree is a deferred-deposit and check-cashing company with stores throughout the West. The provisions of this bill are currently in place at their stores. They have Spanish interpreters in each store. They explain the contract. They do not seek criminal prosecution, or seek treble damages. Their only recourse is a fee for default. Our stores allow a customer to cancel a transaction at no cost. This is just good business.
Regarding the bad-check law, these checks are not bad checks. When a customer writes a check for groceries the store expects there to be funds in that account. In this industry, the expectation is there is no money in the account, which is why the customer is at a check-cashing business. This is more of a pledge than a check under State law.
The average Money Tree customer earns between $25,000 and $50,000. Some live from paycheck to paycheck. These stores fill a need. Their money can be made at the front end of the transaction, rather than waiting for a default. This bill encourages competition while discouraging bad business practices.
Senator Schneider:
What does the Money Tree do when a customer defaults?
Mr. Alonso:
They charge a default fee. If needed, the unpaid fee will go to small claims court or become a wage garnishment. These remedies exist in the law.
Senator Carlton:
How large a company is Money Tree?
Mr. Alonso:
I believe they are the largest on the West Coast with 7 stores in the State, and about 70 stores throughout the West.
Assemblyman Brown:
There is nothing restricting the collection of default fees. This deals with the treble damages. We are trying to avoid a judgment that is five or six times the amount of the loan. A judgment should be around two to two and one-half times the amount of the loan. These companies are entitled to attorney fees and interest. The interest in the statute is prime plus 10 percent, which is not unreasonable.
Senator Neal:
Does section 7, subsection 10, provide a cause of action to the borrower against the lender?
Assemblyman Brown:
I am not sure NRS 604.180 addresses cause of action.
Mr. Powers:
Specifically with regards to NRS 604.180, that is a criminal prohibition, and so it does not create a private right of action. However, a deceptive trade practice in and of itself is actionable by a private right of action pursuant to chapter 41 of NRS.
Senator Schneider:
In section 4, is the maximum amount a company can charge for an insufficient fund check $25?
Assemblyman Brown:
That is correct. They cannot get treble damages on insufficient-funds checks.
Senator Carlton:
I understood that a check might be deposited multiple times, even if it is submitted to the bank before the date on the check. Is this legal?
Assemblyman Brown:
I believe the customer and lender agree contractually to a date to submit the check. The customer can postdate a check for 2 weeks out.
Senator Carlton:
If this post-dated check is run through the bank on the correct day at 9 a.m., and it bounces, then it is run through again at 10 a.m., 11 a.m., and 12 p.m., and no money is available, is there a fine for each submittal?
Assemblyman Brown:
Normally it takes several days for a check to come back. A company is entitled to resubmit a check, but not to fine a $25 fee for each submittal.
Senator Schneider:
I would like to disclose I sit on a board of a credit union. We charge the lender a $25 fee for each returned check. The lender, in turn, charges the customer the $25 fee. These companies, limited to a one-time customer fee of $25, would go in the hole with each additional time they submit a check.
Mr. Alonso:
Once the default period has begun, the interest rates begin, so the company has made prime plus 10 percent interest. They now collect the $25 insufficient‑funds check fee. From there, the company can garnish a paycheck or take the customer to Small Claims Court. My client sees this as the cost of doing business. They are in the business of providing loans. Some will default. Our default rate is around 19 percent. It is not higher because our customers have jobs and checking accounts.
Our concern is not the bounced check, but what happens afterwards. When a company prosecutes the customer under a criminal statute to receive treble damages, this is inappropriate.
Senator Neal:
What about the automatic debit machines used by some retail stores, which takes the money out of the bank immediately. Is the time of check submission when the machine is used, or when the tangible check arrives at the bank?
Chairman Townsend:
Is there a penalty for submitting a check before the contract stipulates?
Assemblyman Brown:
There is no stated penalty in the bill. If a check were submitted before the established date, I would say it would be a breach of contract.
Jim Marchesi, President, Nevada Financial Services Association:
I am the president of the Nevada Financial Services Association. I have a handout for the committee (Exhibit F). We oppose this bill. Under current law, the customer has no incentive to repay their loan. There are no late fees nor detrimental consequences if they do not repay. Another concern is the money we spend on the application process which would be lost should the customer decide to rescind the loan. We feel the bill lacks consistency and definition, and is biased against NRS 604 registrants.
Senator Neal:
Why do you run a credit report on your customers?
Mr. Marchesi:
Our customers are not disadvantaged. They have incomes and the ability to repay. The credit report would prove their ability to repay the loan.
Senator Neal:
If a person writes a check for insufficient funds, he will feel pressured to repay the loan if he knows the district attorney will get involved if he does not repay.
Mr. Marchesi:
Allow me to clarify. The returned-check statute is a civil statute not a criminal statute.
Senator Neal:
What if we reinstated our usury laws? You would be out of business.
Senator Carlton:
It seems to me the cost of generating a loan for a check repayment would be much less the cost than purchasing an automobile, yet the car industry allows a period to rescind a decision. Why is this a burden for you?
Mr. Marchesi:
The right of rescission is not a major burden for large companies, but it is an issue for smaller companies. They ask for the ability to recover those costs.
Senator Neal:
Were these arguments made before the Assembly?
Mr. Marchesi:
Yes.
Senator Neal:
You must have done well there, as the bill passed 40 to 0 in the Assembly.
Mr. Marchesi:
There is language in the bill about deceptive trade practices already covered under existing law. We just want fair and balanced legislation. Lastly, this bill will not stop multiple bills, escalated interests rates, and late charges. Many lenders are not bound by NRS 604 and will continue these practices.
Senator Carlton:
How many members does your association have?
Mr. Marchesi:
We have about 15 corporations representing over 60 percent of transactions conducted.
Senator Carlton:
Is your organization mainly mid-range institutions or individual owners?
Mr. Marchesi:
We have both.
Senator Carlton:
How long have you been in existence?
Mr. Marchesi:
Originally, we were called the Nevada Independent Check Cashers Association. We changed the name as we broadened our scope.
Senator Carlton:
What percentage of your business is in the check-cashing business?
Mr. Marchesi:
I would say about 60 percent.
Senator Carlton:
Is Money Tree a part of your association?
Mr. Marchesi:
Yes.
Chairman Townsend:
I have noticed a growth of check-cashing businesses in southern Nevada. The bank for which I sit questions what big banks are doing wrong because we are not growing like check-cashing businesses. We are not providing loans and opportunities to local community businesses. Regardless of how we feel about this bill, it is important to deem what is important to our constituents in southern Nevada. The committee may have a perception of these types of businesses that is inconsistent with the trends of our society. Consumers are demanding this service, and that is why it is a growing industry.
Mr. Marchesi:
Since 1990, our industry has exploded from 500 stores to 25,000 stores currently. There is a huge demand for our service. It is a simple transaction. Our customers receive excellent customer service. The banks have abandoned the small denomination loans. I believe our Las Vegas market has hit saturation point.
There is a preconceived notion about our industry. It began as a loan service to those without banking accounts. Today, we only loan to people with bank accounts. A person would need to stop by any of our stores to see how professionally business is conducted.
Senator Schneider:
I would like to disclose I am on a credit union board, and we are entering this type of business. We are opening a check-cashing business in front of our credit union. We see there is a market need, which our credit union is not serving. We hope to go after that market, and then convert them to regular credit union customers.
Mr. Marchesi:
There are several banks involved in this business, including Wells Fargo.
Senator Carlton:
I have heard testimony about customers who use these services. However, in my district, I see these businesses popping up in sequence on certain streets in southern Nevada. I have heard complaints about how many check-cashing companies there are on those particular streets. These are not high-rent streets. I believe there is a certain level of clientele targeted.
Mr. Marchesi:
For the record, I would like to state we have just opened two stores on Summerlin.
John M. Vergiels, Lobbyist, Nevada Financial Services Association:
In the bill the $25 insufficient-fund fee is a passed-along fee. The bank charges us $25. We charge the customer $25. There is no financial gain.
In section 7, subsection 2 is a guise to give us the ability to collect. The district attorney does not take checks under a certain amount, and will not even respond to or work with us.
In section 7, subsections 10 and 11 say deceptive trade practices allow treble damages. If you sue us, you get treble damages, but we cannot get treble damages if you do not pay your loan. It is not a fair and balanced bill.
Bonnie L. Parnell, Lobbyist:
I am here representing myself. A couple of years ago, I was contacted by the local justices of the peace about disturbing things occurring in their courts. Defendants being sued by these payday-loan companies were losing trucks, automobiles, and personal property because they could not pay off their loans. I was appalled when I read some of the contracts, which charged up to 535 percent interest rates on loans. I am concerned customers are getting sucked into something that will harm them. I hope the Legislature will protect those people, and provide safeguards against any predatory lending.
Chairman Townsend:
We will close the hearing on A.B. 433 and open the hearing on A.B. 453.
ASSEMBLY BILL 453 (1st Reprint): Makes various changes to provisions relating to insurance. (BDR 57-546)
Alice A. Molasky-Arman, Commissioner, Division of Insurance, Department of Business and Industry:
I made a commitment to the Assembly that if the circumstances affecting insurance remain at status quo, we will not be returning in 2 years with another Omnibus bill. I have a handout for the committee (Exhibit G. Original is on file in the Research Library.). It breaks the bill into nine subjects: Federal Oversight, NAIC Membership and Assessment, Medical Malpractice – Closed Claim Reports, Alternative Risk Mechanisms and Markets, Accreditation, Licensees, The Insurance Contract, Workers’ Compensation, and Liquidation of Insurers. Our purpose is to protect and advance the interest of consumers.
Senator Neal:
The bill expands your authority to share information. How would this occur?
Ms. Molasky-Arman:
We currently have cooperative agreements with several agencies, which we must have under the Graham Greenleaf Privacy Act. We have these agreements with the Office of the Comptroller of Currency, the Federal Reserve System, and the Office of Thrift Supervision. More agreements are arising under federal law. We need this to cooperate with investigative processes.
Senator Neal:
That would be the new information you must share under this bill. Also, how are you revising the requirements of people acting as brokers?
Ms. Molasky-Arman:
We are not changing those requirements. We are adding provisions so reinsurance producers are able to require licensure by a reinsurance intermediary who handles reinsurance contracts for any of our domestic insurers.
Senator Neal:
You are authorizing an insurance consultant to qualify for a license. How is that different under this bill?
Ms. Molasky-Arman:
We are trying to correct a current defect in the law. We are excited to see recognition of the need to regulate insurance consultants. Unfortunately, there are no disciplinary measures in the bill, in the event insurance consultants break the law. This bill enables the commissioner to take action. An example would be a person who acted as an insurance consultant without a license. Currently, we can reprimand the person but not take action against them.
Senator Neal:
What do you want to change about surplus lines insurers?
Ms. Molasky-Arman:
We wish to bring our statutes up to date and to become consistent with national standards. Surplus lines insurers are not licensed. The guaranty association, in the event of insolvency of the insurer, does not cover insurance provided by these people. We must ensure these people meet higher levels of solvency than our admitted carriers.
Senator Neal:
What is the Essential Insurance Act?
Ms. Molasky-Arman:
Current law allows the commissioner to order, or an essential insurance association to privatize, with the commissioner’s approval, a stock insurer. This law has existed for over 20 years. We are changing the law so that in the event of privatization, the association can privatize into a reciprocal or a mutual insurer as well as a stock insurer. Reciprocal and mutual insurers are perceived in the medical liability area to be favored over stock insurers.
Senator Neal:
Why are you asking to extend underinsured vehicle coverage?
Ms. Molasky-Arman:
Assemblywoman Barbara Buckley requested this provision. It was meant to correct an existing loophole. Uninsured and underinsured motorists coverage protects the policyholder. With an additional insurance policy, in the event of tort fees or injures, that person is covered beyond the limit of the tort fees. The statutory limit of a cap is $50,000. The court does not allow the insured to collect coverage from the underinsured or uninsured. This is a matter of fairness for the policyholder.
Senator Neal:
What about the amount of money the Nevada Life and Health Insurers Guaranty Association are obligated to pay for claims?
Mr. Molasky-Arman:
The association most affected by this bill is the Nevada Insurance Guaranty Association, which is the property and casualty association. We want to enable the association to recover claims they have paid when they had no legal obligation to do so. Also, we ask to eliminate the $100 deductible from the return of unearned premiums for claimants against the association. It is not economically feasible to assess this fine, nor is it fair to the policyholder who has paid money in good faith.
Senator Neal:
Why are you are asking the insurer of physicians to make a report to you after a claim.
Ms. Molasky-Arman:
We want to make clear the failure to file the report subjects the insurer to the same kind of penalty and discipline currently in law in NRS 679B.
Senator Neal:
Why are you are revising the distribution of claims for the liquidation of the insurer.
Ms. Molasky-Arman:
We are ensuring the assets to be distributed are not swept into payment of taxes to the federal government. There have been cases where this has occurred. Federal taxes are second in priority of payment than claims to policyholders, to enable the insurance commissioner to operate the liquidation and pay for those costs. This provision has been sent to every national guaranty association for feedback, so that we can get the wording correct.
Senator Neal:
Why do you prohibit bail agents to act as an attorney for the insurer unless they are registered with the office of the sheriff?
Ms. Molasky-Arman:
This is a legal issue to ensure the bail agent has the appropriate authority to operate in the State, and to participate in transactions with the court.
Senator Neal:
You are asking the members of an association, either self-insured public or private employees, to include certain information in a notice of intent to withdraw from an association. Why is that necessary?
Ms. Molasky-Arman:
We removed some of these provisions on the Assembly side. This is to report a withdrawal to an administrator, so the administrator can then report it to the commissioner.
Senator O’Connell:
What changes were made from the original bill to the first reprint?
Ms. Molasky-Arman:
There were few changes made. A couple of provisions regarding self-insurers should not have been in the bill at all, and were removed. Nothing substantial was changed. We added the word “reciprocal” so an association could convert into a mutual and a reciprocal insurer. We changed the wording so as to not change the definition of medical malpractice regarding medical malpractice closed-claims reports;
Senator O’Connell:
We talked about the language regarding medical malpractice in S.B. 97.Is this the same definition you used?
SENATE BILL 97: Makes various changes relating to certain actions against providers of health care. (BDR 1-248)
Ms. Molasky-Arman:
We limited the definition to only define the policy of insurance for medical malpractice.
Senator Carlton:
On page 10 of the bill, you are adding a new category of purchasing groups. Who would this be?
Ms. Molasky-Arman:
These are groups of people who gather to purchase insurance. There are risk‑retention groups and purchasing groups. When a purchasing group registers with us, we must review their registration. We are now adding a $100 registration fee for this service.
Senator Carlton:
What is a prepaid limited-health-service organization?
Ms. Molasky-Arman:
It is a mini health maintenance organization. It provides managed-care services to enrollees for one kind of coverage such as mental health care.
Senator Carlton:
Why would we include these groups, or the motor club to the bill?
Ms. Molasky-Arman:
They are considered under Title 57 of NRS to be insurers.
Chairman Townsend:
We have many proposed amendments. Did the Assembly hear any of these amendments?
Fred L. Hillerby, Lobbyist, American Council of Life Insurers (ACLI):
My amendment (Exhibit H) regards a change the National Association of Insurance Commissioners (NAIC) made to the individual deferred-annuity, nonforfeiture model law. This did not happen at the federal level until March 9, 2003. We did not have time to develop our amendment in time for the Assembly hearings. The commissioner said it would be sufficient to wait until we went before the Senate to make the changes.
Don Jayne, Lobbyist, Nevada Self Insured Association:
We had some amendments before the Assembly. The bill was brought in late, but recently we did identify the need to clarify the level of financial review to be done on administrators (Exhibit I).
James L. Wadhams, Lobbyist, American Insurance Association:
My amendments (Exhibit J and Exhibit K) were presented on the Assembly side. We have a one-word change on page 73 of the bill, line 14, changing “and” to “or.”
Jack Kim, Lobbyist, Sierra Health and Life Insurance Company, Sierra Health Services, Incorporated, and Sierra Healthcare Options:
We proposed an amendment (Exhibit L) in section 56 to change the number of days an insurer must give before the expiration date of an insurance policy from 60 days to 30 days. An amendment passed on the Assembly side requiring 60‑day notice, and we would like to reverse it back to 30 days.
Robert A. Ostrovsky, Lobbyist, Employers Insurance Company of Nevada:
We also have an amendment (Exhibit M), which applies to section 56. At the time the bill was published, we did not recognize the impact of section 56, subsection 2. We ask those provisions not apply to policies for industrial insurance.
Chairman Townsend:
Are you asking to strike lines 8 through 18 on page 48, and replace them with the provisions contained in subsection 1 of this section?
Mr. Ostrovsky:
Correct.
Chairman Townsend:
Has the commissioner reviewed and approved all of these amendments?
Ms. Molasky-Arman:
We have reviewed all amendments and agree with them. We have one concern with Mr. Kim’s amendment, which enables mid-term cancellation of a policy in the event of material misrepresentation by the policyholder or its agent. We do not believe the policyholder should be disadvantaged by a misrepresentation of the agent. This should be a matter between the insurer and the agent without harming the policyholder.
Mr. Kim:
We agree to withdraw the words “or its agent.” Also, in my amendment on page 2, paragraph 4, we agree to change the word “proof” to “evidence” that the notice has been mailed.
Ms. Molasky-Arman:
We have no further amendments at this time.
Mr. Hillerby:
The commissioner confirms this bill is a change to a model act.
Mr. Jayne:
It allows for smaller administrators to bring forth a limited, reviewed financial statement. The commissioner is in agreement with this bill.
Senator Neal:
This leaves Mr. Wadham’s and Mr. Kim’s amendments, which I understand have been approved by the commissioner.
Gary Deacon, Lobbyist, Nevada State Bail Agents Association:
In 1997, this industry introduced legislation through the Division of Insurance. Since then the industry has evolved by writing good law. We agree with the amendments.
Chairman Townsend:
I would ask Mr. Powers to draft an amendment encompassing all amendments heard today. We will bring it back to a subcommittee. We will adjourn the meeting at 10:57 a.m.
RESPECTFULLY SUBMITTED:
Makita Schichtel,
Committee Secretary
APPROVED BY:
Senator Randolph J. Townsend, Chairman
DATE: