Property and Casualty Insurance. Nevada. State Law Supplement

Transcription

1 Property and Casualty Insurance Nevada State Law Supplement

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3 Property and Casualty Insurance Nevada Effective January 1, 2014 State Law Supplement Important: Check for Updates States sometimes revise their exam content outlines unexpectedly or on short notice. To see whether there is an update for this product because of an exam change, go to and check the Insurance Licensing Blog. If there is an update, it will be clearly noted in the blog entries for this state.

4 At press time, this edition contains the most complete and accurate information currently available. Owing to the nature of license examinations, however, information may have been added recently to the actual test that does not appear in this edition. Please contact the publisher to verify that you have the most current edition. This publication is designed to provide accurate and authoritative information in regard to the subject matter covered. It is sold with the understanding that the publisher is not engaged in rendering legal, accounting, or other professional services. If legal advice or other expert assistance is required, the services of a competent professional should be sought. NEVADA PROPERTY AND CASUALTY INSURANCE LAW SUPPLEMENT, EFFECTIVE JANUARY 1, Kaplan, Inc. The text of this publication, or any part thereof, may not be reproduced in any manner whatsoever without written permission from the publisher. If you find imperfections or incorrect information in this product, please visit and submit an errata report. Published in February 2014 by Kaplan Financial Education. Printed in the United States of America. ISBN: / PPN:

5 Nevada Law Supplement 1 INTRODUCTION This supplement focuses on statutes regarding Nevada insurance law. Key aspects of each statute are discussed to help the student pass the state law portion of the licensing examination. In order to understand the content of this supplement, the student should first study the national insurance License Exam Manual. Thorough preparation for the exam requires the complete study of both the national License Exam Manual and the supplement. I. NEVADA STATUTES AND REGULATIONS COMMON TO PROPERTY AND CASUALTY INSURANCE A. DEFINITIONS 1. Transacting insurance [NRS 679A.130] The transaction of insurance is the general business of conducting insurance and includes: solicitation and inducement; negotiations; effectuation of a contract of insurance; and transaction of matters subsequent to effectuation and arising out of such a contract. 2. State of domicile [NRS 679A.090] Insurers are classified by their state of domicile and are considered domestic, foreign, or alien. a. A domestic insurer is an insurance company formed under the laws of Nevada. b. An insurer chartered in another state, commonwealth, or territory of the United States is a foreign insurer to a Nevada resident. c. An alien insurer is formed under the laws of a country other than the United States. 3. Insurer [NRS 679A.100] An insurer is any person or company engaged as the principal party in the business of entering into insurance contracts. For example, a stock or mutual insurance company is an insurer. a. An insurer includes a(n): insurance company licensed to transact insurance; prepaid limited health service organization; HMO; multiple-employer welfare arrangement; self- insured employer using an administrator; and dental care organization.

6 2 Nevada Law Supplement b. Mutual insurer [NRS 680A.030] A mutual insurer is an incorporated insurer without capital stock and the governing body of which is elected by its policyholders. A mutual insurer also includes certain foreign insurers found by the Commissioner to be organized on the mutual plan under the laws of their states of domicile but having temporary share capital or providing for election of the insurer s governing body on a reasonable basis. c. Stock insurer [NRS 680A.050] A stock insurer is an incorporated insurer with its capital divided into shares and owned by its stockholders. 4. Authorized and unauthorized insurers [NRS 679A.030, 685B.030] Insurers must be authorized to do business in Nevada. a. An authorized insurer is one that holds a certificate of authority to transact insurance or reinsurance in Nevada. The certificate of authority must be issued by the Commissioner of Insurance of Nevada. b. An unauthorized insurer is any insurer that does not hold a valid certificate of authority. An unauthorized insurer may still do business in the state of Nevada, but such business must be placed using a licensed surplus lines broker (to be discussed later in this Unit). 5. Certificate of authority [NRS 680A , NRS 685B.030] Insurance companies must have a certificate of authority to transact insurance business. (Do not confuse this with a license issued to an individual to act as a producer). A certificate of authority is the means by which the Commissioner authorizes an insurer to conduct business in Nevada. a. Nevada grants the following special exceptions to this basic requirement: 1.) Insurers that were authorized at one time but have since surrendered their certificates of authority may continue to investigate and settle claims on policies maintained in Nevada. 2.) Nevada residents who purchased a policy from an unauthorized insurer when they lived in another state where that insurer is authorized can continue to be serviced by that company. 3.) Surplus lines transactions are permissible without a certificate of authority. 4.) Insurers do not need a certificate to defend their rights with respect to insurance transactions in Nevada. 5.) Some reinsurance transactions, group life and health, group annuities, and excess liability contracts are also exempt. b. An insurer that wants to sue to enforce its rights arising from an insurance transaction must, however, obtain a certificate.

7 Nevada Law Supplement 3 c. A certificate of authority also is not required for the following: attorneys-at-law acting in the ordinary relation of attorney and client in the adjustment of claims or losses; transactions involving insurance policies or annuity contracts issued before January 1, 1972; and transactions in Nevada relating to a policy issued or to be issued outside the state involving insurance on vessels, craft or hulls, cargoes, marine builder s risk, marine protection, and indemnity or other risks, including strikes and war risks commonly insured under ocean or wet marine forms of policy. d. Prohibited insurers [NRS 680A.090] The Commissioner shall not grant or continue the authority to transact insurance in Nevada to any insurer: of which any director, officer, or other individual in management is incompetent, dishonest, untrustworthy, or of unfavorable business repute; of which the managers are so lacking in insurance company managerial experience in operations of the kind proposed in Nevada that operation would be hazardous to or contrary to the best interests of the insurance- buying or investing public; who is affiliated directly or indirectly through ownership, control, management, reinsurance transactions, or other business relations with any person of unfavorable business repute; or whose business operations are or have been identified as being injurious to insurers, stockholders, policyholders, creditors, or the public, because of illegality, manipulation of assets, accounts, reinsurance, or bad faith. e. Penalty [NRS 680A.060] Anyone who transacts insurance in Nevada without a certificate of authority is guilty of a misdemeanor. 6. Premium [NRS 679A.115] A premium is a consideration or payment for insurance coverage. Premiums are sometimes called assessments, policy fees, or service fees. 7. Producer of insurance [NRS 679A.117, 683A.201,.211] A producer of insurance is a person required to be licensed under the laws of the state to sell, solicit, or negotiate insurance. 8. Provider of insurance [NRS 679A.118] A provider of insurance includes the following: an insurer; producer of insurance; managing general agent; third-party administrator; organization composed of using preferred providers of health care; health maintenance organization; commercial bank; trust company; savings and loan association;

8 4 Nevada Law Supplement credit union; thrift company; financial holding company; affiliate or subsidiary of an insurer or financial holding company; broker/dealer in securities; mortgage lender; and any other person engaged in the business of insurance. 9. Surplus lines broker [NRS 685A.030,.040,.120] Surplus lines insurance refers to a situation in which a policy may be written with an unauthorized insurance company as long as there are no other authorized insurers selling that particular type of policy in Nevada. a. A surplus lines broker must be licensed to transact insurance. b. Any person who has been licensed in Nevada as a resident general lines broker for at least six months, or in another state as a surplus lines broker and continues to be licensed in that state, and who is deemed by the Commissioner to be competent and trustworthy with respect to the handling of surplus lines may be licensed as a surplus lines broker after paying the application fee and passing any required examination. c. Surplus lines licenses are issued for a three- year term. A license that is not renewed expires at midnight on the last day specified for its renewal. The Commissioner may accept a request for renewal received within 30 days after expiration if the request is accompanied by: all applicable fees for renewal; a penalty in an amount that is equal to 50% of all applicable fees for renewal; and a fee established by the Commissioner of not more than $15 for deposit in the Insurance Recovery Account. d. A surplus lines broker must determine that the desired form of coverage is not available from any authorized insurers before the broker can solicit it from an unauthorized company. e. A broker is not required to determine whether the full amount or type of insurance can be obtained from admitted insurers when the broker is seeking to procure insurance for an exempt commercial purchaser if: the broker procuring or placing the nonadmitted insurance has disclosed to the exempt commercial purchaser that such insurance may or may not be available from the admitted market that may provide greater protection with more regulatory oversight; and the exempt commercial purchaser has subsequently requested in writing for the broker to procure such insurance from a nonadmitted insurer.

9 Nevada Law Supplement Managing general agent [NRS 683A.060] A managing general agent is a person or business appointed by an insurer to supervise the insurer s business in Nevada. a. This person or business is an independent contractor who may appoint and terminate agents for the insurer. b. A managing general agent is also a person who negotiates and binds reinsurance contracts on behalf of an insurer. 11. Nonresident producers [NRS 683A.261,.271,.291] Producers residing outside of Nevada may transact insurance in Nevada if they are properly licensed. a. The Commissioner may issue a producer license to a nonresident if: he is currently licensed as a resident and is in good standing in his home state; he has made the proper request for licensure and paid the fee prescribed for the license and a fee of $15 for deposit in the insurance recovery account; he has sent to the Commissioner the application for licensure made in his home state or a completed uniform application; and his home state issues nonresident producer licenses to residents of this state pursuant to substantially the same procedure. b. Nonresident producers must designate the Nevada Insurance Commissioner as the attorney upon whom plaintiffs may serve complaints of law. This expedites the process of filing suits against nonresident producers. c. Applicants for a nonresident license are not required to comply with the education or examination requirements if they are currently licensed in their home state or, if the application is received within 90 days after cancellation of their license and their home state certifies that they were in good standing at the time of cancellation. 12. Adjuster [NRS 684A.020,.030] An adjuster investigates or settles claims for a fee or commission. a. An independent adjuster represents the interests of an insurer. b. A public adjuster is employed by, and represents the financial interests of, the insured. c. An associate adjuster is an employee of an adjuster.

10 6 Nevada Law Supplement 13. Bail agent and bail enforcement agent [NRS ,.055,.100,.150,.173,.190] a. Definitions [NRS ,.055] 1.) A bail agent is an individual appointed by an authorized surety insurer to post bail in return for the promise of money later. 2.) A bail enforcement agent is a person who has contracted with or is employed by a surety or bail agent as a special agent to enforce the terms and conditions of a defendant s release from custody on bail in a criminal proceeding, to locate and apprehend a defendant, surrender a defendant to custody, or both, if appropriate. b. Licensing standards [NRS ,.150] A person may be licensed as a bail agent or bail enforcement agent. A corporation may be licensed as a bail agent or bail enforcement agent only if the corporation is owned and controlled by an authorized surety company or is owned and controlled by one or more licensed agents. c. Bail agent license [NRS ] Persons seeking a bail agent license must: complete a prescribed course of study; pass an examination; be at least 18 years old; have been appointed by an authorized surety insurer; be competent, trustworthy, and financially responsible; and have filed a $25,000 bond, which remains in force until released by the commissioner, or canceled by the surety. d. Bail enforcement agent license [NRS ] To receive, renew, or hold a license as a bail enforcement agent, a person must: be at least 21 years old; be a United States citizen or lawfully entitled to remain and work in the United States; have a high school diploma, a general equivalency diploma, or an equivalent education; submit a report of an investigation of his criminal history from the central repository for Nevada records of criminal history that indicates that he possesses the qualifications for licensure as a bail enforcement agent; submit the results of an examination conducted by a psychiatrist or psychologist that indicate that he does not suffer from a psychological condition that would adversely affect his ability to carry out his duties as a bail enforcement agent; pass a written examination;

11 Nevada Law Supplement 7 submit the results of a test administered no earlier than 30 days before the application date to detect the presence of a controlled substance in his system; and successfully complete the prescribed course of training. 14. Insurance consultant [NRS 683C.010,.020,.080] a. An insurance consultant is a person who, for a fee, offers advice to the public on the benefits and drawbacks of insurance policies. An insurance consultant must hold a license. However, an insurance consultant s license is not required for a(n): attorney licensed to practice law in Nevada who acts in a professional capacity; licensed insurance producer or surplus lines broker; bank s trust officer who acts in the normal course of employment; or actuary or certified public accountant who acts in a professional capacity. b. Restrictions on employment [683C.080] A licensed insurance consultant shall not employ, be employed by or be in partnership with, or receive any remuneration arising out of his activities as an insurance consultant for any licensed producer of insurance surplus lines broker or insurer. 15. Administrator [NRS 683A.025, ] a. An administrator is someone who: collects premiums and adjusts or settles claims related to workers compensation, life or health insurance, or annuities; administers an internal service fund; administers a trust; administers a self- insurance program for an employer; administers an employer- funded program that provides pensions, annuities, health benefits, or death benefits for employees; or an insurer who performs any of the above functions. b. Certificate required [NRS 683A.085;.08524] No one may function as an administrator until they obtain a certificate of registration as an administrator from the Commissioner. A certificate will not be issued to anyone who: is not competent to act as an administrator; is not trustworthy or financially responsible; does not have a good personal or business reputation; has had an insurance license revoked, suspended, or denied in Nevada or another state; or is financially unsound.

12 8 Nevada Law Supplement 16. Reinsurance intermediary [NRS 681A.420] a. A person may not act as a reinsurance broker for a domestic insurer or reinsurer unless he is: a licensed producer in Nevada; or licensed as a nonresident intermediary for reinsurance in Nevada. b. A person may not act as a reinsurance broker for a foreign or alien insurer or reinsurer if he maintains an office, directly, as a member or employee of a firm or association, or as an officer, director, or employee of a corporation in Nevada, unless he is: a licensed producer in Nevada; or licensed as a nonresident intermediary for reinsurance in Nevada. c. A person may not act as a manager for reinsurance for a domestic insurer or reinsurer unless he is: a licensed producer in this state; or licensed as a nonresident manager for reinsurance in Nevada. d. A person may not act as a reinsurance manager for any foreign or alien insurer or reinsurer if he maintains an office, directly, as a member or employee of a firm or association, or as an officer, director, or employee of a corporation in Nevada, unless he is: a licensed producer in Nevada; or licensed as a nonresident manager for reinsurance in Nevada. e. A reinsurance manager must: file a bond from an insurer in an amount that is acceptable to the Commissioner for the protection of the reinsurer; and maintain a policy covering errors and omissions in an amount that is acceptable to the Commissioner. B. COMMISSIONER OF INSURANCE 1. General powers and duties [679B.110,.120,.130; 679B.180,.190; NAC 679B.154] The Commissioner of Insurance has the power to make and enforce rules and regulations to implement the insurance laws of Nevada (contained in the Insurance Code). a. The Commissioner is responsible for organizing and managing the Department and directing and supervising all of its activities. b. The Commissioner may delegate his powers and duties to a deputy examiner or employee of the Insurance Division.

13 Nevada Law Supplement 9 c. The Commissioner is responsible for executing the duties imposed upon him by the Insurance Code, enforcing the provisions of the Code, and conducting examinations and investigations of all insurance matters. d. The Commissioner is also responsible for investigating any person or company licensed to transact insurance in Nevada to determine if any provision of the Insurance Code has been violated and for taking appropriate action to enforce it. e. The Commissioner also investigates fraudulent claims for benefits under an insurance policy. f. Counseling services [NRS 679B.127] The Commissioner may participate in a program that provides counseling to elderly persons concerning health insurance. 2. Enforcement of the Insurance Code [NRS 679B.180] If necessary, the Commissioner may invoke the aid of the courts through any legal process to take action against any person or company that has violated any provision of the Insurance Code. a. The Commissioner may give information to the local district attorney or state attorney general for further action. b. The district attorney or attorney general will either promptly initiate action or refuse to prosecute the claim. c. Penalty for unauthorized transaction of insurance [NRS 679B.185] If any person willfully engages in the unauthorized transaction of insurance, the Commissioner may impose an administrative fine of up to $10,000 for each act or violation. 3. Maintenance of records [NRS 679B.190] The Commissioner must maintain all records relating to the business of insurance and turn them over to his successor. a. Most records, including those relating to investigations, are open for public inspection unless the Commissioner determines that releasing such records will harm the person or company that was investigated. b. Records related to the investigation of fraudulent claims are confidential and not open for public inspection, unless the Commissioner deems that no harm will come from releasing them or unless ordered by the courts to do so. 4. Examinations One of the most important responsibilities of the Commissioner is to periodically examine the records of individuals and companies transacting insurance in Nevada.

14 10 Nevada Law Supplement a. Required examinations [NRS 679B.230,.250] 1.) The Commissioner must examine the books and records of each authorized insurer every five years to determine its: financial condition; ability to meet its obligations; and compliance with the law. 2.) Companies may also be examined to determine whether they will be granted a certificate of authority. The Commissioner may conduct examinations or delegate them to a deputy examiner. 3.) A foreign or alien insurer may be examined in cooperation with the insurance supervisory officers of other states in which the insurer transacts business. The Commissioner may accept a report of the examination of a foreign or alien insurer prepared by the division for a foreign insurer s state of domicile, or an alien insurer s state of entry into the United States. b. Investigation of an insurer s affiliates [NRS 679B.240] To determine if an insurer has complied with the law, the Commissioner may examine an insurer s affiliates. In this context, the term affiliate includes: any agent, broker, solicitor, adjuster, surplus lines broker, bail bondsman, motor club agent, or other licensee; anyone who exclusively manages or controls an insurer; an insurance holding company that owns shares of voting stock of a domestic insurer for the purpose of controlling the insurer; any person who assists in promoting, financing, or forming an insurer in Nevada; any external review organization; and any subsidiary of the insurer. c. Conduct of examinations [NRS 679B.250,.290,.300] 1.) The Commissioner can appoint examiners to conduct each examination. 2.) Any company or individual being examined must give examiners access to accounts, records, documents, files, and any other relevant information. 3.) Examiners authorized in writing by the Commissioner may summon and examine under oath anyone they believe has knowledge of the affairs being investigated. Refusing without just cause to be examined or willfully interfering with examiners is considered a misdemeanor. 4.) Examination costs are paid by the insurer or person being examined.

15 Nevada Law Supplement Hearings [NRS 679B ; 683A.461] a. The Commissioner may hold a hearing whenever he deems necessary. For example, the Commissioner may hold hearings to determine if an insurance law has been violated or to consider new regulations for adoption. b. Hearings are sometimes held at the request of someone other than the Commissioner. A person must request a hearing in writing. 1.) If approved by the Commissioner, a hearing will be held within 30 days after the request is made. 2.) Pending the hearing, the Commissioner may postpone the effective date of any action the hearing will address. c. Notice of hearing [NRS 679B.320] 1.) Generally, the Commissioner must give at least 20 days written notice of a hearing, stating the date, time, and place of the hearing and the matters to be considered. 2.) If the purpose of a hearing is to consider rules and regulations or other matters that require notice to more than 30 people, the Commissioner may give notice in a newspaper. d. Conduct of hearings and examinations [NRS 679B.330,.340] 1.) The person conducting a hearing (the Commissioner or appointee) may: subpoena witnesses and examine them under oath (intentional disobedience of a subpoena is a misdemeanor); and require the production of books, papers, records, correspondence, or other relevant documents. 2.) A record must be made of the hearing. e. Immunity from liability for incriminating testimony [NRS 679B.350] 1.) Witnesses who ask to be excused from testifying on the grounds that it may incriminate them, but who are directed by the attorney general to testify anyway, cannot be penalized because of their testimony. 2.) The witness is not exempt from prosecution for perjury and the suspension of any license or authority conferred. 3.) A witness who files with the Commissioner and the attorney general a statement expressly waiving immunity is not exempt from prosecution.

16 12 Nevada Law Supplement f. Orders on hearings [NRS 679B.360,.370] Generally, within 30 days after a hearing, the Commissioner issues an order on the hearing that must include: the facts found at the hearing; the Commissioner s conclusions; the Commissioner s decision and its effective date; and citation of the Nevada insurance law on which the order is based. g. Right of appeal Any person aggrieved by an order issued by the Commissioner at a hearing may petition for judicial review of the matter. II. LICENSING A. LICENSE REQUIRED [NRS 683A.201] A person shall not sell, solicit, or negotiate insurance in the state of Nevada for any class of insurance unless the person is licensed for that class of insurance. 1. An insurance company does not need to be licensed as a producer in order to transact insurance. However, anyone transacting insurance on its behalf must be licensed as a producer. 2. Any person required to be licensed who transacts insurance without a license is subject to an administrative fine of up to $1,000 for each violation. B. LICENSING QUALIFICATIONS 1. Any person or company that wants to solicit insurance must be licensed to do so. Licenses state the name and address of the licensee. Producers licenses do not list the insurers that have appointed them (a person may be appointed as an agent with more than one company, unless forbidden by the insurer). 2. Qualifications [NRS 683A.251] To be licensed as a producer in Nevada, a person must: be at least 18 years old; not have committed any act that is a ground for refusal to issue or suspend, or revoke a license; have completed a course of study for the lines of business for which the application is made, unless the applicant is exempt from the examination requirement; have paid the appropriate fees; and have successfully passed the examination requirement, unless the applicant is exempt. 3. Any business organization wishing to be licensed must also designate a natural person to be licensed as a producer of insurance. That person must meet the licensing requirements stated above.

17 Nevada Law Supplement Residents of Nevada who are applying for a license must, at their own expense, arrange to have their fingerprints taken by a law enforcement agency and submitted directly to the Central Repository for Nevada Criminal Records in order to have a background search conducted on them there and by the Federal Bureau of Investigation in its national criminal records. C. LICENSING OF FIRMS OR CORPORATIONS A firm or corporation may be licensed as a managing general agent. D. TYPES OF LICENSES [NRS 683A.261] Unless refused by the Commissioner, any qualified person may be issued a license in one or more of the following lines of insurance: life insurance; health insurance; property insurance; casualty insurance; surety (included in property and casualty for purposes of producer licensing); variable annuities and variable life; credit insurance as a limited line; personal lines insurance; fixed annuities as a limited line; crop as a limited line; portable electronics as a limited line; travel and baggage as a limited line; and rental car agency as a limited line. E. LICENSING AND EXAMINATION EXEMPTIONS 1. License exemption [NRS 683A.211] An insurance producer license is not required of the following: an officer, director, or employee of an insurer or an insurance producer who does not receive any commission on policies sold in Nevada; an officer, director, or employee whose activities are executive, administrative, managerial, or clerical and are only indirectly related to the sale of insurance; an officer, director, or employee whose activities relate to underwriting, loss control, inspection or the processing, adjusting, investigating, or settling of claims; an officer, director, or employee who acts as an agency supervisor, assists insurance producers, and provides technical advice that does not include selling insurance; a person who takes enrollments or performs administrative services for group life, accident and health, and annuity plans and receives no commission for the services; an employer or association or its officers, directors, or employees who administer its employee benefit program and who are not compensated by the company issuing the insurance contracts; employees of insurers who rate or classify risks or train insurance producers and who do not sell insurance; a person whose activities are limited to advertising, and not selling, insurance;

18 14 Nevada Law Supplement a salaried, full- time employee who advises his employer about insurance, provided that the employee does not sell insurance nor receive a commission; or an employee of a producer or insurer who responds to requests from policyholders, if the employee does not receive commissions, sell insurance, or offer advice concerning policy terms or conditions. 2. Examination exemptions [NRS 683A.291] Most applicants for a producer s license must pass an examination, except for the following: an applicant who was previously licensed for the same lines of insurance in another state if he is currently licensed in that state or was licensed and in good standing and if the application for a license in Nevada is received within 90 days of the termination of that state s license; a producer who confines his activities to insurance categorized as limited line, credit, travel, baggage, fixed annuity, portable electronics, or covering vehicles leased for a short term; or a person licensed in another state who moves to Nevada and wishes to become licensed with 90 days of establishing residency in the state. F. LICENSEE NAME [NRS 683A.301] The Commissioner may disapprove any licensee name (except an individual applicant s true, natural name) to be used by an applicant or licensee if: it interferes with, or is deceptively similar to, a name used by another licensee; it may mislead the public; it states or implies that the licensee is an insurer, motor club, hospital service plan, or is entitled to engage in insurance activities not allowed under its license(s); it implies that the licensee is an underwriter when that is not the case; or the licensee submits a request to use more than one fictitious name at a single business location. G. TEMPORARY LICENSES 1. The Commissioner may issue a temporary license as a producer of insurance to any of the following for 180 days or less without requiring an examination if the Commissioner believes the license is necessary to carry on the business of insurance: a. The surviving spouse, personal representative, or guardian of a licensed producer who dies or becomes incompetent b. A member or employee of a business organization licensed as a producer, on the death or disability of the natural person designated in the license c. The designee of a licensed producer entering active military service in the armed forces of the United States d. Any person in any other circumstance when the Commissioner believes the public interest would be best served by issuing such a license 2. A temporary license expires when the owner or the owner s personal representative or guardian disposes of the business.

19 Nevada Law Supplement 15 H. APPOINTMENT OF PRODUCER AS AGENT [NRS 683A.321] An insurance producer is not allowed to act as an agent for an insurer unless he is appointed by the company for that purpose. A producer who is not acting as an agent is a broker who does not need an appointment. 1. To appoint a producer, the insurer must file a notice of appointment within 15 days after the contract is executed or the first application for insurance is submitted. a. Upon receipt of the notice of appointment, the Commissioner shall determine, within 30 days, if the producer is eligible for the appointment. b. If he is not eligible, the Commissioner must notify the insurer within five days of the determination. 2. A broker may not place insurance, other than life, health, annuities, or surplus lines business, that covers property or risks in Nevada unless the broker does so with a licensed agent of an authorized insurer. a. An agent is a producer who is compensated by the insurer to sell, solicit, or negotiate insurance on behalf of the insurer. b. A broker is an insurance producer who is not an agent of the insurer, who solicits, negotiates, or procures insurance on behalf of an insured or prospective insured, and who does not have the power, by his own actions as a broker, to obligate an insurer on any risk or any transaction. 3. Termination of appointment [NRS 683A.331] An insurer who terminates the appointment of a producer must notify the Commissioner within 30 days after the termination is effective. If the termination is the result of a violation of Nevada law, the insurer must also notify the Commissioner of this fact. The producer may pursue further action with the Commissioner in these situations. I. LICENSE MAINTENANCE AND TERMINATION 1. Term of license [NRS 683A.261] Insurance licenses remain in effect unless revoked, suspended, allowed to expire, or otherwise terminated. Every insurance license issued in Nevada bears an expiration date on which the license will terminate unless renewed. 2. License renewal/continuing education requirements [NRS 683A.261, ] Producers must request license renewal in writing. Each resident licensee must certify that the licensee has successfully completed 30 hours of approved continuing education within the three-year period before license renewal. Continuing education hours must relate to the type of insurance for which the license was issued. Three of the 30 hours of continuing education must be in the subject of ethics.

20 16 Nevada Law Supplement a. The Commissioner will exempt a licensee from the requirements for continuing education if the licensee certifies that: the licensee has earned and continues to maintain designation as a Chartered Property Casualty Underwriter (CPCU ), Chartered Life Underwriter (CLU TM ), Certified Insurance Counselor (CIC), CERTIFIED FINANCIAL PLANNER TM (CFP ), or Chartered Financial Consultant (ChFC ); or the licensee has 20 years of continuous experience and has earned his primary source of income in the business of insurance by transacting insurance. b. The certification must be submitted to the Commissioner in an affidavit approved by the Commissioner. 3. License denial [NRS 683A.461] If the Commissioner refuses to issue a license, he must promptly notify the applicant or licensee and must state the reasons for the denial. An applicant or licensee may request a hearing on the matter, which must be held within 30 days of the request. 4. Suspension or revocation of license [NRS 683A.451,.461,.490] a. In Nevada, the Commissioner can deny, suspend, or revoke a license, or place a licensee on probation under certain circumstances. After notice and a hearing, the Commissioner may suspend, revoke, limit, or refuse to renew a license if a licensee: provides incorrect, misleading, incomplete, or partially untrue information in his application for a license; violates a law regulating insurance, or violates a regulation, order, or subpoena of the Commissioner or of another state; obtains or attempts to obtain a license by fraud or misrepresentation; misappropriates, converts, or improperly withholds money or property received in the course of the business of insurance; has been convicted of a felony; admits or has been found to have committed an unfair trade practice or fraud; intentionally misrepresents the terms of an actual or proposed contract of or application for insurance; uses fraudulent, coercive, or dishonest practices or demonstrates incompetence and lack of financial responsibility; has had his license denied, suspended, or revoked as an insurance producer in Nevada or any other state; forges another s name to an application or other document; improperly uses notes or other reference material to complete a license examination; knowingly accepts business related to insurance from an unlicensed person; or fails to comply with an administrative or judicial order imposing an obligation to pay child support.

21 Nevada Law Supplement 17 b. A person whose license is suspended or revoked may request a hearing. In addition to or instead of suspension, revocation, or refusal of a license, a violator may be fined $25 to $500. Failure to pay this fine will result in prompt revocation of his license. J. CHANGE OF ADDRESS [NRS 683A.261] A licensee must inform the Commissioner in writing of a change of business or residence address within 30 days after the change. If such notification is not made and the Commissioner is unable to locate the licensee after a diligent effort, the person s license may be revoked without a hearing. K. MAINTAINING RECORDS [NRS 683A.261,.351,.390] 1. All producers must maintain in Nevada a place of business accessible to the public in which the licensee principally conducts transactions under his license. a. The place of business can be in the licensee s residence in Nevada. b. The licenses of the licensee and the licensee s solicitors must be conspicuously displayed in the place of business. c. The agent or broker must keep all required records at this place of business. 2. Producers must keep records of their insurance transactions. The records must show, for each insurance policy placed or countersigned by the licensee: the names of the insurer and the insured; the number and expiration date of the policy; the premiums payable; the names of all other persons for whom business is accepted or to whom commissions are promised or paid; and all premiums collected. 3. The records must be open to the Commissioner s inspection and may be destroyed three years after the policy expires. L. COUNTERSIGNATURE REQUIREMENTS [NRS 680A.300,. 310] 1. Authorized insurers cannot make, write, place, or renew insurance policies in Nevada except through their appointed and licensed agents, any one of whom must countersign the policy. 2. The countersignature rule applies primarily to property and casualty insurance. It does not apply to: life insurance and annuities; health insurance; reinsurance made by or for authorized insurers; policies covering property in transit, or the equipment used to transport the property;

22 18 Nevada Law Supplement bid bonds issued in connection with any public or private contract; or policies issued to risk retention groups (organizations whose members assume a risk among themselves and agree to share the exposure to liability within the group). M. POLICY DELIVERY [NAC 687B.415] Whenever an insurer or agent delivers a policy or certificate of insurance to an individual policyowner, the document must state the: kind and amount of coverage; term of coverage; amount of premium for every coverage; and name and address of the company issuing the coverage. III. MARKETING PRACTICES The business of insurance requires honesty and good faith. For this reason, the insurance industry is regulated to ensure that its responsibilities to the public are upheld. It is illegal to engage in any marketing practice that involves unfair competition or a deceptive act. The following section reviews marketing and claims practices that are illegal in Nevada. A. UNFAIR AND DECEPTIVE PRACTICES Producers are prohibited from engaging in unfair or deceptive acts or methods of competition with respect to selling and servicing insurance policies. Although certain acts clearly are defined in the Code as illegal, the Department of Insurance may also decide whether other unspecified activities are deceptive or unfair. B. UNFAIR CLAIMS METHODS AND PRACTICES [NRS 686A.300,.310] 1. Few things will sour policyowners opinions of their agents or their agents companies more than the belief that they have been treated unfairly in claim settlements. As a result, the following practices are illegal: misrepresenting to insureds or claimants pertinent facts or insurance policy provisions relating to any coverage; failing to act reasonably promptly upon communications regarding claims arising under insurance policies; failing to implement reasonable standards for the prompt investigation and processing of claims arising under insurance policies; failing to affirm or deny coverage of claims within a reasonable time after proof of loss requirements have been completed and submitted by the insured; failing to make prompt, fair, and equitable settlements of claims in which the insurer s liability has become reasonably clear; offering insureds substantially less than the amounts ultimately recovered in legal actions brought by the insureds, when the insureds claims are similar to the amounts ultimately recovered; attempting to settle an insured s claim for less than the amount a reasonable person would have believed he was entitled by referencing the advertising material accompanying the application;

23 Nevada Law Supplement 19 attempting to settle claims on the basis of an application that was altered without notice to the insured, his representative, agent, or broker; failing, upon payment of a claim, to inform insureds or beneficiaries of the coverage under which payment is made; making known to insureds or claimants that the insurer regularly appeals arbitration awards in favor of insureds or claimants for the purpose of compelling them to accept settlements or compromises less than the amount awarded in arbitration; delaying the investigation or payment of claims by requiring an insured, claimant, or physician to submit a preliminary claim report and a formal proof of loss form that contain substantially the same information; failing to settle claims promptly, where liability has become reasonably clear, under one portion of the insurance policy coverage in order to influence settlements under other portions of the insurance policy coverage; failing to explain a claim denial or settlement offer to the insured; advising an insured or claimant not to seek legal counsel; and misleading an insured or claimant about any applicable statute of limitations (a statute of limitations is a period of time within which a person must file a lawsuit for a particular incident; if the person does not file the lawsuit within that time, the courts will not permit him to sue for that incident). 2. Minimum standards in claims settlement practice a. Definitions [NAC 686A.625,.650] A first-party claimant asserts a right to payment under an insurance policy when a particular loss or event occurs. A third-party claimant asserts a claim against any person or legal entity insured under an insurance policy. In the case of motor vehicle policies, for example, the owner of a car that is damaged by another vehicle is a third- party claimant. b. Minimum standards [NAC 686A ] There are certain minimum standards in the practice of resolving claims that, if repeatedly violated, reveal a pattern of unfair claims settlement methods. Even if a prohibited act does not occur often enough to show a pattern, it may violate the general rule against unfair claims methods and practices. These minimum standards include the following requirements: 1.) An agent or insurer must disclose all relevant benefits and coverages of a policy under which a claim is made. 2.) Unless the insurance policy states otherwise, an insurer may not require a claimant to give written notice of a loss within a specified time, unless the claimant s failure to do so would endanger the insurer s rights. 3.) No insurer may ask the claimant to sign a release that extends beyond the incident or condition that gave rise to the claim payment. 4.) No insurer may deny a claim on the basis that it could not inspect the damaged property unless it can prove that it demanded access from the claimant and was unreasonably refused such access.

24 20 Nevada Law Supplement 5.) No insurer may issue a check in partial payment of a loss or claim in the check terms that would release the insurer from complete liability. 6.) Insurers must respond to Department of Insurance inquiries within 10 working days. 7.) Every insurer must acknowledge a claim notice within 20 working days unless the insurer pays the claim within that time. This also means that an insurer, upon receiving the claim notice, must provide necessary forms, instructions, and reasonable assistance so that the claimant can comply with the conditions of the policy. 8.) An insurer must begin investigating a claim within 20 days of receiving the claim notice. The investigation must be completed within 30 working days after the claim notice, and the insurer must tell the claimant if it accepts or denies the claim. If the investigation requires more time, the insurer must explain the reasons for the delay to the claimant. The investigation can then continue in 30-day extensions until completed, with notice to the claimant every 30 days. 9.) An insurer must reply to a claimant s communication within 20 working days if a response is appropriate. 10.) An insurer may not delay settlement of a claim for so long that the claimant s rights may be affected by a statute of limitations, without giving the claimant written notice that the limitations period may expire and may affect the claimant s rights. The insurer must give this notice at least 60 days before the limitations period expires. 3. Standards applicable to insurers under automobile policies [NRS 686A.300; NAC ] a. When an automobile insurance policy provides for the adjustment and settlement of first- party automobile total losses on the basis of actual cash value or replacement with another of like kind and quality, one of the following methods must be applied: the insurer may make a cash settlement based upon the actual cost to purchase a comparable automobile, including all applicable taxes, license fees, and other ownership transfer fees (minus any deductible); or the insurer may offer a comparable replacement automobile and pay all applicable taxes, license fees and other ownership transfer fees (so that the insured will only be responsible for the deductible provided in the policy). b. When liability and damages are reasonably clear, an insurer cannot recommend that a third- party claimant make a claim under his own policy solely to avoid paying claims under the insurer s insurance contract or policy.

25 Nevada Law Supplement 21 c. Insurers may not require a claimant to travel unreasonably to inspect a replacement automobile, obtain a repair estimate, or have the automobile repaired at a specific repair shop. d. When the amount claimed is reduced because of betterment or depreciation, all supporting information must be contained in the claim file. (Betterment exists when the repair actually makes the item better than it was before the accident.) e. Insurers cannot delay making payment for damage to a motor vehicle (for more than 30 days) after receiving a statement of charges from any garage or licensed body shop previously authorized to perform the repairs required by the claim. 4. Motor vehicle physical damage appraiser [NRS 684B.010,.020,.030] A motor vehicle physical damage appraiser is any person, association, or corporation that, for a separate fee, appraises damages to motor vehicles insured under automobile physical damage policies or on behalf of third- party claimants. a. A motor vehicle physical damage appraiser must obtain a license from the Commissioner and pay the applicable license fee. b. This requirement does not apply to licensed insurance adjusters or employees of an authorized insurer, motor club, motor vehicle dealer, or auto body repair shop. C. UNFAIR MARKETING PRACTICES The Insurance Code identifies a number of unfair marketing practices that are punishable by a fine and, in some cases, by suspension or revocation of a license. The following are unfair methods of competition and unfair and deceptive acts concerning the transaction of insurance. 1. Misrepresentation [NRS 686A.030,.040] Misrepresentation and false advertising of a policy or a company is illegal. a. Misrepresentation includes issuing, circulating, or making false statements about the provisions and benefits of a policy, dividends to be received, and the general condition of any insurer. b. It is also illegal to misrepresent the true nature of a policy by using a confusing policy name or making false statements. c. Misrepresentation can also occur through the omission of relevant information during the sales process, either of the producer s own policies or the competition s policies. 2. Twisting [686A.050] If misrepresentation is involved in a replacement sale (that is, one in which a new policy is replacing an existing one that will be surrendered in some manner), the sale is said to be a result of twisting. Twisting is illegal. 3. Fraud [NRS 686A ] Anyone who willfully makes any false or fraudulent statement on an insurance application, presents any false, misleading, or incomplete information in support of a claim, or who assists another in doing so, commits

26 22 Nevada Law Supplement insurance fraud. Insurance fraud is a felony and can subject the guilty person to imprisonment in the state prison for six months to one year, a fine of $5,000, or both. 4. Defamation [686A.080] It is illegal to make any oral or written statements that are false, maliciously critical, or derogatory to the financial condition of an insurer or intended to injure any person engaged in the insurance business. This is true even if the statements are accurate but have no relevance to the defamed person s or company s ability to transact insurance properly. 5. Rebating [NRS 686A ] Nothing of value may be given to a prospective applicant to induce the purchase of a policy. a. The Code specifically describes the following as illegal inducements: paying or offering to pay any part of a policy s premium; promising to provide special favors or advantages in the dividends or other benefits received under a policy; offering anything of value not specified in the contract; and offering stocks, bonds, securities, or advisory board contracts as an inducement to purchase a policy. b. It is not considered rebating for a company to: pay commissions or other compensation to licensed agents, brokers, or solicitors; extend credit to an insured for paying premiums and for which a reasonable interest rate is charged; or return to participating policyholders, dividends, savings, or unabsorbed premium deposits. c. Anyone who violates the rebate law is guilty of a misdemeanor. Agents or brokers may not receive a commission for policies on which a rebate was given. 6. Unfair discrimination [NRS 686A ; NAC 686A ] It is illegal to permit unfair discrimination in the policy rates charged to individuals of the same risk classification. a. Unfair discrimination exists when two people of equal risk are charged different rates or provided different service and benefits solely because of a difference in race, religion, national origin, or where they live. b. The availability of insurance may not be denied to an insured on the basis of sex or marital status. 1.) The amount of benefits payable and the conditions or types of coverage offered may not be restricted, modified, excluded, or reduced solely on the basis of sex or marital status, except as a result of the application of rate differentials permitted under the Insurance Code. 2.) Marital status may be used to determine eligibility for dependent or family coverage.

27 Nevada Law Supplement 23 c. Prohibited practices [NAC 686A.140] The following practices are prohibited: denying coverage to women who are gainfully employed at home when coverage is offered to men who are similarly employed; denying policy riders to women when the riders are available to men; denying dependent coverage under a group contract to husbands of female employees when dependent coverage is available to wives of male employees; denying disability insurance to employed women while covering men who are similarly employed, offering women lower maximum monthly benefits, or using more restrictive benefit periods and definitions of disability for women. d. Rates [NAC 686A.150] No rate differential may be applied on the basis of the sex or marital status of an insured unless it is based on sound actuarial data. 7. Agreement for consultation or related advice: provisions for commissions and fees; written contract [NRS 686A.230, NAC 686A.335] a. Except as otherwise provided, an agreement for consultation or related advice which is entered into by an agent who is also licensed as a broker of casualty, property, or surety insurance may, with respect to property, casualty, or surety insurance that the agent sells to businesses, provide for the agent to receive: a commission paid by the insurer; a fee paid by the client; or a combination of a commission paid by the insurer and a fee paid by the client. b. These provisions do not authorize an agent to receive a commission or fee that is otherwise prohibited by a different agreement between the agent and insurer. c. If an agent and a client enter into an agreement pursuant to Subsection 1 that provides for the agent to receive a fee, the agreement must be expressed in the form of a written contract. The written contract must: set forth the full amount of compensation that the agent will receive pursuant to the agreement; be signed by the agent and the client before the completion of any transaction that will, pursuant to the agreement, entitle the agent to receive compensation; and be retained by the agent for not less than five years. 8. Commissions [NRS 683A.361] a. An insurer or a producer may not pay a commission, brokerage, service fee, or other valuable consideration to a person for selling, soliciting, or negotiating insurance if the person s activities require him to be licensed and he is not. b. A person may not accept a commission, brokerage, service fee, or other valuable consideration for selling, soliciting, or negotiating insurance if the person s activities require him to be licensed and he is not.

28 24 Nevada Law Supplement c. Commissions for renewal and other deferred commissions may be paid to a person whose activities required him to be licensed at the time of the sale, solicitation, or negotiation and he was so licensed at that time. d. An insurer or producer may pay or assign commissions, brokerages, service fees, or other valuable considerations to an insurance agency or a person who does not sell, solicit, or negotiate insurance in Nevada unless the payment would violate the provisions of the Insurance Code. D. PENALTIES [NRS 686A.183,.187] 1. If after due notice and hearing, the Commissioner finds that a person committed an unfair act of competition or a deceptive act that violated the Code, the Commissioner will issue a cease and desist order. 2. The Commissioner may also order one of the following penalties, which depend on the status of the offender. a. If a person, other than a licensed producer, knew or should have known that the act violated the Code, the Commissioner may suspend or revoke the license, and may fine the person up to $5,000 for each act. b. If the offender was a licensed producer, the fine is a maximum of $500 for each act. c. If the producer knew or should have known that the act violated the Code, the Commissioner may suspend or revoke the license. 3. A person who violates the Commissioner s cease and desist order may suffer an additional fine of $5,000 for every violation, a suspension or revocation of his license, or both. E. FIDUCIARY RESPONSIBILITIES [NRS 683A.400,.520; NAC 683A ] 1. A fiduciary responsibility is one in which a person in entrusted with the funds of another person. Nevada considers insurance producers to have a fiduciary relationship with their clients any time the client gives funds to the producer. 2. Any representative of an insurance company who diverts or appropriates policyowner funds for his own use is guilty of embezzlement. Violation of this section of the Code therefore carries risks of penalties far greater than any fines the Insurance Department may impose. 3. This fiduciary regulation can be violated easily, so producers must always make sure to avoid even the appearance of wrongdoing.

29 Nevada Law Supplement 25 a. For example, it is illegal to commingle fiduciary funds received from clients with personal funds such as a personal checking account, even if for a brief period of time. b. An agent who puts an applicant s premium deposit in his own personal checking account, even with full intention of writing a check to transmit the funds to the insurer, has violated this section of the Code. 4. Insurance producers must set up a premium trust account to temporarily hold funds intended for the insurer. The account must be maintained for that purpose only, and no personal funds must ever be placed in it. 5. The one exception to the no commingling of personal funds rule allows producers to place a portion of their unearned commissions in the premium trust account to: avoid being short in the event of a policy cancellation; advance premiums for clients; or cover unanticipated contingencies that may arise in the process of transmitting premiums between the client and insurer. 6. Producers are expected to remit funds to their intended receiver (whether the receiver is the client or the insurer s home office) within 15 days of receiving them. a. If the producer fails to remit the premium to the insurer within 30 days after it is due, the insurer must promptly report the failure to the Commissioner. b. The Commissioner may suspend the violator s license until the funds are remitted or the insurer files a release of the indebtedness with the Commissioner. F. INSURANCE GUARANTY ASSOCIATIONS [NRS 687A.033,.035,.060,.090] 1. There are two associations in Nevada that protect Nevada insureds against insurer insolvency: the Nevada Life and Health Insurance Guaranty Association and the Nevada Insurance Guaranty Association. a. Insurers who transact life or health insurance or annuity contracts in Nevada must belong to the Nevada Life and Health Insurance Guaranty Association. b. Insurers transacting direct insurance (except annuity contracts, life, health, title, surety, mortgage guaranty, and ocean marine insurance) must belong to the Nevada Insurance Guaranty Association. c. Both associations are funded by assessments paid by member insurers. 2. When an insurer is insolvent (it does not have sufficient reserves to support its liabilities) or close to insolvency, the Insurance Guaranty Association may guarantee or

30 26 Nevada Law Supplement reinsure all covered policies or loan the insurer money. The Association also has the following responsibilities when an insurer is insolvent or close to insolvency: paying covered claims (up to $300,000) that existed before insolvency and that arise within 30 days after insolvency; paying the entire amount of the claim, if the claim is for workers compensation; acting as the insurer to the extent of its obligations on the covered claims and having all the rights, duties, and obligations of the insolvent insurer; and notifying insureds of insurer insolvency, if directed by the Commissioner. 3. A covered claim is an unpaid claim or judgment, including a claim for unearned premiums, that arises out of an insurance policy issued by an insurer that becomes insolvent when one of the following conditions exist. a. The claimant or insured, if a natural person, is a resident of Nevada at the time of the insured event. b. The claimant or insured, if other than a natural person, maintains its principal place of business in Nevada at the time of the insured event. c. The property from which the first party s property damage claim arises is permanently located in the state. d. The claim is not a covered claim under the laws of any other state and the premium tax imposed on the insurance policy is payable in Nevada. 4. Any person recovering funds from the Association is deemed to have assigned his rights under the policy to the Association, to the extent of the recovery from the Association. 5. The Association may recover the amount of money paid to an insured if: a. the insured or any of its affiliates has an aggregate net worth of more than $25,000,000 on December 31 of the year preceding the date the insurer became insolvent; or b. the Association paid the money in error. G. THE LIFE AND HEALTH INSURANCE GUARANTY ASSOCIATION [NRS 686C.020, 030, 035, 230, 152, 153, 210] 1. When an insurer is insolvent or close to insolvency, the Life and Health Insurance Guaranty Association may guarantee or reinsure all covered policies or loan the insurer money. 2. When an insurer is insolvent or close to insolvency, the Life and Health Insurance Guaranty Association is responsible for: paying covered claims that existed before insolvency and those arising within 30 days after insolvency;

31 Nevada Law Supplement 27 acting as the insurer to the extent of its obligations on the covered claims and having all the rights, duties, and obligations of the insolvent insurer; and notifying insureds of insurer insolvency, if directed by the Commissioner. 3. The following insured persons are eligible for coverage through the Association when their insurers become insolvent: Residents of Nevada who own life insurance policies or certificates, health insurance policies, or certificates and annuities (except for structured settlement annuities) Nonresidents whose insurers are domiciled in Nevada Beneficiaries, assignees, or payees of eligible insureds 4. The Association does not provide coverage for: the portion of a policy not guaranteed by the insurer, where the risk is carried by the policy s owner; a reinsurance policy, unless assumption certificates have been issued; a portion of a policy that is subject to a rate of interest that exceeded the allowable rates set by the Association; a self-funded or uninsured policy of an employer or association, including a multiple employer welfare arrangement (MEWA), a minimum-premium group insurance plan, a stop-loss group insurance plan, or a contract for administrative services only; a portion of a policy that provides for dividends, credits for experience, voting rights, or fees to the owner of a policy, for services or administration connected with the policy; a policy issued by an insurer at a time when it was not authorized to issue the policy in Nevada; the investment portion of a defined contribution plan that is owned by an entity other than the insurer; and an unallocated annuity contract. 5. The Association liability is limited to the following amounts of coverage. a. For one life, an aggregate of: $300,000 in death benefits from all life insurance policies and no more than $100,000 in net cash surrender values; or $100,000 from annuities, including cash surrender values. b. For health insurance for any one person: $100,000 for coverages other than disability insurance, basic hospital, medical, and surgical insurance, or major medical insurance, including any cash values; $300,000 for disability insurance; or $500,000 for basic hospital, medical, and surgical insurance, or major medical insurance.

32 28 Nevada Law Supplement c. For each recipient of a qualifying structured settlement annuity or its beneficiary, $100,000, including any cash value. d. For one life or person, the Association is obligated only for: an aggregate of $300,000 in benefits, excluding benefits for basic hospital, medical, and surgical insurance or major medical insurance; or an aggregate of $500,000 in benefits, including benefits for basic hospital, medical, and surgical insurance or major medical insurance. e. For the owner of several nongroup life policies, whether the owner is a person or an organization, the Association is obligated for up to $5 million in benefits, regardless of the number of policies held by the owner. f. For each participant in a government retirement plan created under sections 401, 403(b), or 457, $100,000. IV. PROPERTY AND CASUALTY INSURANCE LAWS AND REGULATIONS A. RENEWAL AND CANCELLATION [687B ] The following Nevada laws and regulations relate specifically to the renewal, nonrenewal, and cancellation of property and casualty policies. 1. Midterm cancellation [NRS 687B.320] Insurance policies that have been in effect for at least 70 days or that have been renewed cannot be cancelled by the insurer before the expiration of the agreed term or one year from the effective date of the policy or renewal (whichever is less) except for the following reasons: failure to pay a premium when due; the insured is convicted of a crime arising out of acts that increase the hazard insured against; discovery of fraud or material misrepresentation in obtaining the policy or in the presentation of a claim under the policy; discovery of a violation of any condition of the policy, if it occurred after the first effective date of the current policy and substantially increases the hazard insured against; a material change in the nature or extent of the risk, if it occurs after the first effective date of the current policy and causes the risk of loss to be substantially increased beyond that contemplated at the time the policy was issued or last renewed; a determination by the Commissioner that continuation of the insurer s present volume of premiums would jeopardize the insurer s solvency or be hazardous to the interests of policyowners, creditors, or the public; or a determination by the Commissioner that the continuation of the policy would violate, or place the insurer in violation of, any provision of the Nevada Insurance Code.

33 Nevada Law Supplement 29 No midterm cancellation is effective until in the case of nonpayment of premium at least 10 days, and in the case of any other reason stated above at least 30 days, after the notice is delivered or mailed to the policyholder. 2. Cancellation after one year [NRS 687B.330] A policy issued for a term longer than one year may be cancelled by the insurer by giving notice of the cancellation: for commercial or business policies, 60 days before any anniversary date of the policy; or for all other policies, 30 days before any anniversary date of the policy. 3. Nonrenewals [NRS 687B.340] a. A policyowner has a right to have his policy renewed, on the terms then being applied by the insurer to persons who are similarly situated, for an additional period equal to the expiring term (if the agreed term is one year or less) or for one year if the agreed term is longer than one year, unless the insurer gave the policyowner notice of its intention not to renew the policy beyond the agreed expiration date. Such notice must be given to the insured: at least 60 days before the agreed expiration date for commercial or business policies; or at least 30 days before the agreed expiration date for all other policies. b. If an insurer fails to provide a timely notice of nonrenewal, the insurer shall provide the insured with an insurance policy on identical terms as the expiring policy. This rule does not apply if the: policyowner has accepted replacement coverage; policyowner has requested or agreed to nonrenewal; or policy is expressly designated as nonrenewable by a clause approved by the Commissioner. 4. Renewal with altered terms [NRS 687B.350] a. If the insurer offers to renew the policy but on different terms (including different rates), the insurer must notify the insured in writing of the different terms or rates at least 30 days before the expiration of the policy. b. If the insurer does not provide adequate and timely notice, the insurer must renew the policy at the expiring terms and rates: for a period equal to the expiring term if the term is one year or less; or for one year if the agreed term is more than one year. 5. Other cancellation and renewal information a. Request for information [NRS 687B.355] If a policyowner requests information for the renewal of a policy, the insurer must provide the policyowner with policy information, including claims paid on behalf of the policyowner.

34 30 Nevada Law Supplement 1.) The information must be provided within 30 working days of the insurer receiving a written request from the policyowner. 2.) The insurer may charge the policyowner a reasonable fee for the information. b. Statement of facts [NRS 687B.360] If a notice of cancellation or nonrenewal does not state with reasonable precision the facts on which the insurer s decision is based, the insurer must supply that information within six days of receiving a written request by the policyowner. No notice is effective unless it contains adequate information about the policyowner s right to make such a request. c. Notice of risk-sharing plan [NRS 687B.370] Cancellation notices must contain adequate instructions enabling the policyowner to apply for insurance through any approved voluntary or mandatory risk- sharing plan (except for a notice of cancellation for the failure to pay a premium when due). d. Immunity [NRS 687B.380] An insurer, its authorized representatives, agents, employees, or any person furnishing the insurer with reasons for cancellation or nonrenewal cannot be held liable for any statement they make in complying with the laws regarding cancellation. e. Prohibited cancellation [NRS 687B.385] An insurer cannot cancel, refuse to renew, or increase the premium for renewal of a policy of motor vehicle insurance covering private passenger cars or commercial vehicles because of any claims made under the policy with respect to which the insured was not at fault. f. Cancellation based on discrimination [NRS 687B.390,.400] Insurers cannot cancel or refuse to renew an automobile liability insurance policy solely because of the insured s age, residence, race, color, creed, national origin, ancestry, or occupation. 1.) Insurers cannot refuse to issue, reduce liability limits of, or increase the premium of any automobile insurance policy issued to a resident of Nevada solely because the policyowner has reached a certain age. 2.) Where age is a factor in a rate increase for an individual policyowner, the increase must be justified to the Commissioner. 3.) The burden of proving justification is on the insurer. The insurer pays for any medical examination that is required for a rate increase. 4.) This does not apply to applicants and policyowners who are younger than 25 years old. g. Notice and administrative review [NRS 687B.410] An insurer that intends to withdraw from providing insurance for a particular class of insureds

35 Nevada Law Supplement 31 must notify the Commissioner of that intention at least 60 days before the notice of cancellation or nonrenewal is delivered or mailed to the insureds. 1.) An insured can request a review by the Commissioner within 30 days after receiving a notice of cancellation or nonrenewal. 2.) The grounds for cancellation or nonrenewal must be reviewed by the Commissioner within 15 days of receiving a written request from an insured. 3.) The insurer must withdraw the cancellation or nonrenewal and reinstate the policy unless it can demonstrate the grounds for cancellation or nonrenewal by clear and convincing evidence. B. BINDERS [NRS 687B.015, ] 1. In Nevada, a binder is a policy for the purpose of proving that a person has insurance coverage. A binder can be defined as an oral or written statement providing immediate insurance protection for a specified period. 2. A binder may only be issued by a resident or nonresident agent appointed by the insurer issuing the policy. 3. In most cases, a binder must not be effective for more than 90 days. The effective period of a binder may be extended 30 days at a time with written approval of the Commissioner. 4. All written binders must be made on forms approved by the Commissioner. Within 24 hours after a written binder becomes effective, copies must be delivered to the insured and the insurer providing coverage under the binder. 5. A policy that is issued to replace a binder must include: limits of coverage that are equal to the limits stated in the binder; and an effective date for the policy that is the same as the effective date of the initial binder. 6. The premium for the policy must include the charge for the period covered by the binder, and must be in accordance with rates filed with the Commissioner. An insurer may not use a binder as a means to lower a premium that an insured is charged. 7. A binder related to an insurance policy that provides less than $1 million of coverage must contain a statement that any person who refuses to accept the binder as proof of insurance is subject the following penalties: fine of up to $500, and liability to the party presenting the binder for actual damages sustained. 8. These rules do not apply to binders related to insurance policies that provide coverage of at least $1 million.

36 32 Nevada Law Supplement C. SURPLUS LINES [NRS 685A; NAC 685A ] 1. Condition for coverage [NRS 685A.030,.040] Occasionally, there is a need for specialized coverage not written by insurers authorized in Nevada. Insurance coverages that cannot be obtained from authorized insurers (called surplus lines coverages) may be obtained from unauthorized insurers under the following conditions: the insurance must be obtained through a surplus lines broker licensed in Nevada; the full amount of insurance required must not be available from authorized insurers, after diligent effort has been made to do so; and the insurance must not be exported only to get a lower premium rate than would be accepted by an authorized insurer. (A difference in rates alone will not justify the export of the insurance if an authorized insurer is able and willing to carry the risk.) 2. Surplus lines are often specialty and nonstandard coverages, such as differences in conditions (DIC) or umbrella liability contracts. (To export means to place insurance covering a subject of insurance that is resident, located, or to be performed in Nevada with an unauthorized insurer.) 3. Business with producers [NRS 685A.150] A licensed surplus lines broker may accept surplus lines business from any producer licensed in Nevada for the kind of insurance involved and may compensate the producer. 4. Fees [NRS 685A.155] A surplus lines broker may charge a fee for obtaining surplus lines coverage. 5. Eligible surplus lines insurers [NRS 685A.070] a. A broker shall not place surplus lines insurance with an insurer that it knows is financially unsound. b. An insurer cannot accept surplus lines risks unless it has surplus for policyowners of at least $15 million and, if an alien insurer, unless it maintains at least $5.4 million in a bank or trust company as a trust fund established for the protection of its policyowners in the United States. c. The trust fund must be at least $100 million for a group of insurers, including individual unincorporated insurers, or a group of incorporated insurers under common administration. d. An insurer is not eligible to write surplus lines insurance unless it has established a reputation for financial integrity and satisfactory practices in underwriting and handling claims. Additionally, a foreign insurer must be authorized in its state of domicile to write the kinds of insurance that it intends to write in Nevada. e. Application [NAC 685A.190] An unauthorized insurer must apply to the Commissioner to become eligible to write surplus lines insurance.

37 Nevada Law Supplement 33 f. Notice [NAC 685A.090] Every surplus lines insurance contract must have a notice stamped on the first page informing the policyowner that the insurer is neither licensed nor supervised by the Nevada Department of Insurance and that the contract is not covered by the Nevada Insurance Guaranty Association if the insurer becomes insolvent. 6. Filing requirements a. Broker s affidavit [NRS 685A.050] Within 90 days after placing surplus lines insurance in effect, the broker must execute an affidavit setting forth facts from which it can be determined whether the insurance is eligible for export. b. Memorandum [NRS 685A.060] The broker must file with the Commissioner a memorandum regarding each coverage he has placed with an unauthorized insurer. c. Evidence of coverage [NRS 685A.080] Upon placing surplus lines coverage, the broker must promptly issue and deliver to the insured evidence of the insurance in either a policy or certificate. The policy or certificate must include: a description and location of the subject of the insurance; a description of the coverage, conditions, and term of the insurance; the premium and rate charged and taxes collected from the insured; the name and address of the insured and insurer; and a statement from the broker that the insurance described has been granted or issued. d. License suspension or revocation [NRS 685A.140,.170] The Commissioner may suspend or revoke any surplus lines broker s license if the broker: fails to file a quarterly statement indicating whether or not the broker has transacted any business during the past quarter; fails to pay the required taxes; fails to maintain an office in Nevada or state of resident broker license, or keep required records; or places surplus lines coverage in another way than the approved manner. 7. Service fees [NAC 685A.230] a. The broker may pass on an inspection fee to the insured and may collect the fee if it is directly related to an independent inspection required by insurers for insurance. 1.) The broker shall maintain a copy of each inspection report and each invoice or statement related to the report in his files. 2.) An inspection fee that is charged to the insured must be shown as a separate item on the broker s certificate, on the cover note, or both.

38 34 Nevada Law Supplement b. Exceptions [NRS 685A.020] The surplus lines law does not apply to reinsurance or to the following kinds of insurance when placed by general lines agents, general lines brokers, or surplus lines brokers licensed in Nevada: wet marine and transportation insurance; insurance on subjects located, or to be performed, outside of Nevada, or on vehicles or aircraft owned and principally garaged outside of Nevada; insurance on property and operations of railroads engaged in interstate commerce; insurance on aircraft of common carriers or cargo of such aircraft, or against liability (other than the employer s liability) arising out of the ownership, maintenance, or use of such aircraft; or insurance on automobile bodily injury and property damage liability risks when written by Mexican insurers and covering risks in Mexico. D. GENERAL RATE STANDARDS AND REGULATIONS 1. Purpose [NRS 686B.010] Nevada laws regarding insurance policy rates were created to protect policyowners and the public against the adverse effects of excessive, inadequate, or unfairly discriminatory rates. The laws were also created to: encourage, as the most effective way to produce fair rates, independent action by and reasonable price competition among insurers; provide formal regulatory controls for use if independent action and price competition fail; authorize cooperative action among insurers in the rate- making process, and to regulate such cooperation in order to prevent practices that tend to bring about monopoly or to lessen or destroy competition; encourage the most efficient and economic marketing practices; and regulate the insurance business in a manner that will preclude application of federal antitrust laws. 2. Rate standards [NRS 686B.050] a. General rules [NRS 686B.050] 1.) Insurance rates must not be excessive, inadequate, or unfairly discriminatory, nor may an insurer charge any rate that can eventually destroy the competition or create a monopoly. 2.) The Commissioner may disapprove rates if there is not a reasonable degree of price competition at the consumer level for the class of business to which the rates apply. 3.) Rates are inadequate if they are clearly insufficient (together with the income from investments attributable to them) to sustain projected losses and expenses in the class of business to which they apply. 4.) One rate is unfairly discriminatory in relation to another in the same class if it fails to reflect the differences in expected losses and expenses.

39 Nevada Law Supplement 35 a.) Rates are not unfairly discriminatory simply because an insurer charges different premiums for policyowners with similar loss exposure but different expense factors, or similar expense factors but different loss exposure. b.) As long as the rates reflect these differences with reasonable accuracy, the rates are not improper. c.) Rates are not unfairly discriminatory if they are averaged broadly among persons insured under a group policy. b. Determining acceptable rates [NRS 686B.060] 1.) When determining whether rates comply with the standards, consideration shall be given to: past and prospective loss and expense experience within and outside of Nevada; catastrophic hazards and contingencies; trends within and outside of Nevada; loadings for leveling premium rates over time or for dividends or savings to be allowed or returned by insurers to their policyowners; and all other relevant factors, including the judgment of technical personnel. 2.) The expense provisions included in an insurer s rates may reflect the operating methods of the insurer and, so far as credible, its own expense experience. c. Filing requirements [NRS 686B ] Every authorized insurer and rate service organization required to adhere to the rating laws must file the following with the Commissioner, that are open to public inspection: rates and proposed increases; forms of policies to which the rates apply; supplementary rate information; and rating changes and amendments. d. Disapproval of rates [NRS 686B.110] If the Commissioner finds that a proposed increase will result in a rate which is not in compliance with Nevada insurance law, the Commissioner shall disapprove the proposal. The Commissioner shall approve or disapprove each proposal no later than 60 days after the Commissioner has received all relevant documentation. If the Commissioner fails to approve or disapprove the proposal within that period, the proposal shall be deemed approved. 3. Exceptions [NRS 686B.030] The rate laws apply to all kinds of direct insurance (if written on risks or operations in Nevada by any insurer authorized to do business in Nevada) except: ocean marine insurance;

40 36 Nevada Law Supplement contracts issued by fraternal benefit societies; life insurance and credit life insurance; variable and fixed annuities; large group health insurance; credit accident and health insurance; surety insurance; credit involuntary unemployment insurance; property insurance for business and commercial risks; and casualty insurance for business and commercial risks other than insurance covering the liability of a licensed practitioner. 4. Rate service organizations a. Definition [NRS 686B.020,.130] All rate service organizations must be licensed in Nevada. A rate service organization is any person, other than an employee of an insurer, who assists insurers in rate making or filing by: collecting, compiling, and furnishing loss or expense statistics; recommending, making, or filing rates or supplementary rate information; or advising about rate questions, except as an attorney giving legal advice. b. Examination [NRS 686B.170] The Commissioner can examine the affairs and condition of any rate service organization whenever necessary. V. PROPERTY INSURANCE LAWS AND REGULATIONS A. PROPERTY INSURANCE [NRS 681A.060; NRS 691A.020] 1. Property insurance is insurance on real or personal property against loss or damage from any hazards or causes. It does not include noncontractual legal liability for any such loss or damage, or title insurance. 2. Mobile homes or manufactured homes [NRS 691A.020] Except as provided in bullet 1 below, each insurer that provides a policy for a personal line of property insurance covering a manufactured home or mobile home in Nevada that was manufactured within the immediately preceding 15 years shall offer to an insured, on a form approved by the Commissioner and in addition to any other insurance, the option of purchasing insurance to pay the replacement value of the manufactured home or mobile home in the event of a total loss of the manufactured home or mobile home, including the reasonable costs for: a. transporting and installing the replacement manufactured home or mobile home; and b. debris removal.

41 Nevada Law Supplement 37 1.) The provisions of this section do not apply to a policy of insurance placed on a manufactured home or a mobile home by a creditor or lender. 2.) Nothing in this section requires any insurer to offer any insurance on manufactured homes or mobile homes at a premium which is not fair and adequate. 3.) Replacement value means the amount needed to repair, replace, or rebuild a damaged or destroyed manufactured home or mobile home using new materials of similar kind and quality with no deduction for depreciation. The term does not include the value of land. 3. Loans secured by real property: insurance tie-in prohibited [691A.030] A lender may not require a borrower, as a condition of obtaining or maintaining a loan secured by real property, to provide property insurance on improvements to real property in an amount that exceeds the reasonable replacement value of the improvements. B. INLAND MARINE INSURANCE [NAC 681A.010] 1. The following kinds of inland marine policies may be sold to consumers: Musical instrument dealers policies covering musical instruments and their accessories (does not include radios and record players) Camera dealers policies, covering cameras and their accessories Furrier dealers policies, covering furs and fur garments Equipment dealers policies, covering mobile equipment such as tractors, harvesters, and construction equipment (excluding motor vehicles designed for highway use) 2. Inland marine policies must exclude coverage of money and securities. 3. Floaters for physicians and surgeons instruments in inland marine policies cover furniture, fixtures, and the tenant s interest in the improvements of the buildings located in the portion of the premises in which the insured practices his profession. C. MARINE AND TRANSPORTATION INSURANCE [NRS 681A.050] 1. Marine and transportation insurance includes: a.) Insurance against any kinds of loss or damage to: vessels, craft, aircraft, cars, automobiles, and vehicles of every kind, as well as all goods, freights, cargoes, merchandise, effects, disbursements, profits, moneys, bullion, precious stones, securities, choses in action, evidences of debt, valuable papers, bottomry and respondentia interests and all other kinds of property and interest therein, in connection with any and all risks or perils of navigation, transit, or transportation, including war risks, on or under any seas or other waters, on land or in the air, or while being assembled, packed, crated, baled, compressed, or similarly prepared for shipment or while await-

42 38 Nevada Law Supplement ing the same or during any delays, storage, transshipment or reshipment incidental thereto, including marine builders risks and all personal property floater risks; person or property in connection with a marine, inland marine, transit or transportation insurance, including liability for loss of or damage to either, arising out of or in connection with the construction, repair, operation, maintenance, or use of the subject matter of such insurance (but not including life insurance or surety bonds or insurance against loss by reason of bodily injury to the person arising out of the ownership, maintenance or use of automobiles); precious stones, jewels, jewelry, gold, silver, and other precious metals, whether used in business or trade or otherwise and whether the same is in the course of transportation or otherwise; and bridges, tunnels, and other instrumentalities of transportation and communication (excluding buildings, their furniture and furnishings, fixed contents and supplies held in storage) unless fire, tornado, sprinkler leakage, hail, explosion, earthquake, riot, or civil commotion are the only hazards to be covered; piers, wharves, docks, and slips, excluding the risks of fire, tornado, sprinkler leakage, hail, explosion, earthquake, riot, or civil commotion; other aids to navigation and transportation, including dry docks and marine railways, against all risks. b.) Marine protection and indemnity insurance, meaning insurance against, or against legal liability of the insured for loss, damage, or expense arising out of, or incidental to, the ownership, operation, chartering, maintenance, use, repair, or construction of any vessel, craft, or instrumentality in use in ocean or inland waterways, including liability of the insured for personal injury, illness, or death or for loss of or damage to the property of another person. 2. For the purposes of this Code, wet marine and transportation insurance is that part of marine and transportation insurance which includes only: insurance upon vessels, crafts, hulls, and of interests therein or with relation thereto; insurance of marine builders risks, marine war risks, and contracts of marine protection and indemnity insurance; insurance of freights and disbursements pertaining to a subject of insurance coming within this definition; and insurance of personal property and interests therein, in the course of exportation from or importation into any country, or in the course of transportation coastwise or on inland waters, including transportation by land, water, or air from point of origin to final destination, in connection with any and all risks or perils of navigation, transit, or transportation, and while being prepared for and while awaiting shipment, and during any delays, storage, transshipment, or reshipment incident thereto.

43 Nevada Law Supplement 39 VI. CASUALTY INSURANCE LAWS AND REGULATIONS A. CASUALTY INSURANCE [NRS 681A.020] Casualty insurance includes the following kinds of insurance coverages: Vehicle Liability Workers compensation and employers liability Burglary and theft Personal property floater Glass Boiler and machinery Leakage and fire extinguishing equipment Credit and mortgage guaranty Elevator Congenital defects Livestock Entertainment Miscellaneous B. AUTOMOBILE INSURANCE 1. Proof of financial responsibility [NRS ,.105, ,.190,.210,.220, , ] a. Every owner of a motor vehicle registered in Nevada must continuously provide proof of financial responsibility, which is proof of ability to cover any liability on account of accidents arising out of the ownership, maintenance, or use of a motor vehicle within the United States or Canada. b. This proof must show an ability to cover at least the following amounts if the owner is found liable for a person s physical injuries, death, or loss of property (15/30/10): $15,000 for bodily injury (or death) to one person in one accident; subject to the limit for one person, $30,000 for bodily injury (or death) of two or more persons in any one accident; and $10,000 for injury to or destruction of property of others in any one accident. c. Proof of financial responsibility may be given by filing: approved certificates of insurance; or a certificate of self- insurance, supplemented by an agreement by the selfinsurer that he will pay the same judgments in the same amounts that an insurer would have been obligated to pay if it had an owner s liability insurance policy.

44 40 Nevada Law Supplement d. Evidence of coverage [NRS 690B.023] If security for the operation of a motor vehicle is provided by an insurance contract, the insurer must provide evidence of insurance to the insured on a form approved by the Commissioner, that must include: the name and address of the policyowner; the name and address of the insurer; the policy number; the year, make, and complete identification number of the insured vehicle; a statement that the coverage meets the state s financial responsibility requirements; and the term of the insurance. e. Insurance card [NAC 690B ] 1.) A permanent card constituting evidence of insurance must be issued by an insurer who provides liability insurance coverage for a motor vehicle in the minimum amounts required by the proof of financial responsibility law. The insurer may permit its duly appointed agent to issue a permanent card. A permanent card: may not be effective for longer than the policy term beginning on the effective date of the policy; and must be issued within 60 days after the effective date of an insurance policy or the effective date on which coverage has been bound, and also with each renewal of the policy. 2.) Upon the submission of an application for motor vehicle liability insurance for which coverage has been bound, a temporary insurance card may be issued by: an insurer; an agent of the insurer (insurers must provide agents with an adequate supply of temporary cards); the Western Association of Automobile Insurance Plans; or printed by an insured on a personal computer if such printing is allowed by the insurer and if the insurer has taken reasonable measures, approved by the Commissioner, to prevent a temporary card from being electronically manipulated or altered. 3.) An insurance card must not be larger than 8 1/2 5 1/2 inches or smaller than 3 3/8 2 1/8 inches and must contain, in not less than eight-point bold type: the name of the policyholder; the name of the insurer; the applicable company code issued by the National Association of Insurance Commissioners; the year, make, and complete identification number of the insured vehicle;

45 Nevada Law Supplement 41 the number of the policy; the term of the insurance, including the day, month, and year in which the policy becomes effective and expires; a company logotype printed on the card or a watermark or other embedded marking that makes the card difficult to counterfeit, reproduce, or alter; a telephone number to verify coverage or report a claim; the statement This card has been approved by the Nevada Commissioner of Insurance; and a statement indicating that the card is not valid for more than a specific number of days, not to exceed 60 days, if it is a temporary card. 2. Premium determination and merit rating [NAC 690B ] a. An insurer may consider any chargeable accident when underwriting, rating, canceling, or refusing to renew an automobile policy. 1.) Each rate filing for automobile insurance submitted to the department must define a chargeable accident in terms of a monetary amount of damage. 2.) The insurer s definition may only include those accidents for which the insured is 50% or more at fault. b. An insurer cannot define a claim made under the comprehensive portion of the policy as a chargeable accident in order to cancel the policy, but a series of such claims may be used to: discontinue comprehensive coverage; or raise the deductible upon the renewal of a policy. c. All private passenger automobile insurance policies must explain how the insurer s rating plan increases premiums based upon specific incidents. Each insurer shall, at least 30 days before the expiration of a private passenger automobile insurance policy, advise the named insured of his right to request the reasons for any increase in the premium for the following policy period. d. For purposes of underwriting, rating, cancellation, or nonrenewal of a policy, an insurer must consider only the incidents that occur while a person is operating a private automobile for passengers. This requirement does not apply to a person who has been convicted of reckless driving, driving while intoxicated, or manslaughter committed while driving. 3. Cancellation of policy [NRS ] An insurer cannot cancel or terminate a motor vehicle liability policy until at least 10 days after a notice of cancellation or termination is mailed to the insured.

46 42 Nevada Law Supplement 4. Cancellation of proof of financial responsibility [NRS ] Upon request, the registration division will immediately cancel a certificate of financial responsibility for an owner or operator if: the owner or operator has died or has become permanently incapacitated and unable to operate a motor vehicle; or the owner or operator surrenders his license and registration to the division. 5. Operator s policies [NRS ] a. Instead of obtaining an owner s policy of liability insurance, a person may obtain an operator s policy of liability insurance as long as it states that, unless extended coverage is expressly included in the policy: the insurer is only liable under the policy for damages caused by the insured while operating a motor vehicle or while the insured s motor vehicle is not being operated by any person; the policy does not cover damages incurred while a person other than the named insured is operating the motor vehicle; and the coverage may not meet the requirements of the financial responsibility laws of other states. b. Before an operator s policy of liability may be delivered, the insured must sign an endorsement stating that he has read and understood the policy and its limitations. c. The owner of a motor vehicle who holds an operator s policy cannot permit persons who don t have their own liability insurance (which would cover their operation of that motor vehicle) to operate his motor vehicle. d. This section does not apply to a lessor, dealer, distributor, or other employer who owns a motor vehicle for use in his business. 6. Security following accident [NRS ] a. Upon request, a hearing will be held if, 20 days after receiving report of an accident that resulted in bodily injury, death, or more than $750 of damage to one person s property, the registration division does not have on file satisfactory evidence that the person who would otherwise be required to file security has: been released from liability; been determined not to be liable; or executed a written agreement providing for the payment of an agreed amount in installments with respect to all claims for injuries or damages resulting from the accident. b. The owner s registration or operator s license can be suspended at any time after an adverse determination.

47 Nevada Law Supplement Uninsured and underinsured motorists [NRS 687B.145] a. When an individual who has uninsured vehicle coverage is injured in an accident caused by an uninsured motorist, the injured individual s own insurance company will cover the damages (or, in the case of underinsured coverage, the damages that exceed the underinsured motorist s coverage) up to the limits of the insured driver s coverage. b. Insurance companies transacting motor vehicle insurance in Nevada must offer uninsured and underinsured vehicle coverage that equals the insured s coverage limits for bodily injury (under an insurance policy covering the use of a passenger car). 1.) The insurer is not required to reoffer the coverage to the insured in any replacement, reinstatement, substitute, or amended policy, but the insured may purchase the coverage by requesting it in writing from the insurer. 2.) Each renewal must include a copy of the form offering such coverage. c. An insurance company transacting motor vehicle insurance in Nevada must offer persons insured under policies covering the use of a passenger car the option of purchasing at least $1,000 of coverage to pay for reasonable and necessary medical expenses resulting from an accident. d. Definition [NRS 690B.020] An uninsured motor vehicle is a vehicle that: does not have evidence of financial responsibility available at the Department of Motor Vehicles and Public Safety; has no liability insurance for bodily injury or bond applicable at the time of the accident, with respect to ownership, maintenance, or use of the vehicle; has a policy with an insurer that denies coverage or is insolvent; is used without the permission of its owner and the operator has no bond or liability insurance for bodily injury; is used with the owner s permission but the insurance does not cover the operation of the motor vehicle by a person other than the owner, and there is no liability insurance for bodily injury or bond applicable to the operator; or causes a hit- and- run accident, if no evidence of financial responsibility is filed with the Department within 60 days after the incident. e. A vehicle involved in a collision that results in bodily injury or death shall be presumed to be an uninsured motor vehicle if no evidence of financial responsibility is supplied to the Department of Motor Vehicles and Public Safety in the required manner. 8. Right of subrogation [NRS 690B.020] a. If an insurance company pays a person under uninsured vehicle coverage, the insurer is entitled to recover this payment from the proceeds of any settlement with a party legally responsible for the injury or damage.

48 44 Nevada Law Supplement b. The insurer can also recover this payment from a judgment award. c. Therefore, if the person who received payment from the insurer sues the party responsible for the damage or injury, and settles with that party or wins a judgment against that party, the insurer can recover the money it paid to the extent possible from the settlement amount or judgment award. 9. Primary and excess coverage [NRS 690B.025] The following rules apply if two or more liability insurance policies cover the same motor vehicle when it is involved in an incident that results in a claim against the policies. a. If the motor vehicle was being operated by a person engaged in the business of selling, repairing, storing, or parking the vehicle (while in pursuit of that business), the policy issued to that business is the primary policy and any other policy will provide excess coverage. b. If the motor vehicle was operated by any of the people listed above while not in the pursuit of business, the policy issued to the operator of the vehicle is the primary policy and any policy issued to the business becomes excess coverage. c. If the policyowner s motor vehicle is being serviced or repaired, and the repair shop loans a vehicle to the policyowner for the duration, the policyowner s policy is the primary policy and all other policies provide excess coverage. The law requires the repair shop to notify the policyowner that the policyowner s policy will provide primary coverage while the policyowner uses the loaned vehicle. 10. Premium reduction for older drivers [690B.029] A motor vehicle liability insurance policy delivered in Nevada to a person who is at least 55 years old must contain a provision that can reduce the premium for three- year periods if the insured: for the three- year period before completing the traffic safety course and each three- year period thereafter, is not at fault for a motor vehicle accident, maintains a driving record free of violations, and has not been convicted of a moving traffic violation or an offense involving the operation of a motor vehicle while under the influence of intoxicating liquor or controlled substances; and successfully completes, after turning 55 years old and every three years thereafter, a traffic safety course approved by the Department of Motor Vehicles and Public Safety. The premium reduction must be based on the actuarial and loss experience data available to each insurer and must be approved by the Commissioner. 11. Exclusion of certain drivers [NRS 687B.147] a. A motor vehicle insurance policy delivered in Nevada that covers a private passenger car may exclude, reduce, or limit coverage for the liability of any named insured for bodily injury to: another named insured; or any member of a named insured s household, unless rejected by the named insured after full disclosure of the limitation by the insurer on a form approved by the Commissioner.

49 Nevada Law Supplement 45 b. The form must include the following statement: I understand that this policy excludes, reduces, and limits coverage for bodily injury to members of my family and other named insureds, including the following persons followed by a list of the family members and other named insureds whose coverage has been excluded, reduced, or limited. 12. Motor vehicle damage claim settlement delay prohibited [686A.300] An insurer who issues insurance covering damage to a motor vehicle may not delay making payment for a claim involving damage to a motor vehicle after receiving a statement of charges from any garage or licensed body shop previously authorized by the insured to perform the repairs required by that claim. C. SURETY CONTRACTS [NRS 681A.070,. 691B] 1. Surety insurance is coverage that indemnifies the insured against loss arising from the lack of integrity or fidelity of persons holding positions of trust, from the insolvency of debtors, or from breaches of contract. It includes: fidelity insurance (insurance guaranteeing the fidelity of persons holding positions of trust); insurance guaranteeing the performance of contracts (other than insurance policies) and guaranteeing and executing bonds, undertakings, and contracts of suretyship; and financial guaranty insurance (insurance or bonding that guarantees the payment of the principal and interest on a security if the issuer defaults in payment of the principal or interest). 2. Scope of coverage [681A.070] Surety insurance indemnifies banks, bankers, brokers, financial corporations, or associations against loss (resulting from any cause) of bills of exchange, securities, deeds, jewelry, and gems, including any loss while the items are being transported in armored motor vehicles or by messenger. a. It also covers loss or damage to an insured s premises or furnishings, vaults, and equipment caused by burglary, robbery, theft, vandalism, or any attempt to commit such crimes. 3. Authorized insurers [NRS 691B.020] Whenever a bond, guaranty, or other obligation is required or allowed, or whenever the performance of any act, duty, or obligation is required or allowed to be secured or guaranteed, such bond may be executed by an insurer authorized in Nevada to transact surety insurance. D. WORKERS COMPENSATION INSURANCE 1. Definition [NRS 616A.020] Workers compensation also known as industrial insurance offers a relatively quick and certain remedy to the employee who is injured on the job.

50 46 Nevada Law Supplement a. The employer who provides workers compensation agrees to pay the medical expenses and lost wages of the employee for a certain time, without delay, when the employee suffers a qualifying injury. b. The employer can thus reasonably anticipate the amount of money it must pay the employee and avoid the worries of a lawsuit and potentially large judgment award. c. In exchange, the employee (and his dependents and next of kin) agrees that the payments from the employer will be the only compensation he will receive for the injury. 1.) The employee agrees to give up the right to sue the employer for the injury. 2.) The employee benefits because he receives prompt medical attention and a quick, certain financial settlement without having to sue the employer, litigate the claim, and win a judgment award. Such litigation can require months or even years before the case goes to trial, and even then, the employee cannot be assured that the outcome will be satisfactory. 2. The Nevada Workers Compensation Law [NAC ] Prior to July 1, 1999, Nevada was a monopolistic state for the provision of required workers compensation insurance. a. Insurance could only be purchased from the Nevada state fund (State Industrial Insurance System) or an employer could qualify as a self- insurer. b. Private insurers were permitted to provide workers compensation in the state effective on July 1, 1999, and on January 1, 2000, the state fund became a private mutual insurer doing business as the Employers Insurance Company of Nevada. c. The regulations set the standards and procedures for the Commissioner to certify self- insured employers and to establish the regulations governing the operation of self- insured employers programs for providing workers compensation, in order to protect self- insured employers, their employees, and the state of Nevada. The laws and regulations also pertain to private insurers operating in the state. 3. Employee defined [NRS 616A.105,.110] a. Employee means every person in the service of an employer under any appointment or contract of hire or apprenticeship, express or implied, oral or written, whether lawfully or unlawfully employed, and include, but not exclusively: aliens and minors; all elected and appointed paid public officers; members of boards of directors of quasi-public or private corporations while rendering actual service for such corporations for pay;

51 Nevada Law Supplement 47 musicians providing music for hire, including members of local supporting bands and orchestras commonly known as house bands; and volunteer health practitioners. b. Exceptions An employee is not: a casual or occasional worker whose services are not retained in the usual course of the employer s trade, business, or occupation; a theatrical or stage performer; musicians whose services are not retained for more than two days; a domestic servant in a household or a laborer on a farm, dairy, or ranch, under most circumstances; a person who acts as a sports official at an amateur, intercollegiate, or interscholastic sporting event; a voluntary ski patrolman who does not receive any compensation other than meals, lodging, or use of ski facilities; a person who directly solicits or sells by phone or in person, other than in a retail store, and receives commissions; a person in religious service for a church, such as a member of the clergy; or a real estate broker, broker- salesperson, or salesperson. c. Employer s liability while traveling [NRS 616B.612] Whenever an employee s job duties require the employee to travel, an employer subject to the workers compensation laws must insure the employee against personal injuries sustained while traveling. 4. Self- insured employers [NAC 616B.300; NAC 616B.418,.424] a. To be eligible to establish a self- insurance program, an employer must: be a legally qualified business entity having a tangible net worth of at least $2.5 million; be licensed to do business in Nevada, if not a governmental employer; and make the required deposit, not less than $100,000 or 105% of the employer s expected annual cost of claims. b. The business must also present evidence that it has the administrative resources to report, administer, and settle all claims in a timely manner. The required resources include: the employer s ability to correctly apply Nevada s workers compensation laws and regulations; a qualified, licensed, and competent program administrator who is located in Nevada; an existing and feasible plan for the self- insurance program, that provides for an immediate and personal response to an employee s claim;

52 48 Nevada Law Supplement a plan for the administration of claims that includes written instructions or examples of how to apply the workers compensation law to ensure continuity of service to employees as well as ease of audit by company personnel and regulatory agencies; the ability to communicate the plan for administering the program; and standards of performance for administering the self- insurance program. c. Application for self-insurance Every employer that wants to qualify as a self- insured employer must apply to the Commissioner on the required forms. The application must: be signed by an executive officer of the corporation; include the business s audited financial statements for the past three years; and be accompanied by a nonrefundable application fee of $200. d. Required deposit 1.) Acceptable methods of deposit [NAC 616B.436] A selfinsured employer must meet the deposit requirement of the self- insured workers compensation program by depositing any of the following with the Commissioner of Insurance: cash; a certificate of deposit from a federally insured financial institution in Nevada (made payable to the Commissioner and the employer); obligations guaranteed by the full faith and credit of the United States (such as US Treasury notes or treasury bonds that have a maturity date of no more than one year); any obligation of a US agency, including the Federal National Mortgage Association, Federal Home Loan Bank Board, and Federal Home Loan Mortgage Corporation that is guaranteed by the full faith and credit of the United States (must have a maturity date of no more than one year); or a surety bond that is written by an authorized surety company. 2.) Administration of self-insureds A self-insured employer must at all times maintain adequate resources for the administration of its self- insurance program. After the program is established, the Commissioner and Administrator will evaluate the adequacy of the resources and standards of performance on the basis of the: employer s promptness in filing accident and occupational disease reports; employer s promptness in making first payments in cases of uncontested claims; percentage of contested claims;

53 Nevada Law Supplement 49 number of claimants who are reemployed or rehabilitated; and delay between the cutoff of compensation for temporary disabilities and the payment of compensation for permanent partial disabilities. 3.) A self- insured employer may contract with another entity (located in Nevada) to administer its self- insurance program. e. Reporting requirements A self- insured employer is required to periodically report the following to the Division of Insurance in order to maintain its self-insured status. Any injury or disease suffered by an employee that is expected to cost at least $100,000 in medical expenses must be reported within 30 days of the employee s claim; and Any incident that injured at least five employees must be reported within 30 days of its occurrence. 5. Maximum amount of employee s yearly benefits [NRS 616B.222] To determine the total amount paid to employees for services performed, the maximum amount paid to any one employee during a policy year may not exceed $36, Compliance [616D ] a. Order to cease business [616D.110] If any employer fails to provide and secure compensation, or fails to maintain such compensation, the administrator may order the immediate cessation of all business operations at the place of employment until the employer performs all acts and duties enjoined upon him by law. b. Administrative fines [616D.120] The Administrator may impose an administrative fine of $1,500 for each initial violation, or a fine of $15,000 for a second or subsequent violation, when an insurer, organization for managed care, health care provider, third-party administrator, or employer has: induced a claimant to fail to report an accidental injury or occupational disease; persuaded a claimant to settle for an amount which is less than reasonable; refused to pay or unreasonably delayed payment to a claimant of compensation; refused to process a claim for compensation; made it necessary for a claimant to initiate proceedings for compensation or other relief; failed to comply with the division s regulations covering the payment of an assessment; failed to provide or unreasonably delayed payment to an injured employee or reimbursement to an insurer; or intentionally failed to comply with any provision of workers compensation laws or regulations.

54 50 Nevada Law Supplement NEVADA LAW SUPPLEMENT PRACTICE FINAL Student instructions: Following your thorough study of this supplement, take this 50-question sample examination. Grade your performance utilizing the answer key provided. Carefully review the topics pertaining to those questions answered incorrectly. I. General Insurance 1. A certificate of authority gives a(n) A. agent authority to transact insurance in Nevada B. company authority to transact insurance in Nevada C. broker authority to appoint solicitors D. solicitor authority to solicit insurance applications for a broker 2. Which one of the following producer acts would NOT be a violation of Nevada insurance law? A. Making a maliciously critical statement about another insurer B. Offering to pay part of the policy s premium as an inducement to purchase insurance C. Readjusting group premium rates based on the current year s loss or expense experience D. Misrepresenting policy provisions concerning insurance coverage 3. A characteristic unique to surplus lines insurance is that it A. provides coverage for underinsured motor vehicles B. may be sold by unlicensed brokers, as long as there are no licensed brokers selling that type of coverage in Nevada C. is a discount version of casualty insurance D. may be written with unauthorized insurers provided there are no authorized insurers selling that type of policy in Nevada 4. The Commissioner must examine authorized insurers at least once every A. 90 days B. 12 months C. 3 years D. 5 years 5. Which of these insurance professionals investigates or settles claims for a fee or commission? A. Adjuster B. Broker C. Solicitor D. Bail agent 6. A producer offers a prospective buyer a trip to Jamaica in order to persuade him to buy a policy. If the prospect purchases the policy and takes the trip, the producer will have committed which violation? A. Rebating B. Defamation C. Twisting D. Conservation 7. An applicant for a producer license must A. have a college degree B. be at least 25 years old C. have been a broker for 3 years D. pass an examination unless exempt 8. Which of the following applicants for a producer s license would be required to take an examination? A. An applicant who was previously licensed for the same lines in another state B. A producer whose activities are confined to limited lines such as credit and travel C. A person licensed in another state who moves to Nevada within 90 days of residency D. A person who works in an agent s office and advises the public about the benefits and terms of insurance policies 9. Within how many days after receiving notice of a claim must insurers begin investigating the claim? A. 20 B. 40 C. 60 D. 365

55 Nevada Law Supplement Which of the following is NOT a duty of the Commissioner? A. Examining domestic insurers B. Writing insurance laws C. Enforcing insurance laws D. Authorizing insurers to transact business in Nevada 11. Which of the following is NOT an unfair claims method? A. Suggesting a claimant avoid the high cost of retaining legal counsel B. Attempting to settle claims on the basis of an application that was altered without notice to the insured C. Making a settlement offer to a claimant and suggesting that the claimant ask an attorney to explain the terms of the offer D. Attempting to settle a claim for an amount lower than what the adjuster originally thought the claim could be settled for 12. Using misrepresentation to induce a policyowner to replace a policy is called A. rebating B. defamation C. unfair discrimination D. twisting 13. Insurers may be classified according to the jurisdiction under which they are organized. The main classifications are A. domestic, foreign, and alien B. domestic, locally owned, and out- of- state C. foreign and state D. alien and locally owned 14. In keeping with their fiduciary responsibilities, agents can A. deposit premiums in personal accounts until the end of the month B. set up a premium trust account to hold funds for the insurer C. deposit premiums in an interest- bearing personal account from which earned interest is paid to the insurer D. withhold premiums from an insurer without reporting it to the Commissioner 15. How long must a producer s records remain open to inspection by the Commissioner? A. The duration of the policyholder s life B. 3 years after the policy expires C. 1 year after the policy is sold D. The duration of the agent s career 16. A policy that has been in effect for more than 70 days CANNOT be cancelled because the A. policyowner failed to pay a premium when due B. risk insured against has changed materially and increased the risk of loss C. Commissioner determines that continuation of the insurer s present volume of premiums will jeopardize the insurer s standing among creditors D. insured has filed several small claims and the company does not wish to continue to provide coverage 17. Transacting insurance includes all of the following EXCEPT A. soliciting B. negotiating C. underwriting D. effecting the contract 18. An unauthorized insurer A. is not permitted to issue insurance in the state of Nevada B. is one who has received a certificate of authority from the Commissioner C. may write insurance through any licensed producer D. must place business through a surplus lines broker 19. Which of the following statements regarding a surplus lines broker is CORRECT? A. Any person licensed as an agent or broker may also function as a surplus lines broker. B. A surplus lines broker represents the interests of policyholders. C. A surplus lines broker s license remains in effect for a three- year period. D. No examination is required in order to obtain a license as a surplus lines broker.

56 52 Nevada Law Supplement 20. Which of the following statements regarding nonresident producers is NOT correct? A. They can transact insurance only through licensed resident agents. B. They must designate the Commissioner as their attorney. C. They are not required to comply with Nevada s education or examination requirements. D. They must be currently licensed in another state. 21. Which of the following statements regarding a bail agent and a bail enforcement agent is CORRECT? A. A bail agent enforces the terms and conditions of a defendant s release. B. A bail agent may not also be licensed as a bail enforcement agent. C. A bail enforcement agent may locate and apprehend a defendant. D. A bail enforcement agent must file a $25,000 bond before being licensed. 22. An insurance consultant s license is required for which of the following activities? A. An attorney is asked to give legal advice to a client regarding insurance matters. B. An insurance professional offers to advise an organization regarding the benefits of an insurance policy. C. A licensed insurance producer provides a detailed comparison of premiums for various insurance options. D. An actuary for an insurance company certifies the losses for the company s rate filing. 23. An administrator is a person who performs any of the following functions EXCEPT A. collects premiums for workers compensation insurance B. administers a trust C. administers a self- insurance program for an employer D. issues binders and other temporary evidence of insurance 24. If a person willfully engages in an unauthorized transaction of insurance, the Commissioner may impose a fine of up to how much per violation? A. $1,000 B. $10,000 C. $50,000 D. $100, For an annuity, the Life and Health Insurance Guaranty Association will be responsible for no more than A. $25,000 B. $50,000 C. $75,000 D. $100, When determining whether policy rates comply with state standards, the Commissioner considers all of the following EXCEPT A. the profitability of the insurer B. the past loss and expense experience of the insurer C. catastrophic hazards and contingencies D. the prospective loss and expense experience of the insurer 27. A rate service organization assists insurers in setting rates or making filings by A. giving legal advice about rate questions B. compiling loss or expense statistics C. examining the insurer s financial affairs D. certifying the company s loss information 28. Which of the following statements regarding the application of a fee to an insurance transaction is CORRECT? A. A commissioned producer may not charge a fee in addition to the compensation received from the insurer. B. An agent may charge a fee but a broker is not able to do so legally. C. Additional fees must be added to premiums so an insured receives a bill for the total amount. D. A commissioned producer may charge a fee, pursuant to a written agreement with the insured, in addition to the compensation received from the insurer.

57 Nevada Law Supplement The purpose of the Nevada Insurance Guaranty Association is to A. make low- cost policies available to those applicants who cannot afford insurance B. provide a mechanism for high- risk drivers to secure required insurance coverage C. protect the policyholders of Nevada against an insurer s insolvency D. determine if insurance rates are fair, adequate, and nondiscriminatory 30. If an insurer fails to provide a timely notice of nonrenewal, the insured is entitled to continuing coverage under the policy unless the A. insured has accepted replacement coverage B. insurer may become insolvent if the policy is continued C. insured requests that the policy be continued D. insurer has ceased writing that line of business and left the state 31. When an insurer cancels a policy, the insured must be notified of her possible eligibility for a voluntary or mandatory risk- sharing plan unless the A. insured has filed 3 or more claims during the prior policy period B. policy has been cancelled for nonpayment of premium C. insured is able to replace coverage with another insurer D. policy is cancelled 60 days or more prior to the expiration date 32. An insurer may cancel or refuse to renew a policy because of the insured s A. place of residence B. age C. past loss history D. lawful occupation 34. Surplus lines law applies to A. marine and transportation insurance B. insurance on railroad property C. reinsurance contracts D. surety bonds 35. Nevada s rate laws apply to which of the following lines of insurance? A. Automobile insurance B. Life insurance C. Commercial property insurance D. Ocean marine insurance II. Casualty Insurance 36. Casualty insurance does NOT include which one of the following types of insurance? A. Vehicle B. Workers compensation C. Burglary and theft D. Inland marine 37. Which type of policy for motor vehicle liability insurance does NOT cover damages sustained while a person other than the named insured is operating the motor vehicle? A. Owner s policy B. Operator s policy C. Uninsured motorist coverage D. Surety bond 38. To be eligible to establish a self- insurance program for providing workers compensation, a nongovernmental employer must A. have more than 25 employees B. have a certificate of authority C. be licensed to do business in Nevada D. be a legally qualified business entity with a net worth of at least $1 million 33. A binder of insurance may only be issued for a period of how many days? A. 30 B. 60 C. 90 D. 365

58 54 Nevada Law Supplement 39. The premium for a motor vehicle liability insurance policy can be reduced for a 55 year old who does all of the following EXCEPT A. successfully complete an approved traffic safety course B. not being at fault in a motor vehicle accident in the past 3 years C. not being convicted of a moving violation in the past 3 years D. pass a written safety examination 40. Every owner of a motor vehicle registered in Nevada must continuously provide proof of financial responsibility to cover what amount for bodily injury to one person in one accident? A. $10,000 B. $15,000 C. $30,000 D. $50, Proof of financial responsibility for motor vehicle liability can be given by filing a(n) A. approved certificate of authority B. approved bond of a surety company C. certificate of deposit of $10,000 in cash or securities D. certificate of self- insurance 42. Which of the following statements regarding a motor vehicle physical damage appraiser is CORRECT? A. A motor vehicle physical damage appraiser must be licensed by the state. B. Insurance company claims adjusters may not function as physical damage appraisers. C. An appraiser may not be employed by an auto repair facility or body shop. D. There is no license fee applicable to motor vehicle physical damage appraisers. 43. An insurer may use claims made under the comprehensive portion of an automobile policy A. to add a surcharge to the policy s premium B. to cancel the policy based on chargeable accidents C. to increase the liability coverage under the policy D. to refuse to continue comprehensive coverage 44. An insurer cannot cancel a motor vehicle liability policy until how many days advance notice of cancellation is given to the policyholder? A. 5 B. 10 C. 20 D Which of the following statements regarding uninsured and underinsured motorists coverage in Nevada is NOT correct? A. Both coverages must be offered in an amount equal to the state financial responsibility limit. B. Uninsured motorists coverage is required but underinsured motorists coverage is optional. C. Both uninsured and underinsured motorists coverage must be offered for a limit equal to the bodily injury limit of the policy. D. The insurer is required to reoffer the coverage on any replacement or reinstatement. 46. Which of the following statements about operator s policies is TRUE? A. Operator s policies do not cover damages incurred while a person other than the named insured is operating the motor vehicle. B. An operator s policy exempts the policyholder from financial responsibility. C. Operator s policies differ from owner s policies only in terms of the limits of liability. D. Operator s policies cover family members in addition to the named insured. 47. Which of the following statements regarding insurance on an automobile being driven by a person whose job is parking automobiles is CORRECT? A. The insurance on the vehicle is primary and the insurance on the parking business is excess. B. The insurance on the parking business is primary and the insurance on the vehicle is excess. C. Both policies will share in losses in proportion to their respective limits of liability. D. Neither policy will apply to the loss since the vehicle is being operated by a nonowner.

59 Nevada Law Supplement Under Nevada law automobile policies may A. exclude coverage for any driver B. exclude coverage only for nonowners C. exclude coverage for another named insured D. not exclude any licensed driver from coverage 49. Which of the following statements regarding workers compensation insurance in Nevada is CORRECT? A. The coverage may be purchased from any authorized insurer. B. Coverage is only available from the state fund. C. Employers are not permitted to become selfinsurers. D. Coverage is optional for most employers. 50. Which of the following people is NOT considered an employee under Nevada law? A. A full-time household employee B. A musician who performs nightly at a local club C. A full- time employee of a business D. A salesperson who travels on business

60 56 Nevada Law Supplement ANSWERS TO NEVADA LAW PRACTICE FINAL 1. B 11. C 21. C 31. B 41. D 2. C 12. D 22. B 32. C 42. A 3. D 13. A 23. D 33. C 43. D 4. D 14. B 24. B 34. D 44. B 5. A 15. B 25. D 35. A 45. D 6. A 16. D 26. A 36. D 46. A 7. D 17. C 27. B 37. B 47. B 8. D 18. D 28. D 38. C 48. C 9. A 19. C 29. C 39. D 49. A 10. B 20. A 30. A 40. B 50. A