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