Coverage Analysis
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NEVADA

  ACCIDENTS OR OCCURRENCES

  Intent may be inferred as a matter of law in cases of sexual assault.  State Farm Fire & Cas. Co. v. Smith, 907 F.2d 900 (9th Cir. 1990) and Allstate Ins. Co. v. Foster, 693 F.Supp. 886 (D. Nev. 1988).
 

  ALLOCATION AND SCOPE ISSUES

  A federal district court has ruled in Capital Indemnity Corporation v. Blazer, 51 F. Supp. 2d 1080 (D.Nev. 1999) that where an insurer has provided a defense to both covered and non-covered claims it may only recover the costs of defending the uncovered claims if there was an “understanding” between it and the insured that it would be reimbursed for such costs.  It does not appear that actual consent is required so long as the insurer clearly enunciates its right to recover reimbursement through an express reservation of rights.

  Where more than one policy is potentially triggered by a claim, defense costs should be apportioned in proportion to the amount of the insurer's indemnity obligation.  American Excess Ins. Co. v. MGM Grand Hotels, Inc., 102 Nev. 601, 729 P.2d 1352 (1986).
 

  APPELLATE PROCEDURES

  All appeals are heard directly by the Nevada Supreme Court.
 

  BAD FAITH

  Unfair or deceptive consumer practices are proscribed by Nev. Rev. Stat. §§ 598.360, 41.600 (1991). Unfair claims handling by insurers is regulated under Nev. Rev. Stat. § 686A.310 (1978).

  A cause of action for bad faith was first recognized by the Nevada Supreme Court in USF&G v. Peterson, 540 P.2d 1070 (Nev. 1975).  In the same year, the legislature enacted N.R.S. Sec. 686A.310 to govern Unfair Trade Practices in the insurance industry.  In 1987, the Act was amended to clearly state that third parties had a private cause of action.  However, a violation of the Act does not establish common law bad faith per se. In Hart v. Prudential Property & Cas. Ins. Co., No. CV-S-93-307 (D. Nev. April 11, 1994), the District Court distinguished common law and statutory claims for bad faith, holding that a single violation of the Act did not establish common law bad faith without proof that the insurer intended harm. 

  There is some suggestion that a bad faith claim may not be assigned to a third party.  In Chaffee v. Smith, 649 P.2d 966 (Nev. 1982), the Nevada Supreme Court ruled that a claim for legal malpractice could not be assigned owning to the unique relationship between the attorney and client. 

  An insurer acts in bad faith when it denies a claim without any reasonable basis.  American Excess Ins. Co. v. MGM, 102 Nev. 601, 729 P.2d 1352 (1986). 

  An insurer does not act in bad faith in denying the insured's claim where it had a reasonable basis for doing so even if its interpretation of the policy was ultimately deemed to be wrong.  Pioneer Chlor Alkali Co. v. National Union Fire Ins. Co., 863 F.Supp. 1237 (D. Nev. 1994).  The District Court noted that Nevada's unfair claims statute did not require proof that the insurer knew that it lacked a reasonable basis for disputing coverage, whereas this scienter element is a part of the common law tort of bad faith.

  A third-party tort claimant has no right to assert bad faith claims against the tortfeasor’s liability insurer.    Gunny v.  Allstate Insurance Company, 830 P. 2d 1335 (Nev.  1992).
 
  A covenant of good faith and fair dealing is an implied part of all Nevada contracts, including insurance policies.  Ainsworth v. Combined Ins. Co., 763 P.2d 673, 676 (1987).  An insurer may be sued for bad faith if it acts unreasonably in denying a claim without proper cause. Pemberton v. Farmers Ins. Exchange, 858 P.2d 380 (Nev. 1993)(UM claim). 

  A tort claimant lacks standing to sue a tortfeasor's liability insurer for declaratory relief if a judgment has not yet entered in the underlying action establishing the insured's liability to the claimant.  Kinttle v. Progressive Casualty Ins. Co., No. 26160 (Nev. January 4, 1996). 
 

  BREACH OF POLICY CONDITIONS

  Nevada continues to adhere to the traditional rule that untimely notice defeats coverage without regard to whether it causes prejudice to the insured.  Las Vegas Star Taxi, Inc. v. St. Paul Fire & Marine Ins. Co., 714 P.2d 562 (Nev. 1986);  State Farm Mutual Auto Ins. Co. v. Cassinelli, 67 Nev. 227, 216 P.2d 606 (1950).  See also S.B. Corp. v. Hartford Acc. & Ind. Co., 880 F.Supp. 751 (D. Nev. 1995)(notice condition was a condition precedent to coverage, whether expressly described as such or not; therefore, breach defeats coverage whether prejudicial or not). 

  An insured that settles a claim or otherwise makes a "voluntary payment" without the knowledge or consent of the insurer forfeits its rights under the policy without regard to prejudice.  Las Vegas Star Taxi, supra (insurer not required to prove that the insured's settlement compromise was excessive or that the insurance company would not under all of the contingencies of the injured party's claim have had to pay the settlement sum or more).
 

  BROAD FORM COVERAGES

  Allegations that the insured misappropriated trade secrets, including appropriation of business strategy and pricing information, did not arise “in the course of advertising” the insured’s goods and services.  Associated Aviation Underwriters, Inc. v. Vegas Jet, LLC, 2000 WL 1051941 (D. Nev. July 6, 2000).
 

  CHOICE OF LAWS

  Nevada has adopted the Restatement (Second) of Conflict of Laws, Section 188 "most significant relationship" test.  Williams v. USAA, 849 P.2d 265, 266 (Nev. 1993);  Sotirakis v. USAA, 849 P.2d 789 (Nev. 1990).  In general, it seems that Nevada looks to the state in which contract is executed.  Tweet v. Webster, 610 F.Supp. 104 (D. Nev. 1985).
 

  DECLARATORY RELIEF ACTIONS

  The Supreme Court of Nevada has ruled that a tort plaintiff lacks jurisdictional standing to bring a DJ against an insurer while its claims against the policyholder are still pending.  In Knittle v. Progressive Cas. Ins. Co., No. 26160 (Nev. January 4, 1996), the court ruled that there was no present justiciable controversy inasmuch as the plaintiff's rights were contingent on the successful litigation of the pending tort suit against the policyholder.

 An insurer may seek permissive intervention in the lawsuit against its policyholder for the purpose of crafting special interrogatories to permit apportionment of the damages between covered and non-covered claims.  Fidelity Bankers Life Insurance Company v. Wedco, Inc., 102 F.R.D. 41, 44 (D. Nev. 1984).
 

  DISCOVERY ISSUES

   --Claims Manuals
 

   --Drafting History
 

   --Other Policyholder Claims
 

   --Reinsurance Information
 

   --Reserves
 

  DUTY TO DEFEND

  An insurer's duty to defend is determined by the language of its policy and the allegations in the complaint giving rise to the suit against its insured.  Rockwood Ins. Co. v. Federated Capital Corp., 694 F.Supp. 772 (D. Nev. 1988); see also Continental Cas. Co. v. City of Richmond, 763 F.2d 1076 (9th Cir. 1985).

  If facts are alleged which, if proven, would give rise to the duty to indemnify, then the insurer must defend.  Rockwood Ins. Co. v. Federated Capital Corp., supra.
 

  ESTOPPEL AND WAIVER

  In Vitale v. Jefferson Ins. Co., 116 Nev. Adv. Op. 70, 5 P.3d 1054 ( Nev. 2000), the Nevada Supreme Court ruled that an insurer’s assertion of one exclusion as its basis for denyig coverage did not waive the insurer’s right to later raise additional bases for denying coverage absent evidence of  affirmative misconduct such as sandbagging, failure to investigate, or where the insured relied on an insurer’s misrepresentation to his detriment.
 

  EXCESS INSURERS

  Nevada Supreme Court ruled that excess insurers have an obligation to share defense costs with primary carriers in proportion to the amount of indemnity that they pay for any given loss.  American Excess Ins. Co. v. MGM Grand Hotels, Inc., 729 P.2d 1352 (Nev. 1986).
 

  NUMBER OF OCCURRENCES

  Supreme Court ruled in Ins. Corp. of America v. Rubin, 818 P.2d 389 (Nev. 1991) that each occasion on which insured physician negligently failed to diagnose a young girl's brain tumor involved a separate "occurrence."  More recently, however, the court distinguished Rubin in a case involving a County's negligent failure to properly regulate a day care center where an employee had molested dozens of children, holding that it was the on-going failure to perform this duty that was the "cause" of the County's liability and therefore finding that the diverse claims only involved a single "occurrence."  Washoe County v. Transcontinental Ins. Co., 878 P.2d 306 (Nev. 1994).  It was perhaps not coincidental that the County's policy contained a $50,000 "per occurrence" retention.

  Where the insured ran over the plaintiff, put the car in reverse, and then ran her over again, the claims involved a single "occurrence" despite the multiple culpable acts of conduct.  Bish v. Guaranty Nat. Ins. Co., 848 P.2d 1057 (Nev. 1993).
 

  POLLUTION EXCLUSION

  Little or no case law.  Federal district court suggested in Crystal Bay General Improvement District v. Aetna Cas. & Surety Co., 713 F.Supp. 1371 (D. Nev. 1989) that it would not require coverage for gradual contamination.
  "Absolute" pollution exclusion upheld in Aerolite Chrome Corp. v. Hartford Ins. Co., No. 25G41 (Nev. May 26, 1995)(clean up pollution on insured electroplater's site from illegal dumping).

  Federal court ruled in Montana Refining Co. v. National Union Fire Ins. Co. of Pittsburgh, 918 F.Supp. 1395 (D. Nev. 1996) that a "Hazardous Substances Remedial Action Exclusion" was clearly intended to bar coverage for Superfund claims against a waste generator.  Court rejected insured's "regulatory estoppel" argument, suggesting that Nevada courts would take a "dim view" of drafting history arguments generally.
 

  PUNITIVE DAMAGES

  Punitive damages are not insurable under Nevada law. Ace Truck & Equipment Rentals, Inc. v. Kahn, 746 P.2d 132, 134 (Nev. 1987) and New Hampshire Ins. Co. v. Gruhn, 670 P.2d 941 (Nev. 1983).  The Nevada Supreme Court ruled in Siggelkow v. Phoenix Ins. Co., 846 P.2d 303 (Nev. 1993) that  permitting indemnification for punitive damages would undercut the deterrent effect of such awards and was therefore against public policy.  In Lombardi v. Maryland Casualty Co., 894 F.Supp. 369, 371 (D. Nev. 1995), the U.S. District Court ruled that punitive awards are not "compensatory" and are therefore not "damages" because of "bodily injury." 
 

  STANDARDS FOR POLICY INTERPRETATION

  "Reasonable expectations" doctrine adopted in National Fire Ins. Co. v. Reno's Executive Air, Inc., 682 P.2d 1383, 1383 (Nev. 1984).  Thus, "when an ambiguity exists in an insurance policy, the court should consider not merely the language, but also the intent of the parties, the subject matter of the policy, the circumstances surrounding its issuance, and the policy should be construed to effectuate the reasonable expectations of the insured."  National Union Fire Ins. Co. v. Caesars Palace, 792 P.2d 1129 (Nev. 1990).  If there is no ambiguity, words will be given their usual and ordinary meaning. Siggelkow v. Phoenix Ins. Co., 846 P.2d 303, 304 (Nev. 1993); Dickenson v. Nevada, 977 P.2d 1059, 1061 (Nev. 1982), cited in INA v. Hilton Hotels U.S.A., Inc., 908 F.Supp. 809 (D. Nev. 1995).

  An insurance policy must be considered as a whole to determine what was meant to be covered.  National Union Fire Ins. Co. v. Reno's Executive Air, 682 P.2d 1380, 1383 (Nev. 1984). 

  A policy will be deemed ambiguous if it is reasonably susceptible of two contrary interpretations.  Farmers Ins. Exchange v. Young, 832 P.2d 376, 379 (Nev. 1992).    However, Nevada courts will not look to extrinsic sources of intent to find ambiguity. Id.  However, if the policy is ambiguous, a court should look to the intent of the parties, the subject matter of the policy and the circumstances surrounding its issuance before resolving the claimed ambiguity.  National Union Fire Ins. Co. v. Caesar's Palace Hotel & Casino, 792 P.2d 1129, 1130 (Nev. 1990); Reno's Executive Air, 682 P.2d at 1383.

  Finally, while ambiguities will generally be resolved in favor of the insured, Nevada courts will not rely on the rule of contra proferentum to create coverage where it is beyond the reasonable expectations of the insured.  Montana Refining Co. v. National Union Fire Ins. Co. of Pittsburgh, 918 F.Supp. 1395 (D. Nev. 1996).
 

  THEORIES OF ALTERNATIVE LIABILITY

  No cases.
 

  TRIGGER OF COVERAGE

  "Manifestation" trigger adopted for first party property claims in Jackson v. State Farm Fire & Cas. Co., 835 P.2d 786 (Nev. 1992).

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