Insurance Bad Faith – Nevada – New Cause of Action – Failure to Inform

The Nevada Supreme Court decided in Allstate v William Miller, No. 49760 Filed July 30, 2009, that failure to warn is a factor in a bad-faith claim. The Nevada Supreme Court refused to adopt the absolute rule that a primary liability insurer’s bad-faith liability ends upon a timely offer of the insured’s policy limits.

In this case the Nevada Supreme Court holds that failure to adequately inform may be a proximate cause of an insured’s damages. The Nevada Supreme Court referenced Stark Liquidation v Florists’ Mut. Ins., 243 S.W.3d 385, Noya v. A.W. Coulter Trucking, 49 Cal. Rptr. 3d 584, 589-0-90 (Ct. App. 2006) and Neal v. Farmers Ins. Exchange, 582 P.2d 980 (Cal. 1978.)

The Court advises that generally, an insurer who has no opportunity to settle within policy limits is not liable for an excess judgment for failing to settle the claim. Relative to this issue the Nevada Supreme Court concluded in this case that if there is a question of whether a settlement offer is within the policy limits or whether the insured has the ability or willingness to contribute to the offer’s excess, then the issues “should be resoled in favor of the insured, unless the insurer can show by affirmative evidence that there was no realistic possibility for settlement with policy limits and that the insured would not have made any contribution to a settlement above that amount.” This rule does not imply that the insurer must accept an excessive settlement demand; rather, it requires that the insurer adequately inform the insured so the latter can protect his interests.

The Nevada Supreme Court concluded that the duty to inform the insured arises from the implied covenant of good faith and fair dealing. The law, not the insurance contract, imposes this covenant on insurers. A violation of the covenant gives rise to a bad-faith tort claim. The Nevada Supreme Court had defined bad faith as “an actual or implied awareness of the absence of a reasonable basis for denying benefits of the (insurance) policy. Am. Excess Ins. Co. V. MGM, 102 Nev. 601 (1986).

The Court also held that there was no duty to interplead funds or to stipulate to a judgment in excess of the policy limits.

This case is a significant case dealing with bad faith litigation in Nevada. It confirms that the public in Nevada have a right to be adequately informed by their insurance companies of settlement offers. Failure of the insurer to inform their insured’s gives rise to an action for bad faith damages.

Sam Harding Law Firm, your Las Vegas, Nevada Bad Fath attorney wants you to know about the evolving law of bad faith in Nevada.

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