Strategies, Challenges, and Answers

When Will Nevada Allow An Insurer The Right Of Recoupment?

We know that the duty to defend is broader than the duty to indemnify.  Benchmark Ins. Co. v. Sparks, 254 P.3d 617, 620-21 (2011). We also know that once the duty to defend kicks in on one claim, the insurance company is obliged to defend the insured on all claims raised in the Complaint. Jaynes Corp. v. Am. Safety Indem. Co., 925 F. Supp. 2d 1095, 1103 (D. Nev., 2012) vacated due to settlement, No. 2:10-CV-00764-MMD, 2014 WL 8735102 (D. Nev. Dec. 3, 2014)   A common example is the case where a Plaintiff asserts claims of both negligence and punitive damages against an alleged DUI driver.  There, the auto carrier is obligated to defend both the negligence claim and the non-covered punitive damages claim.   

So what happens when the case is over and the insurer has incurred costs defending the non-covered punitive damage claim?  Can the insurance company seek recoupment from its insured for that portion of the defense related to the punitive damage defense?  The Nevada Supreme Court has not issued a decision on this topic.  However, Nevada often looks to California law for direction.  See Zurich Am. Ins. Co., 720 F. Supp. 2d at 1234 n. 11; see also Commercial Standard Ins. Co., 94 Nev. at 539, 583 P.2d at 451 (relying upon the California Supreme Court’s interpretation of a similar statute).

Assuming that Nevada would follow California, the insurer may not seek reimbursement for the defense costs as to any claims that are potentially covered under the policy.  However, the insurer would have the right of recoupment from the insured “[a]s to the claims that are not even potentially covered”.  See Buss v. Superior Court, 16 Cal. 4th 35, 49, 939 P.2d 766 (1997).

If you have questions about the duty to defend in Nevada, please contact Mike Mills at Bauman Loewe Witt & Maxwell either by phone at 702-240-6060 or by email at mmills@blwmlawfirm.com

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