Defending Against Bad Faith Claims in Nevada
By: Merielle Enriquez
Las Vegas, Nevada is a unique venue for civil litigation and insurance claims. In recent years, there has been concerted effort by some members of the Plaintiffs’ bar to immediately bring issues of bad faith into every personal injury claim possible by issuing arbitrary settlement demands of unreasonable amounts that are time limited. The Defense will benefit from recognizing certain tactics and knowing the proper response to such tactics.
A common scenario that occurs in the claims level and litigation process of personal injury matters in Las Vegas is the immediate issuance of a time limited demand for the policy limits, of an unreasonable time frame.
For example, driver one is hit by driver two in an automobile accident. Driver two has relatively high policy limits on their insurance policy ($100,000 per person in coverage or more.) Driver one’s attorney sends a ten day time limited demand to driver two’s insurance company for the policy limits and provides an inordinate amount of previously unproduced medical records. Plaintiff’s attorney includes language in the correspondence demanding that the insurance company send a copy of the letter to their insured and insinuating that the insurance company is acting in bad faith if it fails to do so. The insurer is not in a position to respond within the timeframe, as liability is in dispute and the demand package is questionable as to medical causation. If the defense does not respond within the arbitrary time frame unilaterally set forth by Plaintiff’s counsel, Plaintiff’s counsel then alleges that any offer of the policy limits is too late and that the insurance company has acted in bad faith. Litigation ensues and Plaintiff’s counsel drives up the costs, medical special damages during litigation, and demands for well in excess of the applicable policy limits.
Each particular case or claim has its own unique set of facts and no one response fits every situation. However, there are certain things an insurance carrier can do to minimize exposure to a future bad faith law suit. Nevada law does allow a direct insured to file a viable bad faith lawsuit against their insurer. Gunny v. Allstate Ins., 108 Nev. 344 (1992). Nevada law does not authorize third-party bad faith claims, but the insured can assign its rights on a potential bad faith lawsuit.
Keeping the insured informed about the details of the case is key, which includes notifying the insurer of any settlement demands. Allstate Ins. v. Miller, 125 Nev. 300 (2009). Nevada law does not treat the failure to accept an arbitrary, unreasonable in amount, and unreasonably time-limited settlement demand as bad faith. AAA v. Chau, 808 F.Supp.2d (D. Nev. 2010). In fact, an insurer has the right to conduct a fair and reasonable investigation of the claim and a mere disagreement in the value of a case is not sufficient grounds to establish bad faith on the part of the insurance company. Schumacher v. State Farm, 467 F.Supp.2d 1090 (D. Nev. 2006).
As such, the best defense against this Plaintiff’s tactic is for the insurer to keep in steady communication with the insured, advise the insured of any settlement demands for the policy limits, engage in a fair and reasonable investigation of the alleged damages, keep an accurate record of any and all good faith attempts to settle this claim, and retain defense counsel to ensure that the insured’s rights are being protected in the underlying claim or litigation.