Blog Post
Nevada Supreme Court: Insurer’s Right to Seek Reimbursement of Defense Costs
Christian Dichter & Sluga P.C. • Mar 12, 2021
Nautilus Insurance Company v. Access Medical, LLC, et al.,
No. 79130, 137 Nev. Adv. Op. 10 (Mar. 11, 2021)
On March 11, 2021, the Supreme Court of Nevada issued an order answering a certified question posed by the United States Court of Appeals for the Ninth Circuit regarding the insurer’s right to seek reimbursement from the insured for defense costs associated with uncovered claims. Specifically, the question was:
Is an insurer entitled to reimbursement of costs already expended in defense of its insureds where a determination has been made that the insurer owed no duty to defend and the insurer expressly reserved its right to seek reimbursement in writing after defense has been tendered but where the insurance policy contains no reservation of rights?
Grounding its answer in Section 35 of the Restatement (Third) of Restitution and Unjust Enrichment, the Court announced that “when a court finally determines that the insurer had no contractual duty to defend, the insurer may ordinarily recover in restitution if it has clearly reserved its right to do so in writing.” 137 Nev. Adv. Op. 10 at 10. It did so recognizing that there exists “significant disincentive” under Nevada law for the insurer to deny a defense outright (Century Surety Co. v. Andrew, 134 Nev. 819, 432 P.3d 180)(holding that “an insurer’s liability where it breaches its contractual duty to defend is not capped at the policy limits plus the insured’s defense costs, and instead, an insurer may be liable for any consequential damages caused by its breach”). The Court reasoned, “[a]s our law has more forcefully encouraged insurers to offer to defend doubtful claims, see Century Sur., 134 Nev. at 822 n. 4, 432 P.3d at 184 n.4, it is only fair to permit those insurers to recover costs that they never agreed to bear.”
Reimbursement gives effect to (rather than modifies) the parties’ agreement, and the Court declined to “force upon parties contractual obligations, terms or conditions which thy have not voluntarily assumed.” 137 Nev. Adv. Op. 10 at 14. This squares with generally applicable principles of unjust enrichment and restitution. The insurer conferred a benefit on the policyholder and the policyholder enjoyed that benefit. The insurer was reasonable in acceding to the policyholder’s demand, and it is equitable to require the policyholder to pay.
The Court also briefly clarified the nature of the duty to defend, acknowledging that on one occasion, it had described this duty as a “legal duty that arises under the law, as opposed to a contractual duty arising from the policy” (Allstate Ins. Co. v. Miller, 125 Nev. 300, 318, 212 P.3d 318, 330 (2009)). Footnote 3 addresses this statement as conflating the duty to defend with the implied covenant of good faith and fair dealing, and concludes: “When an insurer has a contractual duty to defend, the law implies a duty to do so in a reasonable manner. But the duty to defend arises, in the first place, from the contract.”
Christian Dichter & Sluga, P.C. is proud to announce that five of its lawyers have been recognized in the 2024 Edition of The Best Lawyers in America®. We are particularly excited that our partner JP Harrington Bisceglia has been recognized for the first name this year! Since it was first published in 1983, Best Lawyers has become universally regarded as the definitive guide to legal excellence. Best Lawyers has earned the respect of the profession, the media and the public as the most reliable, unbiased source of legal referrals. For the 2024 edition of The Best Lawyers in America, more than 13+ million votes were analyzed to identify the top legal talent, as identified by their peers. Lawyers on The Best Lawyers in America list are divided by geographic region and practice areas. They are reviewed by their peers based on professional expertise and undergo an authentication process to make sure they are in current practice and in good standing. Christian Dichter & Sluga, P.C. would like to congratulate the following lawyers named to 2024 The Best Lawyers in America list: J.P. Harrington Bisceglia Newly Recognized in 2024 Edition! · Insurance Law · Litigation - Insurance Doug Christian · Commercial Litigation · Insurance Law · Personal Injury Litigation – Defendants Stephen Dichter · Commercial Litigation · Criminal Defense: White-Collar · Litigation - Banking and Finance · Litigation - Securities Jill Ann Herman · Personal Injury Litigation - Defendants · Product Liability Litigation – Defendants Gena Sluga · Insurance Law · Litigation – Insurance · Appellate Practice · Commercial Litigation
Arizona Supreme Court Issues New Opinion on Policy Stacking
Christian, Dichter and Sluga is so proud to announce that for the 4 th consecutive year, our firm has been recognized in Chambers USA as one of the best insurance firms in Arizona. We are even more thrilled that we will have two lawyers individually ranked this year, our Managing Partner, Gena Sluga and Partner Amanda Taylor. Congratulations, Gena and Amanda, on being individually ranked by Chambers in the category of Arizona Insurance Law!
The University of San Diego School of Law Alumni Group Admittance to the United States Supreme Court
Super Lawyers is a rating service of outstanding lawyers from more than 70 practice areas who have attained a high degree of peer recognition and professional achievement. The selection process includes independent research, peer nominations and peer evaluations. Every year, Super Lawyers evaluates lawyers across the country for its annual list of top attorneys. Each candidate is measured against 12 indicators of peer recognition and professional achievement. Nominees from more than 70 practice areas are considered. The patented multiphase selection process is rigorous and methodical. The Top Lists below take exclusivity one step further by featuring selected Super Lawyers attorneys with the most total points earned.
Our small band of intrepid lawyers has more Insurance Coverage Super Lawyers than any firm in the Southwest. Congratulations to our AMAZING lawyers.
We would like to Congratulate one of our firms founding members, Steve Dichter, for being selected as a Super Lawyer in white collar criminal defense.
Christian Dichter & Sluga is proud to announce that Partner Jeff Hutchins has been named a Super Lawyer in area of Business Litigation.