Nevada Insurance Law

LexisNexis NAMES NEVADA INSURANCE LAW AS A TOP INSURANCE LAW BLOG FOR 2011

The Advisory Board of the LexisNexis Insurance Law Community has selected Mills & Associates' Nevada Insurance Law as one of the nation’s Top Insurance Law Blogs for 2011.  The Advisory Board described what it saw in the winning blogs.

The Top Blogs contain some of the best writing out there on insurance law.  They contain a wealth of information for the insurance law community with timely news items, practical information, expert analysis, practice tips, frequent postings, and helpful links to other sites.  These blogsites demonstrate how bloggers can impact the world of insurance law. 

Mills & Associates is proud to be among that group of great bloggers.  In the Nevada Insurance Law blog, Mills & Associates strives to provide its readers with concise, informative posts on Nevada’s most current insurance law developments and trends. 

We thank the Board for recognizing the Mills & Associates Nevada Insurance Law Blog as one of the best in the country.

AN INSURANCE COMPANY MUST RESPOND TO A SUBPOENA INVOLVING ONGOING THIRD-PARTY LITIGATION.

With escalating frequency, we at Mills & Associates are seeing aggressive plaintiffs serve subpoenas directly on the defendant’s insurance carriers.  These subpoenas often request records that the retained defense attorney has already produced.  Sometimes they will request a particular claims adjuster appear and testify about those records.  By doing so, plaintiffs are hoping to identify documents or information that the retained defense attorney has improperly withheld.  We thought our readers might benefit from some lessons we have learned in guiding insurance companies through the process of responding to these types of subpoenas. 

Like any other business or individual, an insurance company can be the target of a subpoena.  It is
becoming more common for a plaintiff to subpoena records directly from the company that insures the defendant that that particular plaintiff is suing.  In hotly contested cases, these subpoenas can be very intrusive, time consuming and often the information requested in the subpoena is protected from
disclosure.  Plaintiffs may also serve subpoenas on specific insurance adjusters.  The insurance company must properly and timely respond to the subpoena or it faces the risk of sanctions from the court.  Even worse, without a proper response, the company may be obligated to produce records that otherwise would have been protected. 

How then should an insurance company respond if it is served with a subpoena asking for objectionable material relating to an ongoing third-party case?  Let’s take a quick overview. 

The Retained Defense Attorney Should Not Be The One To Challenge The Subpoena.

Since the retained defense attorney knows the case, the insurance carrier may be initially inclined to have that attorney respond to the subpoena to the insurance company.  However, that response would be ill-advised.  While it is true that there is an attorney/client relationship between the retained defense attorney and the insurance company, that attorney is not in the best position to challenge the subpoena.  In addition to owing a duty to the insurance company, the retained defense attorney also owes a duty to protect the insured.  That tripartite relationship creates a conflict to both clients.  To be best served, the carrier should hire separate counsel to challenge the subpoena.  It goes without saying that the counsel responding to the subpoena and the retained defense attorney need to be in close contact with one another to insure that they give adequate consideration to all issues that might arise during the process. 

Does The Subponea Require The Production Of Records Only Or Does It Require An Appearance At A Deposition?

Subpoenas can require one of two responses.  Some subpoenas require the production of records only.  Others require both an appearance and the production of records.  The appropriate response to the subpoena will depend on the category into which the subpoena falls. 

Objections To A Records Only Subpoena

When the subpoena requests that the company produce records but does not seek an appearance, the company may be able to avoid certain obligations by sending the plaintiff’s attorney a letter detailing the carrier’s objections to the specific requests.   See FRCP 45(c)(2)(A) and NRCP(c)(2)(A).  This may sound simple enough.  However, legal requirements dictate the content, timing and construction of this letter.  If properly executed and conveyed, this letter may relieve the carrier of the obligation to respond to certain requests unless the court issues an order directing the carrier to do otherwise.  Essentially, the letter places the ball back in the plaintiff’s court regarding the objectionable records and requires the plaintiff to take the next step before the matter moves forward.  This letter alone may be enough to deter further action.  If on the other hand, the plaintiff’s attorney persists, or if the subpoena requires an appearance along with the records, a Motion to Quash may be necessary. 

Motion To Quash

Where an appearance is required, the insurance company has the right to file Motion to Quash plaintiff’s subpoena.  Though slightly more intricate than the objection letter described above, the Motion to Quash is relatively simple and experienced counsel can guide the company or its adjuster through the process with ease.  See FRCP 45(c)(3) or NRCP 45(c)(3).  At the hearing on the Motion to Quash, the court will consider whether service was proper, the documents are privileged, the requests are over burdensome or a myriad of other potential issues.  If your company or an adjuster at the company receives a subpoena, we cannot emphasize enough that you contact an experienced insurance coverage attorney immediately.  At Mills & Associates, we are specifically trained to spot nuances that dictate the company’s options and provide it the best possible legal protection. 

Mills & Associates is adept in deciphering and disarming Plaintiff’s subpoenas.  If you or your company have been served, please feel free to contact us to discuss any questions you might have.  This ounce of prevention may be worth a policy-limit of cure.

CELEBRATE LAW DAY 2011

Gerald Ford said “Our constitution works. Our great republic is a government of laws, not of men.”  Andrew Jackson said “The great can protect themselves, but the poor and humble require the arm and shield of the law. “  Republican or Democrat, all acknowledge that the USA is a nation of laws.  In these times of political unrest it is important to remember this country is founded on the rule of law.  

During the cold war the USSR celebrated May 1 with parades emphasizing military might, and power.  In response President Eisenhower declared that May 1 would be celebrated in America as Law Day.  In 1961 Congress made it official and in 36 USC § 113 provided that US Citizens would honor the law on  May 1:

(1) in appreciation of their liberties and the reaffirmation of their loyalty to the United States and of their rededication to the ideals of equality and justice under law in their relations with each other and with other countries; and
(2) for the cultivation of the respect for law that is so vital to the democratic way of life.

We don’t celebrate with parades, fireworks, concerts on the National Mall, or other such holiday trappings. Nobody gets the day off work or school, and the Courts and banks are open.  Instead various State Bar Associations arrange for local lawyers and judges to visit local grammar and secondary schools, to inform and teach future generations what the American judicial system is all about.  On this May 1, Mills and Associates reminds you to celebrate and embrace the law. 

 

THE FUTILITY OF SUMMARY DISPOSITION OF CASES IN CLARK COUNTY, NEVADA

“Why Should I Even Try?”

I don’t know how many times during my first meeting with the client, I have heard recitations about how unjust it is that the client has to defend against facially unsupportable allegations.  “Why don’t you just file a Motion and get us out of this case?” they ask.  My answer has always been “If only it were that easy!” 

When giving that answer, I wasn’t trying to be inconsiderate.  I was just passing on to the client what I had learned by experience; in Nevada State District Courts dismissals of a case on a motion is a rare occurrence. 

Well now, the data has been coming in to back up what has now only been anecdotal.  In 2009 the Clark County Clerk started tracking the likelihood that Motions for Summary Judgment would be granted.  The emerging data backs up what we the attorneys have known for some time.  Summary Judgments are as rare as hen’s teeth. 

From July 2009, to Oct. 2010, Clark County reports that it filed 3008 Motions for Summary Judgment.  Of those Motions, only 318 were granted.  That is a dispositive result in only 10% of the filings.  Obviously, this expected rate of outcome would not be considered a real incentive to people to ask for summary disposition of their case. 

An even greater disincentive is the fact that the Clark County Clerk now imposes a fee every time a party files a Motion for Summary Judgment.  They charge you $200.00 just to slide the Motion through the clerk’s window.  I would guess that these two factors working together would all but shut down the Summary Judgment filings in the county.  And what is even more ironic is that the Judges continue to complain about how their exceptionally high caseloads cause them to be so overworked. 

With that said, I don’t see this situation changing anytime soon.  Once you are in a case, plan on being in it for the long haul, in spite of the Rule of Nevada Civil Procedure that says that Summary Judgment is a remedy that is available in this state. 

GOT QUESTIONS?

These posts on the Mills & Associates Nevada Insurance Law blog are published to provide useful insights on Nevada insurance law to our clients and other subscribers. Many times the topics are suggested by recent case law, or issues raised by litigation. 

As part of our ongoing effort to provide both timely and helpful information, we invite all our readers to submit issues which they would like to see addressed in future blog posts. 

Likewise, please submit questions concerning prior posts.  We will do our best to provide additional information or updates on those topics. 

If you would like to submit a question, or a suggestion for a future blog post, please contact us at Mail@MCMillsLaw.com.

 

NEVADA COURT SYSTEM

The organization of the Nevada Court System is unique.  Compared to the federal system or to other state systems, the Nevada system has some facets that are important to be explored and understood.

The highest court in the Nevada Court System is the Nevada Supreme Court.  It is the court of last resort.  The Nevada Supreme Court is made up of seven justices.  The court is divided into two three-justice panels plus the chief justice.  All appeals and extraordinary writs from the Nevada District Court that are filed in the Nevada Court System are filed with the Nevada Supreme Court.

Right now, Nevada has no intermediate court of appeals.  However, the issue of whether an intermediate court of appeals should be added to the Court System is going before the voters this November.  The issue has faced the voters in the past but has been rejected.  It is not clear whether the outcome will be any different in these economically trying times.  The addition of an intermediate court of appeals would be advantageous to the business community in that it would provide new and additional decisions that other courts could rely on in making determinations about legal issues.  When and if that change occurs, this blog will keep you updated.

The court of general jurisdiction is the Nevada District Court.  The Nevada District Court system is broken up into nine judicial districts that are geographically spread across the state.  Some Districts comprise only one county.  Other Districts in the more rural parts of the state cover multiple counties with one or two judges that ride the circuit to the various county courthouses...

CAN’T KEEP A GOOD OFFER OF JUDGMENT DOWN.

Anyone familiar with our blog knows that Mills & Associates is a proponent of the Nevada Offer of Judgment rules.  Recently the Nevada Supreme Court provided yet another reason why Offers are worth making. In Re Estate of Miller, 125 Nev. Adv. Op. 42, 216 P.3d 239  (September 9, 2009).

Miller involved a will contest in which the Defendant made Offers of Judgment to the Plaintiffs.  At trial the Plaintiffs prevailed and the Defendant appealed.  On appeal the Nevada Supreme Court reversed and found in favor of the Defendant as a matter of law.

Following the appeal, Defendant sought to recover her attorney’s fees and costs.  While initially the District Court awarded Defendant $28,730.25 in costs and $100,000.00 in attorney’s fees the District Court reconsidered and reversed its award finding that a more favorable judgment could not be the result of an appellate reversal.  The Nevada Supreme Court reversed defining the word judgment within the Offer of Judgment rules to mean a “final judgment”.  Thus a trial court judgment which is challenged on appeal is not final for purposes of Offers of Judgment until the appeal is concluded and a final outcome is obtained.  .

Even more important, the Nevada Supreme Court’s found that the recoverable fees and costs include those incurred in bringing or defending the appeal itself, proving once again that the Offer of Judgment is a an often underused, but very powerful litigation tool.

Additional information on strategically implementing Offers of Judgment in Nevada litigation can be found by clicking HERE.  We also encourage you to explore the “Categories” listed in the right column for related topics.

If you have any questions about the Offer of Judgment or other effective litigation strategies, feel free to contact me at 702.240.6060 or by email.

--- Mike Mills

  
 

WHAT HAPPENS WHEN ONE OF MULTIPLE DEFENDANTS FILES FOR BANKRUPTCY?

A previous M&A blog post HERE discussed the ramifications of a bankruptcy filing on civil litigation by a Plaintiff or Defendant.  In that post we learned that where a sole Defendant files bankruptcy, the entire case comes to a stop due to the automatic stay imposed by bankruptcy law.  See 11 U.S.C. 362(a)(1). However, what happens when the insured defendant files bankruptcy, but is only one of several defendants? 

In the case of multiple Defendants, the underlying litigation is not brought to a halt because the automatic stay does not apply to non-debtors.  See 11 U.S.C. 362(a) (1).  A “debtor” is defined in 11 U.S.C. 101(13).  This stay forces the Plaintiff to file a claim against the bankruptcy estate in bankruptcy court and to continue to litigate the case in the original court.  This simultaneous litigation of the same case in two different courts can be time consuming and confusing.

The foregoing general rule about the automatic stay is applicable to the more common chapter 7 and 11 bankruptcies.  The stay may be extended to codebtors with regard to certain consumer claims in cases under bankruptcy chapters 12 and 13.

In order to avoid litigating in two places, most Plaintiff’s attorneys try to get the bankruptcy stay lifted and get the case sent (to the extent that there is insurance coverage only), back to the initial court. 

Just like before, if the Plaintiff files a Motion to Lift the Automatic Stay the court will decide the issue by considering several factors.  The Bankruptcy Court will balance the hardship of requiring the debtor to appear and employ counsel in a non-bankruptcy forum against the hardship caused to other parties if they are required to conduct both bankruptcy and non-bankruptcy litigation.  As stated in our previous bankruptcy blog, one of the most common factors for granting relief from the automatic stay is that the claim against the debtor is covered by insurance and that the insurer will pay for the defense of the claim and also for any amount awarded.

A bankruptcy filing of an insured defendant should be brought to the attention of defense counsel immediately, as the automatic stay, as the name implies, is immediately applicable upon the filing of a bankruptcy case. 

 

DRAM SHOP WONDERLAND CASTLE WITHSTANDS SURPRISE ATTACK

Previous blogs have discussed the long standing rule in Nevada that a proprietor’s sale of alcohol is not the proximate cause of injury to either the consumer or a victim of the consumer of the beverage.

The most recent case that was discussed was Rodriguez v. Primmadonna Co., 125 Nev. Adv. Op. 45 (2009), discussed HERE.  That case involved inebriated casino patrons who had been kicked out of a casino, with the casino’s knowledge that they would be departing in a vehicle.  An ensuing accident led to serious injuries to a member of that party. A new case decided by the Nevada Supreme Court , Sanchez v. Wal-Mart Stores, 125 Nev. Adv. Op. 60 (2009), concerns an attempt to impose similar liability, but this time the dispenser of the “intoxicant” was a pharmacist, not a bartender.

Appellant was changing a tire on the side of U.S. 95 in Las Vegas, Nevada, when he was struck and killed by a driver, Patricia Copening, who was subsequently arrested for driving under the influence of controlled substances.  It was later revealed that Copening had obtained the controlled substances from a variety of area pharmacies, including Defendant Wal-Mart.

The specific issue addressed was whether a pharmacy owes a duty of care to unidentified third parties who were injured by a pharmacy customer who was driving while under the influence of controlled prescription drugs.

In the lower court, appellants had cited Nevada’s Dram Shop cases, previously discussed by Mills and Associates HERE and HERE.  The district court found there to be no material difference between a bartender providing a customer alcohol, and a pharmacist filling a customer’s prescription, therefore eliminating proximate cause.  The Nevada Supreme Court, however, found a discussion of Dram Shop law unnecessary due to their finding of the absence of a legal duty on the pharmacy upon review of applicable Nevada statutes and regulatory provisions. 

The Nevada Supreme Court affirmed the district court’s order dismissing appellant’s action against the pharmacies for failure to state a claim upon which relief can be granted, without the necessity of a review or modification of Nevada’s Dram Shop laws.

 

NEVADA’S MANDATORY COURT-ANNEXED ARBITRATION PROGRAM SURVIVES CONSTITUTIONAL CHALLENGE

In the recent Nevada Supreme Court opinion of Zamora v. Price, 125 Nev. Adv. Op. 32, 213 P.3d 490 (2009), two aspects of Nevada’s Mandatory Court Annexed Arbitration Program survived constitutional challenge. 

Nevada’s Mandatory Court-Annexed Arbitration Program, as set out in NRS 38.250, has been controversial from the outset.  As regular readers of this blog are aware, the Arbitration Program requires that almost all claims valued at $50,000 or less must be arbitrated prior to going to trial.  (Additional info available Here)  While either party can ask for a trial following the mandatory arbitration, the Program also provides that either party may introduce into evidence the Arbitration Award per NRS 38.259(2)(a).  In other words, before the jury makes its decision, it is allowed to know who won the arbitration and how much was awarded. 

In Zamora, the appellant raised two constitutional challenges to the Program.  First, appellant argued that the admission of the arbitration award at his later trial was a violation of his constitutional right to a jury trial.  In addition, he argued that the program violated his right to equal protection under the law because he was forced to go to arbitration while claimants with higher value cases did not have to go to arbitration. 

THE FIVE-YEAR RULE: MANDATORY DISMISSAL IF CASE NOT BROUGHT TO TRIAL WITHIN FIVE YEARS

Under Nevada Rule of Civil Procedure 41(e), the court is obliged to dismiss any suit that is not brought to trial within five years.  The Rule states:

    (e) Want of Prosecution.  The court may in its discretion dismiss any action for want of prosecution on motion of any party or on the court's own motion and after due notice to the parties, whenever plaintiff has failed for 2 years after action is filed to bring such action to trial. Any action heretofore or hereafter commenced shall be dismissed by the court in which the same shall have been commenced or to which it may be transferred on motion of any party, or on the court's own motion, after due notice to the parties, unless such action is brought to trial within 5 years after the plaintiff has filed the action, except where the parties have stipulated in writing that the time may be extended. When, in any action after judgment, a motion for a new trial has been made and a new trial granted, such action shall be dismissed on motion of any party after due notice to the parties, or by the court of its own motion, if no appeal has been taken, unless such action is brought to trial within 3 years after the entry of the order granting a new trial, except when the parties have stipulated in writing that the time may be extended. When in an action after judgment, an appeal has been taken and judgment reversed with cause remanded for a new trial (or when an appeal has been taken from an order granting a new trial and such order is affirmed on appeal), the action must be dismissed by the trial court on motion of any party after due notice to the parties, or of its own motion, unless brought to trial within 3 years from the date upon which remittitur is filed by the clerk of the trial court. A dismissal under this subdivision (e) is a bar to another action upon the same claim for relief against the same defendants unless the court otherwise provides. (emphasis added)

In interpreting the Five-Year Rule, the Nevada Supreme Court has said on numerous of occasions that Rule 41(e) requires dismissal after five years.  Harvey's Wagon Wheel, Inc. v. Van Blitter, 959 F.2d 153, at 156 (9th Cir. 1992), Morgan v. Las Vegas Sands, Inc., 118 Nev. 315, at 320, 43 P.3d 1036 (2002), Erickson v. One Thirty-Three, Inc., 104 Nev. 755, at 758, 766 P.2d 898 (1988), C.R. Fedrick, Inc. v. Nevada Tax Comm'n, 98 Nev. 387, at 389, 649 P.2d 1372 (1982), Ad-Art, Inc. v. Denison, 94 Nev. 73, at 74, 574 P.2d 1016 (1978), Johnson v. Harber, 94 Nev. 524, at 526, 582 P.2d 800 (1978), Plankinton v. Fifth Judicial Dist. Court, 93 Nev. 643, at 645, 572 P.2d 525 (1977), Bank of Nevada v. Friedman, 86 Nev. 747, at 749, 476 P.2d 172 (1970), Great W. Land & Cattle Corp. v. Sixth Judicial Dist. Court, 86 Nev. 282, at 285, 467 P.2d 1019 (1970), Volpert v. Papagna, 85 Nev. 437, at 440, 456 P.2d 848 (1969), Lindauer v. Allen, 85 Nev. 430, at 435, 456 P.2d 851 (1969), Faye v. Hotel Riviera, Inc., 81 Nev. 350, at 352, 403 P.2d 201 (1965), Smith v. Garside, 81 Nev. 312, at 314, 402 P.2d 246 (1965), Thran v. First Judicial Dist. Court, 79 Nev. 176, 380 P.2d 297 (1963), cited, Dubin v. Harrell, 79 Nev. 467, at 470, 386 P.2d 729 (1963).

THE WALLS OF NEVADA’S DRAM SHOP WONDERLAND CASTLE WITHSTAND ASSAULT

In our previous blog post, Dram Shop Wonderland, we addressed attempts that have been made over the years by Nevada lawyers to impose liability on bar, tavern and hotel owners for injuries and damages caused by their inebriated guests.  We noted that despite compelling circumstances, the courts have not imposed liability.  The court’s argument has been that if dram shop liability is to be imposed, it must be done by the Nevada legislature.

It has been 13 years since the last attempt to breach the walls of Nevada’s Dram Shop Wonderland Castle, as recounted in the Nevada Supreme Court opinion of Snyder v. Viani, 112 Nev. 568, 916 P.2d 170 (1996).  However, in October 2009, another assault on the walls was turned back by the opinion of Rodriguez v. Primmadonna Co., 125 Nev. Adv. Op. No. 45 (2009). 

Fabian Santiago, 17 years-old, was a guest with his two adult step-uncles at a Primadonna owned property, Buffalo Bill’s Resort and Casino, in Primm, Nevada. As you may know, Primm is on the I-15, near the border between Nevada and California.  Other than three hotel/casinos, fueling stations and an outlet mall, there is little else in that town. Las Vegas is about 30 minutes to the north. 

MAY I CUT IN? INTERVENING IN NEVADA

There are times when an insurance company may find it necessary to jump into the fray.  If a lawsuit is ongoing and the insurance company is not party to that suit, the carrier can try to intervene in the suit that’s already filed, rather than rather than file a separate action.  Intervention is allowed under Rule 24 of the Nevada Rules of Civil Procedure and under N.R.S. 12.130. 

Intervention may be appropriate in several situations.  A common situation is where an injured Plaintiff sues an uninsured motorist.  The uninsured Defendant may have no interest in defending the action because he is judgment proof.  However, if the Plaintiff had uninsured motorists coverage, that carrier may well have an interest in defending that suit to assert defenses that would not otherwise be asserted by the uninsured tortfeasor.  In order to get the defenses presented, the uninsured motorist carrier will need to intervene in the suit filed by the Plaintiff against that uninsured motorist. 

In the case of American Home Assurance Co. v. Dist. Ct., 122  Nev. 1229, 147 P.3d 1120 (2006), the Nevada Supreme Court said that there is no intervention as of right.  In that case, the worker’s compensation carrier wanted to intervene in an action brought by an injured worker.  The worker’s comp carrier was seeking subrogation directly from the alleged tortfeasor for the expenses paid and yet to be paid to be paid in compensation to the injured worker. 

ONE OF THE PARTIES TO A LAWSUIT FILES BANKRUPTCY. NOW WHAT?

In this turbulent economy, more and more businesses and individuals are filing for bankruptcy protection. When a bankruptcy is filed, what happens where the debtor is either a Plaintiff or Defendant in litigation?  This post will try to answer those questions. 

When a Plaintiff or a Defendant files bankruptcy, the federal bankruptcy law imposes an “automatic stay”.  The automatic stay stops all litigation activity of the debtor.  The stay is triggered by the filing of the bankruptcy petition.  It starts at the time of the filing of bankruptcy, not the time that a creditor or litigant learns of the bankruptcy

If the Plaintiff files bankruptcy that does not necessarily relieve the Defendant of paying damages.  The litigation simply stops until the bankruptcy trustee decides how it wants to handle the matter. The debtor’s bankruptcy trustee becomes the new party in interest in the litigation.  The bankruptcy trustee can fire the Plaintiff’s attorney and hire one that is preferred by the trustee.  The trustee can also decide to settle the matter where the Plaintiff would not previously settle.  Chances are that the Plaintiff won’t get to keep as much of the settlement had he not filed bankruptcy.  The actual amount due the Plaintiff will depend on his or her personal exemptions.  A portion of the settlement money may go to pay creditors.

If the Defendant files for bankruptcy and the Plaintiff still wants to pursue the claim, one of two things can happen.  The litigation could shift to the Bankruptcy Court, where liability and damages could be tried before a Bankruptcy Judge.  If there is a trial in Bankruptcy Court, the Defendant’s obligation to the Plaintiff would be considered a debt of the bankrupt’s estate.  The more common way this is handled to have the automatic stay lifted.  This can be accomplished through a Motion for Relief from the Automatic Stay (filed by the Plaintiff), or via a Stipulation to Lift the Automatic Stay.(11 U.S.C. 362)  The motion or stipulation would ask the court to lift the stay but only as to the extent of the Defendant’s insurance coverage.  The Plaintiff could then only pursue the debtor/defendant for damages within the policy limits.  The parties would then proceed forward in litigation in the court where the case originated. 

While Mills & Associates is not a bankruptcy law firm, we often direct clients to competent attorneys that can help with bankruptcy related litigation issues. 

AN ATTORNEY REPRESENTING HIMSELF CANNOT CLAIM ATTORNEY’S FEES FOR THE TIME THAT HE SPENDS PROSECUTING HIS OWN CLAIM

It is often a phone call from a carrier that becomes the impetus for a new blog post.  This week’s phone call asked whether an attorney, representing himself, would be entitled to recover attorney’s fees for the time he spent prosecuting his own claim.  The company said that an attorney, whose fancy car had been damaged, threatened to take his claim to court.  The attorney insinuated that while there he intended to rack up outlandish attorney’s fees and thereby punish the carrier for not paying him the last couple of thousand dollars on his claim.  Apparently, the attorney has not read the case of Sellers v. Dist. Ct., 119 Nev. 256, 71 P.3d 495 (2003). 

In Sellers, an attorney represented himself in the Justice of the Peace Court.  He was awarded $230.00 for costs of suit and $1,500.00 in attorney’s fees.  There was a challenge to the award of attorney’s fees.  The opinion looked at how other states handle this type of situation.  The Nevada Supreme Court explained:

We join those states that decline to have one rule for attorneys who successfully represent themselves in court and a different a rule for non-attorneys who do the same.  We interpret NRS 69.030 to require that all proper person litigants, whether attorney or non-attorney, be obligated to pay attorney’s fees as a prerequisite for an award of prevailing party attorney’s fees.  This interpretation gives to the Legislature’s clear intent that the prevailing party in Justice’s Court be reimbursed by the losing party for out-of-pocket incurred to prosecute the suit.  To interpret the statute otherwise would require us to redefine what is meant by an attorney fee, which is commonly understood to be the sum paid or charged for legal services.

Because Matthews represented himself and did not pay or incur any obligation to pay attorney’s fees, the Justice’s Court exceeded its jurisdiction by awarding such fees.

It reaching its decision, the Nevada Supreme Court may have wanted to disarm attorneys from making the type of threat that the attorney made in this instance.  Whatever the reason for its decision, it is clear that Sellers prevents an attorney from running up attorney’s fees in a small property damage case based upon his own legal work.  His threats will be empty threats unless and until he hires a lawyer, other than himself, to prosecute that claim.

DOES NEVADA RECOGNIZE A CLAIM OF DIMINISHED VALUE?

It just so happens that last week, I got a telephone call from two adjusters at the same insurance company asking me this question.  I told them both I was confident that Nevada recognized diminished value claims.  But I decided that I would go back, take a look into my research and reconfirm how it is that I was confident that there was recovery for "diminished value" in Nevada.  Here is what I found.

Normally, when someone asks me, "What is the state of the law on a particular topic?", I often start by looking at the Nevada Pattern Jury Instructions.  Although these pattern instructions are not infallible, they were written by a committee of experienced attorneys who have run into similar issues.  If there is no precedent, the instructions are something of a consensus as to what the rule of law ought to be.  If there is no precedent and a trial were held today, chances are better than 95% that a judge would use these instructions to tell the jury what the law is.  Here is what I found.
 
The Nevada Pattern Jury Instructions give four methods to calculate damage to be paid to plaintiff for loss of property:

1.    If the property has no market value after the loss, then the amount paid to plaintiff would be the fair market value of the property before it was destroyed.  NPJI 10.10

2.    If the property can be repaired, but the repairs will cost more than the fair market value, then the amount to be paid will be the fair market value prior to the loss.  NPJI 10.08

3.    If the repairs will cost less than the fair market value and the repairs will fully restore the value of the item, then amount to be paid is the costs of the repairs.  NPJI 10.08

4.    Finally, if the repairs will not fully restore the value of the property, then amount paid is the difference between pre-loss fair market value and post-repair fair market value, plus the costs of repairs.  NPJI 10.09

The next question is whether there are there any precedent setting cases that have considered the issues raised by these instructions?  The answer is yes.  The Nevada Supreme Court took up some of these issues in the case of Dugan v. Gotsopoulos, 117 Nev. 285, 22 P.3d 203 (2001).   In that case, a property owner sustained damage to her car.  She didn't have money to get it fixed.  She drove it around for a while but ultimately had to sell it for scrap.  When trial came, the Plaintiff wanted to introduce evidence of the costs of the repairs.  But the trial judge wouldn't let her do so until she had demonstrated that the cost of repairs was less than the fair market value.  She wanted to say what she thought the car was worth.  The trial judge wouldn't let her.  She wanted to introduce the Kelley "Blue Book" as evidence of the fair market value.  The trial judge wouldn't let her introduce that either.
 
When that case went up on appeal, the Nevada Supreme Court said that a property owner may testify as to what they think the fair market value of their property is.  A property owner can also introduce evidence of fair market value using "market quotations, tabulations, lists, directories or other published compilations, generally used and relied upon by the public or by persons in particular occupations"  i.e. Kelley Blue Book.  In the end, the Nevada Supreme Court did not comment on all of the instructions set out above.  However, they did say that the trial court "abused its discretion by failing to permit Dugan to present evidence about both the value of her car before and after the accident".  Although "diminished value" was not directly the issue in the case, this statement tells me that the Nevada Supreme would allow a claim for "diminished value" and that such a claim would be relatively easy for a plaintiff to prove.

DRAM SHOP WONDERLAND

Once upon a time in a land far, far away the courts refused to legislate from the bench.  That place was called Dram Shop Wonderland.  The story goes like this:

In that day, there were dram shop owners and innkeepers who served their guests beverages known to cause inebriation.  The guests would leave the place in a less than sober state and caused mischief in the town, including damage and injury.  The victims of the mischief made appeals to the courts and the courts ordered the guests to pay for the damage.  However, the victims found it difficult to collect damages from the drunken guests. 

In this town lived a smart lawyer.  He argued that the damages were caused in part by the dram shop owners and innkeepers.  So he sued the owners in court.  He argued that the purveyors of adult beverages should not be serving liquor to drunks.  Therefore, the owners should pay for the damages done by their marauding guests.  But the courts would hear none of it.  The courts told the lawyer that the guests were responsible for the damage done, not the innkeepers or the dram shop owners. 

But as we all know, times have changed.  We no longer have dram shops.  Nowadays they are bars and taverns.  We no longer have inns.  Now they are hotels.  And since those days, a number of courts in a number of states have ruled that bars and hotels that serve alcohol are responsible for the injuries and damage caused by their less than sober guests. 

Following the lead of other states, Nevada lawyers have tried to get Nevada judges to impose liability on the owners for damage or injury caused by the intoxicated guests.  However, no matter how compelling the facts, the Nevada judges have refused.  For example there is case of Hamm v. Carson City Nugget, Inc. 85 Nev. 99, 450 P.2d 358 (1969), a pedestrian was killed when a drunken man was served alcohol at a tavern contrary to the law.  In Hinegardner v. Marcor Resorts, L.P.V., 108 Nev. 1091, 844 P.2d 800 (1992) a passenger was injured by an intoxicated minor who was provided alcohol illegally.  The most recent attempt was the case of Snyder v. Viani, 112 Nev. 568, 916 P.2d 170 (1996) where a bar was sued for the underaged driver’s death.  In each instance the courts have said that if dram shop liability is to be imposed, it will have to be done by the Nevada legislature.

It appears that Dram Shop Wonderland is a place that can still be found.  And that place is now called Nevada.

AVOIDING THE PITFALLS OF POLICY LIMIT DEMAND LETTERS

How many times a week do busy insurance adjusters receive demands to settle a claim for the amount of the insured’s policy limits?  It doesn’t matter that the damage to the Plaintiff’s car is valued under $500.00 and the chiropractic treatment is less than $1,500.  The Plaintiffs are still asking for the entire per person limit.  And that is not all!  The Plaintiffs want the money on exceptionally short notice, providing the adjuster little or no supporting information.  This Nevada Insurance Law Blog post explains why the Plaintiffs’ attorneys submit such unreasonable demands.  We will also explore a strategy on how to address these policy limits demands, no matter how outrageous they may seem. 

I.  WHAT MOTIVATES THE PLAINTIFF’S ATTORNEY TO SEND YOU THAT POLICY LIMIT DEMAND LETTER?

THEY ARE LOOKING FOR DAMAGES IN EXCESS OF THE POLICY LIMITS!

Plaintiffs’ attorneys are constantly searching for ways to maximize a recovery for their clients.  Plaintiff’s attorneys do not want to collect damages from the actual tortfeasor.  That can be difficult and time consuming.  Instead, they like to collect directly from the insurance companies. 

All adjusters know that insurance policies are written with limitations.  Under the policy, the amount of the premium will dictate how much the carrier will have to pay out. 

Plaintiffs’ attorneys know of these limitations and are always looking for ways to get around them.  Plaintiffs’ attorneys and insurance companies both know that if the carrier acts in bad faith, it can be called upon to pay more than the policy limit.  Bad faith claims are a concern for every insurance carrier.  Not only do they damage the carrier’s public image, they also place an insurance carrier at risk to pay damages in excess of the policy limit.  Along with that, there is also the risk that the carrier will have to pay a claim for punitive damages.

Plaintiffs’ attorneys have devised a number of strategies that they believe will automatically put the carrier in bad faith and thereby “open the policy”.  One very common threat made by Plaintiffs’ attorneys is that the policy is immediately opened if the defendant’s carrier fails to accept a settlement demand made at or below the policy limit.  Plaintiffs’ attorneys claim that they are entitled to an “extra-contractual” recovery if the carrier doesn’t pay them the entire policy limit within the time they have prescribed. 

Let’s examine the background behind this common threat and consider the misunderstandings held by many regarding a failure to satisfy a policy limits demand.  Finally, although the threats can never be eliminated, we will discuss strategies that the carrier may adopt to mitigate the possibility that policy will ever be opened due to by bad faith.

II.  DO NOT LET FEAR OF A POLICY LIMIT DEMAND LETTER CAUSE YOU TO FREEZE UP.

INSTEAD, IMPLEMENT YOUR PLAN!

When the policy demand letter arrives, it may or may not include a threat of bad faith.  Just know that the policy limit demand is the foundation for a possible bad faith claim in the future.  Therefore, you have to take the letter seriously.  Do not ignore it.  But don’t let the demand letter cause you to freeze up either.

At the moment when a demand letter is sent and received, any threat of bad faith is just that, a threat.  The impact of any alleged bad faith is a long way off.  When a plaintiff’s attorney claims that the carrier’s bad faith "opened" the policy, the attorney is arguing that the carrier has breached the duty it owes to its insured. 

In fact, the carrier owes a duty to its insured to act reasonably in its negotiations with the claimant as it decides whether it will accept a demand.  If the insurance carrier fails to reasonably consider the interests of the insured, it can be argued that the carrier has acted in bad faith. 

A circumstance that regularly presents itself for the carrier's consideration is whether the plaintiff’s demand is meritorious and whether payment of the insured’s minimum policy limit would in fact settle the case.  If the carrier unreasonably rejects or fails to respond to the plaintiff’s demand, the insured may have grounds to argue later that the carrier has committed bad faith. 

However, bad faith against the carrier is not mature until the insured sustains some damage.  The insured will not be considered damaged unless and until the plaintiff has obtained a judgment against the insured.  In other words, the carrier does not automatically commit bad faith by rejecting the policy limit demand or by making a counter offer. 

Thus, keep in mind, it is not the demand letter that puts the company in bad faith.  Instead, it is how the company reacts (or fails to react) that can cause a bad faith claim to arise.  Therefore, having a response plan in place and executing that response plan will reduce the possible exposure to a bad faith suit.

III.  THE PLAN YOU NEED TO FOLLOW TO AVOID POLICY LIMIT DEMAND PITFALLS

1. Send a written response to every time limit demand in advance of its deadline.

We recommend every response to a time limit policy limit demand be made in writing.  If there is ever a question of timeliness, the writing is evidence of the date of your response to the demand.  Furthermore, the written response documents how the carrier intends to respond to the demand.  If the response is written carefully, there will be no question about the carrier’s intentions toward Plaintiff’s demand.

2. In the carrier’s written response, describe several of the steps that the company has taken to complete its investigation of the claim.

By describing in writing some of the steps the company has taken on the claim, it will demonstrate that the carrier is attending to its duty to investigate.  If the claim were to go on to an extra contractual phase, the letter will be evidence that the carrier did not ignore the file. 

3. Ask the Plaintiff’s attorneys to send you everything that they have in their files that will support their demand

This item may be self evident but it seems to be an alarming trend that Plaintiffs’ attorneys are sending demand letter with little or nothing attached.  In your written response, always point out the fact that the demand included no or few supporting documents.  Tell the Plaintiff’s attorney that you cannot evaluate the claim without access to any evidence of injury or bills.  It is not unreasonable to ask the Plaintiff’s attorney to send you copies of the documents (i.e. medical bills and records) that would support their client’s claim for damages. 

If the Plaintiffs attorney sends authorizations and expects the carrier to send them to the providers and those authorizations do not comply with the HIPAA law, respond in writing that the authorizations will do the company no good because they will not be honored by the Plaintiff’s medical providers. 

Always remind the Plaintiffs attorney in writing that if you cannot evaluate the claim without the medical records and that if you have to go out and get them that that is going to take additional time. 

4. Always detail additional steps that must be taken to complete the evaluation of the claim.

This is a critical step in the response process.  Sometimes counsel will present a time limit demand with an exceptionally short response time fuse.  If the response time is so short (i.e., one to two days) that no legitimate response can be formulated, the written response should say that. 

In particular, the letter should describe steps that still have not been completed.  Perhaps medical records need to be collected.  Maybe witnesses need to be interviewed.  It is possible that photos are needed or measurements taken or experts consulted.  The response should also state all of the additional steps that need to be taken to complete the carrier’s investigation.  In addition, the letter should say that further investigation may be needed based upon completion of the listed steps.  Don’t forget to say that the additional investigation will require additional time to be completed and the company will need time to consider the findings of the investigation.

5. If evidence/information in the claimant’s control is now unavailable for review, mention that fact.

In many investigations, the evidence and information that had been available at one time is no longer available.  For example, a car that once may have been available for thorough evaluation by the company’s engineer may have been repaired and therefore, no longer be available for such an evaluation.  Sometimes photographs taken by the Plaintiff are lost or cannot be developed. 

There are times when parts have been lost, statements have been bungled, or other situations where critical information has been either intentionally or inadvertently destroyed by the Plaintiff or his counsel.  If there is evidence in the case that you would have liked to have seen but that is no longer available, it is always good to mention the loss of that information and document how it is no longer available and how the lack of the information is going to hinder the company’s further investigation of the case. 

6. Recite any authority that grants or insinuates that the carrier may have additional time to respond. 

In many states, fair claims practice regulations obligate the carrier to respond to any particular claim within a certain time frame.  In first party cases, Nevada identifies 30 days as being the appropriate period in which to respond. Nevada Administrative Code 686A.675(3) specifically states that in regard to insurance claims:

If the insurer needs more time to determine whether a claim of a first-party claimant should be accepted or denied, it must so notify the claimant within 30 working days after receipt of the proof of loss giving reasons that more time is needed. If the investigation remains incomplete, the insurer shall, 30 days after the date of the initial notification and every 30 days thereafter, send to the claimant a letter setting forth the reasons that additional time is needed for investigation.

In virtually any letter, it would be appropriate to cite this section of the regulations and would provide for and could argue that the Department of Insurance has indicated that an appropriate response time is 30 days and not the 2 or 3 days that the Plaintiff’s attorney has given you.

IV.  CONCLUSION

By following this plan an insurance carrier can discourage claimants from attempting to take their claims to an extra contractual level.  Although this plan may not always prevent all extra-contractual cases, it has worked well for many of our clients in southern Nevada.

Even if the most persistent claimants are not discouraged by your response letter, the submission of the letter will become good evidence should the case later find itself in extra contractual litigation.

If you have any questions about other defense strategies to respond to Time Limit Demand Letters, please feel free to contact Mr. Mills by email or phone (702) 240-6060.

 

INSURANCE CARRIERS MAY HAVE 10 EXTRA DAYS TO RESPOND

Although they are few and far between, there are a few perks given to insurance companies that are made Defendants in suits brought against them in Nevada. 

Under certain circumstances an insurance company named in a summons and complaint may have 30 days to respond instead of the regular 20 days that most other Defendants have.

For all the information, please visit the post on our Coverage and Bad Faith Blog by clicking HERE.

If you would like to see all the posts on the Mills & Associates Nevada Coverage and Bad Faith Law Blog, click HERE.

 

PUT UP OR SHUT UP! MAKING AN EFFECTIVE DEMAND FOR A NON-RESIDENT COST SECURITY

When Plaintiffs live outside the state of Nevada, the defense attorney can utter the litigation equivalent to these fighting words by filing a Demand for Security of Costs.  If the Demand is properly and timely filed, the Plaintiffs are forced to either post up the security or shut up by having their case dismissed.  The authority to demand that non-residents post a security for costs is found in N.R.S. 18.130. 

The statute provides that where a plaintiff resides out of the state or is a foreign corporation the Defendant may require Plaintiff to post security for costs and charges which may be awarded against that Plaintiff.  The Demand must be filed within the time allowed for the filing of the complaint.  Once the Demand is filed, the proceedings must cease until the Plaintiff secures the costs of the Defendant.  The security can be a cost bond or a cash deposit to the court for an amount not exceeding $500.00.  When the Plaintiff posts the security, he then must notify the Defendant, who has ten days from that notice to answer or otherwise plead to the complaint.

Plaintiff is allowed 30 days to post security.  If the Plaintiff hasn’t posted security 30 days from the date of service of the Demand, the court or judge may dismiss the action.  Although this Demand will not eliminate the claims of the persistent Plaintiffs, it will in fact buy the Defendants a little more time to prepare their defense.