{"id":901588,"date":"2023-09-07T15:26:25","date_gmt":"2023-09-07T21:26:25","guid":{"rendered":"https:\/\/www.myconstructionexpert.com\/blog\/?p=901588"},"modified":"2023-09-07T15:26:29","modified_gmt":"2023-09-07T21:26:29","slug":"defense-within-limits-changing-liability-insurance-nevada","status":"publish","type":"post","link":"https:\/\/www.myconstructionexpert.com\/blog\/defense-within-limits-changing-liability-insurance-nevada\/","title":{"rendered":"Nevada\u2019s Changing Liability Insurance Landscape\u2014State Insurance Regulator Issues Emergency Regulation and Guidance Addressing Controversial \u201cDefense-Within-Limits\u201d Legislation"},"content":{"rendered":"\n

Geoffrey B. Fehling and Andrew S. Koelz | Hunton Insurancey Recovery Blog<\/a><\/p>\n\n\n\n

We\u00a0recently posted\u00a0about Nevada becoming the first state to prohibit defense-within-limits provisions<\/a> in liability insurance policies. Defense-within-limits provisions\u2014resulting in what is called \u201ceroding\u201d or \u201cwasting\u201d policies\u2014reduce the policy\u2019s applicable limit of insurance by amounts the insurer pays to defend the policyholder against a claim or suit.\u00a0<\/p>\n\n\n\n

In response to uncertainty and industry concern about the potential effects the new law may have on the state\u2019s insurance marketplace, Nevada\u2019s Division of Insurance issued an\u00a0Emergency Regulation\u00a0and\u00a0Guidance to Insurers\u00a0on the new law to minimize disruption to the marketplace. After noting that the new law \u201chas the potential to eliminate or greatly reduce the availability of certain policies of liability insurance and significantly increase their costs, which will affect all types of Nevada businesses, non-profit entities, and state and local governments,\u201d Nevada\u2019s Division of Insurance addressed three issues relating to the new law in the Emergency Regulation:<\/p>\n\n\n\n

    \n
  1. The meaning of the term \u201cpolicy of liability insurance,\u201d as used in the new law.<\/li>\n\n\n\n
  2. The insurers to which the new law does not apply.<\/li>\n\n\n\n
  3. How defense coverage is required to be made available.<\/li>\n<\/ol>\n\n\n\n

    A letter from the Insurance Commissioner to the Governor accompanying the Emergency Regulation, and a separate Guidance to Insurers document which was issued by Nevada\u2019s Division of Insurance, provided clarification on each of these issues.<\/p>\n\n\n\n

    Policy of Liability Insurance.<\/em><\/strong> With respect to the new law\u2019s use of the term \u201cpolicy of liability insurance,\u201d \u201cliability insurance\u201d is \u201ca form of casualty insurance, defined in NRS 681A.020(1)(b) as insurance against legal liability for the death, injury or disability of any human being or for damage to property, including liability resulting from negligence in rendering expert, fiduciary or professional services.\u201d The term liability insurance, therefore, encompasses many policies that commonly include defense-within-limits provisions.<\/p>\n\n\n\n

    Scope of Legislation.<\/em><\/strong> Regarding the scope of the new law, it does not apply to risk-retention groups and \u201ccaptive insurance that does not cover third-party liability.\u201d However, the Insurance Commissioner\u2019s letter acknowledges that the new law is expected to impact a broad range of liability policies, including \u201cMedical Malpractice; Errors and Omissions and other professional liability policies; Directors and Officers; Cyber Liability; Employment Practices Liability; Pollution and Environmental Impairment; Fiduciary Liability; Construction Defect; Products and Clinical Trial Liability; and Excess and Umbrella policies.\u201d <\/p>\n\n\n\n

    Defense Coverage.<\/em><\/strong> On the final issue of required defense coverage, the guidance document reiterates that \u201ca policy of liability insurance must now include defense costs outside of the limits of liability and defense coverage must be available.\u201d But it goes on to clarify that the law \u201cdoes not require unlimited defense costs.\u201d Policies may provide for a separate limit for defense costs, including a limit of $0. Policies may also include self-insured retention or deductibles on liability coverage or defense costs.<\/p>\n\n\n\n

    The Emergency Regulation is effective for 120 days from its effective date of July 21, 2023, and it cannot be renewed. Unless modified or rescinded, the Emergency Regulation should remain in effect past October 1, 2023, when Nevada\u2019s new law goes into effect.<\/p>\n\n\n\n

    This is an evolving area of law that the entire insurance industry, but especially Nevada policyholders and insurers doing business in the state, are sure to monitor.<\/p>\n\n\n\n

    \n\n\n\n

    When one of your cases is in need of a construction expert, estimates, insurance appraisal or umpire services in defect or insurance disputes – please call Advise & Consult, Inc. at 888.684.8305, or email experts@adviseandconsult.net<\/a>.<\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"

    Geoffrey B. Fehling and Andrew S. Koelz | Hunton Insurancey Recovery Blog We\u00a0recently posted\u00a0about Nevada becoming the first state to prohibit defense-within-limits provisions in liability insurance policies. Defense-within-limits provisions\u2014resulting in what is called \u201ceroding\u201d or \u201cwasting\u201d policies\u2014reduce the policy\u2019s applicable limit of insurance by amounts the insurer pays to defend the policyholder against a claim… Continue reading Nevada\u2019s Changing Liability Insurance Landscape\u2014State Insurance Regulator Issues Emergency Regulation and Guidance Addressing Controversial \u201cDefense-Within-Limits\u201d Legislation<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":false,"jetpack_social_options":{"image_generator_settings":{"template":"highway","enabled":false},"version":2}},"categories":[10721,9914],"tags":[9895,11927,11207],"class_list":["post-901588","post","type-post","status-publish","format-standard","hentry","category-insurance","category-insurance-coverage","tag-advise-consult","tag-defense-within-limits-provision","tag-liability-insurance-coverage","entry"],"jetpack_publicize_connections":[],"yoast_head":"\nNevada\u2019s Changing Liability Insurance Landscape\u2014State Insurance Regulator Issues Emergency Regulation and Guidance Addressing Controversial \u201cDefense-Within-Limits\u201d Legislation - 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