Nevada Law on Late Claims Submitted to Insurance Company

Posted by: on Wed, Oct 29, 2014

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 Nevada Law on How an Insurance Company Must
Treat a Late Notice of Claim under Applicable Insurance Policy

 

The former Nevada rule on this issue, which was recently overturned – is based on a 1950
Nevada Supreme Court case which followed what was then the majority rule,
but which rule has since become very much the minority rule.  In State
Farm Mutual Auto Ins. Co. v. Cassinelli
, 67 Nev. 227, 247, 216 P.2d 606,
616 (1950), the Court held that:

 

By reason of the overwhelming weight of authority of the courts of last resort within the United
States, we are compelled to hold that on account of the respondent’s failure to
perform the condition precedent, stipulated in the policy as such, of giving
notice of the suit and forwarding summons and complaint within a reasonable
time, no action on his part lay against the company.  Lack of prejudice,
under the terms of the policy, was immaterial.   Id.  In other words,
where the notice was provided after the time period required by the policy, the
Court deemed this to be a failure of a condition precedent to the insurer’s
duty to provide coverage.  This rule is deemed to be the “traditional
view” or the “no prejudice required” rule, which has since been overruled in
most every other jurisdiction except for a small handful of states.  The
Nevada Supreme Court has apparently never revisited the issue since Cassinelli.

 


Strong Arguments Made in 2007 Local Bar Journal and Supported by Compelling
Case Law that Nevada Will Almost Certainly Overrule Cassinelli the Next
Time it Considers the Issue

 

In a 2007 Nevada Lawyer article entitled “Special Feature: The Status of the Notice/Prejudice
Rule for Liability Insurance Claims in Nevada”, Professor Jeffrey W. Stempel
and attorney Timothy S. Menter point out that:

“Even when Cassinelli was authored, the traditional, strict late notice defense was under
attack.  In the half-century since Cassinelli, almost all states
have adopted the view that late notice defeats insurance coverage only when the
insurer is significantly prejudiced by the late notice in terms of its ability
to investigate a loss or defend a claim.  Further, the clear majority of
states require that the insurer bear the burden to establish prejudice from
late notice, with a handful of states requiring the policyholder to prove lack
of prejudice.”

 

After describing the sea change that has occurred in the various court’s decisions on this issue (i.e., requiring a showing of actual prejudice that resulted to the insurer as a
result of the late notice; aka the “notice-prejudice” rule), these commentators
conclude that:

 

“It . . . appears likely, if not certain, that if the same Nevada Supreme Court addressed
the facts of Cassinelli today, it would come to the opposite conclusion
based on the national shift in favor of a notice-prejudice rule and find that
prejudice on the part of the insurer is material and necessary for enforcement
of a notice condition.”

 

While the foregoing commentators further note that while, in their view, Cassinelli
has already been implicitly overruled by “changes in the assumptions and facts
upon which Cassinelli was decided”, they also point out that there is a
further regulatory basis for attacking Cassinelli, which is based upon
the Nevada insurance regulations found at NAC 686A.600(4).  That
regulation provides:

 

  1. No insurer may, except where there is a time
    limit specified in the insurance contract or policy, require a claimant to give written notice of loss or proof of loss within a specified time or seek to relieve the insurer of the obligations if the requirement is not complied with, unless the failure to comply prejudices the insurer’s rights.

 

The Nevada Supreme
Court in 2011 follows the Majority Rule in Las
Vegas Metropolitan Police Dept. vs. Coregis Insurance Company

 

 

In Las Vegas Metroplitan Police Department v Coregis Insurance, 127 Nev.
Adv. Op 47, 256 P.3d 958 (2011), the police department urged the adoption of a
notice prejudice rule, which requires that in order for an insurer to deny a
claim based on late notice, it must have been prejudiced by the late
notice.  The Nevada Supreme Court agreed, and not only adopted the
notice-prejudice rule, but also placed the burden to show prejudice on the
insurance carrier.

 

The court explained that it is more practical and equitable to
require the insurer to prove that it has been prejudiced than it would be to
place that burden on the insured party and require him or her to prove a
negative, namely, that the insured had not been prejudiced.  The court
also recognized that Cassinelli has since been abrogated by NAC 686A.660(4),
adopted in 1980, which states that “no insurer may, except where there is a
time limit specified in the insurance contract or policy, require a claimant to
give written notice of loss or proof of loss within a specified time or seek to
relieve the insurer of the obligations if the reauriement is not complied with,
unless the failure to comply prejudices the insurer’s rights.”

 

 

The Law in
Influential Neighboring States Follows the Modern-Majority Trend

 

It should be noted that some of Nevada’s influential neighbor states have long
adopted the modern notice-prejudice rule.  For example, California has
long held that:

 

[A] defense based on an insured’s failure to give timely notice [of a claim] requires the insurer to provide that it suffered actual prejudice.  Prejudice is not presumed from
delayed notice alone.  The insurer must show actual prejudice, not the
mere possibility of prejudice.  Shell Oil Co. v. Winterthur
Swiss Ins. Co.
, 12 Cal. App. 4th 715, 760-761, 15 Cal. Rptr. 2d
815, 845 (1st Dist. 1993).  Similarly, Arizona, another state
with a strong body of insurance law, has several cases wherein their courts
have held that:

 

It has long been the rule that an insurer cannot escape liability under an insurance contract due to the insured’s failure to give notice within the contract’s time limits unless
the insurer can show prejudice.

 

Salerno v. Atlantic Mut. Ins. Co., 198 Ariz. 54, 6 P.3d 758 (Ct. App. Ariz., Div. 1, 2000); citing,
inter alia,
Lindus v. Northern Ins. Co. 103 Aris. 160, 164, 438 P.2d 311, 315 (1968).

 

By way of an example as to how Arizona might treat a case similar to ours, in Liberty
Mut. Fire. Ins. Co. v. Mandile
, 192 Ariz. 216, 222, 963 P.2d 295, 301 (App.
1997, the court held that the underinsured motorists coverage (UIM) was similar
to an excess policy (like NRM’s Frontier policy) because the “UIM claim ripens
only upon determination that the damages sustained exceed available [liability]
policy limits.”  In that case, the court found that the claim notice was
given five years and ten months after the accident.  In that case, where
the carrier argued late notice, the court held:

 

Liberty Mutual had the burden to demonstrate prejudice due to lack of notice.  Nevertheless,
Liberty Mutual did not present any evidence that, had it immediately been
informed of the accident by the insureds, it would have undertaken an
investigation of the accident.  No evidence demonstrates a policy or
practice by Liberty Mutual of conducting detailed claims investigations, hiring
accident reconstructionists, interviewing witnesses or requiring injured
claimants to submit to medical examinations in cases such as this.  Liberty
Mutual did not even subpoena the liability carrier’s investigation file.   Id. at 222-223.

 

Recent Decisions
in other States Discussing the Development of this Area of Law

 

Finally, in some modern decisions considering the development of these legal
principles, the courts have been quick to point out the considerable change
that has been made in this area of the law.  In Prince George’s County,
Maryland v. Local Government Ins. Trust
, 388 Md. 162, 183, 879 A.2d 81, 93
(Md. App. 2005), the court cited the handful of cases that still held to the
traditional rule (citing, inter alia, the 1950 Cassinelli case),
and stated that “[i]n the four decades since we last considered the common law
rule, the majority “no-prejudice rule” (now “the traditional view”) that [the
prior Maryland precedent-setting case] relied upon became the minority
rule.”  (Citations omitted).  That court further noted that
“[t]hirty-eight states and two territories have adopted the “prejudice
rule”.  Id.

 

Along these same lines, the court in Alcazar v. Hayes, et al., 982 S.W. 2d 845, 1998
Tenn. LEXIS 749 (Sup. Ct. Tenn. 1998), noted that:

 

[O]ur research indicates that only two states whose highest courts have considered the issue
within the last twenty years have continued to strictly adhere to the traditional approach. Id. at 852 (citing cases out of New York and Colorado).

 

About the Authors: The law firm of Albright, Stoddard, Warnick & Albright is an A-V Rated Nevada-based full-service law firm having attorneys licensed in Nevada, California and Utah.  Our firm’s practice includes a strong emphasis on construction law, contracts and litigation in the jurisdictions where we are licensed.

Note: This article, and any other information you obtain at this website, is not offered as legal advice, nor should it be relied upon as such, nor is it a solicitation for legal services.  Only a licensed attorney can advise you with respect to your specific legal needs. We welcome your contacting our firm to discuss such representation.  Contacting us does not create an attorney-client relationship. Please do not send any confidential information to us until such time as an attorney-client relationship has been established.

About the Authors: The law firm of Albright, Stoddard, Warnick & Albright is an A-V Rated Nevada-based full-service law firm having attorneys licensed in Nevada, California and Utah. Our firm’s practice includes a strong emphasis on personal injury accidents. Call us at 702-384-7111.

Note: This article, and any other information you obtain at this website, is not offered as legal advice, nor should it be relied upon as such, nor is it a solicitation for legal services. Only a licensed attorney can advise you with respect to your specific legal needs. We welcome your contacting our firm to discuss such representation. Contacting us does not create an attorney-client relationship. Please do not send any confidential information to us until such time as an attorney-client relationship has been established.