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Vol. 8 - Issue 6
July 10, 2019


Nevada High Court To Address Reimbursement Of Defense Costs


Just as this issue of CO was going to print, the Ninth Circuit handed down Nautilus Ins. Co. v. Access Medical, LLC, No. 17-16265 (9th Cir. July 2, 2019).  The court had before it an insurer’s claim for reimbursement of defense costs, following a judicial determination that the insurer, which undertook its insured’s defense, had no such duty.  On several occasions, the insurer asserted a reservation of rights to seek recovery of its defense costs. 

The district court held that, under Nevada law, the insurer was not entitled to reimbursement.  However, the Ninth Circuit was not so convinced.  The appeals court noted that courts nationally have gone both ways on the issue and discussed the rationales for these two schools of thought.

Concluding that there was no Nevada law on the issue, the appeals court made the decision to seek guidance from the Nevada Supreme Court.  Interestingly, in doing so, the court observed that, when Nevada law is lacking, courts have looked to the law of other jurisdictions for guidance – “particularly California.”  But the court declined to do so here.  Perhaps the Ninth Circuit didn’t like what it saw when it turned to such guidance – California’s Buss decision, which allows an insurer to reserve the right to reimbursement of defense costs, without the insured’s agreement.

Instead, the Ninth Circuit certified the following question to the Nevada Supreme Court: “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?”

No doubt the insurer here will argue that the Nevada high should follow California law, just at is did so closely in State Farm v. Hansen (2015), where it adopted California’s Cumis rule for purposes of determining if an insured is entitled to independent counsel (and specifically speaking the name Cumis fifteen times in the decision).  
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