Strategies, Challenges, and Answers

A Finding Of Bad Faith Does Not Automatically Entitle The Policyholder To An Award Of Attorney’s Fees

Does a finding of bad faith trigger entitlement to an award of attorney’s fees? In Nevada, the answer is no. This issue was addressed in the 2007 case of Merrick v. Paul Revere Life Ins. Co., 500 F.3d 1007 (9th Cir., 2007).

Attorneys fees in Nevada,  Nevada Coverage Law, Nevada Bad Faith Law, Mills & Associates Nevada Insurance and Coverage Lawyers, Las Vegas Insurance and Coverage Lawyers 702-240-6060Paul Revere Life and co-defendant Unum Provident denied Merrick’s disability insurance claim.  Merrick filed suit alleging breach of contract and of the duty of good faith and fair dealing.  Applying Nevada law under the doctrine of Erie Railroad v. Tompkins, 304 U.S. 64 (1983), the jury ruled in favor of Merrick on his claims for breach of contract and bad faith.  Post trial, the U.S. District Court awarded attorney’s fees.   Both insurance companies appealed the award.

The District Court premised its award of attorney’s fees on its interpretation of Farmers Home Mut. Ins. Co. v. Fiscus, 102 Nev. 371, 725 P. 2d 234 (1986). (For more about the Fiscus case, see HERE).  The court decided that the Fiscus decision required an award of attorney’s fees in every case where bad faith damages were awarded.  The District Court said that the bad faith determination was tantamount to a finding that the insurance company lacked reasonable ground for maintaining a defense, subjecting the plaintiff to attorney’s fees pursuant to Nevada Revised Statute Section 18.010(2)(b) in every case.

The Ninth Circuit said that the District Court had misread Fiscus.  The court pointed out that in Fiscus, the Nevada Supreme Court awarded attorney’s fees based on the insurance company’s bad faith interpretation of its policy.  When the insurance company’s defense is based on that same bad faith interpretation, attorney’s fees could be awarded under this statute.  However, according to the Merrick decision, this is not a categorical rule.

Because the trial court relied solely on the holding in Fiscus as a catch-all basis for awarding attorney’s fees, and because the trial court found that the decision could have gone either way, the Merrick court reversed the attorney’s fees award.

In summary, Merrick confirmed that there is no categorical basis for awarding attorney’s fees in Nevada bad faith cases as a matter of law.  However, it did not preclude consideration of such an award on a case-by-case basis where the insurance company’s conduct in defending a bad faith suit is found to be unreasonable. Nevertheless, a prerequisite to such an award will be based on a fact specific analysis of the case in question.

If you have questions regarding the award of attorney’s fees in bad faith or coverage cases, please give Mike Mills at Mills & Associates a call at 702-240-6060×114 or e-mail him, mike@mcmillslaw.com.

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