Follow
Email
Saundra Torres was hurt when the car she was driving was hit by a car driven by Jario Perez-Castellano and owned by Adiel Mollinedo-Cruz. The Mollinedo-Cruz vehicle was insured by Nevada Direct Insurance Company.
After Answering the Complaint, Perez-Castellano and Mollinedo-Cruz ceased their participation in the litigation.
Nevada Direct Insurance Company filed a Declaratory Relief Action against Perez-Castellano, Mollinedo-Cruz and Torres. Nevada Direct hoped to avoid any further duty to defend and indemnify its uncooperative insureds.
The insureds Perez-Castellano and Mollinedo-Cruz defaulted but Torres answered the declaratory relief action. Subsequently, Nevada Direct offered Torres its policy limit plus $1.00. Torres declined the offer.
The court granted declaratory judgment in favor of the insurance company relieving it of any further duty to defend or indemnify Perez-Castellano and Mollinedo-Cruz. However, the court would not deprive Torres of any rights she may have against the Nevada Direct insurance policy.
Ms. Torres pursued and obtained a default judgment against Perez-Castellano and Mollinedo-Cruz in the liability action. She then named Nevada Direct as a defendant in an action to collect all or part of the judgment.
In this action, the immovable object, a declaratory judgment preventing the insurance company from having to indemnify the defaulting insureds collided with the unstoppable force, the default judgment against the insured. This collision is explained in the Nevada Supreme Court case of Torres v. Nev. Direct Ins. Co., 131 Nev. Adv. Op. 54, 353 P.3d 1203 (July 30, 2015).
In Torres’s collection suit against Nevada Direct. Torres claimed that she had a direct right of action against Nevada Direct for the insurance company’s obligation pursuant to NRS 485.3091(5)(a). Torres argued that Nevada Direct had the obligation under that statute to pay at least $15,000 per person / $30,000 per occurrence regarding personal injury liability and $10,000 for property damage liability. See NRS 485.185 and NRS 485.3091(1)(b)(1). However, the trial court found that Nevada Direct had no duty to pay anything. That is because the insurance company had offered the policy limit during the declaratory relief action which Torres had refused.
NRS 485.3091 provides:
- Every motor vehicle liability policy is subject to the following provisions which need not be contained therein:
(a) The liability of the insurance carrier with respect to the insurance required by this chapter becomes absolute whenever injury or damage covered by the policy occurs. The policy may not be cancelled or annulled as to such liability by any agreement between the insurance carrier and the insured after the occurrence of the injury or damage. No statement made by the insured or on behalf of the insured and no violation of the policy defeats or voids the policy.
On appeal, the Nevada Supreme Court compared Nevada’s statute with similar statutes in other states. The Court identified these types of laws as “frozen liability” statutes. The Court found that like Arizona’s “frozen liability” statute, Nevada’s absolute-liability language was unambiguous. The Court enforced the language of the statute and found that “no post-injury violation of a policy will release the insurer under the absolute-liability provision”. 131 Nev.Adv.Op. at 7. In other words, where an absolute-liability law exists, an insurance company cannot circumvent it, no matter what the insured has or hasn’t done. Where a claimant is injured, the insurance company cannot avoid its duty to pay the minimum limit of its bodily injury liability insurance.
The Court said that its finding is consistent with rulings in other states citing Harris v. Prudential Prop. & Gas. Ins. Co., 632 A.2d 1380, 1381- 82 (Del. 1993) (holding that noncooperation of insured cannot defeat application of absolute-liability statute where innocent third party is injured); Dave Ostrem Imps., Inc. v. Globe Am. Gas. / GRE Ins. Grp., 586 N.W.2d 366, 367-68 (Iowa 1998) (stating that condition precedent to coverage cannot defeat application of absolute-liability statute); Cowan v. Allstate Ins. Co., 594 S.E.2d 275, 276-77 (S.C. 2004) (recognizing the appellate court’s holding in Shores v. Weaver, 433 S.E.2d 913, 917 (S.C. Ct. App. 1993), superseded by statute on other grounds as stated in McGee v. S.C. Dep’t of Motor Vehicles, 698 S.E.2d 841 (S.C. Ct. App. 2010), that breach of a policy’s notice requirements by the insured did not release the insurer from liability).
The Court also found its decision consistent with the public policy stated in the Court’s earlier opinion of Federated Am. Ins. Co. v. Granillo, 108 Nev. 560, 563, 835 P.2d 803, 804 (1992) and Hartz v. Mitchell, 107 Nev. 893, 896, 822 P.2d 667, 669 (1991). See the Nevada Law Blog’s take on these cases HERE. Citing Midland Risk Mgmt. Co. v. Watford, 876 P.2d 1203, 1206-07 (Ariz. Ct. App. 1994), the court made it clear that even if the insured breached the insurance contract or made misrepresentations in the policy, that claims up to the minimum limits called for in NRS 485.3091 would have to be paid to be paid.
Ms. Torres also sued Nevada Direct for bad faith. To read about the Court’s decision regarding that portion of the case, click HERE.
If you have questions about the effects of Nevada’s absolute-liability statute NRS 485.3091(5)(a) please call Mike Mills at 702-240-6060. He will be glad to speak with you about your questions.
