Strategies, Challenges, and Answers

If An Insured’s Policy Covers Activities In Nevada, The Insured Can Sue The Company In Nevada For Breach Of That Policy And For Bad Faith

MendesThe Mendes family lived in Massachusetts.  They owned a house in Massachusetts.  They registered to vote there.  Their auto registration and drivers licenses were all from Massachusetts.  In fact, they had auto insurance that they bought in Massachusetts that was underwritten by the Arabella Mutual Insurance Company.  The Arabella policy required that to claim the benefits of all of the policy’s coverage provisions, the insured car had to be principally garaged in Massachusetts.

The Mendeses moved to Las Vegas, but it was going to be a temporary stay.  Before leaving Massachusetts, the Mendeses consulted their insurance agent.  He told them that they didn’t need to change their insurance coverage because they still maintained their Massachusetts residence. 

Three months after their arrival in Las Vegas, the Mendes’ car was hit from behind.  They made claim to Arabella Mutual Insurance Company including  a claim for underinsured motorist coverage.  Arabella denied the UIM claim.  The company said that the car was no longer “principally garaged” in Massachusetts and that the UIM coverage was therefore excluded.

The Mendeses filed suit in Nevada alleging breach of contract and bad faith.  Arabella responded saying that Nevada had no jurisdiction to hear the case.  Arabella Mut. Ins. Co. v. Dist. Ct., 122 509, 134 P.3d 710 (2006).  The company argued that Arabella is a Massachusetts company. Arabella didn’t sell insurance in Nevada.  It had no offices in Nevada.  Its headquarters were in Quincy, Massachusetts.  Instead of arguing about coverage, Arabella merely asserted that Nevada couldn’t make a binding decision over the policy.  In other words, Arabella would force the Mendeses to drop their suit in Nevada and bring a new one in Massachusetts.

Nevada law allows the State to assert jurisdiction over those who are out of state under the provisions of its Long Arm Statute, NRS 14.065.  Because Arabella did not sell insurance in Nevada and had no offices here, the Court agreed with Arabella that Nevada did not have “general jurisdiction” over the company

However, the Mendeses argued that Arabella had subjected itself to “specific personal jurisdiction” of the Nevada courts.  As evidence, the Mendeses pointed to a provision in the insurance policy that said that some of the policy coverages were valid anywhere in the U.S. while others were only valid in Massachusetts.  Arabella should have been able to foresee the possibility that based on that “territory provision”, its insureds could have been sued in any of the 50 states, they said.

In essence, the Court concluded that this insurance company could have been subject to specific personal jurisdiction in any court in the United States of America.  The Court also found that the lawsuit arose from Arabella’s “contact” with Nevada.  Finally, the Nevada Supreme Court said that because Arabella could be called to defend its insured’s if they were sued in any of the states, it was not unreasonable to have Arabella answer to a suit in Nevada.

By this opinion, the Nevada Supreme Court has subjected every U.S. insurance company to its jurisdiction if that company’s insureds or their property happen to find themselves in this state.  Even so, this opinion does not address which State’s laws the trial court would apply to determine if there had been a breach of the provisions of the policy or bad faith.  For insights into that question see our earlier POST.

If you have questions about Nevada insurance coverage or jurisdiction over Nevada cases, contact Mills & Associates, Michael C. Mills for answers.

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