Strategies, Challenges, and Answers

Plain Vanilla Nevada Bad Faith

Farmers Home Mutual Ins. v. Fiscus, 102 Nev. 371, 725 P.2d 234, (1986) is a text book example of a straightforward bad faith suit.  It all started out simply enough.

Vanilla The Fiscus family used an evaporative cooler to keep their Boulder City home tolerable during the long, hot Nevada summers.  The cooler’s water supply line hooked into the pipe under the kitchen sink and ran up to the roof.  While the Fiscus family was away on a three-week summer vacation, the cooler’s supply line became disconnected somehow.  They returned to find a flooded house.  Not only did the house need repairs, but the water damaged their personal property too.

Farmers Home denied the claim for repair of the structure because of a policy exclusion for “continuous or repeated seepage or leakage of water or steam over a period of time from within a plumbing, heating or air conditioning system.”  However, the insurance company got into trouble when it denied coverage for damage to the personal property.  The policy said that the company would pay for damage to personal property caused by “accidental discharge or overflow of water or steam from within a plumbing, heating or air conditioning system.”

The Nevada Supreme Court had no trouble reaching its decision.  The court approved the trial court’s awards for loss and damage to the personal property, as well as damages for the emotional distress caused by the bad faith denial.  Not only did the court approve of the award of prejudgment interest, the court tacked on an additional $5,000.00 in attorney’s fees to supplement the $5,000.00 that the trial court had awarded.  The court did this because of the “continued bad faith denial of the respondents’ claim by bringing this appeal”.

This opinion is a clean and clear example of the elements in a bad faith suit.  The facts are not complicated by a supplemental claim of delayed processing or mishandling under the “Unfair Claims Practices Act”  N.R.S. 686A.310.  Rather, the elements of the cause of action for bad faith are presented in a straightforward fashion:  (1) A denial of the claim where payment should have been made and (2) A knowing or reckless disregard of a lack of a reasonable basis for denying the claim.  See American Excess Ins. Co. v. MGM Grand Hotels, Inc., 102 Nev. 601, 729 P.2d 1352 (1986).

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  1. […] 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 […]