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Nevada’s Absolute Liability Statute Does Not Create A Third-Party Bad Faith Claim.

Third-Party Bad Faith Claim

We have previously written about Saundra Torres.  She was hurt when she was involved in an auto accident with a vehicle that was insured by Nevada Direct Insurance Company.

She filed suit against Nevada Direct’s insureds Perez-Castellano and Mollinedo-Cruz.  For a time, Nevada Direct defended.  But after the insureds failed to cooperate, Nevada Direct withdrew its defense and filed a declaratory relief action.  In the declaratory relief action, Torres refused Nevada Direct’s offer to settle for the policy limit plus $1.00.  Thereafter, the judge granted declaratory relief stating that due to the insureds’ failure to cooperate Nevada Direct had no further duty to defend or indemnify them.

In the meantime, the Plaintiff’s attorney pursued and obtained a judgment against the insureds in the tort action for more than the policy limit.  Plaintiff then pursued the insurance company directly hoping to recover all or part of the default judgment.  The injured Plaintiffs sued Nevada Direct to enforce its obligation under NRS 485.3091. 

She brought multiple causes of action.  First she sued for violation of NRS 485.3091, Nevada’s Absolute-Liability Statute.  We wrote about that portion of the case in an earlier blog post HERE.   In that post we explained the Court’s decision that Ms. Torres had standing to sue the insurance company directly to enforce her judgment against the insured tortfeasor based on NRS 485.3091 up to the amount of the policy limit.  Torres v. Nev. Direct Ins. Co., 131 Nev. Adv. Op. 54, 353 P.3d 1203 (July 30, 2015).

However, Torres was hoping to collect more than just the policy limit.  She had two more causes of action one for breach of promissory estoppel and a second for breach of the duty of good faith and fair dealing.  The Court upheld the trial court’s findings that Ms. Torres had not made out a case of promissory estoppel.

The court went on to consider Mr. Torres’ cause of action for bad faith.  Again, the Court upheld the trial court’s dismissal of the bad faith action.  The determination was based on this Court’s consistent position that the insured does not have standing to bring a cause of action for bad faith against the tortfeasor’s insurance company.  The Court relied on the precedents of a Gunny v. Allstate Ins. Co., 108 Nev. 344, 830 P.2d 1335 (1992).  For more information on the Gunny case click HERE and HERE.  The court said:

Third-party claimants do not have a contractual relationship with insurers and thus have no standing to claim bad faith. Gunny v.Allstate Ins. Co., 108 Nev. 344, 345, 830 P.2d 1335, 1335-36 (1992). While we intimated in dicta in Gunny that a third-party claimant who is a specific intended beneficiary of an insurance policy might have a sufficient relationship to support a bad faith claim, see id. at 345-46, 830 P.2d at 1336, nothing in Nevada’s absolute-liability statute creates a contractual relationship between an insurer and a third party for bad faith.

131 Nev. Adv. Op. 54 at 15-16.

The court concluded:

Here, NRS 485.3091 provides no express language that permits a third-party claimant to pursue an independent bad faith claim against an insurer. Absent such a provision, we will not read language into a statute granting a private cause of action for an independent tort.  See Richardson Constr., Inc. v. Clark Cnty. Sch. Dist., 123 Nev. 61, 65, 156 P.3d 21, 23 (2007) (“[W]hen a statute does not expressly provide for a private cause of action, the absence of such a provision suggests that the Legislature did not intend for the statute to be enforced through a private cause of action.”). Thus, we conclude that Torres does not have standing to pursue a bad faith claim.

Id. at 16.

If you have questions about bad faith in Nevada please call Mike Mills at 702-240-6060.  He will be glad to speak with you about your questions.

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