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Can Plaintiff Discover An Insurance Company’s Involvement In A Prior Bad Faith Suit?

Evidence that an insurance company acted in bad faith in handling a specific claim may come from a variety of sources. Plaintiff’s attorneys may argue that the way the insurance company handled other claims is evidence that it acted in bad faith in the subject case. Those attorneys may point to other bad faith suits or verdicts against the company as evidence of bad faith in the way it handled this claim. Can such evidence be discovered? Is it admissible? The Nevada Supreme Court has not spoken on these issues. However, the case of North River Ins. Co. v. Greater New York Mut. Ins. Co.,872 F.Supp. 1411 (E.D. Pa. 1995) is instructive.

Bad Faith Law in Nevada, Nevada Coverage Law, Nevada Bad Faith Law, Mills & Associates Nevada Insurance and Coverage Lawyers, Las Vegas Insurance and Coverage Lawyers 702-240-6060Greater New York Mutual was a primary carrier. Rather than paying its $1,000,000 policy limit to settle the claim against its insured, the company decided to fight. It took the case to trial. The insured lost when the jury returned a verdict of $5,796,000.

Greater New York then turned to the excess carrier North River asking it to make upthe shortfall. North River paid the excess verdict and with it got an assignment of the insured’s bad faith rights against Greater New York.

North River sued Greater New York for bad faith. During discovery, North River asked Greater New York to identify whether it had been a party to any other bad faith actions for the seven years prior. Greater New York objected alleging that the information sought was irrelevant. North River moved to compel a response to the discovery.

In deciding the motion to compel, the court found the evidence of prior cases to be irrelevant because each of those prior cases would involve different facts and circumstances. Those cases would not be instructive on whether the company acted in bad faith in the way it handled the underlying suit. The court did find though that reserves that Greater New York had set on the underlying claim were relevant to the question of Greater New York’s valuation of the loss and thus whether Greater New York acted in bad faith during the negotiation process.

Whether Nevada courts would handle these questions in the same way is up in the air. An analogy from a Nevada case that might work for the insurance company is found in the personal injury realm. For example, in Southern Pacific Co.. v. Harris, 80 Nev. 426, 395 P.2d 767 (1964), the plaintiff was injured at a railroad crossing when her car collided with a diesel engine. Plaintiff argued that prior accidents at the crossing should be allowed. However, the Nevada Supreme Court found otherwise:

2. Prior negligence of other train crews. In addition to receiving evidence concerning the occurrence of prior collisions at the same crossing, the lower court allowed witnesses to testify that, at prior times, locomotives of the defendant company had traversed the crossing without whistles being blown,bells rung, or engine lights turned on. It is not asserted that such occurrences were so frequent as to constitute a habit; to the contrary, it is conceded that “occasionally” such conduct happened. Citation of authority is unnecessary to support the proposition that the personal conduct of the employees in control of the locomotives at such prior times is not probative of the conduct of the employees (engineer and fireman) on the occasion in question. Such evidence should not have been received.
Id at 432.

This case may go to the question of whether the prior acts or allegations are admissible, but does not fully answer the question of whether they might be discoverable. As you may know, the Nevada Rules of Civil Procedure provide information is discoverable if it is relevant, or likely to lead to the discovery of admissible evidence. N.R.C.P. 26(b)(1). Will the Nevada courts opt to follow the conservative view of non-disclosure or adopt a morel iberal policy in permitting discovery of prior bad faith and then prior to trial decide if the facts are admissible?. Only time will tell.

Please contact Mills & Associates to get answers to all your Nevada Coverage and Bad Faith questions.

Mills & Associates Nevada Coverage and Bad Faith Lawyers 702-240-6060