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Homebuilders, With Their Own Axe To Grind, Argue That Independent Counsel Should Be Required Upon Issuance Of Every Reservation Of Rights Letter

I'm all out of axes except yoursThe Southern Nevada’s Homebuilders Association says that the insurance industry is doing its members wrong by not giving them independent counsel. They file an amicus brief with the Nevada Supreme Court and hope that amidst all this gunfire between the parties that their axe grinding will be heard too.

The Homebuilders Association lobbies for Southern Nevada’s home builders. However, according to the Association’s brief, the homebuilders don’t really “build” the homes themselves. Rather, the sub-contractors do the real building. And since it is the subs that are doing the construction work, why should the homebuilders buy their own construction insurance? Instead, they have been riding the coattails of the subs’ insurance policies as “additional insureds” on the subs policies.

Here is the complaint of the builders. When construction defect attorneys file suit, the builders and the subs are both named as defendants. However, the insurance companies will normally assign them both to the same defense counsel. The builders argue that since the insurance companies regularly reserve their rights as to the “additional insured’s” claims, the insurance companies should be compelled to pay for the builders to hire their own defense attorneys rather than being forced to rely on the same attorneys representing their subs’.

The builders challenge the three alternate models proposed by the insurance industry. They reject the Single-Client Model because it is contrary to Yellow Cab. They likewise reject the Primary-Client Model saying that there is no room for compromise when it comes to ethics. The attorney can’t ethically put the interests of one client ahead of the other. Finally, they argue that the Freedom of Contract Model is an attempt to have the insurance contract override the ethical obligations of the attorney. The builders reject all three of these proposals and point out that each of these proposals ignores the economic realities of the situation and that the Supreme Court is better suited to decide these issues than the legislature.

Surprisingly though, the builders also argue against Cumis and the limitations of its rule. Instead they argue for a per se rule that compels the insurance company to pay for separate counsel every time the insurance company issues a reservation of right letter. They say that this per se rule is ethically better and much easier to administer than Cumis has been. The homebuilders cite to six jurisdictions that they claim follow that rule.

If you have questions about Cumis counsel in Nevada, please contact Mike Mills at 702/240-6060×114. He will discuss your question with you.