Strategies, Challenges, and Answers

In Nevada, An Insurance Agent Or Broker Is Generally An Agent Of The Insured, Not The Insurer

It was a terrible fire.  On November 21, 1980, 85 people died when a refrigerated pastry display caught fire at the MGM Grand in Las Vegas.  The Grand Hotel Gift Shop was destroyed in the fire.  The Gift Shop suffered almost a $1,000,000 in business interruption damages.  

The Gift Shop sued its insurance broker, and the insurance company that wrote its business interruption insurance, Granite State Insurance.  Prior to trial, the Gift Shop settled with the broker and resolved several of its claims with Granite State.  

At trial, the Gift Shop hoped to present evidence of independent negligence on the part of Granite State.  The Gift Shop planned to argue that Granite State negligently hired the broker.  

In the case of Grand Hotel Gift Shop v. Granite St. Ins., 108 Nev. 811; 839 P.2d 599; 1992 Nev. LEXIS 151, the Nevada Supreme Court concluded that the Gift Shop’s insurance broker was an agent of the insured and not an agent of Granite State.  The Court explained the test that should be used.  The Court said:

Although the determination of whether an insurance agent was an agent of the insured or of the insurer should include consideration of the relevant statutory provisions, see Vina v. Jefferson Ins. Co. of New York, 761 P.2d 581, 584-85 (Utah Ct.App. 1988), other factors also merit consideration.  In European Bakers, Ltd. v. Holman, 338 S.E.2d 702 (Ga.Ct.App. 1985), the Georgia Court of  Appeals evaluated the following factors in deciding a factually similar case: (1) the insured’s reliance on the agent’s judgment and discretion in procuring insurance coverage, (2) the general rule that an independent insurance agent is considered the agent of the insured, not the insurer, (3) in dealing with an insured, whether the agent selected which insurance company to use, (4) whether the agent reviewed the insured’s financial records and made recommendations regarding coverage, (5) whether the agent knew that the insured was relying on him to explain the insurance policies he procured, and (6) the general rule that even if the agent acts in a “dual agency” capacity, he is still the agent for the insured, not the insurer. Id. at 704.

NRS 683A.321 (7) explains:

7. As used in this section:

(a)  “Agent” means a producer of insurance who is compensated by the insurer and sells, solicits or negotiates insurance for the insurer.

(b)  “Broker” means a producer of insurance who:

(1)  Is not an agent of an insurer;

(2)  Solicits, negotiates or procures insurance on behalf of an insured or prospective insured; and

(3)  Does not have the power, by his or her own actions as a broker, to obligate an insurer upon any risk or with reference to any transaction of insurance.

The Court found that under the circumstances of the case, the Gift’s Shop’s insurance broker was the broker of the insured and not the insurer.  

If you have insurance questions, please contact Mike Mills at 702.240.6060×114 or email him at