Strategies, Challenges, and Answers

For Purposes Of Policy Cancellation, One Percentage Point Can Make All The Difference In Deciding Whether The Driver Was “At Fault”

In Nevada, insurance companies cannot cancel, raise premiums or refuse to renew insurance policies where the insured was in an accident that was not his or her fault.  The statute reads:

N.R.S. 687B.385  Cancellation, nonrenewal or increase in premium due to claims for which insured was not at fault prohibited.  An insurer shall not cancel, refuse to renew or increase the premium for renewal of a policy of motor vehicle insurance covering private passenger cars or commercial vehicles as a result of any claims made under the policy with respect to which the insured was not at fault.

1110305_50_percent The Nevada Division of Insurance and State Farm had a disagreement as to what the term “at fault” meant.  The Division of Insurance wrote a regulation that that defined “at fault” as being any accident in which “the insured is more that 50 % at fault.

State Farm disagreed.  State Farm felt that Nevada’s comparative fault statute, N.R.S. 41.141 identified an at fault accident as one in which the insured is 50 % or more at fault.  (For further discussion of Nevada’s Comparative Fault statute please click Here.

That one percentage point must have been consequential to the State Farm underwriters. State Farm filed a declaratory relief action asking whether its interpretation of the words “at fault” or the Division’s regulation that defined the term was correct.

In the case of State, Div. of Ins. v. State Farm Mut. Auto. Ins. Co., 116 Nev. 290, 995 P.2d 482 (2000), the Nevada Supreme Court sided with State Farm.  The Court looked at the legislative history of N.R.S. 687B.385 and the rules of statutory construction.  Relying on these tools, the Court decided that the Division’s regulation was inconsistent with the intent of the legislature in passing the law.  The Court struck down the regulation.  Now, you must be less than 50 % at fault in any accident to claim the benefit of N.R.S. 687B.385.

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