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At Renewal, An Insurer Must Give Adequate Notice Of Intended Policy Changes. Otherwise, The Policy Renews Under The Prior Terms

Fire At Moscow City SkyscraperOn November 21, 1980, a devastating fire swept through the MGM Grand Hotel in Las Vegas, Nevada.  The fire killed 85 people and injured more than 700.  A complete copy of the Clark County Fire Report can be downloaded HERE.

At the time, the Grand Hotel Gift Shop served the guests of the hotel.  Fire destroyed the Shop resulting in damage of almost $1,000,000 including lost fixtures, inventory and business interruption.  The Gift Shop sued its insurance agent and its insurer Granite State Insurance Company.

The parties settled most of their dispute pre-trial.  However, they were unable to settle on the total amount of business interruption loss.  The policy in effect did not include ordinary payroll exclusion.  However, that ordinary payroll exclusion had been part of the policy that immediately preceded the subject policy.  The absence of the exclusion reduced the Shops insurance recovery by $113,883.00.  The Shop argued among other things that Granite State had violated NRS 687B.350.  The statute requires that:

an insurer shall not renew a policy on different terms, including different rates, unless the insurer notifies the insured in writing of the different terms or rates at least 30 days before the expiration of the policy. If the insurer fails to provide adequate and timely notice, the insurer shall renew the policy at the expiring terms and rates:

(a) For a period that is equal to the expiring term if the agreed term is 1 year or less; or (b) For 1 year if the agreed term is more than 1 year.

The trial court found that the insurance company had violated NRS 687B.350 because it did not given the Shop notice that the ordinary payroll exclusion was not included as part of the renewal.  Having found a violation, the court read the policy as if the ordinary payroll exclusion had been in the policy.  The insurance company appealed.

The Nevada Supreme Court agreed that the insurance company had not given the Shop proper notice of the change before renewing the policy.  Grand Hotel Gift Shop v. Granite State Ins. Co., 108 Nev. 811, 839 P.2d 599 (1992).  The Court affirmed the award of an additional $113,883.00 to the Shop.

If you have questions about coverage related to insurance policy cancellations and renewals, please contact Mills & Associates.  Mike Mills will be happy to talk to you.  His phone number is 702-240-6060 x114 and he can be reached by email at  Follow us on Twitter @NevadaL