Strategies, Challenges, and Answers

Special Policies Get No Special Treatment

Even Out of the Ordinary Auto Policies Must Provide Minimum UM / UIM Limits

In the case of Continental Insurance v. Murphy, 120 Nev. 506, 96 P.3d 747 (2004), the Nevada Supreme Court said that it will enforce basic mandatory minimum limits of $15,000 per person, $30,000 per accident for uninsured / underinsured motorist coverage, as required by NRS 690B.020 and NRS 687B.145(2), even where the claim involved an out of the ordinary policy that was written especially to cover a “classic automobile”.

In reaching this conclusion, the Nevada Supreme Court reinforced its position that limitations and exclusions over and above that amount of minimum coverage that are unambiguous can and will be enforced by the court. 

Facts of the Case

75718_motorcycle The defendants, Penny and Patrick Murphy, owned a 1969 Plymouth Roadrunner.  They purchased a “classic automobile policy” from Continental Insurance Company.  Unlike a conventional insurance policy where the coverage is stated in amounts per person and per accident, this policy included UM and UIM coverage with single limits of $300,000 per accident.  The premiums were less expensive because the classic car coverage demanded restricted use of the vehicle on an annual basis.

Penny Murphy was injured while riding a motorcycle that was owned by a third party.  Mr. and Mrs. Murphy submitted a UIM claim to Continental.  Continental sought declaratory relief, arguing that the policy language unambiguously and completely excluded UM/UIM coverage for injuries sustained while occupying any other vehicle.  Mr. and Mrs. Murphy countered that the exclusion was utterly void and against public policy.

Decision of the Trial Court

Following the precedent set in the case of State Farm Mutual Automobile Insurance Company v. Hinkle, 87 Nev. 478, 488, P.2d 1151 (1971), and the precedent set in Zobrist v. Farmers’ Insurance Exchange, 103 Nev. 104, 734 P.2d 699 (1987), the trial court found that the coverage exclusion was unambiguous.  However, the trial court determined that the exclusion violated public policy.  Both sides appealed the decision of the trial court. 

The Opinion of the Supreme Court


The Nevada Supreme Court looked back to the decisions it had made in Hinkle and Zobrist, quoted above.  The policy behind those decisions was to strike a balance between providing minimum coverage to all persons while at the same time recognizing the reality that all need to pay a premium to purchase that coverage.  Even though this was a special case involving classic car coverage, the Supreme Court could see no reason to change the position that it had stated in these earlier cases. 

The court said:


While the stated purposes of these required coverages is to provide protection for the persons insured, this mandate is restricted to the minimum limits required per NRS 690B.020(2). Consideration in the modern context such as mechanisms to reduce premiums for certain lines of coverage, i.e., for restricted use vehicle, such as classic cars, remains subject to the public policy considerations of Hinkle and Zobrist, until and unless the legislature changes that mandate.

With that said, the Nevada Supreme Court reasserted the position that a non-occupancy exclusion clause offends public policy to the extent the exclusion purports to preclude recovery of minimum required uninsured / underinsured motorist benefits.  The Supreme Court said that the district court had properly rendered its declaratory judgment in this case. 


The lesson learned from this case is one that has been stated by the court for some time, which is that as a general rule, underinsured motorist coverage follows the insured as a matter of law, regardless of the vehicle involved in the accident.  Therefore, in instances involving underinsured motorist coverage, carriers should be prepared to satisfy minimum coverage limits even if an unambiguous exclusion exists, up to the statutory limit of that mandatory coverage.  That is true even if the auto policy is for an out of the ordinary type coverage.  Over and above that amount of minimum limit, exclusions (assuming they are unambiguous) would allow the carrier to avoid an additional obligation on a claim.