Strategies, Challenges, and Answers

State Farm Argues It Has No Duty To Provide Cumis Counsel In Nevada

Cumis BriefIn prior blog posts, the Nevada Law Blogs promised its readers regular updates regarding the issue of Cumis Counsel that is now before the Nevada Supreme Court. See HERE and HERE. Appellant State Farm recently filed its opening brief in State Farm Mut. Auto. Ins. Co. v. Hansen, Nevada Supreme Court Case No. 64484.  You can read the entire brief HERE.

In 2003, the local press widely published the facts of this case. Plaintiffs Hansen, LeFevre and Grill were at a party. They decided it was time to leave. They loaded into LeFevre’s vehicle and headed for the exit gate of the community. Aguilar was immediately behind Plaintiffs in his State Farm insured auto. Aguilar hit LeFevre’s vehicle from the rear just as it tried to exit the complex. Before Plaintiffs could leave, LeFevre’s vehicle was pelted with rocks, bottles and cans, allegedly thrown by people at the party. Hansen suffered serious injuries when a rock broke through the windshield of the LeFevre car and struck him. The Aguilars had two State Farm policies, an auto policy and a homeowner’s policy.


Plaintiffs filed suit against Brad Aguilar and his father Ernest alleging not only negligence but also intentional torts. State Farm agreed to defend Aguilar but reserved its rights regarding indemnity on both policies, particularly regarding the intentional torts.

Hansen’s counsel communicated a formal demand to settle for $125,000 from driver Aguilar and his father for a total recovery of $250,000 to Hansen.

However, the auto policy limit was limited to $50,000 per person. State Farm divided the auto policy offering $25,000 to Hansen and $12,500 to LeFevre and $12,500 to Grills. LeFever and Grills accepted but Hansen did not. State Farm denied indemnity under the Homeowner’s policy.

Even though there was only $25,000 remaining on the auto policy, Plaintiff Hansen served an Offer of Judgment for $49,000 to extricate the father, Ernest Aguilar from the case. State Farm’s panel counsel recommended that State Farm accept the Offer of Judgment. However, it expired without action.

Thereafter, Aguilar’s attorney demanded $299,000 to settle the claims of both Ernest and Brad. However, both would have to assign their bad faith rights against State Farm to the Plaintiffs. Brad and Ernest accept the demand but State Farm would not indemnify because there was no coverage on the homeowner’s policy and there was only $25,000 remaining on the auto policy.

Hansen then pursued the breach of contract and bad faith claims against State Farm. Hansen lost the claims as to the homeowner’s policy. However, as to the Auto policy, State Farm denied further coverage based upon certain provisions, including the right to defend, the duty to cooperate and the “no action” provision. Hansen, arguing on behalf of the Aguilars, claimed that they had a right to independent counsel that they had been denied. State Farm filed a Motion for Summary Judgment which was denied. Initially, the federal court found a duty to provide independent counsel. The federal court then reconsidered and certified the question to the Nevada Supreme Court.

In its Opening Brief, State Farm’s arguments are fundamental. State Farm points out that in the 30 years since Cumis in California, Nevada has not adopted such a requirement. It argues that such a decision should be made by the legislature and not the courts and even if Cumis is adopted it should be prospective only. State Farm cites cases from across the country arguing that there is no consensus regarding the duty to offer independent counsel or under what circumstances independent counsel must be offered. Furthermore, it argues that independent counsel is bad policy because it is time consuming, wasteful and unnecessary. Remedies exist against any counsel that breaches his or her ethical duties to the client, such as malpractice.

The Answering Brief will be due next month. Counsel have offered and granted extensions to each other so whether the brief will be filed on time in unknown. However, when it is, Nevada Law Blogs will be here to give you an update.

In the meantime, if you have a question about the right and the duty to defend on an insurance policy in Nevada, please contact Mike Mills at Mills & Associates

702-240-6060×114. Mike can also be reached via email mike@mcmillslaw.com. He will gladly respond.