Strategies, Challenges, and Answers

It Is Not Bad Faith To Decline Coverage Where A Genuine Dispute Exists

Bad FaithThe case of Arlitz v. GEICO Cas. Co., No. 2:19-cv-00743-CDS-DJA, 2022 U.S. Dist. LEXIS 211433 (D. Nev. Nov. 22, 2022) involves a Son, a Father and a Motorcycle Passenger.  

The Son loaned his automobile to his Father.  The Father crashed the Son’s auto into the Plaintiff, who was a passenger on a motorcycle.  Plaintiff sustained permanent brain injuries.  

The Son’s insurance was Mid-Century.  The Motorcycle insurance was with Progressive Direct.  The Father had insurance with GEICO.  

The motorcycle’s insurance, Progressive, paid its $50,000 policy limit to the injured Passenger.  The Passenger sued the Son and the Father.  The Son’s insurance, Mid-Century, defended the Father and the Son.  Mid-Century tendered its limits of $100,000 to the injured Passenger.  But the Passenger wouldn’t give a release.  

On the other hand, the Father’s insurance company, GEICO, declined coverage regarding its $15,000 limit.  GEICO said that the Father’s policy did not provide coverage because the Father and Son lived together, disqualifying the Son’s vehicle as an insured auto, and depriving the Father of his GEICO coverage.  GEICO never stepped in to defend.  

The Father and Son who were defended by Mid-Century participated in an arbitration with Plaintiff.  The arbitration award was $65,749,540.00.  The award for past medical special damages was $1,710,935.  The award included $38,605.00 for a specially modified transport vehicle for the Passenger’s use.  The award for future care, and pain and suffering was $64,000,000.  

The Father and Son Defendants assigned their rights against GEICO and the Passenger Plaintiff pursued GEICO on a first party action.  

The Passenger Plaintiff asserted three causes of action

First:         Breach of Contract

Second:    Breach of Covenant of Good Faith and Fair Dealing

Third:        Violations of Nevada Unfair Claims Practices Act.  

GEICO brought a Motion for Summary Judgment regarding the Second Cause of Action for Bad Faith.  The judge granted GEICO’s Motion.  When GEICO made its decision to decline coverage, GEICO had facts that supported its position that the Father and Son resided in the same house, thus disqualifying the Son’s vehicle for GEICO coverage.  The Court said:

Given the facts that GEICO had at the time it disclaimed coverage for [Father], a reasonable person could decide either way as to whether the vehicle [Father] was driving at the time of the accident constituted a “non-owned auto” under the policy. GEICO alleges that at that time, and based on their own statements, Richard and Christopher lived together. ECF No. 111 at 6. The addresses that they provided on the Traffic Accident Report matched; both listed the same address as the one Richard gave to GEICO for his policy information. Id. Thus, GEICO did not act in bad faith when it disclaimed coverage on the information that it had at the time.

Id at 57-58.  

This rule, often referred to as the “Genuine Dispute Doctrine” allows insurance companies to make decisions based upon facts, even if those facts might later be in dispute.  

If you have questions regarding Nevada Coverage Law, please contact Michael C. Mills, Esq.  702.240.6060×114 or at He will do what he can to help you out.