Strategies, Challenges, and Answers

Is It Time To Be Done With The Notion That Nevada Law Should Favor California Law When Nevada Law Is Silent?

Cumis Counsel NevadaThe Nevada Law Blogs have been serializing the arguments made by the parties in the case of State Farm v. Hansen.  We had imagined the two opponents in this case standing face-to-face in an old-west gunfight.  The question to be resolved by this dual is if and under what circumstance an insurance company should be forced to give up its contractual right to select the attorney who will defend the insured and instead allow the insured to choose its own independent counsel at the expense of the insurance company .

In past episodes of this saga, we have seen State Farm fire off a relentless volley of arguments about why the solution that the California Court of Appeal imposed in the case of San Diego Navy Fed. Credit Union v. Cumis Ins. Soc’y, Inc., 162 Cal.App.3d 358, 208 Cal.Rptr. 494 (1984) was not right for Nevada.  We also witnessed the insurance industry arrive just in the nick of time to reinforce the company’s arguments.  The industry encouraged the Nevada Supreme Court to take no action or to adopt solutions used by states other than California to resolve this type of conflict. 

Faced with this withering barrage of arguments, the policyholder stands unflinching.  He is not looking for cover.  Instead, he fires just one shot.  If his argument hits its mark, he may well prevail.  But who knows what might happen if it does not.

The principal argument made in behalf of the policyholder is that the issue of independent counsel in Nevada is already settled.  Hansen points out that in Nevada Yellow Cab v. Eighth Judicial Dist. Court, 123 Nev. 44, 152 P.3d 737 (2007) the Nevada Supreme Court determined that an assigned insurance defense counsel is an attorney for both the insurance company and the policyholder.  Hansen also highlights the fact that where Nevada law is silent, Nevada looks to California law for direction.   See Commercial Standard Ins. Co. v. Tab Constr., 94 Nev. 536, 583 P.2d 449, 451 (Nev. 1978).

Hansen argues that since Nevada’s law is in fact silent on the proper resolution of this type of ethical conflict and since Nevada follows California, the Nevada Supreme Court is all but bound to follow the Cumis precedent.  Hansen seems so sure of his position that his brief suggests that he is ready to skip a trial and argue damages directly to the Nevada Supreme Court.

Earlier rulings by the U.S. District Court suggest that Hansen may be right.  However, the question posed by the Nevada Law Blogs is “Why should the Nevada Courts blindly follow a California precedent?”

The Nevada Law Blogs also ask, “Why should Nevada follow a California precedent regarding independent counsel that ultimately had to be unwound by the California legislature, when it passed Cal. Civ. Code §2860?”

In the 36 years since the Commercial Standard Ins. Co. opinion, Nevada law has matured greatly.  The Nevada Supreme Court has written thousands of opinions expanding the corpus juris of Nevada.  In addition, Nevada will soon open the doors to an Appellate Court that will provide even more law on which Nevada judges and lawyers can rely.  In addition, since the Commercial Standard Ins. Co. decision, Nevada has opened a law school that has grown into a well-respected institution.  The Boyd School of Law is full of legal scholars who can criticize or encourage the development of Nevada law.  Perhaps it is time to put away the notion that Nevada is somehow benefited by following decisions from California.  Maybe it’s time to look at the facts and the merits of each case and make rulings not on geographic proximity but instead on what will be best for Nevada.

These are questions that the Nevada Supreme Court will have to resolve.

In the meantime, please subscribe to the Nevada Law Blogs to receive regular updates on decisions involving Insurance Coverage, Insurance Bad Faith and Trucking.  And as always, call Mike Mills at 702-240-6060×114 to discuss any questions you may have.