State Farm Mutual Automobile Insurance Company v. Hansen

Summary

The Nevada Supreme Court answered two certified questions concerning an insurer’s obligation to provide independent counsel when the insurer and insured have conflicting legal interests. The court held that Nevada law requires the insurer to permit the insured to select independent counsel and pay reasonable costs when an actual conflict exists, but a reservation of rights does not create a per se conflict.

Holdings

1. When an actual conflict of interest exists between an insurer and its insured, Nevada law requires the insurer to satisfy its contractual duty to defend by permitting the insured to select independent counsel and paying the reasonable costs of that representation.
2. A reservation of rights does not create a per se conflict of interest. The insurer must provide independent counsel only when the facts establish an actual, significant conflict of interest.

Questions Presented

1. Whether Nevada law requires an insurer to provide independent counsel for its insured when a conflict of interest arises between the insurer and the insured.
2. Whether a reservation of rights creates a per se conflict of interest requiring the insurer to provide independent counsel.

Disposition

other