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IN THE SUPREME COURT OF THE STATE OF NEVADA
STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY,
Appellant, vs.
STEPHEN TANNER HANSEN, Respondent,
Supreme Court No. 64484
_____________________________________________________________
APPELLANT’S REPLY BRIEF
_____________________________________________________________
V. Andrew Cass
Nevada Bar No. 005246
[email protected] Jeffrey D. Olster
Nevada Bar No. 008864
Lewis Brisbois Bisgaard & Smith LLP 6385 S. Rainbow Boulevard, Suite 600 Las Vegas, Nevada 89118
Tel: 702.893.3383 Fax: 702.893.3789 Attorneys for Appellant
STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY
Electronically Filed Dec 30 2014 08:40 a.m.
Tracie K. Lindeman Clerk of Supreme Court
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TABLE OF CONTENTS
Page I. HANSEN IDENTIFIES NO LAW SUGGESTING, LET ALONE
ESTABLISHING, THAT NEVADA RECOGNIZES A RIGHT TO
INDEPENDENT COUNSEL. ... 2 II. RELIANCE ON CALIFORNIA LAW IS NOT APPROPRIATE FOR
CREATING ENTIRELY NEW RIGHTS AND DUTIES... 4 III. HANSEN’S CONTENTION THAT THE INSTANT CASE
DEMONSTRATES THE NECESSITY OF INDEPENDENT COUNSEL RELIES ON INSURANCE COVERAGE ARGUMENTS THAT THE FEDERAL COURT HAS TWICE REJECTED AND LACKS ANY
FACTUAL SUPPORT. ... 6 IV. HANSEN CONCEDES THAT AN INSURER’S RESERVATION OF
RIGHTS LETTER DOES NOT CREATE A PER SE CONFLICT OF
INTEREST. ... 9 V. HANSEN LARGLY IGNORES THE RATIONALES PROFFERED BY
COURTS THAT HAVE REJECTED INDEPENDENT COUNSEL
RIGHTS... 10 VI. HANSEN DOES NOT DISPUTE THAT THE LEGISLATURE IS IN THE
BEST POSTION TO DETERMINE WHETHER NEVADA SHOULD
CREATE A NEW DUTY TO PROVIDE INDEPENDENT COUNSEL. ... 11 VII. HANSEN PROVIDES NO ARGUMENT, LET ALONE AUTHORITY, AS
TO HOW STATE FARM COULD POSSIBLY HAVE BEEN SUBJECT TO A DUTY TO PROVIDE INDEPENDENT COUNSEL IN NEVADA
BACK IN 2005. ... 11 VIII. THE PROPOSED AMICUS CURIAE BRIEF BY CENTEX HOMES
SHOULD NOT BE CONSIDERED BY THIS COURT. ... 12 IX. CONCLUSION ... 15
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Respondent Stephen Tanner Hansen (“Hansen”) devotes the lion’s share of his 55-page Answering Brief to re-arguing insurance coverage issues that two federal court judges have already soundly rejected in the pending federal court proceedings. Conversely, Hansen largely avoids the first and primary question certified by this Court, which is 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.1 As detailed in the Opening Brief, no Nevada law establishes or suggests such a requirement. This issue was not presented or referenced, let alone decided, in this Court’s Yellow Cab opinion.
In short, as discussed below, nothing in the Answering Brief provides any basis for this Court to now establish a new duty under Nevada law for liability insurers to provide independent or “Cumis” counsel. As this Court has implicitly recognized for decades, existing Nevada ethics, legal malpractice and insurance laws provide more than ample guidance and protections for all parties to the tripartite relationship.
I. HANSEN IDENTIFIES NO LAW SUGGESTING, LET ALONE ESTABLISHING, THAT NEVADA RECOGNIZES A RIGHT TO INDEPENDENT COUNSEL.
Hansen begins his brief with the brazenly false proclamation that “Nevada law has been consistent that an insurer must provide independent counsel for its insured when a conflict arises between and [sic] insurer and an insured,” particularly since this Court’s Yellow Cab decision. (Answering Brief at 1.) If this statement were true, there would obviously be no need for the certified question proceedings now before the Court.
1 Hansen also notably concedes the second certified question, which is whether this Court would find that a reservation of rights letter creates a per se conflict of interest that would require insurers to provide independent counsel.
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As detailed in State Farm’s Opening Brief, and as readily acknowledged by the federal court, this Court has never recognized or established the right to independent or “Cumis” counsel. (Opening Brief at 21-24.) This Court’s Yellow Cab opinion did not address whether an insured was entitled to independent counsel.
Rather, as this Court is readily aware, Yellow Cab involved an attorney disqualification issue. Nowhere in the opinion did this Court establish or suggest that independent counsel rights exist in Nevada. To the extent this Court said anything in Yellow Cab that is relevant to the salient issue in these proceedings, it reaffirmed that, in the context of the tripartite relationship, “the primary client remains the insured.” Nevada Yellow Cab Corp. v. Eighth Jud. Dist. Ct., 123 Nev.
44, 51, 152 P.3d 737 (2007) (emphasis added).
This reaffirmation that the insured is the “primary client” is consistent with the opinions of the State Bar of Nevada Standing Committee on Ethics and Professional Responsibility (hereafter the “Standing Committee”), which has consistently recognized for over 25 years that an attorney’s paramount duty is owed to the insured, not to the insurer that retains and pays the attorney. (Opening Brief at 21-24.) These opinions (Formal Opinion Nos. 9, 26 and 28) establish that an attorney, though retained by an insurer, cannot disclose to the insurer confidential information obtained from the insured when such information could jeopardize the insured’s insurance coverage, and that the defense attorney’s files belong to the insured, not the insurer. (Id.) In all of its relevant opinions, which were issued well after the Cumis case was decided and well after Cal. Civil Code Section 2860 was passed, the Standing Committee found that the Nevada Rules of Professional Conduct provided sufficient, common-sense guidance to attorneys who are retained by insurance companies to represent insureds pursuant to insurance contracts that provide insurers with the right to defend. No need or desire for independent
“Cumis” counsel was ever suggested or recommended by the Committee, even though a body of independent counsel law from other jurisdictions was readily
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available.
Hansen completely ignores these Standing Committee opinions in his brief.
Hansen also fails to address, let alone explain, why,in the 30-plus years since Cumis was decided, neither this Court nor the Nevada legislature have ever expressly recognized independent counsel rights. Instead, Hansen (like the federal court) assumes that this Court has silently and implicitly adopted California independent counsel law because this Court has, on some occasions, looked to California courts for guidance. As discussed below, this assumption is not warranted here.
II. RELIANCE ON CALIFORNIA LAW IS NOT APPROPRIATE FOR CREATING ENTIRELY NEW RIGHTS AND DUTIES.
The federal court’s initial conclusion (prior to its decision to certify the issue to this Court) that independent “Cumis” counsel rights exist in Nevada was based largely on the premise that Nevada follows California law in the absence of express Nevada authority. As support for this conclusion, the federal court cited only one opinion by this Court, Commercial Standard Ins. Co. v. Tab Constr., 94 Nev. 536, 583 P.2d 449 (1978).2 The Commercial Standard case, however, which involved the timeliness of a lawsuit against a surety, does not stand for the sweeping proposition that this Court always, or even generally, relies on California law. In the Commercial Standard opinion, this Court cited two factually analogous California cases that provided interpretive guidance because California had a similar statutory scheme relating to mechanics liens. Thus, Commercial Standard merely shows that this Court may look to California law to aid in the interpretation or application of identical, or substantially identical, statutes. See also Cheung v.
Eighth Jud. Dist. Ct., 121 Nev. 867, 879-880, 124 P.3d 550 (2005) (California case
2 The federal court also relied on two unpublished federal decisions, Selfaison v. First Nat.
Bank of Ariz., No. 09–CV–01918, 2011 WL 742212 at *2 (D. Nev. 2011) and Miller v.
Skogg, No. 2:10–CV–01121, 2011 WL 383948 at *3 (D. Nev. 2011). Both of these federal decisions, however, merely cite to the Commercial Standard case.
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law reviewed because the California cases involved similar constitutional provision) (Becker, C.J., concurring).
Here, in contrast, there is no corresponding Nevada statute or constitutional provision that could benefit from guidance from a California court (i.e., there is no Nevada statute establishing a right to independent counsel). To the contrary, neither the Nevada legislature nor this Court have seen fit to create independent counsel rights, despite the extensive creation and development of independent counsel laws in California for decades. This is simply not the type of situation where reference to or reliance on California to aid the interpretation of a statute or other existing law is appropriate.
Indeed, over the course of the last decade, this Court has decided insurance issues based on its own independent reasoning, after examining law from many jurisdictions. See, e.g., Powell v. Liberty Mut. Fire Ins. Co., 252 P.3d 668, 673-74, 127 Nev. Adv. Rep. 14 (2011) (examining the laws of many other states, including New York, Utah, Massachusetts, Mississippi, the District of Columbia, Florida, Minnesota, Illinois, Florida, Pennsylvania, Virginia and New Mexico, but not California, when determining whether an earth movement exclusion applied);
United National Ins. Co. v. Frontier Ins. Co., Inc., 120 Nev. 678, 685-88, 99 P.3d 1153 (2004) (citing law from Idaho, Florida, Illinois, Colorado and Alaska, along with California, to assess the existence of “property damage” and insurer duties under a general liability policy); Beckwith v. State Farm Fire and Cas. Co., 120 Nev. 23, 27-, 83 P.3d 275 (2004) (examining the laws of Texas, Louisiana, New York, Arizona, Missouri and Wisconsin, but not California, in determining the meaning of “occurrence” under a general liability policy). In other words, this Court does not reflexively rely on or adopt California law to assist in the interpretation of Nevada law, especially in the insurance context. The notion that California is an all-purpose “gap filler” is simply incorrect, and does a disservice to the Nevada judiciary.
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Furthermore, Cumis was decided in California decades ago, before the rise of the modern trend away from recognizing Cumis rights,3 and before the current Rules of Professional Conduct, which were adopted by Nevada in 2006. In contrast, California is now effectively locked into the Cumis model by statute (Cal. Civil Code § 2860). As fully discussed in State Farm’s Opening Brief and the Amici Curiae Brief, Nevada law is more consistent with states that have not adopted Cumis counsel rights, and with the modern trend away from Cumis. (Opening Brief at 19- 24; Amici Curiae Brief at 11-16.)
In sum, the argument that Cumis rights should be recognized in Nevada, or that such rights have implicitly been adopted by legislative and judicial silence, because such rights exist in California, is grossly misplaced.
III. HANSEN’S CONTENTION THAT THE INSTANT CASE
DEMONSTRATES THE NECESSITY OF INDEPENDENT COUNSEL RELIES ON INSURANCE COVERAGE ARGUMENTS THAT THE FEDERAL COURT HAS TWICE REJECTED AND LACKS ANY FACTUAL SUPPORT.
Hansen’s argument that HJC had a conflict of interest that somehow adversely affected the Aguilars rests entirely on the premise that coverage was somehow available for the Aguilars under the State Farm Homeowners Policy.
Coverage under the Homeowners Policy existed, however, only if Brad Aguilar did something accidental and unrelated to use of the vehicle that caused the rock- throwing incident that caused Hansen’s injuries. (Opening Brief at 6-8.) As detailed in the Opening Brief, despite nearly a decade of underlying litigation (i.e., sufficient time to develop all facts that could possibly support coverage under the Homeowners Policy), two federal judges have now soundly rejected Hansen’s
3 See Amici Curiae Brief by the American Insurance Association, National Association of Mutual Insurance Companies and Property Casualty Insurers Association of America, at 11-16.
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coverage contentions. (Id.)
Specifically, in State Farm Fire’s motion for summary judgment as to the claims purportedly assigned by Brad Aguilar, Judge Kent Dawson held that
“Plaintiffs have failed to provide any facts that demonstrate negligent conduct by Brad independent of his use of a motor vehicle,” and that “[a]ny negligence or negligent infliction of emotional distress claims that could be asserted against Brad arise from his use of a vehicle.” (App. at 551.) “Accordingly, the clear and unambiguous terms of the State Farm Fire [Homeowners] Policy exclude coverage and State Farm Fire was under no obligation to defend Brad for negligence or negligent infliction of emotional distress.” (Id.)
Similarly, in granting State Farm Fire’s motion for summary judgment as to the claims purportedly assigned by Ernest Aguilar, Judge Miranda Du reasoned that the Homeowners Policy expressly precluded coverage for claims arising out of the use of an automobile, and the undisputed facts showed that Brad Aguilar’s only wrongdoing was the allegedly negligent collision with LeFevre’s vehicle. (App. at 918-19.) With respect to the intentional tort allegations, Judge Du concluded that, even assuming arguendo that Brad was involved with non-vehicular activities (which she noted was contrary to the “clear facts” and allegations),4 any such involvement would necessarily involve intentional (and not accidental) conduct, and was therefore also excluded by the Homeowners Policy. (App. at 920.)
In other words, notwithstanding the unsupported arguments by Hansen’s counsel, there is no evidence in the 10-year record in this case that Brad did anything before or after colliding with LeFevre’s vehicle that contributed to Hansen’s injuries – even though Hansen (through his counsel) controlled how the Tort Action was plead, discovered and argued.5 This complete lack of evidence is
4 Again, it is undisputed that Brad Aguilar did not engage in the throwing of rocks or other objects at Hansen. (App. at 306, 551 [lines 10-11] and 552 [lines 12-13].)
5 For example, Hansen is the one who sued the Aguilars for injuries arising out of the
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critical because, again, this matter comes before this Court subsequent to an extensive development of the record based on three motions for summary judgment filed by State Farm. Thus, there is a complete record of facts and evidence that the federal court has now repeatedly heard and adjudicated. Hansen’s assertion that the federal court’s summary judgment rulings were somehow based on “manipulated facts” (Answering Brief at 11) is entirely unsupported. Hansen does not identify any facts that were “manipulated,” let alone cite to any portion of the record that shows this purported “manipulation.”
Hansen’s essential premise -- that the Aguilars’ defense counsel could have and should have somehow done more to advocate for coverage under the Homeowners Policy -- is therefore nothing more than a red herring. Counsel, whether independently retained by the insured or assigned by an insurance company, cannot create facts. There is nothing that HJC – or “Cumis” counsel for that matter – could have done, short of procuring or creating false evidence to create some additional grounds for liability for the Aguilars, that would have affected coverage under the Homeowners Policy. Again, though the coverage and claim handling issues have been thoroughly litigated in the federal proceedings, Hansen does not identify a single example of anything HJC did, or did not do, that somehow affected coverage.
Hansen’s suggestion that HJC was somehow constrained by its “conflict”
(i.e., its business relationship with State Farm) is thus merely theoretical and potential, not significant and actual. See Dynamic Concepts v. Truck Ins. Exch., 61 Cal.App.4th999, 1007-1008, 71 Cal.Rptr.2d 882 (1998). In the absence of facts that would provide a basis for indemnity coverage under the Homeowners Policy, there was no conflict of the type that would trigger independent counsel (e.g., under California law). Notably, Hansen even concedes that State Farm’s knowledge of the accident between the Hansen and Aguilar vehicles, and then obtained summary judgment on the automobile negligence claim in the Tort Action.
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salient facts did not depend on HJC: “Importantly, State Farm’s knowledge was not limited to those facts presented by [defense counsel] Clayton but also directly from [State Farm claim representative] Smith who attended a number of the fact witness deposition[s].” (Answering Brief at 23-24.) In other words, because State Farm representatives attended depositions, State Farm was not dependent on HJC to obtain facts relating to insurance coverage, further demonstrating that there was no actual tripartite conflict in connection with the defense of the underlying case.
Finally, even if, hypothetically, a “conflict” existed between State Farm and the Aguilars, HJC, consistent with decades of Nevada law and State Bar guidance establishing that the insured is the primary client in the tripartite relationship, treated the Aguilars as their primary clients, even going so far as to repeatedly recommend that State Farm accept the settlement demands by Hansen’s counsel, and even though Hansen’s demands exceeded the limits of the Auto Policy. (Opening Brief at 4-6.) In other words, HJC’s recommendations necessarily and implicitly requested that State Farm reverse its (correct) coverage position with respect to the Homeowners Policy. Hansen ignores these critical undisputed facts in his Brief.
When stripped down to its essence, Hansen’s argument is that the purpose of
“independent counsel” is to serve as an insurance coverage advocate for the insured.
Even in states that have recognized Cumis rights, the role of independent counsel is to defend the insured without compromising insurance coverage, not to serve as an affirmative coverage advocate. (Opening Brief at 12-21.)
IV. HANSEN CONCEDES THAT AN INSURER’S RESERVATION OF RIGHTS LETTER DOES NOT CREATE A PER SE CONFLICT OF INTEREST.
The second question certified by this Court in these proceedings is, if Nevada required insurers to provide independent counsel in the event of a conflict between the insurer and insured, does a reservation of rights letter creates a per se conflict of interest (obligating the insured to provide independent counsel)? Hansen notably concedes that the answer to this question is no. Specifically, Hansen unequivocally
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states: “A reservation of rights in and of itself does not create a conflict of interest in every instance.” (Answering Brief at 2 [emphasis in original] and 35.)
Accordingly, there is no dispute between the parties that, even if Nevada were to recognize a right to independent counsel, the mere issuance of a reservation of rights letter does not create a per se conflict that obligates the insurer to provide independent counsel.6
V. HANSEN LARGLY IGNORES THE RATIONALES PROFFERED BY COURTS THAT HAVE REJECTED INDEPENDENT COUNSEL RIGHTS.
In its Opening Brief, State Farm discussed the reasons why courts in other jurisdictions have refused to establish independent counsel rights, namely: (1) the expectation that attorneys will uphold their professional obligations and comply with ethical rules; (2) the availability of remedies in the event any actual (as opposed to potential or theoretical) “conflict” causes damages to the insured, such as claims for legal malpractice and breach of fiduciary duty against the attorney, as well as claim for insurance bad faith and estoppel against the insurer; and (3) the preservation of the insurer’s contractual right to defend lawsuits brought against insureds. Hansen largely ignores these rationales.
Again, HJC treated the Aguilars’ interests as paramount, thereby upholding their professional and ethical obligations. Moreover, Hansen nowhere explains why existing legal malpractice and insurance bad faith remedies are somehow insufficient to address situations when an actual conflict, as opposed to a merely hypothetical conflict, causes harm to an insured. Finally, Hansen ignores the insurer’s contractual right to defend, which plays an important societal role in containing costs and reducing insurance premiums.
6 Again, even among the states that do recognize independent counsel rights, virtually all reject a “per se” rule that the mere reservation of rights obligates the insurer to provide independent counsel. (Opening Brief at 18:13 – 19:1.) Even under California law, the issuance of a reservation of rights letter, in and of itself, does not automatically trigger a right to independent counsel. (Id. at 15:4-15.)
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VI. HANSEN DOES NOT DISPUTE THAT THE LEGISLATURE IS IN THE BEST POSTION TO DETERMINE WHETHER NEVADA SHOULD CREATE A NEW DUTY TO PROVIDE INDEPENDENT COUNSEL.
In its Opening Brief, State Farm discussed this Court’s long history of judicial restraint with respect to issues implicating significant financial and public policy concerns. (Opening Brief at 26-27.) Such issues should be resolved by the legislature, this Court has reasoned, because the legislature has the resources and authority to conduct the factually-intensive investigation that ideally should be completed before significant changes in in law or policy are implemented. (Id.)
The potential creation of a new obligation that will affect an entire industry is therefore best left to the legislature, which can thoroughly investigate and assess whether the need for such an obligation exists. While this Court is certainly the final arbiter on issues of legal interpretation and legal ethics, it is simply not equipped to conduct the type of factual investigation necessary to determine whether a sea-change in Nevada insurance industry practices is warranted. Hansen does not argue otherwise in his Answering Brief.
VII. HANSEN PROVIDES NO ARGUMENT, LET ALONE AUTHORITY, AS TO HOW STATE FARM COULD POSSIBLY HAVE BEEN SUBJECT TO A DUTY TO PROVIDE INDEPENDENT COUNSEL IN NEVADA BACK IN 2005.
In its Opening Brief, State Farm demonstrated why new laws that establish new rights or duties, whether enacted by the legislature or created by this Court, only operate prospectively, as such laws impose legal consequences on events that were completed before the enactment or creation of the new law. (Opening Brief at 28-29.)7 Here, the salient claim handling by State Farm occurred nearly ten years
7 Statutes and judicial opinions creating new duties are distinguishable from situations where a court promulgates a new or different legal rule governing, for example, evidence or procedure. See, e.g., Leavitt v Siems, 330 P.3d 1, 5, 130 Nev. Adv. Rep. 54 (2014)
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ago, in 2005 and 2006. (See Appellant’s Appendix at 328, 688, 890.) Accordingly, it would be manifestly unjust for this Court to now create or recognize a right to independent counsel, and then, at the same time, conclude that State Farm was somehow bound by this new right in connection claim handling in 2005. Absent notice of such a requirement, holding State Farm liable for not providing independent counsel in this case would constitute the civil equivalent of an ex post facto law. Hansen wholly ignores this critical consideration in his Answer Brief.
VIII. THE PROPOSED AMICUS CURIAE BRIEF BY CENTEX HOMES SHOULD NOT BE CONSIDERED BY THIS COURT.
Proposed amici curiae Centex Homes, Centex Real Estate Corporation and Southern Nevada Home Builders Association have filed a motion for leave to file amicus brief in support of Hansen, including a proposed Amicus Curiae Brief. As discussed below, this proposed brief should not be considered by this Court.8 Even if considered, this proposed brief further illustrates why, if independent counsel rights were to be considered in Nevada, such rights should be considered by the Legislature and not by this Court.
Centex asserts that it has an interest in this matter because it “requires its subcontractors to obtain commercial general liability insurance policies for themselves, and Centex also requires its subcontractors to obtain coverage for Centex.” (Proposed Amicus Curiae Brief at 1.) In other words, Centex’s risk
(explaining that this Court’s prior opinion regarding expert testimony standards properly applied ‘retroactively’ to case that was on appeal when prior opinion issued). Applying a legal rule to a pending lawsuit, however, is qualitatively different than recognizing a significant new legal obligation, and then applying this new obligation to a conduct that occurred nearly a decade ago because a party somehow ‘should have known’ that the new legal obligation existed.
8 Notably, Centex provides no evidence (other than counsel’s arguments) to support its allegations as to why independent counsel rights would provide any benefit to the homebuilding industry, especially when, as explained below, imposing such rights on the insurers of Centex’s subcontractors would substantially increase the cost of insurance.
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management strategy is to leverage its status as a national homebuilder with billions of dollars in business to force local subcontractors to obtain insurance for Centex, rather than purchasing coverage for itself. Centex would have this Court further leverage this imbalance of power to extract from its subcontractors’ insurers a right to independent counsel that was never contemplated or underwritten. As a general contractor, virtually every case Centex is involved in implicates multiple trades;
hence in all these cases, the additional insured carriers would have to reserve rights to ensure their right not to pay for damage from trades they do not cover.9 Under Centex’s reasoning, this means that in every case the insurers are obligated to provide it independent counsel to protect Centex’s own interests, even though Centex has decided not to obtain and pay for its own insurance.
In other words, if the Court accepts Centex’s argument, Centex would effectively obtain a valuable insurance policy benefit without the agreement of the insurers, and without paying the additional premium required to support it, by not buying insurance at all. Certainly, one would expect that if Centex wants an insurance policy with the right to select and control independent counsel, it should negotiate for such coverage with its own insurance carriers and pay the additional
9 Centex admits that in some cases an additional insured carrier would only cover 1-2% of its actual liability. (Proposed Amicus Brief at 21.) It is not commercially reasonable or sustainable to force a carrier to waive its right to only pay for what it actually contracted to cover in order to retain control of the defense as agreed to in the policy. For example, it is not reasonable to force the insurer of a cabinet subcontractor to pay for damages because of grading, structural or other significant defects to maintain its right to control the defense. This would result in excessive premiums across all trades in Nevada. Centex attempts to distort the issue by claiming a carrier has no right in the policy to defend under a reservation of rights. To the contrary, the well-established phrase “reservation of rights”
makes it clear that the carrier is preserving its right to pay for only what it actually covers under any given policy of insurance. There is no right in the policy to a defense of uncovered claims; rather, the need of a carrier to pay for a complete defense is prophylactic, not contractual, i.e., one cannot realistically defend only part of a lawsuit.
See, e.g., Buss v. Superior Court, 16 Cal. 4th 35, 48-49 (Cal. 1997). It is Centex that seeks to inject non-bargained for rights into Nevada insurance policies.
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premium this would require.
Notably, courts in California have repeatedly rejected Centex’s contention that its status as an additional insured entitles it to independent counsel. See, e.g., Travelers Property Cas. Co. of America v. Centex Homes, 2013 U.S. Dist. LEXIS 50460 at *38-*47 (N.D. Cal. April 8, 2013); Travelers Prop. v. Centex Homes, 2011 U.S. Dist. LEXIS 36128 at *22-*27 (N.D. Cal. April 1, 2011). These courts recognize that the existence of uninsured liability does not affect the amount of insured liability, nor vice versa. Defense counsel is not a wizard who can magically transform the facts. Taking Centex’s example, the amount of damages from cabinets does not affect the amount of damage from landscaping. To claim that defense counsel can make it otherwise is disingenuous, and unsupported.
In fact, the reason Centex is making this argument is so that it can further leverage an independent counsel benefit to which it is not entitled into indemnity to which it is not entitled. It is no secret that one reason insurers contract to retain the right to control the defense is to keep costs in line with reasonable premiums. If Centex controls defense counsel it can attempt to increase the cost of that defense to exorbitant levels—something both its chosen independent counsel and Centex have every incentive to do—in order to increase the odds an insurer will pay more than it owes simply to “stop the bleeding.”10 While this may increase premiums for its subcontractors, Centex does not care because, as it freely admits, it does not buy its own insurance—it pushes that responsibility onto its subcontractors. This Court should not countenance Centex’s transparent attempt to rewrite Nevada insurance policies while avoiding responsibly for the costs this necessarily requires.11
10 For example, in the two Travelers cases from the Northern District of California cited above, the issues included Centex’s inappropriate billing of multiple additional insured carriers for the same defense costs.
11Centex also implies that it is inappropriate for a carrier to settle out the covered liability, thereby eliminating any potential for coverage under an additional insured endorsement.
This is incorrect. Once an insurer has settled all covered claims, the insured has obtained all to which it is entitled under the policy. See, e.g., Meadowbrook, Inc. v. Tower Ins. Co.,
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In sum, Centex has not shown that its alleged interest in the instant dispute permits the filing of the proposed Amicus Curiae Brief. This asserted interest is unsupported by evidence and, in any event, is largely a product of Centex’s decision not to purchase its own insurance. Additionally, Centex’s arguments further illustrate why any decision as to whether to create independent counsel rights in Nevada is best left to the Legislature, which has the resources and means to investigate whether there is actually a problem that requires a fix. State Farm, again, respectfully submits that there is no such problem.
IX. CONCLUSION
Based on the foregoing, as well as the points and authorities set forth in Opening Brief, appellant State Farm Mutual Automobile Insurance Company respectfully requests that this Court conclude and clarify that Nevada law does not require an insurer to provide independent or “Cumis” counsel for its insured when a conflict of interest arises. If this Court should ultimately establish that an insurer has a duty to provide independent counsel under Nevada law, this newly created duty certainly should not be triggered by an insurer’s mere reservation of rights, and
Inc., 559 N.W.2d 411, 417 (Minn. 1997) (“Once the insurer settled and paid those claims, it had completely performed its contractual duty. The insured assumes he had a right to force the insurer to defend claims not arguably covered by the policy, but he did not.”);
Society Ins. v. Bodart, 819 N.W.2d 298, 301 (Wis. App. 2012) (“[T]he general rule consistently reflected in persuasive authority is this: An insurer’s duty to defend ends after all at least arguably covered claims are settled and dismissed.”); Lockwood Intern., B.V. v.
Volm Bag Co., Inc., 273 F.3d 741, 744-45 (7th Cir. 2001) (“Nor can the insured prevent the insurer from settling covered claims for an amount that protects the insured from having to pay anything on those claims out of his own pocket, merely because the settlement, by giving the insured all that he contracted for, will terminate the insurer’s duty to defend the entire suit.”). As even the California courts have held: “The insurer does not insure the entire range of the insured’s well-being, outside the scope of and unrelated to the insurance policy … It is an insurer, not a guardian angel.” Camelot by the Bay Condominium Owners’ Assn. v. Scottsdale Ins. Co., 27 Cal.App.4th 33, 52 (Cal. App.
1994). In fact, this is a red herring, as the right to settle is distinct from the right to control the defense. See Western Polymer Technology, Inc. v. Reliance Ins. Co., 32 Cal.App.4th 14 (Cal. App. 1995); Hurvitz v. St. Paul Fire & Marine Ins. Co., 109 Cal.App.4th 918 (Cal. App. 2003). Therefore, whether a carrier does or does not provide independent counsel does not affect its ability to settle only the covered claims.
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certainly should not apply retroactively to State Farm’s handling of the defense of the Tort Action in this case.
Dated this 29thday of December, 2014.
LEWIS BRISBOIS BISGAARD & SMITHLLP
By /s/Jeffrey D. Olster V. Andrew Cass
Neada Bar No. 005246 Jeffrey D. Olster
Nevada Bar No. 008864
6385 S. Rainbow Boulevard, Suite 600 Las Vegas, Nevada 89118
Attorneys for Appellant
STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY
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CERTIFICATE OF COMPLIANCE
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This brief has been prepared in a proportionally spaced typeface using Microsoft Office Word 2010 in Times New Roman font, size fourteen (14).
2. I further certify that this brief complies with the page or type-volume limitations of N.R.A.P. 32(a)(7) because, excluding the parts of the brief exempted by N.R.A.P. 32(a)(7)(C), it is either:
[x] Proportionately spaced, has a typeface of 14 points or more, and contains 5,582 words; or
[] Monospaced, has 10.5 or fewer characters per inch, and contains ___ words or ___ lines of text; or
[] Does exceed by ____ pages.
3. Finally, I hereby certify that I have read this brief, and to the best of my knowledge, information, and belief, it is not frivolous or interposed for any improper purpose. I further certify that this brief complies with all applicable Nevada Rules of Appellate Procedure, in particular N.R.A.P. 28(e), which requires every assertion in the brief regarding matters in the record to be supported by a reference to the page and volume number, if any, of the transcript or appendix where the matter relied on is to be found. I understand that I may be subject to sanctions in the event that the accompanying brief is not in conformity with the requirements of the Nevada Rules of Appellate Procedure.
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Dated this 29thday of December, 2014.
LEWIS BRISBOIS BISGAARD & SMITHLLP
By /s/Jeffrey D. Olster V. Andrew Cass
Neada Bar No. 005246 Jeffrey D. Olster
Nevada Bar No. 008864
6385 S. Rainbow Boulevard, Suite 600 Las Vegas, Nevada 89118
Attorneys for Appellant
STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY
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CERTIFICATE OF SERVICE
I hereby certify that I am an employee of LEWIS BRISBOIS BISGAARD &
SMITH LLP and, pursuant to NRCP 5(b), that on the 29th day of December, 2014, I deposited for first class United States mailing, postage prepaid, at Las Vegas, Nevada, a true and correct copy of the foregoing APPELLANT’S REPLY BRIEF addressed as follows:
Jerome Bowen Sarah Banda
Bowen Law Offices
9960 W. Cheyenne Avenue, Suite 250 Las Vegas, Nevada 89129
Attorneys for Plaintiff/Respondent
/s/ Nicole Etienne
An Employee of LEWIS BRISBOIS BISGAARD & SMITH LLP
