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Enforceability of Anti-stacking Provisions and Non-Duplication of Benefits Clauses in Uninsured/Underinsured Motorist Portions of Coverage in Nevada Auto Policies

Author: Tom McGrath

Guest Editor: Cinnamon J. Carr

August 3, 2020 10:51am

Evaluating and handling first party claims for benefits under the uninsured and underinsured (“UM/UIM”) coverage provisions of Nevada insurance policies presents many challenges.  Nevada law does not permit the UM/UIM carrier to compel the claims to arbitration nor does it require an insured to obtain the carrier’s consent before the insured reaches a settlement agreement with the tortfeasor, regardless of whether the settlement exhausts the tortfeasor’s applicable policy limits.  There is also no requirement the insured’s settlement with the tortfeasor exhaust the tortfeasor’s applicable insurance limits before the insured may collect UM/UIM benefits.  The UM/UIM carrier is entitled to offset the tortfeasor’s entire applicable policy limits, regardless of the actual amount the tortfeasor’s carrier pays to settle the third party claim.  But under Nevada law, the offset applies to the insured’s damages and it does not reduce insured’s available UM/UIM limits.

Two subjects that frequently give rise to inquiries from UM/UIM carriers regarding Nevada UM/UIM policies relate to anti-stacking clauses and the enforceability of exclusions prohibiting duplication of benefits.

In Nevada, anti-stacking causes are not enforceable if the insured is paying a separate premium for each of the two policies he/she wishes to stack.  Nevada Revised Statute Section 687B.145(1) allows an insurance carrier to prohibit stacking if three requirements are met:  The anti-stacking provision (1) must be in clear language; (2) must be prominently displayed in the policy; and (3) the insured must not “have purchased separate coverage on the same risk nor paid a premium calculated for full reimbursement under that coverage.”  The carrier possesses the burden of proving all three requirements are satisfied.

In its relatively recent published decision, Clifford v. GEICO Casualty, 428 F.Supp.3d 317 (2019), the Nevada Federal District Court, interpreting Nevada law, upheld an anti-stacking provision contained in two GEICO automobile policies, issued separately to Clifford and Clifford’s mother.  Clifford claimed she was entitled to UIM benefits under both policies after she was involved in an accident where she alleged she sustained damages in excess of the tortfeasor’s applicable policy limits.

The Court in Clifford explained the anti-stacking provisions were enforceable because 1) the terms were in clear language that an average insured would understand; 2) the anti-stacking language was presented in bold font, capital font and italics and therefore, in a manner that provided “greater prominence” to said language and 3) Clifford only paid the premium for her policy not her mother’s policy and even though both policies afforded coverage for the same vehicle.  See Clifford at pgs.323-324.  Therefore, the Court held Clifford was entitled to recover UIM benefits only under one policy, although it permitted her to recover under her mother’s policy, which afforded higher UIM limits.

Regarding UM/UIM claims arising from an injury/incident occurring while an insured is in the course and scope of his or her employment, most auto insurance policies contain provisions reducing the benefits/amounts an insured may collect under UM/UIM coverage when the insured “could have been paid” by workers’ compensation insurance for the same damagesIn Fernandez v. State Farm, 338 F.Supp.3d 1193 (2018), the Nevada Federal District Court explained the key distinction regarding when a UM/UIM carrier may enforce a non-duplication of benefits clause in its policy.  The Court declared the clause only is enforceable if the insured actually receives workers’ compensation benefits.  When the insured receives workers’ compensation benefits, the carrier is entitled to an offset for the same.  And, as explained above, the offset is subtracted from the damages instead of reducing the applicable UM/UIM limits.

Conversely, in instances where the insured has not received any workers’ compensation benefits, the UM/UIM carrier cannot assert any offset.  In Fernandez, the insured could have filed a workers’ compensation claim, but she did not.  The Court also noted that had she filed a workers’ compensation claim, she would have received benefits from the workers’ compensation carrier that paid for all of her medical treatment related to the accident that gave rise to her UM/UIM claims.  The Court relied on Nevada’s two-fold policy of making victims whole while avoiding double recovery.  In instances where the insured collects workers’ compensation benefits, enforcing a provision prohibiting recovery only where the insured actually receives/collects benefits is consistent with Nevada’s policy; whereas a provision prohibiting recovery where the insured “could have collected” but did not actually receive any workers’ compensation benefits does not ensure victims are made whole and therefore is not enforceable.

Furthermore, Nevada law does not compel a claimant who suffers a workplace injury to file a workers’ compensation claim, which may frustrate carriers further.  In cases where the claimant insured’s UM/UIM policy affords significant limits, most plaintiffs’ attorneys will urge the insureds to forego presenting a workers’ compensation claim because the workers’ compensation carrier will direct the insured’s medical treatment, not his or her attorneys.  Moreover, when a workers’ compensation carrier possesses a lien for said treatment, if an insured later files a lawsuit against their carrier for first party claims regarding UM/UIM coverage, Nevada law provides an exception to its strict collateral source rule and the carrier will be permitted to introduce evidence at trial regarding the amount paid for the insured claimant’s medical treatment.  Hence, the jury will have the option to choose whether the insured claimant’s damages should be measured by the amount paid instead of the amount billed.  Without the workers’ compensation lien, Nevada’s collateral source rule will permit the introduction of evidence regarding only the amount billed.

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