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The Nevada Division of Insurance and Power to Suspend Policy Exclusions for Pandemic-Related Coverage

Author: Cheryl Wilson

Guest Editors: Jeremy Freedman, Ashley Kaye

November 30, 2020 3:59pm

The Nevada Division of Insurance can create law and determine when the law has been violated.  The Division of Insurance has original jurisdiction to hear matters when a party seeks to force a carrier to comply with the insurance code. (Allstate Ins. Co. v. Thorpe (Nev. 2007) 123 Nev. 565; see also NRS § 686A.015 [stating “the Commissioner has exclusive jurisdiction in regulating the subject of trade practices in the business of insurance in this state.”]). NRS 679B.301(1) authorizes the Insurance Commissioner to hold hearings for any purpose under Title 57, the insurance code.   Similarly, the Insurance Commissioner resolves issues of rate charges for automobile services. (NRS 487.686). One of the more significant powers of the Division of Insurance is that it can re-write insurance policies that apply in the State of Nevada but are written elsewhere.

An insurer may argue it violates due process rights to rewrite a policy not sold within Nevada. “The Due Process Clause protects an individual’s liberty interest in not being subject to the binding judgment of a forum with which he has established no meaningful ‘contacts, ties, or relations.’” (Burger King v. Rudzewicz (1985) 471 U.S. 462, 471–72).  However, “minimum contacts” provide sufficient basis to impose Nevada law on a foreign insurance carrier. “When a corporation ‘purposefully avails itself of the privilege of conducting activities within the forum State,’ it has clear notice that it is subject to suit there….” (Hanson v. Denckla (1958) 357 U.S. 235, 253).

Thus, in June 2020, the Division of Insurance issued notice it was going to re-write any insurance policy which attempted to profit from the pandemic. The Division of Insurance issued a Notice to Property and Casualty Insurers advising of Disallowance of New Exclusions Related to COVID-19, Viruses, or Pandemics.[1]

Within the Notice, Nevada advised it will not approve any new policy or endorsement language which specifically excludes pandemic-related coverage, on a temporary basis. The new rule is designed to “protect consumers against narrowing of previously expected insurance coverage” during this “time of great uncertainty.” The Notice specifically excludes policies that predate the COVID-19 pandemic, with exclusions for business interruption and related perils arising from viruses or pandemics. Instead, the State of Nevada directs this Notice to an insurer that claims an exclusion but adds additional explicit language while the pandemic rages. The Notice includes previously approved language and asks for “voluntary” withdrawal of those pandemic-related exclusions.

The Nevada Division of Insurance will not approve any exclusion language, and for those insurers who previously submitted and received approval for such language beginning after March 12, 2020, it asks them to “voluntarily” withdraw the language.

This means for those policies of coverage issued before the pandemic that properly and clearly excluded from coverage loss caused by a virus, there is no impact.  However, for those policies which recently issued a clarification of coverage or other restatement to make it appear there is no coverage for pandemic-related losses, such policies are subject to interpretation by Nevada to remove any such exclusion. In the event a policy attempts to violate these provisions, an insured has a private right of action and can file a claim with the Division of Insurance to secure compliance by an insurer.

 

[1] http://doi.nv.gov/uploadedFiles/doinvgov/_public-documents/News-Notes/NVDOI_Statement_on_Virus_and_Pandemic_Exclusions.pdf.

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