Today the Supreme Court of Nevada decided it will follow the lead of other jurisdictions and require insurers to hire two different defense attorneys for the insured, in certain circumstances. State Farm Mut. Auto. Ins. Co. v. Hansen, 131 Nev. Adv. Op. 74 (2015) was unanimously decided to adopt this requirement after examining similar rules in other states.
We conclude that Nevada law requires an insurer to provide independent counsel for its insured when a conflict of interest arises between the insurer and the insured. Nevada recognizes that the insurer and the insured are dual clients of insurer-appointed counsel. When the insured and the insurer have opposing legal interests, Nevada law requires insurers to fulfill their contractual duty to defend their insureds by allowing insureds to select their own independent counsel and paying for such representation. We further conclude that an insurer is only obligated to provide independent counsel when the insured’s and the insurer’s legal interests actually conflict. A reservation of rights letter does not create a per se conflict of interest.
This is the first time the Supreme Court has applied this rule in Nevada and represents a shift in how some insurers may need to defend their insureds. We are examining the opinion’s implications and will be updating our website soon with a more in depth analysis.
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