By Professor Jeffrey Stempel
In Las Vegas Metropolitan Police Department v. Coregis Insurance Co., 256 P.3d 958 (Nev. 2011), the Nevada Supreme Court formally joined the vast majority of states in embracing a "notice-prejudice" rule regarding whether an insurer may deny coverage due to late notice of a loss or claim by the policyholder. Under a notice-prejudice approach, late notice to the insurer is not necessarily fatal to the policyholder’s claim and the tardy policyholder may nonetheless obtain coverage unless the insurer demonstrates that it was prejudiced by the late notice. The Court made clear that the burden of proving prejudice was on the insurer because “it is more practical and equitable” to do so. In addition to stating that the result was required by longstanding administrative regulations (NAC 686A.660(4) states that late notice does not relieve the insurer of its obligations unless failure to comply with a policy’s notice provision “prejudices the insurer’s rights), the Metro-Coregis Court overruled State Farm Mut. Auto Insurance Co. v. Cassinelli, 216 P.2d 606 (1950), which had adopted a strict requirement that late notice was the failure of a condition that excused the insurer from providing coverage.
The Court also distinguished Las Vegas Star Taxi, Inc. v. St. Paul Insurance Co., 714 P.2d 562 (1986), which had been read by many lawyers as maintaining the “no prejudice required” strict view of an insurer’s late notice defense.
Further, the Metro-Coregis Court rejected the notion that the normal rules of insurance policy construction were subject to alteration if the policyholder was "sophisticated."
On the merits of the case, the Metro-Coregis court reversed summary judgment granted the insurer by the trial court due to genuine disputes of material fact and remanded for further proceedings pursuant to notice-prejudice rule.
The Court also strongly suggested that the complexity and ambiguity of the 75-page policy coupled with the police department’s reasonable expectations regarding when notice was required made notice in the case timely even though notice came years after the underlying event giving rise to tort liability.
