The case of Jimenez v. GEICO Secure Ins. Co., 730 F. Supp. 3d 1091 (Nev. 2024) resulted in the publication of a decision which seems to have been willfully misinterpreted in the literature or perhaps it simply was not read beyond the headnotes. In Jimenez, a U.S. District Judge considered the decision in an earlier case, Chowning v. Nationwide, which was decided by a magistrate judge in Nevada a year earlier. The cite for the magistrate judge's decision is Chowning v. Nationwide Ins. Co. of Am., No. 22-cv-00798-CDS-EJY, 2023 WL 2971435 (D. Nev. 2023) (USMJ).
As the Jimenez Court wrote, “GEICO argues that I should follow Chowning, which held that a [statutory unfair claims settlement practices] claim was futile without a settlement demand from the injured party.” Jimenez, 730 F. Supp. 3d at 1096. But the Jimenez Court disagreed. The district judge in that case did not find the decision by a magistrate judge in Chowning to be “controlling law”:
The Supreme Court of Nevada has not decided the precise question of whether a settlement demand from the claimant is a prerequisite to an insurance bad faith claim. See Chowning, 2023 WL 2971435, at *6. Neither party cites controlling law on this point.
Jimenez, 730 F. Supp. 3d at 1095 (emphasis added).
Nevada law was involved in the Jimenez case and the Jimenez Court applied Nevada Supreme Court decisions which establish that a liability carrier generally cannot be held liable for its alleged bad faith in settlement regardless of whether there has been a settlement demand or not, if it “’has no opportunity to settle within policy limits .…' Or, if settlement is possible beyond policy limits, … that the insured would be willing to contribute the excess amount.” Jimenez, 730 F. Supp. 3d at 1095, quoting Allstate Ins. Co. v. Miller, 125 Nev. 300, 315, 212 P.3d 318, 328 (2009) (en banc) (emphasis added).
Applying the Nevada law of bad faith, as interpreted by the Nevada Supreme Court and followed in the Jimenez case, the policyholder’s complaint at issue failed in its claim of bad faith in settlement because it did not contain any allegation that the defendant carrier had “an opportunity to settle, either within policy limits or outside of policy limits with Jimenez’s contributions.” Jimenez, 703 F. Supp. 3d at 1096.
Without an allegation that the defendant carrier had an opportunity to settle, both the common law claim of bad faith and the statutory claim of bad faith failed, and for that reason both of these claims were dismissed. Jimenez, 730 F. Supp. 3d at 1096.
The Jimenez decision is thoughtful and researched. Not once did the Jimenez Court write that a demand (or offer) is necessary to a viable claim of bad faith in settlement; what Nevada law requires is what all modern jurisdictions require, which is an opportunity for the liability carrier “to settle within policy limits or in excess of policy limits with contribution” from the bad-faith plaintiff. Jimenez, 730 F. Supp. 3d at 1096.
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