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In March, the Supreme Court of Nevada provided important new precedent for insurers battling the use of American Law Institute’s Restatement of the Law of Liability Insurance (“the Restatement”). The Restatement was approved in 2018 after a years-long drafting process and strong objections from the insurance industry which saw the Restatement as prejudicial and an attempt to actually change legal principles applicable to insurance coverage disputes.  

In a 4-3 decision, the Court, in Nautilus Ins. Co. v. Access Med., No. 79130 (Nev. Mar. 11, 2021) ruled an insurer is entitled to reimbursement costs incurred during the defense of its insured when the insurer owed no duty to defend and the insurer reserved its right to seek reimbursement. This ruling is significant because it directly contradicts the Restatement, which provides an insurer may not be reimbursed for defense costs, even if it is subsequently determined the insurer did not have a duty to defend unless such reimbursement is stated in the insurance policy. The pro-insured Restatement described the “default rule” as prohibiting insurers from seeking reimbursement in such situations.

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