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Nevada Division of Insurance Update Regarding the Regulations Governing Defense Costs

On July 20, 2023, The Nevada Division of Insurance issued guidance in response to the recently passed Assembly Bill 398, affecting policies of liability insurance including insurance issued by authorized insurers and non-risk retention group captive insurers that provide third-party liability coverage.

Effective October 1, 2023, AB 398 prohibits the issuance or renewal a policy of liability insurance which (1) either reduces the limit of liability stated in the policy by the costs of defense, legal costs and fees and other expenses for claims; or (2) otherwise limits the availability of coverage for the costs of defense, legal costs and fees and other expenses for claims.

The Nevada Division of Insurance has advised that such policies include defense costs outside of the limits of liability, and defense coverage must be made available. However, the law does not require unlimited defense costs. For policies of liability insurance other than those which do not limit defense costs, a separate limit for defenses costs must be made available (including a limit of $0).

The bill does not prohibit insurers from issuing policies which include self-insured retentions or deductibles on liability coverage and/or defense costs.

The Nevada department will prioritize review of any forms which are filed to ensure compliance with AB 398 upon its effective date.

For more information on this Nevada Division of Insurance  update or any other questions, please contact Westmont Associates, Inc.


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