## Facts

- Michael Vasquez operated a mobile auto-detailing business, Blue Streak Auto Detailing, LLC, and used his truck for both personal and business purposes.
- Vasquez struck Ryan T. Pretner with the truck, causing severe brain injuries.
- Vasquez had a \$100,000 personal auto policy with Progressive and Blue Streak had a \$1 million commercial liability policy with Century.
- Pretner sued Vasquez and Blue Streak, alleging Vasquez was acting in the course of Blue Streak’s business when the collision occurred.
- Century concluded Vasquez was using the truck for personal purposes and denied both defense and coverage.
- After Century maintained its denial, Vasquez and Blue Streak allowed default to be taken and entered a non-execution/assignment agreement assigning Blue Streak’s rights against Century to Pretner.
- Progressive paid its \$100,000 limit.
- Following a prove-up hearing, the state court entered an approximately \$18 million default judgment and found Vasquez was working at the time of the accident; Blue Streak incurred essentially no defense costs because no defense was mounted.
- Pretner, as assignee, sued Century in federal court for breach of contract (including duty to defend), bad faith, and statutory unfair claims practices; the federal court found a duty-to-defend breach but no bad faith and certified a damages question to the Nevada Supreme Court.

## Issues

1. When an insurer breaches the contractual duty to defend but does not act in bad faith, are damages limited to policy limits plus the insured’s defense costs, or may the insured recover all consequential damages caused by the breach?
2. Is the insurer’s good faith relevant to determining the measure of damages for breach of the duty to defend?

## Decision

- The court answered the certified question by holding that damages for breach of the duty to defend are not capped at the policy limits plus defense costs.
- The court held the insurer may be liable for any consequential damages proximately caused by the breach, even if those damages exceed the policy limits.
- The court held that good-faith determinations are irrelevant to measuring contract damages for breach of the duty to defend.
- The matter returned to federal court to determine causation and foreseeability of the claimed consequential damages under the facts.

## Legal Principles

- The duty to defend is a contractual obligation; wrongful refusal to defend constitutes a breach of contract.
- Contract remedies for breach of the duty to defend include foreseeable consequential damages proximately caused by the breach.
- Policy limits restrict indemnity for covered liabilities but do not cap the insurer’s liability for damages arising from its own breach of the duty to defend.
- Bad faith is not a prerequisite to recovering consequential contract damages for failure to defend; bad faith and the duty to defend are separate doctrines with different requirements.
- An excess judgment (including one entered by default) may be recoverable as consequential damages if it is a foreseeable result of the insurer’s failure to defend and is proximately caused by that breach.

## Conclusion

Nevada law permits recovery of all foreseeable consequential damages caused by an insurer’s breach of the duty to defend, without limiting recovery to policy limits plus defense costs, and without regard to whether the insurer acted in good faith.


Century Sur. Co. v. Andrew, 134 Nev. 819, 432 P.3d 180 (Nev. 2018)