Nevada Governor Joe Lombardo signed into law AB 398, which modifies the Nevada Insurance Code (NRS Title 57). The new law states that as of October 1, 2023, Nevada insurers are prohibited from issuing or renewing a liability insurance policy containing language where that policy’s limit is reduced by (or where the availability of coverage is limited as to) the “costs of defense, legal costs and fees and other expenses for claims.”
Basically, this new law removes defense costs, attorney’s fees, and other expenses from insurance policies, thereby eliminating the usual provisions that established “burning” or “eroding” policy limits for insureds.
From the standpoint of attorney malpractice insurance, AB 398 could be impactful because some carriers structure these policies to include “burning” or “eroding” policy limits. However, most do not. Generally, “burning” or “eroding” policy limits carry lower premiums attached to them, and are, therefore, attractive to insureds that are sensitive to cost.
Nevada attorneys are advised to consult with their insurance brokers and check their policy language to determine whether they are impacted. ALPS (the State Bar of Nevada’s endorsed lawyers’ professional liability insurance provider) and other legal malpractice carriers in the state are expected to work with insureds to ensure continuation of coverage.