In a 4-3 decision filed on March 11, the Nevada Supreme Court responded to a certified question from the United States Court of Appeals for the Ninth Circuit. In Nautilus Insurance Company v. Access Medical, LLC; Robert Clark Wood, II; and Flournoy Management LLC, 137 Nev. Adv. Op. 10 (Nev. 2021), the court held that an insurer that reserves its right to seek reimbursement of defense costs paid to defend an insured may recover those defense costs from the insured upon a showing that the claim was not covered. The court held, “when a court finally determines that the insurer had no contractual duty to defend, the insurer may ordinarily recover in restitution if it has clearly reserved the right to do so in writing.”
The coverage dispute arose out of underlying litigation between former business partners that worked together selling medical devices. “After the partnership soured,” one of the former business partners alleged in a lawsuit that his former business partners (the insureds, in the coverage dispute) intentionally interfered with his new business, including by allegedly telling a prospective client that he was “banned” from selling medical devices. The former business partner-insureds tendered the intentional interference claim to their insurance carrier.