Shedding Light on Nevada Coverage Requirements after a Loss with a Rental Car

Can a Nevada car rental company or insurance company pull coverage if a renter won’t cooperate after a loss with a rental car? The short answer is no.

Each month Las Vegas, Nevada swells with visitors who rent cars and tool around the desert. More than 3.4 million people visited Las Vegas in September 2019. The Las Vegas airport reported airport rental car revenue of $28 million dollars for the month of September 2019. I am not sure how many actual vehicles that number represents, but it is clearly a large number.

Nevada requires short-term lessors (i.e. car rental companies) to provide evidence of minimum coverage on rental vehicles as a condition of DMV registration. In turn, Nevada requires that the independent minimum coverage provided under that statute to also cover short-term lessees (i.e. renters) for the lessor to avoid joint and several liability to any injured third-party claimant for damages caused by the renter. 

Thus, the Nevada statute in question implicitly requires that the car rental company independently provide minimum “insurance” or “coverage” to indemnify the short-term lessee for his or her liabilities to third parties injured by the short-term lessee’s negligence. (Hall v Enterprise, 122 Nev. 685 [2006]).

So, if a tourist does not own a car and, while visiting Las Vegas, rents a car at the airport, under Nevada law, the car rental company affords the renter up to $25,000 in indemnity as primary insurance. What if the same tourist has a car accident and refuses to cooperate when a claim is made or if the adverse party brings a suit against the tourist who still refuses to cooperate? Can the car rental company or any other insurance company pull coverage because of the harm the tourist is causing himself and, by extension, to the indemnifying entity? 

No. Once a loss occurs in Nevada, the minimum coverage of insurance cannot be voided because of non-cooperation by the insured.

Case Law

Torres v. Nevada Direct Insurance (131 Nev. 531, 2015) involved a default judgment against a driver and owner of a vehicle. The insurance carrier sued in a separate lawsuit and won a judgment that the insured defendant owner had not complied with the terms of the policy and thereby breached the agreement and voided coverage. However, the plaintiff then sued the carrier directly for the minimum coverage required under Nevada law. 

After a bench trial relying on the prior ruling finding the insured was not cooperative, judgment was entered in favor of the insurance carrier. However, on appeal, the Nevada Supreme Court reversed the decision because an insurance company cannot avoid Nevada’s absolute-liability statute even if there is a finding of non-cooperation.

Currently, under Nevada’s motor vehicle financial law, all motor vehicles must be insured for at least $25,000 bodily injury or death liability per incident. 

Nevada statute contains the absolute-liability provision: “[e]very motor vehicle liability policy is subject to the following provisions which need not be contained therein: 5 (a). The liability of the insurance carrier with respect to the insurance required by this chapter becomes absolute whenever injury or damage covered by the policy occurs. The policy may not be cancelled or annulled as to such liability by any agreement between the insurance carrier and the insured after the occurrence of the injury or damage. No statement made by the insured or on behalf of the insured and no violation of the policy defeats or voids the policy.” 

Seemingly Harsh

This law seems harsh because it imposes automatic coverage for a loss even if the car rental company is prejudiced due to lack of knowledge of the incident or the inability to assert defenses. But the same law serves to protect the car rental company by limiting liability to the statutory minimum. Therefore, if the tortious tourist has a default judgment entered against him for $200,000, the car rental company need only pay $25,000.

In Stevens v. Penske Truck (unpublished decision) the driver for the third party was involved in a collision with the Stevens family who sued Penske, alleging negligent entrustment. In response, Penske filed a motion for summary judgment arguing that any responsibility for the loss was limited by statute at that time to $15,000 per person and $30,000 per occurrence. 

The district court held a hearing on the matter, and Penske deposited two checks totaling $30,000 with the district court. The district court granted Penske’s motion for summary judgment, holding that Penske complied with the statute by depositing the two checks for the statutory insurance minimums. The Stevens family appealed but the Nevada Supreme Court affirmed.   

In addition, Penske’s act of depositing two checks totaling $30,000 with the district court ensures that the Stevenses are indemnified in satisfaction of the statute without engrafting independent tort liability on Penske. 

Statutory Obligation

Thus, under Nevada law, a car rental company, whether self-insured or under a policy of insurance, has the statutory obligation to indemnity a renter for the minimum amount of coverage after a loss. If the renter does not cooperate and/or there is an excess award, the car rental company must pay the minimum statutory amount towards the claim or judgment but has no indemnity obligation beyond that amount. 

The duty to defend is a different issue. However, the indemnity is absolute and limited.

Cheryl Wilson is a senior counsel in Tyson & Mendes’ Las Vegas office. She is a trial attorney primarily focused on civil defense of claims asserting negligence, product liability, professional liability, and business torts.

This article was originally posted on Tyson & Mendes blog and used with permission.