Enforceability of Anti-Stacking Provisions In Nevada - The Importance of Prominently Displayed Provisions
(October 2019) - Insurers should be familiar with NRS 687B.145, commonly referred to as Nevada’s anti-stacking statute. The statute provides:
Any policy of insurance or endorsement providing coverage under the provisions of NRS 690B.020 or other policy of casualty insurance may provide that if the insured has coverage available to the insured under more than one policy or provision of coverage, any recovery or benefits may equal but not exceed the higher of the applicable limits of the respective coverages, and the recovery or benefits must be prorated between the applicable coverages in the proportion that their respective limits bear to the aggregate of their limits. Any provision which limits benefits pursuant to this section must be in clear language and be prominently displayed in the policy, binder or endorsement. Any limiting provision is void if the named insured has purchased separate coverage on the same risk and has paid a premium calculated for full reimbursement under that coverage.
In other words, an anti-stacking provision in an insurance policy is enforceable if three conditions are met – the provision is 1) clear, 2) prominently displayed, and 3) the insured did not pay a premium calculated for full reimbursement. Insurers revised their policies as case law developed, adding italics, capitalization, and bold typeface, and underlining anti-stacking provisions. After four decades of case law applying the statute, insurers could be confident that their policies met the “prominence” prong of the test. However, a recent USDC-Nevada case should temper that confidence.
The anti-stacking provision at issue was in ALL CAPS and underlined (with defined terms in bold italics). Plaintiff’s counsel argued that the anti-stacking provision at issue was not prominent because there were 64 separate provisions within the policy which used the same capital letters, bold type, and italicization as the anti-stacking provision.
While the district court did not accept the plaintiff’s invitation to quantify the percentage of the policy that used the same exact features, it did find that the anti-stacking provision in the policy was not prominent. Although the district court acknowledged that the provision was in all capital letters and underlined, while the rest of the policy, on balance, was not, it found the provision was not prominent when compared to its surrounding terms. The court noted that the provision at issue was contained on a page where nearly all the text was in capital letters with some terms bolded and italicized. Additionally, other provision on the same page were also capitalized and underlined. The district court noted these other provision were not merely identical anti-stacking provisions, but instead related to whether the coverage was primary and what proportion the insurer would pay if other insurance applied. The anti-stacking provision was sandwiched between those clauses, which were capitalized and underlined, and various exclusions which were capitalized, but not underlined. Thus, the district court determined the anti-stacking provision did not have greater prominence than other surrounding provisions. Therefore, the provision was unenforceable and the insured was entitled to “stack” the policy limits of his three insured vehicles.
The parties subsequently reached a settlement and the court order was withdrawn. However, the Nevada Plaintiffs’ bar is well aware of the argument and the fact that it was successful. Insurers should expect more arguments attacking the prominence of their anti-stacking provisions.
Priscilla L. O’Briant, Partner