Like in many other states, Nevada law allows insurance companies to deny claims if a policyholder provides bad information when applying for the insurance coverage in question.
However, the law limits when insurance companies may deny a claim for fraud or misrepresentation.
Fraud involves deliberate dishonesty. In other words, fraud cannot happen even when a policyholder makes a serious and careless but still honest error.
However, insurance carriers may also deny a claim if a policyholder misrepresents a fact that, if the insurance company had known about it, would not have issued a policy at all, would have charged more or would have placed more restrictions on the policy.
Unlike fraud, denying on these grounds does not require that the insurance company prove a policyholder was trying to mislead the insurance company. Misstating important information alone is enough to deny a claim.
Carriers will need to be able to prove they have the right to deny coverage
Being able to deny coverage for fraud or other misconduct first requires the insurance carrier to do a thorough investigation.
Not investigating diligently could mean an insurer will not be able to deny a claim even if it turns out the insurer had grounds to do so. Also, the denial could lead to the policyholder accusing the insurer of bad faith.
Even if the insurance company has a well-documented case to deny a claim, the company should still expect an uphill battle in court.
While they do not have to prove fraud or misrepresentation beyond a reasonable doubt like in a criminal case, carriers will not be allowed simply to make accusations.
The carrier will have to show in court, often in the face a skilled plaintiff’s attorney and a sympathetic policyholder, that the carrier followed both the law and the terms of its policy at every step.
