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O.P.H. of Las Vegas, Inc. v. Oregon Mutual Insurance Company

Supreme Court of Nevada

September 14, 2017

O.P.H. OF LAS VEGAS, INC., Appellant,
v.
OREGON MUTUAL INSURANCE COMPANY; DAVE SANDIN; AND SANDIN & CO., Respondents.

         Appeal from district court orders granting summary judgment in an action by an insured against its insurer and its broker arising out of cancellation of a fire insurance policy. Eighth Judicial District Court, Clark County; Gloria Sturman, Judge.

         Affirmed in part, reversed in part, and remanded.

          McLetchie Shell, LLC, and Margaret A. McLetchie and Alina M. Shell, Las Vegas, for Appellant.

          Hutchison & Steffen, LLC and Michael K. Wall, Patricia M. Lee, and Michael S. Kelley, Las Vegas, for Respondents Dave Sandin and Sandin & Co.

          Lewis Brisbois Bisgaard & Smith LLP and Robert W. Freeman, Jr., and Priscilla L. O'Briant, Las Vegas, for Respondent Oregon Mutual Insurance Company.

          BEFORE DOUGLAS, GIBBONS and PICKERING JJ.

          OPINION

          PICKERING, J.

         In this insurance policy cancellation dispute, we are asked to resolve two issues. The first is whether NRS 687B.360 requires a cancellation notice to contain a statement of a policyholder's right to request additional information to be effective. We hold that NRS 687B.360 requires strict compliance; without an express statement of a policyholder's right to request additional information about the reasons for a policy's cancellation, the cancellation notice is ineffective. Because the insurance company's cancellation notice failed to provide the statement required by NRS 687B.360, the policy remained in effect at the time of loss. We therefore reverse the district court's grant of summary judgment for the insurance company and remand so the insured may pursue its claims against the insurer.

         The second issue is whether, under Nevada law, an insurance broker who obtains an insurance policy for a client has a duty to monitor the client's premium payments and to alert the client when the policy is about to be canceled for nonpayment of premiums. We hold that the relationship between the insurance broker and the insured client in this case did not give rise to such a duty. We therefore affirm summary judgment in favor of the broker against the insured.

         I.

         Unless otherwise noted, the following facts are undisputed: Appellant O.P.H. of Las Vegas, Inc. operated an Original Pancake House restaurant in Las Vegas. Between 2002 and 2012, respondent Dave Sandin or Sandin & Co. served as the insurance broker for OPH (except for a two-year period when OPH used another broker). In December 2011, Sandin recommended that OPH purchase a Business Owner Protector policy[1] for the restaurant from respondent Oregon Mutual Insurance Co., which OPH did. The policy term ran from December 26, 2011, until December 26, 2012, and permitted periodic premium payments.

         On July 26, 2012, OPH defaulted on its obligation to pay the premium for which it had been billed earlier in the month. Five days later, Oregon Mutual issued OPH a cancellation notice (Notice). The Notice stated that Oregon Mutual would cancel the policy on August 16, 2012, if it did not receive payment by August 15, 2012. The Notice did not inform OPH of its right under NRS 687B.360 to request and receive within 6 days additional information if needed to relay "with reasonable precision" the facts on which OPH based its cancellation decision.

         Though OPH denies receiving the Notice, Oregon Mutual attests that it mailed the Notice to OPH on August 1, 2012. Oregon Mutual did not mail a copy of the Notice to the broker, Sandin. On August 13, 2012, OPH realized that it had not made its July premium payment, wrote a check for the premium due, then failed to mail the payment to Oregon Mutual. On August 17, 2012, a fire destroyed the Original Pancake House. OPH reported the loss and submitted a claim under the policy. Oregon Mutual denied coverage, stating that the policy had been canceled for failure to pay the premium effective August 16, 2012, the day before the fire.

         OPH sued Oregon Mutual, Sandin, and Sandin & Co. on various theories, including, as against Oregon Mutual, breach of contract, bad faith and negligence and, as against the Sandin defendants, breach of fiduciary duty. Early on in the case, OPH filed a motion for partial summary judgment against Oregon Mutual on the ground the Notice did not comply with NRS 687B.360 and thus had no effect. The district court denied the motion. After conducting discovery, Oregon Mutual moved for summary judgment asserting that the policy did not cover the loss because it had been validly canceled for nonpayment of premiums before the fire occurred. The Sandin defendants also filed a ...


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