The Nevada Supreme Court adopted a minority viewpoint by determining that an insurer's liability is not capped at policy limits, and the insured's defense costs when an insurer breaches its duty to defend. Instead, an insurer may be liable for any consequential damages caused by its breach, even if it did not act in bad faith. The case is Century Sur. Co. v. Andrew, No. 73756, 2018 Nev. LEXIS 112 (Dec. 13, 2018).

A truck owned and driven by Michael Vasquez struck Ryan Pretner causing significant brain injuries. After the accident, Pretner and his legal guardian Dana Andrew (Both referred to under the name Pretner for the rest of this article) initiated a personal injury action in state court. Vasquez used the truck for personal use and for his mobile auto detailing business, Blue Streak Auto Detailing, LLC (Blue Streak). When the accident occurred, Vasquez was covered under a personal auto liability policy issued by Progressive Casualty Insurance Company (Progressive) while Blue Streak was covered under a commercial liability policy issued by Century Surety Company. The Century policy had a policy limit of $1 million.

When Century received the accident report, they conducted an investigation and concluded that at the time of the accident Vasquez was not driving within the course and scope of his employment, therefore the accident was not covered under the commercial liability policy. Century rejected Pretner's demand to settle the claim within the policy limit, so they sued Vasquez and Blue Streak in state court alleging that Vasquez was in the course and scope of his employment when the accident occurred. Century was notified of the suit but refused to defend. Vasquez and Blue Streak defaulted in the state court action and notice of the default was sent to Century who maintained that the claim was not covered under the policy.