Insurance is a contract between the insurer and the policy holder. All insurance contracts in Nevada contain an implied covenant of good faith and fair dealing. Under Nevada law, the duty of good faith is defined as "honesty in fact and the observance of reasonable commercial standards of fair dealing." This means that insurance companies in Nevada must: Pay legitimate first-party claims up to the insurance coverage policy limit when the policy holder experiences a “covered risk,” and payment must be reasonably prompt, Promptly and fairly investigate claims to determine who is liable, Defend the policy holder against third-party insurance claims, and Use good faith efforts to settle claims in appropriate cases.