Opinion ID: 2453652
Heading Depth: 1
Heading Rank: 4

Heading: An insurer may contractually limit its duties if it does so unambiguously

Text: An insurance policy is a contract between a policyholder and an insurer in which the policyholder agrees to pay premiums in exchange for financial protection from foreseeable, yet unpreventable, events. 1 New Appleman Insurance Law Practice Guide § 1.03[1] (Leo Martinez et al. eds., 2010). As such, the duties undertaken by the policyholder and the insurer are defined by the terms of the policy itself. Id. In a standard auto liability policy, such as the one at issue here, the insurer generally undertakes two duties in exchange for the policyholder's premium payments: (1) a duty to indemnify the policyholder for damages he or she causes while driving, and (2) a duty to defend the policyholder against any claims of liability brought against the policyholder in connection with these damages. United Nat'l Ins. Co. v. Frontier Ins. Co., 120 Nev. 678, 684, 99 P.3d 1153, 1156 (2004). With regard to these two duties, we have held that [t]he duty to defend is broader than the duty to indemnify. Id. at 686, 99 P.3d at 1158. In other words, as a general rule, an insurer's duty to defend is triggered whenever the potential for indemnification arises, and it continues until this potential for indemnification ceases. Id. at 686-87, 99 P.3d at 1158. Because the duties undertaken by an insurer are dictated by the terms of its contract with the policyholder, however, an insurer is free to contractually limit these dutiesthat is, to contract its way around this general rule. Farmers Insurance Group v. Stonik, 110 Nev. 64, 67, 867 P.2d 389, 391 (1994). While an insurer such as Benchmark is free to contract its way around this general rule, insurance policies are contracts of adhesion. Id. That is, the policies are drafted by the insurer and are offered to the policyholder without any opportunity for the policyholder to negotiate the policy's terms. Thus, in order for an insurer to effectively limit its contractual obligations, the insurance policy's language must unambiguously convey the insurer's intent to do so. Id. It follows that `any ambiguity or uncertainty in an insurance policy must be construed against the insurer and in favor of the insured.' United Nat'l, 120 Nev. at 684, 99 P.3d at 1156 (quoting Vitale v. Jefferson Ins. Co., 116 Nev. 590, 594, 5 P.3d 1054, 1057 (2000)).