In Nevada, insurance clauses that purportedly require arbitration to resolve first party (UM/UIM) insurance claims for auto insurance are unenforceable. NRS 690B.017 (Provisions for arbitration not binding) provides:
No provision for arbitration contained in an automobile liability or motor vehicle liability insurance policy delivered, issued for delivery or renewed in this State is binding upon the named insured or any other person who makes a claim under the policy.
The statute is clear on its face in that auto insurance carriers in Nevada may not compel their insureds to submit their uninsured/under-insured claims to arbitration.
In areas outside first party auto insurance polices, using Nevada contract law principles, mandatory arbitration clauses may be enforceable (apparently, even when they don’t exist). See Pacificare of Nevada, Inc. v. Rogers, 127 Nev. Adv. Op., 71, 2011 WL 6016079 (Nev. 2011):
Mandatory arbitration clause contained in private Medicare insurer’s contract survived expiration and replacement of contract by subsequent contract that did not contain arbitration clause; although later contract contained generic language purporting to “replace all prior” contracts, language did not indicate parties’ explicit intention to rescind parties’ agreement to arbitrate insured’s claim against insurer for alleged failure to adopt and implement quality assurance program, which insured brought after she contracted hepatitis C following medical procedure performed by health care provider that had been approved by insurer Absent the explicit intention to rescind an arbitration clause in a subsequent agreement, the clause will survive even where the prior agreement itself is rescinded by the latter agreement.
However, courts may refuse to enforce a provision of a contract that contravenes the state’s public policy. Picardi v. Eighth Judicial Dist. Court, 251 P.3d 723, 726 (Nev. 2011) (holding that because class action waiver in the arbitration agreement violates public policy, it is unenforceable).
Thus, arbitration agreements cannot be used to avoid rights and liabilities imposed by statute when doing so would violate the public policy of this state… And although Nevada public policy favors enforcement of arbitration provisions, “[t]he policy of enforcing arbitration arises only after an enforceable agreement to arbitrate is found to exist.”).
See also, D.R. Horton, Inc. v. Green, 120 Nev. 549, 96 P.3d 1159 (Nev. 2004) (holding Mandatory arbitration clause of home purchase agreement was substantively unconscionable; clause imposed $10,000 penalty on home purchasers for refusing to arbitrate, without imposing any penalty on developer/vendor for refusing to arbitrate, and clause required each party to pay equally for costs of arbitration, without disclosing to purchasers that arbitration costs could be significant and therefore could preclude purchasers from effectively vindicating their rights in arbitral forum.”).
Similarly, the US Supreme Court has upheld companies’ right to use arbitration clauses to limit consumer remedies. In Compucredit Corp. v. Greenwood, 565 US __, 132 S.Ct. 665 (January 10, 2012) the U.S. Supreme Court held that companies that promise to repair an individual’s credit can force customers into arbitration, instead of to a judge or jury trial, under the Federal Arbitration Act (FAA), even though the 1996 the Credit Repair Organizations Act gives consumers “the right to sue,” because the latter act doesn’t explicitly overrule the FAA. The impact of this decision extends the scope of the FAA and represents another in a string of decisions approving of forced arbitration clauses in consumer contracts.
The district court denied the companies’ motion to compel arbitration of the claims, concluding that “Congress intended claims under the CROA to be non-arbitrable.” The Ninth Circuit affirmed.
The Supreme Court, in its 10-page opinion, attacked the lower courts’ line of reasoning that the disclosure provision gives consumers the “right to sue,” which “clearly involves the right to bring an action in a court of law.” The Court said because the CROA is silent on whether claims under it can proceed in an arbitrable forum, the FAA requires the arbitration agreement to be enforced according to its term.
As an aside, the American Arbitration Association (AAA) recently announced that it would cap consumers’ arbitration costs at $375, and require the business to pay the remainder. However
• Cases can migrate to other arbitration providers. AAA has been named in arbitration clauses primarily by companies that expected AAA’s high costs to deter claims. These companies will switch to new arbitration providers.
• The changes are not being applied to cases already in system, report some attorneys
who have inquired about their clients’ cases.
• The changes don’t apply to cases involving more than $75,000.
When making a claim on your own insurance, it is imperative you understand your rights. The insurance company has a team of lawyers on its side, you need an experienced attorney on yours. Yan Kenyon has experience in first party and third party insurance claims for its clients. Initial consultations are always free. Please come and speak with one of our attorneys today about your insurance questions.
-Jay
Jay Kenyon is a founding partner of Yan Kenyon, specializing in personal injury claims and litigation.
