CONSTRUCTION DEFECT JOURNAL

"News and Information for Construction Defect and Claims Professionals"

The End of Eroding Limits Policies in Nevada is Just the Beginning

The end printed on paper in typewriter

These unprecedented changes to the insurance code are relevant to policyholders and insurers alike.

August 28, 2023
Payne & Fears LLP

On June 3, 2023, Nevada Gov. Joe Lombardo signed into law AB 398 (the Act) which modifies the Nevada insurance code by restricting the types of liability policies that can be offered in the state.

The End of Eroding Limits Policies in Nevada
First, the Act prohibits liability insurers from issuing “eroding limits” or “burning limits” policies. These are insurance policies under which defense costs decrease policy limits. Most professional liability policies are eroding limits policies. As of Oct. 1, 2023, insurers in Nevada may no longer issue or renew any policy where policy limits are eroded by defense costs.

This change may result in higher premiums on these types of policies to compensate for the higher payouts they will now have to provide in Nevada.