Century Sur. Co. v. Andrew, 432 P.3d 180

Michael Vasquez, driving for his business Blue Streak, caused severe injury to Pretner; Vasquez had $100,000 personal coverage (Progressive) and Blue Streak had $1,000,000 commercial coverage (Century Surety).
Century investigated, concluded Vasquez was not acting in scope of employment, and refused to defend Blue Streak; Blue Streak defaulted in the underlying tort suit.
Default judgment entered against Vasquez and Blue Streak for $18,050,183; Progressive tendered its $100,000 limit and Blue Streak assigned its rights against Century to respondents.
Federal court found Century breached its duty to defend but did not act in bad faith; initially held liability capped at policy limit plus defense costs, then reconsidered and awarded consequential damages beyond policy limits; case was certified to the Nevada Supreme Court.
Nevada Supreme Court framed the certified question: whether an insurer that breaches the duty to defend but acts in good faith is liable only up to policy limits plus defense costs or liable for all consequential damages from the breach.
Court ruled that breach of the contractual duty to defend permits recovery of consequential damages (including excess judgments) if caused by the breach; bad faith is not required to recover such damages.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether an insurer's liability for breaching its duty to defend (absent bad faith) is capped at the policy limit plus defense costs	Respondents: insurer liable for all consequential damages, including judgments exceeding policy limits	Century: liability limited to policy limits plus insured's defense costs when no bad faith	Court: Not capped; insurer may be liable for consequential damages beyond policy limits if those damages flow from the breach
Whether proof of bad faith is required to recover excess damages from breach of the duty to defend	Respondents: bad faith not required; breach alone can yield consequential damages	Century: excess liability should require bad faith or wrongful failure to settle	Court: Bad faith is irrelevant; objective breach suffices if damages are consequential and foreseeable
Whether insurer may rely on facts outside the complaint to deny defense	Respondents: duty to defend is based on complaint allegations; outside facts generally not permitted to avoid defense	Century: relied on its investigation to deny coverage and defense	Court: Generally insurers cannot use facts outside the complaint to refuse defense unless defending under reservation of rights or in a timely coverage action

Century Sur. Co. v. Casino W., Inc., 130 Nev. 395, 329 P.3d 614 (Nev. 2014) (insurance contracts governed by general contract principles)
United Nat'l Ins. Co. v. Frontier Ins. Co., Inc., 120 Nev. 678, 99 P.3d 1153 (Nev. 2004) (duty to defend arises when complaint alleges potential coverage)
Reyburn Lawn & Landscape Designers, Inc. v. Plaster Dev. Co., Inc., 127 Nev. 331, 255 P.3d 268 (Nev. 2011) (breach of duty to defend may require reimbursement of defense costs)
Comunale v. Traders & Gen. Ins. Co., 50 Cal.2d 654, 328 P.2d 198 (Cal. 1958) (majority rule limiting liability to policy plus fees when insurer only refused to defend)
Newhouse v. Citizens Sec. Mut. Ins. Co., 176 Wis.2d 824, 501 N.W.2d 1 (Wis. 1993) (insurer liable for all damages naturally flowing from breach, including excess judgments)
Hamlin Inc. v. Hartford Accident & Indemnity Co., 86 F.3d 93 (7th Cir. 1996) (excess judgment recovery depends on whether judgment consequentially flowed from insurers breach)
Stockdale v. Jamison, 416 Mich. 217, 330 N.W.2d 389 (Mich. 1982) (breach of duty to defend creates contractual liability for foreseeable damages without regard to insurer's good faith)
Allstate Ins. Co. v. Miller, 125 Nev. 300, 212 P.3d 318 (Nev. 2009) (recognizing separate duties to defend and indemnify)