Post‑Offer Interest Applies to Punitive Damages; “Genuine Dispute” Folded into Nevada Bad‑Faith Standard and May Defeat Refusal‑to‑Defend Claims; Unfair Insurance Practices Liability Limited to Insurers — Olson v. Mid‑Century Ins. Co.

Introduction

In Olson v. Mid‑Century Ins. Co., No. 86892 (Nev. Sept. 4, 2025), the Nevada Supreme Court addressed a multi-issue insurance and civil procedure appeal arising from an insurer’s refusal to defend and indemnify its insured after a replacement-vehicle notice dispute. The case sits at the intersection of insurance bad faith, statutory unfair claims practices, damages, and Nevada’s offer-of-judgment regime.

The underlying tort suit yielded a default judgment against the insured, Elizabeth McFetridge, after her insurer(s)—Mid‑Century Insurance Company (MIC) and related Farmers entities—declined coverage and refused to defend on the theory that McFetridge had not notified them of a replacement vehicle after an earlier crash. Tort plaintiff Layne Olson then obtained an assignment of McFetridge’s rights and sued the Farmers entities for breach of contract, bad faith, unfair insurance practices under NRS 686A.310, and other claims. A jury found for Olson on breach of contract and unfair practices, but not on bad faith, and assessed punitive damages against three Farmers entities. It also found McFetridge failed to mitigate her damages, capping compensatory damages at $142,500 despite an accrued default judgment exceeding $4.27 million.

On appeal and cross-appeal, the Nevada Supreme Court:

• Affirmed the jury’s mitigation finding and most trial management rulings;
• Clarified how Nevada’s “genuine dispute” concept functions within bad faith, and allowed its application to refusal-to-defend claims where the insurer reasonably believes no defense is owed;
• Announced a significant new rule: post-offer interest under NRCP 68 applies to the entire judgment, including punitive damages;
• Held that Farmers Group, Inc. (FGI), as an attorney-in-fact/manager, is not an “insurer” and thus not subject to private liability under NRS 686A.310; and
• Struck the punitive award against FGI, while sustaining punitive awards against MIC and FIE and the district court’s application of Nevada’s punitive damages cap.

The Court affirmed in part, reversed in part, and remanded for the district court to award post-offer interest on the punitive component and to strike punitive damages against FGI. Three separate opinions were filed: a concurrence/dissent by Justice Pickering (disagreeing with post-offer interest on punitive damages), a concurrence/dissent by Justice Lee (joined by Justice Cadish) on the bad-faith instruction, and a separate dissent by Justice Cadish on mitigation.

Summary of the Judgment

• Mitigation: The Court upheld the jury’s finding that the insured failed to mitigate and that $42,500 in defense expenditures would have avoided all but $100,000 of the default judgment. The Court rejected arguments that Farmers had to prove the insured could afford the mitigation spend; it was enough to show the insured failed to take reasonable steps once on notice.
• New trial motions: Denied. The jury was sufficiently and fairly instructed overall; alleged attorney misconduct was not preserved and did not amount to plain error; discovery and expert rulings were not abuses of discretion.
• Bad faith/genuine dispute: The Court held that “genuine dispute” is not a freestanding doctrine but is subsumed in Nevada’s reasonableness standard for bad faith. A reasonable, good-faith dispute may defeat bad faith—including refusal-to-defend—claims. The panel found no reversible instructional error in context, though Justice Lee (joined by Justice Cadish) would have reversed for failure to distinguish the duty to defend from indemnify.
• Offer of judgment interest: The Court established that post-offer interest under NRCP 68 applies to the entire judgment, including punitive damages, distinguishing prejudgment interest under NRS 17.130. Justice Pickering dissented on this point, citing Ramada Inns and California’s Lakin decision.
• NRS 686A.310 defendant status: FGI is not an “insurer” and cannot be liable for statutory unfair practices; summary judgment for FGI on that claim is affirmed.
• Punitive damages: The Court struck punitive damages against FGI but sustained $500,000 punitive awards against MIC and FIE, concluding the unfair practices verdict supported punitive damages and the cap in NRS 42.005(1)(a) was applied permissibly. The Court included prejudgment interest on compensatory damages when evaluating the 3:1 cap.
• Damages math: The district court properly harmonized the special verdict answers to reach $142,500 in unavoidable compensatory damages. Farmers’ contrary reading was unreasonable.

Analysis

Precedents Cited and Their Role

• Automatic Merchandisers, Inc. v. Ward, 98 Nev. 282 (1982): Duty to mitigate is to take reasonable steps to limit damages. Guided the mitigation defense.
• Albert H. Wohlers & Co. v. Bartgis, 114 Nev. 1249 (1998), and Guaranty Nat’l Ins. Co. v. Potter, 112 Nev. 199 (1996): Bad faith requires unreasonableness and knowledge thereof. The Court locates “genuine dispute” within this standard; also uses Wohlers to reaffirm that NRS 686A.310 applies only to “insurers.”
• Dillard Dep’t Stores, Inc. v. Beckwith, 115 Nev. 372 (1999): Mitigation questions are for the jury when properly instructed. Supports deference to the jury’s mitigation finding (Justice Cadish would distinguish).
• Horne Indem. Co. v. Lane Powell Moss & Miller, 43 F.3d 1322 (9th Cir. 1995): Duty to mitigate arises when the party is aware of facts making mitigation necessary. Used to uphold the notice finding.
• D & D Tire, Inc. v. Ouellette, 131 Nev. 462 (2015); Cook v. Sunrise Hosp., 124 Nev. 997 (2008): Standards for instructional errors; reversal only if prejudicial and outcome likely different.
• Lioce v. Cohen, 124 Nev. 1 (2008): Attorney misconduct review and plain error standards.
• United Nat’l Ins. Co. v. Frontier Ins. Co., 120 Nev. 678 (2004) and Gray v. Zurich Ins. Co., 419 P.2d 168 (Cal. 1966): Duty to defend arises with potential for coverage; broader than indemnity. Framed Justice Lee’s dissent on instruction precision.
• Lunsford v. Am. Guar. Liab. Ins. Co., 18 F.3d 653 (9th Cir. 1994): A reasonable belief in no duty to defend can defeat bad-faith refusal to defend; cited to support applying the reasonableness construct to defense obligations.
• Uniroyal Goodrich Tire Co. v. Mercer, 111 Nev. 318 (1995); Shuette v. Beazer Homes, 121 Nev. 837 (2005): NRCP 68/NRS 17.117 post-offer interest applies to the “entire judgment” and differs from compensatory prejudgment interest; supports allowing post-offer interest beyond categories recognized in NRS 17.130. Olson extends this logic to punitive damages.
• Ramada Inns, Inc. v. Sharp, 101 Nev. 824 (1985): Prejudgment interest under NRS 17.130 does not attach to punitive damages. Distinguished in Olson as a different species of interest with a different purpose.
• Garrison v. Target Corp., 869 S.E.2d 797 (S.C. 2022): Other jurisdictions read similar offer rules to award post-offer interest on the “entire” verdict, including punitive; supportive.
• Lakin v. Watkins Associated Indus., 863 P.2d 179 (Cal. 1993): California’s offer-of-judgment interest (limited to “damages for personal injury”) does not include punitive damages. Justice Pickering leans on Lakin; the Olson majority distinguishes the Nevada rule’s text as not limited by damage type.
• Lehrer McGovern Bovis, Inc. v. Bullock Insulation, Inc., 124 Nev. 1102 (2008) and Motor Coach Indus., Inc. v. Khiabani, 137 Nev. 416 (2021): Standards for reading special verdicts and harmonizing arguably inconsistent answers; used to uphold damages calculations.
• West Virginia v. United States, 479 U.S. 305 (1987): Prejudgment interest compensates for loss of use of money; cited to include prejudgment interest in calculating the punitive cap ratio.
• Club Vista Fin. Servs. v. Eighth Judicial Dist. Ct., 128 Nev. 224 (2012); M.C. Multi‑Family Dev. v. Crestdale Assocs., 124 Nev. 901 (2008); Hallmark v. Eldridge, 124 Nev. 492 (2008): Deferential standards for discovery, evidentiary, and expert witness rulings, which were affirmed.
• Cromer v. Wilson, 126 Nev. 106 (2010); Wood v. Safeway, 121 Nev. 724 (2005): Summary judgment standards; applied to uphold denial of summary judgment where coverage was genuinely disputed.

Legal Reasoning

1) Mitigation of Damages: Ability to Pay Not Required; Reasonable Steps Are

The Court affirmed the jury’s determination that the insured failed to mitigate. Key points:

• Mitigation requires reasonable steps; the defense does not obligate the proponent to prove the plaintiff could afford a particular mitigation expense. The focus is on whether reasonable efforts were taken in light of notice and circumstances.
• Evidence that the insured took no steps to avoid default—despite notice of the lawsuit—was adequate. The jury could credit insurer evidence mailed to the insured over her contrary testimony and decide she was on notice pre-default.
• Jury instruction on the statutory duty to update the DMV with address changes (NRS 483.390) was relevant to whether the insured’s own inaction contributed to damages and did not unfairly prejudice the jury.

Separate opinions:

• Justice Cadish would have reversed the mitigation verdict because the jury found mitigation required a $42,500 defense spend, and there was no substantial evidence that such an expenditure would be “reasonable” for McFetridge to make (as opposed to pro bono or low-cost alternatives). The majority held otherwise.

2) Bad Faith and the “Genuine Dispute” Idea: Subsumed Within Reasonableness, and Can Defeat Refusal‑to‑Defend

The panel explained that Nevada’s bad-faith tort requires proof that the insurer acted unreasonably and knew it. Within that framework, a genuine, good-faith dispute over obligations (coverage or defense) is not a separate doctrine; it is a way of saying the insurer’s conduct was reasonable—thus defeating bad faith.

Application to refusal-to-defend: Although often applied to indemnity disputes, the Court accepted that a reasonable, contract-based belief that no defense is owed can defeat a claim of bad-faith refusal to defend (citing Lunsford). The challenged instruction stated generally that a genuine dispute over coverage defeats bad faith; the Court found no reversible error when read with the broader instruction set explaining defense and indemnity duties.

Separate opinions:

• Justice Lee (joined by Justice Cadish) would have reversed on bad faith: because the duty to defend is triggered by the potential for coverage and is broader than indemnity, a generic “genuine dispute over coverage” instruction risks collapsing defense into indemnity. In their view, the jury needed a distinct instruction that a genuine dispute over indemnity does not necessarily eliminate the duty to defend when potential coverage is present.

3) Offer‑of‑Judgment: Post‑Offer Interest Runs on Punitive Damages

This is the decision’s headline holding. NRCP 68(f)(1) imposes “applicable interest on the judgment from the time of the offer to the time of entry of the judgment” when an offeree rejects an offer and fails to obtain a more favorable judgment. The Court:

• Read “interest on the judgment” to mean interest on the entire judgment, relying on Uniroyal’s construction of the offer-of-judgment statute—now codified in NRS 17.117.
• Explained that post-offer interest is distinct from compensatory prejudgment interest under NRS 17.130. Its purpose is punitive/incentivizing settlement; it is not compensatory. Thus, Ramada Inns’ rule prohibiting prejudgment interest on punitive damages under NRS 17.130 does not control NRCP 68’s separate penalty interest.
• Distinguished California’s contrary result in Lakin, noting California’s statute expressly limits the penalty to “damages for personal injury,” while NRCP 68 contains no damage-type limitation.

Separate opinions:

• Justice Pickering dissented on this issue, reasoning that “post-offer” interest is still prejudgment interest and Ramada’s logic should bar attaching interest to punitive damages before judgment. She viewed awarding both punitive damages and pre-judgment penalty interest as a double penalty.

4) NRS 686A.310 Liability: Only “Insurers” Are Subject to the Private Cause of Action

Reaffirming Wohlers, the Court held that Nevada’s unfair insurance practices statute provides a private cause of action only against “insurers.” Farmers Group, Inc., an attorney-in-fact/manager (not a licensed insurer in Nevada), is therefore not a proper defendant on an NRS 686A.310 claim. California’s contrary approach to attorney-in-fact liability flows from California-specific statutory text (Cal. Ins. Code § 1281) not present in Nevada’s scheme.

5) Punitive Damages: Basis, Cap, and Defendant Scope

• Basis: Although the jury rejected common-law bad faith, it found statutory unfair insurance practices, a tort that can support punitive damages. The Court read the verdict and instructions together to conclude the punitive awards against MIC and FIE rested on that tort finding.
• FGI: Because FGI is not an insurer and the statutory unfair practices claim against it was dismissed, there was no noncontractual tort basis to support punitive damages against FGI; that punitive award was reversed.
• Cap: NRS 42.005(1)(a) caps punitive damages at three times compensatory damages (subject to exceptions not implicated). The Court approved including prejudgment interest on compensatory damages when determining the ratio, citing the compensatory function of prejudgment interest. With compensatory damages of $142,500 plus $69,690.31 prejudgment interest (total $212,190.31), each remaining $500,000 punitive award fell below 3:1.

Open question flagged by the record:

• Whether the 3:1 cap applies per defendant or in the aggregate was not decided. A footnote indicates a concession at oral argument on how to compare punitive and compensatory figures, and the Court therefore “need not address” that question. Practitioners should treat the issue as unresolved by Olson and examine district court practice carefully.

6) Damages Math and Special Verdict Harmonization

The Court endorsed the district court’s harmonization of the special verdict form, which yielded $142,500 in unavoidable damages: all but $100,000 of the $4,274,557.91 default (with interest) could have been avoided at a defense cost of $42,500, leading to $100,000 + $42,500. The Court rejected a literal reading that would have produced a negative compensatory award, emphasizing that courts must reconcile special verdict answers if reasonably possible.

7) Other Trial and Pretrial Rulings

• Discovery, expert admissibility, and alleged attorney misconduct rulings were within the district court’s discretion and did not warrant a new trial.
• Denial of summary judgment on coverage/breach was proper given genuine issues of fact, leaving breach and unfair practices for the jury.

Impact

A. Settlement Strategy and Exposure: Offers of Judgment Now Reach Punitive Awards

• Plaintiffs: Offers of judgment are more potent. If punitive liability is plausible, a rejected, reasonable offer may generate post-offer interest on the entire ultimate judgment—including punitive damages—substantially increasing exposure for defendants who guess wrong.
• Defendants: Rejection calculus must now discount the risk of post-offer interest on punitive awards. Risk managers and carriers should update offer-evaluation models, especially in cases where punitive exposure is non-frivolous (e.g., unfair insurance practices, fraud).
• Drafting: Parties may want to state on the record the date of service, the scope of the offer (global or segmented), and track the start/stop of post-offer interest to avoid later disputes.

B. Insurance Bad Faith Litigation

• Genuine dispute: Nevada continues to measure bad faith through reasonableness and insurer knowledge; a genuine dispute is not a separate defense but can defeat both indemnity and defense-based bad-faith theories where the insurer’s position is reasonably grounded in the policy and facts.
• Duty to defend vs. indemnify: The majority’s acceptance that a reasonable no-defense belief can defeat bad-faith refusal-to-defend claims will be cited by insurers; however, Justice Lee’s opinion underscores the need for careful, separate instruction on the broader defense duty. Expect litigants to propose precise, bifurcated instructions in future trials.

C. Corporate Structure of Insurers and Liability Under NRS 686A.310

• Only insurers: Olson reaffirms that the private cause of action under NRS 686A.310 targets insurers, not management companies or attorneys-in-fact. Plaintiffs must identify and sue the entities that actually qualify as “insurers” in Nevada.
• Punitive damages: Where only a non-insurer affiliate remains as a deep pocket, Olson restricts the path to punitive damages predicated on NRS 686A.310. Plaintiffs will need independent tort bases if they seek punitive damages against non-insurer affiliates.

D. Mitigation Defense in Default/No‑Defense Contexts

• Insurer defenses: Olson makes clear an insured’s inaction in the face of notice can substantially trim damages even when the insurer breached defense/coverage duties. Evidence of available steps (even if costly) can justify large offsets.
• Plaintiff counter-strategies: Build a record of efforts (legal aid, communications, payment plans) and inability to access counsel; marshal proof that “reasonable” expenditures were not feasible to challenge mitigation verdicts. Note Justice Cadish’s dissent arguing the defense must tether “reasonable” expenditures to the insured’s circumstances.

E. Punitive Damages Cap Mechanics

• Include prejudgment interest on compensatory damages in the denominator. Olson endorses this approach, modestly raising the cap threshold before a punitive reduction is required.
• Per defendant or aggregate: Unresolved. Parties should raise and preserve the question, and courts should articulate their approach in written orders.

Complex Concepts Simplified

• Offer of judgment (NRCP 68): A formal settlement proposal. If rejected, and the offeree does worse at trial, penalties apply. In Nevada, one penalty is “interest on the judgment” from offer to entry of judgment. Olson says this runs on the entire award, including punitive damages.
• Post-offer interest vs. prejudgment interest: Both accrue before final judgment. Post-offer interest (NRCP 68/NRS 17.117) is a settlement incentive/penalty and attaches to the entire judgment. Prejudgment interest (NRS 17.130) is compensatory and does not apply to punitive damages (Ramada Inns).
• Duty to defend vs. duty to indemnify: Indemnify = pay covered judgments/settlements; triggered by actual coverage. Defend = pay for the defense if there is a potential for coverage; broader and triggered earlier. An insurer can owe a defense even if indemnity ultimately is not owed.
• “Genuine dispute” in bad faith: Not a standalone doctrine in Nevada; rather, if an insurer’s position is reasonably debatable and taken in good faith, the conduct is not “unreasonable,” defeating bad faith. Olson allows this reasoning to be applied to refusal-to-defend claims as well as indemnity disputes.
• Mitigation of damages: The injured party must take reasonable steps to limit losses. The burden is on the defendant to show reasonable steps existed and were not taken, and that damages would have been less with reasonable diligence and expenditure. Olson’s majority does not require proof that the plaintiff could afford a particular expenditure; Justice Cadish disagrees.
• NRS 686A.310 (unfair insurance practices): Nevada’s private claim targets “insurers.” Management companies/attorneys-in-fact that are not licensed insurers in Nevada are not proper defendants under this statute.
• Punitive damages cap (NRS 42.005(1)(a)): Generally capped at three times compensatory damages. Olson approves including prejudgment interest on compensatory damages in the cap calculation but leaves open whether the cap is applied per defendant or in the aggregate.

Conclusion

Olson v. Mid‑Century Ins. Co. meaningfully advances Nevada law in three ways. First, it establishes that post-offer interest under NRCP 68 runs on the entire judgment—including punitive damages—significantly altering settlement dynamics in cases with potential punitive exposure. Second, it clarifies that Nevada’s “genuine dispute” concept is an expression of bad faith’s reasonableness standard and can defeat both refusal-to-indemnify and refusal-to-defend claims where the insurer’s position is reasonably grounded. Third, it confirms that the unfair insurance practices statute (NRS 686A.310) provides a private claim only against insurers, not against non-insurer affiliates or attorneys-in-fact.

The Court also provides practical guidance on mitigation of damages when an insured faces a default after a denied defense, endorses the inclusion of prejudgment interest in punitive cap calculations, and models how to harmonize special verdicts to avoid unreasonable results. While the Court’s approach drew thoughtful partial dissents on interest, mitigation, and jury instructions regarding the duty to defend, Olson furnishes a comprehensive map for trial courts and litigants navigating insurance disputes, damages, and Nevada’s powerful offer-of-judgment framework.

Going forward, litigants should refine jury instructions to clearly differentiate defense and indemnity obligations, develop a meticulous mitigation record tied to the insured’s actual circumstances, and treat offers of judgment with heightened care wherever punitive damages are in play. Finally, counsel should note the unresolved question whether NRS 42.005’s cap applies per defendant or to aggregate punitive awards and preserve this issue for appellate resolution.