A $375,000 Reserve Does Not Equate to a Valuation Confession: Nevada Federal Court Tosses UIM Bad-Faith Claims in Damian v. American National[1]

Introduction

Bad-faith claims frequently arise when an insured believes an insurer undervalued a claim or failed to pay benefits quickly enough. Put succinctly, the Plaintiff will often argue the carrier knew the claim was worth more than it offered, and the proof is in the file.

However, Nevada Federal jurisprudence imposes a demanding standard for proving insurance bad faith. These tests go beyond the notice pleading of State Court. To prevail, an insured must do more than show that a claim was denied or undervalued; rather, the insured must demonstrate that the insurer acted unreasonably and with actual or implied awareness that it lacked a reasonable basis for its position.[1]

In a recent decision, Magistrate Judge Nancy J. Koppe of the United States District Court for the District of Nevada granted summary judgment without a hearing in favor of American National Property and Casualty Company on claims for insurance bad faith, violations of Nevada’s Unfair Claims Practices Act, and punitive damages arising out of an underinsured motorist (“UIM”) claim.[2]

In Damian v. American National Property and Casualty Company, Magistrate Judge Koppeheld that a dispute over claim value, even when substantial, does not establish bad faith absent evidence demonstrating that the insurer knowingly acted without a reasonable basis.[3] Indeed, valuation disputes are generally breach of contract claims rather than as Unfair Claims types of actions.

This decision reinforces Nevada law expressed in Guaranty National Insurance Co. v. Potter: bad faith requires not just an unreasonable position, but either actual or implied knowledge that the insurer has no reasonable basis to maintain their position. The gap between reserves, valuations, and offers is the texture of ordinary claims adjustment, rather than evidence of a mens rea or intent as required by unfair claims acts.

The Court’s Decision

The Damian action arose from a UIM claim submitted by plaintiff Andres Damian following an automobile accident. The plaintiff alleged causes of action for breach of contract, breach of the implied covenant of good faith and fair dealing, violation of Nevada’s Unfair Claims Practices Act, and negligence based on the insurer’s handling of his claim. He also sought punitive damages.

The insurer moved for partial summary judgment on the bad-faith, statutory, and punitive damages claims. In support of those claims, the plaintiff argued that:

The insurer internally valued the claim significantly higher than its settlement offers (at 2.5x to the settlement offer);
The insurer failed to reconcile competing medical opinions regarding pre and post medical examinations;
The insurer delayed 18 months in obtaining an independent medical examination, thus failing to provide a timely investigation; and
The insurer relied too heavily on its retained medical expert while disregarding the opinions of treating providers.[4]
He anchored the case to Igartua v. Mid-Century Insurance Co., where the court held that summary judgment is not warranted “simply because the question of liability was ‘fairly debatable.”[5]

The court rejected those arguments.

The record demonstrated that the insurer responded to the claim, adjusted its evaluation after receiving additional medical information, and obtained an independent medical examination after the plaintiff presented more than $100,000 in past medical specials and more than $600,000 in claimed future medical expenses. The court found such conduct consistent with a reasonable investigation and evaluation process.[6]

The plaintiff also relied heavily on evidence that the insurer maintained a $375,000 reserve and argued that the reserve reflected the insurer’s true valuation of the claim. Plaintiff repeatedly characterized the reserve as a “confession” of the claim’s value.

The court disagreed, noting that reserves serve multiple adjustment purposes and do not necessarily reflect what an insurer believes must be paid to resolve a claim. Further, the court observed that the plaintiff demanded the $1 million policy limits, making the alleged reserve figure materially different from the settlement position maintained by the plaintiff throughout the claim.[7]

Why the Bad-Faith Claim Failed

The court emphasized Nevada’s longstanding bad-faith standard. To prevail, an insured must show not only that the insurer acted unreasonably, but also that it knew or recklessly disregarded the absence of a reasonable basis for its conduct. Mere hind sighted disagreement with a claim valuation is insufficient.

Applying that standard, the court concluded that the plaintiff failed to produce evidence from which a reasonable jury could find:

The insurer acted unreasonably;
The insurer knew it lacked a reasonable basis for its position;
The insurer recklessly disregarded the absence of a reasonable basis; or
The claim evaluation process was unsupported by legitimate investigation and expert review.[8]

The court emphasized the following In defeating the bad faith claims: (1) prompt initial response; (2) iterative re-evaluation as records arrived; (3) communication with counsel; (4)expert review; and (5) ongoing settlement efforts. This conduct demonstrated to the court that the carrier actively investigated the claim rather than stonewalling or stalling. [9]

The Court Also Dismissed the Nevada UCPA Claims

The plaintiff alleged several violations of Nevada’s Unfair Claims Practices Act (UCPA), including failures to conduct a prompt investigation, effectuate a fair settlement, and provide adequate explanations regarding claim handling. Chapter 686A of the UCPA mirrors Section 5 of the Federal Trade Commission (FTC) Act,[10] which prohibits unfair or deceptive acts or practices in commerce. Importantly, the UCPA permits a private right of action, to sue an insurance company directly for damages based on claims handling activities and categories contemplated by the statute.

Judge Koppe also found the evidence insufficient to support any of the statutory claims. The insurer investigated the claim, communicated with counsel, reviewed records, obtained expert opinions, and made settlement efforts throughout the adjustment process.[11] As a result, the court granted summary judgment on all statutory unfair claims practices allegations.

Punitive Damages Were Also Barred

The court similarly rejected the plaintiff’s request for punitive damages.

Under Nevada law, punitive damages require clear and convincing evidence of oppression, fraud, or malice.[12] The court found no evidence approaching that level of misconduct. Instead, the record established that the insurer reviewed medical records, considered expert opinions, conducted an independent medical examination, and reevaluated its position as new information emerged. Those facts defeated any plausible basis for punitive damages.[13]

Legal Takeaways

The reserve-versus-value distinction is now squarely usable. Plaintiff’s counsel frequently argue that an insurer’s refusal to offer its full reserve is itself evidence of bad faith. Damian supplies a direct answer because that court held that a reserve covers “all aspects of adjusting” a claim.[14] This language supports the position that a reserve figure is not an admission of liability or value.
Reasonableness can be resolved as a matter of law. Under Allstate v. Miller, a court may decide whether an insurer’s conduct was reasonable rather than sending the question to a jury. Damian is a reminder that a well-documented claim file is not only trial evidence but may be a foundation for ending a bad-faith claim at summary judgment. For this reason, maintaining a robust claims handling timeline parallel to a medical chronology is highly recommended.
“Fairly debatable” is a floor, not a shield. The court accepted the plaintiff’s argument that summary judgment is not warranted merely because liability was “fairly debatable.” What defeated summary judgment in the Damian action was affirmative evidence the insurer actually investigated and actively managed the claim, not an after-the-fact characterization of the dispute as a close call. In other words, the “fairly debatable” standard sets a minimum the insurer must affirmatively prove it met; it is not a shield that attaches automatically whenever the underlying liability question was arguable.

Practical Guidance for Insurers

To some extent, the Damian opinion is less as a pronouncement of new law or differing legal interpretation. Instead, it explains the importance of the insurer’s claim-handling record. In the end, the insurer’s contemporaneous documentation and ongoing evaluation of the claim carried the day.

Four concrete lessons stand out:

Claim Files Should Reflect Changes in Evaluation . American National prevailed because its offer demonstrably rose as the medical record grew. Settlement posture visibly tracked new information documented in the claim file. This was likely the most persuasive factor the Court relied on in dismissing the bad-faith claim.

While Nevada does not have statutory or case law guidelines advising as to how often a claims handler must ‘touch the file’ (such as California), we recommend a monthly review may demonstrate that the insurer is sufficiently monitoring or ‘working’ the file.

Reserves will Often Become Litigation Exhibits. Nevada courts (in both federal and state level) frequently permit discovery of reserve information in first-party bad-faith cases where the insurer’s evaluation of the claim is directly at issue.[15]

Damian built his case around the $375,000 reserve not being offered as a settlement. The court recognized the consistent documentation and that the reserve reflects the full cost of adjusting the claim. This includes expenses and should not be considered the number the carrier believes it owes. Even so, jurors may be tempted to assume a reserve reflects an insurer’s assessment of settlement value.

Let the Demand Define the Stakes. The plaintiff maintained an all-or-nothing demand for the $1 million limit throughout the case. This is precisely what made his reserve argument collapse. If the record provides the insured will accept only policy limits, the claims handler should note the same. In this case, it reframed every intermediate figure as a concession the insured would have rejected anyway.

Expert Opinions are a Foundation. The retained expert survived scrutiny because he relied on other providers’ testing and the insured’s own statements. An IME that rests on the broader record is far harder to recast as a results-driven hired gun.

To be clear, no matter the result, plaintiff’s counsel will frequently characterize the insurer’s expert as having reached a predetermined conclusion when it comes to the First-Party litigation. That reality makes it critical for claims handlers to obtain expert opinions supporting discrete medical, causation, and damages determinations.

Conclusion

The decision in Damian v. American National Property and Casualty Company serves as a reminder that Nevada bad-faith claims require far more than evidence of a valuation disagreement. The federal court concluded that the insurer’s investigation, expert review, ongoing analysis, and settlement efforts provided a reasonable basis for its claim evaluation and defeated both common-law bad-faith and statutory unfair claims practices theories.

For insurers defending UIM claims, the opinion underscores an important principle: when a carrier can demonstrate a thorough investigation, reliance on competent information, and ongoing reassessment of the claim as new evidence develops, Nevada federal courts remain reluctant to convert an ordinary valuation or breach of contract dispute into a bad-faith case.

[1] Andres Damian v. American National Property & Casualty Co., 2026 WL 2838403 (D. Nevada — Sept. 21, 2026) Case No. 2:25-cv-00964-NJK.

[1] The axiomatic case law is set forth in the following matter. “an actual or implied awareness of the absence of a reasonable basis for denying benefits of the [insurance] policy.” Allstate Ins. Co. v. Miller, 212 P.3d 318, 324 (Nev. 2009) (internal citation omitted). This Allstate case also provides the factors to consider when demands come in and the type of information the insurer must keep their insured apprised of.

[2] The baseline and likely oldest case law being that “Bad faith is established where the insurer acts unreasonably and with knowledge that there is no reasonable basis for its conduct.” Guaranty Nat. Ins. Co. v. Potter, 912 P.2d 276, 272 (1996)

[3] An insurer does not act in bad faith merely because it disagrees with the claimant’s estimation of his injuries or delays paying out benefits until it receives relevant documents or expert opinions. See Amini v. CSAA Gen. Ins. Co., 2016 WL 6573949, at *4 (D. Nev. Nov. 4, 2016)

[4] Damian at p.4.

[5] Igartua v. Mid-Century Ins. Co., 262 F. Supp. 3d 1050, 1053-55 (D. Nev. 2017);

[6] Damian at p.4-5.

[7] Id. The Court, in its footnotes suggested the Plaintiffs were unable to present competent evidence to demonstrate that a reserve, meant to cover settlement and expenses, constitutes the fair value of a case.

[8] Damian at 5.

[9] Id at 5-6.

[10] 15 U.S.C. § 45.

[11] Id at 6.

[12] Bongiovi v. Sullivan, 138 P.3d 433, 450–51 (Nev. 2006) (quoting NRS 42.005(1))

[13] The punitive damages also cannot stand alone in the Nevada bad faith cases, when the breach of contract claims are the sole surviving cause of action.

[14] Damian p. 5, FN 3.

[15] The scope of discovery may be limited and insurers may still assert work-product objections as to reserve-related materials created in anticipation of litigation. In our experience, the more consequential discovery battle is not the reserve number itself but the documents explaining why the reserve was set or changed, the approval process, and whether the adjuster believed exposure exceeded offers or whether management overrode or ignored claim recommendations.

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