Century Surety Company v. Andrew

Michael Vasquez drove a truck for personal use and for his mobile auto-detailing business, Blue Streak Auto Detailing, LLC (Blue Streak) (plaintiff). Vasquez struck Ryan Pretner (plaintiff), causing significant brain injuries. Vasquez had $100,000 in personal-automobile-liability coverage from Progressive Casualty Insurance Company (Progressive), and Blue Streak had $1 million in commercial-liability coverage from Century Surety Company (Century) (defendant). Century declined to settle the claim within the policy limit. Pretner and his legal guardian, Dana Andrew (collectively, Pretner) (plaintiff) sued Vasquez and Blue Streak in state court, alleging Vasquez was using the truck for business purposes. Century declined to defend Vasquez because it concluded Vasquez was driving for personal purposes. Vasquez and Blue Streak opted to default and notified Century, which still maintained there was no coverage. Vasquez and Blue Streak then settled with Pretner, who agreed to not execute any judgment against Vasquez and Blue Streak. Blue Streak assigned Pretner its rights against Century. Progressive paid $100,000. Following a hearing, a default judgment was entered against Vasquez and Blue Streak for $18 million, along with a factual finding that Vasquez was working at the time of the accident. Blue Streak incurred no defense costs. Pretner, as an assignee of Blue Streak, sued Century for breach of contract, breach of the implied covenant of good faith and fair dealing, and unfair claims practices. Century removed to federal court, which found—despite no bad faith—a breach of the duty to defend entitled Blue Streak to recover consequential damages exceeding the $1 million policy limit because the default judgment was reasonably foreseeable. The federal court stayed the proceedings and certified a question to the Nevada Supreme Court.