Nevada Property Definitions and Contract Protections

Introduction

Nevada's insurance law sorts insurance into named kinds. It also adds a few protections that apply to property policies. A statute is a written law passed by the Legislature. NRS (Nevada Revised Statutes) is Nevada's collection of those laws.

This lesson covers two definitions. The first tells you when insurance counts as "marine and transportation" insurance. The second tells you what counts as "property insurance." After that, you'll learn four rules from chapter 691A, the part of the NRS about property insurance.

The practical skill is reading a situation and asking the question that particular law asks. Each definition and each rule asks a different question.

What you'll be able to do

• Decide whether a situation fits Nevada's definition of marine and transportation insurance, and whether it also fits the narrower "wet marine" part.
• Apply Nevada's definition of property insurance, including the two things it leaves out.
• State which contract rules apply to property policies on Nevada property, and who may write regulations for chapter 691A.
• Recognize when an insurer must offer replacement-value coverage for a mobile home, and check whether a lender's insurance demand goes beyond Nevada's limit.
• Explain what Nevada's wildfire rule allows insurers to do, and what it does not do by itself.

Before you start

These lessons help but aren't required:

• Inland marine: match valuable or mobile property to the right floater. A floater is coverage that follows movable belongings wherever they go.
• Mobile homes, boats and farms: separate the property interests
• Insurers: identity, domicile, authority and transactions

Two definitions answer two different questions

Start with the big picture:

• Marine and transportation insurance asks: Is this property, or this responsibility, tied to transportation? Or is it one of a few items the law names directly?
• Property insurance asks: Is this insurance protecting property, or someone's financial stake in property, against loss or damage?

The word "marine" is misleading. In Nevada's definition it is not limited to water. It also covers land and air transportation, and it names some items that don't need to move at all.

Some things fit the wording of both definitions. Jewelry, for example, is personal property, and the marine definition also names it directly. So don't treat these as a strict "one or the other" sort. Your job is to recognize what each definition reaches.

Marine and transportation insurance: property in transit, plus a few named items

Under NRS 681A.050, marine and transportation insurance covers these groups.

1. Property exposed to transportation risks. This includes vessels, aircraft, vehicles, goods, cargo, money and valuable papers. They count when they face the risks of travel, on or under water, on land or in the air. The coverage continues through these stages:

• while goods are packed, crated or otherwise prepared for shipping
• while they wait to be shipped
• during delays and storage along the way
• during transshipment (moving goods from one carrier to another mid-trip) or reshipment

2. Two named coverage types. The definition also expressly includes:

• marine builder's risks, which insure a vessel while it is being built
• all personal property floater risks

3. Precious items, moving or not. Precious stones, jewelry, gold, silver and other precious metals count. It doesn't matter whether they are used in business or personally. It also doesn't matter whether they are being transported.

4. Transportation and communication structures. Bridges, tunnels, piers and docks fall in this group, with limits explained below.

Worked example: a necklace and a painting

Marisol owns a diamond necklace and an original oil painting. Both stay in her home. Her pronouns are she/her.

• The necklace fits the marine and transportation definition even while it sits in a drawer. Jewelry is named directly, and transit doesn't matter for jewelry.
• The painting is not on the list of precious items. While it simply hangs at home, nothing ties it to transportation.

Now change one fact: Marisol ships the painting to a gallery in Las Vegas. Insurance covering it during the trip is tied to transit risks, including packing and waiting before shipment. Insurance under a personal property floater would also fit.

The rule this example shows: precious stones and metals fit regardless of movement. Other belongings need a transportation connection or floater coverage.

Bridges, docks and the "near water" mistake

The fourth group has built-in limits.

Bridges and tunnels. Bridges, tunnels and similar transportation or communication structures generally fit the definition. Two limits apply:

• Buildings are carved out. So are their furniture, fixed contents and supplies held in storage.
• Coverage on a bridge does not fit this part if the only hazards covered are fire, tornado, sprinkler leakage, hail, explosion, earthquake, riot or civil commotion.

Piers, wharves, docks and slips. These fit, but without the risks of that same list of hazards.

Other aids to navigation. Dry docks and marine railways fit against all risks.

Example: a bridge insured against a broad range of risks fits this part. Change one fact, so the bridge's policy covers only fire and hail. Now it falls outside this part, because those named hazards are the only ones covered.

The tempting mistake is thinking that anything near water is marine. A restaurant on a lakeshore is still a building. Being close to water does not make its insurance marine and transportation insurance.

When responsibility to others counts

The marine definition also reaches some liability, meaning responsibility for harm done to others.

It includes liability for injury to people or damage to property that comes from building, repairing, operating, maintaining or using the thing that marine or transportation insurance covers. It leaves out three things:

• life insurance
• surety bonds
• insurance for bodily injury that comes from owning, maintaining or using automobiles

It also includes marine protection and indemnity insurance, often shortened to P&I. In plain terms, P&I protects a vessel's owner or operator against costs and legal responsibility from owning, running, chartering, maintaining, repairing or building a vessel used on the ocean or inland waterways. Covered items include another person's injury, illness or death, and damage to another person's property.

Example: a river tour boat operator faces a claim from a passenger who was hurt on board. Coverage for that responsibility fits P&I.

Consider this situation: a jewelry store keeps rings in a locked display case and never ships them. A coworker says the store's coverage on the rings can't be marine and transportation insurance because nothing is moving. Is the coworker right?

Wet marine and transportation: the vessel-and-voyage slice

Nevada's insurance Code also sets aside a narrower part of marine and transportation insurance. It calls this part wet marine and transportation insurance. It includes only four things:

1. Vessels and hulls. This means insurance on boats and ships and their hulls (the body of the vessel), and on interests in them.
2. Three named marine coverages. These are marine builder's risks, marine war risks and P&I.
3. Freight and disbursements. This means shipping charges and related outlays tied to a subject in this list.
4. Personal property in certain shipments. The goods must be moving in one of these ways: - being exported from or imported into a country - moving coastwise (along a coast between ports) - moving on inland waters

For these shipments, coverage includes land, water and air legs from the starting point to the final destination. It also includes preparation, waiting, delays and storage along the way.

Worked example: same goods, different trip

A Reno shop imports glassware from overseas. The glassware crosses the ocean by ship, then travels by truck to the shop's warehouse. It sits in a port warehouse for a week waiting for the truck.

This shipment fits wet marine and transportation. It is an importation, and the truck leg and the storage are part of the trip from origin to final destination. The trip does not have to be entirely on water.

Change one fact: the glassware is made in Las Vegas and trucked to Reno. The trip is still transportation on land, so it fits the broad marine and transportation definition. It is not an import or export, and it isn't moving coastwise or on inland waters. So it does not fit the wet marine part.

Here are three items to sort:

• (a) a fishing boat's hull
• (b) a gold watch kept at home
• (c) a domestic truck shipment of furniture

Which fit wet marine and transportation?

Property insurance: protecting property and people's stakes in it

Under NRS 681A.060, property insurance is insurance on any kind of real or personal property, and on any interest in that property. It protects against loss or damage from any cause. It also covers loss that follows from that damage.

Here is what each term means in plain English:

• Real property: land and things permanently attached to it, such as a house.
• Personal property: movable belongings, such as furniture or tools.
• Interest in property: someone's financial stake in it. An owner has an interest. So does a lender whose loan is backed by the property.
• Loss that follows from the damage: the definition reaches the follow-on financial loss, not only the physical damage. For example, a landlord may lose rent because a fire made the apartment unlivable.

The definition leaves out two things:

1. Noncontractual legal liability for the loss. This is responsibility the law places on someone for causing the damage, as opposed to responsibility they agreed to in a contract. Suppose a contractor's welding torch burns a client's garage. The contractor's responsibility to the client is outside the property insurance definition. The garage owner's own coverage on the garage is inside it.
2. Title insurance. This is insurance about problems with legal ownership of real estate. Nevada defines it separately.

Compare this with the marine definition. The property insurance definition carves out this kind of legal liability. The marine definition expressly brings some liability in, such as P&I. That difference helps you tell the two apart.

A category is not a coverage promise

"Any cause" describes what kind of insurance can belong in this category. It does not mean every property policy pays for every cause.

Example: suppose a homeowners policy excludes flood. Excluding something means policy wording removes it from coverage. The policy is still property insurance under Nevada's definition, and a flood loss can still be unpaid under that policy. To learn what a specific policy pays, you read that policy. Read a loss scenario: peril, hazard and cause covers how to trace a loss to its cause.

Consider this situation: Theo's policy covers his rental duplex against fire. After a fire, Theo loses three months of rent while repairs happen. A neighbor's home was also damaged, and the neighbor sues Theo, claiming Theo's faulty wiring caused the fire. Which parts of this situation fall within Nevada's property insurance definition? Theo's pronouns are he/him.

Property contracts in Nevada: which rules apply

NRS 691A.010 sets the starting rule. Every property insurance contract covering property located in Nevada is subject to two sets of rules:

• the applicable rules in chapter 687B, the NRS chapter on insurance contracts
• other applicable parts of Nevada's insurance Code

The trigger is where the insured property is located. If an insurer based in another state covers a Las Vegas warehouse, it is covering property located in Nevada, so these rules reach that contract.

NRS 691A.040 lets Nevada's Commissioner of Insurance adopt regulations to carry out chapter 691A. The Commissioner is the state official who oversees insurance. Regulations are detailed rules issued by the Commissioner's office. See Nevada's Commissioner: authority, examinations and hearings.

Mobile-home replacement value: paying for a new home, not the old one's worth

NRS 691A.020 creates a duty to offer a coverage option. The duty applies when all of these are true:

• An insurer provides a personal lines property policy, meaning coverage bought for personal or household use rather than for a business.
• The policy covers a manufactured home or mobile home in Nevada. A manufactured home is a factory-built home. Nevada takes the exact definition from another chapter of the NRS.
• The home was manufactured within the immediately preceding 15 years.

When those conditions are met, the insurer must offer the insured an option to buy coverage that pays replacement value if the home is a total loss. The offer is made on a form the Commissioner has approved. It comes in addition to any other insurance.

The option covers three things:

• the replacement value of the home
• reasonable costs to transport and install the replacement home
• reasonable costs of debris removal

Replacement value is the cost to repair, replace or rebuild the home with new materials of similar kind and quality. Nothing is subtracted for depreciation, which is the loss of value from age and wear. Replacement value does not include the value of the land.

Worked example: the replacement measure

Rae owns a 9-year-old mobile home on a lot Rae also owns in Nevada. Rae's pronouns are they/them.

Policy assumptions for this example:

• Rae bought the replacement-value option.
• A covered fire destroys the home, which counts as a total loss.
• The policy limit is high enough to cover the full amount.
• There is no deductible.
• All costs are reasonable.

Figures:

Replacement-value measure: $98,000 + $7,500 + $2,500 = $108,000.

Two tempting mistakes:

• Using $52,000. That figure subtracts depreciation, which replacement value does not do.
• Adding the $45,000 lot. Land is not part of replacement value, and the lot wasn't destroyed.

For more on these measures, see Value damaged property correctly and Calculate deductibles, limits and coinsurance.

Facts that change the answer

• Age. If Rae's home were 20 years old, it would be outside the 15-year window. This section would not require the offer.
• Lender-placed policy. If a creditor or lender placed the policy on the home, the section does not apply.
• Declined option. The insurer must offer the option, but the option is not automatically included. If Rae had declined it, this section would not give Rae replacement-value coverage.
• Price. The section never requires an insurer to offer mobile-home coverage at a premium that is not fair and adequate.

Consider this situation: an insurer sells a personal policy on a 6-year-old Nevada mobile home. The insurer doesn't mention any replacement-value option, saying "our standard policy already pays something on a total loss." Does that meet the rule?

Lender demands: a cap on how much coverage a lender can require

When a loan is secured by real property, the lender can look to the real estate if the loan isn't repaid. Typical examples are a mortgage and a deed of trust, which is a document that pledges real estate as security for a loan.

NRS 691A.030 limits what that lender may demand. A lender may not require the borrower to insure improvements for more than their reasonable replacement value. This applies both when the borrower first gets the loan and while the borrower keeps it.

An improvement is a fixture, building or other structure attached to the land and intended as a permanent addition. The rule uses broad terms for both sides:

• Lender includes a mortgagee, a beneficiary of a deed of trust, or another creditor holding such an instrument.
• Borrower includes a mortgagor, a person who grants a deed of trust, or another debtor.

Worked example: the land isn't an improvement

Dana buys a Henderson home for $620,000, which includes the land. The reasonable replacement value of the house and its attached structures is $410,000. Dana's loan is $500,000. Dana's pronouns are they/them.

Dana's lender says Dana must insure the dwelling for $620,000. Check the demand against the rule:

1. Identify the improvements: the house and its attached structures. The land is not an improvement.
2. Find their reasonable replacement value: $410,000.
3. Compare: $620,000 is more than $410,000. The lender cannot require it.

Change one fact: the lender instead demands coverage equal to the $500,000 loan. That still exceeds $410,000, so the lender still cannot require it. The cap follows the improvements' replacement value, not the purchase price and not the loan balance.

The lender may require coverage up to $410,000 for the improvements.

What this rule doesn't do

• It limits what a lender may require. It doesn't address what a borrower chooses to buy on their own.
• It is not a promise about any claim payment. What a policy pays after a loss depends on the policy's terms.

Consider this situation: a lender requires a borrower to insure a home's improvements for $300,000. The improvements' reasonable replacement value is $340,000. Does this violate NRS 691A.030?

Wildfire: insurers may exclude it or sell it separately

A peril is a cause of loss, such as fire or hail. NRS 691A.035 gives insurers several permissions about one peril, wildfire:

• Exclude wildfire. An insurer issuing a property policy may leave wildfire out of that policy's coverage.
• Sell wildfire-only coverage. An insurer may issue a property policy that covers only wildfire. It can be sold on its own, or in coordination with a policy that excludes wildfire. This permission is subject to Nevada's other applicable insurance laws.
• Use a different definition. An insurer may use a definition of "wildfire" that differs from the statute's, but only if the Commissioner has approved that variation.

The statute's default definition

Unless an approved variation applies, a wildfire is a fire that meets all four of these conditions:

1. It is unplanned.
2. It is uncontrolled.
3. It burns in an area of combustible vegetation, meaning brush, grass or trees that can burn.
4. It started outside any residential or commercial property.

Worked example: where the fire started

Lightning ignites brush on a hillside outside town, and the fire spreads into a neighborhood. For this example, assume the ignition point on the hillside is not on or within any residential or commercial property. Being outside town doesn't settle that question by itself; the statute asks where the fire started relative to residential or commercial property. Check the conditions:

• unplanned: yes
• uncontrolled: yes
• in burnable vegetation: yes
• started outside any home or business property: yes

It fits the default definition.

Change one fact: a fire starts in a home's kitchen and spreads to the house next door. It began inside residential property, so it does not meet the default definition.

Whether that kitchen fire is covered depends on the policy's other terms. The wildfire rule concerns wildfire only.

Permission is not an automatic exclusion

The statute allows insurers to exclude wildfire. It does not write that exclusion into every Nevada policy. To know whether a particular policy excludes wildfire, and which definition it uses, read that policy.

This lesson does not cover how a wildfire-only policy is coordinated with another policy. The statute allows that arrangement without describing a procedure for it.

Consider this situation: a Carson City homeowner hears that "Nevada law now excludes wildfire from home insurance." Their policy says nothing about wildfire. What's wrong with the claim they heard, and what should they check?

Compare the easily confused ideas

• Marine and transportation vs. wet marine. The broad definition asks whether something is tied to transportation on water, land or air, or is one of the named items. The wet subset asks whether it is a vessel, a named marine coverage, or goods being imported, exported, or moved coastwise or on inland waters.
• Marine and transportation vs. property insurance. The marine definition brings in certain liability, such as P&I. The property insurance definition leaves out noncontractual legal liability for the loss.
• Category vs. coverage. A definition tells you what kind of insurance something is. The policy tells you what it pays.
• Offer vs. automatic coverage. For a qualifying mobile home, the insurer must offer the replacement option. The insured decides whether to buy it.
• Replacement value vs. depreciated value. Replacement value uses new, similar materials with nothing subtracted for age. A depreciated figure subtracts for age and wear.
• Lender requirement vs. borrower choice. NRS 691A.030 caps what a lender may require. It says nothing about what a borrower chooses on their own.
• Exclusion permission vs. exclusion in fact. NRS 691A.035 allows a wildfire exclusion. Only the policy wording shows whether one exists.

Practice on your own

1. A company ships machine parts from Mexico into Nevada by rail, then by truck to a Sparks factory. Before the rail leg, the parts sit crated at the Mexican plant waiting for pickup. Does insurance on these parts fit (a) marine and transportation insurance, and (b) wet marine and transportation insurance?

2. A homeowner's policy covers fire, hail and windstorm damage to the house and contents, plus additional living costs after a covered loss. Does this fit Nevada's property insurance definition? Would adding coverage for injuries to guests change anything?

3. A lender has a $350,000 loan secured by a Reno home. It placed its own insurance on a 12-year-old mobile home that serves as other collateral for the borrower. The borrower asks why they were never offered the replacement-value option. Does NRS 691A.020 require the offer here?

4. A policy defines wildfire using a definition the Commissioner has not approved, and that definition differs from the statute's. Under NRS 691A.035, is the insurer allowed to use that definition?

5. A property policy covers a storage building in Elko. The insurer is based in another state. Which contract rules does NRS 691A.010 make applicable?

What to remember

• Marine and transportation insurance covers property tied to transportation on water, land or air, including preparation, waiting and incidental storage. It also includes floaters, marine builder's risks, and precious stones and metals whether moving or not.
• Structures are limited. Bridges and tunnels fit unless only the listed hazards are covered, and buildings are carved out. Docks and piers fit without those hazards. Being near water doesn't make something marine.
• Wet marine is the narrower slice: vessels and hulls, marine builder's and war risks, P&I, related freight and disbursements, and goods being imported, exported, or moved coastwise or on inland waters. Those shipments include land and air legs.
• Property insurance protects real and personal property, and interests in it, against loss from any cause, including loss that follows from the damage. It leaves out noncontractual legal liability and title insurance. A category is not a promise of coverage.
• Chapter 691A:
• Property contracts on Nevada property follow the applicable rules in chapter 687B and the rest of the Code, and the Commissioner may write regulations.
• Qualifying personal mobile-home policies must offer a replacement-value option: new materials, no depreciation, no land, plus reasonable transport, installation and debris removal. This doesn't apply to lender-placed policies.
• Lenders can't require insurance on improvements above their reasonable replacement value.
• Insurers may exclude wildfire or sell wildfire-only coverage. Read the actual policy.