Strategies, Challenges, and Answers

The Nevada Supreme Court Enforced An Oral Insurance Contract Based On A Handshake

WhitakerMany dream of living back in the day when a man’s word was his bond and a handshake was enough to seal a deal.  But even back then, was a handshake a good way to do business?  Apparently not for Mr. Whitaker and Mr. Musgrave.  Their tale is found in the reports of the Nevada Supreme Court, Truck Ins. Exch. v. Whitaker & Musgrave, 71 Nev. 1, 278 P.2d 277 (1955).

The two became partners in the livestock business.  Musgrave owned the local livestock auction in Fallon, Nevada.  Whitaker owned trucks and hauled some of Musgrave’s livestock over the road.  The two joined forces when Whitaker bought a share of the auction.

The two went to their local insurance agent looking for a plan on how to deal with insurance.  To keep the premiums down, the agent wrote two separate policies, one for the auction’s trucks that would be moving livestock around town and a second for Whitaker’s trucks that would be hauling livestock over the road.  The two told the agent that sometimes, the auction’s trucks would need to go over the road.  The agent reassured them that the auction trucks would be covered by the over-the-road policy if that ever happened.  They sealed the deal with a handshake. 

Not a good move!  One day, an auction truck was hauling hogs from Nevada to California.  There was an accident.  The cargo was lost.  When the two filed their cargo claim with Truck Insurance Exchange, the claim was denied.  There was no paperwork to back up the handshake arrangement that they had made with their insurance agent.

When Musgrave and Whitaker filed suit, Truck Insurance Exchange fought the claim.  A jury believed the insurance agent’s story.  The jury awarded the men $712.63 for the cargo loss.  Truck Insurance wasn’t satisfied.  It appealed to the Nevada Supreme Court.  The court upheld the jury’s decision.

Was the agent’s word as good as his bond?  Yessiree!  But how much did the two gentleman pay in attorney’s fees to uphold this oral insurance contract?  After five years of litigation, I’m going to guess that it was more than the price of the hogs.

The lesson to be learned is that in business, solid written contracts are a must.  That goes double when it comes to insurance.  Make sure that the policy specifically provides the needed coverage.

If you are looking for a coverage opinion, please feel free to give Mike Mills a call at 702-240-6060×114 or email him at