The Nevada Supreme Court addressed the scope of an insurer's duty to defend under the implied covenant of good faith and fair dealing in Allstate Insurance Co. v. Miller, 125 Nev. Adv. Op. No. 28 (July 30, 2009).
The opinion considered when an insurer has a duty to inform its insured about settlement opportunities.
The Court held that an insurer's duty to defend includes a duty to "adequately inform the insured of settlement offers," including reasonable offers that exceed policy limits. An insured's failure to so inform its insured can be used as a factor in bad faith claims. The failure to inform can also serve as a proximate cause of damages to the insured.
See the entire opinion here