Powers v. United Services Automobile Ass'n

POWERS, Appellant/Cross-Respondent, WILLIAM R. v. SERVICES AUTOMOBILE UNITED ASSOCIATION COMPANY, US A A INSURANCE CASUALTY Respondents/Cross-Appellants . No. 26794 July 962 P.2d 596 Christensen, & Vegas; Raleigh, Brenske Las Hunt McGarry, & Las for Vegas, Appellant/Cross-Respondent. & Beckley, Singleton, Jemison List and Daniel Polsenberg, F. Patton, Howard, Moss, Vegas; & Vegas; Las Pearson Las Walker,

Loveder, Ana, California, Strickroth & Santa Respondents/Cross-Appellants. Reno, Jeanney, Drendel &

Bradley, for Amicus Curiae Nevada Lawyers Trial Association.

OPINION Court, Rose, theBy J.:

Retired Air boat, Force Colonel William Powers lived on his 1987, 28, the “Mikimbi.” On en April route from Texas to Mexico, through Florida the Gulf of the Mikimbi sank. On May 2, 1987, USAA, reported Powers his loss to his insurer for thirty- After years. five USAA commenced investigation, its it accused intentionally Powers of sinking 14, his own boat. On December sank, eight after months the Mikimbi USAA denied In May Powers’ claim. USAA instigated criminal charges Powers against pursuing allegedly claim, an false insurance trial, wire including fraud and mail fraud. At Powers was acquit- ted.

Powers then a civil brought against action USAA based on its conduct in A handling his claim. found that USAA acted in in failing bad faith pay breach of fiduciary Powers, relationship and had breached the insurance con- tract. The awarded special, Powers compensatory, and puni- however, tive damages; district court denied Powers’ motion judgment to amend the to include post-judgment interest on the punitive damages. appeals

Powers the denial of his motion regarding post- interest on judgment punitive damages; USAA now cross-appeals the judgment. jury’s We affirm the verdicts conclude that Powers was entitled to on the punitive interest damage award as of the date the judgment was entered.

FACTS Retired Force boat, Air Colonel William Powers lived on his 28, 1987, en route April On the afternoon the “Mikimbi.” Mexico, the Gulf of Powers fell through to Florida from Texas to the odor of smoke and Mikimbi. He awoke aboard the asleep engine room. The water entering to find water went below that an had Powers noticed exhaust hose was above his ankles. that fumes and sea water were engine from the so disconnected He attempted room. to save his engine into being pumped boat, the hose and to close a unsuccessfully trying gate to reattach thru-hull, which was frozen the open position. valve at the inhaling and confused from extremely engine felt sick Powers monoxide. He vomited a few times from fumes and carbon room finally stopped the fumes. In a panic, his exertion and the boat by cutting into hose continuing siphon water from into the coming near the thru-hull. Water was still at the valve side with the thru-hull leaning port because it was boat thru-hull, stuffed a sheet into the tempo- below sea level. Powers entering water from the boat. rarily stopping Guard for and boarded help, then called U.S. Coast Powers few At the direction of the Coast provisions. a life raft with a boat, Guard, by Richard fishing captained a commercial Underwood, After resting fishing rescued Powers. aboard boat, in an re-boarded the Mikimbi to save it. He attempt into the thru-hull had come previously that the sheet stuffed found out, rags had entered the boat. He stuffed more and more water p.m., At 6:55 Powers informed opening. approximately into under The Guard that the leak was control. Coast the Coast Powers, an water who emergency pump Guard parachuted unsuccessfully attempting minutes to retrieve the thirty spent then experienced pains. from the ocean. Powers chest pump that Powers abandon his boat. Coast Guard insisted left, to board the attempted no one Mikimbi. The After Powers water, eventually sank at 11:30 that boat continued to take on land, flew Powers where A Guard night. helicopter Coast nearby hospital. him to a When his blood was ambulance took a.m., (1) carbon presence at 12:30 showed tested (2) elevated breathing enzymes from fumes and from monoxide spent night exertion. He in the damage physical muscle due day against and left the the next hospital care unit intensive medical USAA never reviewed Powers’ records medical advice. of his claim. during investigation sank, 1987, 2, the Mikimbi days four after Powers May On USAA, thirty-five years. for He his insurer his loss reported whom he described the incident did that the woman to believed then decided of events. USAA explanation not understand his (CSU), Security Unit” which case to its “Claims assign Powers’ McNeely, investigator, a CSU Wayne special fraud. investigates was as the chief designated investigator Powers’ claim. his May telephone conversation with McNeely regarding the Mikimbi, of the sinking Powers stated that the exhaust hose had “deteriorated” at the thru-hull. He used term “deteriorated” simplify explanation (McNeely his had no expertise in marine investigations), and because he concerned that USAA would automatically deny claim if he explained his that he had deliber- ately cut the hose.

Although McNeely testified that at point in the review of claim, he had no reason to believe that Powers had intention- Mikimbi, ally sunk the began investigate Powers’ looking finances for motive to file a fraudulent July claim. In sank, two months after the Mikimbi frustrated with USAA’s failure to pay telephoned McNeely to explain why how and he had cut the exhaust hose. USAA decided to raise the Mikimbi from the ocean. Powers asked USAA to allow him to be when the present boat was raised and brought into port. USAA refused Powers’ At the request. end of September 1987, USAA surveyed raised and the Mikimbi outside of Powers’ presence. Davis, salvager, Harry

USAA had hired a local to oversee the Mikimbi, raising of the notwithstanding Davis’ lack of as a marine training investigator. Although Davis had told USAA that the boat could raised at a cost of approximately $30,000, the actual (which cost to USAA of raising the Mikimbi $200,000 involved numerous failed exceeded attempts) cost—a approximately double the amount which for the Mikimbi had Wimberly, CSU, been insured. Don district manager of the wrote in an October internal USAA memo that “Davis has completely misled us all for his own on the purposes cost of the project.” [Mikimbi]

USAA also allowed Davis to interview Captain Underwood— only witness to the Mikimbi sinking who USAA interviewed. Davis however, recorded this interview on an audio tape; there was evidence that selected portions Captain Underwood’s statement recorded. USAA failed to produce this tape at trial. USAA did not interview other witnesses to the sinking 2, 1987, of the Mikimbi. On October Davis made a videotape of Mikimbi, purportedly depicting contents of the boat at the trial, time it was raised. At Davis admitted that his videotape a “re-creation” and that he had allegedly moved items found on the boat purposes videotape. On the tape, Davis held up a pipe alleged wrench which he had been found near the thru-hull and could have been gate used to shut the frozen valve. Powers maintained that no such wrench had been present on his boat at trial, the time At sinking. expert witness—a metal- that the wrench in the lurgist depicted videotape did not —testified having consistent with been submerged show corrosion on the event, In any boat in ocean water for five months. USAA failed to the wrench analysis expert. produce The an kit” —a videotape depicted “adaptor large also hose and two which could have been clamps purportedly used Again, Powers to the hose at thru-hull. repair Powers denied sank, when it having had these items on his boat and his expert the clamps they testified that condition of indicated that had trial, been in ocean water for five At submerged months. Mikimbi, McNeely admitted that even had been on the present kit” not have enabled “adaptor Powers to a cut repair hose. Mikimbi, investigating McNeely

While took numerous photographs of its interior. Powers told USAA that he had left almost all of his on the Mikimbi and possessions that various items had been stored in a cabinet above the stove. The cabinet three but separate consisted of doors one un-partitioned McNeely/Davis cabinet. The inspection revealed that the cabinet evidence that Powers had empty supposedly removed all of — his belongings intentionally sinking before his boat. McNeely’s showed two of three which were photographs doors latched However, were taken pictures closed. no of the third door which had a broken latch and door which open through the cabinet during contents could have fallen out the numerous attempts raise the boat. also showed that videotape photographs hoses from

the toilet and the raw water intake had been pump disconnected. McNeely Davis told that these hoses could have been intention- However, as a means of ally sinking disconnected boat. Powers maintained that water would not enter the boat if those explained hoses disconnected—he one of the hoses simply holding took waste from the toilet to tank. McNeely investigated positions never these inconsistent and adopted Davis’ conclusions. mid-October, USAA asked Powers to submit to an examina- oath; examination, complied.

tion under Powers At this sunk; reiterated the manner in which the boat had his testimony was consistent with the information had provided McNeely July, raising Shortly to the of the Mikimbi. after prior examination, Powers asked USAA to seal the Mikimbi and allow Guard to examination perform independent the Coast of its and left the condition. USAA refused boat and its contents in custody. Davis’ 9, 1987,

On McNeely closing November submitted his report raw in which he stated that toilet and water intake hose had disconnected, to take on water. The causing report the boat been the Mikimbi. intentionally had sunk Not- that Powers concluded McNeely expertise had no fact that withstanding the he admitted that he never sinkings, of boat investigation that a had siphon Powers’ contention confirm attempted designer, The Mikimbi’s William the boat. on occurred Crealock, siphon case that a could have in the instant testified described Powers. in the manner occurred that the report by stating his McNeely concluded the Insurance Crime Prevention Institute forwarded to which investi- (ICPI) companies funded insurance entity —an to the FBI for criminal possible and refers cases claims gates 14, 1987, months after the eight December On prosecution. sank, denying denied Powers’ claim. letter USAA Mikimbi concealment or swearing, misrepre- that “false the claim stated policy. fact” voided the insurance any material sentation file, including Powers’ USAA USAA’s forwarded The ICPI conclusions, FBI May investigator an to the FBI. investigator McNeely The federal told McNeely. contacted great signifi- which USAA had attached hoses to the disconnected cance, during become disconnected numerous could have 1989, the FBI May the Mikimbi. In contacted to raise attempts arrived at the FBI When and his wife for an Powers. Powers interview, Attorney’s The U.S. Office filed he was arrested. allegedly Powers for false charges against pursuing criminal wire and mail fraud. including in March 1991. Davis testified in

The federal trial commenced trial; and at the federal he was grand jury again a federal front of trial, At the on both occasions. federal by USAA compensated the Mikimbi and gate valve from demon- Davis presented However, not frozen. to the that was Powers’ strated testimony metallurgist of a who concluded included the defense with after the Mikimbi been been had tampered the valve had the valve which would not be there was lubricant on raised as in ocean water. after five months present charges. Powers on all Notwithstand- jury acquitted A federal USAA wrongdoing, of criminal stood acquittal Powers’ ing Moreover, investigate USAA continued to his claim. denial of that Powers had hired Captain to establish attempted case and eventually the Mikimbi. USAA abandoned to sink Underwood but maintained that its denial investigation, still subsequent upon alleged based his “material justified claim was of Powers’ misrepresentations.” with the federal charges, arrest connection prior

Just against alleging filed the instant case USAA six Powers had contract, (2) (1) breach of bad faith failure to action: causes of (4) claim, (3) mali- fiduciary relationship, breach of pay distress, (5) infliction of emotional intentional prosecution, cious Claim Settlement Practices Act. A (6) of the Unfair violation action, favor on the first three causes of found in Powers’ action, and awarded him special, three causes of rejected the final However, damages. judgment did punitive compensatory, on the dam- punitive interest post-judgment not award Powers ages. that the district court erred in ground

Powers on appeals punitive damages interest on his post-judgment to award failing award; com- judgment awarding Powers cross-appeals damages. pensatory punitive

DISCUSSION1 The district court did not err in allowing jury to determine ’ misrepresentation whether Powers was material initially told USAA that the exhaust hose aboard the later, Mikimbi had “deteriorated.” Two months he told USAA that he had cut the The USAA policy hose. the insuring Mikimbi following contained the “False provision: swearing, concealment misrepresentation by any or material fact covered person trial, this At policy.” voids Powers admitted that he had misrep- resented the detachment of the hose because he was worried that would summarily deny his claim. USAA asserts that this was material as a matter of misrepresentation law and that it was permit jury error to decide issue of materiality. We disagree. involving

Under most circumstances misrepresentations by an insured to an insurance it is “a company, question of fact for the jury to decide whether the variance between the representation existing and the facts was material.” Gerhauser v. N. B. & M. Co., 174, (1871). Ins. 7 Nev. 196 “The rule is well established that, materiality if the of the representations or statements inferences to be drawn from and depends upon facts circum- proved, question materiality stances is one for the jury.” Co., 30, 43, 801, Smith v. N. A. A. I. 46 Nev. 205 P. 804 (1922). In and Smith materiality both Gerhauser issue arose to false statements made in insurance respect applications. It 28(h) designates plaintiff appellant, 1NRAP below as the and the cross-appellant, defendant below as unless otherwise ordered. If we were to damages cross-appeal, reverse Powers’ award on USAA’s Powers’ issue on concerning appeal post-judgment Accordingly, interest would be moot. i.e., opinion cross-appeal, validity will on first address issues damages Powers’ award. Smith, materiality judged could be as a in that acknowledged stipulated contract parties’ in cases where matter of law material; however, where to be considered facts were certain outside the terms of the matters “materiality must shown contract, Nev. at 205 P.2d at of fact.” 46 805. question it is a Smith, the deception in Gerhauser Unlike the situation rather than to the application the claims process relates to here in the rarest of cases of this kind that the and it is process, Further reluctance jury. can be taken from the issue materiality fostered reason of the jury from the is fact remove this issue already has ruled on issue in case a that in this Gerhauser, whether there the issue is is put favor. As and the representation existing between the material “variance a cases, then, it the jury Under our is 7 Nev. at 196. facts.” is, the “vari- representation, decide whether false must the existing representation between the [true] ance [false] material,” or, facts, say, substantially which is to related as instruction, relevant “reasonably in the put investigation.” company’s whether Powers’ misrepresenta- that in this case

We conclude properly of fact to be decided question material was tion was determination that materiality not entitled to a jury. USAA was a matter of law. in this case as was present which the could have upon evidence There was substantial misrepresentation was reasonably that Powers’ concluded material if it is supported by will not be overturned jury’s

A verdict clearly verdict unless the erroneous evidence substantial presented. Bally’s the evidence light of all when viewed Wallen, 105 Nev. P.2d Union v. Credit Employees’ evidence (1989). upon there was substantial We conclude that misrepresen- have determined that Powers’ could jury which not material.2 tation was “ that: A fact is material if it concerns The was instructed jury the insurance reasonably company’s relevant to investi- subject a importance would attach to that and if a reasonable gation, person the facts fail to correspond is false when representation fact. A reasoning regard apply the same with this same conclusion 2Wereach alleged initial concealment of the fact that that Powers’ to USAA’s assertions engine that failure manifold and slipped off the hose the exhaust McNeely May conversation with were in his 1987 siphon a effect mention recounting in Powers’ purported inconsistencies We note that the material. jury. presented to the relevant events

699 way, misrepresentation another Stated its assertions.” subject relevant and concerns “if the false statement material proceeding.” as it was then investigation to the insurer’s germane 51, Golden, (2d 1993). Cir. To 985 F.2d Indem. Co. v. Pacific that an it must shown misrepresentation, a material be deemed differently have had” proceeded would “investigation insurer’s 56-57. told the truth. Id. at the insured case, evidence which the ample upon there was In the instant investigation USAA’s of Powers have concluded that could differently May had stated not have proceeded that he Wimberly hose. testified he had cut the exhaust the onset due to the fact that the Powers’ claim from suspicious According McNeely, USAA had in calm waters. Mikimbi sank call in telephone Mikimbi to Powers’ prior decided to raise the that he had cut exhaust hose. explained wherein he July 1987 conversation, USAA with its proceeded plans Following this the boat. raise concluded, Furthermore, based on easily could have evidence, the exhaust hose was cut rather that the fact that “reasonably relevant” to USAA’s deteriorated was than focussed on the manner in investigation. USAA’s Crealock, designer, The boat’s William the Mikimbi sank. which the exhaust hose off of the slipped the fact that testified that was manifold, the valve at the with the fact that combined engine closed, caused the Mikimbi to take on not be thru-hull could (i.e., the thru-hull the hose at cut or The condition of water. deteriorated) factor in the of the boat. sinking was not a relevant evidence, upon that based substantial

We conclude found, definition of contained materiality applying have could May misrepresentation No. in Instruction void his policy.3 not material so as to overruling court erred in reject contention that the district 3We USAA’s testimony materiality. objections expert on the issue of to the USAA’s testimony expert lies within sound discretion district admission 1538, 1547-48, Levine, 101-10 112 Nev. 930 P.2d Prabhu v. court. Cf. scientific, special (1996). technical or other provides that “[i]f NRS 50.275 knowledge fact to understand the evidence or to will assist the trier of ized issue, may testify expert qualified as an . . . a fact in a witness determine Moreover, knowledge.” NRS scope such 50.295 within the matters testimony concerning the ultimate issues in give opinion permits expert did not its discretion in court abuse conclude that district a case. We testify materiality and Powers to as to experts for both USAA permitting at issue. misrepresentation 700 relationship instructed that the between was jury properly

The nature; jury could have fiduciary was and Powers USAA fiduciary duty breached its to Powers that USAA properly found fiduciary responsibility USAA breached a argued that Powers (1) copies photographs Powers’ by refusing requests himto at the October 1987 examination under had been shown Powers oath; (2) when the Mikimbi was raised and not to be present days three after USAA had where the boat was until telling him (3) protect seal the Mikimbi to evidence to possession; allegations that he had intention- against needed to defend ally sunk his boat. that, duty while an insurer’s to an insured can

USAA contends fiduciary respects, of a in some the insurer has be “akin” claims. See fiduciary duty questionable Employers no to pay Construction, v. Albert D. Seeno 945 Co. of Wausau Insurance (9th 1991). a fiduci- imposing Cir. USAA contends F.2d insured would ary duty first-party require compa- to a USAA every presented by argues nies to claim insured. pay a duty policyholders insurance carrier owes to its other that an reserves meritless claims. We are dissipate paying not to its case, in the arguments; jury these instant persuaded duty based on USAA’s failure fiduciary did not find a breach of claim, but its failure to with the upon comply pay of its insured. requests reasonable on this issue as follows: jury The was instructed company an insurance to an insured duty owed fiduciary in nature. ... A exists when fiduciary relationship trust and confidence in the right expect one has another. This integrity fidelity special relationship because, aware, as insurers are well exists in consumers part of mind and gain protection, peace contract for insurance calamity. security against added). properly It is clear that the instructed (Emphasis is, concedes, as USAA duty policyholder to its

that an insurer’s fiduciary relationship. to a “akin” instruction, argues of this Notwithstanding language verdict, have recognize we would jury’s that to affirm place the insurer to requires “new tort” which insured’s agree. We cannot Nevada has long above its own. interests between the insurer and special relationship its recognized Co., 587, 592, 104 Nev. Ainsworth v. Combined Ins. insured. (hereinafter I”). (1988) “Ainsworth 763 P.2d to find that USAA breached a was not asked case instant own; rather, Powers’ interests over duty to place whether USAA’s refusal to with its comply to consider instructed relevant to his own for information claim requests insured’s breach of “the trust and confidence” an insured is constituted in his insurer. place entitled to motion for denying judgment notwithstanding USAA’s trial, cited Tynes new the district court v. Bankers

verdict or a Co., 1115, (Mont. 1986). The Life 730 P.2d 1124-26 Montana regarding reviewed other states’ decisions nature of the court insured, and between insurer and held that fiduciary relationship between insurer and insured can be relationship a special nature,” “fiduciary although in it is not identical to described as of a trust. The court fiduciary duty relationship explained that of the kind duty basically good is a statement of faith type Misconduct, an insurer to a insured. duty first-party owed concealing gain or facts to an misrepresenting advantage such as insured, fiduciary breach of this kind of responsibil- over the is a 1126; Rawlings at see also v. ity. Tynes, Apodaca, 730 P.2d 726 565, (Ariz. 1986) an (holding although 571 insurer is P.2d word, fiduciary in the strict sense of the “it has some not a duties nature” and duties include an fiduciary obligation of a these during relevant facts discovered of a disclose claim); Indus. Indem. of the N.W. v. Kallevig, policyholder’s 1990) (Wash. (holding P.2d 526 insurer’s duty 792 duty which is good fiduciary “fairly to act in faith is a broad and be breached conduct short of intentional bad faith or may fraud”). jury’s supported by

We conclude that the verdict was substan- concealed facts to gain advantage tial evidence USAA Powers, and that this misconduct constituted a breach of the over nature of its with Powers. The could fiduciary relationship reasonably concluded that USAA’s failure to comply have to be at the request photographs, present raising boat, party investigate and to have an outside boat was not fiduciary with a of trust and keeping relationship confidence— supports jury’s nature —with its insured. Such a conclusion faith, fiduciary duty the breach of finding of bad of which is a component. a new cause of action based on an adopting

We are not failure to its insured’s interests its company’s put above own; that breach of the merely recognizing fiduciary arewe duty relationship part of the insurer-insured nature Therefore, fair faith and we need not good dealing.4 address damages unfairly contention that punitive USAA’s assessed USAA Additionally, argues jury’s this verdict. that the verdict on whether it found USAA explain breaching does not liable for or good dealing covenant of faith and fair breaching fiduciary contends that when there are duty. way USAA two actions and no other, whether on one determine found or the an error Gordon, requires action a new trial. Lightenburger in either v. However, (1965). 407 P.2d Nev. the verdict indicates found USAA liable for both a that the breach of the covenant and a dealing faith fair breach of good fiduciary relationship, granting compensatory damages punitive to Powers for In this case we jury’s awards both. view the finding fiduciary duty a breach of as buttressing finding of bad faith. verdict, the form of stipulated to parties

Both jury punitive that ask the its explain the court request did not or irregulari- time to raise inconsistencies damage amount. trial. Mfg. of a is at Eberhard Co. v. in the form verdict ties 271, (1981); Baldwin, 681 see also Brascia v. Nev. 628 P.2d 97 n.2, 765, (1989) Johnson, 592, P.2d n.2 Nev. 781 768 105 596 verdict challenge in a party that a must inconsistencies (holding jury and failure to while the object discharged, the before waiver). clarify verdict constitutes is available clearly that in the verdict states the language We conclude waived its finding right question and that USAA jury’s object at trial. by failing the verdict form of that USAAacted in bad evidence was substantial There faith claim denying Powers’ if the verdict that an jury’s will not be overturned judgment A in bad substantial evidence. supported acted faith is insurer McClelland, 504, 105 Nev. 780 Insurance Co. v. United Fire evidence, this this court must (1989). reviewing P.2d 193 prevail- evidence favorable to that believed presume Id.; favor. see party’s drew in inferences ing party I, at 763 P.2d 675. To establish 104 Nev. at Ainsworth to pay refusal an insurance case of bad-faith facie prima 4However, giving defining that the instruction extent error, fiduciary relationship adopt and USAA we between Powers constituted view that it was harmless. concurrence’s that the insurer had no must establish reasonable plaintiff coverage, and that insurer knew or reck- disputing

basis for that there was no lessly the fact reasonable basis for disregarded Corp., Falline v. GNLV 107 Nev. disputing coverage.5 (1991). P.2d

We conclude that there was abundant evidence upon which the jury could have found that USAA knew or recklessly disregarded the fact that there was no reasonable basis for denying Powers’ claim. in Experts investigations management testified that done, USAA’s was improper, incomplete, poorly in violation of procedures, USAA’s own and rendered the opinion that USAA’s conduct amounted to bad faith. Presuming Powers, believed evidence favorable to justified in concluding that USAA began its investigation by submitting the unit, directly claim to its fraud failing to review the evidence objectively. There was substantial evidence that had USAA undertaken an objective investigation, USAA would have discov- ered evidence to show that the claim should have been paid.

Among other things, McNeely admitted that there were errone- ous conclusions his closing report (e.g., that the disconnected toilet and raw water intake hoses sink); caused the boat to however, USAA made no effort errors, to correct these known though even report was relied upon by federal authorities in pursuing charges criminal against Powers. Additionally, there valve, gate was evidence that the which had been kept USAA’s custody, had been tampered with so as to further discredit Furthermore, Powers. the jury could have believed that videotape contained numerous fabrications and was designed to USAA with a provide deny reason to Powers’ claim when no such actually reason existed. We conclude that the jury’s verdict that USAA liable to is Powers for bad faith supported by is substantial evidence and is not clearly erroneous. upon

Based our review of the record and the parties’ arguments on we conclude appeal, that there was substantial evidence to jury’s award support special of and compensatory damages contract, upon based USAA’s breach of the insurance bad faith refusal to Powers’ pay breach of a fiduciary relation- Furthermore, we will ship. not disturb an award of punitive damages unless the trial record lacks substantial evidence to it. First Interstate Bank v. support Jafbros Auto 106 Body, Nev. 54, 56, 765, (1990). 787 P.2d 767 reject 5We USAA’s contention that its actions were reasonable as a matter of law. 704 the evidence the could have believed

We conclude that guilty that USAA had been of finding oppression, supported malice, NRS There are implied. or See 42.005. express fraud or record, individually in the taken and cumula- numerous facts a determination. The evidence showed which such tively, support investigative made numerous critical omissions that USAA finding of A support oppression. these omissions process; conclude USAA undertook intentional properly could also to ensure the denial of Powers’ claim designed of conduct course fraud and conduct constituted malice. and that such of fraud egregious example oppression, the most Perhaps videotape newly in the USAA of and/or malice is contained upon There was evidence which the ample raised Mikimbi. that USAA “enhanced” the actual contents could have concluded support Mikimbi in an effort to create for its decision to of the deny justify forwarding claim and to his claim to case, and, ultimately, Attorney’s the U.S. Office. In this the ICPI were indeed warranted. damages we conclude that punitive punitive damages interest on imposition post-judgment proper judgment of a computation imposi- NRS 17.130 outlines interest thereon.6 The statute for interest to any provides tion of served, of the date the judgment complaint on a as accrue a judgment, damages interest on certain such as although parts served, until after the accrues as of complaint not incurred see, sustained, actually e.g., damages date those 1201, 1209, Klindt, v. 110 Nev. P.2d Gibellini accrues on (1994) (holding interest costs from time pre-judgment served); LTR Stage Gray after Lines v. Line complaint incurred 283, 289, (1990) Tours, (holding 106 Nev. 792 P.2d damages actually accrues on from time interest pre-judgment served). complaint incurred after that the argues plain language the statute does not states: portion of NRS 17.130 6The relevant by any justice, court for judgments rendered . . . 1. all debt, computed, near the amount must be as as damages or costs . . . be, may and cents .... in dollars provided contract or otherwise rate of interest is 2. When no judgment law, judgment, the draws interest from the in the specified or satisfied, except complaint until of the summons time of service damages, which interest representing future draws any amount entry judgment until .... satisfied time of the from the

705 rather, it damages; interest on punitive preclude post-judgment case, In the “judgment.” present on a for interest provides cumu- damages, compensatory punitive included award Powers argues in the case. judgment latively comprising the court should be-treated entered judgment of a every aspect same, punitive damages accrue on as and that interest should is awarded. judgment the date the of interest does not accrue on held that pre-judgment We have entitled punitive is never plaintiff because a damages punitive v. 101 Sharp, of Ramada Inns Nev. right. as a matter damages (1985). this rule to 824, expanded apply 1 We later 711 P.2d damages. Ainsworth v. Com punitive interest on post-judgment 237, (1989), Co., 1003 105 Nev. 774 P.2d cert. Ins. bined denied, (hereinafter II”). (1989) “Ainsworth U.S. 493 958 court to revisit the issue consider the asks this interest on post-judgment punitive of imposing in favor policies damages awards. compensate interest is to post-judgment of purpose in the money judgment of the use of the awarded for loss

plaintiff “ which that judgment to the elements of regard ‘without ” London, 288, 45 F.3d Lloyd’s Air v. Separation composed.’ Co., 1995) Oil (9th Perkins v. Standard 487 (quoting Cir. 290 1973)). (9th Separation, In Air the Ninth 675 Cir. F.2d post-judgment to award interest failing also noted Circuit the time value exploit incentive for the defendant creates an delaying frivolously timely or otherwise money by appealing “Moreover, awarding interest on post-judgment Id. payment. with the purpose post-, is consistent damages exemplary plaintiff to a successful for the compensation judgment interest — actual payment entitlement to and of an time between intervening F.2d Corp., v. Petrolite damages.” Brown award 1992). (5th Cir. allowing contention that interest to to USAA’s response meritorious we damages appeals, would deter on punitive

accrue defendants who from a appeal judg- the courts require note that interest, and that pay imposi- damages for compensatory ment Moreover, meritorious appeals. considered to deter tion is not to warrant the egregious enough whose conduct defendant be given preferential damages should punitive imposition money during appellate to make treatment and be allowed to be paid plaintiff. what has been ordered on process above, mentioned we policies our review of the upon Based be modified to the extent that it II should that Ainsworth believe on punitive interest litigants post-judgment denies successful punitive that Powers’ dam- we conclude damages. Accordingly, interest as of the post-judgment have accrued should award age entered. was judgment date

CONCLUSION materiality misrepresentation question of is We conclude evidence that there was substantial We further conclude fact. misrepre- have concluded that Powers’ jury could which upon material. was not sentation circumstances, that, in limited an insurer further conclude We fiduciary to a breaching responsibility liable for be held may finding that USAA breached its jury’s The insured. first-party was substantial evidence. supported in this case relationship Further, jury’s findings identified the and verdict properly damages. award verdict jury’s regarding we conclude that

Additionally, evidence and by substantial was supported bad faith was USAA’s that Powers is enti- Finally, we conclude clearly erroneous. not damages interest on his award as of punitive post-judgment tled to judgment. entered the court the date district Therefore, judg- district court’s portion we reverse inter- damages post-judgment without punitive that awards ment damages court to award punitive remand to the district and est judgment We affirm the in all other interest. post-judgment with respects.

Shearing JJ., concur. and Young, J., concurring: Maupin, J., Rose, J., C. Springer, argue opinions

The made points force the both persuasive elegance equal because I I write controversy separately at trial. of this sides review, matter. re-try, this prefer would that, light of its exoneration on the correctly argues USAA intentional inflic- alleging prosecution, action malicious causes of distress, and violation of the Unfair Claims emotional tion of Act, in the process material claims representation Practices any recovery would void this matter.1 Powers to USAA by Mr. (based prosecution prosecu on the federal 1Although claim the malicious fraud), practices unfair settlement and the Mr. Powers for tion of that, alleged if were based on several acts infliction claims intentional faith, bad a successful outcome in favor of evidence of proved, were also compel conclusion that the verdicts were does not on those claims prove that Mr. failed to have concluded could inconsistent. the claim bad faith. It were not essential to of those claims that elements probable, that the concluded Mr. Powers had if not possible, also and, thus, upon the claims which USAA was “overpleaded” his case duplicative of the bad faith claim. simply exonerated case, I cannot conclude that the However, of this in the context as a matter of proved materiality misrepresentation law. precious a claimant who lies to an insurer has little Ordinarily, Certainly, or her claim is denied. when his complain right lied initially counsel that about the through admission boat, Mikimbi, immunize USAA from sinking of his for a refusal to “fiduciary” liability preliminary pay faith or bad of a undertaking comprehensive investiga- and for its investigation It was the nature of the and the thereafter.2 tion complete provided after the pay failure Mr. Powers’ claims of bad faith and legitimate “fodder” for breach of contract. of evidence my colleagues suggest, larger body As submit- Quite was vigorously disputed. ted for consideration trial court was confronted with evidence of the Mr. uniquely, the during stages to mislead the carrier initial of attempts Powers’ and shoddy unprofessional investigation the evidence of a USAA, by an ill-advised referral for by prosecution federal authorities, conflicting regarding evidence how the Mikimbi sank, of USAA had allegations agents planted and evidence Thus, guilty that Mr. Powers was of sabotage. to bolster its claim against excellent that did exist for and many arguments the severely by undermined liability of “extra- imposition Although may activities of both parties. curricular” have developed competent entertained cir- reasonably suspicions Mr. Powers in the of implicating cumstantial evidence loss Mikimbi, sunk the of whether Mr. Powers boat3and questions that effect justified the evidence USAA to developed whether were, my the claim with or without cause” in “proper denial of for the opinion, jury.4 of bad “comparative” no doctrine in Nevada Because there is insurer, and because this insured and an case between an

faith evidence, disputed, albeit of miscon- replete competent sides, trial court properly I that the both conclude duct Mr. materiality misrepre- of the issue of submitted view, 2Thus, investigation, including my the fact that cost in floor, far exceeded the value of the claim raising the ocean the Mikimbi from of this matter. to the resolution is irrelevant boat, an issue central that Mr. Powers did not sink 3Ifthe believed case, been immaterial as a matter misrepresentation would have this to connection, literally every appeal, in this I would note that issue this law. In rendered dispute, would have been moot if post-judgment interest save interrogatory special whether via jury had been asked to resolve sinking of the Mikimbi. culprit in the Powers was the recovery claim for bad on Mr. Powers’ No. conditioned 4Instruction proper “without cause.” finding the claim was denied on a faith USAA on finding against It was the this the jury. sentations breach of contract and for the predicate that provided issue faith awards. bad fiduciary duty, breach of counsel regarding to the verdict As that Mr. Powers argument at oral contended Mr. Powers fiduciary obligation. for a limited a claim sought to establish as follows: on this issue was instructed fiduciary for a breach of a rela- damages

Plaintiff seeks duty defendant. The owed plaintiff between tionship in fiduciary an insured is nature. company an insurance aby preponderance must establish plaintiff recover order to existed between fiduciary relationship that a the evidence a duty that defendant breached and defendant and plaintiff facts to plaintiff. known disclose one right exists when has the fiduciary relationship A integrity fidelity in the and confidence trust expect another. because, in as part exists insurers relationship This special aware, for insurance to gain consumers contract are well security calamity.5 against of mind and peace protection, nature,” “fiduciary the term the instruction By use of seems First, language this internally implies general, inconsistent. Second, limited, fiduciary relationship.6 obligation dis- not, itself, Third, in and fiduciary. known information is close argument conceded at oral that a relation- attorneys Mr. Powers’ “in context fiduciary which is nature” this means ship This, fairly” “deal with its insured. that the insurer must course, alleged special does not distinguish relationship from Further, as ordinary relationship. argued by other contractual not, USAA, necessity, claims do of a fiduci- first-party implicate the relationship third-party as in case of claims. This is ary general fiduciary duty. pled a claim for breach of a The 5Mr. Powers claim issue, was, language based on the of the instruction on this limited by Although liability the trial court. the instruction limited the somewhat facts, theory represented evidence that USAA withheld known to counsel at fiduciary argument relationship argued the “limited” that was at trial in oral truth, of failures USAA to tell Mr. Powers the failures to “seal” the terms investigation, independent produce for an and failures to certain Mikimbi though arguments beyond scope Even these went well the of the photographs. instruction, they simply part parcel I conclude that of the claim for faith. bad general theory a 6Mr. Powers’ counsel concedes that claim under this unnecessary first-party implicate and also conceded that do claims fiduciary relationship. fiduciary general duty Given the fact that the instruc faith, virtually nothing appears to the claim for bad tion added that Mr. theory altogether. been Powers’ counsel have wise to abandon this

709 between the insurer and the because, relationship degree, to a fact, inmay, claims become adversarial. See first-party in insured Exch., 795, (Utah 1985).7 701 P. 2d 800 Ins. Farmers v. Beck however, Here, a “fiduciary” the definition of in relationship innocuous as to add little or nothing instruction is so to of Mr. Powers’ bad faith claim. The instruction is the elements “ tort; i.e., this language defining devoid of the standard ‘one of the other and to purported] confidence act party gain[ed] ” Perry with the other’s interests in mind . . . .’ or advise v. 943, 947, 335, Jordan, (1995) 111 Nev. 900 P.2d 338 (quoting Balkus, 318, (Ct. 1972)), 321 Rptr. App. Kudokas v. 103 Cal. or “ exert ‘superior position unique USAA was in a to influence ” . . v. 102 party. Hoopes Hammargren, of the .’ Nev. dependent 425, 431, (1986) 242 725 P.2d Barbara A. v. John (quoting Thus, G., (Ct. 1983)). Rptr. App. Cal. because the added to the fiduciary relationship nothing of a duties definition good dealing, to the covenant of faith and fair implied attendant contract, every this instruction to providing harmless error. that the nature of this case represents anomaly

I would note Thus, only it is of jurisprudence. marginal prece- in this area value. The bench and bar should most careful in the dential conclusions from drawing any sweeping future about it.8 Springer, J., dissenting: C. majority misapprehended I believe the has

I dissent because case, errors committed ignored of this has several facts relating our to the jurisprudence the trial court and has distorted insurance claims. property adjustment majority’s my disagreement percep- begin by noting I critical, which Mr. Powers made to false statements tion to the represented company, Mr. Powers company. his insurance oath, sinking boat’s was that the that the cause of his boat’s under “broke loose” near had “deteriorated” and hose exhaust signal third-party 7Fiduciary obligations are a feature of claims covered obligations largely liability right arise from the insurance. These insurer’s insured, duty legal representation right provide and the Beck, against the insured. See the conduct of defense suits control duty obligations protect of the insurer Such also stem from P.2d at 799. liability. duty personal estate from extra-contractual the insured’s processing first-party good faith in the to exercise claims is not carrier fiduciary se, Therefore, obligation. “akin” to such an per but is fiduciary given obligations should not be separate on instruction context. Rose, J., punitive damages an award of should be agree with 8I subject post-judgment interest. hose, according to Mr. The broken hull. exited the it where point to enter the hull sea water caused sinking, of the version intended, the disrespect With no boat, sink. causing it to the gave Powers to his which Mr. statements proof-of-loss sworn The truth is were, simply, lies.1 and plainly company insurance because of “break loose” did not hose exhaust the external Powers, later according to his own deterioration. natural knife.” statement, it “cut with me that Mr. Powers did not admit it plain record makes

The he realized that the company cut the hose until he had and would discover that the hose the sunken boat to raise going his false statements explains saying had been cut. Mr. he feared that were made because “USAA reports false that the the automatically deny his claim” if told truth. did not consider these lies to be “imma- Naturally, the USAA into marine federal insurance and asked for a terial” were imma- misrepresentations FBI did not think The fraud. think that terial, they did not were prosecutors and the federal immaterial; indicted Mr. Powers based upon a federal grand investigation. FBI’s they if lies would be immaterial

Mr. Powers’ company’s investigation.” relevant to “reasonably that his loss was caused in a a claimant tells an insurer When established that conclusively and it later way, certain is incident, way there is no a false account of gave insured not related to the can be immaterial and “com- statements such course, description Of an insured’s investigation.” pany’s the investiga- it is the heart of investigation; related to the loss is tion. in two vital majority respects. with the first company

I part original report that Mr. Powers’ false majority’s saying loose”) and “broke was made not (that the hose “deteriorated” rather, carrier, but “to simplify the insurance to deceive me, difference cut- To there is sufficient between explanation.” deteriorate and break loose on its own to having ting a hose actually gave three different versions of the at least events 1Mr. Powers (1) deteriorated at the sinking: that an exhaust hose thru-hull leading up to the hose; (2) story plus through ruptured number to leak in causing water through ruptured engine into the hold being pumped exhaust water loss) (3) the had “detached” at one end (sworn proof hose hose other, manifold) engine cut at the thru- (having “slipped off” the end, “siphon” which thereby causing kind of caused the hold to some hold merely support I recount these “versions” to sink the boat. with water fill certainly grounds investigating had reasonable my saying that USAA it, referring matter paying and for to federal authori than rather ties. lying My Powers was and not simplifying. that Mr. conclude majority with the is with its focus on what disagreement second what the to sink. No one knows caused boat to caused the boat and majority concurring opinions Mr. Powers. except sink Mr. Powers can recover millions of to assume that dollars seem if he to the that he did company proved his insurance against in deep sink his boat. Mr. Powers was financial deliberately not trouble, investigators many and insurance had and domestic boat; but, he for the of purposes reasons to believe sank sound lawsuit, matter. What does matter is that he this does not false, and misled his insurance carrier in made sworn statements of causing it to hundreds thousands of investigation, spend truth the matter. to the of try get dollars to his marine insurance carriers in contract and Mr. Powers sued the insurance claimed “refusal without companies’ tort based on claim for of cause”2 to Mr. Powers’ loss his sail boat. pay proper damages and on his con- judgment A awarded Mr. Powers claims, the tort breach and on two tort one for of tract claim dealing, faith and fair the other for good covenant implied the unrecognized of a tort previously USAA’s commission Nevada, namely, property company’s supposed fiduciary duty to “disclose known facts.” breach of a “[fjalse policy, the terms of Mr. Powers’ insurance Under or material fact swearing, misrepresentation concealment the insurance contract covered violates by any person” he Mr. Powers admits that was Although “voids” the policy. and misrepresentation concealment swearing, of false guilty that, therefore, fact, not “material” and he claims that these were relating not be voided. The facts insurance contract should and misrepresentation concealment swearing, Mr. Powers’ false follows. facts are as of material The boat April boat sank on 1987. Mr. Powers’ two weeks after the sinking, USAA. Approximately insured 11, 1987, Wayne McNeely, Powers told claims May Mr. on USAA, his boat sank reason investigator for near the ruptured place had “deteriorated” exhaust hose the hull to outside of boat through passed where hose “thru-hull”). Mr. Powers told Mr. (a McNeely called place hose, “grabbed that, ruptured hose when he discovered According from the outside.” coming the water could feel facts, immediately he realized then-version of Mr. Powers’ straighten the boat out and “help down would taking the sail in the water.” Mr. deep wouldn’t so the thru-hull maybe No. 8. 2Instruction sail, McNeely that after he took down the told Mr. and, thus, way “about half in the water”

thru-hull was still in the boat.” Mr. Powers tried to coming “water was still stuff hose, avail; and, but to no according into the ruptured towels Powers, boat continued to take on water until it sank. Mr. 14, 1987, May June about a month after his 11 report On official, Mr. Powers filed his sworn McNeely, “proof USAA. In this sworn statement Mr. Powers claimed loss” with engine due to the “failure of the main that his loss was exhaust causing hull. . . sea water to be pumped hose at the exit thru into fitting.” thru hull through exposed boat . . . his sworn [the] statement, truth, did not tell the did of loss Mr. Powers proof the hose. He used the word that he had cut admit failure deterioration, than a as he had reported. exhaust hose rather first statement, formal, of Mr. proof In his sworn loss Powers added he that sinking; to stated sea water complication another was Later, engine.” into boat main being “pumped he [the] [the] effect, by siphoning that the water was rather propelled claimed engine. than force of varying of Mr. Powers’ stories made much sense

None to decided operatives; USAA’s claims so USAA to contract for the of Bachrach & Wood to investigative services Associates make an and evaluation of the independent investigation sinking. Bachrach understandably concluded that Mr. Powers had made quite contradictions” in his statements and previous “numerous found the incident to be Mr. Powers’ versions of inconsistent with (For independent investigation Bachrach’s of facts. example, noted that Mr. Powers claimed that his boat was operat- Bachrach ing pilot prior discovering something on auto that was “amiss”; however, Bachrach that reported upon “inspection vessel, any there was no auto aboard the nor pilot adapters or evidence ever providing that there was an auto apparatus pilot aboard.”) Bachrach concluded its in the report following manner:

SYNOPSIS OF OBSERVATIONS: undersigned, using the sworn statement under oath by data, William as the Mr. R. Powers basic other state- items, well sighting ments and miscellaneous as as the vessel data, construed the aforementioned auxiliary as observations interest, and offers points and other of herewith the follow- ing synopsis: claim for the initiating sinking The insured his of his sailboat, “MIKIMBI”,

West Sail made various state- numerous ments which contained contradictions. It is the undersigned of the that the ultimate opinion reported cause vessel under the conditions subject sinking, report- edly reported sinking, existed at the time of the would have nearly an feat. impossible been USAA report, the Bachrach officials decided to receiving After and take gulf the bottom the a look for raise the boat from course, was, to what Mr. Powers witness themselves. and, time the sinking; on inside the boat at the going had been sea, of the was on the bottom Mr. Powers long so as boat story he chose to tell. When could tell about Mr. Powers boat, he realized that he plan inspect of USAA’s learned Powers knew that the hose had not “deterio- problem. had a Mr. “failed”; rather, It had not Mr. rated” at the thru-hull. Powers hose, investigators had cut the and insurance have been cutting it was Mr. Powers’ intentional suspecting justified the water to enter boat. As Mr. the hose that caused Powers admitted, he feared that his lies would be discovered. By himself account, to “explain his own Mr. Powers forced this because look down there and see . . . that cut hose.” somebody going that, he told at trial at the time USAA that Mr. Powers admitted “failed,” he “playing deteriorated or with the the hose had (sometimes called “simplifying”). Eventually, truth a little bit” Mr. had to admit that had cut the the time came when Powers hose himself. opinion had the benefit of Bachrach’s Mr. Powers’ still, “nearly sinking impossible”;

first accounts of the another, independent investigator, an employ USAA decided to firm, provide opinion” law “second in order to admiralty to whether USAA should pay have additional advice as of the Admiralty lawyer Spiegelfeld Allen von retained claim. deposition and gave firm took Mr. Powers’ sworn admiralty his of the give sinking. another version opportunity reported deposition Mr. von results Spiegelfeld the in a letter to USAA dated October same 1987. appraisal letter, Spiegelfeld reported October 26 Mr. von Mr. In the Mr. Powers told Mr. von sinking. latest version napa to see coming that he had awakened from smoke Spiegelfeld Mr. Powers Upon inspection, noticed that engine from the room. engine from the hose had detached itself manifold3 the exhaust emitting was exhaust and water into the that the engine and tried to the related that he reattach hose engine room. Mr. Powers he not do so because the heat. He to the but that could engine the stopping the thus water engine, that he then turned off stated According the room. to being pumped from into Mr. and exhaust explained: Mr. Powers Spiegelfeld, von tendency has 3Testimony the of the manifold a at trial indicated that heat to “very, very hose difficult manifold and that the to fuse exhaust hoses to the Crealock, engine. expert, William Mr. Powers’ own admitted get off” of the a come at the exhaust manifold. USAA it is for hose to off that uncommon thought fact and this investigators that Mr. Powers was aware was story “failure” was at why up he made exhaust hose first hose, entry thru-hull into boat. at the other end of room, returning engine to he found Upon that water coming through was exhaust hose from the through hull It his version fitting. was that suction had somehow created, been which water causing was to into the pump via the hull Mr. through fitting. vessel Powers stated that in order to the suction effect he went over to stop a to the panel hull fitting for hose and through exhaust with screw driver took the off. . . . panel Mr. Powers then state[d] he the 4-inch with and cut hose a knife also used a pair of cut the pliers According deposition to wire. to his tried he to however, every the hole rags, stuff time the boat would port rags wallow fall out the water would gush in. water, At point a certain after the boat had taken on Mr. boat, he

Powers decided abandon his rescued that, later, He told von fishing Spiegelfeld vessel. Mr. “since his sinking, boat was that he be not asked back it.” pushed to Mr. then, Powers, “rescued,” after being returned to his boat. Mr. von Spiegelfeld goes report: on to back board Upon getting on his boat the water higher,

however, he to plug the hole to the attempted through hull fitting again. For he could explain, reasons Mr. Powers claims that he reattached the hose to exhaust manifold at absolutely this time. This makes no sense since no water was boat coming through the hose. added.)

(Emphasis admiralty attorney’s investigation prompted him to report

to the company: very Powers’ statements are inconsistent and make little

sense. He acknowledged several false statements made ^[4] was, company understandably, very 4The much concerned about the implausibility inconsistencies of Mr. Powers’ various versions of the 11, 1987, version, sinking. example, May For in his Mr. Powers said that he engine immediately “shut the off and went below.” In his October 1987 prior statement he that he turn engine going said did not off the into the engine important This room. becomes because of Mr. Powers’ claim that he room, poisoning engine which, suffered carbon from monoxide in the testimony, according his and portholes open. other had all engine “[T]he smoke, just full room was see, and it was dark hardly back there. I couldn’t my up and water was almost knees.” his October 6 statement Mr. Powers testified that the water was deep. “about 8 inches” It was “about my investigators mid-calf or over ankles.” USAA were concerned about this eight discrepancy because if the had been water over inches in depth, the air engine engine intake for the would under water probably be and the would running not have been under these Mr. Spiegelfeld, circumstances. von the admiralty lawyer, reported opinion to USAA his change that Mr. Powers’ in why he came up When asked investigation. the early on hose, he wavered and the rotted story about original his with he lied stated that because Mr. Powers Ultimately waffled. claim. . . . Mr. Powers also want to confuse did not he 4-inch hose to the reattached the why he explain did not manifold, it while the was engine he did or how exhaust under water. by saying: report his concluded Spiegelfeld

Mr. von should be claim that Mr. opinion Powers[’] We are of be on the basis denial should that the basis for and denied intentionally by or at direction was “caused that the loss Furthermore, that it be stated should person.” of a covered engine have been that the would story [to have] his “realization resulted from galley.” deep in the in knee water if he were under water when he lowered the sail. In his stories as to told two different Mr. Powers statement, before he cut the that he lowered sail Mr. Powers said October cut, trying get the valve (Before was to while Mr. Powers and hose. inlet, necessary he found it to cut the before water and cut off the outside that, heeling port I hose, on me that was still “it dawned he testified got up and being up. I went back mainsail my So mainsail because down.”) statement, lowering the sail testified that Mr. Powers Later in his (“It sail-lowering] was after I the hose. performed [the he had cut after got it, port, and if I that sail heeled over to on me that I was cut and it dawned inconsistency bit.”) down, this USAA considered might help a little lowered, upright, the boat would come the sail was important because once water, thereby breaking idly in the and float stop movement its forward causing boat to fill sea water his Powers claimed siphon which Mr. had, as was once hose. If Mr. Powers through portion of the exhaust the cut hose, appear it would he cut the down before testimony, taken the sail his any little, any, very if stopped water would have been siphoning way opening. It is hard to of the thru-hull the boat have entered could claim, circumstances, justified making not USAA was under these paying this claim. inquiries before further investigators part of USAA pause on the some matter that caused Another of the end of the Powers’ reinstallation whether Mr. question as to was the engine detached from manifold had become he claimed hose that exhaust end, the hose at the hull at the thru- he had cut or after place had taken before Spiegelfeld, von to Mr. statement fixture. In his October hull engine. Mr. Powers was “reclamped” the hose to he explained how hose,” in the affirma- you answered cut the was “after asked if this question why USAA would this answer difficult to understand tive. It is not say that he went to the trouble of why Mr. Powers to wonder manifold, unless, suspected by as to the dangling hose reclamping the testimony way to the to conform his USAA, in this testified Mr. Powers very could Mr. Powers when it was raised. boat was in that the condition were traceable to the hose’s story problems that all of his well maintain manifold, boat showed that the when the recovered engine detaching from these additional inconsistencies not engine. I recount was attached to hose decision, case, merely that USAA’s but to show “reargue the facts” of recommendations, under the was “reasonable” independent upon two based circumstances. was voided “false by swearing, concealment policy any any of material fact by or covered misrepresentation person.” 14, 1987,

On approximately December two months after USAA, Spiegelfeld following the von receiving report, attorney advice, Powers, Spiegelfeld’s advising von wrote to Mr. him that coverage” grounds it was on the that the loss had “denying been intentionally” and that the “voided” policy “caused the policy reason of Mr. Powers’ violation of provision relating to misrepresentation any “false concealment or of swearing, mate- rial fact covered any person.”

CONTRACT LIABILITY view, my Mr. Powers not have an does enforceable claim in either respect tort or contract. With to Mr. Powers’ contract claim, USAA based its denial of his contractual claim on two first, that grounds: the independent investigators believed that and, second, Mr. intentionally Powers had sunk his boat that Mr. Powers was in with guilty, connection USAA’s claims investiga- tion, swearing, of false concealment and misrepresentation of material USAA does not claim the right prevail facts. now in this appeal by having intentionally reason Mr. Powers’ sunk boat5; rather, his USAA claims that is entitled judgment as a matter of law based on the in the provision policy that reads: swearing,

False or misrepresentation concealment any material person fact covered voids this policy. It is uncontested admitted that Mr. Powers was guilty “false swearing, concealment misrepresentations” relating [and] to the manner in which this loss was incurred. Mr. Powers admits intentionally that he lied company to the because he feared that if truth, he told the USAA “might deny” his claim. Powers’ strained at position trial and appeal on is that the quoted policy provision not apply does to his claim because misrepresenta-. his tions and concealments were “material” not to USAA’s investi- gation relating circumstances to the sinking. argues that the misrepresentations question were that, material as a matter of if they law and are not material as a law,

matter of there was no evidence probative in the record to jury finding that the support misrepresentations mate- rial. instructed jury was that a lie is “material if it concerns a intentionally sank 5The issue of whether Powers his own boat to defraud company part play has no in either the

his insurance contract or tort claims lawsuit. reasonably company’s investiga- relevant to the insurance subject can be said that Mr. possibly not see how it I do tion.” If it had not been for Mr. investigation. lies no relation to this had sinking, inconsistent versions of the Powers’ lies had to spend would not have hundreds of companies and to intensify to raise boat investi- thousands dollars gation. rule, that, as a I agree majority general ques- misrepresentations in the context of made in materiality tions of fact; however, the facts in this process questions the claims are made in this case misrepresentations that the cannot case dictate than any in other material way misrep- be considered as properly starkly Mr. and sometimes varying resentations. Powers’ false very to core the sinking go of the the of “insurance versions eminently and are relevant the investigation” to companies’ had companies duty The insurance a to investigation. investigate it cannot be said under circum- the false claims. Because to the I investigation, that the lies were not relevant stances material a matter of law. they conclude are as in brief that correctly argues “questions relating with actual are sinking pertinent the the insured’s involvement coverage, to an of . . . the therefore issue [and [and material] that] said, truthfully.” I obligated is to answer As have under insured involving by an insured misrepresentations circumstances most of the an it is “a fact for company, question insurance representation the and the whether the variance between decide Co., N. Gerhauser v. B. & M. Ins. facts was material.” existing that, 174, (1871). “The is well established if 7 196 rule Nev. depends of or statements materiality representations upon proved, to be from facts and circumstances inferences drawn jury.” one Smith v. N. A. A. I. materiality of is question 30, 43, 801, (1922). Co., 804 In both Nev. 205 P. Gerhauser Smith, materiality issue arose to false state- respect and it in and was applications; acknowledged made ments insurance Smith, 44, 45, materiality at 205 P. could in 46 Nev. at in parties’ in cases which the be as a matter of law judged material; be facts shall considered that certain stipulates contract but, must shown matters outside the “materiality be where fact,” contract, question it a of id. at P. at is terms of Smith, the deception in Gerhauser Unlike situation 805. than the application rather process relates to the claims here in cases this kind that the infrequently of only process, jury. This is one those be taken from materiality issue must cases. were lies material as matter of view that Mr. Powers’ my

It is be way they in which could found logical there is no law because material; be is no not to there sufficient evidence the record contrary which a could to a from come conclusion. I believe to be the case even if competent expert this witness were to testify contrary. to the evidence which it possibly from could concluded

that Mr. Powers’ lies were not material was introduced in the law, form evidence in insurance opinion expert a Mr. however, Fitzgibbons, Patrick Mr. did Fitzgibbons.6 testify that Mr. Powers’ were not relevant misrepresentations or that did not they claim; investigation affect of this company’s flatly

Mr. told the Fitzgibbons just jury that Mr. Powers’ misrepresentation was not a misrepresentation.” “material Mr. Fitzgibbons’ opinion is unsubstantiated fact or reason and no on provides substantial evidence the issue of I materiality. As out, already way have there is no pointed which Mr. Powers’ misrepresentations being can be viewed as either irrelevant or sinking. immaterial to the Mr. Fitzgibbons presented jury with his conclusion that about the Mr. tale deteriorated hose was not a “material misrepresentation.” The first unfounded reason Fitzgibbons gave support opinion that the misrepresenta- (at tions not material that a deteriorated hose was not least to Mr. according Fitzgibbons) the real cause the sinking, it, or as Mr. Fitzgibbons put misrepresentation was not material “the because exhaust hose was not the deteriorat[ion] sinking cause the vessel.” The other justification offered by Fitzgibbons Mr. for Mr. opinion his that Powers’ misrepresen- tations were immaterial that Mr. Powers’ later of recanting first previous his stories rendered the lies immaterial.

With the regard to first reason for opinion, his that the misrep- resentation about the deteriorated hose was not material because hose-deterioration was not the real sinking, cause the it would that what Mr. appear Fitzgibbons telling the jury was that the story the false about deteriorated hose would not be material hose-deterioration was the actual the unless cause of sinking. testimony 6The Mr. by and might witnesses called him lead to cutting the conclusion that Mr. Powers’ of the exhaust hose himself did not jury might the boat cause to sink. The even have believed Mr. Powers’ or third second version believed that the boat sank not because Powers through passed cut the exhaust hose near where it the hull of his boat to the but, rather, outside sea water because exhaust hose became detached itsat juncture to the exhaust I throughout, manifold. As have maintained whether deliberately Mr. Powers did did not cutting or sink boat his the exhaust where it exited the hull an hose is not issue in this case. The issue is whether deliberately representations “reasonably his false were relevant” to the investigation sinking. insurance carriers’ of the I do not see how it can “immaterial,” possibly be said these say they that lies were which is to importance investigation. had no relevance to the or long as did not lie Mr. so Mr. Powers According Fitzgibbons, accident, his statements were real cause of the false about the investigation. opinion USAA’s Such an necessarily immaterial to In the logic. has no basis law or first explanation an and such have the idea to what Fitzgibbons slightest does not as Mr. place, was; he no more about what sinking cause of the knows the real did a I do and not claim to know. As the boat sink than caused assumptions to the real cause Mr. as consequence, Fitzgibbons’ cannot be accepted are unwarranted and sinking completely opinion. grounds expert for his legitimate as if were as Fitzgibbons competent testify even Mr. Secondly, whether a deteriorated exhaust sinking, the true cause of the to do sinking nothing was not the cause has hose was or materiality What does have to misrepresentations. with dissent, materiality, throughout as discussed do subject a reasona- misrepresentations whether the “concernfed] (Instruc- to the company’s investigation” relevant bly 14), whether “affected attitude and action of they tion No. they in its or whether were “calculated investigation, insurer” deflect discourage, company’s investiga- or either to mislead been “a productive area have relevant or might” tion in Golden, Co. v. F.2d investigate.” Pacific Indem. 985 area to 1993) (2d Fine v. Bellefonte Underwriters Ins. (citing Cir. denied, Co., 1984), (2d 725 F.2d Cir. cert. 469 U.S. (1984). If Mr. had told the that Mr. Powers’ Fitzgibbons were rele they were not material because not misrepresentations USAA’s or that would not affect the investigation, they vant to or actions USAA in its or that the attitude calculated to mislead or discourage, were not misrepresentations investigation, provided these reasons have might deflect for That the was or was opinion. sinking basis acceptable nothing with the material caused a deteriorated hose has to do misrepresentations; Fitzgibbons’ assumption ity of a sinking provides was not caused deteriorated hose no that the for that the support opinion misrepresentations rational his not material. correctly matter in his brief: “Not all put

Mr. Powers coverage ground denying misrepresentations provide misrepresenta- It is material an insurance voiding policy. support position, has this of his tion which effect.” material, Pacific were not Mr. Powers cites misrepresentations Golden, (2d 1993), a case v. F.2d Cir. in Indem. Co. brief, which, claimant lied according to Mr. Powers’ about home and “later admitted this was why gasoline he stored in his told the untruthfully company claimant that lie.” The snowmobiles; for use with his gasoline he had stored whereas, in to gasoline in he had stored the order actuality, He neighbor’s his lawn. later admitted that he had poison told the story because he was embarrassed to tell the false real reason for he storing gasoline and because was afraid that storing gaso- in home affect his coverage. line his The district court against entered the claimant because of judgment the misrepre- reversed, The Second Circuit Court of Appeals sentations. hold- think, I ing, the claimant’s properly personal reasons for material, in storing gasoline his home were not not relevant to the cause of the fire or the company’s investigation. to The Pacific is, course, Indemnity entirely case different from the case at hand.

Mr. Powers offered no evidence to show that misrepresenta- his tions were not to USAA’s investigation relevant of the sinking of boat than the conclusory other mentioned opinion of Mr. Fitzgibbons that the Mr. Powers’ misrepresentations were not brief, however, material. In his Mr. Powers makes an argument that leads the conclusion to issue whether hose or intentionally deteriorated was cut is much very relevant to the insurance company’s investigation. Asserts Mr. Powers: off,

If a boat sinks because hose deteriorates and comes boat, allowing water enter the to that would be an accidental If an intentionally loss covered. insured cuts a hose for reason, boat, no water enter his apparent lets that would to appear be an sink boat. effort added.) (Emphasis correct that his saying cutting the exhaust at the thru-hole

hose “would to be an appear effort to sink the then, boat.” Understandably “appeared” USAA also that Mr. Powers had engaged “an effort to sink the boat.” Under circumstances, these it is difficult for Mr. Powers to maintain that whether the hose deteriorated or was intentionally cut does not matter and is irrelevant USAA’s the sinking. Mr. Powers’ deterioration-of-the-hose lie “would appear” to be material; case, if this is then USAA had right every Powers’, misrepresentations consider Mr. relevant to its investigation. deterioration of hose was or was not the That of the sinking absolutely actual cause has nothing to do with the of whether Mr. question misrepresentations were mate- rial.

Mr. Powers did not could bring or in evidence that insur- do not consider companies misrepresentation ance of this kind to rather, their investigations; be relevant to brought in expert simply unsupported who stated his conclusion Mr. Powers’ misrepresentations were not material in this gave case and as

721 two, unacceptable reasons mentioned opinion the reasons for that not a sinking of was deteriorated hose cause the above: the lie. recanted his Mr. Powers faulty unfounded Fitzgibbons’ Mr.

Having discussed hose lie was material deteriorating not that the explanation cause of the I on sinking, go was not the to deterioration because Fitzgibbons gave that for saying reason Mr. examine the other material, namely, were not that the Mr. misrepresentations that lies renders them immaterial. recanting Specifi- of the told the that if Mr. Powers “came Fitzgibbons cally, Mr. that be misrepresentation . . . would not a any back and corrected Fitzgibbons clearly wrong Mr. misrepresentation.” material the that when Mr. Powers “corrected” his when told the immaterial misrepresentation this rendered misrepresentation, investigation. to USAA’s they

The that lies become immaterial once are recanted idea to than the idea that to a more substance it lies one’s has little the falsely-stated rendered immaterial if company are Mr. Fitzgibbons’ not the “real” cause of loss. versions were lies is USA reasoning respect recanting A (defined learn “truth” as Mr. Powers’ latest eventually did that, therefore, company sinking) version of earlier lies. It to me materially affected Mr. Powers’ seems ever Fitzgibbons nor Mr. learned the that neither the company sinking. Only knows. “true” cause of materiality as it relates later revelations subject The Co., Fine v. Ins. “truth” discussed in Bellefonte Underwriters is denied, (1984). (2d 1984), U.S. cert. 725 F.2d 179 Cir. Fine, whether a false statement would be mate the issue was ultimately proved which it related to matter be rial if or whether disposition in the ultimate is decisive subject concerned a merely that the false statement sufficient investigation the insurance at reasonably company’s relevant to question answer to this was: time. The court’s materiality false is clear that law [a] statement[] not to be an insurance is company during turn out to have been. what the facts later judged by Id. at 183. Fine, “not whether materiality determined According subject deal with a later determined to be answers or not the false loss was “caused other than because the unimportant” factors dealt.” Id. at 184 (emphasis those with which the statements added). are if they might

False sworn answers material have affected the attitude and action They insurer. are equally may if have they material said to been calculated either to discourage, or mislead deflect company’s investigation time, might area that seem to the at company, relevant or productive investigate. area Fine, added). (emphasis 725 F.2d at 184 disposes Fitzgibbons’

Fine of Mr. explanation recanting of former untruths the cures and misrepresentations makes them case, immaterial. the being Fitzgibbons’ This neither expla- Mr. material, nation that false be statements cannot nor his explana- tion former lie the recanting that a cures defect and renders the lie immaterial, final, can his support conclusory opinion that Mr. “did not a misrepresentation.” Powers make material Fitzgibbons’ opinions Mr. are patently fallacious and unrelia- ble. One who makes a claim loss to an insurance company be lying just cannot excused for because his false rendition later been turns out not to have the true cause of the loss or because he caught later in a lie and the is recants false statement. face, On its the manner in a which boat would ordinarily, sinks always, if be being paramount not seen as importance and materiality the to insurance company being asked pay to loss; and would for the it not matter much an to investigating if company were, insurance the claimant’s misrepresentations fact, after the or causally recanted shown not to be related to the eventually-discovered cause the loss. For example, if Mr. had told USAA that his boat had been by hit an air-to-sea then, (after and a later missile at date he suspected that the boat), that, company going inspect to raise and the admitted actually, had not been hit missile but by a at all had collided reef, then, with a would see the probably, most air-to-sea missile story being a material misrepresentation part. as on his Under circumstances, such hypothetical accept few would Fitzgibbons- testimony lilce effect misrepresentation that the sworn by that his boat had been sunk by insured a missile was not a (a) material misrepresentation either because the story missile was false was not the “real” missile cause of the boat’s first, (b) or sinking because insured’s false statement was later new, by “true” replaced story. recanted jury’s It is hard to understand conclusion that Mr. Powers’ by false statements were “material” other than assuming jury must have Mr. accepted Fitzgibbons’ “expert” but baseless conclusion that Mr. Powers’ telling false stories about how the sank were not to the boat material companies’ investigation. claims It would appear also that the Fitzgibbons for given the reasons accepted must have

jury company a lie to one’s insurance about namely, that opinion, if the false are not not “material” facts occurred is how the loss if the insured recants a previous of the loss or the “real” cause case, reliable had no substantial or jury being lie. This a conclusion that Mr. it which to base upon before evidence misrepresentations swearing, concealments Powers’ false “material.” were not another, verdict on con- why jury reason There is second that, even if were The reason is it must be set aside. liability tract were not material as a question the lies in conceded law, trial court to permit was error for the matter of matters which should be decided to the opinion going receive an expert and not witness. itself properly advisory matter, not and Mr. Powers can recover do misrepresentations allowed tell Fitzgibbons When Mr. on his insurance claim. were not material misrepresentations that Mr. Powers’ and, effect, com- they that were not relevant to insurance in reach, what result to telling he was investigation, pany’s than the in favor of the claimant rather insur- namely, to decide company. ance advisory ques- notes condemn use of such

The referred-to as, Testamentary to make a will?” “Did T capacity tions have judicial be decided forum and not is a matter to “capacity” then, A legal “expert.” proper question, opinion mental to know the capacity “Did T have sufficient would be: object and the natural of his extent of his property nature and scheme of distribution?” The to formulate a rational bounty is, obviously, that questions the two kinds of difference between that is determinative of legal for a conclusion one calls does not. the other is evidential and controversy, questions have been asked about could Fitzgibbons Mr. story of the deteriorated exhaust telling Mr. Powers’ whether investigation,” or company’s “relevant to the insurance hose was importance” would attach to these person whether a “reasonable the attitude lies, “might affect the misrepresentations or whether in investigation.” and action of the its Mr. Fitzgibbons insurer manner; rather, testify bluntly did not in told the jury: “My is that Colonel Powers did not'make a opinion material misrepresentation.” legal This conclusion was an opinion that Fitzgibbons’ “told the what result to reach.” Mr. answer USAA’s defense dispositive liability to contract in this case. correctly

The jury was instructed on the issue of materiality fact and instructed that a is material if “a reasonable person to that fact” fact importance attach and if the “concerns a subject relevant to the reasonably company’s investiga- tion.” The only evidence Mr. Powers’ several inconsistent were or incompatible important stories7 not relevant to the investigation Fitzgibbons’ saying was Mr. so. Mr. Powers him- self does not how such be explain stories could irrelevant or unimportant brief, investigation. to an insurance his Golden, (2nd Powers cites to Pacific Indem. Co. v. 985 F.2d 51 1993), Cir. in support argument materiality his on the issue. case, Citing this Mr. Powers tells this court that a is not it might material unless

misrepresentation affect the attitude of the investigation, and action insurer or was discourage, calculated to mislead or deflect the company’s might in an area that have been relevant or investigate. productive to

Id. at 56. us, however, to tell

What Mr. Powers fails this case does He support position. his does not tell us how his misrepresen- tations and concealments would not affect the attitude and action insurer, or misrepresentations how concealments could discourage, be said not calculated to mislead or investigation. certainly deflect the It is clear company’s to me that conflicting Mr. Powers’ stories did affect the action of the com- (for pany action example, company’s spending some $300,000.00 boat); apparent, to recover and it is also from his admissions, own his false stories “calculated” to deflect investigation. the company’s for the explanation jury’s apparent conclusion that misrepresentations concealments were material is that exactly prompted 7It cannot be said what to tell varying Mr. Powers these trying stories other than manner that he influence the in which his being apparently claim was handled USAA. Mr. Powers himself believed impor his own mind that were of sufficient relevance and his statements willing telling company tance to the he was to risk lies about truly what happened. unfounded conclusions Fitzgibbons’ misunderstood became of Mr. Powers’ dispositive conclusions and that these unreliability the inherent and conclu- Because of contract claim. it opinion because sory Fitzgibbons’ nature of the Mr. this permitted opinion the trial court to have error for prejudicial judgment I would reverse the jury, be received evidence to for retrial Mr. Powers’ contract the trial court and remand of of the value of his boat. recovery action for

TORT CLAIMS brief, in Mr. Powers’ found summarized “[t]he As faith and fair good dealing the covenant of US A A had breached information to Col. fiduciary duty a disclose and breached this, damages awarded of compensatory For Powers. $350,000.00.” The antecedent of the “this” is USAA’s pronoun torts, USAA “had breached the namely, two commission of and breached a dealing fiduciary and fair good of faith covenant added.) duty (Emphasis to disclose.” known duty Breach to “disclose fiduciary facts” of $5 a of over million8 on a judgment the court affirms Today tort, exclusively by compa- committable brand-new called, fiduciary duty “breach of a to ‘disclose nies. tort is ”9 new majority opinion, As I understand this known facts.’ refusing the insurance company’s “tortoid” is based on “(1) requests photographs” part of of copies [that (2) to be when the Mikimbi was investigations], present claims $47,236.29 judgment 8The is for for the breach of contract $350,000.00 claims, $5 punitive damages. on the tort and million in way telling majority opinion 9There is no of from the whether an insurance fiduciary duty company’s independent tort breach disclose is tort or merely corollary Perhaps strangest or of the bad faith “sub-tort” tort. aspect majority opinion separate is creation of this new of the tort not as a “merely” “part duty good and “new cause of action” but as faith dealing” majority opinion correctly, If I and fair tort. understand fiduciary “component” is now a breach of relations tort the bad faith tort. investigative photographs withholding or other failures to If “disclose” tort, independent investigative is not an then this court materials should not If, $5 judgment entered on tort allow the of over million to stand. on the hand, company’s an insurance failure to “disclose” confidential inves other tort, tigative comprise “component” of the bad faith then materials I would Maupin’s my hearty agreement “merely” express concurring with Justice seriously opinion, that we must not take this case wherein realizes and that anomaly jurisprudence.” agree I represents “an in this area with the sub-tort, is, creation of this tort or or whatever it Justice that the doubtful, any, precedential and that the value “bench bar should be drawing any sweeping the future about conclusions it.” most careful in from 726

raised and not him where the telling boat was until three days (3) after USAA had possession; and to seal the Mikimbi to protect evidence Powers needed against to defend allegations that he had intentionally sank his boat.” Refusing [sic] “Powers’ requests” does look like the kinds of conduct that would justify suing insurance in the companies future for breach of what I see “duty Henceforth, as a non-existent to disclose.” insurance com- panies must hasten to open up their investigative files and not to “refuse” requests material contained in their files. not, course, I would disagree the majority’s saying that “the relationship between USAA and Powers was fiduciary in nature”; conjure but to a new and unnecessary tort action to be superimposed on the so-called is, “bad faith” tort I humbly suggest, a tortured jurisprudential solecism unknown to the law of torts and unique to the State of Nevada. (No. The trial 19), court’s instruction upon which this novel based,

tort action is stated: In order to recover plaintiff must establish by a preponder- ance of evidence that a fiduciary relationship existed between plaintiff and defendant and that defendant breached duty a to disclose known to plaintiff. facts There is no need to engage general in a discussion of the scope fiduciary relationships that might arise out of insurance con- tracts because we are dealing with tort claims relating to a very narrowly-defined specific duty, duty that was described in jury’s instruction as the “duty to disclose known facts to plaintiff” in connection with USAA’s of possible insurance fraud on the part Mr. Powers. Mr. Powers cites no authority to support position that an insurer has a fiduciary “duty to disclose known facts” to its insured during its investiga- tion of a suspected much less authority to support the existence of a tort called “breach of the duty to disclose known facts.” Even if some pertinent authority had been presented, I would have serious reservations judicial about the recognition of a tort based on an insurance company’s refusal to disclose to a claimant property all of the “known facts” relating to an investi- gation of the claimant for fraud.10

When I examine the nature duty-to-disclose of Mr. Powers’ tort claim in this case and take a look at the “known facts” alluded to Powers, it by Mr. becomes rather clear that Mr. Powers should Co., 10SeeMartin v. State Farm Mut. Auto. (D. Ins. Supp. F. 1997) (Although Nev. recognized Nevada special has contractual rela insured, tionship between insurer and it has never classified the relationship fiduciary duty giving breach.). as rise to a tort action for not be allowed to recover tort damages arising out of a claim that duty USAA breached a During disclose facts. fraud investiga- case, tions of the kind instituted USAA in this one would think that refusal to provide photographs or to permit person being investigated present during the investigation would be a rather accepted common and It circumstance. is hard to envision a normal, tort out action’s of such arising expected conduct on the part of insurance fraud investigators.11 company’s duty

If “breach to an insurance of disclose known action, facts” an and tort independent is not self-sufficient then $5 judgment the of over million should be reversed. If an insur-

ance to reveal company’s investigative refusal photographs is said tort, bad “component” this court to be a faith then I (as the that such a is ground judgment put by dissent on Justice Maupin) an in of “anomaly jurisprudence.” unfounded this area good dealing Breach the covenant and of faith of fair jury The was instructed that “an insurance company breaches and duty dealing its of faith fair with its good policyholder by cause, refusal, to proper compensate policyholder without policy” a loss covered the and that “a denial of a claim in bad fails, faith occurs when an insurance without company proper cause, due pay to the amount under the insurance policy.” added.) jury The on the (Emphasis was not instructed of meaning the phrase, proper “without cause.” the tort of breach the implied instruction on of covenant of good dealing faith and the court given by fair trial is incomplete necessary the of this fails to state elements tort. The vital element of the “bad faith”12 is the insurance so-called tort com conduct, in wrongful merely denying a claim pany’s incor and, cause, therefore, rectly without but in “proper” denying the claim, asserting complains 11In this tort Mr. Powers because USAA refused, demand, material, provide evidentiary on him with certain all of through discovery procedures. which was available normal Mr. Powers damages they divulge, upon wants to mulct USAA in because refused to demand, subject the confidential matter of USAA’s misrepresentation part dangerous and fraud on the of Mr. Powers. What a precedent compensatory we were punitive it would be if to allow damages against just companies they to be awarded insurance because do not respond under-investigation demand an the company the insured that provide photographs up company’s exhibits that make fraud investi gation of its insured. of breach of the the torts faith” in connection with of the term “bad 12Use criticized in dealing and fair is sometimes good faith implied covenant of nevertheless, throughout literature; form I will abbreviated use this legal opinion. wrongfully, claim without reasonable basis or with the it denying rightful a claim. See knowledge Falline v. (1991). GNLV 107 Nev. Corp., P.2d 888 A mere denial of a “improper” incorrect or claim is not tortious. A may, good utmost of faith and company propriety, deny later, court, proven to have that its denial of the was, indeed, claim and that the claimant improper entitled to given, Under the instruction as an indemnity. all insurance com have to do to liable to pany would become its insured for commis faith sion of the bad tort would to deny mistakenly a claim cause,” say, “without that is to proper deny questionable should, claim have paid that it rather properly, common —a occurrence in insurance world. “without cause” have argue proper could very It is hard denying to have meant claim been understood knowledge disregard or “with or reckless “unreasonably” gave in this case no The instructions claim.” rightfulness meant in the “proper” as to what the word context hint to the case, present instruction. In was not bad faith was; say, and the seems cause” instruction told what “proper when denies a claim company incorrectly, (that in a manner with which the say, is to improperly been “without proper the claim has denied disagrees), then cause,” itself, by of a claim “without proper cause.” Mere denial is, course, It liability. create common to tort is insufficient that, make occasionally, companies mis- knowledge which they by for are later held a deny disputed takes and claims denied incorrectly “improperly” payment. to or court have decisions, determined later to have been made These claims cause, cannot form the proper and thus without basis incorrectly good covenant of implied tort for breach of faith for actions dealing. and fair Harrah’s, 217, 215, in v. 99 Nev. This ruled Aluevich court 986, (1983), may cause of that there be “a action in 660 P.2d covenant of faith fair good breach of an implied tort in fairly good insurer to deal faith with dealing where an fails cause, compensate to refusing, proper without its its insured added.) policy.” (Emphasis a loss covered insured for as that an in holding were to be read action Insofar as Aluevich merely company’s refusing out of an insurance to tort can arise was later determined have been a which refusal pay is not in incorrectly reading or such accord- improperly, made the bad relating law faith tort. generally-accepted ance with the in does not include the language Aluevich essential quoted The must, wrongfulness that in any or reckless element of intentional action, the incorrect or accompany “improper” bad faith tort (“without company’s improper denial of a claim. An insurance cause”) be an “actual accompanied by denial must or proper of the absence of a reasonable basis for deny- awareness implied MGM, of the Am. Excess Ins. Co. v. ing policy.” benefits 601, 605, (1986). 1354-55 Nev. 729 P.2d Instruction, not the jury No. does advise that a quoted (even denial of an insurance claim improper mere incorrect or if that the insurer failed appear “improperly” it is later made to not, therefore, obligation abide and did have a by its contractual not, itself, claim) denying cause for the basis “proper” liability for breach of the recovery. implied for tort Tort covenant dealing faith and fair to have been in good appears imposed that did this case on the basis of an instruction not contain all of tort; however, of the USAA did object the essential elements and, thus, jury’s the instruction acceded to the being drasti- cally regard liability. misinformed with to USAA’s stated, USAA this

Although, permitted as case to decided jury, this does not mean that USAA by misinstructed has no the tort right challenge judgment under discussion. USAA brief that the evidence does not argues support a verdict for good breach of the covenant of faith and fair implied dealing. correctly, further that the “mere argues, USAA entitlement to damages prove duty contract . . . does not a breach of the of good USAA dealing.” correctly argues faith and fair also that the “insured prove position must also unreasonableness that, case, taken the insurer” and in this Mr. Powers failed to element of the tort. I with agree argument. this prove case, considering judgment the bad faith tort entered in this I regard note that the was instructed to one particu- in which the faith covenant was claimed good lar manner to have breached, namely, by been USAA’s “refusal” to pay Mr. under the Accordingly, charge, Powers’ claim. could not have been held liable for such conduct as untoward delay might or with bad faith which have occurred payment after (for pay USAA’s “refusal” to the claim example, alleged to by of evidence USAA order defeat Mr. Powers’ “planting” claim). majority things The reliance on such as USAA’s done, and “investigation [being] improper, incomplete poorly procedures” misplaced. Although violation of USAA’s own a might have concluded that the firms with whom USAA incomplete contracted did an or poorly done, bring would not in this case to in a bad permit verdict, they liability were not instructed that could faith because had, they they and if negligent investigation; be based on a 730 Further, note, been, obviously,

have instructed. I improperly companies found for the insurance on Mr. Powers’ unfair settlement suit. policies claim case, finding liability tort in this under the basis given jury, bad faith tort instruction to is USAA’s to refusal claim, refusal that was based on Mr. a Powers’ “false pay legitimate or on USAA’s belief swearing” misrepresentations had sunk his own boat. that Mr. Powers 1004, In Falline GNLV 107 Nev. 823 P.2d Corp., v. 888 (1991), liability held that for there to be under this this court tort “ a there must be an ‘absence of reasonable basis for denying knowledge and the defendant’s or disregard benefits . . . reckless ” denying the lack of a reasonable basis for the claim.’ Id. at Co., United & Fidelity Franks v. States Guar. (quoting 1985) (Ariz. App. (quoting P.2d Ct. Noble v. National Co., (Ariz. 1981) (en banc)). Am. Life Ins. 624 P.2d 866 a case for the tort of prima order to establish breach of the facie covenant, then, Mr. Powers had prove faith to two elements good tort, (1) no grounds had reasonable for refusing (2) the claim and that USAA knew or pay recklessly disre- the fact that there was no reasonable garded refusing basis for proof the claim. There is no such in this record. pay inherent in the problems jury’s Aside from an receiving tort, on the bad faith the facts of incomplete instruction this case (even instruction) fall short of under a correct supporting any liability arising version of bad faith tort out of USAA’s refusal case, Under the this claim. circumstances of this is difficult pay in which USAA could be held any to conceive of scenario to have grounds deny had no reasonable claim or that it refused to rightful claim with an awareness that it had knowingly no pay advised, deny the claim. USAA had been grounds reasonable formal, denial of the shortly before its written indepen- Spiegelfeld, dent Mr. von attorney/investigator, “Mr. very are inconsistent and make little Powers’ statements sense.” evaluator of the Spiegelfeld, independent Mr. von claim, advised USAA “that Mr. Powers’ claim should be denied that the for denial should be that the loss was bases ‘caused ” at the direction of a covered intentionally by person,’ or be voided the ‘false policy swearing, “that should conceal- material by any ment or facts covered misrepresentation ” complicity between guilty Unless some Mr. von person.’ shown, and USAA were the von letter Spiegelfeld Spiegelfeld evidence that virtually USAA was not unopposable provides awareness that there was no acting wrongful with the “reasonable MGM, See denying policy.” basis for benefits of 102 Nev. at at 1354-55. 729 P.2d We to be mindful must continue that Mr. Powers lied to USAA and that he did not tell the truth until he felt threatened by USAA’s to raise the boat from the plan bottom of the sea. USAA with a dealing was self-admitted liar. This alone prompted further on the inquiry part USAA. When this is added to USAA’s evaluation of the physical evidence and Mr. Powers’ multiple inconsistent and versions of the implausible sinking, USAA had be appears what to me to sound reason to exercise caution in all, with claim. All in dealing very this is difficult to find in this record indication that USAA knew that Mr. Powers had a it, nevertheless, valid claim and that knowingly or recklessly denied the claim in the that it knowledge was dealing with a rightful claim. argues,

USAA and I agree, liability on Mr. Powers’ bad faith claim cannot sustained if USAA’s denial was accompa- nied factual or legitimate legal issues regarding the validity of Falline, 888; the claim. See 107 Nev. 823 P.2d National Dutton, Life Sav. Ins. Co. v. (Ala. 1982) 419 So.2d (“[I]f the evidence produced by either side creates a fact issue and, thus, regard validity to the of the claim the legitimacy thereof, of the denial the tort claim must fail and should not be jury.”). submitted to the In deciding to “refuse” to honor Mr. USAA had to deal with a number of factual to whether relating issues13 Mr. Powers intentionally scuttled his boat and with a critical legal issue as to whether Mr. Powers’ false misrepresentations and concealments were “material” under the terms of the policy.

It is worth noting that the trial judge, after hearing all the evidence, did not see this as a bad faith case. While discussing fees, attorney’s the issue of the trial judge made the following comment: already

I’ve indicated that I thought defended in [USAA] good faith. I can’t find that the insurance defended company this without grounds reasonable because of . . . several factors involved. was a that he could possibility have sunk the [T]here boat himself, there conflicting and so is some evidence to that 13Early investigation suspected on in its that Mr. lying Powers was perhaps may get and that he have sunk his own boat to money. the insurance heightened suspicions investigations when USAA’s disclosed that $30,000.00 deeply in debt Mr. Powers was and that he owed to his former reports wife. One of indicated that Mr. Powers “obviously strapped money desperate. Repeatedly Mr. Powers bankruptcy company asserted that would have to file for soon.” The trying unsuccessfully also aware that Mr. Powers had been to sell his boat in pay order to off his debts.

effect, so I can’t find that the insurance company defended in bad faith. It difficult indeed to challenge the trial court’s perception case; had, and it is rather obvious that USAA of necessity, struggling

been with a number of legitimate factual by issues time it decided finally deny to this claim. In making its decision deny coverage, to USAA also had to deal with legitimate legal relating materiality issues of Mr. Powers’ false accounts of sinking. rather Although clear that USAA made its decision to “refuse” this claim on the many legitimate basis of factual and issues, legal Mr. Powers was able to find an “expert” who was willing relating issue, to offer an opinion ultimate liability namely, whether USAA guilty of committing the tort of breach of the good covenant of faith and fair dealing. This evidence opinion was offered in the form expert testimony by Fitzgibbons, Mr. Patrick Fitzgibbons same Mr. that told the jury that Mr. Powers’ lying his insurance company about how his boat sank was not “material.” Fitzgibbons Mr. took the stand regard this was asked the question: you

Can tell you this what gleaned from your facts review of USAA’s file handling of Colonel Powers claim that would breach the covenant of faith good and fair dealing? [Emphasis added.]

Mr. evaded the Fitzgibbons question entirely and gave the following question: answer to Yes, The implied good covenant of faith and fair dealing is something by that is created the law try to equalize— (answer discontinued because of objection) track, get Fitzgibbons To Mr. on Mr. back Powers’ attorney Fitzgibbons asked Mr. a leading question which is remarkably you like the “Have proverbial, stopped beating your wife?” if, Without ever asking Fitzgibbons Mr. in his opinion, USAA faith, duty had breached its of good Mr. Powers’ counsel asked tell Fitzgibbons Mr. how USAA had breached its good-faith duty to The Mr. Powers. question put to Mr. Fitzgibbons way: this by way

What did USAA do of breaching its covenant good faith and fair dealing in this case? gave

Mr. Fitzgibbons following answer: member, right. 22-year All USAA had a been insured with years, USAA for 22 a retired colonel in the Air Force who made, time, recall, years’ had in that 22 Ias one prior claim. And that was when his automobile was hit trying that was to land. Colonel airplane Powers lost his which he yacht, had done most of the yacht, work on this himself, building yacht put time, this in a great deal of effort, and He turned in expense. this claim to USAA within days three or four after the yacht sank. in my

And USAA should opinion, have taken this claim in good They faith. should have paid claim within 30 days them, on it being reported to and this is what they are statute, required to do this particular to deal with their insured in faith good fairly.

Based on the facts recited Mr. Fitzgibbons, namely, that Mr. Powers had been with USAA for twenty-two years and had colonel, made only one was a retired had yacht,” “lost his had done most of the yacht, work on the and had turned in his claim within three or four days, Fitzgibbons testified that “USAA should have taken this claim in good faith” and that it “should have this claim within paid days.”14 issue, course, is whether USAA acted reasonably, and attorneys even if were to be allowed testify as to whether tortious, companies guilty conduct, bad faith is obvious that had Fitzgibbons Mr. no rational basis for his opinion. I Fitzgibbons’

Unless misread Mr. opinion, is telling the claim, jury that USAA should have paid this and within thirty days, because Mr. Powers was with the company for twenty-two colonel, was a retired did most of the yearfe, work on his own and made his claim within three or yacht days. four Fitzgibbons’ Mr. that USAA should opinion have paid fraudulent claim thirty days within the time that Mr. Powers highlights untenability made it the overall and extravagance of the Fitzgibbons testimony. lying With a claimant who ultimately was fraud, aby grand jury indicted federal for insurance no insurance could be company pay such a claim “within expected testimony Mr. is the days.” Fitzgibbons’ only evidence upon jury could have relied in reasonably which support Mr. Fitzgibbons 14Mr. also told the that when a in an earlier criminal proceeding acquitted boat, intentionally scuttling Powers of his USAA paid have promptly point apologized “should claim at that to Colonel they course, for what opinion, Powers ignores caused to be done to him.” This misrepresentation ground denying the material for the claim and acquittal represents adjudication seems to assume that the an of the merits of is, face, position opinion USAA’s in this validity. case. This on its of no claim, testimony clearly tort and his is insufficient for its intended purpose.15

Finally, Fitzgibbons’ opinion Mr. that USAA “should have good certainly taken this claim in faith” does not provide evi- dence would a verdict support which based on USAA’s having breached the covenant of implied good faith and fair dealing. Obviously, USAA could have denied this claim when it it, have” without paid being guilty “should of bad It faith. could faith, merely incorrectly, have but in denied good a disputed conduct, claim. To evidence of bad faith provide Fitzgibbons Mr. have had to have testified not only that USAA should have claim, but that taken its failure to accept claim was accompanied by wrongful knowing a denial of the a knowing denial of a claim that the knew company or should have Merely known was a valid claim. stating USAA “should good have taken this claim in faith” does not furnish prima liability for tort case this case.16 facie for the tort of make a case prima failed to facie brief, reply argues 15In “ample his Mr. Powers that there is evidence to support jury’s only this verdict.” Mr. Powers then cites in brief two bases damages. that he entitled to for his contention recover tort One is the testimony; Hall, Fitzgibbons testimony expert other is of James “an brief, managing investigations.” According in the field of to the Mr. Hall “explained improper, in detail how USAA’s had been incom done, plete, poorly procedures.” and in violation of showing USAA’s A employed sloppy investigating procedures does tend to show that grounds disputing coverage (or USAA had no reasonable or that it knew recklessly disregarded) that there was no reasonable disputing basis for coverage. Fitzgibbons’ testimony prima If Mr. fails to furnish tort facie case, there no tort There is no tort case. case. McClelland, Fire v. 16Inote that in United Insurance Co. 105 Nev. (1989), n.l, approved expert’s court 780 P.2d 196-97 n.1 (1) company “responsible policy opinion that the holderQ” (2) Fitzgibbons pay If Mr. knew that it should that claim. had testified not claim” but that USAA “should have taken the also that USAA “knew claim,” refused, so, pay that it should but nonetheless to do then such testimony prima liability for a would have formed the basis tort in this facie testify. He did not so case. passing Fire I would note in that United Insurance witness testified faith, “guilty company the insurance was of bad and was liable for 510, damages.” testimony given punitive Id. at 780 P.2d at 196-97. This testimony previous company rebuttal counter offered the insurance on testimony relating previous deposition that he to the witness’ “had not seen part appellant punitive damages.” that warranted conduct on the Id. at holding at in United Fire Insurance should not be 780 P.2d 197. authority Fitzgibbons proposition for the that Mr. would be taken as allowed that, opinion, testify guilty in his on direct examination punitive the bad faith tort and was liable to Mr. Powers for commission of damages. breach of the implied covenant good faith and fair dealing. failed Having in his I proof, reverse Mr. Powers’ tort judgment for breach of the implied covenant of good faith and fair dealing. MARTINEZ, Appellant,

RAMON v. THE Respondent. NEVADA, STATE OF

No. 29172 CACERAS, Appellant, ARMANDO v. THE Respondent. NEVADA, STATE OF

No. 29173 ELIERSE, RUIZ, JORGE aka JORGE RAMON aka DIAZ, RAMOR, Appellant, BRAYAN aka WILSON v. Respondent. NEVADA, THE STATE OF

No. 29174 July 961 P.2d 143 Kennedy, Kirk T. Las for Vegas, Appellants Martinez and Caceras. Pallares, Las Vegas, Appellant

Jose C. Elierse. General, Papa, Attorney Frankie Sue Del City; Carson Stewart Bell, Attorney Tufteland, L. District and James Chief Deputy Attorney, County, Clark for Respondent. District notes position of this support USAA cites model, USAA, (the claims Rule of Evidence 704 Federal 50.295). The cited of NRS notes caution enactment Nevada’s merely which would tell the opinions “the admission of against reach, in the the oath- somewhat manner of what result in Mr. Powers’ contract day.” earlier sole issue of an helpers the admitted were mate- misrepresentations claim was whether voided, material, the policy were misrepresentations rial. If the immaterial, misrepresentations If the prevails. and USAA

Case Details

Case Name: Powers v. United Services Automobile Ass'n

Court Name: Nevada Supreme Court

Date Published: Jul 16, 1998

Citation: 962 P.2d 596

Docket Number: 26794

Court Abbreviation: Nev.