Powers v. United Services Auto. Ass'n

• Decision Date: 16 July 1998
• Docket Number: No. 26794,26794
• Citation: 962 P.2d 596,114 Nev. 690
• Parties: William R. POWERS, Appellant/Cross-Respondent, v. UNITED SERVICES AUTOMOBILE ASSOCIATION and USAA Casualty Insurance Company, Respondents/Cross-Appellants.
• Court: Nevada Supreme Court

Page 596

962 P.2d 596

114 Nev. 690

William R. POWERS, Appellant/Cross-Respondent, v. UNITED SERVICES AUTOMOBILE ASSOCIATION and USAA Casualty Insurance Company, Respondents/Cross-Appellants.

No. 26794.

Supreme Court of Nevada.

July 16, 1998.

Brenske & Christensen, Raleigh, Hunt & McGarry, Las Vegas, for Appellant/Cross-Respondent.

Beckley, Singleton, Jemison & List and Daniel F. Polsenberg, Pearson & Patton, Las Vegas; Howard, Moss, Loveder, Strickroth & Walker, Santa Ana, CA., for Respondents/Cross-Appellants.

Bradley, Drendel & Jeanney, Reno, for Amicus Curiae Nevada Trial Lawyers Association.

OPINION

ROSE, Justice.

Retired Air Force Colonel William Powers lived on his boat, the "Mikimbi." On April 28, 1987, en route from Texas to Florida through the Gulf of Mexico, the Mikimbi sank. On May 2, 1987, Powers reported his loss to USAA, his insurer for thirty-five years. After USAA commenced its investigation, it accused Powers of intentionally sinking his own boat. On December 14, 1987, eight months after the Mikimbi sank, USAA denied Powers' claim. In May 1989, USAA instigated criminal charges against Powers for pursuing an allegedly false insurance claim, including wire fraud and mail fraud. At trial, Powers was acquitted.

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

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

FACTS

Retired Air Force Colonel William Powers lived on his boat, the "Mikimbi." On the afternoon of April 28, 1987, en route from Texas to Florida through the Gulf of Mexico, Powers fell asleep aboard the Mikimbi. He awoke to the odor of smoke and went below to find water entering the engine room. The water was above his ankles. Powers noticed that an exhaust hose had disconnected from the engine so that fumes and sea water were being pumped into the engine room. He attempted to save his boat, unsuccessfully trying to reattach the hose and to close a gate valve at the thru-hull, which was frozen in the open position.

Powers felt extremely sick and confused from inhaling engine room fumes and carbon monoxide. He vomited a few times from his exertion and the fumes. In a panic, he finally stopped the water from continuing to siphon into the boat by cutting the hose at the valve near the thru-hull. Water was still coming into the boat because it was leaning to the port side with the thru-hull below sea level. Powers stuffed a sheet into the thru-hull, temporarily stopping water from entering the boat.

Powers then called the U.S. Coast Guard for help, and boarded a life raft with a few provisions. At the direction of the Coast Guard, a commercial fishing boat, captained by Richard Underwood, rescued Powers. After resting aboard the fishing boat, Powers re-boarded the Mikimbi in an attempt to save it. He found that the sheet previously stuffed into the thru-hull had come out, and more water had entered the boat. He stuffed more rags into the opening. At approximately 6:55 p.m., Powers informed the Coast Guard that the leak was under control. The Coast Guard parachuted an emergency water pump to Powers, who spent thirty minutes unsuccessfully attempting to retrieve the pump from the ocean. Powers then experienced chest pains. The Coast Guard insisted that Powers abandon his boat.

After Powers left, no one attempted to board the Mikimbi. The boat continued to take on water, and eventually sank at 11:30 that night. A Coast Guard helicopter flew Powers to land, where an ambulance took him to a nearby hospital. When his blood was tested at 12:30 a.m., it showed the presence of (1) carbon monoxide from breathing fumes and (2) elevated enzymes from muscle damage due to physical exertion. He spent the night in the intensive care unit and left the hospital the next day against medical advice. USAA never reviewed Powers' medical records during its investigation of his claim.

On May 2, 1987, four days after the Mikimbi sank, Powers reported his loss to USAA, his insurer for thirty-five years. He believed that the woman to whom he described the incident did not understand his explanation of events. USAA then decided to assign Powers' case to its "Claims Security Unit" (CSU), which investigates fraud. Wayne McNeely, a CSU special investigator, was designated as the chief investigator of Powers' claim. In his May 1987 telephone conversation with McNeely regarding the sinking of the Mikimbi, Powers stated that the exhaust hose had "deteriorated" at the thru-hull. He used the term "deteriorated" to simplify his explanation (McNeely had no expertise in marine investigations), and because he was concerned that USAA would automatically deny his claim if he explained that he had deliberately cut the hose.

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

USAA had hired a local salvager, Harry Davis, to oversee the raising and investigation of the Mikimbi, notwithstanding Davis' lack of training as a marine investigator. Although Davis had told USAA that the boat could be raised at a cost of approximately $30,000, the actual cost to USAA of raising the Mikimbi (which involved numerous failed attempts) exceeded $200,000--a cost approximately double the amount for which the Mikimbi had been insured. Don Wimberly, district manager of the CSU, wrote in an October 27, 1987 internal USAA memo that "Davis has completely misled us all for his own purposes on the cost of the [Mikimbi] project."

USAA also allowed Davis to interview Captain Underwood--the only witness to the Mikimbi sinking who USAA interviewed. Davis recorded this interview on an audio tape; however, there was evidence that only selected portions of Captain Underwood's statement were recorded. USAA failed to produce this tape at trial. USAA did not interview any other witnesses to the sinking of the Mikimbi. On October 2, 1987, Davis made a videotape of the Mikimbi, purportedly depicting the contents of the boat at the time it was raised. At trial, Davis admitted that his videotape was a "re-creation" and that he had moved items allegedly found on the boat for purposes of the videotape. On the tape, Davis held up a pipe wrench which he alleged had been found near the thru-hull and could have been used to shut the frozen gate valve. Powers maintained that no such wrench had been present on his boat at the time of sinking. At trial, Powers' expert witness--a metallurgist--testified that the wrench depicted in the videotape did not show corrosion consistent with having been submerged on the boat in ocean water for five months. In any event, USAA failed to produce the wrench for analysis by Powers' expert.

The videotape also depicted an "adaptor kit"--a large hose and two clamps which purportedly could have been used by Powers to repair the hose at the thru-hull. Again, Powers denied having had these items on his boat when it sank, and his expert testified that the condition of the clamps indicated that they had not been submerged in ocean water for five months. At trial, McNeely admitted that even had it been present on the Mikimbi, the "adaptor kit" would not have enabled Powers to repair a cut hose.

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

The videotape and photographs also showed that hoses from the toilet and the raw water intake pump had been disconnected. Davis told McNeely that these hoses could have been intentionally disconnected as a means of sinking the boat. However, Powers maintained that water would not enter the boat if those hoses were disconnected--he explained that one of the hoses simply took waste from the toilet to a holding tank. McNeely never investigated these inconsistent positions and adopted Davis' conclusions.

In mid-October, USAA asked Powers to submit to an examination under oath; Powers complied. At this examination, Powers reiterated the manner in which the boat had sunk; his testimony was consistent with the information he had provided to McNeely in July, prior to the raising of the Mikimbi. Shortly after this examination, Powers asked USAA to...