Opinion ID: 1405600
Heading Depth: 1
Heading Rank: 4

Heading: The jury's finding of bad faith is supported by substantial evidence.

Text: Allianz first contends that there is insufficient evidence to support the jury's finding of bad faith because it had reasonable grounds upon which to deny making full payment on Bartgis' claim. Specifically, Allianz asserts that based on the language of the ancillary charges limitation provision, a genuine issue existed as to its obligation under Bartgis' policy which, in turn, obviates its bad faith liability for failure to pay Bartgis' claim. [2] We disagree. It is well settled in Nevada that every contract imposes upon the contracting parties the duty of good faith and fair dealing. Hilton Hotels Corp. v. Butch Lewis Productions, Inc., 109 Nev. 1043, 1046, 862 P.2d 1207, 1209 (1993). As we explained in Ainsworth v. Combined Insurance Co., 104 Nev. 587, 592, 763 P.2d 673, 676 (1988), [t]he relationship of an insured to an insurer is one of special confidence. [3] A consumer buys insurance for security, protection, and peace of mind. (footnote added). While an insured assumes various duties under an insurance contractsuch as the timely payment of premiumsthe insurer assumes the concomitant duty to negotiate with its insureds in good faith and to deal with them fairly. Id. Bad faith is established where the insurer acts unreasonably and with knowledge that there is no reasonable basis for its conduct. Guaranty Nat'l Ins. Co. v. Potter, 112 Nev. 199, 206, 912 P.2d 267, 272 (1996). In reviewing a determination of bad faith, this court will not disturb a trial court's findings of fact unless they are clearly erroneous and not based on substantial evidence. Id. In Sparks v. Republic National Life Insurance Co., 132 Ariz. 529, 647 P.2d 1127, 1137 (Ariz.1982), the Arizona Supreme Court faced a similar situation wherein the defendant insurance company asserted that the evidence was insufficient to support a finding of bad faith because its obligation under the insurance contract was `fairly debatable.' In Sparks, the insureds suffered catastrophic injuries in a small plane crash while their health insurance policy was in effect. Id. at 1131. Subsequently, after the insured's small business went bankrupt due to their debilitating injuries and inability to work, the insurer terminated their health insurance policy for underpayment and denied them any further medical benefits for injuries sustained while their policy had been in force. Id. In rejecting the insurance company's argument that its obligation pursuant to the policy was debatable due to a certain policy provision, and in concluding that substantial evidence supported the giving of the bad faith instruction, the Sparks court held: We disagree with the [insurance company's] contention that an insurer's belief that a portion of its insurance contract precludes coverage raises an absolute defense to a claim of bad faith. If the insurer's interpretation of its own contract as excluding coverage could render an insured's claim fairly debatable, then insurers would be encouraged to write ambiguous insurance contracts, secure in the knowledge that an obscure portion of the policy would provide an absolute defense to a claim of bad faith. Although the insurer's belief that the validity of the insured's claim was fairly debatable is a defense to a charge of bad faith, such a belief is a question of fact to be determined by the jury. Id. at 1137. In similar fashion, we reject Allianz's assertion that its interpretation of the ancillary charges limitation provision in Bartgis' policy provided reasonable grounds upon which to deny Bartgis' claim, thereby sheltering it from bad faith liability. To the contrary, substantial evidence was presented to the jury from which it could have concluded that Allianz and Wohlers had engaged in bad faith. Specifically, the jury heard evidence of the November 1990 letter from Wohlers to Bartgis, which had been pre-approved by Allianz, that made no mention of the harsh ancillary charges limitation provision. Further, the evidence adduced at trial established that in the same letter, Allianz and Wohlers made the significant misrepresentation that the new Allianz policy contained comparable benefits with Bartgis' previous MONY policy, a policy which did not contain the ancillary charges limitation provision. Additionally, the jury heard evidence that the defendants continued to conceal the ancillary charges limitation provision in subsequent communications to Bartgis. Finally, the evidence presented at trial established that by way of Allianz's and Wohlers's tortured interpretation of the arcane ancillary charges limitation provision, Bartgis' policywhich Allianz and Wohlers had ostensibly represented as a comprehensive major medical insurance policycovered only hospital room and board. By interpreting the policy in a manner that denied coverage for all medically necessary procedures and expenses such as the operating and recovery room expenses, anesthesia, all medications, sutures, and roughly ninety percent of Bartgis' hospital bill, Allianz and Wohlers deprived Bartgis of the peace of mind and security for which she had bargained. Based on these facts, we conclude that Allianz's failure to inform Bartgis of the significant reduction in coverage, its representation that coverage under the two policies was comparable, its absurd interpretation of the ancillary charges limitation provision, and its denial of Bartgis' claim pursuant to that provision, were unreasonable. Accordingly, we conclude that the jury's finding of bad faith is supported by substantial evidence.