Court Opinion

ID: 9545401
Source: CourtListenerOpinion
Date Created: 2023-08-07 17:11:31.807321+00
Date Added: 2024-06-11T15:14:41.428595
License: Public Domain

Maupin, J.,
concurring:
The opinions of Rose, J., and Springer, C. J., argue with equal elegance and persuasive force the points made by both sides of this controversy at trial. I write separately because I would prefer to review, not re-try, this matter.
USAA correctly argues that, in light of its exoneration on the causes of action alleging malicious prosecution, intentional infliction of emotional distress, and violation of the Unfair Claims Practices Act, any material representation in the claims process by Mr. Powers to USAA would void any recovery in this matter.1 *707However, in the context of this case, I cannot conclude that the materiality of the misrepresentation was proved as a matter of law.
Ordinarily, a claimant who lies to an insurer has precious little right to complain when his or her claim is denied. Certainly, Mr. Powers’ admission through counsel that he initially lied about the sinking of his boat, the Mikimbi, would immunize USAA from bad faith or “fiduciary” liability for a preliminary refusal to pay this claim, and for its undertaking of a comprehensive investigation thereafter.2 It was the nature of the investigation and the failure to pay after the investigation was complete that provided legitimate “fodder” for Mr. Powers’ claims of bad faith and breach of contract.
As my colleagues suggest, the larger body of evidence submitted for consideration by the jury was vigorously disputed. Quite uniquely, the trial court was confronted with evidence of Mr. Powers’ attempts to mislead the carrier during the initial stages of the claim, evidence of a shoddy and unprofessional investigation by USAA, an ill-advised referral for prosecution by federal authorities, conflicting evidence regarding how the Mikimbi sank, and allegations that agents of USAA had planted evidence to bolster its claim that Mr. Powers was guilty of sabotage. Thus, the many excellent arguments that did exist for and against the imposition of liability were severely undermined by the “extracurricular” activities of both parties. Although USAA may have reasonably entertained suspicions and developed competent circumstantial evidence implicating Mr. Powers in the loss of the Mikimbi, the questions of whether Mr. Powers sunk the boat3 and whether the evidence developed by USAA to that effect justified denial of the claim with or without “proper cause” were, in my opinion, for the jury.4
Because there is no doctrine in Nevada of “comparative” bad faith between an insured and an insurer, and because this case was replete with competent evidence, albeit disputed, of misconduct by both sides, I conclude that the trial court properly submitted the issue of the materiality of Mr. Powers’ misrepre*708sentations to the jury. It was the finding against USAA on this issue that provided the predicate for the breach of contract and bad faith awards.
As to the verdict regarding breach of fiduciary duty, counsel for Mr. Powers contended at oral argument that Mr. Powers sought to establish a claim for a limited fiduciary obligation. The jury was instructed on this issue as follows:
Plaintiff seeks damages for a breach of a fiduciary relationship between plaintiff and defendant. The duty owed by an insurance company to an insured is fiduciary in nature. In order to recover plaintiff must establish by a preponderance of the evidence that a fiduciary relationship existed between plaintiff and defendant and that defendant breached a duty to disclose known facts to plaintiff.
A fiduciary relationship exists when one has the right to expect trust and confidence in the integrity and fidelity of another.
This special relationship exists in part because, as insurers are well aware, consumers contract for insurance to gain protection, peace of mind and security against calamity.5
By use of the term “fiduciary in nature,” the instruction seems internally inconsistent. First, this language implies a general, not a limited, fiduciary relationship.6 Second, an obligation to disclose known information is not, in and of itself, fiduciary. Third, Mr. Powers’ attorneys conceded at oral argument that a relationship which is fiduciary “in nature” in this context only means that the insurer must “deal fairly” with its insured. This, of course, does not distinguish this alleged special relationship from any other ordinary contractual relationship. Further, as argued by USAA, first-party claims do not, of necessity, implicate a fiduciary relationship as in the case of third-party claims. This is *709because, to a degree, the relationship between the insurer and the insured in first-party claims may, in fact, become adversarial. See Beck v. Farmers Ins. Exch., 701 P. 2d 795, 800 (Utah 1985).7
Here, however, the definition of a “fiduciary” relationship in the jury instruction is so innocuous as to add little or nothing to the elements of Mr. Powers’ bad faith claim. The instruction is devoid of the standard language defining this tort; i.e., that “ ‘one party gain[ed] the confidence of the other and purported] to act or advise with the other’s interests in mind . . . .’ ” Perry v. Jordan, 111 Nev. 943, 947, 900 P.2d 335, 338 (1995) (quoting Kudokas v. Balkus, 103 Cal. Rptr. 318, 321 (Ct. App. 1972)), or that USAA was in a “ ‘superior position to exert unique influence of the dependent party. . . .’ ” Hoopes v. Hammargren, 102 Nev. 425, 431, 725 P.2d 238, 242 (1986) (quoting Barbara A. v. John G., 193 Cal. Rptr. 422, 432 (Ct. App. 1983)). Thus, because the definition of a fiduciary relationship added nothing to the duties attendant to the covenant of good faith and fair dealing, implied in every contract, providing this instruction to the jury was harmless error.
I would note that the nature of this case represents an anomaly in this area of jurisprudence. Thus, it is only of marginal prece-dential value. The bench and bar should be most careful in the future about drawing any sweeping conclusions from it.8

Although the malicious prosecution claim (based on the federal prosecution of Mr. Powers for fraud), and the unfair settlement practices and intentional infliction claims were based on several alleged acts that, if proved, were also evidence of bad faith, a successful outcome in favor of USAA on those claims does not compel the conclusion that the verdicts were inconsistent. The jury could have concluded that Mr. Powers failed to prove elements of those claims that were not essential to the claim of bad faith. It is also possible, if not probable, that the jury concluded Mr. Powers had “overpleaded” his case and, thus, the claims upon which USAA was exonerated were simply duplicative of the bad faith claim.

Thus, in my view, the fact that the cost of the investigation, including raising the Mikimbi from the ocean floor, far exceeded the value of the claim is irrelevant to the resolution of this matter.

If the jury believed that Mr. Powers did not sink the boat, an issue central to this case, the misrepresentation would have been immaterial as a matter of law. In this connection, I would note that literally every issue in this appeal, save the post-judgment interest dispute, would have been rendered moot if the jury had been asked to resolve via special interrogatory whether Mr. Powers was the culprit in the sinking of the Mikimbi.

Instruction No. 8, conditioned recovery on Mr. Powers’ claim for bad faith on a finding that the claim was denied “without proper cause.”

Mr. Powers pled a general claim for breach of a fiduciary duty. The claim was, based on the language of the jury instruction on this issue, limited somewhat by the trial court. Although the instruction limited the liability theory to evidence that USAA withheld known facts, counsel represented at oral argument that the “limited” fiduciary relationship was argued at trial in terms of failures by USAA to tell Mr. Powers the truth, failures to “seal” the Mikimbi for an independent investigation, and failures to produce certain photographs. Even though these arguments went well beyond the scope of the instruction, I conclude that they were simply part and parcel of the claim for bad faith.

Mr. Powers’ counsel concedes that a general claim under this theory was unnecessary and also conceded that first-party claims do not implicate a general fiduciary relationship. Given the fact that the fiduciary duty instruction added virtually nothing to the claim for bad faith, it appears that Mr. Powers’ counsel would have been wise to abandon this theory altogether.

Fiduciary obligations are a signal feature of third-party claims covered by liability insurance. These obligations arise largely from the insurer’s right and duty to provide legal representation to the insured, and the right to control the conduct of the defense of suits against the insured. See Beck, 701 P.2d at 799. Such obligations also stem from the duty of the insurer to protect the insured’s personal estate from extra-contractual liability. The duty of the carrier to exercise good faith in the processing of first-party claims is not fiduciary per se, but is only “akin” to such an obligation. Therefore, a separate instruction on fiduciary obligations should not be given in this context.

I agree with Rose, J., that an award of punitive damages should be subject to post-judgment interest.