Summary
The Supreme Court of Nevada denied rehearing in an insurance dispute, clarifying its prior opinion regarding jury instructions on fiduciary duty and the materiality of the insured's misrepresentation. The court held that the jury instruction on fiduciary relationship was not error and that materiality was properly submitted to the jury. It also rejected arguments that the decision would create new causes of action or chill fraud investigations.
Topics
Practice areas
Questions Presented
- Whether rehearing should be granted because the court misapprehended a material matter in the record.
- Whether the jury instruction on breach of a fiduciary relationship was erroneous.
- Whether the materiality of Powers' misrepresentation should have been determined as a matter of law.
Holdings
- Rehearing is denied because the court did not misapprehend a material matter in the record or otherwise, and rehearing would not promote substantial justice.
- The jury instruction given by the district court on breach of a fiduciary relationship was not error.
- Materiality of an insured's misrepresentation is generally a question of fact, and only where reasonable minds cannot differ may the issue be resolved as a matter of law.
Key quotations
“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.” (1288)
“material if it concerns a subject reasonably relevant to the insurance company's investigation, and if a reasonable person would attach importance to that fact.” (1288-89)
“it is only in the rarest of cases [involving deception in the claims process] that the materiality issue can be taken from the jury.” (1289)
“this case was replete with competent evidence, albeit disputed, of misconduct by both sides, ... [and] the trial court properly submitted the issue of the materiality of Mr. Powers' misrepresentations to the jury.” (1289-90)
“Not only was the impropriety of USAA's denial of Powers' claim supported by substantial evidence, the jury was shown that USAA manufactured evidence to support its denial of coverage, and then was instrumental in sending this false evidence to the FBI, which resulted in Powers being indicted and eventually acquitted at trial when the falsity of the evidence was uncovered.” (1290)
Factual background
Powers owned a boat that sank. He initially reported to USAA that an exhaust hose had deteriorated before the boat sank; in fact, he had cut the hose to stop a siphon effect. USAA denied the claim, treating the matter as a fraud investigation from the beginning because the boat sank in calm waters, and before Powers' initial statement to special investigator Wayne McNeely. Evidence showed that USAA manufactured evidence to support its denial of coverage and sent it to the FBI, leading to Powers' indictment and eventual acquittal. A jury found for Powers, awarding damages including punitive damages.
Procedural history
The underlying case arose from a jury verdict in favor of Powers against USAA in a Nevada district court. USAA appealed, and this court issued an opinion on July 16, 1998. USAA petitioned for rehearing, which was opposed by Powers. The court denied the petition and clarified its prior opinion, specifically addressing the fiduciary relationship jury instruction and the materiality of Powers' misrepresentation.