Ruling goes against boat insurer

Eleven years ago, Air Force Col. William Powers saw his retirement dream -- a 42-foot sloop he assembled by hand -- sink beneath the waves 200 miles from shore in the Gulf of Mexico.

But the nightmare only escalated when his insurance company, USAA Casualty, rejected his claim contending he had scuttled the boat.

USAA instigated a criminal prosecution in federal court on insurance fraud charges, although the case was based on evidence that had been altered, fabricated and hidden by company investigators.

Powers was acquitted by a jury, but years of litigation remained as he stubbornly sought vindication and compensation from USAA, one of the country's largest insurance companies.

A 1994 jury trial resulted in an award of $400,000 in compensation and $5 million in punitive damages.

Last week, the Nevada Supreme Court -- after an appeal process that lasted four years -- finally upheld the verdict.

In a 4-1 decision, the high court actually reversed an earlier precedent and approved assessment of interest on the $5 million punitive damage award from the date of the jury decision. Before the Powers decision, the Supreme Court had declared that no such interest could be earned.

Attorneys have long criticized that practice because a prolonged appeal process would let a losing party actually make money by collecting the interest on the award they otherwise would have had to pay.

The change means Powers' award jumps to about $8 million, according to his attorney, William Brenske.

Brenske said Powers is "delighted" by the high court decision. But he noted that the Vietnam War hero is now 67 and has suffered recent health problems, limiting the opportunity to recoup his dreams.

"This incident consumed his life," the attorney said. "He was angry. It takes a lot of tenacity to fight a $3 billion company.

"His reputation is an important thing to him," Brenske continued. "As an Air Force officer, there was always talk of honor and duty. Getting his name back was the most important thing to him."

The trial jury had concluded that USAA had acted in bad faith by denying Powers' original $40,000 claim of compensation for the boat and instigating the federal criminal case based on the bogus evidence from its investigator.

But it wasn't a simple case for the jury because Powers had admitted lying to USAA originally about how his boat, the Mikimbi, sank in 400 feet of water 200 miles off the Louisiana coast.

Initially Powers said the exhaust pipe simply had deteriorated, allowing water to spill into the hold. But as USAA talked of raising the craft for inspection, he admitted the pipe had just fallen off. He also confirmed that he cut off another part of the pipe in his effort to save the vessel.

But trial evidence indicated the problems leading to the sinking of the Mikimbi were not intentional.

Testimony showed Powers had struggled valiantly for hours to save his sailboat in rolling seas before being ordered to abandon ship by the U.S. Coast Guard when he began suffering chest pains.

The Supreme Court decision, authored by Justice Bob Rose and signed by justices Cliff Young and Miriam Shearing, concluded that the jury had considered all of the evidence before reaching its decision and there was "substantial evidence" to support the punitive damage award.

Justice Bill Maupin, in a concurring opinion, said the issue rightfully was left to the jury.

But Chief Justice Charles Springer, in a 35-page dissent, concluded that there were reasonable grounds for USAA to have denied Powers' claim and there was insufficient evidence to show "bad faith" by the insurance company to justify punitive damages.

USAA spokesman Hal Schade said Tuesday the company is "extremely disappointed with the opinion and is studying the implications this case holds for other Nevada policyholders. It is unfortunate that the court has decided that Col. Powers should benefit financially at the expense of other USAA members."

Brenske said USAA made some bad decisions in the case based on erroneous information provided by its investigators and has not been able to admit it made a mistake.

"A man who spent his life in the service of his country deserves better than he got," Brenske said, pointing out that Powers twice received the Silver Star for his Vietnam War service as a pilot. Powers also was the original test pilot for the F111.

Attorney Charles Waterman, who defended Powers at his criminal trial, said his former client "deserves every dime of the judgment."

"They tried to ruin his life," Waterman said. "They influenced the federal government to accuse him of a crime. They made him an emotional wreck and they got what they had coming."

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