Court asked to reconsider insurance-fraud ruling

CARSON CITY -- A group that includes insurance companies, casinos and governments says the Nevada Supreme Court is punishing those who seek to stop insurance fraud.

The coalition has filed petitions with the court to re-hear the case in which the United Services Automobile Association was ordered to pay $5.4 million to retired Air Force Col. William Powers whose yacht sank in the Gulf of Mexico in 1987.

The company, suggesting Powers deliberately sank the boat, denied the claim and sought criminal charges of which Powers was acquitted.

The court, in its July 16 ruling with Chief Justice Charles Springer dissenting, said the company and its affiliated firm USAA Casualty Insurance Co., "knew or recklessly disregarded the fact that there was no reasonable basis for denying Powers' claim." It agreed with a Clark County District Court jury that the companies showed bad faith in rejecting payment.

The group, in two friend-of-the-court briefs, said the decision appears to tolerate attempted fraud "which allows confessed wrongdoers to obtain multimillion-dollar windfalls against business entities attempting to deter fraud and falsehood."

The petitions, filed by Carson City attorney Robert Crowell, said, "That this court would let stand a $5 million punitive damage award to someone who admittedly lied in a claim, thus creating the suspicion of fraud, demonstrates to Nevada business that the law and this court will not lend any reasonable protection to victims of intentional false representation."

It also urged the court to reverse the ruling that interest, which amounts to $1 million in this case, should be allowed to accumulate on punitive damages during the appeal from the district court.

In its July decision, the court said there was evidence presented at the trial before District Judge Myron Leavitt to show the insurance companies tampered with evidence to discredit Powers and that the investigations were "improper, incomplete (and) poorly done..."

The majority decision, written by Justice Robert Rose, said while there were misrepresentations made by Powers in filing his claim, they were not material.

Springer dissented, saying Powers lied initially about how the $100,000 sailboat sank and the insurance companies' investigations showed inconsistencies in his story.

Powers, according to the insurance companies, was deeply in debt, owed his ex-wife $30,000 and was trying unsuccessfully to sell his boat to settle his financial troubles.

Crowell, in his petitions, said, "This court has now set the stage for admitted liars to escape the consequences of telling falsehoods, as it has narrowed the ways in which misrepresentations are considered material."

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