Appendix — Combined Insurance Co. of America v. Ainsworth

89-282 ») ||) psrmccus”

No. 89- : i7 Bee

| JOSEPH F. SPANIOL, Jp.

; : RK

IN THE Fee

Supreme Court of the Gnited States

OCTOBER TERM, 1989

COMBINED INSURANCE COMPANY OF AMERICA,

Petitioner,

v.

THOMAS AINSWORTH,

Respondent.

APPENDIX TO PETITION

FOR A WRIT OF CERTIORARI

TO THE SUPREME COURT OF NEVADA

*STEPHEN L. MORRIS

M. KRISTINA PICKERING

Of Counsel: LIONEL SAWYER & COLLINS

1700 Valley Bank Plaza

CHARLES ALAN WriGHT 300 South Fourth Street

727 East 26th Street Las Vegas, Nevada 89101

Austin, Texas 78705 (702) 383-8888

(512) 471-5151

GEOFFREY C. HAZARD, JR.

127 Wall Street

New Haven, Connecticut 06520

(203) 432-4971

Attorneys for Petitioner

*Counsel of Record

PRESS OF BYRON S. ADAMS, WASHINGTON, D.C. (202) 347-8203

TABLE OF CONTENTS

Part 1: Opinions and Judgments Below, and Proceed-

ings Thereon in This Court

ee Se SE eae la

S. COON FS OOD, | <nceccnceicrscenconsesdesasers 60a

3. August 28, 1986 Order Granting Defendant’s

Motion for Judgment Notwithstanding the

WINN: silanes taib sidan os eshipetcsbanncebticibtanenantinnans 7la

4. May 23, 1989 Judgment. RE AN 8la

5. June 15, 1989 Order of Circuit Justice O’Con-

nor, Granting Stay of Execution. ................... 83a

6. June 23, 1989 Order Approving Bond ............. 84a

Part 2: Proceedings Before Nevada Supreme Court

7. Combined’s March 20, 1987 Statement of the

Issues Presented For Review. ..............ccceeeeeee 86a

8. Excerpts from Combined’s March 20, 1987 An-

EEL AISA OR Se Rea one RCO 87a

9. Excerpts from Ainsworth’s April 14, 1987 Re-

I IS Cri ils tinal dat ienicasichets cheecbcmurssuieneoasanedsnticss 10la

5G, Fe i IS shtsicetalabicedevsncencinernsvanssctons 106a

11. May 18, 1987 Motion to Postpone

pS RIES IR no OA a a OOO ES 108a

12. Excerpts from Ainsworth’s May 25, 1987 Op-

position to Motion to Postpone Argument. .... 114a

13. Excerpts from May 26, 1987 Supplemental

PE siitnicedinnseieisinndidiatinatnetainvinanmtanisses 127a

14. May 29, 1987 Order Denying Motion to Post-

I Ss. sttnccnnpensdsevensenvinnssassontinnestnennaens 130a

15. Excerpts from Combined’s June 1, 1988 Second

Supplemental Memorandum of Authorities. .... 132a

16. Excerpts from Ainsworth’s July 8, 1988 Sup-

OEE SRIIINUIIID. | secsncsscocvncecsessneceencinsonneene 136a

ii

. Excerpts from Combined’s July 11, 1988 Points

OF CBE: ccceevenssiasineveseninisscersenninannaiannmmammniaiece

18. Excerpts from Combined’s November 14, 1988

Petition for Rehearing. ...........ccccccsesseeeseeeeeeees

19. February 24, 1989 Response of E.M. Gunderson

to Purported “‘Motions” Belatedly Filed by

ReSPORGONE. ...ccesvevssnsasncceveonssencnsmhonaanmnmanaiuensares

20. March 17, 1989 Application to Chief Justice

Young, Or In His Absence, The Acting Chief

Justice, For Permission to File A Reply To

Gunderson, Neumann, Wall Filings of Febru-

APy-22 and 24, 1DGD. ....ccccesrescccocccccccosssnessoneres

~]

1

Part 3: Proceedings Before the Trial Court

21. Jury Instruction No. 24. ....scscccccesssscssescnsssnsees

22. Excerpts from March 20, 1986 Trial

DrBTMOTI,. | .xcenacerescsnnnsincuenindeiinssiiastndanincusshasetons

Part 4: Pertinent Nevada Statutes.

23. Nev. Rev. Stat. § 42.010 (1988). .....................

24. Nevada Assembly Bill 307 (1989) .............:.eee

25. Limitations on Awards of Punitive Damages in

Certain Actions: Hearings Before Joint Nevada

Senate and Assembly Committee on Judiciary

on AB307 and 436, Nevada Legislature (1989)

(excerpts of testimony) (prepared by Nevada

Legislative Counsel Bureau). ..........:ccccseceeeeeeees

26. Limitations on Awards of Punitive Damages in

Certain Actions: Hearings Before Nevada Sen-

ate Committee on Judiciary on AB307, Nevada

Legislature (1989) (excerpts of testimony) (pre-

ae by Nevada Legislative Counsel

MEPDIED) os0.casercennssnsservedensisianiegninsabneiaaaanabaesannuhs

l4la

145a

150a

180a

188a

189a

200a

20la

204a

la mM

APPENDIX A—PART 1

IN THE SUPREME COURT OF THE STATE OF

NEVADA

No. 17625

THOMAS AINSWORTH,

Appellant,

VS.

COMBINED INSURANCE COMPANY OF AMERICA,

Respondent.

FILED

May 19, 1989

CLERK OF SUPREME COURT

By /s/ Jeanne C. Richards

CLERK

Appeal from a judgment notwithstanding the verdict.

Second Judicial District Court, Washoe County; Deborah

A. Agosti, Judge. Petitions for rehearing and motions re-

lating to participation of Supreme Court justice in the

above-entitled matter. .

Petitions for rehearing denied; motions denied.

Peter Chase Neumann, Reno;

Bradley & Drendel, Reno,

for Appellant.

Mortimer, Sourwine, Mousel,

Sloane & Knobel, Reno; Lionel

Sawyer & Collins, and M. Kristina

Pickering and Steve Morris, Las

2a

Vegas, Geoffrey C. Hazard, Jr.,

New Haven, Connecticut,

for Respondent.

Laura FitzSimmons, Carson City,

for Amicus Curiae.

OPINION

PER CURIAM:

On October 26, 1988, in an opinion authored by former

Chief Justice E.M. Gunderson,! this court unanimously con-

cluded that substantial evidence supported the jury’s as-

sessment of $5,939,500 in punitive damages against

respondent Combined Insurance Company of America

(Combined). Accordingly, we reversed the district court’s

judgment notwithstanding the jury’s verdict, reinstated the

jury’s assessment of punitive damages against Combined,

and affirmed the district court’s denial of Combined’s mo-

tion for a new trial. See Ainsworth v. Combined Ins. Co.,

104 Nev. __, 763 P.2d 673 (1988).

Pursuant to NRAP 40, both parties to this appeal sub-

sequently filed timely petitions for rehearing challenging

different facets of this court’s decision. Thereafter, on De-

cember 30, 1988, forty-six days after the time to file a

petition for rehearing had expired under NRAP 40(a), and

on the last judicial day preceding Chief Justice Gunder-

son’s official retirement as an elected justice of this court,

Combined filed a motion alleging that then Chief Justice

Gunderson was disqualified from any participation in this

appeal. Combined’s motion, therefore, requests this court

: After serving on this court for eighteen years, Chief Justice Gun-

derson did not seek re-election to a fourth term of office. His elected

term formally expired on January 2, 1989, when then Justice-elect Rose

succeeded to that office. See Nev. Const. art. 6, §3. Thus, neither

Justice Rose nor former Chief Justice Gunderson participated in the

court’s deliberations on the petitions for rehearing and the motions

resolved in this opinion.

3a

to issue an order (1) disqualifying former Chief Justice

Gunderson from any future participation in this matter,

(2) vacating the opinion, and (8) scheduling reargument on

the merits of the appeal. On February 7, 1989, Combined

also filed a “‘supplemental motion” seeking an evidentiary

hearing and discovery on certain factual allegations relat-

ing to the issue of disqualification. Combined further sup-

plemented its motions with papers asserting previously

unraised allegations of improperiety on February 16, 1989.

Appellant Ainsworth opposes both Combined’s petition for

rehearing and its motions respecting former Chief Justice

Gunderson’s participation in this appeal. In addition, Ain-

sworth has requested this court to impose sanctions upon

Combined and its counsel pursuant to NRCP 11 and NRAP

38 for abusing the appellate processes of this court.

On February 24, 1989, former Chief Justice Gunderson

filed a personal response to Combined’s allegations chal-

lenging his prior participation in this appeal. Among other

things, his response expresses the view that Combined’s

allegations of ethical impropriety constitute procedurally

improper, belated attempts to obfuscate the issues, delay

the final resolution of this matter, and abuse the appellate

processes of this court.? Accordingly, former Chief Justice

‘In an effort to impose a degree of judicial decorum in these pro-

ceedings, and pending our consideration of the timeliness and proce-

dural propriety of the various documents before us, Chief Justice Young

entered orders on February 24, 1989, and March 10, 1989, directing

‘the clerk of this court to neither receive, nor file, any further papers

in this matter unless the Chief Justice or Acting Chief Justice first has

expressly granted a party leave to file such papers.” Pursuant to those

directives, Combined has requested leave of Chief Justice Young to file

a reply primarily addressing former Chief Justice Gunderson’s persona!

response of February 24, 1989. We have carefully considered the mat-

ters set forth in Combined’s latest proposed reply, and we conclude

that, under the circumstances present here, Combined’s reply may be

made a part of the official record of this proceeding. See Component

Systems v. District Court, 101 Nev. 76, 79 n.2, 692 P.2d 1296, 1299

(1985). Accordingly, we hereby direct the clerk of this court to file that

4a

Gunderson’s response suggests that Combined’s allegations

respecting his prior participation in this appeal warrant

summary rejection.

Having carefully considered all the papers and docu-

ments tendered in this matter, and for the reasons set

forth below, we deny al] the petitions and motions pres-

ently pending in this docket, with the above-noted excep-

tion of Combined’s request for leave to file its latest

proposed reply.

I. AINSWORTH’S PETITION FOR REHEARING

In his petition for rehearing, Ainsworth requests recon-

sideration and clarification of footnote 2 of the opinion so

as to permit him to collect post-judgment interest on the

jury’s award for punitive damages.* See Ainsworth v. Com-

document.

We observe, however, that sound judicial policy underlies the absence

of any provisions in our rules permitting the filing of replies to op-

positions to motions and petitions without the express leave of this

court. See NRAP 27; NRAP 40. No litigant has an unqualified right

to inundate a court with motions, supplements, errata, responses, ex-

hibits and replies belatedly asserting arguments that it previously failed

to raise. Nor do litigants have unfettered license to utilize such methods

to manipulate judicial proceedings and unreasonably delay a final res-

olution of litigation. Moreover, although we have concluded that Com-

bined's additional papers do not necessarily prejudice the opposing party

or further burden this court with additional improper argument, we

specifically reject Combined’s contention that it has a due process right

to reply to what it characterizes as former Chief Justice Gunderson’s

‘governmental attack.”’ Cf. Gardiner v. A.H. Robins Co., Inc., 747 F.2d

1180 (8th Cir. 1984). At the time his response wes filed in this court,

former Chief Justice Gunderson had retired from his elected position

on this court, and he was performing no judicial functions related to

this appeal. Therefore, his response is not a judicial or governmental

declaration; it is simply his personal response to publicly disclosed ac-

cusations tendered against him by Combined and its counsel.

8 Ainsworth initially asserted these same arguments in a motion to

amend the opinion. Combined contends that the motion is procedurally

improper. Any perceived procedural] errors arising out of the fact that

5a

bined Ins. Co., 104 Nev. , , n.2, 768 P.2d 678,

677 (1988). The challenged footnote concluded that appel-

lant was ‘‘not entitled to interest on the punitive damages

award.”’ See Ramada Inns v. Sharp, 101 Nev. 824, 711

P.2d 1 (1985). Further, it observed that Combined had

previously tendered full payment of that portion of the

judgment below awarding Ainsworth approximately

$210,000 in policy benefits and compensatory damages.

Thus, we held that Ainsworth was not entitled to the

payment of any interest whatsoever on the judgment. The

footnote clearly illustrates that we previously considered

and rejected Ainsworth’s contentions on appeal respecting

his entitlement to interest. His similar contentions on re-

hearing, therefore, constitute improper reargument under

NRAP 40(cX1).¢

Ainsworth contends, however, that this court may have

overlooked or misapprehended case law which is arguably

favorable to his position. See Buck v. Burton, 768 F.2d

285 (8th Cir. 1985), citing Turner v. Japan Lines, Ltd.,

702 F.2d 752 (9th Cir. 1983) (purpose of awarding interest

Ainsworth initially raised these contentions by motion, were remedied

and rendered moot when Ainsworth subsequently filed his timely petition

for rehearing seeking the same relief. Accordingly, and in light of our

decision denying Ainsworth’s petition for rehearing, we also deny as

moot Ainsworth’s initia] motion to amend.

‘NRAP 40(c) provides:

(1) Matters presented in the briefs and ora! arguments may

not be reargued in the petition for rehearing, and no point

may be raised for the first time on rehearing.

(2) The court may consider rehearings in the following cir-

cumstances:

(i) When it appears that the court has overlooked or

misapprehended a material matter in the record or oth-

erwise, or

(ii) In such other circumstances as will promote substan-

tia] justice.

itiatetaaierinieiinele

6a

to a party recovering money judgment is to compensate

the wronged person for being deprived of the monetary

value of the loss from the time of the loss to the payment

of the money judgment). Additionally, Ainsworth now pro-

poses that awards of post-judgment interest on judgments

assessing punitive damages would promote substantial jus-

tice and deter frivolous appeals and other dilatory tactics

by defendants who can afford to litigate such judgments

endlessly. We disagree.

First, Ainsworth has raised these particular legal ar-

guments for the first time on rehearing. Consequently,

they constitute improper argument under NRAP 40(c\1).

Second, in Ramada Inns v. Sharp, 101 Nev. 824, 711 P.2d

1 (1985), we observed that the purposes underlying com-

pensatory and punitive damages distinguish a plaintiff's

entitlement to preyudgment interest on such awards. While

compensatory damages are intended to compensate a

wronged party, punitive damages are solely designed to

punish and deter fraudulent, malicious or oppressive con-

duct. See also NRS 42.010. A plaintiff is therefore never

entitled to punitive damages as a matter of right. Thus,

in rejecting Ainsworth’s arguments on appeal respecting

his entitlement to interest, we applied our prior reasoning

and holding in Ramada Inns to the question of post-yudg-

ment interest, and concluded that the purposes and policies

underlying awards of punitive damages would not be fur-

thered by an award of any interest in this case. The

authorities Ainsworth has cited for the first time on re-

hearing do not alter our conclusion in this regard. Third,

we have concluded that other more appropriate means are

available to deter frivolous litigation and dilatory tactics.

See NRCP 11; NRAP 38. In sum, this court did not mis-

apprehend or overlook any material matters in this regard.

Nor has Ainsworth presented any persuasive reasons dem-

onstrating that a departure from our prior holding would

“promote substantia! justice.’’ Accordingly, we deny Ain-

sworth’s petition for rehearing. See NRAP 40(c).

II. COMBINED’S PETITION FOR REHEARING

First, Combined contends that this court’s opinion as-

sumes material facts not found in the record and misstates

others that are. Specifically, Combined complains that the

opinion unfairly and inaccurately represents that, at the

time Combined denied Ainsworth’s first claim for benefits,

it had reason to know from its review of the initial claims

form that a doctor’s statement respecting the cause of

Ainsworth’s stroke was nothing more than an “hypothe-

sis.”’ See Ainsworth, 104 Nev. at___ , 768 P.2d at 674.

Combined correctly notes that the initial doctor’s report

contained in the first claims form submitted by Mrs. Ain-

sworth simply stated that a disease of the arteries was

the cause of Ainsworth’s stroke.’ The claims form con-

tained nothing to indicate that the doctor’s initial report

was merely an hypothesis. Nonetheless, it is undisputed

that evidence was presented to Combined, after it had

denied the first claim, indicating that the doctor had since

concluded the stroke was the result of an accident, not a

disease. Further, as Combined observed in its brief on

appeal, the doctor himself later testified at trial that his

initial report was pure speculation and an hypothesis. Our

reference to the initial doctor’s report as an ‘“‘hypothesis,”

therefore, was ultimately factually accurate.* Thus, this

court was adequately and accurately informed, and no ma-

terial matter was misapprehended or overlooked in this

* Specificaily, the doctor’s report stated, ‘“‘Stroke occurred from dis-

ruption of atheromatous plaque during angiogram.”

‘ During the oral argument of this appeal, Justice Steffen specifically

focused on this issue and questioned appellant's counsel in detail as to

whether Combined's initial denial of the claim was in fact reasonably

based on the doctor's first report. As that colloquy clearly reveals, and

as our opinion reflects, Combined’s subsequent failure to investigate

and evaluate the claim fairly and its subsequent denials of the Ain-

sworths’ repeated requests for reconsideration, after it had reason to

know of Ainsworth’s dire need for benefits, constitute the conduct that

supports the jury’s punitive damage award.

8a

regard. See NRAP 40(c). Consequently, we conclude that

this contention does not form a proper basis for rehearing.

Combined further contends, however, that the opinion

inaccurately states that ‘‘Combined sent [Mrs. Ainsworth]

a third denial letter’’ prior to receiving the results of its

medica] consultant’s second evaluation of the claim. See

Ainsworth, 104 Nev. at __ , 763 P.2d at 674. We concede

the opinion misstates this fact, and we hasten to correct

our inaccurate summary of that sequence of events. As

Combined observes, the undisputed testimony on this sub-

ject at trial indicates that, although Combined’s adjuster

prepared and dated the third denial letter prior to Com-

bined’s receipt of its medical consultant’s second evalua-

tion, the letter was apparently not mailed to Ainsworth

until after Combined’s medical consultant completed his

second evaluation.

Although the opinion does misstate this sequence of

events, we are not persuaded that this court thereby over-

looked a material matter, or labored under a material mis-

apprehension. See NRAP 40(c). The opinion otherwise

accurately sets forth substantial evidence supporting the

jury’s verdict. Accordingly, this matter does not alter our

consensus that the record as a whole provides substantial

support for the jury’s verdict, and we therefore conclude

that rehearing is not warranted on this basis.

Second, Combined argues that, in the opinion, this court

overlooked and omitted facts favoring Combined’s position

that it did not act in a manner deserving of punitive dam-

_ ages. In its latest reply, Combined further complains that

this court did not give appropriate deference to the district

court’s view of the evidence. Specifically, Combined argues

that this court:

could only read about what the trial judge ex-

perienced in person, yet the Court concluded she

was wrong in her view of the facts and law. on

punitive damages. But see Jeffers v. Bob Kauf-

9a

man Machinery, 101 Nev. 684, 686-87, 707 P.2d

1153, 1154 (1985) (in considering a district court’s

decision to withdraw the issue of punitive dam-

ages from the jury, ‘“‘we give deference to the

district court’s weighing of the evidence’’).

Combined’s contentions, however, fail to recognize that,

under the well-established standard of review governing

appeals from judgments notwithstanding a jury’s verdict,

our primary focus was not with each and every fact before

the jury favoring Combined’s position, nor was our primary

focus with the district judge’s view of the facts. Rather,

our main concern was with whether the jury’s view of the

facts was supported by any substantial evidence in the

record. See Jacobson v. Manfredi, 100 Nev. 226, 679 P.2d

251 (1984). Although in Jeffers we gave deference to the

district court’s weighing of the evidence, where the district

court had withdrawn the issue of punitive damages from

the jury during the trial, we also reversed the district

court’s separate post-trial grant of a judgment notwith-

standing the jury’s verdict on the underlying cause of ac-

tion. In so doing, we explained that the standard governing

our review of an order granting a motion for judgment

n.o.v. compels us to view the evidence that was before

the jury “in a light most favorable to the nonmovant.”

We further observed that, in reviewing a grant of a judg-

ment n.o.v., the nonmovant must be given “ ‘the benefit

of every reasonable inference’ from any substantial evi-

dence supporting the verdict.’ Jeffers, 101 Nev. at 685,

707 P.2d at 1154. Additionally, we have previously held

that, in passing upon a motion for judgment n.o.v., ‘‘nei-

ther the credibility of the witnesses nor the weight of the

evidence may be considered,’’ and the district court ‘“‘may

only grant the motion if the evidence was such that ‘rea-

sonable men would have necessarily reached a different

conclusion.’ ’’ See Wilkes v. Anderson, 100 Nev. 433, 434

683 P.2d 35 (1984).

10a

Similarly, as our opinion in Ainsworth clearly states,

our review of the evidence in this record was guided by

this standard of review. See Ainsworth, 104 Nev. at __,

763 P.2d at 675. Former Chief Justice Gunderson, there-

fore, quite properly confined our opinion’s recital of the

facts to the substantial evidence in the record supporting

the jury’s verdict. Contrary to Combined’s contention, we

did not thereby unfairly resolve the evidence against Com-

bined. We simply reviewed all the evidence in the light

most favorable to Ainsworth, as we are required to do

under the pertinent standard of review. We further con-

sidered al] the pertinent facts and contentions raised by

the parties before issuing our-opinion reversing the district

court’s order. Therefore, we conclude rehearing is unwar-

ranted on this basis as well.

Third, Combined alleges that the opinion ‘finds Com-

bined guilty of oppression for having written and inter-

preted the policy as it did.’”’ Combined further asserts that

the case we cited for this alleged ‘“‘finding”’ did not involve

punitive damages and allegedly supports Combined’s po-

sition. See Ainsworth, 104 Nev. at ____ , 763 P.2d at 676,

citing Catania v. State Farm Life Ins. Co., 95 Nev. 582,

598 P.2d 631 (1979). As Ainsworth responds, however, this

court did not “‘find’’ Combined guilty of oppression, the

gury did. We merely held that substantial evidence sup-

ported the jury’s verdict. The opinion simply does not hold

that the policy language itself was evidence of oppression.

Rather, it observes that the Ainsworths were entitled to

have the policy language applied as the average man would

understand it. The Catania case is appropriate support for

that proposition. Consequently, not only do Combined’s

contentions in this regard misstate our primary holding

and analysis, they completely fail to demonstrate sempe-

tent grounds for rehearing.

Fourth,.Combined alleges that this court announced a

“new standard’ for punitive damages and that the “‘new

standard” should only be applied prospectively, if at all.

lla

Contrary to Combined’s contention, however, we an-

nounced no new standards, nor did we hold, as Combined

asserts, that proof sufficient to establish bad faith will,

without more, also support an award of punitive damages.’

Rather, in addition to the evidence supporting the jury’s

finding of bad faith, which Combined did not contest on

appeal, we observed that the record also contained sub-

stantial evidence that “the Ainsworths were in desperate

need of funds, and that Combined had reason to know of

their dire circumstances.’’ Ainsworth, 104 Nev. at

___, 763 P.2d at 676. For example, the record evidenced

that ‘“‘Combined knew ... Thomas Ainsworth was a 59-

year old male who had suffered a stroke and was comatose

for seven days,” and that “five times within eighteen

months, the insured’s wife requested payment, indicating

clearly that the policy benefits ... were urgently needed.”’

Id. at__, 763 P.2d at 675. Moreover, Combined’s re-

peated statements to the Ainsworths that it had given

careful consideration to the claim were belied by substan-

tial evidence in the record indicating that, instead, its in-

vestigation of the claim was sadly inadequate.

Where, as here, substantial evidence indicates that an

insurer knowingly refused payment of a valid claim for

"It could be argued, however, that an insurer’s bad faith refusa] to

honor claims under health, accident and life policies is per se tantamount

to oppression. People place inordinate reliance on the integrity of in-.

surance companies to provide them the security for which they have.

bargained and paid. In the instant case, the Ainsworths had faithfully

paid their premiums to Combined for thirteen vears under the belief

that if and when an accident occurred, they would enjoy the financial

security they expected their policy to provide them. Instead, Combined

made every effort to convince the Ainsworths that they were not en-

titled to their policy benefits. Perhaps most egregiously, Combined’s

agents attempted to convince the Ainsworths that Combined had dili-

gently sought to validate and honor their claim, but could not do so

because the event upon which the claim was based was not covered

by the policy. In many other instances of bad faith denials, disappointed,

mistreated insureds are no longer insurable and thus unable to obtain

coverage from other, more responsible insurance companies.

12a

urgently needed policy benefits in bad faith, and the in-

surer not only knew the claimant was in dire need of those

benefits, but also had reason to know that it was probable

that the claimant would suffer unjust hardship if deprived

of those benefits, in our view, a finding of oppression is

amply justified.£ As the opinion points out, our previous

decision in Jeep Corporation v. Murray, 101 Nev. 640, 650,

708 P.2d 297, 304 (1985), clearly indicates that ‘‘oppres-

sion,” sufficient to warrant an award of punitive damages

under NRS 42.010, “‘is present where the plaintiff has been

subjected to ‘cruel and unjust hardship in conscious dis-

regard of his rights.’ ’’ Ainsworth, 104 Nev. at___, 763

P.2Zd at 675. Thus, once again we observe, there was not

only substantial evidence supporting the jury’s uncontested

finding that Combined processed the claim in “‘bad faith”

and in conscious disregard of Ainsworth’s clear right to

the policy benefits, but there was also substantial evidence

supporting a finding that, in so doing, Combined con-

sciously and deliberately attempted to pressure the Ain-

sworths ito abandoning their rightful claim, and, thereby,

subjected them ‘‘to cruel and unjust hardship.”’ Therefore,

we applied no ‘‘new standard” respecting the sufficiency

of the evidence required to support awards of punitive

damages. See also Roth v. Shell Oil Company, 185

* As our prior opinion in this matter noted. an insurer like Combined

has a specia! relationship with its insureds which is distinguishable from

the relationship between parties to ordinary contracts. This special re-

lationship exists in part because, as insurers are well aware, consumers

contract for insurance to gain protection, peace of mind and security.

See Fletcher v. Western National Life Insurance Co., 89 Cal. Rptr. 78,

95 (Cal. Ct. App. 1970); see also K Mart Corp. v. Ponsock, 103 Nev.

39, 732 P.2d 1364 (1987). In addition to the jury’s uncontested finding

that Combined intentionally refused to pay the valid policy claim in

bad faith, the record manifestly supports a legitimate inference that

Combined had knowledge that its refusal to pay would substantially

and adversely affect Ainsworth’s comfort, security, peace of mind and

well-being. In our view, the finding of bad faith, coupled with Com-

bined’s course of conduct and other evidence described in the opinion,

supports a finding of oppression.

13a

Cal.App.2d 676, 682 (Cal.App. 1960). Accordingly, we con-

clude rehearing is unwarranted on this basis.

Fifth, Combined asserts that rehearing is warranted be-

cause the amount of punitive damages is excessive. In the

papers before us, Combined frequently complains that the

punitive damage award is over six times greater than any

other such award previously affirmed by this court. Com-

bined further objects to our consideration of the fact that

the award constitutes only .4 percent of its 1985 total

assets. It argues that the award represents more than 400

percent of the “‘total revenues Combined derived from its

-operations in Nevada in 1986,”’ and that assessing punitive

damages on the basis of its “policyholder reserves ... is

like assessing punitive damages against a bank based on

total deposits, as if the depositors’ money were the bank’s.”’

Finally, Combined also criticizes the opinion’s application

of the factors we previously set forth in Ace Truck v.

Kahn, 103 Nev. 503, 746 P.2d 132 (1987), as appronriate

guidelines upon which to assess the excessiveness of an

award of punitive damages. According to Combined, our

opinion is ‘‘irreconcilably inconsistent”’ with Ace Truck be-

cause it allegedly revives the old “financial annihilation”’

test and the “shock the conscience rule” that Ace Truck

allegedly rejected. We disagree.

Initially, we acknowledge that the jury’s verdict of ap-

proximately $6,000,000 is considerable. We note, however,

that in spite of the considerable size of the verdict, Com-

bined’s counsel did not seriously attempt to present on

appeal a factually persuasive or legally comprehensive ar-

gument that the verdict was so excessive as to warrant

a remand or remittitur. To the contrary, counsel essen-

tially proceeded on an “all or nothing” theory that in-

cluded no particulars concerning the excessiveness of the

punitive award. Such particulars were presented for the

first time in Combined’s petition for rehearing. In any

event, Combined does not now raise any concerns that we

l4a

have misapprehended or overlooked, or that we previously

failed to consider carefully. NRAP 40(c).

Additionally, the factors we considered in our evaluation

of the verdict are far from inconsistent with the guidelines

set forth in Ace Truck. As we stated in Ace Truck, as

well as in our previous opinion in this case, the financial

position of the defendant remains a relevant circumstance

in evaluating excessiveness. Under our holding in Ace

Truck, we may still appropriately consider ‘‘any circum-

stances which relate to the limits of punishment and de-

terrence that can be properly imposed in a given case.’

Ace Truck, 103 Nev. at 510, 746 P.2d at 137. Thus, we

appropriately considered that the $6,000,000 verdict was

only .4 percent of Combined’s total 1985 assets in con-

* This court issued its opinion in Ace Truck v. Kahn, 103 Nev. 503,

746 P.2d 132 (1987), on November 30, 1987, six months after the

Ainsworth appeal was orally argued, but nearly one year before our

opinion in Ainsworth was issued. We nonetheless considered it appro-

priate to analyze the size of the verdict in this case under the standards

announced in Ace Truck. Further, following the issuance of the Ace

Truck opinion, the parties were permitted to file supplemental briefs

on appeal. Nonetheless, Combined still did not address in a meaningful

way the specific factors set forth in Ace Truck. As noted, we deem it

of some significance that Combined did not attempt to present a com-

pelling, factually complete and legally tenable argument on appeal ad-

dressing the propriety of a substantial reduction in the award. Although

Combined’s briefs asserted in a superficial and cursory manner that

the verdict ‘‘shocked the conscience,” that the jury received no proper

guidance on the question of damages, and that the jury “‘only heard

counsel's impassioned argument that damages would be assessed as a

percentage of the Combined’s net worth,”’ the major focus of. Com-

bined’s argument in its briefs on appeal was that the verdict constituted

an excessive fine or a violation of due process under the constitution.

Further, Combined’s briefs made only passing reference to this court's

inherent authority to issue a remittitur of the verdict in requesting

such action as an alternative to reversal or remand. At oral argument,

Combined’s counsel made no reference whatsoever to these issues. This

court may have been much more receptive to Combined’s contentions,

if they had been cogently presented on appeal rather than belatedly

asserted in a petition for rehearing.

15a

cluding that the verdict was not excessive. Further, we

properly evaluated whether Combined’s financial position

and whether the nature of its misconduct warranted an

award sufficient to cause it real concern if it was to be

deterred from similar future misconduct. Similarly, because

the ‘‘shock the conscience rule’’ entails an evaluation of

the ‘“‘magnitude of the award as related to the miscon-

duct,”” such an evaluation is entirely consistent with the

views expressed in Ace Truck. Id. at 507, 746 P.2d at 135.

Thus, Combined’s allegation that the Ainsworth opinion

“revives” the “financial annihilation test’? and the ‘‘shock

the conscience rule’’ that Ace Truck ‘‘rejected,’’ indicates

that Combined has misconstrued the nature of our holdings

in both cases.

Moreover, we note that because our opinion in Ace Truck

was issued after this appeal was briefed and argued, it

"was entirely proper for this court thoroughly to analyze

the verdict in light of the numerous guidelines announced

in Ace Truck, as well as in accordance with a more tra-

ditional analysis. In sum, we were not persuaded under

any of those guidelines that the verdict in this case was

unwarranted. Combined’s belated contentions in rehearing,

therefore, relate to matters that we have previously, thor-

oughly considered—notwithstanding Combined’s failure to

focus on them—and we have not altered our prior con-

sensus. Accordingly, we conclude that Combined’s conten-

tions in this regard state no competent grounds for

rehearing.

Finally, Combined alleges for the first time on rehearing

that Ainsworth’s counsel may have improperly orches-

trated communications to Combined, prior to the filing of

this action, that did nothing to inform Combined that it

was mistakenly denying the claims. Specifically, Combined

asserts that Ainsworth’s counsel may have failed to iden-

tify himself and ‘‘set out his role and knowledge of the

facts’’ -: an attempt to ‘‘set-up”’ a claim against Combined

for baa faith and punitive damages. Combined further as-

16a

serts that Ainsworth’s counsel’s conduct should be fully

explored in an evidentiary hearing and that, therefore, this

court’s “‘opinion should be withdrawn and the matter re-

manded to the district court for further proceedings pur-

suant to NRCP 60(b).”” We again disagree.

Combined’s allegations are entirely speculative. Further,

the scant factual assertions submitted in support of these

allegations were clearly known to Combined prior to or

during the course of the proceedings below. As counsel

for Ainsworth observes, Combined had every opportunity

to raise these concerns in the district court during or after

the trial, but failed to do so. Moreover, it was Combined’s

responsibility to evaluate and pay the claim fairly, in good

faith and in a manner free of malice or oppression, not

Ainsworth’s counsel’s responsibility. We conclude, there-

fore, that Combined’s contentions in this regard are not

only improperly raised for the first time on rehearing, but

are also wholly insufficient to support any reasonable in-

ference of impropriety on the part of Ainsworth’s counsel.”

In light of the above, we hereby deny Combined’s

petition for rehearing. NRAP 40(c).

III. COMBINED’S MOTIONS CHALLENGING FORMER

CHIEF JUSTICE GUNDERSON’S PARTICIPATION IN

THIS APPEAL

On December 30, 1988, the last judicial day of 1988,

Combined filed a motion in this court stating in part:

This motion ... requests Chief Justice Gun-

derson to disqualify himself from participating in

this appeal from this time forward. In the alter-

native, in the event Chief Justice Gunderson de-

© Counsel for Ainsworth denies Combined’s allegations as “‘absurd,

unfounded and insulting,” and has moved to strike this particular por- _

tion of Combined’s argument. In light of our conclusion that Combined’s

petition for rehearing is without merit, we deny Ainsworth’s motion

as moot.

17a

clines to voluntarily step aside, the motion

requests the Court to disqualify him. In either

event, the motion also asks the Court to vacate

its opinion in this appeal and schedule re-argu-

ment on the merits at the earliest time conve-

nient to the Court.

As counsel for Combined were presumably well-aware,

however, on January 2, 1989, the very next judicial day,

Justice-Elect Rose officially succeeded to former Chief Jus-

tice Gunderson’s seat on the Nevada Supreme Court. See

Nev. Const. art. 6, § 3 Gustices of supreme court hold

office ... from and including the first Monday of January

next succeeding their election). Although upon his retire-

ment Chief Justice Gunderson was duly commissioned a

Senior Justice of the Nevada Court System, he may not

now lawfully participate in any decision of this court ex-

cept upon an order of the Chief Justice specifically as-

signing him to sit temporarily in his capacity as a Senior

Justice. See Nev. Const. art. 6, § 19(1a) and 19(1\Xc); SCR

10; see also Fox v. Fox, 84 Nev. 368, 441 P.2d 678 (1968)

(decree filed by a district judge after the expiration of his

term was invalid); Lagrange Constr. v. Del E. Webb Corp.,

83 Nev. 524, 435 P.2d 515 (1967) (judge whose term had

expired had no power or authority to perform any judicial

function). Without a specific order of assignment, Senior

Justice Gunderson may perform only ‘routine ministerial

acts.” SCR 10(8). No order directing Senior Justice Gun-

derson to participate in any judicial capacity in this matter

has been entered, and Combined has cited no authority in

support of its assertion that Senior Justice Gunderson’s

disqualification is presently required or necessary under

these circumstances. Accordingly, we conclude that insofar

as Combined’s motion seeks the voluntary recusal or dis-

qualification of Senior Justice Gunderson from any present

participation in this matter, the motion is a nullity. At the

very least, that issue does not presently present an “‘actual

controversy,’ and has been rendered moot by the expi-

18a

ration of his elected term of office. See generally Nev.

Const. art. 6, § 4; Boulet v. City of Las Vegas, 96 Nev.

611, 614 P.2d 8 (1980).

Combined also argues, however, that former Chief Jus-

tice Gunderson’s participation in these proceedings was

improper and that vacatur and reargument are required

because (1) under NRS 1.225, he entertained a disquali-

fying bias or prejudice for and against the litigants and

their counsel; (2) under the Nevada Code of Judicial Con-

duct, his impartiality was reasonably and sufficiently sub-

ject to question so as to create a disqualifying appearance

of impropriety; and (8) under the due process clause of

the constitution, his alleged partiality denied Combined its

right to a fair hearing before an impartial tribunal. Com-

bined asserts that, under these provisions, the former Chief

Justice should have disqualified himself from any partici-

‘ pation in this matter or disclosed certain facts to Com-

bined’s counsel prior to taking part in this appeal. We

disagree. For the reasons which follow, we conclude va-

catur and reargument are unwarranted as a matter of law

because none of the factual allegations Combined has as-

serted in support of these contentions constitute competent

grounds for disqualification under our statutes, our rules

of judicial conduct, or the constitution.!! See In re Petition

to Recall Dunleavy, 104 Nev. ; P.2d — (Adv.

Op. No. 1384, December 29, 1988); Goldman v. Bryan, 104

Nev. ___ , 764 P.2d 1296 (1988); see also Liljeberg v.

Health Services Acquisition Corp.,___ U.S. __ , 108 S.Ct.

2194 (1988); Aetna Life Insurance Co. v. Lavoie, 475 U.S.

813 (1986).

The pertinent provisions of NRS 1.225 and the Canons of the

Nevada Code of Judicial Conduct are set forth in an appendix to this

opinion.

19a

A. Combined’s allegations respecting procedural rul-

ings, the oral argument and former Chief Justice

Gunderson’s response of February 24, 1989.

First, Combined contends that this appeal was handled

in a manner that was contrary to this court’s “normal

procedure.’’ Combined asserts that these “procedural ir-

regularities” evidence former Chief Justice Gunderson’s

bias or create a disqualifying appearance of impropriety.

Specifically, Combined complains that Ainsworth’s counsel

properly perfected this appeal only after this court issued

two sua sponte orders in December of 1986, advising

counsel that the appeal was jurisdictionally deficient and

advising counsel how to correct the deficiency. Next, Com-

bined alleges that, contrary to the court’s normal proce-

dure, the former Chief Justice personally ‘‘intervened”’ and

entered an order on April 22, 1987, directing the clerk to

schedule the appeal on the court’s “first available argu-

ment calendar.’’ Combined also complains that this court

denied its subsequent motion of May 18, 1987, seeking a

postponement of the oral argument, with “‘undue expedi-

tion.’’ Combined’s motion sought to stay the ora] argument

in this matter pending the United States Supreme Court’s

resolution of constitutional questions in an unrelated case

that might have had a bearing on the issues presented in

this appeal. See Bankers Life and Cas. Co. v. Crenshaw,

—— U.S.—_, 108 S.Ct. 1645 (1988).

We observe, however, that the two orders issued by this

court in December 1986, were entered prior to the date

that Justice Gunderson became Chief Justice, and were

not even signed by Justice Gunderson. Although former

Chief Justice Gunderson did sign a third order, after he

became Chief Justice, allowing this appeal to proceed, such

orders advising counsel of jurisdictional defects revealed

by our preliminary review of the records on appeal are

by no means “contrary to this court’s normal procedure.”’

They are issued as a matter of course to insure that this

court’s jurisdiction to entertain an appeal has been prop-

20a

erly invoked, and to insure that appeals are resolved on

the merits whenever possible.’ Further, former Chief Jus-

tice Gunderson’s order of April 22, 1987, directing the

clerk to schedule oral argument on the next available cal-

endar, was entered in response to a motion filed by Ain-

sworth requesting oral argument of this appeal. This court

rarely denies such requests, and in granting them, it is

commonplace for the Chief Justice to direct the clerk to

schedule oral argument on the next available calendar.

Thus, these procedural rulings were not contrary to this

court’s normal procedure, nor do they demonstrate any

prejudice, bias or appearance of impropriety stemming

from an extrajudicial source. See Shepard v. State, 756

P.2d 597 (Okl. Crim. App. 1988) (judge’s honest efforts to

expedite trial do not demonstrate bias and are permissible

so long as they do not operate to prejudice defendant’s

rights); see also In re Petition to Recall Dunleavy, 104 Nev.

, P.2d (Adv. Op. No. 134, December 29,

1988) (neither NRS 1.225, nor the code of judicial conduct

will permit allegations of bias, partially founded on a jus-

tice’s performance of his official duties, to disqualify. the’

justice; to do so would nullify the court’s authority and

permit manipulation of justice, as well as the court); United

States v. Board of Sch. Com’rs, Indianapolis, Ind., 503

For example, a similar order was issued by this court in April of

1988, in an unrelated appeal in which one of Combined’s present co-

counsel] represents the appellants as counsel of record. Like the order

signed by former Chief Justice Gunderson is this case, our order in

that unrelated case advised counse] that the appeal could proceed be-

cause counsel had properly cured a jurisdictional] defect pursuant to the

directives of an earlier order in which we called that defect to counsel's

attention. Further, that order stated that this court had determined

that oral argument was warranted and directed the clerk to schedule

that appeal for ora] argument on the court's “‘first available calendar.’

See United Fire Ins. Co. v. McClelland, Docket No. 18705 (order filed

April 26, 1988). Quite clearly, therefore, counsel for Combined reck-

lessly failed to investigate this court’s policies and procedures before

tendering the conclusory allegation that the rulings complained of were

“contrary to normal procedure.”’

’

2la

F.2d 68, 81 (7th Cir. 1974) (rulings and actions of a judge

during the course of official judicial proceedings do not

establish legally cognizable grounds for disqualification),

cert. denied, 439 U.S. 824 (1978).

Moreover, this court’s order of May 29, 1987, denying

Combined’s request for a postponement of the oral ar-

gument, concluded in part that “‘the United States Supreme

Court may not reach any issue that is directly relevant to

this .case.”” As it turns out, that was precisely the result.

See Bankers Life and Cas. Co. v. Crenshaw,__ US.

—__. , 108 S.Ct. 1645 (1988) (Supreme Court did not reach

insurer's claims that punitive damage award violated due

process and, other constitutional provisions because such

claims were ‘hot raised and passed upon in state court).

Therefore, Combined has not only failed to allege any le-

gally cognizable grounds establishing bias or an appearance

of impropriety, it\has also failed to demonstrate that ‘it

suffered any prejudice from this court’s procedural rulings.

Accordingly, we conclude that Combined’s contentions in

this regard are entirely frivolous and warrant our sum-

mary rejection”

18 Combined also complains that this court im rly filed former

Chief Justice Gunderson’s response of February 24, 1984 because that

document was not properly served on counsel for Combine

to NRAP 25. In support of this assertion, Combined cites autfiagrities

supporting the proposition that a judge is a “‘party’’ to a proceatige

involving the issue of that judge’s disqualification. See Harvey v. Lewis,

158 N.W.2d 809 (Mich. Ct. App. 1968). We note, however, that Com-

bined was notified of the filing of the response and no prejudice what-

soever to Combined’s position is either alleged or apparent as a result

of any failure to serve that document. Moreover, we note that, in spite

of Combined’s insistence that former Chief Justice Gunderson should

be considered a ‘‘party’’ to these proceedings, counsel for Combined

never served former Chief Justice Gunderson with any of the numerous

papers that it has filed with the clerk of this court after his official

retirement from his elected office. Any inference that this court has

somehow unfairly treated Combined and its counsel is, therefore, wholly _,

|

22a

Second, Combined contends that former Chief Justice

Gunderson’s participation in the oral argument of this

appeal evidenced actual bias and prejudice or an appear-

ance of bias and prejudice against Combined and its

counsel. In the initial motion and in a statement in support

of the motion,’* counsel for Combined asserted in conclu-

sory terms that, during the oral argument of this matter,

the former Chief Justice evidenced “‘a partisanship inap-

propriate to the appellate judicial process.”’ Specifically,

counsel complains that the former Chief Justice

/ ~~

unreasonable. _

It should also be noted that former Chief Justice Gunderson, who

responded to Combined’s accusations at the request of this court, was

informed by the Clerk of the Court that service of his response was

unnecessary because he was not a party, and the Clerk would supply

notice of the filing to the parties, which she did. NRAP 25(1\(b) requires

service of all papers filed by parties. This court has not had the occasion

previously to decide whether by reason of a motion to disqualify, the

status of a participating justice or judge is transmogrified to that of

a party. Although we have substantial doubt that such a change occurs,

we decline to decide the issue because Combined has suffered no prej-

udice whatsoever from the lack of service by or at the behest of former

Chief Justice Gunderson.

“ The factual allegations in Combined’s initial motion of December

30, 1988, were supported in part only by the unsworn statement of

Combined’s counsel. Neither NRS 1.225 nor the Nevada Code of Judicial

Conduct presently provides that factual allegations in a motion to dis-

qualify a supreme court justice must be made upon affidavit. Compare

NRS 1.235 (requiring ‘the filing of supporting affidavits in motions

seeking disqualification of district judges). We take this opportunity to

note, however, that in ov’- future consideration of motions to disqualify

a judge or justice, we shal] deem it appropriate to substantially discount

factual allegations that are not supported by sworn statements and that

are not otherwise verifiable from the record before us. Because we

have not heretofore addressed this problem in a published decision, and

because Combined’s factual allegations are otherwise legally insufficient,

we do not premise any of our conclusions in this matter on counsel's

initial failure to provide his sworn supporting affidavit, nor is it nec-

essary to address the effectiveness of counsel’s subsequent affidavit

submitted in an attempt to remedy the motion’s initial deficiency.

23a

(1) ‘openly ridiculed” and was uncivil and hostile to Com-

bined and its attorney; (2) ‘acted not as a member of an

appellate court but as an advocate for the appellant”;

(3) ‘expressed the opinion that Combined’s very policy was

an act of bad faith’’; and (4) expressed an “‘animus” that

was not “‘confined to Combined and its counsel but seem-

ingly reached the insurance industry as a whole.” In sup-

port of these conclusory accusations, Combined relies upon

a copy of the official reporter’s audio recording of the oral

argument before this court.

We have carefully reviewed the official reporter’s mas-

ter recording of the oral argument, which constitutes the

formal record of that hearing, and we conclude that

counsel’s “statements of mere conclusions” are not only

legally insufficient to support Combined’s motions, but are

also belied by the tone, tenor and substance of former

Chief Justice Gunderson’s remarks. See Litinsky v. Quer-

ard, 683 P.2d 816, 818 (Colo. Ct. App. 1984) (to permit

“statements of mere conclusions” of the pleader respecting

a judge’s alleged hostility at trial ‘‘to form the basis of a

legally sufficient motion to disqualify would be to permit

any party dissatisfied with the outcome of a trial to...

create unwarranted delay and chaos’’). In our view, former

Chief Justice Gunderson’s remarks at oral argument, at

the most, displayed his usual, well-known aggressive use

of the Socratic method. Contrary to Combined’s conten-

tions, his questions directed to Combined’s counsel were

no more “uncivil or hostile’ than those propounded to

most first year law students“by many of their professors.

Further, the former Chief Justice allowed counsel for Com-

bined extra time to complete his arguments and, contrary

to normal procedure, again permitted counsel] additional

time for a second rebuttal at the very end of the argument.

A reasonable, objective assessment of the actions and re-

marks of the former Chief Justice leads to the conclusion

that he was merely attempting to insure that the court

was adequately apprised of the parties’ legal contentions,

24a

and was not acting as an “advocate’’ for appellant Ain-

sworth’s position. His conduct of the hearing, as well as

his questioning of both counsel, were “well within the

acceptable boundaries of courtroom exchange.” See In re

Drexel] Burnham Lambert Inc., 861 F.2d 1307, 1316 (2nd

Cir. 1988).

Additionally, former Chief Justice Gunderson’s remarks

simply revea] judicial familiarity with the factual record

that was before this court. Although he may have ex-

pressed strong views regarding the jury’s uncontested find-

ing of bad faitn, and regarding the separate, additional

facts in the record evidencing the oppressive nature of

Combined’s conduct, his expression of those views at the

oral argument exhibited no bias stemming from an extra-

judicial source. See Goldman v. Bryan, 104 Nev.__,

—___ , n.6, 764 P.2d 1296, 1301 (1988) (what a judge learns

in his official] capacity does not establish disqualifying bias

under NRS 1.225, or a disqualifying appearance of impro-

priety under the code of judicial conduct); In re Guardi-

anship of Styer, 536 P.2d 717 (Ariz. Ct. App. 1975)

(although a judge may have a strong opinion on merits of

a cause or a strong feeling about the type of litigation

involved, the expression of such views does not establish

disqualifying bias or prejudice). See also Aetna Life In-

surance Co. v. Lavoie, 475 U.S. 813, 820-21 (1986) (general

claim of hostility on part of state supreme court justice

towards insurance companies that were dilatory in paying

just claims fell ‘“‘well below”’ level of claims constituting

sufficient grounds establishing constitutional violation un-

der due process clause); In re International Business Ma-

chines Corp. 618 F.2d 923, 931-32 n.11 (2nd Cir. 1980)

(where, under federal provision similar to Nevada Code of

Judicial Conduct Canon 3, ‘‘occasional flareups toward

counsel” were held insufficient to establish a judge’s per-

sonal prejudice against the litigant involved, “it would be

anomalous to hold’”’ that such a claim could nonetheless

satisfy constitutional standard for recusal under the due

25a

process clause). We conclude, therefore, that Combined’s

contentions respecting former Chief Justice Gunderson’s

remarks at oral argument are legally insufficient to sup-

port the relief requested under either NRS 1.225, the Ne-

vada Code of Judicial Conduct, or the due process clause

of the constitution.

Third, in its latest reply, Combined also asserts that

former Chief Justice Gunderson’s response to Combined’s

accusations “condemns Combined and its counsel on facts

found by the Justice outside the record of this case.”’ Thus,

Combined claims that the response ‘“‘on its face disqualifies

Justice Gunderson.’’ We observe, however, that, although

former Chief Justice Gunderson’s response does indicate

that, after the opinion in this case issued, his adverse

judicial impressions of the respondent insurance company

may have been reinforced by extrajudicial, post-opinion

reading, his response recites no facts supporting a rea-

sonable inference of preconceived bias against the insur-

ance company stemming from an extrajudicial source at

or prior to the date this case was decided.

Further, although former Chief Justice Gunderson’s re-

sponse candidly acknowledges that he harbored precon-

ceived, negative impressions respecting the legal abilities

of one of Combined’s counsel, his response also indicates

that those impressions were based upon his perception of

counsel's prior ‘“‘work product and performance in this

court.”” Thus, those perceptions constitute neither an ex-

trajudicial, nor a disqualifying bias. See generally Goldman

v. Bryan, i104 Nev. ___ , 764 P.2d 1296 (1988); see also In

re Cooper, 821 F.2d 833, 838-42 (1st Cir. 1987) (a judge

is not required to “‘mince words” respecting counsel who

appear before him; it is a judge’s job to make credibility

determinations, and when he does so, he does not thereby

become subject, legitimately, to charges of bias). To what-

ever extent former Chief Justice Gunderson’s response may

evidence negative, personal impressions about Combined’s

counsel, based upon counsel’s prior legal associations, his

26a

performance on the bar examination or his marital situ-

ation, those impressions were formed during the course of

his judicial and administrative duties as a Justice and Chief

Justice on this court. See United States v. Conforte, 457

F.Supp. 641, 657 (D. Nev. 1978) (where oriain of judge’s

impressions was inextricably bound up with judicial pro-

ceedings, judge’s alleged bias did not stem from an ex-

trajudicial source), modified on other grounds, 624 F.2d

869 (9th Cir.), cert. denied, 449 U.S. 1012 (1980).

' Additionally, those negative impressions extended only

to counsel for the litigant involved, not to the litigant itself.

Generally, an allegation of bias in favor of or against

counsel for a litigant states an insufficient ground for dis-

qualification because it is not indicative of extrajudicial bias

against the party. See In re Petition to Recall Dunleavy,

104 Nev. : P.2d_._ (Adv. Op. No. 134 at 6),

citing Gilbert v. City of Little Rock, Ark., 722 F.2d 1390,

1398-99 (8th Cir. 1983), cert. denied, 466 U.S. 972 (1984);

see also Davis v. Board of School Com’rs of Mobile County,

517 F.2d 1044, 1050 (5th Cir. 1975) (if a party could suc-

cessfully challenge a judge based upon allegations of bias

against party’s attorney, it “‘would bid fair to decimate

the bench” and lawyers, once in a controversy with a

judge, “‘would have a license under which the judge would

serve at their will’’), cert. denied, 425 U.S. 944 (1976).

Lastly, if we assume that counsel for Combined has

seriously tendered his allegations of bias or prejudice aris-

* Although we anticipated _and would have much preferred a more

restrained response frém the former Chief Justice, it is not difficult to

understand why the beleaguered jurist may have been goaded to the

uttermost limits of his capacity for tolerance. While in the beginnings

of recuperation from a major heart attack for which he was hospitalized,

Combined filed a supplement to its motion to disqualify the former

Chief Justice that irresponsibly accused him of secret business involve-

ments with Ainsworth’s counsel through Justice Gunderson’s wife. The

aforementioned supplement will be dealt with in some detail later in

this opinion.

27a

ing out of former Chief Justice Gunderson’s alleged hos-

tility at oral argument, then we must also assume that,

shortly after the oral argument, counsel was on notice of

at least some of the facts asserted in support of these

contentions. Counsel, however, electing to gamble on the

outcome of our decision, waited over sixteen months until

the decision was announced before tendering these con-

tentions to this court. Similarly, counsel was aware of the

nature and circumstances surrounding the previously dis-

cussed procedural rulings of this court, not only well in

advance of the issuance of this court’s decision, but also

well in advance of the oral argument.

We have previously held that time limitations on a chal-

lenge to a district judge’s impartiality are not extended

for litigants who knew or should have known the necessary

facts at an earlier date. See Jacobson v. Manfredi, 100

Nev. 226, 679 P.2d 251 (1984). The statutory and code

provisions applicable in this case set forth no specific time

limits. Well-reasoned authority supports a conclusion, how-

ever, that counsel, knowing facts assertively supportive of

a motion for reconsideration, recusal or vacatur based upon

charges of bias and impropriety, ‘‘may not lie in wait”

and raise those allegations in a motion “‘only after learning

the court’s ruling on the merits.”’ See Phillips v. Amoco

Oil Co., 799 F.2d 1464, 1472 (11th Cir. 1986), cert. denied,

481 U.S. 1016 (1987). See also Delesdernier v. Porterie,

666 F.2d 116, 121 (5th Cir.) (absence of time requirement

in federal disqualification provisions does not ‘‘allow counsel

to make a game of the federal judiciary’ s ethical obliga-

tions’’; judiciary should seek to “preserve the integrity of

the [provisions] by discouraging bad faith manipulation of

its rules for litigious advantage’’), cert. denied, 459 US.

839 (1982).

We conclude, therefore, that the factual allegations

Combined has asserted in these respects are legally in-

sufficient to support the relief requested. Additionally, we

conclude that Combined waived its right to raise these

28a

issues at this late date because its counsel, knowing the

subsequently asserted factual basis for these allegations,

did not promptly tender an objection to this court, but

instead remained silent and gambled on the outcome of

the appeal.

B. Combined’s allegations respecting Ainsworth’'s

counsel’s association with former Chief Justice

Gunderson’s 1982 campaign for judicial office.

Combined disingenuously alleges that former Chief Jus-

tice Gunderson should have disqualified himself from any

participation in this appeal because he had a close and

undisclosed, political relationship with counsel] for Ain-

sworth. Combined observes that both counsel for Ain-

sworth acted as Washoe County campaign co-chairmen in

the former Chief Justice’s 1982 campaign for re-election

to this court.

In rejecting a similar contention as legally insufficient

to support disqualification or vacatur, we recently held:

[Ijntolerable results would ... obtain if a liti-

gant could disqualify a member of this court solely

because counsel for the litigant’s adversary had

vears before contributed to the justice’s cam-

paign. The citizens of this state have voted to

retain an elected judiciary and the Nevada Con-

stitution specifically provides that the justices of

this court shall be elected. See Nev. Const. art.

6, § 3.... If the mere fact that an attorney had

contributed to a judge’s campaign constituted a

reasonable ground for the subsequent disqualifi-

cation of that judge, upon a challenge made after

the judge has ruled on the merits of a motion,

the conduct of judicial business in the courts of

this state would be severely and intolerably ob-

structed.

29a

See In re Petition to Recall Dunleavy, 104 Nev. __.,

P.2d ; (1988) (Adv. Op. No. 134 at

6). In Dunleavy, we further observed:

In a small state such as Nevada, with a concom-

itantly limited bar membership, it is inevitable

that frequent interactions will occur between the

members of the bar and the judiciary. Thus, al-

legations of bias based upon a judge’s associa-

tions with counsel for a litigant pose a particularly

onerous potential for impeding the dispensation

of justice.

Id. at 6-7 cf. United States v. Murphy, 768 F.2d 1518,

1537-38 (7th Cir. 1985), cert. denied, 475 U.S. 1012 ,.986).

Moreover, as we noted above, an allegation of bias in favor

of or against an attorney for a litigant generally states

an insufficient ground for disqualification because it is not

indicative of extrajudicial bias against a party. See Dun-

leavy, supra.

In the instant case, we similarly conclude that counsel’s

associations with the campaign in issue, years before this

case came before this court, do not presently constitute

legally competent grounds for recusal, vacatur or rear-

gument under our statutes or code of judicial conduct. Nor

do such associations establish the direct, substantial, pe-

cuniary, and conflicting interests which have been held to

warrant recusal and vacatur under the due process clause.

See Aetna Life Insurance Co. v. Lavoie, 475 U.S. 813

(1986). This state’s constitution and code of judicial con-

duct specifically compel and countenance the election of

all state judges, and leading members of the state bar play

important and active roles in guiding the public’s selection

of qualified jurists. Under these circumstances, it would

be highly anomalous if an attorney’s prior participation in

a justice’s campaign could create a disqualifying interest,

an appearance of impropriety or a violation of due process

30a

sufficient to require the justice’s recusal from all cases in

which that attorney might be involved.

Additionally, we note that Combined has conspicuously

refrained from addressing opposing counsel’s averments

that their association with the campaign was fully disclosed

in numerous public, political advertisements and was well-

known among members of the state bar long before this

appeal was ever perfected. See Adair v. Adair, 670 P.2d

1002, 1003 (Okl. Ct. App. 1983) (where counsel! failed to

refute opposing counsel’s averment that he was informed

prior to trial of opposing counsel’s public support of trial

judge’s campaign of judicial office, appellate court held

that ‘‘[fJailure to timely object waived any disqualification

of the judge’’). We conclude, therefore, that Combined’s

counsel had knowledge of the factual basis for this con-

tention well in advance of this appeal, and Combined’s

failure to tender a prompt objection on this ground pre-

cludes it from seeking our present consideration of the

question. See Jacobson v. Manfredi, 100 Nev. 226, 679 P.2d

251 (1984); Phillips v. Amoco Oil Co., 799 F.2d at 1472;

Delesdernier v. Porterie, 666 F.2d at 121.

Finally, in response to Combined’s allegations, former

Chief Justice Gunderson asserts that an objective assess-

ment of his prior associations with the law firms repre-

senting both parties to this appeal reveals no reasonable

basis upon which to conclude that he was biased in favor

of counsel for Ainsworth. Specifically, former Chief Justice

Gunderson avers that the law firm presently representing

Combined in this proceeding, Lionel, Sawyer & Collins,

was also supportive of his campaign for re-election. More-

over, the response indicates that a senior partner in that

firm has not only been a friend, political ally and supporter

of the former Chief Justice, but years ago was also the

former Chief Justice’s law partner. The response also cites

numerous published decisions of this court in which the

former Chief Justice ruled against the positions espoused

by counsel for Ainsworth in matters that had substantial

3la

monetary significance."° Under these circumstances, we

fully agree with former Chief Justice Gunderson’s state-

ment that ‘“‘[i]t cannot seriously be contended by objective

persons that on such a record, an appearance of impro-

priety now exists.”’

C. Combined’s allegations respecting the Nevada Trial

Lawyers Association.

First, Combined contends that former Chief Justice Gun-

derson improperly participated in this matter because he

failed to disclose that the Nevada Trial Lawyer Association

(NTLA) “had previously honored [him] for his support of

causes they espouse,” and that it ‘‘did so again shortly

before the opinion favoring Ainsworth in this appeal.”

Combined asserts that, not only are both Ainsworth’s

counsel active members of the NTLA, but that the NTLA

filed a brief in this appeal as amicus curiae in favor of

Ainsworth’s position. Incredibly, Combined also alleges

that, in accepting the above-noted award, the “Chief Jus-

tice is reported to have addressed the [NTLA] as a whole

and said that the Trial Lawyers were always welcome in

the Court because they were always on the right side.”’

Counsel for Combined asserts that he has ‘interviewed

more than one witness on [this] subject,” but that ‘‘[nJone

of these witnesses wishes voluntarily to supply an affi-

davit.”’ Finally, Combined asserts that the NTLA’s primary

orientation is ‘“‘anti-insurance,’’ and that under these cir-

cumstances, former Chief Justice Gunderson’s acceptance

of the award constituted a violation of the code of judicial

conduct and created an appearance of impropriety suffi-

cient to warrant vacatur and reargument. We disagree.

As the responsive affidavits supplied by counsel for Ain-

sworth establish, in September of 1988, at the NTLA’s

16 See Sierra Pac. Power Co. v. Rinehart, 99 Nev. 557, 665 P.2d 270

(1983); Davies v. Butler, 95 Nev. 763, 602 P.2d 605 (1979); Allen v.

Anderson, 93 Nev. 204, 562 P.2d 487 (1977); State v. Kallio, 92 Nev.

665, 557 P.2d 705 (1976).

fi

32a

annual convention, former Chief Justice Gunderson was

presented with a ‘‘special recognition award”’ for eighteen

years of dedicated service to the People of the State of

Nevada. Contrary to Combined’s contention, the award

was not in recognition for any unspecified support the

former Chief Justice allegedly provided to the causes the

NTLA espouses. The special award consisted of a modest

plaque entitled, ‘‘Lifetime Dedication to Nevada’s Justice

System Award.” Additionally, while attending the award

ceremony, the former Chief Justice paid for his own air-

fare, his own motel room and his own meals. Further, we

deem it of little significance that counsel for Ainsworth

are prominent members of the NTLA. It is our under-

standing that approximately one thousand members of the

Nevada Bar belong to that organization, including mem-

bers of the firm presently representing Combined on

appeal, and from the affidavits submitted by Ainsworth,

7 We note that several attorneys in the firm presently representing

Combined in this appeal are apparently also members of the NTLA,

and, therefore, presumably had knowledge of the award at the time it

was conferred. Moreover, the award in question was disclosed and

reported in newspapers throughout the state at the time. In one such

report, it was noted that former Chief Justice Gunderson had not only

been honored by the NTLA, but he had also recently received the

American Judicature Society’s ‘‘Herbert Harley Award,” as well the

American Bar Association’s annual award for excellence in judicial ed-

ucation. See Gunderson Cited For His Dedication, Las Vegas Sun,

September 23, 1988; see also Justice Gunderson Honored, Reno Gazette-

Journal, September 16, 1988; Nevada Trial Lawyers Honor Gunderson,

Las Vegas Sun, September 16, 1988. Combined has not refuted the

averments presented by Ainsworth that its counsel knew or had reason

to know of the award prior to the issuance of this court’s decision. It

would appear, therefore, that Combined’s counsel could have tendered

a much more timely objection to the former Chief Justice’s participation,

but instead, did not object to these tenuous grounds until well after

this court’s opinion had issued. Accordingly, Combined’s failure to tender

a prompt objection constitutes a waiver of its right to raise the issue

at this late date. See Jacobson v. Manfredi, 100 Nev. 226, 679 P.2d

251 (1984); Phillips v. Amoco Oil Co., 799 F.2d at 1472; Adair v. Adair

670 P.2d at 1003.

33a

it appears that the NTLA is a much more broadly based

organization than Combined portrays.

Ainsworth has also submitted the affidavits of numerous

individuals who were present at the award dinner, and

who deny that the former Chief Justice made the remark

attributed to him by Combined and its anonymous, reluc-

tant witnesses. One such affidavit characterizes Com-

bined’s summary of the former Chief Justice’s remarks as

“totally inaccurate” and as “an unfair gross distortion.”

In light of these refutations, Combined’s bare, unsupported

allegation is of little legal significance. See United States

v. Hines, 696 F.2d 722, 729 (10th Cir. 1982) (where charge

of bias in affidavit was based upon alleged remark of trial

judge that an unnamed person allegedly overheard, court

rejected the charge as wholly insufficient and noted that

justice would be severely impeded if disqualification could

be premised on such ‘‘scant submissions’’).

In support of its assertion that the acceptance of the

award constituted a violation of the Canons of the Code

of Judicial Conduct, Combined cites a ‘‘quiz’”’ that appeared

in the November 1, 1988, issue of the ABA Journal and

an ABA Informal] Ethics Opinion which the quiz purports

to construe. See ABA Comm. on Ethics and Professional

Responsibility, Informal Op. 86-1516 (1986). These

authorities suggest that a ‘“‘specialized bar association”’

which has a clearly definable litigation posture, may not

ethically establish ‘‘a judicial award program which the

association acknowledges could likely result in the selection

of a judge whose philosophy is similar to that of the as-

sociation.”’ Jd. As noted, however, the NTLA is-a much

more broadly based bar association than Combined at-

tempts to portray. Further, as Ainsworth has observed,

numerous jurists have been similarly honored by the NTLA

and its parent organization, the Association of Trial Law-

yers of America. Notably, the entire Nevada Supreme

Court was similarly honored by the NTLA in 1986. Under

these circumstances, it cannot be reasonably contended by

|

34a

an objective person, knowing all the facts and circum-

stances, that by accepting such an award, any of these

members of the judiciary, including the former Chief Jus-

tice, lent “‘the prestige of [their] office[s] to advance the

private interests of others ....’’ Nor did they thereby

“convey or permit others to convey the impression” that

the organization was in a special position to influence them.

See Nev. Code of Judicial Conduct Canon 2B; see also Nev.

Code of Judicial Conduct Canon 5C(5Xa) (a judge may ac-

cept a gift incident to a public testimonial to him). Ac-

cordingly, we reject these allegations as wholly insufficient

to support vacatur or reargument under NRS 1.225, the

code of judicial conduct or the due process clause.’

Second, Combined asserts that a ‘‘substantial and per-

vasive appearance of impropriety’ exists in this case be-

cause Laura FitzSimmons, the attorney who signed the

amicus brief on behalf of the NTLA, simultaneously rep-

resented former Chief Justice Gunderson in another un-

related matter. Combined contends that vacatur and

reargument are warranted because the former Chief Jus-

tice should have disclosed this attorney-client relationship

or recused himself from participating in this appeal. See

Potashnick v. Port City Const. Co., 609 F.2d 1101 (5th

Cir.) (judge was disqualified from case where, during the

litigation before him, judge was not only being represented

in another matter by counsel for the litigant, but also had

personal business dealings with that counsel), cert. denied,

449 U.S. 820 (1980); ABA Comm. on Ethics and Profes-

sional Responsibility, Informal Op. 1477 (1981) (a judge

‘* Combined similarly complains that the counsel who signed the ami-

cus brief on behalf of the NTLA in this appeal hosted an ‘invitation

only” retirement party for former Chief Justice Gunderson on January

6, 1989. We conclude that any inference of impropriety arising out of

said counsel’s voluntary involvement in that event, after the former

Chief Justice’s retirement from this court, is wholly unreasonable. We

reject this contention as entirely frivolous.

35a

must recuse himself in cases in which a litigant is rep-

resented by the judge’s own attorney). We disagree.

We are persuaded by the responsive affidavits of

FitzSimmons and other members of the NTLA amicus cur-

iae committee that FitzSimmons’ involvement in Ainsworth

was extremely limited and cannot reasonably support any

inference of impropriety. For example, the affidavits es-

tablish that FitzSimmons did not author the amicus brief,

but merely signed it, at the request of the chairman of

the NTLA amicus curiae committee, because she was the

only Northern Nevada member of the committee available

who could do so in time to insure that the brief was

promptly filed with the clerk of this court in Carson City.

Further, FitzSimmons avers that she “knew very little

about the facts of the [Ainsworth] case,’’ that she had

“absolutely no motive” to attempt to affect the outcome

of the appeal, that she did not participate in and only

attended a portion of the oral argument, and that she

‘never discussed this case with Chief Justice Gunderson

before his retirement from the court.’’*

Moreover, although Combined has cited authorities which

suggest that a judge should not participate in a case in

which the judge’s own attorney also represents a “‘litigant’’

appearing in the case, Combined has cited no authorities

establishing that an attorney's appearance on behalf of an

amicus curiae constitutes representation of a “‘litigant.”’ In

our view, it cannot be reasonably contended that the NTLA

appeared in this matter as a “‘litigant.”” Rather, the NTLA

was merely allowed to file a brief in this appeal as a

‘‘friend of the court.’’ Nor can it be reasonably inferred,

under the facts cited above, that FitzSimmons’ act of sign-

ing the NTLA brief and attending a portion of the oral

'* We also note that FitzSimmons’ representation of former Chief

Justice Gunderson in the above referenced unrelated matter concluded

in April of 1987, after the NTLA brief was filed in this case, but before

this case was orally argued, and well before the opinion was filed.

,

36a

argument amounted to representation of a “litigant” suf-

ficient to create a disqualifying appearance of impropriety.

Lastly in this regard, we note that FitzSimmons has

averred that her husband serves on the Board of Gover-

nors of the State Bar of Nevada with one of Combined’s

present co-counsel on appeal, as well as with a member

of a firm that remains one of Combined’s counsel of re-

cord. On information and belief, FitzSimmons avers that

her representation of former Chief Justice Gunderson was

discussed among the members of the Board and was known

to Combined’s counsel] well before this appeal came before

this court. Once again, however, Combined’s counsel have

not refuted the averment and have conspicuously refrained

from any comment respecting when they became aware

of the alleged factual basis for their complaints of impro-

priety and bias. Accordingly, we conclude that Combined

has not only asserted allegations that are legally insuffi-

cient to support the relief requested under NRS 1.225, the

code of judicial conduct or the due process clause, but its

failure to tender a prompt objection constitutes a waiver

of its right to raise the issue at this point in these pro-

ceedings. See Jacobson v. Manfredi, 100 Nev. at 230, 679

P.2d at 254; Phillips v. Amoco Oil Co., 799 F.2d at 1472;

Adair v. Adair, 670 P.2d at 1003.

D. Combined’s allegations respecting former Chief

Justice Gunderson’s involvement in unrelated lit-

igation.

Combined further maintains that an appearance of im-

propriety exists because of former Chief Justice Gunder-

son's alleged ‘“‘undisclosed relationship” with counsel for

Ainsworth and with attorney FitzSimmons in unrelated

_ litigation pending in the state district court at the time

this case initially came before us. See Flangas v. Manou-

kian, Case No. A208009, Eighth Jud. Dist. Ct., Clark Co. |

(1986). The unrelated conspiracy litigation in question has

a tortuous history that has no substantive connection what-

37a

soever with the instant matter. See generally In re Ross,

99 Nev. 1, 656 P.2d 832, reh’g denied, 99 Nev. 657, 668

P.2d 1089 (1983). Nonetheless, Combined attempts to re-

litigate and rehash issues which have been long since for-

mally adjudicated in proceedings that are not even remotely

connected with the instant case. In essence, however, Com-

bined alleges that an appearance of impropriety exists in

this case because one of Ainsworth’s counsel, Peter C.

Neumann, represented the plaintiff Flangas in civil liti-

gation in the state court, and because former Chief Justice

Gunderson, represented by attorney FitzSimmons, suc-

cessfully resisted an improper attempt by the defendant

in that same litigation to subpoena certain evidence under

the former Chief Justice’s control.”

More specifically, Combined speculates that (1) the for-

mer Chief Justice was allied with attorneys Neumann and

FitzSimmons in pursuit of a common goal; (2) Neumann

may have entered the Flangas case at the urging of former

Chief Justice Gunderson; and (3) Neumann, FitzSimmons

and the former Chief Justice may have discussed the Ain-

sworth case in private, undisclosed interviews respecting

* The subpoena in question, which the district court quashed as “‘in-

valid. burdensome, and oppressive," sought evidence that the district

court concluded had been entrusted to former Chief Justice Gunderson

in custodia legis by the federa) court. See Flangas v. Manoukian, Case

No. A208009, Eighth Jud. Dist. Ct., Clark Co. (orders filed November

7, 1986, and March 20, 1987). Combined argues that former Chief

Justice Gunderson was not entrusted with any evidence by the federal

court in custodia legis. We may appropriately take judicial notice of

the public record of the state district court proceedings, and we have

done so. See Jory v. Bennight, 91 Nev. 763, 542 P.2d 1400 (1975);

Cannon v. Taylor, 88 Nev. 89, 493 P.2d 1313 (1972). Our review of

the pertinent orders entered by the district court reveals that former

Chief Justice Gunderson’s recital of his role in that litigation is fully

in that litigation, adversely to the position now espoused by Combined.

38a

the Flangas litigation. These speculative, conclusory alle-

gations, however, are insufficient on their face to establish

legally cognizable grounds for recusal. See Goldman v.

Bryan, 104 Nev. ___ , 764 P.2d 1296 (1988).

Moreover, the allegations are refuted by the affidavits

and verified responses of the concerned parties. For ex-

ample, the averments of both attorney Neumann and the

former Chief Justice indicate that they were not “‘allied

in the pursuit of a common goal,” and that they did not

discuss the Ainsworth case in any interviews conducted in

connection with the Flangas case. Further, the affidavits

of Neumann and Flangas deny that Neumann entered the

litigation at the urging of the Chief Justice; rather, it

appears that Neumann was recommended to Flangas by

an attorney in private practice. Accordingly, we reject

Combined’s contentions in this regard as wholly insuffi-

cient to establish any disabling bias or any reasonable in-

ference of impropriety.”

E. Combined’s allegations respecting Mrs. Gunderson

and Peavine, Inc.

In 1985, counsel for Ainsworth, Peter C. Neumann,

formed Peavine, Inc., for the purpose of obtaining an FCC

permit to operate a new television station in the Reno,

Nevada area. Neumann withdrew Peavine’s application to

* We further note that the unrelated litigation in question was highly

publicized within the state and involved, among other things, certain

actions of the Board of Governors of the State Bar of Nevada. As

previously noted, one of Combined’s present co-counsel on appeal, as

wel! as a member of the firm which represented Combined below, are

members of the Board of Governors. Thus, it strains credulity to sup-

pose that Combined’s counse] were not aware of the various individuals

and attorneys involved in the Flangas case, well in advance of the date

this case was argued or decided. Under these circumstances, we are

persuaded that Combined waived its right to tender an objection on

these grounds at this late date. See Jacobson v. Manfredi, 100 Nev. at

230, 679 P.2d at 254; Phillips v. Amoco Oil Co., 799 F.2d at 1472;

Adair v. Adair, 670 P.2d at 1003.

39a

the FCC and dissolved the corporation later that same

year when it became clear that it had little chance of

successfully competing against other applicants for the per-

mit. Apparently, with the intention of being repaid by the

corporation if it became successful, Neumann personally

paid the expenses incident to the formation of the cor-

poration and incurred as a result of filing the FCC ap-

plication. Neumann avers; however, that during its short-

lived existence, Peavine had no assets or liabilities, no

stock was ever issued by Peavine to any person, and “‘no

funds or monies were ever received’’ by the corporation

or any of the individuals involved. Among others, former

Chief Justice Gunderson’s wife and brother-in-law were

two of the individuals involved in Peavine. Combined al-

leges that Mrs. Gunderson’s involvement in the Peavine

venture ‘‘supplies an additional ground for disqualification

of Justice Gunderson, vacatur, and rehearing in this case.”

We disagree.

Combined asserts that former Chief Justice Gunderson

should have disclosed “‘his wife’s financial] dealings with

Neumann in this case’’ because Nevada is a community

property state and Mrs. Gunderson’s “‘interest in and ex-

posure to liability of the debts of Peavine would pres-

umptively be shared by her husband.”’ We note, however,

that Canon 6 of the Nevada Code of Judicial Conduct only

requires a judge to report “‘extrajudicial’’ income. Further,

Canon 6C provides that compensation or income of a

judge’s spouse, attributed to the judge because of com-

munity property laws, “‘is not extrayudicial compensation.”’

Thus, even if Mrs. Gunderson had profited in some way

from her association with Peavine, Canon 6 imposed no

obligation upon the former Chief Justice to disclose his

wife's involvement. Contrary to Combined’s contentions,

therefore, thé Peavine venture does not establish that the

former Chief Justice violated any code provisions relating

to his duties to disclose the financial dealings of his spouse.

See Nev. Code of Judicial Conduct Canon 6. Nor do Com-

40a

bined’s speculative allegations demonstrate that the former

Chief Justice violated Canon 3C(2) by failing to keep him-

self informed of the financial dealings of his spouse.

Moreover, the Peavine venture was abandoned long be-

fore this appeal was docketed in this court. There was no

business relationship in existence at the time this case

came before this court which could have been affected by

the outcome of this appeal or created an appearance of

impropriety. Thus, the legal authorities cited by Combined

are clearly distinguishable frem the instant situation. Cf.

Liljeberg v. Health Services Acquisition Corp.,____ US.

___ , 108 S.Ct. 2194 (1988) Gudge had fiduciary interest

in litigation before him, sufficient to warrant his disqual-

ification under 28 U.S.C. § 455, where, at the time of trial,

judge was trustee for university that had substantial fi-

nancial interest in the outcome of the litigation); Aetna

Life Insurance Co. v. Lavoie, 475 U.S. 813 (1986) (vacation

of state supreme court opinion required, where, at the time

opinion was issued, state supreme court justice had a di-

rect, pecuniary interest in outcome of appeal); Potashnick

v. Port City Const. Co., 609 F.2d 1101 (5th Cir.) (judge

was disqualified from case where, during the litigation

before him, judge was not only being represented in an-

other matter by counsel for the litigant, but judge had

personal business dealings with that counsel as well), cert.

denied, 449 U.S. 820 (1980). Further, Combined’s allega-

tions completely fail to establish that, during his tenure

on this court, former Chief Justice Gunderson ever had

any direct, ongoing pecuniary interest in the outcome of

any litigation before~this court, including the Ainsworth

litigation. See Nev. Code of Judicial) Conduct Canons

3C(1\d) and 6C; NRS 1.225(2\a). The long abandoned busi-

ness link between Neumann and Mrs. Gunderson is simply

too remote in time as well as in substance from the Ain-

sworth case. See In re Drexel Burnham Lambert Inc., 861

F.2d 1307 (2nd Cir. 1988) (where party to litigation before

judge had been retained by a firm under contract with

4la

judge’s wife’s family to arrange financing for sale of family

business, judge’s connection with party was too remote to

warrant recusal even though wife was expected to receive

$30 million from the sale).

r We conclude, therefore, that Combined’s allegations are

wholly insufficient, under NRS 1.225, the Nevada Code of

Judicial Conduct, or the due process clause, to establish

that former Chief Justice Gunderson had any direct dis-

qualifying interest in this litigation or that his impartiality

toward the litigants might reasonably be questioned.”

IV. COMBINED’S MOTION FOR AN_ EVIDENTIARY

HEARING ANB DISCOVERY

Combined has moved this court for an evidentiary hear-

ing and discovery on its factual allegations of bias and

—

* Combined also contends that Neumann’s personal efforts and ser-

vices on behalf of Peavine, Inc., constituted a “gift, bequest, favor or

loan’’ to Mrs. Gunderson under Nevada Code of Judicia] Conduct Canon

5C. In light of the fact that Mrs. Gunderson never received anything

of any real, tangible worth as a result of her involvement in Peavine,

we conclude that Neumann’s efforts on behalf of Peavine cannot be

reasonably characterized as a ‘‘gift’’ under Canon 5C, and do not es-

tablish any reasonable inference of favoritism or impropriety. Combined

also alleged that there was no public record of Mrs. Gunderson’s busi-

ness relationship with Neumann and Peavine, Inc. Although there is

evidence that this assertion may have been knowingly false, it is clear

from the record that such a relationship was revealed in a public notice

published in Reno's largest newspaper of general circulation on four

separate occasions. Moreover, Combined’s bald assertion that Mrs. Gun-

derson’s involvement with Neumann and Peavine, Inc., and Justice

Gunderson’s_ failure to disclose the benefits from such involvement,

constituted violations of Nevada’s Judicial] Code is specious. At most,

Mrs. Gunderson may have had an expectancy of value if Neumann’s

efforts as an attorney had borne fruit for Peavine, Inc. They did not.

Mrs. Gunderson received neither value nor liability. Whatever expect-

ancy she may have had did not materialize. Furthermore, if Mrs. Gun-

derson had received compensation in the form of stock or income for

her efforts, Justice Gunderson’s community property interest in any

such emoluments would not have been reportable by him under the

Judicial Code. See Canon 6C.

,

42a

impropriety. As discussed above, however, we have con-

cluded that Combined’s factual allegations present no le-

gally competent grounds supporting a reasonable inference

of bias, prejudice or impropriety under NRS 1.225, the

Nevada Code of Judicial Conduct or the due process clause

of the constitution. Under such circumstances, ‘summary

dismissal of the instant challenge is warranted as a matter

of law, and no formal hearing is required.’’ See In re

Petition of Dunleavy, 104 Nev. at : i Y

(Adv. Op. No. 134 at 5). Further, we are persuaded that

most, if not all, of the factual allegations Combined has

asserted in support of its motions were known or should

have been known to Combined’s counsel well before this

court issued its opinion. Such prior notice forecloses any

right Combined might have otherwise asserted to an ev-

identiary hearing or discovery. Moreover, as previously

noted, any issue respecting former Chief Justice Gunder-

son's present disqualification has been rendered moot by

his retirement. Therefore, the hearing before unchallenged

justices that is provided under NRS 1.225(4) is inapplicable

and, contrary to Combined’s suggestion, summary rejec-

tion of its factual allegations will not deny Combined any

right to established adjudicatory procedures.

Finally in this regard, Combined asserts that a hearing

and discovery are necessary because it has a night to in-

quire into the “origin, history and role of the ‘bench memo’

which was prepared before oral argument”’ by former Chief

Justice Gunderson’s law clerk. Combined, however, has

established no factual circumstances or legal cause why it

should have the right to inquire into the confidential work

product of this court. Nor has our independent inquiry

into the circumstances surrounding the preparation of that

memorandum revealed any. Even if the former Chief Jus-

tice did influence his law clerk’s preparation of that mem-

orandum, such interaction between a justice and his law

‘Clerk is entirely proper. Thus, Combined has neither al-

leged nor demonstrated any facts or circumstances enti-

43a

tling it to an evidentiary hearing on this question. In any

event, our inquiry into the matter reveals that the contents

of the law clerk’s memorandum in the Ainsworth case

resulted entirely from that individual’s independent re-

search and analysis, free of any direct influence from for-

mer Chief Justice Gunderson. Accordingly and in light of

the above, we deny Combined’s motion for an evidentiary

hearing or discovery.

Vv. AINSWORTH’S MOTION FOR SANCTIONS

Ainsworth requests this court to impose sanctions upon

Combined and its counsel] for abusing the appellate proc-

esses of this court and for knowingly filing false and friv-

olous claims for the sole purpose of delay. See NRAP 38.

As discussed above, we are persuaded that counsel for

Combinéd has tendered a number of entirely frivolous al-

legations. Further, the manner in which Combined has

litigated this matter in this court clearly suggests that it

has attempted to misuse the appellate processes of this

court for the sole purpose of delaying a final resolution

of this litigation. Nonetheless, we have concluded that Ain-

sworth’s motion for sanctions should be denied.

As previously noted, the punitive damage award in this

matter is the largest ever affirmed by this court. In light

of the substantial penalty that Combined has already in-

curred, we are reluctant to impose further punishment

against the company in the form of sanctions, and decline

to do so.

For the reasons expressed above, we hereby deny the

petitions and motions presently pending in this docket, and

we direct the clerk of this court to issue the remittitur

forthwith.

44a

/s/ Young, C.J.

Young

/s/ Steffen, J.

Steffen

/s/ Springer,J.

Springer

MOWBRAY, J., concurring:

I concur in the result only.

This case is a simple lawsuit.

It was tried to a jury and decided by a jury. The jury

heard the evidence. The district judge properly charged

the jury. At the conclusion of the presentation of the evi-

dence the jury found in favor of appellant Ainsworth and

awarded both compensatory and punitive damages. The

evidence supports the jury’s verdict.

Respondent, Combined Insurance Company of America,

has presented nothing in its petition for rehearing now

before us that challenges in any way the integrity of the

jury’s verdict. Therefore, I would let the jury’s verdict

stand and I would deny respondent’s petition for rehear-

ing. I would also deny Ainsworth’s petition for rehearing.

Finally, I reject as wholly meritless Ainsworth’s request

for sanctions.

/s/ Mowbray, J.

Mowbray

45a

APPENDIX B

NRS 1.225 and the Nevada Code of Judicial conduct pro-

vide:

1.225 Grounds and procedure for disqualifying supreme

court justices.

1. A justice of the supreme court shall not act as such

in an action or proceeding when he entertains actual bias

or prejudice for or against one of the parties to the action.

2. A justice of the supreme court shall not act as such

in an action or proceeding when implied bias exists in any

of the following respects:

(a) When he is a party to or interested in the action or

proceeding.

(b) When he is related to either. party by consanguinity

or affinity within the third degree.

(c) When he has been attorney or counsel for either of

the parties in the particular action or proceeding before

the court.

(d) When he is related to an attorney or counselor for

either of the parties by consanguinity or affinity within

the third degree.

3. A justice of the supreme court, upon his own motion,

may disqualify himself from acting in any matter upon the

ground of actual or implied bias.

4. Any party to an action or proceeding seeking to dis-

qualify a justice of the supreme court for actual or implied

bias shall file a charge in writing, specifying the facts upon

which such disqualification is sought. Hearing on such

charge shall be had before the other justices of the supreme

court.

5. Upon the disqualification of a justice of the supreme

court pursuant to this section, a district judge shall be

46a

designated to sit in his place as provided in section 4 of

article 6 of the constitution of the State of Nevada.

6. No person shall be punished for contempt for making,

filing or presenting a charge for disqualification pursuant

to subsection 4.

(Added to NRS by 1957, 521)

47a

PART V. NEVADA CODE OF JUDICIAL CONDUCT

CANON 1

A judge should uphold the integrity and independence of

the judiciary.

An independent and honorable judiciary is indispensable

to justice in our society. A judge should participate in

establishing, maintaining, and enforcing, and should him-

self observe, high standards of conduct so that the integ- ©

rity and independence of the judiciary may be preserved.

The provisions of this Code should be construed and ap-

plied to further that objective without any limitation upon

the supreme court in the exercise of its powers of general

superintendence, whether constitutional, statutory or in-

herent, in areas not delineated in the Code.

[Added; effective July 1, 1977.]

CANON 2

A judge should avoid impropriety and the appearance of

impropriety in all his activities.

A. A judge should respect and comply with the law and

should conduct himself at all times in a manner that pro-

motes public confidence in the integrity and impartiality .

of the judiciary.

B. A judge should not allow his family, social, or other

relationships to influence his judicial conduct or judgment.

He should not lend the prestige of his office to advance

the private interests of others; nor should he convey or

permit others to convey the impression that they are in

a special position to influence him. He should not testify

voluntarily as a character witness.

[Added;. effective July 1, 1977.]

48a

CANON 3

A judge should perform the duties of his office impartially

and diligently.

The judicial duties of a judge take precedence over all

his other activities. His judicial duties include all the duties

of his office prescribed by law. In the performance of these

duties, the following standards apply:

A. Adjudicative responsibilities.

(1) A judge should be faithful to the law and maintain

professional competence. He should be unswayed by par-

tisan interest, public clamor, or fear of criticism.

(2) A judge should maintain order and decorum in

proceedings before him.

(3) A judge should be patient, dignified, and courteous ©

to litigants, jurors, witnesses, lawyers, and others with

whom he deals in his official capacity, and should require

similar conduct of lawyers, and of his staff, court officials,

and others subject to his direction and control.

(4) A judge should accord to every person who is le-

gally interested in a proceeding, or his lawyer, full right

to be heard.according to law, and except as authorized by

law, neither initiate nor consider ex parte or other com-

munications intended to influence his judicial action con-

cerning a pending or impending proceeding. A judge,

however, may obtain the advice of a disinterested expert

on the law applicable to a proceeding before him if he

gives notice to the parties of the person consulted and the

substance of the advice, and affords the parties reasonable

opportunity to respond. Notice need not be given where

the advice is confined to case citations or other abstract

legal references. |

(5) A judge should dispose promptly of the business

of the court.

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49a

(6) A judge should abstain from public comment about

a pending or impending proceeding in any court, and should

require similar abstention on the part of court personnel

subject to his direction and control. This subsection does

not prohibit judges from making public statements in the

course of their official duties or from explaining for public

information the procedures of the court.

(7) Proceedings in court should be conducted with fit-

ting dignity and decorum. As provided by law, a court

during any and all court proceedings under the jurisdiction

of such court, on its own motion or on the motion of an

attorney representing any interested party, or at the re-

quest of the witness testifying under subpena, ..all pro-

hibit by minute order any person, firm, association or

corporation from broadcasting, televising, or taking motion

pictures, or arranging for the broadcasting, televising, or

taking of motion pictures of, such proceedings. The taking

of still photographs in the courtroom, during sessions of

the court or recesses between sessions, should be regulated

by loca] rule or practice.

B. Administrative responsibilities.

(1) A judge should diligently discharge his adminis-

trative responsibilities, maintain professional competence

in judicial administration, and facilitate the performance

of the administrative responsibilities of other judges and

court officials.

(2) A judge should require his staff and court officials

subject to his direction and control to observe the stand-

ards of fidelity and diligence that apply to him.

(3) A judge should report dishonesty, or other serious

unprofessional conduct of a judge or lawyer to the appro-

priate disciplinary body.

(4) A judge should not make unrecessary appoint-

ments. He should exercise his powerof appointment only

on the basis of merit, avoiding nepotism and favoritism.

50a

He should not approve compensation of appointees beyond

the fair value of services rendered.

C. Disqualification.

(1) A judge should disqualify himself in a proceeding

in which his impartiality might reasonably be questioned,

including but not limited to instances where:

(a) He has a personal bias or prejudice concerning a

party, or personal knowledge of disputed evidentiary facts

concerning the proceeding;

(b) He has served as lawyer for any of the parties or

has been a material witness in the particular action or

proceeding before the court; or a lawyer with whom he

previously practiced law was during such association a ma-

terial witness concerning the matter;

(c) A lawyer with whom he previously practiced law

served during such association as a lawyer in the particular

action or proceeding before the court;

(d) He knows that he, individually or as a fiduciary,

or his spouse or minor child residing in his household, has

a financial interest in the subject matter in controversy

or in a party to the proceeding, or any other interest that

could be substantially affected by the outcome of the pro-

ceeding;

(e) He knows that he or his spouse, or a person within

the third degree of relationship to either of them:

(i) Is a party to the proceeding, or an officer, director,

or trustee of a party;

(ii) Is acting as a lawyer in the proceeding;

(iii) Has an interest that could be substantially af-

fected by the outcome of the proceeding;

(iv) Is likely to be a material witness in the proceed-

ing.

(2) A judge should inform himself about his personal

and fiduciary financial interests, and make a reasonable

:

i

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:

5la

effort to inform himself about the personal financial in-

terests of his spouse and minor children residing in his

household.

(3) For the purpose of this section:

(a) The degree of relationship is calculated according

to the civil law system;

(b) “Fiduciary” includes such relationships as execu-

tor, administrator, trustee, and guardian;

(c) ‘Financial interest’? means ownership of a legal or

equitable interest, however small, or a relationship as di-

rector, advisor, or other participant in the affairs of a

party, except that:

(i) Ownership in a mutual or common investment fund

that holds securities is not a ‘‘financial interest’ in such

securities unless the judge participated in the management

of the fund;

(ii) An office in an educational, religious, charitable,

fraternal, or civic organization is not a “financial interest’”’

in securities held by the organization;

(iii) The proprietary interest of-a policyholder in a

mutual insurance company, of a depositor in a mutual sav-

ings association, or a similar proprietary interest, is a

‘financial interest’’-in the organization only if the outcome

of the proceeding could substantially affect the value of

the interest;

(iv) Ownership of government securities is a “financial

interest’ in the issuer only if the outcome of the pro-

ceeding could substantially affect the value of the secu-

rities.

D. Remittal of disqualification.

(1) A judge disqualified by the terms of Canon 3C(1Xc),

Canon 3C(1Xd) or Canon 38C(1Xe) may, instead of with-

52a

drawing from the proceeding, disclose on the record the

basis of his disqualification. If, based on such disclosure,

the parties and lawyers, independently of the judge’s par-

ticipation, all agree in writing or on the record in open

court that the judge’s relationship is immaterial or that

his financial interest is insubstantial, the judge is no longer

disqualified, and may participate in the proceeding. The

agreement shall be incorporated in the record of the pro-

ceeding.

(2) Canon 3C(1e\ii) shall not apply to the presenta-

tion of ex parte or uncontested matters except in fixing

attorneys’ fees.

[Added; effective July 1, 1977.]

CANON 4 7

A judge may engage in activities to improve the law, the

legal system, and the administration of justice.

As a judicial officer and person specially learned in the

law, a judge is in a unique position to contribute to the

improvement of the law, the legal system, and the admin-

istration of justice, including revision of substantive and

procedural law and improvement of criminal and juvenile

justice. To the extent that his time permits, he is en-

couraged to do so, either independently or through a bar

association, judicial conference, or other organization ded-

icated to the improvement of the law.

A judge, subject to the propér performance of his ju-

dicial duties, may engage in the following quasi-judicial

activities:

A. He may speak, write, lecture, teach, and participate

in other activities concerning the law, the legal system,

and the administration of justice.

B. He may appear at a public hearing before an exec-

utive or legislative body or official on matters concerning

nn a a

53a

the law, the legal system, and the administration of justice,

and he may otherwise consult with an executive or leg-

islative body or official on such matters.

C. He may serve as a member, officer, or director of

an organization or governmental agency devoted to the

improvement of the law, the legal system, or the admin-

istration of justice. He may assist such an organization in

raising funds and may participate in their management

and investment, but should not individually solicit funds.

He may make recommendations to public and private fund-

granting agencies on projects and programs concerning the

law, the legal system, and the administration of justice.

[Added; effective July 1, 1977.]

CANON 5

A judge should regulate his extrajudicial activities to

minimize the risk of conflict with his judicial duties.

A. Avocational activities.

A judge may write, lecture, teach and speak on nonlegal

subjects, and engage in the arts, sports, and other social

and recreational activities, if such avocational activities do

not detract from the dignity of his office or interfere with

the performance of his judicial duties.

B. Civic and charitable activities.

A judge may participate in civic and charitable activities

that do not reflect adversely upon his impartiality or in-

terfere with the performance of his judicial duties. A judge

may serve as an officer, director, trustee, or nonlegal ad-

visor of a bona fide educational, religious, charitable, fra-

ternal, or civic organization subject to the following

limitations:

(1) A judge should not serve if it is likely that the

organization will be engaged in proceedings that would

54a

ordinarily come before him or will be regularly engaged

in adversary proceedings in any court.

(2) A judge should not individually solicit funds for

any educational, religious, charitable, fraternal, or civic

organization, or use or permit the use of the prestige of

his office for that purpose, but he may be listed as an

officer, director, or trustee of such an organization. A

judge may, however, join a general appeal on behalf of

an educational, religious, charitable, or fraternal organi-

zation, or speak on behalf of such organization.

C. Financial activities.

(1) A judge should refrain from financial and business

dealings that tend to reflect adversely on his impartiality,

interfere with the proper performance of his judicial duties,

or exploit his judicial position.

(2) A judge should not involve himself in frequent

transactions with lawyers or persons likely to come before

the court on which he serves.

(3) Subject to the requirements of subsection (1), a

judge may hold and manage investments, including real

estate, and engage in other remunerative activity, but

should not participate in, nor permit his name to be used

in connection with, any business venture or commercial

advertising program, with or without compensation, in such

a way as would justify a reasonable inference that the

power or prestige of his office is being utilized to promote

a business or commercial product. A judge should not serve

as an officer, director, manager, or employee of a business

affected with a public interest including, without limitation,

a financial institution, insurance company, or public utility.

(4) A judge should manage his investments and other

financial interests to minimize the number of cases in which

he is disqualified. As soon as he can do so without serious

financial detriment, he should divest himself of investments

55a

and other financial interests that require frequent dis-

qualifications.

(5) Neither a judge nor a member of his family re-

siding in his household should accept a gift, bequest, favor

or loan from anyone except as follows:

(a) A judge may accept a gift incident to a public

testimonial to him; books supplied by publishers on a com-

plimentary basis for official use; or an invitation to the

judge and his spouse to attend a function or activity de-

voted to the improvement of the law, the legal system, or

the administration of justice;

(b) A judge or a member of his family residing in his

household may accept ordinary social hospitality; a gift,

bequest, favor, or loan from a relative; a wedding or en-

gagement gift; a loan from_a lending institution in its

regular course of business on the same terms generally

available to persons who are not judges; or a scholarship

or fellowship awarded on the same terms applied to other

applicants;

(c) A judge or a member of his family residing in his

household may accept any other sft, bequest, favor, or

loan only if the donor is not a party or other person whose

interests have come or are likely to come before him, and,

if its value exceeds $250, the judge reports it in the same

manner as he reports compensation in Canon 6C.

(6) For the purposes of this section ‘‘member of his

family residing in his household” means any person who

resides in a judge’s household and who is a relative of the

judge or is treated by the judge as a member of his family.

(7) A judge is not required by this Code to disclose

his income, debts, or investments, except as provided in

this Canon and Canons 3 and 6.

(8) Information acquired by a judge in his judicial ca-

pacity should not be used or disclosed by him in financial

56a

dealings or for any other purpose not related to his judicial

duties.

D. Fiduciary activities.

A judge should not serve as the executor, administrator,

trustee, guardian, or other fiduciary, except for the estate,

trust, or person of a member of his family, and then only

if such service will not interfere with the proper perform-

ance of his judicia] duties. ‘‘Member of his family” includes

a spouse, child, grandchild, parent, grandparent, or other

relative or person with whom the judge maintains a close

familial relationship. As a family fiduciary the judge is

subject to the following restrictions:

(1) He should not serve if it is likely that as a fiduciary

he will be engaged in proceedings that would ordinarily

come before him, or if the estate, trust, or ward becomes

involved in adversary proceedings in the court on which

he serves or one under its appellate jurisdiction.

(2) While acting as a fiduciary a judge is subject to

the same restrictions on financial activities that apply to

him in his personal capacity.

E. Arbitration.

A judge should not act as an arbitrator or mediator

except in the performance of his judicial duties.

F. Practice of law.

A judge should not practice law except as permitted by

law.

G. Extrajudicial appointments.

A judge should not accept appointment to a govern-

mental committee, commission, or other position that is

concerned with issues of fact or policy on matters other

than the improvement of the law, the legal system, or the

administration of justice. A judge, however, may represent

his country, state or locality on ceremonial occasions or

57a

in connection with historical, educational, cultural, and

community service activities.

[Added; effective July 1, 1977.]

CANON 6

A judge should regularly file reports of compensation

received for quasi-judicial and extrajudicial activities.

A judge may receive compensation and reimbursement

of expenses for the quasi-judicial and extrajudicial activities

permitted by this Code, if the source of such payments

does not give the appearance of influencing the judge in

his judicial duties or otherwise give the appearance of

impropriety, subject to the following restrictions:

A. Compensation.

Compensation should not exceed a reasonable amount

nor should it exceed what a person who is not a judge

would receive for the same activity.

B. Expense reimbursement.

Expense reimbursement should be limited to the actual

cost of travel, feod, and lodging reasonably incurred by

the judge and, where appropriate to the occasion, by his

spouse. Any payment in excess of such an amount is com-

pensation.

C. Public reports.

A judge should report the date, place and nature of any

activity for which he received compensation, and the name

of the payor and the amount of compensation so received.

Compensation or income of a spouse attributed to the judge

by operation of a community property law is not extra-

judicial compensation to the judge. His report should be

made annually and shouid be filed on or before April 30

of each year as a public document in the office of the

clerk of the supreme court.

[Added; effective July 1, 1977.]

58a

CANON 7

A judge should refrain from political activity inappropriate

to his judicial office.

A. Political conduct in general.

(1) A judge or a candidate for election to judicial office

should not:

(a) Act as a leader or hold any office in a political

organization;

(b) Make speeches for a political organization or can-

didate or publicly endorse a candidate for nonjudicial of-

fice;

(c) Solicit funds for a political organization or candi-

date;

(2) A judge should not become a candidate in an elec-

tion for a nonjudicial office, except as the constitution of

Nevada permits.

B. Campaign conduct.

(1) A candidate, including an incumbent judge, for a

judiciai office:

(a) Should maintain the dignity appropriate to judicial

office, and should encourage members of his family to

adhere to the same standards of political conduct that

apply to him;

(b) Should prohibit public officials or emplovees sub-

ject to his direction or control from doing for him what

he is prohibited from doing under this Canon;

(c) Should not make pledges or promises of conduct -

in office other than the faithful and impartial performance

of the duties of the office; indicate his views on pending

or impending litigation; or misrepresent his identity, qual-

ifications, present position, or other fact. He may campaign

on the basis of his ability, experience, and record; and may

answer allegations directed against his record in office.

59a

(2) A candidate, including an incumbent judge, for a

judicial office, may solicit funds for his campaign no earlier

than 180 days before the primary election and no later

than 90 days after the last election in which he participates

during the election year. A candidate should not use or

permit the use of campaign contributions for purposes un-

related to the campaign.

(3) A candidate, including an incumbent judge, shall

comply with the provisions of the Nevada Election Cam-

paign Practices Act, as adopted in 1975 and now appearing

as NRS 294A.010 et seq.

[Added; effective July 1, 1977.]

Attest: A full, true and Correct Copy

Clerk of the Supreme Court

By /s/ Jeanne C. Richards Chief Deputy

60a

IN THE SUPREME COURT OF THE STATE OF

NEVADA

No. 17625

THOMAS AINSWORTH,

Appellant,

vs.

COMBINED INSURANCE COMPANY OF AMERICA,

Respondent.

FILED

OCT 26 1988

/s/ Jeanne C. Richards

JUDITH FOUNTAIN

CLERK, SUPREME COURT

Appeal from a Judgment Notwithstanding the Verdict,

Second Judicial District Court, Washoe County; Deborah

A. Agosti, Judge.

Reversed.

Peter Chase Neumann, Reno:

Bradley & Drendel, Reno,

for Appellants,

Mortimer, Sourwine, Mousel,

Sloane & Knobel, Reno; Lionel,

Sawyer & Collins, and M. Kristina

Pickering and Steve Morris, Las

Vegas,

for Respondent,

Lambrose, FitzSimmons & Perkins,

Carson City,

for Amicus Curiae.

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6la

OPINION

By the Court, GUNDERSON, C.J.

On January 14, 1982, Thomas Ainsworth was a healthy,

working man who also served his community as a member

of the Sparks City Council. His only health concerns in-

volved occasional “dizzy spells,’’ which he had experienced

at irregular intervals over a period of several years. Within

twenty-four hours, Thomas Ainsworth’s life was shattered.

Because of an accident which occurred during the admin-

istration of an angiogram, Thomas suffered a stroke. He

immediately went into a coma, which continued for seven

days. He was still 100% disabled after six months. The

stroke did not kill him, but some of its effects are per-

manent and devastating. He will never walk or talk as

well as he previously did.

While Thomas was fighting for his life, his wife, Evelyn

Ainsworth, was fighting a different battle. She attempted

to collect benefits for Thomas under two accident policies

issued by the respondent, Combined Insurance Company

of America (Combined). The Ainsworths had been advised

by agents of Combined that their accident policies would

protect them in the event of ‘‘any conceivable accident.”’

Relying on this promise, and the advice of Thomas’ phy-

sician, Evelyn sent in an accident claim.

The insurance adjuster who received the claim denied

it immediately, without any investigation whatsoever, be-

cause the doctor’s report hypothesized that the stroke may

have been caused by the disruption of atheromatous plaque

during the angiogram. The adjuster focused upon this one

sentence in the report, and concluded that the development

of arterial plaque had contributed to Thomas’ stroke. Since

the policy excluded any accident which was contributed to

by disease, Combined refused to pay benefits under the

policies. These benefits amounted to $9,600.

Evelyn was distressed by the denial, but decided to re-

submit the claim on advice from her nephew, who was a

62a

physician, and from the Combined salesman who came by

in June to collect the next biannual premium. Combined’s

salesman discussed the Ainsworths’ financial condition with

Evelyn, and encouraged her to resubmit her claim. He

even promised to put a hold on the premium check while

the matter was cleared up.

The claim was resubmitted, along with a doctor’s report

which corrected the earlier hypothesis. The doctor stated

that the results of the angiogram clearly showed that

Thomas’ blood vessels were normal and were not built up

with atheromatous plaque. He affirmed that the stroke was

entirely accidental, and could have resulted from numerous

causes.

At this time, Combined sent its file to its medical con-

sultant, Dr. Goldfinger. The consultant was provided, how-

. ever, only with the first doctor’s report and records from

Washoe Medical Center, where Thomas had been trans-

ferred after the accident. The consultant’s one-line report

stated that the stroke was the resuit of disease. After

receiving the consultant’s report, Combined again denied

the claim, without evaluating the second doctor’s report

or the record summaries from the Veteran’s Administra-

tion Hospital, where the accident occurred. Combined never

made further inquiry into the claim, never telephoned or

wrote to the doctors, and never obtained a copy of the

operating report or the angiogram.

In November, 1982, Evelyn submitted Thomas’ ciaim for

the third time, accompanied by yet another doctor’s report

explaining that Thomas had been the victim of an accident.

By this time, the claim file included more records from

the V.A. Hospital. The file was sent to Dr. Goldfinger for

a second evaluation, but on the same day Combined sent

Evelyn a third denial letter. Two days later, Dr. Goldfinger

again recommended denying the claim, because the angio-

gram had been ordered for the purpose of diagnosing

63a

Thomas’ dizzy spells. Thus, according to Goldfinger, the

loss was not “‘purely accidental.’’

In a further effort to obtain the badly-needed policy

benefits, Evelyn submitted the claim for the fourth time

in February, 1983. With her claim she included a letter

from her husband’s doctor which confirmed that the an-

giogram “revealed no pre-existing vascular disease.” In

response to this claim, Combined offered to ‘‘compromise”’

by paying the Ainsworths $1,940 in exchange for a release

of all claims. Evelyn understandably refused this offer, and

wrote a fifth letter, requesting payment of the full benefits

under the two policies, a total of $9,600. Combined still

refused to pay. :

The Ainsworths then sued Combined, seeking the pay-

ment of benefits and compensatory and punitive damages.

The jury awarded the benefits, $200,000 in compensatory

damages, and $5,939,500 in punitive damages. Combined

moved for a judgment notwithstanding the verdict and for

a new trial. The district court denied the latter motion,

but granted the former, totally eliminating the award of

punitive damages. For the reasons expressed in this opin-

ion, we reverse the judgment of the district court and

reinstate the jury’s verdict. The denial of the motion for

new trial is affirmed.

SUBSTANTIAL EVIDENCE

The function of this court in evaluating a grant of judg-

ment notwithstanding the verdict is to determine whether

the jury’s verdict is supported by substantial evidence. The

yarty favored by a verdict is entitled to have the evidence

interpreted in the manner most favorable to him, and gains

the benefit of every inference of fact fairly deductible from

the evidence. Stackiewicz v. Nissan Motor Corp., 100 Nev.

443, 686 P.2d 925 (1984); Dudley v. Prima, 84 Nev. 549,

445 P.2d 31 (1968). Judgment notwithstanding the verdict

is inappropriate when there is any substantial evidence to

64a

support that verdict. Jacobson v. Manfredi, 100 Nev. 226,

679 P.2d 251 (1984).

A jury may award punitive damages where the defendant

has been guilty of fraud, malice, or oppression. NRS

42.010. We conclude that the punitive damages award in

this case is supported by substantial evidence of oppression

on the part of the defendant, Combined. Therefore, we

reverse the decision of the district court.

Oppression has been defined as ‘‘a conscious disregard

for the rights of others which constitute[s] an act of sub-

jecting plaintiffs to cruel and unjust hardship.’’ Roth v.

Shell Oil Company, 185 Cal. App. 2d 676, 682 (Cal. App.

1960); accord Jeep Corp. v. Murray, 101 Nev. 640, 650,

708 P.2d 297, 304 (1985). Our decisions have recognized

that such a “‘conscious disregard’’ may support an award

of punitive damages. Leslie v. Jones Chemical Co., 92 Nev.

391, 551 P.2d 234 (1976); Nevada Cement Co. v. Lemler,

89 Nev. 447, 514 P.2d 1180 (1973). The Ainsworths pre-

sented substantial evidence that Combined had consciously

and deliberately ignored their rights to the payment of

benefits.

The initial claim was denied immediately without any

investigation, although Combined claimed in its letter that

it had been given “‘careful consideration.” In fact, Com-

bined made no independent inquiry concerning Thomas’

accident, whether by telephone or letter. The sum total of

its investigativé effort was to send a $5 check to each of

two hospitals, accompanied by a records request form. This

effort was clearly inadequate to support Combined’s as-

sertion that it handled the claim properly. Furthermore,

we are not impressed by Combined’s alleged lack of knowl-

edge concerning the Ainsworths’ precarious finances. From

the outset, Combined knew that Thomas Ainsworth was

a 59-year-old male who had suffered a stroke and was

comatose for seven days. This information was more than

adequate to give Combined notice that its insured, who

oceania,

65a

had paid premiums for thirteen years, had an unqualified

and urgent need for the benefits of the accident policies.

Additionally, five times within eighteen months, the in-

sured’s wife requested payment, indicating clearly that the

policy benefits of $9,600 were urgently needed.

Combined’s cumulative response to the next three claim

submissions was also sadly inadequate. In spite of the se-

riousness of the accident, Combined failed to obtain ac-

curate and complete medical records. Although it used the

services of a medical consultant; the consultant was not

provided with adequate information. When Evelyn sent

additional medical reports, these were initially ignored be-

cause Combined’s employees felt they merely repeated the

Statements contained in the initial report. After further

consideration of the reports and a second outside consul-

tation, Combined continued to deny the claim simply be-

cause the angiogram was ordered as a diagnostic tool. We

fail to understand why an accident cannot occur during

the administration of a medical test. The stroke was an

unplanned and unexpected result of the angiogram. The

fact that Thomas underwent the procedure on the orders

of his doctor is irrelevant. If Thomas had been hit by a

truck on his way to the doctor’s office, the accident would

not be the result of a disease, in spite of the fact that

Thomas was engaged in seeking medical treatment at the

time.

Combined’s obstinate and unjustified refusal to pay, in

our opinion, constitutes oppression as contemplated by the

statute. The evidence establishes that the Ainsworths were

in desperate need of funds, and that Combined had reason

to know of their dire circumstances. The record clearly

supports an inference that Combined consciously disre-

garded the rights of its insured by clinging to its restric-

tive definition of “‘accident’”’ as used in its policy.

This intransigent resistance is remarkable in light of the

written inducements offered to obtain renewal premiums

66a

from Thomas and Evelyn Ainsworth. As stated above, they

had carried insurance with Combined since 1969. At trial,

documents were introduced which showed that Combined

sent ‘‘good news letters’ to its insureds, assuring them

they were covered in the event of “‘any conceivable ac-

cident,” incurred in “any activity whatsoever.”” When the

salesman arrived to collect the premiums, he reminded the

Ainsworths of the benefits they were receiving, as ex-

plained in the news letters. In fact, the salesman’s manual

defined “‘accident’”’ simply as ‘‘an event that is unforseen

[sic.] and unexpected.’’ Given such information, the Ain-

sworths could reasonably expect that an unforeseeable, un-

expected accident which occurred as a result of a medical

test would be covered by their policy. See National Union

Fire Ins. v. Reno’s Exec. Air, 100 Nev. 360, 682 P.2d

1380 (1984); Catania v. State Farm Life Ins. Co., 95 Nev.

532, 598 P.2d 631 (1979). x

The relationship of an insured to an insurer is one of

special confidence. A consumer buys insurance for security,

protection, and peace of mind. Rawlings v. Apodaca, 726

P.2d 565 (Ariz. 1986Xen banc). The insurer is under a duty

to negotiate with its insureds in good faith and to deal

with them fairly. The insurer may not rely on its own

ambiguous contract as the sole basis for denial. Rawlings,

supra, at 572, see also Sullivan v. Dairyland Ins. Co., 98

Nev. 364, 649 P.2d 1857 (1982). To allow such conduct

would only encourage ambiguous contracts. Indeed, our

law has held that any ambiguity wil! be construed against

the insurance company, and rightly so. N. American Life

& Cas. Co. v. Gingrich, 91 Nev. 491, 588 P.2d 163 (1975).

Negotiations between a wealthy, sophisticated commercial

venturer and a naive consumer cannot be of equal strength.

‘The covenant of good faith and fair dealing is implied into every

commercial contract. NRS 104.1203. In Nevada, insurance contracts

are directly regulated by statutes which prohibit deceptive advertising

and other unfair trade practices. See NRS 686A.020; 686A.030(1);

686A.040; 686A.310(1\b), (c), (e), and (f).

De mn CO a eer

67a

For that reason, the law attempts to render an ambiguous

contract fair by making the drafter responsible for am-

biguity. The insurance industry is heavily regulated by the

state, because it is an important public trust. Along with

the profits obtained from insurance premiums, insurers

must accept the obligations of good faith and fair dealing

imposed by law.

Furthermore, even if the evidence is not sufficient to

prove that Combined acted oppressively in avoiding the

payment of benefits, we note that in the past we have

found malice in fact when the defendant has engaged in

wilful and intentional conduct, done in reckless disregard

of its possible results. Nevada Cement, supra, 89 Nev. at

451, 514 P.2d at 1183; Nevada National Bank v. Huff, 94

Nev. 506, 582 P.2d 364 (1978). Combined’s conduct was

neither accidental nor simply negligent. In spite of five

requests made in eighteen months, in spite of the serious

nature of its insured’s. accident, it conducted no independ-

ent investigation and utterly failed to evaluate fairly the

medical evidence it possessed in its claim file.

Therefore, we conclude that the jury’s award of punitive

damages was supported by substantial evidence.

PUNITIVE DAMAGES

Traditionally this court has held that the amount of a

punitive damages award was subjective, and therefore best

left to the jury’s determination. Phillips v. Lynch, 101 Nev.

311, 704 P.2d 1083 (1985); Miller v. Schnitzer, 78 Nev.

301, 371 P.2d 824 (1962). Recently we have attempted to

define the allowable limits of punitive damages in a more

objective fashion. Ace Truck v. Kahn, 103 Nev. 503, 746

P.2d 182 (1987). Ace Truck described several factors which

contribute to an appellate evaluation of a punitive damages

award. We conclude, however, that none of these factors

prevent us from affirming the award in this case.

68a

First, we note that the financial position of the defendant

is still relevant to_the determination of the amount of the

punitive damages award. The wealth of a defendant is

directly relevant to the size of an award, which is meant

to deter the defendant from repeating his misconduct as

well as punish him for his past behavior. See Midwest

Supply, Inc. v. Waters, 89 Nev. 210, 510 P.2d 876 (1973).

We note that the award in this case, while large, amounts

to only 5% of Combined’s 1985 net operating gain. The

award constitutes only .04% of Combined’s 1985 total] as-

sets. Since we find its business conduct totally unaccept-

able, we are reluctant to disturb the jury’s determination

that a sizable award is necessary to deter Combined from

pursuing its inappropriate methods.

Second, we conclude that the culpability and blamewor-

thiness of Combined is considerable, with few mitigating

circumstances. Despite repeated requests by the insured,

all of which were accompanied by medical reports, Com-

bined failed to investigate the claim properly. It refused

to pay on the basis of one inaccuracy in the initial report,

an inaccuracy which was corrected by three later reports.

Combined must take full responsibility for the handling of

the claim, and its own obstinate refusal to take more ap-

propriate action.

Third, we look to the vulnerability of, and injury suf-

fered by, the offended party. Thomas Ainsworth was in a

highly vulnerable position as the result of the devastating

consequences of his stroke. Unable to communicate effec-

tively, he depended on the efforts of his wife, a woman

who was inexperienced in handling business matters. Suf-

ficient evidence was produced at trial to show that Thomas

was permanently impaired in his speaking ability by the

lack of crucial funds to pay for speech therapy at the

proper time during his recovery. Thomas’ injuries prompted

the jury to make a substantial award of compensatory

damages. These injuries also support an award of punitive

damages.

69a

Another factor is the offensiveness of the punished con-

duct when compared to societal values of justice and pro-

priety. As discussed above, insurance is a special kind of

commercial activity. The insurer is under a duty to treat

its policyholders fairly. The obstinate, unjustified refusal

to pay a legitimate claim is offensive to society, precisely

because the consumer pays for insurance to gain security

and peace of mind.

Finally, we must evaluate the means judged necessary

to deter future misconduct. Combined is a very large,

wealthy insurance company which sends its agents out

among the innocent citizenry, selling policies door-to-door.

Its policyholders are not sophisticated commercial inves-

tors; they are ordinary citizens who hope to protect them-

selves from future calamities. If Combined is to be deterred

from its past course of conduct, this can only be done

through an assessment of punitive damages. In order to

accomplish this purpose, the amount awarded must be suf-

ficient to cause the defendant real concern. We cannot say

that an assessment of .04% of the respondent’s total assets

is unwarranted under the circumstances of this case. The

award does not shock our judicial conscience, and it is not

clearly excessive.? Hale v. Riverboat Casino, Inc., 100 Nev.

299, 682 P.2d 190 (1984).

Other contentions have been considered and are deemed

to be totally without merit. We therefore reinstate the

jury’s verdict. We reverse the grant of judgment notwith-

standing the verdict, and affirm the denial of respondent’s

motion for a new trial.

/s/ Gunderson, C.J.

Gunderson

* Appellant is not entitled to interest on the punitive damages award.

See Ramada Inns v. Sharp, 101 Nev. 824, 711 P.2d 1 (1985). We

understand that the policy benefits and compensatory damages have

already been paid. Therefore, no interest is awarded by this decision.

70a

We concur:

/s/ Steffen, J.

Steffen

/s/ Young, J.

Young

/s/ Springer, J.

Springer

/si Mowbray. J.

Mowbray

Attest: A full, true and Correct Copy

Judith Fountain, Clerk of the Supreme Court

By /s/ Sharon E. Page Deputy

7la

IN THE SECOND JUDICIAL DISTRICT COURT OF THE

STATE OF NEVADA IN AND FOR THE COUNTY OF

WASHOE

No. 83-5569

Department No. 3

THOMAS AINSWORTH and EVELYN AINSWORTH,

Plaintiffs,

vs.

COMBINED INSURANCE COMPANY OF AMERICA, a for-

eign corporation; RONALD IOVINELLI; HERMAN BACA,; et

al.,

Defendants.

ORDER GRANTING DEFENDANT’S MOTION FOR

JUDGMENT NOT WITHSTANDING VERDICT

and

ORDER DENYING DEFENDANT’S MOTION FOR A NEW

TRIAL ON THE ISSUE OF COMPENSATORY DAMAGES

Defendant’s Motion for Judgment Notwithstanding The

Verdict or In The Alternative For A New Trial was filed

on March 28, 1986. Plaintiff's Opposition was filed on April

9, 1986, and Defendant replied to the Plaintiff's Opposition

on April 15, 1986. Thereafter, the matter was submitted.

Pursuant to NRCP 50(b), Defendant moves for a judg-

ment notwithstanding the verdict, requesting the Court for

an order setting aside the verdict of punitive damages

awarded in the above-captioned action.

72a

Pursuant to NRCP 59(a), Defendant also moved for an

order granting a new trial on the grounds that excessive

compensatory and punitive damages had been awarded un-

der the influence of passion and prejudice.

The jury in this case was called upon to decide several

issues:

(1) It was for the jury to decide whether Plaintiff’s in-

jury was an accident not caused or contributed to by dis-

ease. Plaintiff had suffered a stroke while undergoing a

medical procedure known as a angiogram. This procedure

required the physical intrusion into the Plaintiff, Tom Ain-

sworth’s, body of a catheter. Evidence was presented that

the stroke resulted from disruption of atheromatous

plaques during that procedure. Plaque forms on the inner

walls of blood vessels in someone who has arteriosclerotic

disease. When the plaque breaks off, it can form a block-

age which results in a stroke. The jury found that the

Plaintiff was entitled to benefits under the terms of the

policy issued by the Defendant, which was an accident

disability insurance policy.

(2) The jury was required to determine whether or not

Defendant’s refusal to pay benefits to the Plaintiff was in

bad faith. The jury found the insurance company acted in

bad faith when it refused to pay the benefits to which

Plaintiff was entitled. The insurance company should have

paid the Plaintiff $9,600.

(3) The jury was asked to determine the amount of dam-

ages, if any, to which the Plaintiff, Tom Ainsworth, was

entitled for breach of the covenant of good faith and fair

dealing. The jury was entitled to consider his emotional

distress. The jury awarded the Plaintiff $200,000.

(4) The jury was asked to determine whether or not

Evelyn Ainsworth was entitled to recover on her claini of

fraud against the Defendant. The jury found in favor of

the Defendant.

73a

(5) The jury was instructed to determine the appropri-

ateness of an award of punitive damages against the

Defendant. The jury found that the Plaintiff, Tom Ain-

sworth, was entitled to punitive damages in the sum of

$5,939,500.

The Defendant does not, at this time, challenge the ju-

ry’s findings of coverage under the policy or of its own

bad faith in refusing to pay the Plaintiff benefits due under

the policy. Defendant challenges the award of punitive

damages asserting that the verdict should be set aside as

a matter of law. Defendant asserts that no substantial

evidence exists to support the jury’s finding of malice in

fact. Defendant’s motion can only succeed where there is

no substantial evidence to support the verdict after all

favorable inferences from the evidence are drawn in favor

of the prevailing party. Sanguinetti v. Strecker, 94 Nev.

200 (1978).

Plaintiff argues that evidence of malice in fact exists in

the claims file itself. The critical evidence in the claims

file is as follows:

When Plaintiff, through his wife, submitted a claim based

upon Plaintiff’s stroke to the Defendant, Plaintiff's phy-

sician informed Defendant, through a statement included

in the form, of the nature of Plaintiff's injury and how it

was caused.

The claim was denied the day after it was received by

Defendant. The Plaintiff was notified of the denial, which

stated Defendant’s position that the “loss was not due

solely to accidental injuries, but was actually caused or -

contributed to by disease.’’ The Defendant denied the claim

without benefit of consultation with an independent phy-

sician or without reviewing the Plaintiff’s medical records.

Upon transmitting the denial letter, Defendant also or-

dered Plaintiff's medical records from Washoe Medical

Center.

74a

After Defendant’s second request for benefits, the

Defendant requested Plaintiff's medical records from the

Veterans Administration Hospital (where the injury oc-

curred). Before those records were made available to

Defendant, Defendant solicited the opinion of its medical

consultant, Dr. Goldfinger. Dr. Goldfinger was asked by

Defendant to ‘‘advise us as to our liability under the pol-

icies.”” Defendant represented to Dr. Goldfinger that the

Plaintiff's policy provided benefits “for losses resulting

solely from accidental injuries, providing such loss is not

caused or contributed to by sickness or disease.”’

Dr. Goldfinger advised Defendant that the Plaintiff's

injury ‘‘was contributed to by arteriosclerotic disease.”’

All the records of the VA Hospital were subsequently

received except for the operative report, which was never

forwarded. The VA Hospital records contained additional

evidence of arteriosclerotic disease. After their receipt.

Plaintiff's claim was again denied.

Plaintiff, through his wife, sent Defendant a third med-

ical report and asked for reconsideration. This report in-

formed Defendant that the angiogram showed Plaintiff's

“cerebral arteries were completely normal at the time of

his stroke.”

Plaintiff's claim was denied a third time. Defendant in-

dicated the reason for the denial was that the stroke was

the ‘“‘result of conditions ... more properly classified as

sickness... .”

The claim was also resubmitted to Dr. Goldfinger, with

all the medical records in Defendant’s possession. Dr. Gold-

finger replied that the injury was not purely accidental.

A fourth request for reconsideration was sent to

Defendant along with the report of Dr. Boradbent, who

had performed the angiogram. Dr. Broadbent reiterated

the view that the angiogram revealed no preexisting vas-

cular disease. His report was not sent to Dr. Goldfinger.

7da

Subsequently, the Defendant offered to compromise

Plaintiff's claim for $1,940 (20 percent of the claim).

Plaintiff again requested reconsideration for payment in

full and Defendant again refused, but renewed its offer

to pay 20 percent.

Plaintiff also points to the testimony of two witnesses

called as experts by Plaintiff to support his argument that

malice in fact existed in this case. David Moiola, an in-

surance broker, testified that he and any reasonable con-

sumer would expect Plaintiff's injury to be covered.

Barbara Paull, an insurance claims adjuster, testified

that in her opinion the way the claim was handled by the

Defendant amounted to bad faith and reckless misconduct.

Defendant argues that Plaintiff has confused the issues

of bad faith and malice. It is true that a breach of the

covenant of good faith and fair dealing in and of itself

does not give rise to the requisite finding of malice in fact

which is necessary to sustain an award of punitive dam-

ages.

Based on the relationship which exists between an in-

surer and its insured, an insurer has the duty to act in

good faith in the handling of its insured’s claims. A cause

of action exists against the insurer wherever this duty is

breached. An unreasonable refusal to pay the insured for

a valid claim subjects the insurance company to liability

for all damages proximately resulting from such refusal

and an insurer may breach the covenant of good faith and

fair dealing when it fails to properly investigate its in-

sured’s claims.

It does not follow that because plaintiff is en-

titled to compensatory damages that he is also

entitled to exemplary damages. In order to justify

an award of exemplary damages, the plaintiff

must be guilty of oppression, fraud or malice. He

must act with the intent to vex, injure or annoy,

76a

or with a conscious disregard of the plaintiff's

rights.... Silherg v. California Life Insurance

Company, 521 P.2d 1103 at 1110 (1974).

In Silberg, the Court stated further that a breach of the

covenant of good faith and fair dealing did not necessarily

establish that the Defendant acted with the requisite intent

to injure the Plaintiff. .

Based on the evidence admitted at trial, substantial evi-

dence cannot be found to support a finding of malice in

fact upon which the jury could have properly awarded

punitive damages.

The jury could properly find, and did so, that the

Defendant breached the covenant of good faith and fair

dealing by the manner in which the Plaintiff's claim was

handled and ultimately by the Defendant’s refusal to pay

benefits. However, the Defendant was in receipt of infor-

mation from Plaintiff's own physician that plaque breaking

away from Plaintiff's blood vessels during the angiogram

caused the stroke. Defendant was further in receipt of

information that plaque forms only in the presence of ar-

teriosclerotic disease. Defendant’s conduct cannot, under

these circumstances, be characterized as malicious: a mo-

tive and willingness to vex, harrass, annoy or injure an-

other person.

A judgment notwithstanding the verdict is in-

appropriate where there is any substantial evi-

dence to support the verdict, and the plaintiff

must be given the benefit of every reasonable

inference in support of the verdict. Hernandez v.

City of Salt Lake, 100 Nev. 504 (1984).

Granting to the Plaintiff the benefit of every reasonable

inference in support of the jury’s verdict, the evidence

exists to support a finding of bad faith, but not a finding

of malice. The evidence does not, under any interpretation,

demonstrate that the Defendant intended to do harm for

the mere satisfaction of doing it. Before punitive damages

are appropriate, it must be concluded from the conduct

being examined that an inference can be drawn that the

Defendant acted with the requisite intent to injure the

Plaintiff. Thus is the nature of malice in fact.

In United Stated Fidelity v. Peterson, 91 Nev. 617 (1975),

the Nevada Supreme Court recognized the cause of action

in tort for an insurer’s breach of the implied covenant of

good faith and fair dealing. But, in Peterson, the Supreme

Court upheld the District Court’s refusal to instruct the

jury on punitive damages despite evidence in the record

that the Defendant had been given notice by the Plaintiff

of several valid claims and that Defendant had knowledge

of the effect its refusal to pay would have on the Plaintiff.

The Defendant knew the Plaintiff was due the money and

yet refused to pay. The Court cited Silberg as well as

several Nevada cases in support of its conclusion. Those

Nevada cases, in addition to Silberg, are instructive here.

In Village Development Company v. Felice, 90 Nev. 314

(1974), the Court stated:

The record contains evidence to show negli-

gence and unconscionable irresponsibility. Still

after careful consideration and extensive debate,

we find insufficient evidence to support a finding

of oppression, fraud or malice, express or implied

.... We have heretofore sustained awards of pu-

nitive damages where evidence showed the wrong

was willful, and damage either intended or a nec-

essary consequence. Here, however, the evidence

does not to us appear quite sufficient to meet

our previously-established requirement that more

must be shown than malice in law, and that there

must be substantial evidence of malice in fact.

The proposition of law stated in Felice continues to have

vitality today. In Nevada, malice in fact must be shown

in order to sustain a verdict for punitive damages.

78a

An award of exemplary damages, in an action

for damages for injuries inflicted by the

defendant’s malicious act, can be made only if

the plaintiff can show that malice in fact, as dis-

tinguished from malice in law, existed with re-

spect to the defendant’s act. The distinction

between malice in fact and malice in law is sub-

stantial. Malice in fact, or actual malice, denotes

ill will on the part of the defendant, or his desire

to do harm for the mere satisfaction of doing it.

Malice in law, on the other hand, is merely a

legal fiction: it is that form of malice which the

law presumes, either conclusively or disputably,

to exist on the production of certain designated

evidence. Malice in fact cannot be presumed; its

existence must be found as a matter of fact by

the jury, although it may be proved either by

direct evidence or declaration, or by an inference

drawn from the actual conduct of the defendant.

Whilé the element of malice which is essential to

a recovery of exemplary, or punitive, damages is

sometimes called “express malice’, or “actual

malice’, ‘“‘real malice’, or “true malice’, it is

always, in the last analysis. malice of only one

kind—the malice of evil motive. ... Malice in fact,

sufficient to support an award of damages within

the scope of NRS 42.010 may be established by

a showing that the appellant’s wrongful conduct

was willful, intentional and done in reckless dis-

regard of its possible results. Nevada Credit Rat-

ing Bureau, Inc. v. Williams, 88 Nev. 601 at 609

and 610 (1972).

No reasonable inference from the evidence here can be

made that Defendant acted with iil will or desire to do

harm for the mere satisfaction of doing it. Nor does the

evidence support a finding that the Defendant consciously

79a 7

and deliberately disregarded the Plaintiff's rights in reck-

less disregard of the possible results. Jeep Corporation v.

Murray, 101 Nev. Adv. Op. 180 1985). In fact, it is un-

disputed that Defendant had no knowledge of Plaintiff's

financial circumstances or was in any manner apprised of

how its conduct affected the Plaintiff financially or oth-

erwise. This fact becomes significant when the facts of

those cases cited to the Court on the issue of punitive

damages are analyzed. In virtually every case where an

award of punitive damages was sustained, Defendants had

knowledge of the wrongful nature of their conduct and

knowledge of the resulting harm.

In Defendant’s Motion for a New Trial, it is unnecessary

to decide whether Defendant is entitled to a new trial on

the issue of punitive damages. As a matter of law, Plaintiff

is not entitled to punitive damages.

Defendant requests a new trial on the issue of compen-

satory damages and argues that the damages were awarded

under the influence of passion and prejudice. The jury

awarded Plaintiff, Tom Ainsworth, $200,000 for emotional

distress and benefits that should have been paid under the

policy.

It can hardly be denied that, because of their

very nature, a determination of their monetary

compensation falls peculiarly within the province

of the jury .... We may not invade the province

of the fact finder by arbitrarily substituting a

monetary judgment in a specific sum felt to be

more suitable. Stackiewicz v. Nissan Motor Com-

pany, 100 Nev. 443 (1984).

As conceded by counsel for the Plaintiff, the verdict is

substantial, but under the circumstances of this case, it

cannot be said that the award is so excessive as to suggest

the intrusion of passion and prejudice upon the delibera-

tions of the jury.

80a

For all the. reasons enumerated,

NOW, THEREFORE, IT IS HEREBY ORDERED that

Defendant’s Motion for Judgment Notwithstanding the

Verdict is granted and that Defendant’s Motion for a New

Trial on the Issue of Compensatory Damages is denied.

DATED this 28 day of August, 1986.

/s/ Demnborah A.

Agosti

DISTRICT JUDGE

8la

SECOND JUDICIAL DISTRICT COURT OF THE STATE

OF NEVADA IN AND FOR THE COUNTY OF WASHOE

Case No. 83-5569

Dept. No. 3

THOMAS AINSWORTH,

Plaintiff,

V.

COMBINED INSURANCE COMPANY OF AMERICA,

Defendant.

JUDGMENT

The cause of Thomas Ainsworth, plaintiff, versus Com-

bined Insurance Company of America, defendant having

come before the Court for jury trial on March 17, 1986;

And a duly impaneled jury having heard the evidence,

having been instructed on the law, and having rendered

its verdict on the issue of punitive damages in favor of

plaintiff Thomas Ainsworth, and against defendant Com-

bined Insurance Company of America, and having assessed

said punitive damages in the amount of Five Million Nine

Hundred Thirty-Nine Thousand Five Hundred Dollars

($5,939,500.00);

And the Supreme Court of Nevada having Ordered said

jury verdict reinstated, in its decision filed October 26,

1988, and published in the case of Ainsworth v. Combined

Insurance Company of America, 104 Nev. __, 763 P.2d

673 (1988), of which this Court takes judicial notice;

And the Supreme Court of Nevada having Ordered de-

nied all petitions for rehearing in the matter, and the

82a

Court’s published opinion filed May 19, 1989, in the case

of Ainsworth v. Combined Insurance Company of America,

105 Nev. Advance Opinion 53, P.2d __, (May 19,

1989), of which this Court takes judicial notice;

And the Clerk of the Supreme Court of Nevada having

issued Remittitur pursuant to Rule 41(a),N.R.A.P. and the

decision of the Nevada Supreme Court, receipt of which

was obtained by the Clerk of this Court this date, and

jurisdiction thereby having been returned to this Court;

NOW, THEREFORE, as provided in Rule 58, Nevada

Rules of Civil Procedure, judgment is hereby rendered in

favor of Thomas Ainsworth and against Combined Insur-

ance Company of America, in the sum of Five Million Nine

Hundred Thirty-Nine Thousand Five Hundred Dollars

($5,939,500.00).

Dated this 28rd day of May, 1989.

/s/ Deborah A. Agosti

DISTRICT JUDGE

83a

SUPREME COURT OF THE UNITED STATES

No. A-984

COMBINED INSURANCE COMPANY OF AMERICA,

Applicant

v.

THOMAS AINSWORTH

ORDER

UPON CONSIDERATION of the application of counsel

for the applicant and the response filed thereto,

IT IS ORDERED that execution and enforcement of the

judgment of the Supreme Court of Nevada, case No. 17625,

filed in the Second Judicial District Court of Nevada,

County of Washoe, No. 83-5569, Dept. No. 3, on May 30,

1989, be, and the same is hereby, stayed pending the timely

filing and disposition by this Court of a petition for a writ

of certiorari. If the petition for a writ of certiorari is

denied, this stay terminates automatically. In the event

the petition for a writ of certiorari is granted, this order

shall remain in effect pending the issuance of the mandate

of this Court.

This stay is further conditioned upon the posting of a

good and sufficient bond with the Clerk of the Supreme

Court of Nevada to be approved by that Court.

/s/ Sandra Day O’Connor

. Associate Justice of the Supreme

Court of the United States

Dated this 15th day of June, 1989.

84a

IN THE SUPREME COURT OF THE STATE OF

NEVADA

No. 17625

THOMAS AINSWORTH,

Appellant,

vs.

COMBINED INSURANCE COMPANY OF AMERICA,

Respondent.

FILED

JUN 23 1989

CLERK OF SUPREME COURT

By /s/ J. Richards

CHIEF DEPUTY CLERK

ORDER APPROVING BOND

Pursuant to our order of June 22, 1989, Combined In-

surance Company of America has submitted to the clerk

of this court a supersedeas bond in the amount of

$8,000,000. The bond complies in all respects with our

previous order. We therefore approve the bond and direct

the clerk of this court to file the bond, forthwith. Further,

the clerk of this court shal] return to counsel for Combined

the original $7,000,000 supersedeas bond previously sub-

mitted by Combined.

It is so ORDERED.

/s/ Young, C. J.

/s/ Springer, J.

/s/ Steffen, J.

85a

ec: Peter Chase Neumann

Bradley & Drendel

Mortimer Sourwine Mouse] Sloane & Knobel

Lionel Sawyer & Collins

Laura FitzSimmons

Geoffrey Cornell Hazard, Jr.

CERTIFIED COPY

The document to which this certificate is attached is a full,

true and correct copy of the original on file and of record

in my Office.

DATE: June 26, 1989

Supreme Court Clerk,

State of Nevada

By Sharon E. Page Deputy

86a

APPENDIX B—PART 2

IN THE SUPREME COURT OF THE STATE OF

j NEVADA

Case No. 17625

THOMAS AINSWORTH,

Appellant,

VS.

COMBINED INSURANCE COMPANY OF AMERICA,

Respondent.

RESPONDENT’S ANSWERING BRIEF

*- * *

I. ISSUES PRESENTED FOR REVIEW.

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4. Punitive damages impose a quasi-criminal exaction on

the defendant, and they are a windfall to the plaintiff.

Should Nevada join Arizona, Indiana, Maine, New York,

the Virgin Islands, the District of Columbia, and the Amer-

ican Bar Association Action Commission to Improve the

Tort Liability System and require their proof to be by

clear and convincing evidence?

’-* *

6. Would reversal of the lower court’s judgment n.o.v.

and reinstatement of the jury’s disproportionate punitive

verdict, rendered on insufficient evidence and unconsti-

tutionally vague instructions, result in a denial of Com-

bined Insurance Company of America’s rights to Due

Process of Law and the imposition of an Excessive Fine,

in derogation of the Eighth and Fourteenth Amendments

to the United States Constitution?

87a

IN THE SUPREME COURT OF THE STATE OF

NEVADA

Case No. 17625

THOMAS AINSWORTH,

Appellant,

Vs.

COMBINED INSURANCE COMPANY OF AMERICA,

Respondent.

RESPONDENT’S ANSWERING BRIEF

x* * *

On March 9, 1987, the United States Supreme Court

granted review in Bankers Life & Casualty Co. v. Cren-

shaw, 483 So.2d 254 (Miss. 1985), reviewed granted, —_—

U.S. —— (1987) (Case No. 85-1765), the case on which

Ainsworth principally relies to sustain his appeal. The grant

of review in Bankers Life confirms that punitive damages

and the lack of clear standards to govern their award pose

serious constitutional questions. Wheeler, The Constitu-

tional Case for Reforming Punitive Damages Procedures,

69 Va.L.Rev. 269 (1982) [hereinafter, ‘‘Wheeler, The Con-

stitutional Case for Reform’’}; see also Aetna Life Insur-

ance Co. v. LaVoie, —_— U.S. ——, 106 S.Ct. 1580, 1589

(1986). While a heightened concern with fairness to the

defendant is appropriate in the punitive damages setting,

that concern is not counterbalanced by any claim of nght

in the plaint.ff. On the contrary, ‘‘a plaintiff is never en-

titled to punitive damages as a matter of right.’”’ Nevada

Cement Co. v. Lemler, 89 Nev. 447, 451, 514 P.2d 1180,

1182 (1973); Allen v. Anderson, 93 Nev. 204, 562 P.2d 487

(1977). This disparity between the plaintiff’s and

defendant’s interests has led a number of commenta

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