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Sierra Pacific Power Co. v. Hartford Steam Boiler Inspection and Insurance Co.

United States District Court, District of Nevada

December 5, 2014

SIERRA PACIFIC POWER COMPANY, a Nevada Corporation, Plaintiff,
v.
THE HARTFORD STEAM BOILER INSPECTION AND INSURANCE COMPANY, a Connecticut Corporation; and ZURICH AMERICAN INSURANCE COMPANY, a New York Corporation, as successor in interest to ZURICH INSURANCE COMPANY, U.S. Branch, Defendants.

ORDER

LARRY R. HICKS, UNITED STATES DISTRICT JUDGE

Before the Court is Defendants Hartford Steam Boiler Inspection and Insurance Company and Zurich American Insurance Company’s (collectively “Defendants”) Motion to Amend the Court’s Order of September 19, 2014 Pursuant to Rules 52 and 60. Doc. #228.[1] Plaintiff Sierra Pacific Power Company (“Sierra Pacific”) filed a Response. Doc. #231. Also before the Court is Sierra Pacific’s Motion to Alter or Amend Judgment under Rules 59 and 52. Doc. #229. Defendants filed a Response (Doc. #230), to which Sierra Pacific Replied (Doc. #232).

I. Factual Background and Procedural History

This case involves a dispute regarding insurance coverage that Sierra Pacific procured from Defendants. Sierra Pacific operates power generation stations in Nevada and California. Defendants insure Sierra Pacific’s facilities, including the Farad Dam on the Truckee River in California (the “Dam”). The Dam was completely destroyed by a flood in 1997, at which point Sierra Pacific filed a claim for damages with Defendants.

Following a three-day bench trial on April 8 to 10, 2008, as well as written briefing and written closing arguments by the parties, the Court awarded declaratory relief and entered judgment in favor of Sierra Pacific in accordance with the Court’s Findings of Fact and Conclusions of Law. Doc. #164; Doc. #165. Therein, the Court determined that the actual cash value (“ACV”), with proper deduction for depreciation, of the Dam was $1, 261, 000. Doc. #164 at 8. The Court also reaffirmed its earlier findings that Defendants’ payment of $1, 011, 200 to Sierra Pacific in April 2001 did not constitute an agreement as to the ACV or satisfaction of ACV coverage under Defendants’ policy. Id. at 4-5, 7. The Court further determined that the replacement cost of the Dam was $19, 800, 000. Id. at 5.

On October 10, 2008, Sierra Pacific filed a Motion to Reconsider the Court’s determination of the Dam’s ACV. Doc. #166. On July 10, 2009, the Court denied Sierra Pacific’s Motion, finding that the Dam’s ACV had already been litigated.[2] Doc. #182. The Court explained that “the most persuasive evidence before the [C]ourt concerning the [D]am’s [ACV] is a letter in which [Sierra Pacific’s] insurance broker [Mark Walters] stated to [Sierra Pacific’s] claims manager [John Hargrove], ‘We are only agreeing that the ACV is $1, 261, 200 and nothing else.’” Id. at 4-5 (citing Doc. #167, Ex. D at 1). The Court also found pertinent an email from Mark Walters to Sierra Pacific’s former manager of claims and insurance Curtis Risley, agreeing to apply Defendants’ depreciation factors to the Dam to reach an ACV of $1, 261, 000, subject to Sierra Pacific’s claims manager’s review. Id. at 5 n.4 (citing Doc. #167, Ex. C, p. 2).

Thereafter, the parties filed notices of appeal. Doc. #183; Doc. #187. On July 27, 2012, the Ninth Circuit Court of Appeals issued a Memorandum vacating the Court’s finding that the ACV of the Dam was $1, 261, 200, and remanding for a determination of the ACV based on reducing the replacement cost of $19, 800, 000 by the “appropriate” depreciation, and to fashion an appropriate order tolling the three-year period for replacing the Dam until the conclusion of the litigation in this matter. Doc. #213 at 17.[3] The Ninth Circuit rejected Sierra Pacific’s argument that the Dam’s ACV should be calculated as the full replacement cost without any depreciation. Id. at 6. The Ninth Circuit also rejected the argument that the parties had agreed to an ACV. Id. at 7 (noting that neither of the documents authored by Mark Walters evidenced Sierra Pacific’s actual agreement to the ACV; rather, they represented only Sierra Pacific’s insurance broker’s recommendation to Sierra Pacific as to the ACV). The Ninth Circuit went on to reject the proposed ACV of $1, 261, 200 because it was not related to the figure found as the replacement cost ($19, 800, 000). Id.

On October 18, 2013, the Court held a Status Conference and ordered the parties to submit briefing on the issue of depreciation. Doc. #219. On November 18, 2013, Defendants filed a Memorandum Regarding Proper Depreciation to Apply to the Replacement Cost of the Farad Dam to Reach Actual Cash Value. Doc. #221. Also on November 18, 2013, Sierra Pacific filed a Memorandum Brief on Depreciation. Doc. #222. On December 3, 2013, Defendants and Sierra Pacific filed their respective Responses. Doc. #223; Doc. #224. The Court held that based on the evidence presented at trial, it was appropriate to apply a 50% rate of depreciation for the in-river Dam and a 5% rate of depreciation for the wing wall, and that subtracting this depreciation from the full replacement cost yielded an ACV of $12, 216, 600. Doc. #225 at 7.

Both parties filed Motions to Amend the Judgment. Doc. #228; Doc. #229. Defendants request that the Court clarify that the deductible of $1, 600, 000 and the prior payment of $1, 011, 200 should be deducted from any amount that they are ordered to pay. Doc. #228 at 1. Sierra Pacific requests that the Court amend its Order to increase the ACV because the prior Order was based partially on a mistake as to the age of the Dam, and the Court should not have applied a 50% depreciation rate for the Dam. Doc. #229 at 1-2. Sierra Pacific also requests that the Court grant it prejudgment interest on the corrected ACV of the Dam. Id. at 16-19. The Court has thoroughly reviewed and considered the pleadings, evidence and testimony presented at trial, and all post-trial and post-appeal briefing and argument.

II. Legal Standard

Upon motion by a party within twenty days of the entry of judgment, “the court may amend its findings—or make additional findings—and may amend the judgment accordingly.” Fed.R.Civ.P. 52(b). Such a motion shall be accompanied by a motion for a new trial, or to alter or amend a judgment under Federal Rule of Civil Procedure 59(e). A party can also seek relief from final judgment under Federal Rule of Civil Procedure 60(b). “Reconsideration is appropriate if the district court (1) is presented with newly discovered evidence, (2) committed clear error or the initial decision was manifestly unjust, or (3) if there is an intervening change in controlling law.” School Dist. No. 1J, Multnomah Cnty., Or. v. ACandS, Inc., 5 F.3d 1255, 1263 (9th Cir. 1993). “A Rule 59(e) motion may not be used to raise arguments or present evidence for the first time when they could reasonably have been raised earlier in the litigation.” Carroll v. Nakatani, 342 F.3d 934, 945 (9th Cir. 2003). District courts have discretion regarding whether to grant a motion to amend under Rule 59(e) or 60(b). Wood v. Ryan, 759 F.3d 1117, 1121 (9th Cir. 2014).

III. Discussion

A. Depreciation

In its prior Order, the Court found that the 50% depreciation rate for the Dam was appropriate because it was supported by the only evidence regarding depreciation that was presented at trial. Doc. #225 at 4. The Court referred first to a letter to Sierra Pacific’s claims manager John Hargrove (“Hargrove”) from insurance broker Mark Walters (“Walters”) summarizing a meeting with Pat Jeremy (“Jeremy”), vice president and executive general adjuster for Hartford’s special risk claims. The letter stated that the parties “agreed to apply a 50% depreciation factor to the older portion [of the Dam] . . . and a 5% depreciation to the new wing wall.” Defendants’ Trial Ex. 630. Jeremy also testified that on July 28, 1999, he met with Curtis Risley (“Risley”), manager of Sierra Pacific’s claims and insurance department, and that Risley agreed to a depreciation rate of 50% for the Dam. Doc. #197 (Trial Transcript) 264:2-10; see Plaintiff’s Trial Ex. 75 at ZUR 283 (“The 50% depreciation was acceptable to Curt[is] on the Dam.”). ...


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