## Facts

- Debra Bartgis was an employee covered by her employer’s group major medical plan, administered by Albert H. Wohlers & Co. and underwritten by North American Life and Casualty Company (later Allianz).
- In 1990, the employer switched to a new policy and told employees the coverage was “comparable” to the prior plan.
- The new policy included an “ancillary charge limitation” that was not disclosed to employees: after an inpatient stay exceeded 24 hours, many hospital charges beyond basic room and board were treated as “ancillary” and reimbursed at sharply reduced rates.
- In 1991, Bartgis underwent a hysterectomy after precancerous cells were found; her hospital bill was approximately $9,500–$10,000 and her stay exceeded 24 hours.
- The insurer/administrator applied the ancillary-charge limitation and paid only about 10% of the bill, leaving Bartgis responsible for roughly $9,000.
- Bartgis later could not obtain replacement insurance due to her medical condition.
- Bartgis sued for breach of contract, insurance bad faith (implied covenant of good faith and fair dealing), fraud, and violations of Nevada’s Unfair Claims Practices Act (NRS 686A).
- A jury found for Bartgis on all claims and awarded $8,757.75 in contract damages, $275,000 in emotional-distress damages, and punitive damages of $7,500,000 against the insurer and $500,000 against Wohlers.

## Issues

1. Whether sufficient evidence supported findings that the insurer and plan administrator acted in insurance bad faith in handling and paying Bartgis’s claim.
2. Whether describing the new policy as “comparable” while omitting the ancillary-charge limitation supported fraud/misrepresentation liability.
3. Whether defendants’ conduct supported liability under NRS 686A for misrepresenting policy provisions and engaging in unfair claim-settlement practices.
4. Whether punitive damages were supported by clear and convincing evidence of oppression, fraud, or malice, and whether the amounts had to be reduced under NRS 42.005 and due process limits.

## Decision

- The Nevada Supreme Court affirmed the judgment for Bartgis on breach of contract, bad faith, fraud, and NRS 686A violations.
- The court held the evidence supported the jury’s findings that defendants’ conduct was unreasonable and lacked a reasonable basis, and that the “comparable” representation and nondisclosure were materially misleading.
- The court upheld the availability of punitive damages based on the nature of the misconduct.
- The court reduced the punitive-damages awards to comply with Nevada’s statutory punitive-damages cap (NRS 42.005) and proportionality requirements, affirming the judgment as modified.

## Legal Principles

- In Nevada, insurance bad faith requires proof that the insurer acted unreasonably and with knowledge that there was no reasonable basis for its conduct.
- Every contract includes an implied covenant of good faith and fair dealing; in insurance, the insurer-insured relationship entails heightened duties of fair dealing and honest claims handling.
- Material misrepresentations or omissions about coverage can support fraud liability, particularly where coverage limitations are concealed while the policy is presented as “comparable.”
- NRS 686A prohibits, among other conduct, misrepresenting pertinent policy provisions and failing to attempt in good faith to effectuate prompt, fair, and equitable settlements where liability is reasonably clear.
- Punitive damages require clear and convincing evidence of oppression, fraud, or malice and are subject to statutory limits under NRS 42.005; awards must maintain a reasonable relationship to compensatory damages.

## Conclusion

The Nevada Supreme Court upheld liability against both the insurer and plan administrator for underpaying a major medical claim based on an undisclosed limitation and for related bad-faith, fraud, and statutory unfair-practices violations, while enforcing Nevada’s statutory cap by reducing the jury’s punitive-damages awards.


Albert H. Wohlers & Co. v. Bartgis, 969 P.2d 949 (Nev. 1998)