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

MEMORANDUM

Sierra Pacific Power Co. (“Sierra”) operates power generation stations in Nevada and California. Insurers Hartford Steam Boiler Inspection & Insurance Co. (“Hartford”) and Zurich American Insurance Co. (“Zurich”) (together “Insurers”) insured Sierra’s facilities, including the Farad Dam on the Truckee River in California, with $200 million in total coverage. The Farad Dam was completely destroyed by a flood in 1997, and Sierra filed a claim for the damage with the Insurers. A dispute arose over the value of the dam, and whether Sierra could recover replacement cost of the dam or only actual cash value since the dam had not yet been rebuilt. Following bench trial, the district court concluded that Sierra was entitled to the dam’s actual cash value of $1,261,200, but that Sierra could recover replacement cost if the dam was actually rebuilt within three years from the court’s ruling. The court determined that the replacement cost of the dam was $19,800,000. Sierra appeals the trial court’s ruling that the actual cash value (“ACV”) of the dam is $1,261,200. The Insurers appeal the rulings that (1) Sierra can recover $4 million it spent so far in preparation for replacing…