                  This opinion is subject to revision before final
                         publication in the Pacific Reporter

                                  2017 UT 81

                                       IN THE
          SUPREME COURT OF THE STATE OF UTAH

                      FIRE INSURANCE EXCHANGE,
                               Appellee,
                                        v.
                       ROBERT ALLEN OLTMANNS,
                              Appellant.

                               No. 20160304
                         Filed November 21, 2017

              On Certiorari to the Utah Court of Appeals

                    Second District, Farmington
                   The Honorable Glen R. Dawson
                          No. 090700825

                                  Attorneys:
    Stewart B. Harman, Joel D. Taylor, Salt Lake City, for appellee
            Donald L. Dalton, Salt Lake City, for appellant

       JUSTICE HIMONAS authored the opinion of the Court, in which
         CHIEF JUSTICE DURRANT, ASSOCIATE CHIEF JUSTICE LEE,
                      and JUSTICE PEARCE joined.
   JUSTICE DURHAM filed an opinion concurring in part and concurring
                            in the result.


   JUSTICE HIMONAS, opinion of the Court:
                              INTRODUCTION
    ¶1 Robert Oltmanns was named as a defendant in a personal
injury case. He filed a claim with his insurer, Fire Insurance Exchange,
who questioned whether the claim was covered under the policy.
Rather than deny the claim outright, Fire Insurance brought a
declaratory judgment action to determine whether the claim was
                 FIRE INSURANCE EXCHANGE v. OLTMANNS
                           Opinion of the Court


covered under Mr. Oltmanns’s policy. The court of appeals ultimately
held that it was covered, and Mr. Oltmanns filed a counterclaim
seeking attorney fees for the declaratory judgment action, arguing that
it was brought in bad faith. The question presented for this court is
whether the court of appeals erred in concluding that Fire Insurance’s
denial of Mr. Oltmanns’s insurance claim was “fairly debatable,” thus
negating Mr. Oltmanns demand for attorney fees and expenses for the
coverage dispute and appeal. We affirm the court of appeals’ decision
to uphold the summary judgment of the district court.
                               BACKGROUND
   ¶2 In 2006, Mr. Oltmanns was piloting a Honda F-12 AquaTrax
personal watercraft that was towing Mr. Oltmanns’s brother-in-law,
Brady Blackner. Mr. Blackner sustained injuries, and filed a lawsuit
against Mr. Oltmanns. Mr. Oltmanns tendered the defense to Fire
Insurance Exchange under his homeowner’s insurance policy. The
insurance policy contains the following provision under Section II -
Liability, Coverage E – Personal Liability:
           We pay those damages which an insured becomes
       legally obligated to pay because of bodily injury,
       property damage or personal injury resulting from an
       occurrence to which this coverage applies. . . . At our
       expense and with attorneys of our choice, we will defend
       an insured against any covered claim or suit. We are not
       obligated to pay defense costs, including attorneys’ fees of
       any claim or suit where you select an attorney not chosen
       by us because there is a dispute between you and us over
       coverage. We may investigate and settle any claim or suit
       that we consider proper. Our obligation to defend any
       claim or suit ends once we have paid our limit of liability.
In the same liability section of the insurance contract, in a subsection
titled “Additional Coverages,” Fire Insurance agrees to pay “[i]n
addition to the limits of liability . . . all costs we incur in the settlement
of a claim or defense of a suit with attorneys of our choice.”
   ¶3 Fire Insurance conducted an in-house review of Mr.
Oltmanns’s claim and then submitted his claim to outside counsel for a
coverage opinion. Whether the accident was deemed covered was
uncertain because of the following exclusion in its liability coverage:



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                          Opinion of the Court


          We do not cover bodily injury [that] . . . .
         7. results from the ownership, maintenance, use,
      loading or unloading of:
            a. aircraft
            b. motor vehicles
            c. jet skis and jet sleds or
            d. any other watercraft owned or rented to an
        insured and which:
               (1) has more than 50 horsepower inboard or
        inboard-outdrive motor power; or
               (2) is powered by one or more outboard motors
        with more than 25 total horsepower; or
               (3) is a sailing vessel 26 feet or more in length.
             Exclusions 7c and d do not apply while jet skis, jet
         sleds or watercraft are stored.
    ¶4 Fire Insurance also asked Mr. Oltmanns’s attorney to continue
to represent him, indicating that Fire Insurance might reimburse him for
his fees and expenses should the accident be deemed a covered
occurrence. Fire Insurance’s outside counsel advised Fire Insurance that
he believed there was a high probability that the incident would not be
covered, but that Fire Insurance should authorize him to file a
declaratory judgment action seeking a determination of its
responsibility to Mr. Oltmanns under the policy. He advised this course
of action because “[u]nder Utah law, a liability insurance carrier’s duty
to defend is broader than its duty to indemnify,” and “[i]t would be
dangerous to simply deny coverage because Mr. Blackner and
Mr. Oltmanns may enter into an agreement to stipulate to a large
judgment and Mr. Oltmanns could then assign his claims against Fire
Insurance Exchange to Mr. Blackner.”
    ¶5 Fire Insurance filed the action and then moved for summary
judgment. The district court ruled in favor of Fire Insurance, finding
that the exclusion precluded coverage. Mr. Oltmanns appealed and the
court of appeals reversed, holding that the term “jet ski” as used in the
exclusion was ambiguous and construed the contract against the
insurer in favor of the insured. Fire Ins. Exch. v. Oltmanns, 2016 UT App
54, ¶ 5, 370 P.3d 566. Fire Insurance then settled with Mr. Blackner for
the policy limit of $300,000 and paid Mr. Oltmanns’s attorney fees and
expenses for his defense of that claim.



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                         Opinion of the Court


    ¶6 Fire Insurance did not pay for Mr. Oltmanns’s costs of
defending the declaratory judgment action. Mr. Oltmanns then filed a
counterclaim against Fire Insurance in the still open declaratory
judgment action seeking “damages for breach of the implied covenant
[of good faith and fair dealing], which include his attorney fees for
prosecuting this coverage action and the successful appeal” as well as
“damages for the severe emotional distress that was caused by the
coverage denial and his self-defense of a significant personal injury
claim.” Fire Insurance once again moved for summary judgment and
for a motion to dismiss. The district court granted summary judgment
finding that Fire Insurance’s actions were reasonable because the
coverage issue was “fairly debatable.” Fire Insurance then withdrew its
motion to dismiss. Mr. Oltmanns appealed and the court of appeals
affirmed the district court, holding that “when an insurance company
proceeds in a reasonable way to resolve a difficult coverage question,
its eventual loss at the appellate level does not foreclose a
determination that an issue of interpretation was fairly debatable, as
was the case here.” Id. ¶ 15.
                        STANDARD OF REVIEW
    ¶7 This case comes before us on certiorari review from the court of
appeals decision. “[W]e review the court of appeals’ decision for
correctness. The review focuses on whether the court of appeals
correctly reviewed the trial court’s decision [to grant summary
judgment to Fire Insurance] under the appropriate standard of review.”
Orvis v. Johnson, 2008 UT 2, ¶ 6, 177 P.3d 600 (citation omitted). “We
review the district court’s grant of summary judgment for correctness.”
Torian v. Craig, 2012 UT 63, ¶ 13, 289 P.3d 479 (citation omitted). Under
Utah Rule of Civil Procedure 56, we view any facts and any reasonable
inferences “in the light most favorable to the party opposing summary
judgment.” Farmers Ins. Exch. v. Call, 712 P.2d 231, 237 (Utah 1985)
(citation omitted).
                                ANALYSIS
   ¶8 In both his trial- and appellate-level briefing, Mr. Oltmanns
advanced the same basic argument: because it wasn’t “fairly debatable”
whether the term “jet ski” encompassed a Honda F-12 Aquatrax (in
Mr. Oltmanns view, it obviously did not), Fire Insurance breached its
duty to Mr. Oltmanns by seeking a declaratory judgment that the “jet
ski” exclusion in Mr. Oltmanns’s insurance policy encompassed bodily


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                           Opinion of the Court


injuries resulting from the use of that jet-ski-like watercraft. As
Mr. Oltmanns has put it:
       [Fire Insurance] relied on the advice of counsel [that an
       Aquatrax would be encompassed by the “jet ski” policy
       exclusion] in refusing the tender of defense. However, the
       advice was patently flawed. Therefore, the claim was not
       “fairly debatable,” and [Fire Insurance] breached the
       insurance contract and the implied duty of good faith
       [and] fair dealing.
   ¶9 On Mr. Oltmanns’s account of the governing law, then,
whether Fire Insurance breached its duties to Mr. Oltmanns turned
entirely on whether the “jet ski” exclusion’s applicability to an
Aquatrax was fairly debatable: If it was fair for Fire Insurance to argue
that the “jet ski” exclusion encompassed an Aquatrax then there was no
breach; otherwise, according to Mr. Oltmanns, there was.
     ¶10 Mr. Oltmanns’s argument fails on its own terms. It was more
than fair for Fire Insurance to argue that its policy’s “jet ski” exclusion
applied to bodily injuries resulting from the use of an Aquatrax. In
litigating whether the “jet ski” exclusion encompassed Aquatrax
accidents, Fire Insurance put forward substantial usage evidence
suggesting that the term “jet ski” is, in Fire Insurance’s words, a
“genericized term for any type of personal watercraft.” Fire Insurance’s
argument is bolstered by the fact that “jet ski” is frequently treated as a
generic term in cases, ordinances, and dictionaries 1 The cited


   1 See, e.g., Calhoun v. Yamaha Motor Corp., U.S.A., 40 F.3d 622, 624 (3d
Cir. 1994) (noting that a “Wavejammer” is “a type of jet ski
manufactured by Yamaha Motor Corporation”); 4 MATTHEWS
MUNICIPAL ORDINANCES § 52:32 (2d ed. 2017) (“Boat shall mean any
watercraft, including sea planes when not airborne, sailboat, ‘jet ski,’
‘aqua-trike’ or similar type of watercraft”; “Motorboat shall mean any
boat operated through use of a motor or motorized propulsion,
including ‘jet skis[]’“); Jet Ski, WIKIPEDIA, https://en.wikipedia.org/
wiki/Jet_Ski (last visited Oct. 13, 2017) (“The term [jet ski] is often used
generically to refer to any type of personal watercraft used mainly for
recreation, and it is also used as a verb to describe the use of this type of
water vehicle.” (citation omitted)); Jet Ski,FREE DICTIONARY
http://medical-dictionary.thefreedictionary.com/Jet+Ski (last visited
Oct. 13, 2017) (defining “jet ski” as “[a] motorised personal watercraft
                                                                      (cont.)

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                FIRE INSURANCE EXCHANGE v. OLTMANNS
                           Opinion of the Court


dictionaries, ordinances, and cases show that the public uses the
trademarked term ”jet ski” generically, at least on occasion. That
suggests that the scope of the term may be fairly debatable.
    ¶11 That conclusion is also confirmed by the context of the ”jet ski”
exclusion in the insurance policy. The governing language excludes
injury resulting from “the ownership, maintenance, use, loading or
unloading of aircraft, motor vehicles, jet skis and jet sleds, or any other
watercraft owned or rented to an insured.” (numbering omitted). With
the exception of jet ski, each of the excluded terms unambiguously
refers to the generic name for a category of items. None refers to a
specific brand. This supports a generic reading of “jet ski” under the
noscitur a sociis canon of construction. See Third Nat’l Bank in Nashville v.
Impac Ltd., Inc., 432 U.S. 312, 322 (1977) (“[W]ords grouped in a list


in which one or two people ride on the water in much the same way as
one rides a motorcycle”); Jet Ski, LONGMAN DICTIONARY OF
CONTEMPORARY ENGLISH http://www.ldoceonline.com/dictionary/jet-
ski (last visited Oct. 13, 2017) (A “jet ski” is “a small fast vehicle on
which one or two people can ride over water for fun.”); Jet Ski,
WORDWEB           ONLINE       http://www.wordwebonline.com/search.
pl?w=jet+ski (last visited Oct. 13, 2017) (defining “jet ski” as “[a] jet-
powered watercraft with a seat and handlebars, ridden in a similar way
to a motorbike”); see also Trial Judge Properly Restricted Expert Testimony
in Jet Ski Death Suit Calhoun v. Yamaha Motor Corp., 1 NO. 1 ANDREWS
EXPERT & SCI. EVIDENCE LITIG. REP. 13 (2003) (Expert testimony was
allowed in a case “to explain how jet skis operate and the differences
between Yamaha’s jet ski and other brands and models.”). But see
Definition of “Jet Ski”, CAMBRIDGE DICTIONARY http://dictionary.
cambridge.org/us/dictionary/english/jet-ski (last visited Oct. 13, 2017)
(defining “jet ski” as “a brand name for a type of small water vehicle
for one or two people that is moved forward by a fast stream of water
being pushed out behind it”); Jet Ski, DICTIONARY.COM
http://www.dictionary.com/browse/jet-ski (last visited Oct. 13, 2017)
(“Jet ski” is a “[t]rademark” for “a brand of personal watercraft.”); Jet
Ski, THE FREE DICTIONARY http://www.thefreedictionary.com/Jet-
skiing (last visited Oct. 13, 2017) (defining “Jet Ski” as “[a] trademark
for a personal watercraft”).




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should be given related meaning.“ (footnote omitted)). And that further
indicates that the scope of “jet ski” is at least fairly debatable.
    ¶12 True, in a decision from an earlier phase of this case—a
decision not currently before us—the court of appeals concluded that
the “jet ski” exclusion did not apply to injuries resulting from the use of
an Aquatrax, apparently declaring the term “jet ski” irredeemably
obscure. See Fire Ins. Exch. v. Oltmanns, 2012 UT App 230, ¶¶ 9–10, 285
P.3d 802 (“Even discounting the bizarre possibility that [Fire Insurance]
meant to refer only to one Kawasaki watercraft model, it still cannot be
definitively said what the insurer intended . . . .”). But, candidly, the
correctness of the court of appeals’ decision is as open to debate as the
issue it resolved.
    ¶13 The concurrence, however, doesn’t affirm the court of appeals
on the basis that Mr. Oltmanns’s argument fails on its own terms.
Instead, the concurrence concludes that Mr. Oltmanns waived his
argument that he was entitled to attorney fees because Fire Insurance
breached its duties when it sought a declaratory judgment that it did
not have to defend Mr. Oltmanns in connection with the Aquatrax
accident. It then devotes many pages of dicta to its view that
Mr. Oltmanns’s “fair debatability” argument analyzed the problem the
wrong way. According to the concurrence, Mr. Oltmanns should have
characterized his claims against Fire Insurance as “third-party claims.”
Infra ¶¶ 26–27. Under this characterization of Mr. Oltmanns’s lawsuit,
the concurrence tells us that “fair debatability” is irrelevant. Instead,
because it arose in the third-party context, the appropriateness of Fire
Insurance’s decision to file a declaratory judgment action turned not on
whether the “jet ski” coverage question was fairly debatable, but on
whether Fire Insurance’s position was “reasonable under the
circumstances.” Infra ¶ 28.
   ¶14 The concurrence then proceeds to outline the entire syndrome
of duties and obligations that an insurer owes an insured in the third-
party context. Because Fire Insurance’s declaratory judgment action
arose in the third-party context, the concurrence says that Fire
Insurance was operating under a “heightened duty” to act as an agent
or fiduciary for Mr. Oltmanns. Infra ¶¶ 41–42. It therefore owed Mr.
Oltmanns four duties:
       (1) [T]he duty to defend an action brought against
       [Mr. Oltmanns] that could conceivably fall within the
       scope of the policy coverage (as defined by the insurance
       contract), (2) the duty to be fair and reasonable in

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                FIRE INSURANCE EXCHANGE v. OLTMANNS
                          Opinion of the Court


       diligently investigating the validity of claims, (3) the duty
       to indemnify [Mr. Oltmanns] for valid claims, and (4) the
       duty to settle claims within the policy limits where
       possible.
Infra ¶ 48.
    ¶15 And, despite concluding that Mr. Oltmanns failed to preserve
his argument that Fire Insurance breached its duty to defend him in the
underlying lawsuit arising from the Aquatrax accident, the concurrence
also details the scope and nature of the duty an insurer owes an insured
to defend against a third-party lawsuit. Infra ¶¶ 49–50.
   ¶16 We have two problems with the concurrence’s analysis. First,
we don’t agree that Mr. Oltmanns “waived his argument that Fire
Insurance breached the implied covenant of good faith by bringing the
declaratory judgment action” because he somehow “conceded that [Fire
Insurance’s decision to file that action] was merited in his brief to the
court of appeals and his brief to this court.” Infra ¶ 24. The court of
appeals certainly didn’t see it this way. It understood Mr. Oltmanns to
have argued that Fire Insurance breached its fiduciary duties in seeking
declaratory judgment because the coverage question—whether an
Aquatrax was covered by the term “jet ski”—was not “fairly
debatable.”
    ¶17 We see this same argument in Mr. Oltmanns’s brief to this
court. It’s true that there are stray comments in Mr. Oltmanns’s
supreme court briefing to the effect that Fire Insurance “had the right to
seek declaratory relief.” But the obvious thrust of Mr. Oltmanns’s
argument is that he is entitled to attorney fees in connection with the
declaratory judgment action because “[t]here was no good basis for
[Fire Insurance’s decision to] fil[e] the declaratory judgment action”—
and this because whether the term “jet ski” encompassed an Aquatrax
was not a “‘fairly debatable’ coverage question.” We therefore consider
this argument on its own terms. And we conclude that, even accepting
Mr. Oltmanns’s premises—i.e., even accepting that Mr. Oltmanns
would be entitled to attorney fees if the coverage question was not
fairly debatable—Mr. Oltmanns loses.
   ¶18 We are also concerned by the concurrence’s decision to
explain, in detail, the differences between first-party and third-party
insurance claims. On its own terms, the concurrence’s opinion is good
stuff. It’s, as Judge Chamberlain Haller might put it, “lucid, intelligent,


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                          Opinion of the Court


[and] well thought-out.” 2 And it may very well be entirely correct. But
this isn’t the case for it. Mr. Oltmanns framed his claim as a first-party
claim: Fire Insurance is liable because it could not fairly argue—it
wasn’t “fairly debatable”—that an Aquatrax was a “jet ski.” Fire
Insurance then responded to this argument on those same terms. As a
consequence, nobody—not the parties, not the insurance industry, not
the plaintiffs’ bar—is fairly on notice that this is the case in which we
intend to announce that an insurer’s decision to seek a declaratory
judgment in connection with a third-party lawsuit must be analyzed
under third-party insurance law. Nor, needless to say, has anybody
been put on notice that we’re prepared to announce an overarching
framework for the analysis and resolution of third-party claims—a
framework that, on its face, purports to occupy the field, controlling a
vast array of possible insurance lawsuits. We need adversarial briefing
before we can fairly do this.
     ¶19 To be clear, we don’t mean that we’re categorically bound by
litigants’ decision to litigate a case under the wrong legal principles (if
wrong legal principles they be). We agree with the concurrence that our
court will not “be forced to ignore the law just because the parties have
not raised or pursued obvious arguments.” Infra ¶ 27 (quoting
Kaiserman Assocs. v. Francis Town, 977 P.2d 462, 464 (Utah 1998)).
    ¶20 But there is a pragmatic reason to draw our decision here
narrowly: the law in this area is unsettled. Courts around the country
take different approaches to the issues the concurrence resolves. Some
courts part ways with the concurrence’s repudiation of the “fairly
debatable” standard in the third-party context, denying bad faith claims
in this context as long as the coverage question on which the insurer
sought a declaratory judgment is “fairly debatable.” See, e.g., Universal-
Rundle Corp. v. Commercial Union Ins. Co., 725 A.2d 76, 89–90 (N.J. Super.
Ct. App. Div. 1999) (upholding denial of a bad faith claim against
insurer because the coverage question was “fairly debatable” and
concluding that “for purposes of evaluating bad faith claims against an
insurer, it should [not] matter whether the coverage at issue is first- or
third-party”); Wis. Pharmacal Co. v. Neb. Cultures of Cal., Inc., 876 N.W.2d
72, 78 (Wis. 2016) (“[An] insurer does not breach its contractual duty to
defend by denying coverage where the issue of coverage is fairly


   2 MY COUSIN VINNY (20th Century Fox 1992) (overruling a “lucid,
intelligent, and well thought-out objection” given the circumstances).


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                          Opinion of the Court


debatable as long as the insurer provides coverage and defense once
coverage is established.” (alteration in original) (citation omitted)). But
see Hart Constr. Co. v. Am. Family Mut. Ins. Co., 514 N.W.2d 384, 391
(N.D. 1994) (applying reasonableness standard to whether an insurer
breached its duties to an insured in seeking a declaratory judgment in
connection with a third-party lawsuit). Courts also advance different
approaches to the duty to defend. See, e.g., Wis. Pharmacal Co., 876
N.W.2d at 78 (noting that an insurer need not necessarily tender
defense of a third-party lawsuit during pendency of a declaratory
judgment action if it requests “a bifurcated trial on the issues of
coverage and liability[] [andmoves] to stay any proceedings on liability
until the issue of coverage is resolved” (first and second alterations in
original) (citation omitted)).
    ¶21 The concurrence claims that the law in Utah is well-settled on
all of these issues. Infra ¶ 27 n.3. But we’ve never held that an insurer
must defend against all third-party liability claims that could
“conceivably” fall within insurance coverage. Nor have we considered
whether an insurer may, consistent with its fiduciary obligations, stay
the underlying proceedings until any dispute over coverage is resolved.
Nor, in our view, have we squarely repudiated any role for the “fairly
debatable” standard in the third-party insurance context. And because
there are a variety of possible approaches to the issues the concurrence
explores, we won’t take a stand on any of them until after they have
been put squarely before us. Here, the parties have litigated this as a
first-party insurance dispute, and we therefore lack the benefit of
adversarial briefing on the principles the concurrence elucidates.
     ¶22 We certainly agree with the concurrence that we shouldn’t
bind ourselves to a “confuse[d] . . . distinction between first-party
insurance claims and third-party insurance claims” just because the
litigants have potentially misapplied this law. Infra ¶ 27. Nor do we
need to commit ourselves to a third-party insurance framework in a
case where nobody has asked us to. Instead, we chart a middle ground.
We affirm the court of appeals on the basis that Mr. Oltmanns’s
argument isn’t persuasive on its own terms—the coverage question was
fairly debatable. But we expressly flag, for future litigants, the questions
(1) whether claims like those before us should be analyzed under third-
party insurance principles and (2) if so, what those principles are.




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                              CONCLUSION
    ¶23 For the reasons set forth above, Mr. Oltmanns’s claim that Fire
Insurance did not fairly evaluate his claim and unreasonably rejected it
fails. Thus, we affirm the court of appeals’ decision to uphold the
district court’s grant of summary judgment to Fire Insurance.


   JUSTICE DURHAM, concurring in part and concurring in the result:

    ¶24 I concur in the portion of the majority opinion that concludes
that Mr. Oltmanns’s claim that Fire Insurance did not fairly evaluate his
claim and unreasonably rejected it fails. In doing so, I affirm the court
of appeals’ decision to uphold the summary judgment of the district
court, but do so on alternate grounds. “It is well settled that an
appellate court may affirm the judgment appealed from if it is
sustainable on any legal ground or theory apparent on the record.”
Moss v. Parr Waddoups Brown Gee & Loveless, 2012 UT 42, ¶ 26, 285 P.3d
1157 (citation omitted). In this case, Mr. Oltmanns waived his argument
that Fire Insurance breached the implied covenant of good faith by
bringing the declaratory action when he conceded that it was merited
in his brief to the court of appeals and his brief to this court. As to the
question presented to this court regarding the breach of duty in filing a
declaratory judgment, we hold that Fire Insurance was “entitled to seek
a declaratory judgment as to its obligations and rights,” Farmers Ins.
Exch. v. Call, 712 P.2d 231, 237 (Utah 1985) (citation omitted), as
acknowledged by Mr. Oltmanns.
   ¶25 I also concur in the majority’s decision to reject Mr. Oltmanns’s
argument that Fire Insurance breached its duty to defend on
preservation grounds. Mr. Oltmanns failed to preserve his claim for a
breach of the duty to defend in his opposition to Fire Insurance’s
summary judgment motion.
     ¶26 Unfortunately, parties and the lower courts have conflated the
common law principles regarding insurer’s duties under insurance
contracts regarding third-party claims against the insured on the one
hand, and first-party claims where the insured sues the insurer on the
other. While both third-party and first-party claims involve coverage
decisions, the relationship of the insurer to the insured, the implied
obligations of good faith performance, and the remedies available to
the insured are different depending on the type of claim. These
differences are significant. “[T]he relationship betweem the insurer and
its insured [in a first-party context] is fundamentally different than in a

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            DURHAM, J., concurring in part and in the result


third-party context.” Beck v. Farmers Ins. Exch., 701 P.2d 795, 799 (Utah
1985) (“This distinction is of no small consequence.”). As it relates to
this case, the holding does not rest on this distinction because Mr.
Oltmanns waived the claim he is bringing before us, so his argument
fails regardless of the context in which he brought it. The judgments in
the courts below, however may have the effect of confusing our
jurisprudence in this area. Therefore, we take this opportunity to clarify
well settled principles of law regarding first-party insurance claims and
third-party insurance claims as part of our responsibility “[a]s the
state’s highest court . . . to maintain a sound and uniform body of
precedent.” Patterson v. Patterson, 2011 UT 68, ¶ 20, 266 P.3d 828.
    ¶27 These principles are clearly laid out in our precedent. To ignore
the incorrect approach the parties have taken in this case could set
incorrect precedent for future cases and further confuse the distinction
between first-party insurance claims and third-party insurance claims.
“[S]ettled appellate precedent is of crucial importance in establishing a
clear, uniform body of law.” In re United Effort Plan Tr., 2013 UT 5, ¶ 18,
296 P.3d 742 (citation omitted). “As the state’s highest court, we have a
responsibility to maintain a sound and uniform body of precedent and
must apply the [correct] law.” 1 Patterson, 2011 UT 68, ¶ 20. Although we
are not actually applying the principles of law governing first-party and
third-party insurance claims to the holding of this case, we reiterate the
need to clarify the law because of the arguments and judgments made
in the briefs and the courts below. The parties’ “failure to address the
legal question from the right perspective does not render us powerless

   1  The majority would have us apply the principles of law for
first-party claims because “the parties have litigated this as a first-party
insurance dispute.” Infra ¶ 21. We think this unwise and believe that
where the inappropriate law has been argued or applied, the appellate
courts have a duty to ensure that the correct law is applied: “[a]s a court
of last resort, [the supreme court] ha[s] the authority to decide on
whatever grounds we deem appropriate, regardless of preservation or
presentation.” State v. Johnson, 2017 UT 70, ¶ 43, ___ P.3d ___ (alterations
in original) (citation omitted). Typically, however, appellate courts
under these circumstances would ask for supplemental briefing or a
remand to the court below. See id. ¶ 45. Because our holding does not
rest on the distinction in the law in this case, I do not see the need to do
so.


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            DURHAM, J., concurring in part and in the result


to work the problem out properly. A court of appeals may and often
should do so unbidden rather than apply an incorrect rule of law to the
parties’ circumstances.” 2 Williams-Guice v. Bd. of Educ., 45 F.3d 161, 164
(7th Cir. 1995). “[W]e decline to ignore controlling law because counsel
failed to argue it below.” Patterson, 2011 UT 68, ¶ 21, see also id. ¶¶ 18,
20, (“[W]e are unwilling to disregard controlling authority that bears
upon the ultimate resolution of a case solely because the parties did not
raise it below. . . . And the failure to raise the controlling [precedent] in
the district court is a failure that can be appropriately assigned to
counsel for both parties.”) 3; Kaiserman Assocs. v. Francis Town, 977 P.2d

   2 I note that Oltmanns’ claim fails regardless of whether first-party
claim law or third-party claim law applies because he waived his
argument as to Fire Insurance’s breach of duty in filing a declaratory
judgment. I agree with the majority that “Mr. Oltmanns’s argument
fails on its own terms.” Supra ¶ 10. However, the reasoning for my
holding is that “Fire Insurance was ‘entitled to seek a declaratory
judgment as to its obligations and rights,’” supra ¶ 24, and that
Oltmanns acknowledges this right in his brief, thus waiving any claims
for attorney fees for that declaratory judgment.
   3 I disagree with the majority that because both parties have framed
their claim as a first-party claim we must apply first-party insurance
claim law to the case. Ultimately, I do not apply either. However, as a
court, we are not bound to accept arguments regarding incorrect law.
This is clearly a third-party insurance claim, and we have clearly
defined precedent regarding third-party claims. Nor do I agree with the
majority’s claims that the common law in third-party insurance claims
is unsettled in Utah. Supra ¶ 20. We do not “need adversarial briefing
before” we can reiterate what has been litigated by other parties who
have had the opportunity to litigate their claims in our adversarial
system and been decided by this court. Supra ¶ 18. The precedent is
clear and has been extensively litigated by those who have had the
opportunity to present adversarial briefing. Nor is it pertinent that the
law in this area is unsettled in other jurisdictions. Supra ¶ 20. It is well
settled in Utah and neither party has asked us to reconsider our
precedent. In fact, one of the primary cases on insurance law also
reached the United States Supreme Court, who only reversed on the
amount of punitive damages awarded. See Campbell v. State Farm Mut.
Auto Ins. Co., 2001 UT 89, 65 P.3d 1134, reh’g denied (2001); cert. granted
65 P.3d 1134; rev’d & remanded on other grounds, 538 U.S. 408 (2003).


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                FIRE INSURANCE EXCHANGE v. OLTMANNS
            DURHAM, J., concurring in part and in the result


462, 464 (“In our view, an overlooked or abandoned argument should
not compel an erroneous result. We should not be forced to ignore the
law just because the parties have not raised or pursued obvious
arguments.”); Adkins v. Uncle Bart’s Inc., 2000 UT 14, ¶ 40, 1 P.3d 528
(same).
    ¶28 Here, the parties are incorrectly using arguments derived from
common-law first-party insurance claims when they should be using
the common-law principles of third-party claims. Whether a question of
coverage is “fairly debatable” has become a term of art that has only
been decided in Utah in the context of first-party claims. Therefore, it is
not applicable to this case. Because Mr. Oltmanns’s claim falls under
third-party liability law, the relevant questions are whether the insurer
initiated the declaratory judgment action to have the court determine a
”question of construction or validity” as defined by Utah Code
section 78B-6-408 and whether the insurer’s inquiry was “reasonable
under the circumstances,” pursuant to Utah Rule of Civil Procedure
11(b). 4
    ¶29 We take this opportunity now, to restate our precedent
concerning first-party claims and third-party claims to fulfill our
responsibility “[a]s the state’s highest court . . . to maintain a sound and
uniform body of precedent.” Patterson, 2011 UT 68, ¶ 20. While
insurance policies are contracts at their core, they are treated differently
than most contracts under the common law to protect the reasonable
expectations of the insured and the insurer. See generally Mark A.
Geistfeld, Interpreting the Rules of Insurance Contract Interpretation, 68
RUTGERS U. L. REV. 371 (2015). This is true for both liability insurance
claims where a third party makes a claim against the insured’s policy
and first-party claims where an insured seeks reparation from its own
insurer.
           I. INSURANCE LAW IS CONTRACT LAW THAT
                  CONTAINS ADDED PROTECTIONS
                       FOR THE INSURED
   ¶30 Basic contract law is based on the assumption that courts act to
“adjust a commercial relationship between parties with roughly equal
bargaining power.” Mark A. Geistfeld, Interpreting the Rules of Insurance

   4This rule was amended in May 2016, but the relevant provision
here was unchanged.


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            DURHAM, J., concurring in part and in the result


Contract Interpretation, 68 RUTGERS U. L. REV. 371, 382 (2015) (quoting
ROBERT H. JERRY, II & DOUGLAS R. RICHMOND, UNDERSTANDING
INSURANCE LAW § 25D(b) (5th ed. 2012)). However, in the context of
insurance contracts, the insured is presumed to be “an ordinary,
unsophisticated consumer, possessing an understanding of only the
most rudimentary aspects of the coverage.” Id. Thus, courts have
“interpret[ed] standard-form insurance policies to protect the ordinary
policyholder’s reasonable expectations of coverage.” Id. at 373.
Additionally, insurers need to be able to rely on reasonable
interpretations to avoid the “risk of legal error that can significantly
disrupt the insurer’s actuarial calculations,” thus keeping insurance
available and affordable. Id. at 374. Insurance law incorporates all the
basic principles of contract law, including the implied duty of good
faith and fair dealing. But, because of the nature of insurance contracts,
and the importance of the public policy considerations, insurers are
held to a higher standard than ordinary merchants.
                         A. Public Policy Implications
    ¶31 The practice of treating questions of interpretation of insurance
contracts differently and of providing for broader remedies under
certain conditions than contracts in general comes as a result of several
public policy implications inherent in insurance contracts. Insurance
policies are adhesion contracts. Insurance companies typically use
standardized forms, and there is no room for negotiation or approval of
specific provisions or exceptions. See Douglas R. Richmond, Trust Me:
Insurers Are Not Fiduciaries to Their Insureds, 88 KY. L.J. 1, 4 (2000); see
also Geisfeld, supra ¶ 29, at 382; MARGARET N. KNIFFIN, 5 CORBIN ON
CONTRACTS § 24.27 (Joseph M. Perillo ed., rev. ed., 1998) (“Disparity of
bargaining power is likely to exist when a person applies for an
insurance policy. The applicant usually has little or nothing to do with
the authorship of the policy provisions. The applicant may not even
read the policy, being discouraged by the number of terms and the
fineness of print. An insurance company normally issues thousands of
such policies, using printed forms prepared and approved by its
actuaries, officers, and attorneys.” (footnote omitted)).
    ¶32 And, purchasing insurance is not always “voluntary.”
Insurance coverage is often a requirement of obtaining a mortgage and
is mandatory for drivers in Utah. See UTAH CODE § 31A-22-302
(requiring owners or operators to carry both no-fault and liability auto
insurance). Also, rather than being strictly a commercial relationship,
most “insureds purchase their policies for peace of mind and security


                                    15
                 FIRE INSURANCE EXCHANGE v. OLTMANNS
             DURHAM, J., concurring in part and in the result


rather than for financial gain.” Richmond, supra ¶ 31 at 4 (footnote
omitted).
    ¶33 Because of these policy considerations, “this Court has
expressed its commitment to the principle that ‘insurance policies
should be construed liberally in favor of the insured and their
beneficiaries so as to promote and not defeat the purposes of
insurance.’” U.S. Fid. & Guar. Co. v. Sandt, 854 P.2d 519, 521 (Utah 1993)
(citation omitted). This includes construing “ambiguous or uncertain
language in an insurance contract that is fairly susceptible to different
interpretations . . . in favor of coverage,” 5 id. at 522, and “in light of how
the average, reasonable purchaser of insurance would understand the
language of the policy as a whole,” id. at 523.
                 B. The Duty of Good Faith and Fair Dealing
    ¶34 Insurers have, at minimum, the same implied “duty of good
faith and fair dealing implied in all contracts and . . . a violation of that
duty gives rise to a claim for breach of contract.” Beck v. Farmers Ins.
Exch., 701 P.2d 795, 798 (Utah 1985). “Every contract or duty . . .
imposes an obligation of good faith in its performance and
enforcement.” U.C.C. § 1-304 (AM. LAW INST. & UNIF. LAW COMM’N
2016). See also RESTATEMENT (SECOND) OF CONTRACTS § 205 (AM. LAW
INST. 2017) (“Every contract imposes upon each party a duty of good
faith and fair dealing in its performance and its enforcement.”); Aditi
Bagchi, Note, Unions and the Duty of Good Faith in Employment Contracts,
112 YALE L.J. 1881, 1882 (2003) (“The duty of good faith is a background
condition imposed on all contracts that limits the negative effects of

   5But  see Truck Ins. Exch. v. Rutherford, 2017 UT 25, ¶ 14, 395 P.3d 143
(finding that where language is unambiguous in insurance code there is
“no need for a tie-breaker, and thus no relevance for the principle of
liberal construction of the Act” (emphases added) (citation omitted)). In
Rutherford, we noted that our common law interpretation that the “tie
goes to the insured” in ambiguous statutes was abrogated by Utah
Code sections 31A-1-102 and -201(1). Id. ¶ 15. While Rutherford required
us to interpret the coverage mandated by statute, this case requires us
to interpret the coverage mandated in a contract. Our interpretation of
insurance contracts is still governed by the common law requirement
that we construe insurance contracts “in favor of coverage” when the
terms are ambiguous.


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            DURHAM, J., concurring in part and in the result


unequal bargaining power . . . .”). “’Good faith’ . . . means honesty in
fact and the observance of reasonable commercial standards of fair
dealing.” U.C.C. § 1-201(b)(20) (AM. LAW INST. & UNIF. LAW COMM’N
2016).
    ¶35 In insurance contracts, the good faith performance of an
insurer is evaluated by an objective standard that is measured by what
a reasonable insured would expect from an insurer. See Sandt, 854 P. 2d
at 523. “Good faith . . . emphasizes faithfulness to an agreed common
purpose and consistency with the justified expectations of the other
party; it excludes a variety of types of conduct characterized as
involving ‘bad faith’ because they violate community standards of
decency, fairness or reasonableness.” RESTATEMENT (SECOND) OF
CONTRACTS § 205 cmt. a (AM. LAW INST. 2017). In the insurance context,
this court has held “that the implied obligation of good faith
performance contemplates, at the very least, that the insurer will
diligently investigate the facts to enable it to determine whether a claim
is valid, will fairly evaluate the claim, and will thereafter act promptly
and reasonably in rejecting or settling the claim.” Beck, 701 P.2d at 801
(applying this duty in the first-party context); see also Black v. Allstate
Ins. Co., 2004 UT 66, ¶¶ 19–20, 100 P.3d 1163 (applying the same
standard in the third-party context), reh’g denied (2004).
    ¶36 Insurers are also required to “’deal with laymen as laymen and
not as experts in the subtleties of law and underwriting’ and to refrain
from actions that will injure the insured’s ability to obtain the benefits
of the contract.” Beck, 701 P.2d at 801 (citation omitted). Insurers owe a
responsibility to their insureds because of their position of authority
and control over the underwriting process. See Allen v. Metro. Life Ins.
Co., 208 A.2d 638, 644 (N.J. 1965) (“While insurance policies and binders
are contractual in nature, they are not ordinary contracts but are
‘contracts of adhesion’ between parties not equally situated. The
company is expert in its field and its varied and complex instruments
are prepared by it unilaterally whereas the assured or prospective
assured is a layman unversed in insurance provisions and practices. He
justifiably places heavy reliance on the knowledge and good faith of the
company and its representatives and they, in turn, are under
correspondingly heavy responsibility to him.”(citations omitted)).




                                    17
                FIRE INSURANCE EXCHANGE v. OLTMANNS
             DURHAM, J., concurring in part and in the result


           II. IMPLIED AND CONTRACTUAL DUTIES AND
            OBLIGATIONS UNDER THIRD-PARTY CLAIMS
                     AND FIRST-PARTY CLAIMS
    ¶37 While all insurers have a duty of good faith and fair dealing
with their insureds, there is a difference in the relationship between the
insurer and the insured, the insurer’s implied obligations of good faith
performance, and the remedies available to the insured depending on
whether the claim is a third-party liability claim or a first-party claim.
This difference gives rise to an heightened duty in the case of
third-party claims.
                      A. Relationships Between Parties
    ¶38 Third-party cases involve liability, not just coverage. In these
cases, a person who is not a party to the insurance contract sues the
insured for the losses that are covered by the insurance contract.
Insureds seek coverage under their insurance contract for their
responsibility for the losses of the third party up to the coverage limit in
the policy, tendering the defense of the claim to the insurer. The
insurer’s duty lies in defending and indemnifying the insured in good
faith. An insurer is not in privity of contract with the third party who
has made a claim against the company’s insured, so the contractual
duty to deal fairly and in good faith does not extend to an injured
third-party. See Pixton v. State Farm Mut. Auto Ins. Co., 809 P.2d 746
(Utah Ct. App. 1991). An insurer’s duties in these claims are owed to
the insured, not the third party. See Black v. Allstate Ins. Co., 2004 UT 66,
¶ 20, 100 P.3d 1163 (“When an insurer processes a claim . . . from a
third party requesting coverage under the insured’s liability policy, the
insurer must act in good faith with respect to its own insured.”), reh’g
denied (2004). In third-party claims, the insureds look to the insurers to
defend and indemnify them. In essence, the insurer and the insured are
on the same side and the third party is the adversary.
    ¶39 In first-party cases, insureds suffer a loss and then make claims
for reparations from their insurers, arguing that the loss is covered by
the policy. For example, if a hailstorm damages an insured’s roof, she
would make a claim under her homeowner’s policy for repairs. In these
cases, the relationship between the insured and the insurer is more
adversarial. They have conflicting interests. The insured wants to get
the most compensation possible, and the insurer wants to cover as little
as permissible under the contract. “In the [first-party] situation, the
insured and the insurer are, in effect and practically speaking,

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            DURHAM, J., concurring in part and in the result


adversaries.” Beck v. Farmers Ins. Exch., 701 P.2d 795, 799 (Utah 1985)
(alteration in original) (citation omitted).
          B. Standard of Care and Implied and Contractual Obligations
    ¶40 The differences in the relationships between the insured and
the insurer in these two types of claims affect the implied obligations of
good faith performance. In third-party claims, the insured has a
heightened duty that incorporates not only all of the typical contractual
obligations of good faith and fair dealing that exist in every insurance
contract, but also a duty as a fiduciary to their insureds. First-party
claims, on the other hand do not give rise to this heightened duty.
1. Third-Party Heightened Duty
    ¶41 In third-party cases, there is not only the implied duty of good
faith performance that inheres in any insurance contractual
relationship, but there is an extended duty because “the insurer acts as
an agent for the insured with respect to the disputed claim.” Beck, 701
P.2d at 799.
    ¶42 This heightened duty has been characterized as fiduciary in
nature in our prior case law. See, e.g., Black, 2004 UT 66, ¶ 27 (“[U]pon
the initiation of formal legal proceedings . . . the insurer undertake[s] a
fiduciary duty to defend its insured by appointing counsel and
thereafter zealously protecting the interests of its insured in defending
or negotiating settlement of the action.” (emphasis added)); Campbell v.
State Farm Mut. Auto Ins. Co., 2001 UT 89, ¶ 121, 65 P.3d 1134 (“The
duties of good faith arising in a third-party context include fiduciary
duties and are higher duties than the duties arising under the contract
theory in a first-party context.” (emphasis added)), reh’g denied, (2001);
cert. granted, 65 P.3d 1134; rev’d & remanded on other grounds, 538 U.S.
408 (2003); Campbell v. State Farm Mut. Auto Ins. Co., 840 P.2d 130, 140
(Utah Ct. App. 1992) (noting that “the implied duty of good faith and
fair dealing [in a third-party insurance case] . . . . imposes a fiduciary
duty upon the insurer because of the trust and reliance placed in the
insurer by its insured” (emphasis added)); Beck, 701 P.2d at 799 (“In
essence, the contract itself creates a fiduciary relationship because of the
trust and reliance placed in the insurer by its insured.” (emphasis
added)); Ammerman v. Farmers Ins. Exch., 430 P.2d 576, 578 (Utah 1967)
(“The covenant in the policy requiring the insurer to defend the insured
imposes upon it a fiduciary responsibility.” (emphasis added)).
    ¶43 Fiduciary duties are “established, whether by express contract
or by conduct and circumstances of the parties, which imply a fiduciary

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                FIRE INSURANCE EXCHANGE v. OLTMANNS
            DURHAM, J., concurring in part and in the result


bond and a duty on the party in whom confidence is placed to exercise
good faith toward the party reposing that confidence while entering
into transactions during the continuance of the relationship.” First Sec.
Bank of Utah N.A. v. Banberry Dev. Corp., 786 P.2d 1326, 1330 (Utah
1990).
           [T]here are generally two types of fiduciary
       relationships: “(1) [T]hose specifically created by contract
       such as principal and agent, attorney and client, and
       trustee and cestui que trust, for example, and those created
       by formal legal proceedings such as guardian and/or
       conservator and ward, and executor or administrator of
       an estate, among others, and (2) [T]hose implied in law
       due to the factual situation surrounding the involved
       transactions and the relationship of the parties to each
       other and to the questioned transactions.”
Id. at 1332 (second and third alterations in original) (citation omitted).
Most fiduciary relationships require that the fiduciary “give priority to
his beneficiary’s best interests whenever he acts on the beneficiary’s
behalf.” Richmond, supra ¶ 31, at 1 (citation omitted); see also Banberry
Dev. Corp., 786 P.2d at 1333 (“A fiduciary relationship imparts a
position of peculiar confidence placed by one individual in another. A
fiduciary is a person with a duty to act primarily for the benefit of
another.” (citation omitted)). It is a duty that requires “undivided
loyalty” to the beneficiary. Richmond, supra ¶ 31, at 1 (citation omitted).
    ¶44 Fiduciary duties “arise whenever a continuous trust is reposed
by one party in the skill and integrity of another.” Banberry Dev. Corp.,
786 P.2d at 1333. “Generally in a fiduciary relationship, the property,
interest or authority of the other is placed in the charge of the
fiduciary.” Id. (citation omitted). Fiduciary duties can be established by
statute 6 or by common law. 7

   6  See, e.g., UTAH CODE § 16-10a-840 (explaining the fiduciary duties
owed by directors to a corporation); UTAH CODE § 48-3a-409 (explaining
the fiduciary duties owed by members in a member-managed limited
liability company); UTAH CODE §§ 22-1-1 to -2, 75-7-801 to -804
(explaining the fiduciary duties owed by the trustee of a trust).
   7See, e.g., Daniels v. Gamma W. Brachytherapy, LLC, 2009 UT 66, 221
P.3d 256; Christensen & Hensen, P.C. v. Barrett & Daines, 2008 UT 64, 194
                                                                      (cont.)

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             DURHAM, J., concurring in part and in the result


    ¶45 There are, however, some differences between typical fiduciary
relationships and the relationship between the insurer and the insured
in third-party cases. “In the [third-party] situation, the insurer must act
in good faith and be as zealous in protecting the interests of the insured
as it would be in regard to its own.” Beck, 701 P.2d at 799 (alteration in
original) (citation omitted). This is a lower standard than that required
of a typical fiduciary relationship where the fiduciary must place the
interests of the beneficiary above its own. This court described the
nature of the duty of the insurance company as fiduciary in Ammerman,
adopting a lower fiduciary obligation than that of a typical fiduciary.
430 P.2d at 579 (describing the obligation as one that “should be looked
at realistically, and . . . dictated by reason and prudence under the
circumstances . . . [with] an awareness . . . that the nature of the risks
and the extent of liability under an insurance policy are based on
premiums . . . correlated to the legitimate costs of the insurance”).
    ¶46 Some scholars have argued that third-party insurer/insured
relationship should not be lumped together with other fiduciary
relationships. “If insurers were made to be true fiduciaries, they would
lose their ability to hold down premiums by weeding out illegitimate
claims, contesting an insured’s liability, or disputing a third-party
claimant’s damages.” Richmond, supra ¶ 31 at 24. Were this the case,
“[t]he cure might then be worse than the illness because insurers would
then surely have to fund their new duty through significantly increased
premiums.” Id. We acknowledged this concern in Ammerman. 430 P.2d
at 578–79 (“It is true that the company cannot properly gamble with or
sacrifice the insured’s interest simply to protect itself. By the same
token it is neither practical nor reasonable to expect it to subvert its
own interests entirely to protect the insured by requiring it to accept
any offer below the policy limits, regardless of circumstances, and
however questionable the issues of liability and damage may be.”).
However, “the existence of a fiduciary relationship . . . is manifest in . . .
[the] confidence of the [insured] in the [insurer]” because “there . . .
exist[s] a certain inequality, dependence, . . . business intelligence,
knowledge of the facts involved, or other conditions, giving to [the
insurer] advantage over the [insured].” Banberry Dev. Corp., 786 P.2d at
1333 (citation omitted). A fiduciary relationship is established by the
insurance contract when the insurer contracts to defend the insured for

P.3d 931; Sorensen v. Barbuto, 2008 UT 8, 177 P.3d 614; Banberry Dev.
Corp., 786 P.2d.


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                 FIRE INSURANCE EXCHANGE v. OLTMANNS
             DURHAM, J., concurring in part and in the result


third-party liability claims. See Grantsville v. Redevelopment Agency of
Tooele City, 2010 UT 38, ¶ 42, 233 P.3d 461 (“A fiduciary relationship
‘results from the manifestation of consent by one person to another that
the other shall act on his behalf and subject to his control, and consent
by the other so to act.’” (quoting Wardley Corp. v. Welsh, 962 P.2d 86,
89 (Utah Ct. App. 1998) quoting RESTATEMENT (SECOND) OF AGENCY §
1(1) (AM. LAW INST. 1958)).
   ¶47 Because of the insurer’s special role “[i]n the third party
context, . . . an insured may state a cause of action in tort for an
insurer’s breach of its obligations.” Campbell, 840 P.2d at 138.
“Accordingly, Utah law allows an insured to sue an insurer in tort to
remedy a violation of that duty.” Id. Thus a breach of the heightened
duty of an insurer acting as a fiduciary in third-party cases “renders the
insurer answerable in tort to remedy a breach of that duty.” Id. at 140.
This exposes the insurer to the possibility of “consequential and
punitive damages awards in excess of policy limits” if they fail to act
reasonably in their duties as fiduciary in third-party claims. Black, 2004
UT 66, ¶ 25 (citation omitted).
    ¶48 Insurers owe their insureds four duties in third-party claims:
(1) the duty to defend an action brought against their insureds that could
conceivably fall within the scope of the policy coverage (as defined by
the insurance contract), (2) the duty to be fair and reasonable in
diligently investigating the validity of claims, (3) the duty to indemnify
their insureds for valid claims, and (4) the duty to settle claims within
the policy limits where possible. See Black, 2004 UT 66, ¶¶ 20–21 (“When
an insurer processes a claim, whether it be from its own insured or from
a third party requesting coverage under the insured’s liability policy, the
insurer must act in good faith with respect to its own insured. In
previous cases before this court, we have addressed the good faith duty
owed by an insurer to its insured when negotiating settlement of and
defending claims brought by third parties. In addition to these duties,
we hold today that claims submitted by third parties must be diligently
investigated to determine their validity and then reasonably evaluated in
light of all the facts. This is a duty the insurer owes to its insured by
virtue of the insurance policy. Hence, . . . [the insurer] at least had an
obligation to [the insured] to diligently investigate the facts, and then act
fairly and reasonably in evaluating and settling the claim. We note that
this duty to investigate and reasonably evaluate a third-party claim does
not require that the insurer’s evaluation ultimately prove to be correct.
For example, the fact that a different outcome is reached at a subsequent

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             DURHAM, J., concurring in part and in the result


trial is not dispositive of whether the insurer breached its duty. Rather,
whether an insurer discharges its duty in these instances hinges upon
whether the investigation and subsequent resolution of the claim is fair
and reasonable.” (citing Sperry v. Sperry, 1999 UT 101, ¶ 11, 990 P.2d
381; Beck, 701 P.2d at 799–800; Ammerman, 430 at 578–79)); see also
Richmond, supra ¶ 31 at 7. If an insurer breaches one of these duties
when its insured is being sued by a third party, the insured has a cause
of action in contract law for breach of the implied covenant of good faith
and in tort law for failure to act as fiduciaries for the insured.
    a. The contractual duties to defend and indemnify in third-party
       claims
    ¶49 The duties to defend and indemnify the insured are defined by
contract. The insurer has a duty to defend as defined in contract, and
that duty may well exceed the duty to indemnify. This duty arises
when the insurer has obligated itself to defend the insured in the
insurance contract and there is a sufficient factual basis for potential
liability of a covered incident. “The duty to defend is broader than the
duty to indemnify, but the insurer’s obligation is not unlimited; the
duty to defend is measured by the nature and kinds of risks covered by
the policy and arises whenever the insurer ascertains facts which give
rise to the potential of liability under the policy.” Deseret Fed. Sav. &
Loan Ass’n v. U.S. Fid. & Guar. Co., 714 P.2d 1143, 1146 (Utah 1986)
(citation omitted). Nevertheless, “an insurer may have a duty to defend
an insured even if . . . the insurer is ultimately not liable to indemnify
the insured.” Fire Ins. Exch. v. Therkelsen, 2001 UT 48, ¶ 22, 27 P.3d 555.
    ¶50 Even where insurers have contracted to defend their insureds
in liability cases, they are not required to defend all cases regardless of
how frivolous they are or how unlikely it is that the loss is covered by
the policy. “Where there is no potential liability, there is no duty to
defend.” Deseret Fed. Sav. & Loan Ass’n, 714 P.2d at 1147 (citations
omitted). “When faced with a decision as to whether to defend or
refuse to defend, an insurer is entitled to seek a declaratory judgment
as to its obligations and rights.” Farmers Ins. Exch. v. Call, 712 P.2d 231,
237 (Utah 1985). However, an insurer has a duty to defend against a
potentially viable third-party liability claim “unless relief is obtained by
way of a declaratory judgment.” State Farm Mut. Auto Ins. Co. v. Kay,
487 P.2d 852, 855 (Utah 1971), overruled on other grounds by Call, 712 P.2d
231. Thus, when there is a non-frivolous claim and there is a question as
to whether the insurer will have to pay the claim, the insurer should
defend the insured until it obtains a declaratory judgment holding that

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            DURHAM, J., concurring in part and in the result


there is no coverage for the loss under the policy. At that point in time,
the duty to defend ends.
   b. The heightened duty to act as fiduciaries in third-party claims
    ¶51 Because insurers act as insureds’ agents in the disposition of
third-party claims, they have an implied heightened duty as fiduciaries
to diligently investigate the validity of claims and to settle claims
within the policy limits where possible. This duty extends beyond the
duty of good faith and fair dealing that exists in first-party claims. This
duty arises because
       [a]n insurer’s failure to act in good faith exposes its
       insured to a judgment and personal liability in excess of
       the policy limits. . . . The insured is wholly dependent
       upon the insurer to see that, in dealing with claims by
       third parties, the insured’s best interests are protected. In
       addition, when dealing with third parties, the insurer acts
       as an agent for the insured with respect to the disputed
       claim.
Beck, 701 P.2d at 799.
    ¶52 “With such a dependent relationship must come a standard of
care that exists independent of the insurance policy and without
specific reference to the policy terms.” Richmond, supra ¶ 31 at 7
(footnote omitted); see also Campbell 840 P.2d at 138 (“This higher duty
is imposed on the insurer because in a third-party situation, the insurer
‘controls the disposition of claims against its insured, who relinquishes
any right to negotiate on his own behalf.’” (citation omitted)). This
heightened duty to act as fiduciaries also exposes insurers to tort
liability for breach of these duties.
    ¶53 This court has held that “claims submitted by third parties
must be diligently investigated to determine their validity and then
reasonably evaluated in light of all the facts.” Black, 2004 UT 66, ¶ 20.
The fulfillment of this duty is not dependent on the ultimate outcome
of the claim. “Rather, whether an insurer discharges its duty in these
instances hinges upon whether the investigation and subsequent
resolution of the claim is fair and reasonable.” Id. ¶ 21. If an insurer
chooses not to defend an insured in a third-party claim, it must do so
only after it has
       ma[d]e a good faith determination based on all the facts
       known to it, or which by reasonable efforts could be

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      discovered by it, that there is no potential liability under the
      policy. This means that there are no disputed facts which if
      proved by the plaintiff at trial would result in liability
      under the policy. However, this does not mean that the
      insurer can simply say, “We don’t believe that the
      plaintiff can prove what he is alleging.” The insurance
      contract includes the duty to defend [when] . . . . the
      allegations, if proved, could result in liability under the policy.
Deseret Fed. Sav. & Loan Ass’n, 714 P.2d at 1147 (emphasis added)
(citations omitted). This duty to diligently investigate claims and to
reasonably evaluate them in light of the facts available to determine
their validity is not defined by contract and inheres in all third-party
claims. Even if an insurer eventually pays for a claim and the associated
costs of that claim, this “eventual payment . . . does not necessarily
vitiate the insured’s cause of action [in tort] for breach of the duty” to
defend. Campbell, 840 P.2d at 139.
    ¶54 If an insurer does not defend an action, and a court finds “facts
which give rise to the potential of liability under the policy,” Deseret
Fed. Sav. & Loan Ass’n, 714 P.2d at 1146 (citation omitted), the insurer
faces significant claims for damages. An insured may bring a contract
claim for breach of the contract term promising to defend against third-
party claims. See Beck, 701 P.2d at 801 (“[A]s parties to a contract, the
insured and the insurer have parallel obligations to perform the
contract in good faith, obligations that inhere in every contractual
relationship.”). An insured may also bring tort claims for breach of the
insurer’s heightened duty in third-party claims. See id. at 799
(“[B]ecause a third-party insurance contract obligates the insurer to
defend the insured, the insurer incurs a fiduciary duty to its insured to
protect the insured's interests as zealously as it would its own;
consequently, a tort cause of action is recognized to remedy a violation
of that duty.” (citation omitted)). Additionally, the insurer may be
liable for the entire judgment entered against its insured or any
settlement that the insured and the third-party reach even if it exceeds
the policy limits. See Douglas R. Richmond, An Overview of Insurance
Bad Faith Law and Litigation, 25 SETON HALL L. REV. 74, 79 & n.30 (1994)
(“Under the judgment rule, the mere entry of an excess judgment
against the insured is sufficient to hold the offending insurer wholly
liable. The reasoning is basic: judgment proof insureds are injured by
excess judgments because their credit is potentially impaired, title to



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                 FIRE INSURANCE EXCHANGE v. OLTMANNS
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their exempt estates may be clouded, their ability to borrow may be
eroded, and they may be forced into bankruptcy.”).
    ¶55 In light of this precedent, we leave insurers few options when
handling a third-party claim. Insurers must (1) be certain that an
occurrence is not covered, see Deseret Fed. Sav. & Loan Ass’n, 714 P.2d at
1147 (“The insurer must make a good faith determination based on all
the facts known to it, or which by reasonable efforts could be
discovered by it, that there is no potential liability under the policy.
This means that there are no disputed facts which if proved by the
plaintiff at trial would result in liability under the policy.” (citations
omitted)); (2) seek a declaratory judgment regarding coverage, see Call,
712 P.2d at 237 (“When faced with a decision as to whether to defend or
refuse to defend, an insurer is entitled to seek a declaratory judgment
as to its obligations and rights.”); or (3) pay or settle the claim with the
third party. Because of the risks to an insurer of not obtaining a
declaratory judgment when there is a belief that the insurer will
possibly prevail in a coverage dispute, even if that chance is remote, it
is usually reasonable for an insurance company to request the district
court to “issue [a] declaratory judgment[] determining rights, status,
and other legal relations within its respective jurisdiction,” UTAH CODE
§ 78B-6-401(1), if the insurer determines that the occurrence is not likely
covered under the policy.
   c. The insurer’s rights under third-party claims
    ¶56 Under Utah Code section 78B-6-401, (the declaratory judgment
statute) “[e]ach district court has the power to issue declaratory
judgments determining rights, status, and other legal relations within
its respective jurisdiction . . . . The declaration . . . shall have the force
and effect of a final judgment or decree.” In Baird v. State, 8 we held that


   8The operative statute in Baird, Utah Code section 78-33-2, was
renumbered and amended in 2008 and was the predecessor to Utah
Code section 78B-6-401. It read
      Any person interested under a deed, will or written
      contract, or whose rights, status or other legal relations
      are affected by a statute, municipal ordinance, contract
      or franchise, may have determined any question of
      construction or validity arising under the instrument,
      statute, ordinance, contract or franchise and obtain a
                                                                       (cont.)

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the phrase “’rights, status and other legal relations’ in the declaratory
judgment statute relates to a justiciable controversy where there is an
actual conflict between interested parties asserting adverse claims on an
accrued set of facts.” 574 P.2d 713, 715 (Utah 1978). See also Miller v.
Weaver, 2003 UT 12, ¶ 15, 66 P.3d 592 (“Stated another way, ‘[a]
justiciable controversy authorizing entry of a declaratory judgment is
one wherein the plaintiff is possessed of a protectible interest at law or
in equity and the right to a judgment, and the judgment, when
pronounced, must be such as would give specific relief.’” (alteration in
original) (citation omitted)). Declaratory judgments are “designed to
resolve . . . controversies in order to curtail further problems.” Pintar v.
Houck, 2011 UT App 304, ¶ 25, 263 P.3d 1158.
    ¶57 In addition to our case law about the rights of a party to bring
a declaratory judgment action under Utah Code section 78B-6-401, we
have specifically recognized this right under third-party liability case
law. The standard is whether the insurer initiated the declaratory
judgment action to have the court determine a “justiciable
controversy.” See W. Cas. & Sur. Co. v. Marchant, 615 P.2d 423, 427 (Utah
1980) (holding that “[i]t would not comport with our ideas of either law
or justice to prevent any party who entertains bona fide questions
about his legal obligations from seeking adjudication thereon in the
courts,” and “where the plaintiff merely stated its position and initiated
[an] action for [a] determination of what appears to be a justiciable
controversy” (citing UTAH CONST. art. 1, § 11)). In the third-party
insurance claim, an insurer who files a declaratory action to determine
its coverage obligations is within its rights to do so provided there is a
legitimate question of coverage. 9


       declaration of rights, status or other legal relations
       thereunder.
Although some material changes were made in the 2008 statute, what
constitutes a “justiciable controversy” remains the same.
   9  Although not at issue on this appeal, we note that in the
underlying case which gave rise to this appeal, the district court found
the term “jet ski” in the contract to be “clear and unambiguous in that
the meaning would be plain to a person of ordinary intelligence and
understanding viewing the matter fairly and reasonably, in accordance
with the usual and natural meaning of the words . . . .” In the transcript
at oral arguments on this issue, the district court stated that in its “best
                                                                     (cont.)

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                FIRE INSURANCE EXCHANGE v. OLTMANNS
             DURHAM, J., concurring in part and in the result



view . . . it would be plain to a person of ordinary intelligence and
understanding that the generic term ‘jet ski,’ as included in the
insurance agreement in this case, includes the watercraft involved in
this litigation. So I’m going to grant the motion for that reason . . . .” In
its memorandum to the district court in support of summary judgment,
Fire Insurance attached several websites as exhibits, including boat
reviews and a Wikipedia article among others.
    Neither the lawyer nor the court explains how a personal “best
view” or a self-selected sampling of websites of questionable reliability
provides substantial evidence as to how a layman reading the contract
would interpret “jet ski.” As recognized by this court and others,
lawyers should provide courts with meaningful tools using the best
available methods when the court is tasked with determining ordinary
meaning. See FCC v. AT&T, Inc., 562 U.S. 397, 40607 (2011); State v.
Rasabout, 2015 UT 72, 356 P.3d 1258 (Lee, A.C.J., concurring); State v.
Canton, 2013 UT 44, ¶¶ 13, 20, 27 n.6, 308 P.3d 517; People v. Harris, 885
N.W.2d 832, 838–42 (Mich. 2016).
    Even though we place great trust in a judge’s discernment, a
“judge’s confidence in her linguistic intuition may be misplaced. . . .
Though the human language faculty is very good at assessing which
meanings are linguistically permissible in a given context, human
intuition is less successful in selecting the most common meaning or
common understanding.” Stephen C. Mouritsen, Hard Cases and Hard
Data: Assessing Corpus Linguistics as an Empirical Path to Plain Meaning,
13 COLUM. SCI. & TECH. L. REV. 156, 160–61 (2012) [hereinafter
Mouritsen, Hard Cases]. When terms are to “be interpreted according to
their ordinary meaning, they implicate a set of empirical questions,
many of which are amenable to different types of linguistic analysis. . . .
[I]n the field of corpus linguistics, scholars . . . determine . . . those
meanings that are consistent with common usage,” or “the term’s
ordinary or most frequent meaning” based on empirical data rather
than personal intuition. Id. at 161. These tools for empirical analysis are
readily available to lawyers and should be used when appropriate. See,
e.g., Rasabout, 2015 UT 72, ¶¶ 57–134, (Lee, J., concurring); In re Adoption
of Baby E.Z., 2011 UT 38, ¶¶ 86–105, 266 P.3d 702 (Lee, A.C.J.,
concurring); Brief for the Project On Government Oversight et al. as
Amici Curiae Supporting Petitioners, FCC v. AT&T, Inc., 562 U.S. 397
(2011) (No. 09-1279); 2017 BYU Law Review Symposium, Law & Corpus
Linguistics,       2017      B.Y.U.      L.       REV.      (forthcoming),
                                                                      (cont.)

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    ¶58 Where an insurer files a declaratory judgment action to
determine its responsibilities in a third-party claim that comports with
Utah Code section 78B-6-401(1) and Utah Rule of Civil Procedure 11(b),
the insured is not entitled to attorney fees unless they are provided for
in the insurance contract. See Call, 712 P.2d at 237–238 (“An award of
attorney fees is not warranted ‘where the plaintiff merely stated its
position and initiated this action for determination of what appears to
be a justiciable controversy.’” (citation omitted)); W. Am. Ins. Co. v.
AV&S, 145 F.3d 1224, 1230 (10th Cir. 1998) (refusing to award attorney


http://lawcorpus.byu.edu/; Neal Goldfarb, Words, Meanings, Corpora:
A Lawyer’s Introduction to Meaning in the Framework of Corpus Linguistics,
2017 B.Y.U. L. REV. (forthcoming), https://ssrn.com/abstract=2907485;
Stephen C. Mouritsen, The Dictionary is Not a Fortress: Definitional
Fallacies and a Corpus-Based Approach to Plain Meaning, 2010 B.Y.U. L.
REV. 1915; Mouritsen, Hard Cases, supra; Daniel Ortner, The Merciful
Corpus: The Rule of Lenity, Ambiguity and Corpus Linguistics, 25 B.U. PUB.
INT. L.J. 101 (2016); James C. Phillips, Daniel Ortner, & Thomas Lee,
Corpus Linguistics & Original Public Meaning: A New Tool to Make
Originalism More Empirical, 126 YALE L.J. FORUM 20 (2016); Neal
Goldfarb, LAWN LINGUISTICS, https://lawnlinguistics.com/ (last visited
May 16, 2017) (discussing many contemporary issues regarding corpus
linguistics and the law and providing links to various online tools and
resources).
    Additionally, both Fire Insurance’s and the court of appeals’
reliance on Wikipedia is ill-advised. See Fire Ins. Exch. v. Oltmanns, 2012
UT App 230, 285 P.3d 802. The article cited as authority for using
Wikipedia by the majority warns against its use in precisely this kind of
case, an appeal from a summary judgment. The article specifically
cautions judges to “exercise care when citing a Wikipedia entry because
of the collaborative and constantly changing nature of its content,”
warning that judges “should not rely upon a Wikipedia entry as the
sole basis for their holding or reasoning or to demonstrate the existence or
absence of a material fact in the context of a motion for summary judgment.”
Lee F. Peoples, The Citation of Wikipedia in Judicial Opinions, 12 YALE J.L.
& TECH. 1, 50 (2010) (emphasis added). Further, because Wikipedia is a
public collaboration it may be a reliable source for possible or
permissible definitions of terms, but it can never yield reliable evidence
on which of those possible uses are “common” or “ordinary.” For that,
some type of empirical analysis is required.


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                FIRE INSURANCE EXCHANGE v. OLTMANNS
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fees for a declaratory action where “[t]here is no evidence in the record
that West American did not file this action in good faith or was
stubbornly litigious”).
    ¶59 However, the right to bring a declaratory judgment action to
determine a coverage question does not relieve the insurer of the duty
to defend during the pendency of the declaratory judgment action if
there is a potentially viable third-party liability claim. “[A]n insurer
may have a duty to defend an insured even if . . . the insurer is
ultimately not liable to indemnify the insured.” Therkelsen, 2001 UT 48,
¶ 22. See also Deseret Fed. Sav. & Loan Ass’n, 714 P.2d at 1146; Kay, 487
P.2d at 855. This duty to defend is defined and governed by the
insurance contract, and where it exists, the insurer must defend the
insured until the suit is finalized or there is a declaratory judgment that
there is no coverage under the policy.
2. First-Party Standard of Good Faith and Fair Dealing
    ¶60 Because “[n]o relationship of trust and reliance is created by
the [insurance] contract” in the first-party situation, the insurance
contract “simply obligates the insurer to pay claims submitted by the
insured in accordance with the contract.” Beck, 701 P.2d at 800. “The
Utah Supreme Court has found the nature of the relationship between a
first-party insurer and its insured to be contractual, rather than
fiduciary.” Id. at 801. “[T]he insured and the insurer have parallel
obligations to perform the contract in good faith, obligations that inhere
in every contractual relationship.” Id. (citations omitted).
    ¶61 Although in the third-party context an insurer’s breach of its
duties as a fiduciary can expose the insurer to punitive damages in tort
liability, a breach of the implied duty of good faith and fair dealing in
the first-party context only permits remedies in contract law. See Id. at
800 (“Without more [than a breach of duties and obligations of the
parties in a first-party relationship], a breach of those implied or
express duties can give rise only to a cause of action in contract, not one
in tort.”). See also Allapattah Servs., Inc. v. Exxon Corp., 61 F. Supp. 2d
1326, 1328 (S.D. Fla. 1999) (“[D]amages for breaches of a contract are
generally limited to those that equate to the benefit of the bargain
intended to be realized under the terms of the contract, or, in other
words, that which the non-breaching party would have received had
the contract been performed . . . .”); Walsh v. Ford Motor Co., 627
F. Supp. 1519, 1523 (D.D.C. 1986) (“The central purpose of damages in
actions for breach of contract or warranty is to place the plaintiff in the

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same position he would have occupied had the contract not been
breached. Consequently, punitive damages are not awarded for mere
breach of contract, regardless of the motives or conduct of the
breaching party.” (citing 5A CORBIN, CORBIN ON CONTRACTS § 992 at 5
(1964); U.C.C. § 1-106(1) (AM. LAW INST. & UNIF. LAW COMM’N);
Simpson, Punitive Damages for Breach of Contract, 20 OHIO ST. L.J. 284
(1985)).
     ¶62 However, the damages recoverable under contract law are not
constrained by the policy limits. See Beck, 701 P.2d at 801–02 (“Damages
recoverable for breach of contract include both general damages, i.e.,
those flowing naturally from the breach, and consequential damages,
i.e., those reasonably within the contemplation of, or reasonably
foreseeable by, the parties at the time the contract was made. We have
repeatedly recognized that consequential damages for breach of
contract may reach beyond the bare contract terms.” (citations
omitted)).
    ¶63 If an insurer denies a first-party claim and the insured brings a
suit against the insurer, the insurance company does not have to pay
the claim until a judgment is made by the court. Noting that “[a]n
insured frequently faces catastrophic consequences if funds are not
available within a reasonable period of time to cover an insured loss,”
this court specifically allowed for “damages for losses well in excess of
the policy limits” when they are “foreseeable and provable.” Id. at 802
(citations omitted). Thus, while breach of first-party duties by the
insurer only has remedies available under contract law, the damages
awarded the insured may exceed the policy limits in the insurance
contract. See id. at 798 (holding “that the good faith duty to bargain or
settle under an insurance contract is only one aspect of the duty of good
faith and fair dealing implied in all contracts and that a violation of that
duty gives rise to a claim for breach of contract”).
    ¶64 In the first-party context, the insurer does not have a duty
beyond the implied duty of good faith and fair dealing. However, this
duty still requires an insurer to “diligently investigate the facts to
enable it to determine whether a claim is valid, . . . fairly evaluate the
claim, and . . . act promptly and reasonably in rejecting or settling the
claim.” Id. at 801 (citations omitted). But as a party to a contract,
“[w]hen a claim is fairly debatable, the insurer is entitled to debate it.”
Callioux v. Progressive Ins. Co., 745 P.2d 838, 842 (Utah Ct. App. 1987).
    ¶65 Because of the potential harm to insureds from an unpaid
legitimate claim, our case law has recognized that an insurer may not

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                   FIRE INSURANCE EXCHANGE v. OLTMANNS
               DURHAM, J., concurring in part and in the result


deny a claim and require the insured to bring a suit in order to obtain
coverage unless the question of coverage is reasonable or “fairly
debatable.” This “fairly debatable” standard has become a term of art in
first-party claims. See Jones v. Farmers Ins. Exch., 2012 UT 52, ¶ 7, 286
P.3d 301 (“Farmers defended against Mr. Jones’s causes of action by
arguing that his [underinsured motorists] claim was fairly debatable.”
(emphasis added)); Prince v. Bear River Mut. Ins. Co., 2002 UT 68, ¶ 28,
56 P.3d 524 (“The denial of a claim is reasonable if the insured’s claim is
fairly debatable.” (emphasis added)); Billings v. Union Bankers Ins. Co., 918
P.2d 461, 465 (Utah 1996) (“[A] first-party insurer may [not] be held
liable for breaching the implied covenant on the ground that it
wrongfully denied coverage if the insured’s claim, although later found
to be proper, was fairly debatable at the time it was denied.” (emphasis
added)); Callioux, 745 P.2d at 842 (“When a claim is fairly debatable, the
insurer is entitled to debate it, whether the debate concerns a matter of
fact or law.” (emphasis added) (citation omitted)). The use of this term
of art in our first-party case law predates our 1997 amendment to Utah
Rule of Civil Procedure 11(b), 10 which requires a similar standard.

   10   Utah Rule of Civil procedure 11(b) states that
         [b]y presenting a pleading, written motion, or other
         paper to the court (whether by signing, filing, submitting,
         or advocating), an attorney or unrepresented party is
         certifying that to the best of the person's knowledge,
         information, and belief, formed after an inquiry
         reasonable under the circumstances, . . . it is not being
         presented for any improper purpose, such as to harass or
         to cause unnecessary delay or needless increase in the
         cost of litigation; . . . the claims, defenses, and other legal
         contentions are warranted by existing law or by a
         nonfrivolous argument for the extension, modification, or
         reversal of existing law or the establishment of new law;
         . . . the allegations and other factual contentions have
         evidentiary support or, if specifically so identified, are
         likely to have evidentiary support after a reasonable
         opportunity for further investigation or discovery; and
         . . . the denials of factual contentions are warranted on
         the evidence or, if specifically so identified, are
         reasonably based on a lack of information or belief.


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However, in addition to the rule 11(b) requirements, the “fairly
debatable” standard in first-party insurance claims also incorporates
“the implied contractual obligation to perform a first-party insurance
contract in good faith,” which “contemplates at the very least, that the
insurer will diligently investigate the facts to enable it to determine
whether a claim is valid, . . . fairly evaluate the claim, and . . . act
promptly and reasonably in rejecting or settling the claim.” Beck, 701
P.2d at 801.
              III. MR. OLTMANNS’ COUNTERCLAIMS
                     AGAINST FIRE INSURANCE
    ¶66 Where      Mr.     Oltmanns—either         through     negligence,
inexperience, or a combination of the two—caused injury to his
brother-in-law while operating a personal watercraft and his brother-
in-law sought to recover his expenses associated with the event, Mr.
Oltmanns was potentially liable for those injuries. Mr. Oltmanns turned
to his insurer, tendering his defense pursuant to the contract. The
insurer diligently investigated the claim, but did not defend Mr.
Oltmanns in the personal injury case during the investigation. “Fire
Insurance asked Mr. Dalton to continue defending Robert Oltmanns
and told him that in the event coverage was extended for the July 2006
accident, Fire Insurance would reimburse him for the costs and fees
incurred by Robert Oltmanns.” Fire Insurance admits that they “did not
offer or propose to defend the claim.” Mr. Oltmanns argues that the
insurer should not have requested a declaratory judgment action
because the ambiguity in the contract is presumed to be interpreted in
his favor. Mr. Oltmanns claims that the Fire Insurance inappropriately
relied on outside counsel in its decision to file a declaratory judgment.
Mr. Oltmanns also claims that Fire Insurance breached its duty of good
faith by failing to assume the defense while deciding whether the
incident was covered. We address each of these claims in turn.
             A. Mr. Oltmanns’s Claim for Attorney Fees for the
                       Declaratory Judgment Action
    ¶67 One remedy that Mr. Oltmanns seeks here is a right to recover
attorney fees in the declaratory judgment action under contract law,
claiming that Fire Insurance should not have requested a declaratory
judgment action. Utah courts do not allow recovery for attorney fees
“in the ordinary lawsuit unless it is provided for by statute or by
contract,” Am. States Ins. Co. v. Walker, 486 P.2d 1042, 1044 (Utah 1971),
or “where they are a legitimate item of damages caused by the other
party’s wrongful act,” W. Cas. & Sur. Co. v. Marchant, 615 P.2d 423, 427

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                FIRE INSURANCE EXCHANGE v. OLTMANNS
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(Utah 1980). This court has applied that standard in the case of
insurance contracts where attorney fees have been awarded “in [a]
declaratory judgment action” if “the insurance company acted in bad
faith or fraudulently or was stubbornly litigious.” Walker, 486 P.2d at
1044; see also Doctors’ Co. v. Drezga, 2009 UT 60, ¶ 38, 218 P.3d 598 (“The
rule that attorney fees will not be available to a prevailing insured
following an action for declaratory relief unless an insurer is found to
have acted fraudulently, stubbornly or in bad faith remains
undisturbed. Nor do we intend to abandon the caution that Utah courts
have long shown regarding the awarding of attorney fees.”).
    ¶68 We affirm the court of appeals’ affirmance of the district
court’s grant of summary judgment to Fire Insurance on this claim and
deny Mr. Oltmanns’s request for attorney fees for the declaratory
judgment action. Because of the potential liability that is at stake for
insurers in third-party cases, insureds face a very high bar in proving
that an insurer filed a declaratory judgment in bad faith or to be
stubbornly litigious. In this case Fire Insurance relied on the advice of
outside counsel. Even though outside counsel believed that Fire
Insurance would prevail, he advised Fire Insurance to file a declaratory
judgment action to determine coverage. Fire Insurance was “entitled to
seek a declaratory judgment as to its obligations and rights,” Farmers
Ins. Exch. v. Call, 712 P.2d 231, 237 (Utah 1985) (citation omitted).
Attorney fees for a declaratory judgment action brought in compliance
with Utah Code section 78B-6-401 and Utah Rule of Civil Procedure 11,
and not provided for in Mr. Oltmanns’s insurance contract, are
unavailable. See also UTAH CODE § 78B-5-825(1) (not awarding
“reasonable attorney fees” unless “the court determines that the action
or defense to the action was without merit and not brought or asserted
in good faith”).
     ¶69 Additionally, Mr. Oltmanns waived the right to argue that Fire
Insurance acted in “bad faith or fraudulently or was stubbornly
litigious” when it brought a declaratory judgment action for whether
the “jet ski” exception applied in his situation. He did so by stipulating
in its brief to the court of appeals and to this court that “Fire Insurance
was within its rights to file for declaratory relief. For this, it had the
advice of counsel,” noting that “no one contended” in the district court
that “Fire Insurance [did not have] the right to seek declaratory relief.”
In fact, in Mr. Oltmanns’s briefing, his main contention is that Fire
Insurance breached its duty because “[a] reasonable response would
have been to assume defense of the Blackner action.” Failure to assume

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            DURHAM, J., concurring in part and in the result


the defense does not mean that Fire Insurance breached its duty by
filing a declaratory judgment. “What Fire Insurance got [from counsel]
was a recommendation to file for declaratory judgment. Fire Insurance
argued over-and-over in the trial court that it had the right to seek
declaratory relief. No one contended otherwise. However, it never
occurred to Fire Insurance that it could argue the coverage question
while at the same time defending its insured.” (Emphasis added.) Mr.
Oltmanns’s briefing shows that he seeks a remedy for breach of duty to
defend through an award of attorney fees for the declaratory judgment
action. This is not how the law works. Mr. Oltmanns therefore waived
the argument that Fire Insurance brought the declaratory judgment
action in bad faith and seeks damages pertaining to the attorney fees
for defending the declaratory judgment action only under contract law;
this request is without merit. There are no disputed material facts that
indicate that Fire Insurance acted in bad faith in filing the declaratory
judgment. Thus, summary judgment was appropriate for this claim.
            B. Mr. Oltmanns’s Claim of Bad Faith for Relying on
                       Opinion of Outside Counsel
    ¶70 Mr. Oltmanns also claimed that Fire Insurance impermissibly
relied on the allegedly flawed advice of outside counsel. Thus, he
argues, Fire Insurance did not fairly evaluate his claim and
unreasonably rejected it. We agree with the court of appeals that “[a]n
insurance company may reasonably and fairly rely, at least initially,
upon a coverage opinion from qualified outside counsel, received in the
course of careful investigation and evaluation of a claim.” Fire Ins. Exch.
v. Oltmanns, 2016 UT App 54, ¶ 15, 370 P.3d 566. Mr. Oltmanns thus
does not prevail on this claim.
           C. Mr. Oltmanns’s Claim for Breach of Duty to Defend
   ¶71 Mr. Oltmanns argued in its operative complaint in the district
court and its briefing to the court of appeals and this court that “Fire
Insurance breached its duty by failing to assume defense of the
Blackner action” breaching “both contractual and implied duties.”
However, Mr. Oltmanns failed to preserve this argument in their
memorandum in opposition to Fire Insurance’s motion for summary
judgment.
     ¶72 The Utah Rules of Civil Procedure at the time required that
“[t]he motion, memoranda and affidavits [filed in summary judgment
actions] shall be in accordance with Rule 7.” UTAH R. CIV. P. 56(c)



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                 FIRE INSURANCE EXCHANGE v. OLTMANNS
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(2014). 11 Summary judgment was required “if the pleadings, depositions,
answers to interrogatories, and admissions on file, together with the
affidavits, if any, show that there is no genuine issue as to any material
fact and that the moving party is entitled to a judgment as a matter of
law.” Rule 7(c)(3)(A) requires that “[a] memorandum supporting a
motion for summary judgment shall contain a statement of material facts
as to which the moving party contends no genuine issue exists.” Rule
7(c)(3)(B) requires that “[a] memorandum opposing a motion for
summary judgment shall contain a verbatim restatement of each of the
moving party’s facts that is controverted, and may contain a separate
statement of additional facts in dispute.”
    ¶73 Fire Insurance submitted a memorandum in support of their
motion for summary judgment, which included statements that
“Oltmanns tendered defense,” that “Fire Insurance asked [Oltmanns’s
attorney] to continue defending Robert Oltmanns,” and “that in the
event coverage was extended, . . . Fire Insurance would reimburse him
for the costs and fees incurred.” In Mr. Oltmanns’s memorandum in
opposition to Fire Insurance’s motion for summary judgment, Mr.
Oltmanns does not use these facts to raise a breach of the duty to defend
claim as an additional fact in dispute. Although Mr. Oltmanns raised
this claim in his operative counterclaim, this does not nullify the
mandate of rule 7(c)(3)(B) to restate controverted claims and raise
“additional facts in dispute.”
     ¶74 Because the claim was not raised as a disputed material fact in
Mr. Oltmanns’s opposition memorandum, it was not preserved. The
claim for failure to defend was not properly presented to the district
court in its opposition to summary judgment motion, so the court was
not properly put on notice that it should rule on the failure to defend
claim separately from the claim regarding the declaratory judgment
action. See Donjuan v. McDermott, 2011 UT 72, ¶ 20, 266 P.3d 839 (“To
properly preserve an issue for appellate review, the issue must be raised
in the district court. Additionally, the issue must be specifically raised, in
a timely manner, and must be supported by evidence and relevant legal
authority. The purpose of the preservation requirement is to put the


    Both rule 56 and rule 7 were substantially modified in 2015 to
    11

more closely follow the style of the Federal Rules of Civil Procedure.
We use the 2014 rules in place at the time the memoranda were filed.


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                           Cite as: 2017 UT 81
             DURHAM, J., concurring in part and in the result


district court on notice of an issue and provide it with an opportunity to
rule on it.” (citations omitted)).
    ¶75 I would affirm the court of appeals’ decision to uphold the
district court’s grant of summary judgment, but do so on alternate
grounds. Mr. Oltmanns waived his argument that Fire Insurance
breached the implied covenant of good faith by bringing the
declaratory judgment action when he conceded that it was merited in
his brief to the court of appeals and his brief to this court. Therefore,
summary judgment on behalf of Fire Insurance was appropriate.




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