UMIA Insurance v. Saltz ( 2022 )

2022 UT 21IN THE
SUPREME COURT OF THE STATE OF UTAH
UMIA INSURANCE, INC.,
Appellant / Cross-Appellee,
v.
RENATO SALTZ, M.D. and SALTZ PLASTIC SURGERY, P.C.,
Appellees / Cross-Appellants.
No. 20200008
Heard: October 18, 2021
Filed June 9, 2022
On Direct Appeal
Third District, Salt Lake
The Honorable Keith A. Kelly
No. 160907287
Attorneys:
Troy L. Booher, Beth E. Kennedy, Taylor P. Webb, Salt Lake City,
Mark D. Malloy, Steven L. Miracle, Milwaukee,
for appellant / cross-appellee
Julianne P. Blanch, Alan S. Mouritsen, Salt Lake City,
for appellees / cross-appellants
ASSOCIATE CHIEF JUSTICE LEE authored the opinion of the Court in
which CHIEF JUSTICE DURRANT, JUSTICE PEARCE, JUSTICE HAGEN*,
and JUDGE POHLMAN joined.
Due to his retirement, JUSTICE HIMONAS did not participate herein;
JUSTICE DIANA HAGEN sat.
Having recused herself, JUSTICE PETERSEN does not participate herein;
COURT OF APPEALS JUDGE JILL POHLMAN sat.
_____________________________________________________________
* JUSTICE DIANA HAGEN became a member of the Court on May
18, 2022, but sat as a visiting judge prior to her confirmation.
UMIA INSURANCE, INC v. SALTZ
Opinion of the Court
ASSOCIATE CHIEF JUSTICE LEE, opinion of the Court:
¶1 Renato Saltz is a plastic and reconstructive surgeon who was
sued by a former patient for releasing her pre- and post-surgery
photographs to a news outlet. Saltz turned over his legal defense to
his malpractice insurance provider, UMIA Insurance, Inc. UMIA
initially defended Saltz but eventually filed its own declaratory
judgment suit, claiming that Saltz lacked insurance coverage for the
former patient’s claims. Saltz countersued. He claimed he had
coverage under the plain language of his UMIA policy and under
principles of waiver and promissory estoppel. He also sought
compensatory and punitive damages under a claim that UMIA had
breached its duty of good faith.
¶2 The district court found that Saltz was not covered under the
plain language of the policy and dismissed his claim for waiver and
his request for punitive damages. But it denied UMIA’s motion for
judgment as a matter of law and allowed Saltz’s promissory estoppel
and breach of the duty of good faith claims to go to a jury. Over
UMIA’s objections, the court also allowed evidence from a
settlement negotiation to be presented to the jury. The jury found for
Saltz on both claims.
¶3 We affirm in part, reverse in part, and remand for further
proceedings on Saltz’s requests for punitive damages and for
attorney fees incurred on appeal. The district court properly allowed
Saltz’s claims for promissory estoppel and breach of the duty of
good faith to go to the jury, and the court was correct to deny
UMIA’s motion for a new trial on the claim for breach of the duty of
good faith. As for UMIA’s assertion that the district court
improperly admitted evidence from the 2017 settlement talks, we
affirm the district court on the ground that UMIA failed to carry its
burden of persuasion on appeal. The district court erred, however, in
dismissing Saltz’s claim for waiver and request for punitive
damages. Because Saltz successfully established that he was covered
under his UMIA policy by promissory estoppel, we do not reach the
question of whether Saltz has a viable waiver claim or was covered
under the plain language of the policy.
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I
¶4 Dr. Renato Saltz has practiced plastic and reconstructive
surgery in Utah for thirty years. 1 UMIA Insurance provided Dr. Saltz
a $1,000,000 malpractice insurance policy. At various times, news
outlets featured stories highlighting Dr. Saltz’s work and opinions
on plastic surgery. And these interactions between Saltz and the
press are what ultimately led to the case before us.
¶5 In 2006, Saltz performed an abdominoplasty on Conilyn
Judge. As part of that procedure, Judge gave written consent for a
nurse to take nude pictures of her before and after the operation.
This was standard practice in the plastic surgery field.
¶6 A year after the procedure, a local Fox News affiliate
interviewed both Saltz and Judge for a story on plastic surgery. After
the interviews, but before the broadcast, Fox requested some before
and after photos of Judge. And without her consent, Saltz gave Fox
unredacted photos of Judge—without any instructions on how the
photos should be displayed in the broadcast. Fox then aired edited
photos in the beginning of 2008, showing Judge’s body from her
neck to her upper thigh, with black bars placed over her breasts and
groin.
¶7 A month later, Saltz received a letter from Judge’s attorney
complaining about the release of the photos to Fox. And in early
2009, Judge filed a civil suit against both Fox and Saltz, asserting
various tort claims and seeking millions of dollars in damages (the
“Judge Lawsuit”).
¶8 After receiving Judge’s initial letter, Saltz contacted Mike
Imbler, a claim consultant at UMIA who had worked with Saltz for
over five years. Imbler retained the law firm Richards Brandt Miller
Nelson (“RBMN”) to represent Saltz. A few months later, RBMN
contacted Saltz and advised him to ask Hartford—his general
liability insurance carrier—if it would cover the Judge Lawsuit.
Hartford denied coverage. Satisfied with his coverage under his
UMIA policy, Saltz did not challenge Hartford’s denial.
¶9 UMIA controlled how the Judge Lawsuit was handled and
negotiated. During the first two years of the case, UMIA
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1 “On appeal, we review the record facts in a light most favorable
to the jury’s verdict and recite the facts accordingly.” USA Power,
LLC v. PacifiCorp, 2016 UT 20, ¶ 8 n.3, 372 P.3d 629 (citation and
internal quotation marks omitted).
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UMIA INSURANCE, INC v. SALTZ
Opinion of the Court
unsuccessfully offered Judge $50,000 to drop her claims, and Fox
settled separately for $300,000. After the Fox settlement, Judge and
Saltz went into mediation. UMIA controlled the mediations,
authorizing RBMN to offer up to $150,000 to settle. But mediation
was unsuccessful and litigation resumed. Judge was willing to
accept an $800,000 settlement offer, but UMIA offered only $100,000.
¶10 RBMN filed a motion for summary judgment, asserting that
Judge had consented to the photo release when she signed a pre-
operation consent form. That motion was granted. And UMIA then
instructed RBMN to withdraw the $100,000 settlement offer. In
response, Judge appealed the district court’s grant of summary
judgment.
¶11 The parties litigated that appeal for the next five years.
During that time, settlement discussions were suspended. This
appellate process culminated in our decision in Judge v. Saltz Plastic
Surgery, P.C., 2016 UT 7, 367 P.3d 1006, where we reversed the
district court’s dismissal and remanded the case for further
proceedings. The case returned to the district court in 2016.
¶12 After the case returned to the district court, Judge offered to
settle for $1,000,000. RBMN counseled Saltz to consider obtaining
independent counsel. And he did so—retaining Parsons, Behle &
Latimer (“PBL”) to represent him personally. A week later, PBL
asked UMIA to either settle the Judge Lawsuit for the full $1,000,000
of coverage or indemnify Saltz for any damages that might be
awarded in the suit. After receiving the request, Nick Ghiselli,
UMIA’s general counsel, reviewed the Judge Lawsuit and raised, for
the first time, the possibility that the Judge Lawsuit was not covered
under Saltz’s policy. Ghiselli doubted that Judge’s claims were
“covered by the UMIA policy,” but recognized that “[i]t might be too
late” for UMIA to deny coverage under the principles of promissory
estoppel and waiver.
¶13 Upon this discovery, UMIA informed Saltz that it would not
settle the Judge Lawsuit for policy limits, that it did not think Saltz
had coverage under his UMIA policy, and that Saltz should ask
Hartford to revisit its initial coverage denial. At the same time,
UMIA responded to Judge’s demand by offering her $200,000 to
settle the case. Judge refused. PBL then sent UMIA a follow-up letter
expressing concern with its sudden about-face. Ghiselli responded
by characterizing the letter as containing unwarranted “threats,”
especially in light of UMIA’s recent settlement offer. Two weeks
later, UMIA sent a letter to Saltz that asserted that the Judge Lawsuit
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was not covered under his policy but agreeing to defend Saltz under
a reservation of rights. 2
¶14 Saltz’s relationship with UMIA deteriorated in the wake of
these events. In November 2016, UMIA filed the lawsuit that is the
genesis of this appeal—a declaratory judgment action seeking to
establish that the Judge Lawsuit was not covered under Saltz’s
insurance policy with UMIA. Saltz disputed UMIA’s denial of
coverage under the plain language of the policy. And he asserted
several counterclaims against UMIA, contending in the alternative
that he had coverage under the policy through principles of waiver
and promissory estoppel. Saltz also claimed that UMIA had
breached the covenant of good faith and fair dealing—a claim on
which Saltz sought compensatory and punitive damages. At Saltz’s
request, Hartford also revisited its initial coverage denial. It agreed
to defend Saltz under a reservation of rights and to contribute half of
his defense costs incurred thus far.
¶15 Several weeks later, UMIA moved for summary judgment on
its declaratory judgment claim, asserting that the Judge Lawsuit was
not covered under the plain language of its policy with Saltz. The
district court agreed, leaving only Saltz’s counterclaims for breach of
the duty of good faith and associated damages and his claims for
coverage under the UMIA policy under theories of waiver and
promissory estoppel.
¶16 The parties entered into settlement negotiations over both
cases in June 2017. Hartford, UMIA, and Saltz all agreed to
contribute toward a settlement offer in the Judge Lawsuit. Hartford
offered $200,000, and Saltz offered $35,000. UMIA offered only
$15,000—less than ten percent of its previous offer and its lowest
since the Judge Lawsuit began. Judge rejected the offer. Hartford
then increased its contribution to $400,000, bringing the total offer up
to $450,000. UMIA informed the mediator that it would not offer
more than $15,000 in any settlement offer, and Saltz stated that he
would continue to pursue his claim for breach of the duty of good
faith against UMIA. After UMIA left the negotiations, Hartford and
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2 A reservation of rights letter “explains the insurer’s coverage
position. [It] inform[s] the insured in detail . . . of every reason for
the insurer’s position concerning the possible disclaimer of
coverage.” 1 JUDITH F. GOODMAN & SUE C. JACOBS, LAW AND
PRACTICE OF INSURANCE COVERAGE LITIGATION § 8:2 (2021).
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UMIA INSURANCE, INC v. SALTZ
Opinion of the Court
Saltz settled the Judge Lawsuit for $1,000,000 in total, each
contributing $500,000.
¶17 The suit between UMIA and Saltz continued, with both
parties filing various pretrial motions. UMIA attempted to preclude
Saltz from introducing evidence of its actions during the June 2017
settlement talks, asserting that the evidence was barred by Rule 408
of the Utah Rules of Evidence. The district court denied the motion.
It held that UMIA had opened the door to the evidence when it
admitted evidence from various other settlement mediations with
Judge. The district court ruled in UMIA’s favor, however, on its
motion for summary judgment, dismissing Saltz’s request for
punitive damages under his claim for breach of the duty of good
faith. In so doing, the district court found that UMIA’s conduct did
“not rise to the level of willful and malicious misconduct” or
“knowing and reckless indifference toward or disregard of” Saltz’s
rights. Saltz’s claims for promissory estoppel, waiver, and breach of
the duty of good faith remained.
¶18 The case went to trial in August 2019. After Saltz presented
his case in chief, UMIA moved for a judgment as a matter of law,
asserting that Saltz had failed to establish a basis for promissory
estoppel, breach of the duty of good faith, or waiver. Regarding
promissory estoppel, UMIA contended that Saltz had failed to
demonstrate that he was prejudiced by UMIA’s eight-year delay in
questioning coverage. With respect to breach of the duty of good
faith, UMIA asserted that Saltz had not presented any evidence to
support the claim. The district court allowed Saltz’s claims for
promissory estoppel and breach of the duty of good faith to go to the
jury, but dismissed his waiver claim, holding that waiver did not
apply in the context of third-party insurance. 3
¶19 The jury found for Saltz on both claims. It found that UMIA
was estopped from denying coverage and had to reimburse Saltz the
full $500,000 payment he made to Judge during the June 2017
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3 Third-party insurance coverage refers to an agreement where
“the insurer contracts to defend the insured against claims made by
third parties against the insured and to pay any resulting liability, up
to the specified dollar limit.” Beck v. Farmers Ins. Exch., 701 P.2d 795,
798 n.2 (Utah 1985). This is in contrast to first-party insurance
coverage, which refers to “an insurance agreement where the insurer
agrees to pay claims submitted to it by the insured for losses suffered
by the insured.” Id.6
Cite as: 2022 UT 21Opinion of the Court
settlement talks. It also found that UMIA had breached the covenant
of good faith and fair dealing, causing Saltz $500,000 in damages and
causing him to incur attorney fees.
¶20 After the jury verdict, UMIA renewed its motion for
judgment as a matter of law. 4 UMIA raised the same basic objections
to Saltz’s claims for promissory estoppel and breach of the duty of
good faith that it raised on its first motion for judgment as a matter
of law. The district court denied UMIA’s motion and confirmed the
jury’s award.
¶21 UMIA filed this appeal, and Saltz cross appealed.
II
¶22 UMIA challenges the denial of its renewed motion for
judgment as a matter of law on Saltz’s claims for promissory
estoppel and breach of the duty of good faith. UMIA also asks us to
order a new trial on claims for breach of the duty of good faith if we
do not overrule the district court’s decision on the motion. Finally,
UMIA asks for a new trial on the ground that it was prejudiced by
the district court’s improper admission of evidence of UMIA’s
actions during the 2017 settlement talks.
¶23 On his cross appeal, Saltz challenges the district court’s
dismissal of his waiver claim and request for punitive damages. He
also asks us to reverse the determination that the Judge Lawsuit was
not covered under the plain language of the UMIA insurance policy.
And Saltz seeks an award of his attorney fees incurred on appeal.
¶24 We affirm the district court’s denial of UMIA’s renewed
motion for judgment as a matter of law on Saltz’s promissory
estoppel claim. But we reverse the dismissal of Saltz’s claim for
waiver. We also affirm the determination that UMIA was not
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4 Effective May 2016, Utah Rule of Civil Procedure 50 was
amended to change the terms “judgment notwithstanding the
verdict” and “directed verdict” to “judgment as a matter of law.” See
Arnold v. Grigsby, 2018 UT 14, ¶ 10 n.2, 417 P.3d 606. But this change
in terminology did not alter the governing standard. UTAH R. CIV. P.
50 advisory committee’s notes to 2016 amendment. We generally
follow the terminology of the amended rule in this opinion—
speaking of “judgment as a matter of law” and employing the terms
“judgment notwithstanding the verdict” and “directed verdict” only
where these terms appear in motion titles, court order titles, and case
law.
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UMIA INSURANCE, INC v. SALTZ
Opinion of the Court
entitled to judgment as a matter of law on Saltz’s claim for breach of
the duty of good faith. And we likewise affirm the denial of UMIA’s
request for a new trial on the same claim for breach of the duty of
good faith. As for UMIA’s assertion that the district court
improperly admitted evidence from the 2017 settlement talks, we
affirm on the ground that UMIA failed to carry its burden of
persuasion on appeal. But we reverse the dismissal of Saltz’s request
for punitive damages and conclude that Saltz is entitled to an award
of his attorney fees on appeal.
A. Promissory Estoppel
¶25 UMIA filed a renewed motion for judgment as a matter of
law on Saltz’s promissory estoppel claim, asserting that Saltz failed
to establish that he was prejudiced by UMIA’s delay in questioning
coverage. 5 The district court denied the motion. It held that there
was “evidence from which the jury could determine that there was
prejudice [to Saltz].” UMIA challenges that denial on appeal.
¶26 We review a denial of a motion for judgment as a matter of
law “for correctness.” Mounteer Enters., Inc. v. Homeowners Ass’n for
the Colony at White Pine Canyon, 2018 UT 23, ¶ 13, 422 P.3d 809(citation omitted) (using the nomenclature of “judgment
notwithstanding the verdict”). And we overturn such a decision
“only if the appellant can demonstrate that there was no basis in the
evidence, including reasonable inferences which could be drawn
therefrom, to support the jury’s verdict.” USA Power, LLC v.
PacifiCorp, 2016 UT 20, ¶ 29, 372 P.3d 629 (citation omitted) (using
the nomenclature of “judgment notwithstanding the verdict”). As
applied here, this standard requires UMIA to establish that Saltz
failed to put on evidence that UMIA’s delay resulted in prejudice to
Saltz. And we affirm on the ground that UMIA has failed to carry
that burden.
¶27 Under the majority rule among state courts, if a breach of a
duty has been shown, prejudice to the insured is “conclusively
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5 Generally, “estoppel cannot be used to create [insurance]
coverage.” 7 STEVEN PLITT ET AL., COUCH ON INSURANCE § 101:9 (3d.
ed. 2021). Courts have recognized “several exceptions” to this rule.
Id. But they are triggered only where “there is prejudice to the
insured from the insurer’s actions,” as where “[t]he insurer
unreasonably delays in informing interested parties that it may
disclaim coverage.” Id.
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presumed” once a “[third-party] insurer, without reservation of
rights . . . [,] assumes the exclusive control of the defense of claims
against the insured.” 6 This rule is based on the notion that “the loss
to an insured of the right to manage and control an action against
him, as a consequence of the insurer’s defense of such action” is so
severe that prejudice can be presumed. R.D. Hursh, Annotation,
Liability Insurance: Insurer’s Assumption of or Continuation in Defense of
Action Brought Against the Assured as Waiver or Estoppel as Regards
Defense of Noncoverage or Other Defense Existing at Time of Accident, 38
A.L.R. 2d 1148 § 5[b] (1954); see also id. § 2.
¶28 Other courts reject a presumption of prejudice—holding that
the assumption of an insured’s defense is not in and of itself
sufficient to establish prejudice. Prejudice, under this rule, is a
question of fact to be resolved in light of evidence presented by the
parties. World Harvest Church, Inc. v. GuideOne Mut. Ins. Co., 695
S.E.2d 6, 11 (Ga. 2010) (explaining the difference between the
majority and the minority rules regarding prejudice in the context of
third-party insurance); see also 38 A.L.R. 2d 1148 § 5[c] (1954).
¶29 This court and a handful of others have taken a different
approach. We have endorsed a presumption of prejudice, but only in
cases where the insurer “assumes the defense of an action or
claim . . . and conducts the action to final judgment, or the claim to
settlement.” State Farm Mut. Auto Ins. Co. v. Kay, 487 P.2d 852, 855
(Utah 1971) (quoting with approval Boulet v. Millers Mut. Ins. Ass’n of
Ill., 362 F.2d 619, 622–23 (8th Cir. 1966)), overruled on other grounds
by Farmers Ins. Exch. v. Call, 712 P.2d 231 (Utah 1985). When “the
insurer disclaims and withdraws prior to final judgment or
settlement, prejudice to the insured is not presumed,” and the
insured must prove that he “was actually prejudiced” by the delay.
Kay, 487 P.2d at 855. In other words, under our law, prejudice is not
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6 World Harvest Church, Inc. v. GuideOne Mut. Ins. Co., 695 S.E.2d 6,
11 (Ga. 2010) (citations omitted) (quoting Arceneaux v. Amstar
Corp., 969 So.2d 755, 767 (La. Ct. App. 2007)) (adopting this general
rule and recognizing a variant in which prejudice is shown “without
resort to a presumption” and “without any further proof”) (citing 14
LEE R. RUSS, COUCH ON INSURANCE §§ 202:67–202:69 (3rd ed.); R.D.
Hursh, Annotation, Liability Insurance: Insurer's Assumption of or
Continuation in Defense of Action Brought Against the Assured as Waiver
or Estoppel as Regards Defense of Noncoverage or Other Defense Existing
at Time of Accident, 38 A.L.R. 2d 1148 § 5[b] (1954)).
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UMIA INSURANCE, INC v. SALTZ
Opinion of the Court
presumed from mere relinquishment of control of the defense to the
insurer, or from a disclaimer or withdrawal of coverage prior to final
judgment or settlement. Until the insurer either settles the suit or
litigates it to final judgment, the insured bears the burden of
establishing prejudice.
¶30 In Kay, we recognized that an “insurer is entitled to a
reasonable time to investigate the facts” but held that it is required to
“act seasonably in disclaiming liability . . . and . . . cannot delay its
decision so long that the insured’s rights are prejudiced thereby.” Id.
Ultimately, we identified two ways that an insured could establish
prejudice arising from an insurer’s delay in questioning coverage.
First, we noted that prejudice may be shown by proof that the
insured was deprived of “an opportunity to prepare an adequate
defense before trial.” Id. at 856. Second, we explained that prejudice
may be established by evidence that the insured was deprived of “an
opportunity . . . to effect a settlement.” Id.
¶31 We affirm on the ground that Saltz presented evidence that
he was prejudiced under the standard set forth in Kay. Saltz elicited
expert testimony showing that UMIA’s delay in questioning
coverage deprived him of an opportunity to settle the Judge Lawsuit.
Saltz’s expert testified that UMIA missed opportunities to settle
during its eight-year delay in questioning coverage. The expert
asserted that there would have been better settlement opportunities
if UMIA had been more collaborative with Fox in 2011 when Fox
settled. If UMIA had “been on the inside” of that settlement, it
would have been “a collective offer,” which is “far more appealing to
an injured party” because the whole issue gets resolved at once. In
the expert’s opinion, UMIA missed another opportunity to settle
when it withdrew its $100,000 offer right after Judge’s claim was
dismissed on summary judgment in 2011. The expert believed that
UMIA did this because it “feared that Ms. Judge would accept that
offer.”
¶32 The expert also testified that when an insurer questions
coverage early on in the litigation, the plaintiff’s incentives are
altered. In the expert’s opinion, questioning coverage early increases
the time to compensation for a successful plaintiff by as much as
eight to ten years. A plaintiff may want to avoid waiting to be
compensated while the insured and insurer dispute coverage. And
both plaintiffs and their attorneys “ha[ve] to incur expense and
additional attorney[] fees fighting [for] coverage” for the insured
because their recovery and compensation, respectively, depends on
the outcome of the insurer’s declaratory judgment suit. Plaintiffs
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may also choose to avoid publicity about their claim as the discovery
(and possible appellate) processes driven by a third-party insurer
unfold—because “the more it’s advertised, the more it hurts [the
plaintiff].” These incentives “motivate[]” plaintiffs, increasing the
likelihood of settlements occurring “early and for less money.”
¶33 UMIA did not question coverage until after eight years of
litigation. As the case was close to resolution, Judge knew she would
be compensated soon if she won her case. The discovery and
appellate processes had concluded, meaning that Judge had already
been subject to public exposure. If UMIA had sent a reservation of
rights letter and filed for declaratory judgment action earlier, it
“would have changed [things] significantly,” because Judge would
have had incentives to settle. Indeed, in the expert’s opinion, Judge
would have been “highly motivated” to settle.
¶34 This testimony shows that UMIA deprived Saltz of
settlement opportunities with Judge through its delay in questioning
coverage. This is sufficient under Kay, which holds that prejudice can
be established by proof that an insured was deprived of “an
opportunity . . . to effect a settlement.” Id. (emphasis added). And a
reasonable jury could have found that UMIA deprived Saltz of an
opportunity to settle the Judge Lawsuit. 7
B. Waiver
¶35 The district court dismissed Saltz’s waiver claim based on its
understanding of our decision in Kay. It concluded that Kay requires
an insured to show that he was prejudiced by an insurer’s delay in
reserving its rights to obtain coverage under an insurance policy.
And it effectively concluded that a waiver claim is not available in
the third-party insurance context.
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7 UMIA rightly notes that Saltz did not present evidence of the
settlement amount that Judge might have accepted before UMIA
contested coverage. Certainly Saltz could have done so. And perhaps
such evidence would have affected the jury’s assessment of the
prejudice element of Saltz’s promissory estoppel claim. But that is
not the question presented for our review. We are not asked to
decide whether the jury was presented with the best or most direct
evidence of prejudice. We are asked only to decide whether Saltz
presented some evidence on which the jury could have based its
determination of prejudice. We conclude that Saltz carried this
burden under Kay, and we affirm the district court on that basis.
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UMIA INSURANCE, INC v. SALTZ
Opinion of the Court
¶36 This decision hinged on a conclusion of law. We accordingly
review it for correctness, affording no deference to the district court’s
analysis. See State v. Daniels, 2002 UT 2, ¶ 18, 40 P.3d 611.
¶37 Our decision in Kay was not as sweeping as the district court
surmised. In Kay, we agreed with the Eighth Circuit that “[p]rejudice
. . . is an essential element in . . . estoppel.” Kay, 487 P.2d at 855. But
we said nothing about whether waiver was a viable claim against a
third-party insurer. And we did not require proof of prejudice as an
element of a claim for waiver.
¶38 Our more recent case law makes clear that “[p]rejudice is
irrelevant to a claim of waiver.” Mounteer Enters., Inc., 2018 UT 23,
¶ 33 (citation omitted). Waiver is a deeply embedded principle of
contract law. It requires only “a showing of words or conduct
manifesting the ‘intentional relinquishment of a known right.’” Id.(citing Wilson v. IHC Hosps., Inc., 2012 UT 43, ¶ 61, 289 P.3d 369). And
we see no principled reason why this doctrine should not extend to
the third-party insurance context.
¶39 We hold that waiver is a valid claim in the third-party
insurance context and affirm that such a claim may be established
without proof of prejudice. But we need not consider whether the
elements of waiver were established here, or remand for further
proceedings on that question, since Saltz successfully established
coverage under the doctrine of promissory estoppel.
C. Breach of the Duty of Good Faith
¶40 After the jury entered its verdict, UMIA renewed its motion
for judgment as a matter of law on Saltz’s claim for breach of the
duty of good faith, contending that Saltz had failed to present
evidence to support this claim. Alternatively, it requested a new
trial, asserting error in the jury instructions. The district court denied
both motions.
¶41 As noted above, we review a denial of a motion for a
judgment as a matter of law “for correctness.” Mounteer Enters., Inc.,
2018 UT 23, ¶ 13 (citation omitted). We will reverse the denial of
such a motion “only if the appellant can demonstrate that there was
no basis in the evidence, including reasonable inferences which
could be drawn therefrom, to support the jury’s verdict.” USA Power,
LLC v. PacifiCorp, 2016 UT 20, ¶ 29 (citation omitted).
¶42 We review a decision to grant or deny a new trial under an
abuse of discretion standard. Id. ¶ 30. In so doing, “[w]e review the
legal standards applied by the [district] court . . . for correctness.”
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State v. Bess, 2019 UT 70, ¶ 17, 473 P.3d 157 (first and second
alterations in original) (citation and internal quotation marks
omitted). We will reverse and remand for a new trial if the district
court made a legal error serious enough that “the likelihood of a
different outcome is sufficiently high to undermine [our] confidence
in the verdict.” SIRQ, Inc. v. The Layton Cos., 2016 UT 30, ¶ 32, 379
P.3d 1237 (alteration in original) (internal quotation marks omitted)
(citing State v. Knight, 734 P.2d 913, 920 (Utah 1987)).
¶43 We affirm the district court’s denial of UMIA’s motion for
judgment as a matter of law. Saltz presented evidence of UMIA’s
actions from which the jury could infer that the insurer breached its
duty of good faith. We likewise conclude that there is not a sufficient
basis to overrule the denial of UMIA’s new trial motion. Although
there were errors in the jury instructions, those errors do not
“undermine [our] confidence in the verdict.” SIRQ, Inc., 2016 UT 30,
¶ 32 (alteration in original) (citation omitted).
1. Evidence of UMIA’s Breach of the Duty of Good Faith
¶44 As a third-party insurer, UMIA had a fiduciary responsibility
to “act in good faith and be as zealous in protecting the interests of
its insured as it would in looking after its own.” Ammerman v.
Farmers Ins. Exch., 430 P.2d 576, 579 (Utah 1967) (citations omitted);
see id. at 578 (holding that “[t]he covenant in [an insurance] policy
requiring the insurer to defend the insured imposes upon it a
fiduciary responsibility”). Third-party insurers are subject to a
heightened duty because “the insurer controls the disposition of
claims against its insured” and “[t]he insured is wholly dependent
upon the insurer to see that, in dealing with claims by third parties,
the insured’s best interests are protected.” 8 Beck v. Farmers Ins. Exch.,
701 P.2d 795, 799 (Utah 1985). A failure to uphold this duty
constitutes bad faith. See id. at 799–800.
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8 The relationship between the insurer and its insured is
“fundamentally different” for third-party and first-party insurers.
Beck v. Farmers Ins. Exch., 701 P.2d 795, 799 (Utah 1985) (citing Lyon v.
Hartford Accident & Indem. Co., 480 P.2d 739, 745 (Utah 1971)). “[T]he
insured and the insurer are, in effect and practically speaking,
adversaries” in the first-party context. Beck, 701 P.2d at 799 (quoting
Lyon, 480 P.2d at 745). In the first-party context, the insurer’s duty of
good faith is entirely based on the contract between the insurer and
the insured. Beck, 701 P.2d at 800. First-party insurers do not have a
fiduciary duty toward the insured. Id. at 799-800.
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UMIA INSURANCE, INC v. SALTZ
Opinion of the Court
¶45 Our case law sets forth a number of specific duties that are
inherent in the duty to act in good faith. Among those obligations
are duties to: act “promptly and reasonably” in accepting or rejecting
the insured’s claim for coverage, defend the insured, “diligently
investigate” the claims against the insured, “fairly and reasonably”
evaluate the claims against the insured, and “fairly and reasonably”
settle the claims against the insured. U.S. Fidelity v. U.S. Sports
Specialty, 2012 UT 3, ¶ 20, 270 P.3d 464; Kay, 487 P.2d at 855; Black v.
Allstate Ins. Co., 2004 UT 66, ¶ 20, 100 P.3d 1163. Saltz presented
evidence suggesting that UMIA fell short on several of these
grounds.
¶46 The first category of evidence went to the requirement that
insurers act “promptly and reasonably” in accepting or rejecting an
insured’s claim of coverage. U.S. Fidelity, 2012 UT 3, ¶ 20. UMIA and
Saltz both agreed that UMIA delayed eight years in questioning
Saltz’s coverage. And evidence of such delay is a sufficient basis for
a jury to conclude that UMIA neglected to act “promptly and
reasonably” in accepting or rejecting Saltz’s claim of coverage. See id.¶47 The second category of evidence went to the duty to “fairly
and reasonably” settle claims against the insured. Black, 2004 UT 66,
¶ 20. Our court of appeals has said that an insurer has “a duty to
accept an offer of settlement within the policy limits when there is a
substantial likelihood of a judgment being rendered against the
insured in excess of those limits.” Campbell v. State Farm Mut. Auto.
Ins. Co., 840 P.2d 130, 138 (Utah Ct. App. 1992) (citation omitted).
And we agree. An insurer’s duty of good faith does not require the
insurer to ignore its own interests in defense of the insured. See
Ammerman, 430 P.2d at 579 (stating that an insurer is not required “to
accept any offer below the policy limits, regardless of circumstances,
and however questionable the issues of liability and damage may
be”). But an insurer cannot “gamble with or sacrifice the insured’s
interest simply to protect itself.” Id. Attempting to balance these two
considerations, we hold that an insurer has a duty to accept a
settlement offer at or below policy limits if there is a substantial
likelihood of an excess verdict.
¶48 Saltz presented sufficient evidence that UMIA breached the
duty to settle under these standards. Saltz’s UMIA policy had a
coverage limit of $1,000,000, and Judge made several offers within
those limits. Supra ¶¶ 4, 9, 12. Yet UMIA refused all of Judge’s
settlement offers. At trial, Saltz presented evidence that could
support a jury verdict that UMIA did so in bad faith. An RBMN
attorney testified that there was “a potential” for “an excess verdict”
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and stated that he “told UMIA on multiple occasions before the June
2017 mediation that [he was] concerned about a verdict in excess of
policy limits.” The RBMN attorney also expressed the opinion that
there was a “pretty good chance” the jury “would be incensed and
inflamed” on Judge’s behalf. And this made him “concerned that it
could result in a very large verdict [for Judge].” This is a sufficient
basis for the jury to find that UMIA failed to “fairly and reasonably”
settle the claims against Saltz. See Black, 2004 UT 66, ¶ 20.
¶49 Either of these grounds alone would be adequate to affirm
the jury’s verdict. Together they are more than sufficient. We affirm
the denial of UMIA’s motion on that basis.
2. Jury Instructions on Breach of the Duty of Good Faith
¶50 As discussed above, an insurer must fulfill specific
obligations to satisfy its duty to act in good faith toward the insured:
a duty to act “promptly and reasonably” in accepting or rejecting the
insured’s claim for coverage; a duty to defend; a duty to “diligently
investigate” the claims against the insured; a duty to “fairly and
reasonably” evaluate the claims; and a duty to “fairly and
reasonably” settle those claims. Supra ¶ 45. The jury instructions on
good faith were based on these duties.
¶51 UMIA claims that there was error in all six of the jury
instructions on good faith. The instructions state:
1. The insurer will diligently investigate the facts to
enable it to determine whether the insured’s claim is
covered under the policy.
2. The insurer will fairly evaluate the insured’s claim.
3. The insurer will thereafter act promptly and
reasonably in either rejecting or finding the policy
covers the insured’s claim, which includes the duty to
act reasonably in reserving its rights.
4. The insurer will not retaliate against the insured for
exercising his or her rights under the law.
5. The insurer will settle the case against its insured
when it receives a settlement offer within policy limits
if there is a substantial likelihood of judgment in excess
of policy limits.
6. The insurer will guard the best interests of the
insured as zealously as it would its own, meaning that
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UMIA INSURANCE, INC v. SALTZ
Opinion of the Court
the insurer cannot gamble with or sacrifice the
insured’s interest simply to protect itself.
¶52 UMIA raises various objections to these instructions. It
asserts that the first four set out duties that apply to first-party (not
third-party) insurers and contends that the fifth instruction
improperly defines the duty to settle. UMIA also objects to the sixth
instruction, contending that it does not articulate a separate duty but
is simply a general restatement of the duty of good faith.
¶53 We conclude that instructions one and two were erroneous
in stating that UMIA had a duty to “diligently investigate” and
“fairly evaluate” the “insured’s claim.” These are duties of first-
party, not third-party insurers. 9 A third-party insurer’s duties are
related to “the disposition of claims [by third parties] against its
insured.” Beck, 701 P.2d at 799; supra ¶ 18 n.3. The instructions
should have said that UMIA needed to “diligently investigate” and
“fairly evaluate” the “claims against the insured.” See supra ¶ 51. The
instructions, as given, were accordingly in error.
¶54 We nonetheless affirm because the errors in these
instructions were minor and technical and were unlikely to have
affected the jury’s verdict. We reach that conclusion for two reasons.
¶55 First, in this case, investigating and evaluating “the insured’s
claim” is effectively the same as investigation and evaluating the
“claims against the insured.” Saltz’s claim was that the Judge
Lawsuit was covered by his insurance. So diligently investigating
and fairly evaluating Saltz’s claim for coverage necessarily involves
diligently investigating and fairly evaluating Judge’s claims against
Saltz (the “claims against the insured”).
¶56 Second, most of the evidence Saltz presented at trial centered
on other obligations owed under the duty of good faith. As UMIA
acknowledges in its briefing, the “central focus” of Saltz’s evidence
was on UMIA’s alleged failure to settle, not its duty to evaluate and
investigate. So not only was the error slight, but it is unlikely to have
affected the jury’s decision about the main argument made by Saltz
at trial.
_____________________________________________________________
9 See Beck, 701 P.2d at 801 (citations omitted) (holding that the
duty of good faith requires a first-party insurer to “diligently
investigate the facts to enable it to determine whether a claim is
valid” and “fairly evaluate the claim” made by the insured).
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¶57 We affirm on this basis. We hold that the technical errors in
instructions one and two were harmless, as they do not “undermine
[our] confidence in the verdict.” SIRQ, Inc., 2016 UT 30, ¶ 32
(alteration in original) (citation and internal quotation marks
omitted).
¶58 Regarding the third jury instruction, Utah law requires both
first- and third-party insurers to act “promptly and reasonably” in
accepting or rejecting the insured’s claim for coverage. Supra ¶ 45.
The jury instruction follows the language of our case law. It is not in
error.
¶59 As to the fourth jury instruction, UMIA is right that we have
not previously held that the duty of good faith encompasses a
principle of non-retaliation. But we see no basis for concluding that
the instruction was in error. The duty of good faith requires the
insurer to “be as zealous in protecting the interests of its insured as it
would in looking after its own.” Ammerman, 430 P.2d at 579
(citations omitted). And it seems clear that an insurer is not zealously
protecting an insured’s interests if it retaliates against the insured.
¶60 We also uphold the fifth jury instruction. This instruction
was correct in light of our above conclusion that an insurer has a
duty to accept a settlement offer at or below policy limits if there is a
substantial likelihood of an excess verdict. Supra ¶ 47.
¶61 Regarding the final jury instruction, the duty of good faith
broadly requires that an insurer must “be as zealous in protecting
the interests of its insured as it would in looking after its own.”
Ammerman, 430 P.2d at 579. This instruction could have been
expanded upon—in setting forth specific obligations stemming from
the duty of good faith. But the instruction as given was not
inaccurate. At most, it made a redundant statement of the duty of
good faith. And such a statement does not “undermine [our]
confidence in the verdict.” SIRQ, Inc., 2016 UT 30, ¶ 32 (alteration in
original) (citation and internal quotation marks omitted).
¶62 We affirm the district court’s denial of UMIA’s motion for a
new trial. While jury instructions one and two were erroneous, the
error was not serious enough to “undermine [our] confidence in the
verdict.” Id. Instructions three, four, and five were proper. And
instruction six, while redundant, was harmless.
D. Evidence of June 2017 Settlement Talks
¶63 Prior to trial, UMIA moved to exclude evidence of its actions
during the June 2017 settlement talks. On appeal, UMIA asks for a
new trial on the ground that this evidence—which it asserts was
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UMIA INSURANCE, INC v. SALTZ
Opinion of the Court
prejudicial to its case—was barred under the plain language of Utah
Rule of Evidence 408. This rule deems settlement offers and
negotiations inadmissible “to prove or disprove liability for or the
validity or amount of a disputed claim.” UTAH R. EVID. 408(a). The
district court rejected this argument. Since “UMIA [was] not seeking
to preclude evidence of its prior offers in the Judge Lawsuit and . . .
intend[ed] to introduce evidence regarding those prior offers,” the
district court held that rule 408 did not apply. Supra ¶ 17. In so
doing, the district court effectively found that UMIA had “opened
the door” 10 to consideration of this category of evidence. 11
¶64 We affirm on the ground that UMIA failed to carry its
burden of persuasion on appeal. Under our appellate rules and case
law, UMIA had the burden to “explain, with reasoned analysis
supported by citations to legal authority and the record, why the
[appellant] should prevail on appeal.” UTAH R. APP. PROC. 24(a)(8);
see State v. Nielsen, 2014 UT 10, ¶ 41, 326 P.3d 645 (appellants bear the
“burden of persuasion”). To carry this burden, UMIA was obliged to
engage with and respond to the grounds for the decision it is
challenging on appeal. 12 And UMIA failed to carry this burden—by
_____________________________________________________________
10 The idea of “opening the door” is “an evidentiary principle”
that “allows the admission of otherwise inadmissible testimony to
‘qualify, explain, or limit’ testimony or evidence previously
admitted.” Rodriguez v. State, 753 So.2d 29, 42 (Fla. 2000) (citations
omitted). This concept is “based on considerations of fairness and
the truth-seeking function of a trial.” Id. (citation and internal
quotation marks omitted).
11 The district court also stated that “[rule] 408 does not apply
when a party is seeking to introduce evidence of offers . . . [that are]
not [] offered to show . . . liability.” UMIA contends that the district
court incorrectly concluded that its actions were being offered to
show only bad faith and not liability. It argues that rule 408 excludes
the admission of its actions on the ground that they were also
“designed” to settle UMIA’s liability on the claim for breach of the
duty of good faith. But even if rule 408 applies, UMIA’s actions
could still be admissible under the “opening the door” exception.
And UMIA failed to address that question in its briefing on appeal.
12Matter of Discipline of La Jeunesse, 2018 UT 6, ¶¶ 27, 32, 416 P.3d
1122 (holding that the appellant has the “burden to identify the
grounds for the district court’s decision that it is challenging on
appeal” and must argue why it should prevail with “reasoned
(continued . . .)
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merely asserting that the plain language of rule 408 barred the
evidence—and neglecting to adequately address the door-opening
exception that formed a key basis of the district court’s ruling. We
decline to order a new trial on that ground.
E. Punitive Damages
¶65 UMIA also moved to dismiss Saltz’s request for punitive
damages on summary judgment. The district court granted the
motion, holding that there was “not sufficient evidence in the
record” to meet the standard for such an award. We review a
decision on summary judgment “for correctness, granting no
deference to the [trial] court’s conclusions, and we view the facts and
all reasonable inferences in the light most favorable to the
nonmoving party.” Bodell Constr. Co. v. Robbins, 2009 UT 52, ¶ 16, 215
P.3d 933 (citation omitted). “Summary judgment is appropriate if
‘reasonable jurors, properly instructed, would be able to come to
only one conclusion.’” Jones v. Mackey Price Thompson & Ostler, 2015
UT 60, ¶ 27, 355 P.3d 1000 (quoting Clegg v. Wasatch Cnty., 2010 UT 5,
¶ 15, 227 P.3d 1243). We reverse the district court’s dismissal of
Saltz’s request for punitive damages under his claim for breach of
the duty of good faith on the ground that a reasonable jury could
conclude from the evidence that Saltz is entitled to an award of
punitive damages.
¶66 A jury may award punitive damages if it finds that “it [has
been] established by clear and convincing evidence that the acts or
omissions of the tortfeasor are the result of . . . conduct that
manifests a knowing and reckless indifference toward, and a
disregard of, the rights of others.” UTAH CODE § 78B-8-201(1)(a). The
question then is whether “the facts and all reasonable inferences”
drawn from them in Saltz’s favor could lead “reasonable jurors” to
conclude that UMIA was knowingly and recklessly indifferent
toward Saltz’s rights. See Jones, 2015 UT 60, ¶ 27 (citation omitted).
¶67 A reasonable jury could conclude that UMIA “manifest[ed] a
knowing and reckless indifference toward, and a disregard of,
[Saltz’s rights].” UTAH CODE § 78B-8-201(1)(a). The material facts at
analysis supported by citations to legal authority and the record”);
see also Arave v. Pineview W. Water Co., 2020 UT 67, ¶ 62, 477 P.3d
1239 (concluding that “[b]y failing to adequately analyze or argue”
the ground on which we should rule in its favor, the appellant
“fail[s] to meet its burden of persuasion and [] shift[s] the burden of
research and argument to this court.” (citations omitted)).
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UMIA INSURANCE, INC v. SALTZ
Opinion of the Court
issue on Saltz’s claim of a breach of the duty of good faith are
undisputed. Both parties agree that Saltz clearly communicated his
desire to settle the Judge Lawsuit and that UMIA delayed eight years
in questioning coverage and filing a declaratory judgment action.
They also agree that UMIA characterized Saltz’s request to settle at
the policy limits as “threats” in internal communications. And both
acknowledge that UMIA’s settlement offers dramatically decreased
after this request from Saltz—from $200,000 to $15,000. A reasonable
jury could infer that UMIA’s sudden unwillingness to contribute
meaningfully to settlement so close to trial was the product of
reckless indifference toward Saltz’s rights as its insured.
Accordingly, we reverse the district court’s dismissal of Saltz’s
request for punitive damages and remand for further proceedings.
F. Attorney Fees on Appeal
¶68 Saltz asks that we award him the attorney fees he incurred in
this appeal. A party is entitled to reasonable attorney fees incurred
on appeal if he was awarded attorney fees below, “preserve[d] the
issue of attorney fees” on appeal, and prevails on the issue that
served as the basis for the award. See Meadowbrook, LLC v. Flower, 959
P.2d 115, 120 (Utah 1998); see also UTAH R. APP. PROC. 24(a)(9).
¶69 At trial, the jury awarded Saltz attorney fees under the
express or implied terms of the insurance contract with UMIA,
concluding that Saltz’s fees were a foreseeable consequence of
UMIA’s breach of the implied covenant of good faith and fair
dealing. See, e.g., Billings v. Union Bankers Ins. Co., 918 P.2d 461, 468
(Utah 1996) (“Attorney fees may be recoverable as consequential
damages flowing from an insurer’s breach of either the express or
the implied terms of an insurance contract.” (citations omitted)). And
the district court entered a judgment for Saltz that included
$987,877.62 in attorney fees.
¶70 Because he was awarded fees below—and because we hold
in Saltz’s favor on his claim for breach of the duty of good faith that
was the basis for the award—Saltz is entitled to the reasonable
attorney fees he incurred on appeal. We remand to the district court
for further proceedings on the fee award.
III
¶71 We affirm the district court’s denial of UMIA’s renewed
motion for judgment as a matter of law on Saltz’s promissory
estoppel claim. A reasonable jury could have found that UMIA was
estopped from denying coverage under Saltz’s policy because Saltz
presented evidence that UMIA’s delay in reserving its rights
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deprived him of opportunities to settle before the eventual 2017
agreement with Judge. While the district court improperly dismissed
Saltz’s corollary claim that UMIA had waived its right to disclaim
coverage, we need not remand for further proceedings on that claim
since Saltz already established coverage via promissory estoppel.
¶72 We also affirm the district court’s denial of UMIA’s renewed
motion for judgment as a matter of law on Saltz’s claim for breach of
the duty of good faith. Saltz presented sufficient evidence of UMIA’s
breach, and UMIA was not entitled to a new trial because any errors
the district court made in the jury instructions were harmless. And
we affirm the district court’s admission of evidence from the June
2017 settlement talks because UMIA did not sufficiently brief the
issue of whether UMIA opened the door to the evidence by
admitting evidence from other settlement talks.
¶73 We reverse the district court’s dismissal of Saltz’s request for
punitive damages. We do so on the ground that a reasonable jury
could conclude from the evidence that UMIA was knowingly and
recklessly indifferent toward, and disregarded, Saltz’s rights. Finally,
we remand to the district court for further proceedings on Saltz’s
request for punitive damages and the award of attorney fees he
incurred on appeal.
21