Opinion ID: 2533998
Heading Depth: 1
Heading Rank: 4

Heading: sif has duties to policyholders regarding management of surplus and dividends

Text: The existence of a duty is a question of law over which this Court may exercise free review. Summers v. Cambridge Joint Sch. Dist. No. 432, 139 Idaho 953, 955, 88 P.3d 772, 774 (2004).
The implied covenant of good faith and fair dealing exists in all contracts in Idaho. Idaho First Nat'l Bank v. Bliss Valley Foods, Inc., 121 Idaho 266, 287, 824 P.2d 841, 863 (1991) (citing Luzar v. Western Sur., 107 Idaho 693, 696, 692 P.2d 337, 340 (1984)). In Idaho First Nat'l Bank, this Court noted with approval the Washington Supreme Court's definition of the implied covenant of good faith and fair dealing. Id. at 288, 824 P.2d at 863. That court stated that, [t]here is in every contract an implied duty of good faith and fair dealing.... It requires only that the parties perform in good faith the obligations imposed in this agreement. Id. (quoting Badgett v. Sec. State Bank, 116 Wash.2d 563, 569, 807 P.2d 356, 360 (1991)) (emphasis added). This Court stated that, [o]ur analysis of the implied covenant of good faith and fair dealing is consistent with surrounding states. Id. In Kelso this Court held that the SIF's governing statutes were incorporated in its contracts with its policyholders. Kelso, 134 Idaho at 138, 997 P.2d at 599. Kelso also held that policyholders had a right to rely on the statutes creating and regulating the SIF, and the limits those statutes place on how the SIF can invest its policyholders' premiums. Kelso, 134 Idaho at 138, 997 P.2d at 599. This covenant reaches to the SIF's statutory obligations that are incorporated into its contracts. The SIF has duties to its policyholders regarding surplus and dividends by virtue of the fact that the implied covenant of good faith and fair dealing extends to the statutes that are incorporated in the policyholders' contracts. See also Sec. Officers Serv., Inc. v. State Comp. Ins. Fund, 17 Cal.App.4th 887, 21 Cal.Rptr.2d 653 (1993). The SIF's argument that it has no duties to policyholders, at least with respect to dividends, fails. Although the Manager does not have a duty to declare dividends, his discretionary authority to declare dividends is nonetheless subject to the implied covenant of good faith and fair dealing.