Opinion ID: 2625838
Heading Depth: 2
Heading Rank: 1

Heading: inez campbell's bad faith claim

Text: ¶ 136 Although the majority declines to address the issue, it is clear under Utah law that Inez Campbell never had standing to sue State Farm for bad faith. While this court has long recognized tort claims for an insurance company's breach of its implied covenant of good faith and fair dealing, see Ammerman v. Farmers Ins. Exch., 19 Utah 2d 261, 266, 430 P.2d 576, 577-78 (1967), we have always required that plaintiffs wishing to bring such claims first demonstrate a contractual nexus through which their suits arise. As we unanimously held only two years ago in Sperry v. Sperry, Utah law clearly limits the duty of good faith to first parties to insurance contracts. Consequently, only a first party can sue for breach of that duty. 1999 UT 101, ¶ 7, 990 P.2d 381. This conclusion is as natural as it is logical, for both first- and third-party claims arise only because of the contractual relationship of the parties. Savage v. Educators Ins. Co., 908 P.2d 862, 866 (Utah 1995). ¶ 137 In this case, Curtis Campbell was a party to the insurance contract with State Farm, and his wife Inez Campbell was not. The contract itself states: STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY ... Agrees with the insured, named in the declarations made a part hereof, in consideration of the payment of the premium and in reliance upon the statements in the declarations and subject to all the terms of this policy.... (Emphasis added.) The only person listed as a named insured on the declarations to which the contract refers is Curtis Campbell. In fact, Mr. Campbell is the only person listed on those declarations at all. Consequently, Mr. Campbell was the only one with whom State Farm [a]gree[d] ... in consideration of the payment of the premium to provide insurance for those designated as covered by the policy. Mrs. Campbell was simply a beneficiary of the contract, an additional insured. ¶ 138 Importantly, we have explicitly held that the implied covenant of good faith and fair dealing does not extend to parties who are merely beneficiaries of an insurance policy. In Savage v. Educators Insurance Co., 908 P.2d 862 (Utah 1995), a school bus driver who was insured under an Educators policy purchased by her employer sued the insurance company for allegedly acting in bad faith by resisting to compensate her for medical expenses she had incurred. Recognizing that the duty of good faith and fair dealing is a contractual covenant, one that arises solely as an incident to contractual obligations owed by an insurer to its insured, Chief Justice Zimmerman's 4-1 opinion, from which Justice Durham dissented, flatly rejected the plaintiff's contention that she had standing to sue. Id. at 866. We held: Because Savage has no contractual relationship with Educators, she has no cause of action against it for breach of the covenant of good faith and fair dealing. This conclusion is consistent with the commentators and the great majority of courts in other jurisdictions.... Id. [2] Nothing is different here. Just as the Jordan School District contracted with Educators for a policy that insured Pat Savage, in this case Mr. Campbell purchased his insurance policy from State Farm, a policy that also insured Mrs. Campbell. Consequently, the contract states by its own terms that it is an agreement between State Farm and Curtis Campbelland no one else. Had Mrs. Campbell wished to be named as a party to the contract rather than merely as a beneficiary of it, she could have negotiated for that right. Because she did not do so, however, she had no right under Utah law to sue for bad faith. See Savage, 908 P.2d at 866. ¶ 139 To this degree, Justice Durham's assertion that any conclusion reached concerning whether Inez Campbell had standing to sue for bad faith is an advisory one constitutes nothing less than hyperbolic pretense. The claim for bad faith was the crux of the case against State Farm, and it was for this reason that the lower court bifurcated the trial in the first place. Moreover, our decision in Savage addressed precisely the issue in question here. Accordingly, any notion that the question of whether Mrs. Campbell had standing to sue for bad faith is an open [one] in Utah can be characterized only as a conclusion that recklessly throws all judicial restraint, particularly in the name of stare decisis, to the wind for the sake of achieving a desired result: a binding judgment against State Farm for its, admittedly, condemnable behavior. ¶ 140 Importantly, however, the law has long recognized that not all actions causing injury enjoy recourse in the courts. E.g., Craftsman Builder's Supply, Inc. v. Butler Mfg. Co., 1999 UT 18, ¶ 140, 974 P.2d 1194 (Zimmerman, J., concurring) (The law simply does not recognize that every harm suffered should be compensated.); Demman v. Star Broadcasting Co., 28 Utah 2d 50, 53, 497 P.2d 1378, 1380 (1972) (finding that lawsuits cannot be allowed in every instance); see also Black's Law Dictionary 398 (7th ed. 1999) (`There are cases in which the law will suffer a man knowingly and wilfully to inflict harm upon another, and will not hold him accountable for it.' (quoting John Salmond, Jurisprudence 372-73 (Glanville L. Williams ed., 10th ed.1947))). This rule of damnum absque injuria applies regardless of how offensive or inappropriate society might find an actor's conduct to be, and this court has itself repeatedly barred recovery for conduct that could very well be considered condemnable but for which there is no cause of action. See, e.g., Sears v. Ogden City, 572 P.2d 1359, 1362 (Utah 1977) (holding that there is no recovery for government action making access to one's property difficult and inconvenient); Demman, 28 Utah 2d at 53, 497 P.2d at 1380 (denying recovery for slander to a losing political candidate after a radio station broadcasted obnoxious remarks by a caller who asserted that the candidate was unqualified and a felon); N.M. Long & Co. v. Cannon-Papanikolas Constr. Co., 9 Utah 2d 307, 310, 343 P.2d 1100, 1102 (1959) (affirming judgment for no recovery from defendants who had made unusable plaintiff's fish pond business by draining water from their property); Twenty-Second Corp. of the Church of Jesus Christ of Latter-Day Saints v. Oregon Short Line R.R. Co., 36 Utah 238, 255-56, 103 P. 243, 249-50 (1909) (disallowing recovery for disruption of worship services caused by operation of a railroad near a church on Sundays). Consequently, regardless of Justice Durham's assertion to the contrary, it absolutely does matter what legal theory plaintiffs hang their damages on, because failure to sufficiently prove all elements of a given cause of action makes the difference between an injury for which the law provides recourse and one for which there is no legal remedy at all. As such, the majority opinion's curious admission that the jury was not at all affected in its decision and verdict by the legal labels applied to describe [State Farm's] conduct in this case both undermines the logic of the opinion itself and emphasizes the importance of whether Mrs. Campbell had standing to sue for bad faith. For if, as the majority recognizes, the jury disregarded the appropriate legal standard in an attempt to punish State Farm for conduct the jury found offensive, that is unrefuted evidence of error in law, passion, and prejudice on the jury's partnecessitating a new trial on the court's own motion. See, e.g., Bennion v. LeGrand Johnson Constr. Co., 701 P.2d 1078, 1084 (Utah 1985); Paul v. Kirkendall, 1 Utah 2d 1, 3, 261 P.2d 670, 671 (1953); Utah R. Civ. P. 59. Moreover, the majority's recognition that the jury disregarded the applicable legal standards in this case actually helps explain the great extent to which the trial court's erroneous instruction that State Farm had committed bad faith against Mrs. Campbell confused and inflamed the jury. See infra part III.A. ¶ 141 Indeed, the majority's reluctance to recognize that Mrs. Campbell never had standing to sue for bad faith only highlights the problems created at the trial level when the lower court inappropriately allowed Mrs. Campbell standing. In fact, the trial court's failure to recognize that Mrs. Campbell did not have standing to pursue a bad faith claim for State Farm's failure to settle the lawsuit against Mr. Campbell eventually led to the court's rendering a faulty verdict in the first stage of the case, and then erroneously instructing the jury in the second stage that State Farm had already been found liable to Mrs. Campbell for bad faith when no such verdict had ever been rendered.