Opinion ID: 4249099
Heading Depth: 2
Heading Rank: 2

Heading: implied and contractual duties and

Text: 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. 18 Cite as: 2017 UT 81 DURHAM, J., concurring in part and in the result
¶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, 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. 19 FIRE INSURANCE EXCHANGE v. OLTMANNS DURHAM, J., concurring in part and in the result
¶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 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 20 Cite as: 2017 UT 81 DURHAM, J., concurring in part and in the result 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 ¶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 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 P.3d 931; Sorensen v. Barbuto, 2008 UT 8, 177 P.3d 614; Banberry Dev. Corp., 786 P.2d. 21 FIRE INSURANCE EXCHANGE v. OLTMANNS DURHAM, J., concurring in part and in the result 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 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 22 Cite as: 2017 UT 81 DURHAM, J., concurring in part and in the result 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 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. 23 FIRE INSURANCE EXCHANGE v. OLTMANNS DURHAM, J., concurring in part and in the result 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 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 24 Cite as: 2017 UT 81 DURHAM, J., concurring in part and in the result 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 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. 25 FIRE INSURANCE EXCHANGE v. OLTMANNS DURHAM, J., concurring in part and in the result 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 thirdparty 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 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 26 Cite as: 2017 UT 81 DURHAM, J., concurring in part and in the result 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 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 8 The 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 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. 27 FIRE INSURANCE EXCHANGE v. OLTMANNS DURHAM, J., concurring in part and in the result 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 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 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 (cont.) 28 Cite as: 2017 UT 81 DURHAM, J., concurring in part and in the result 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), 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 (cont.) 29 FIRE INSURANCE EXCHANGE v. OLTMANNS DURHAM, J., concurring in part and in the result ¶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 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 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. 30 Cite as: 2017 UT 81 DURHAM, J., concurring in part and in the result 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 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, 31 FIRE INSURANCE EXCHANGE v. OLTMANNS DURHAM, J., concurring in part and in the result 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 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 32 Cite as: 2017 UT 81 DURHAM, J., concurring in part and in the result 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. 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. 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. 33 FIRE INSURANCE EXCHANGE v. OLTMANNS DURHAM, J., concurring in part and in the result