Opinion ID: 167029
Heading Depth: 3
Heading Rank: 2

Heading: Settlement of the Cosner Claims

Text: On appeal, the Elworthys do not dispute that CGU had a right under the terms of the contract to enter into a settlement with Cosner to dispose of the claims against them. 3 Rather, they argue that in settling the claims, CGU damaged their ability to recover on their counterclaims against Cosner and thus violated the duty of good faith and fair dealing. More specifically, they argue that CGU (1) deprived them of $100,000 they would have received under the proposed global settlement agreement; 4 (2) assisted Cosner in its defense of the Elworthys’ affirmative claims by paying it $20,000 more than it would have received under the proposed global settlement; and (3) breached its voluntarily assumed duty to represent the Elworthys in their affirmative claims against 3 The policy provides that CGU “may investigate and settle any claim or suit that we decide is appropriate.” Although the Elworthys list as one of the issues presented for review as whether the insurance contract gave CGU the unfettered right to settle the claims, they do not argue further that CGU breached any explicit terms of the contract. 4 We note, as did the District Court, that the Elworthys were not entitled to receive $100,000 from an unexecuted settlement agreement. When the global settlement negotiations failed, the Elworthys were entitled to pursue their claims in court, which they failed to do. -5- Cosner. Wyoming recognizes a contract-based cause of action for breach of the implied covenant of good faith and fair dealing. Scherer Constr., LLC v. Hedquist Const., 18 P.3d 645, 652–53 (Wyo. 2001); see also Squillance v. Wyo. State Employees’ and Officials’ Group Ins. Bd., 933 P.2d 488, 491 (Wyo. 1997) (stating that general principles of contract interpretation apply to insurance policies). This implied covenant requires that “neither party commit an act that would injure the rights of the other party to receive the benefit of their agreement.” Scherer Constr., 18 P.3d at 653. “Compliance with the obligation to perform a contract in good faith requires that a party’s actions be consistent with the agreed common purpose and justified expectations of the other party.” Id. “The purpose, intentions, and expectations of the parties should be determined by considering the contract language and the course of dealings between the conduct of the parties.” Id. (emphasis and quotation omitted). The obligation to act in good faith is not a limitless one. The covenant of good faith and fair dealing does not “establish new, independent rights or duties not agreed upon by the parties.” Id. Whether a party has breached this duty “is a factual inquiry that focuses on the contract and what the parties agreed to.” Id. at 654. Though a factual inquiry, summary judgment may be appropriate if “the party’s actions alleged as the basis for the breach . . . were in conformity with the clear language of the contract.” Id. at 654 n.2. “If the action complained of is -6- clear and within the intention of the parties as expressed within the unambiguous language of the contract, then summary judgment is appropriate.” Id. Applying these standards, we conclude that there is no genuine factual dispute as to whether CGU breached the implied covenant of good faith and fair dealing. The contract language provided that CGU could settle any claim it deemed appropriate. 5 It did not place an affirmative duty on CGU to negotiate a global settlement for claims brought by the Elworthys against CGU; it did not place an affirmative duty on CGU to represent the Elworthys in their affirmative claims against CGU; 6 nor did it place an affirmative duty on CGU to seek the Elworthys’ consent before settling the claims against them. See Whitlock Constr., Inc. v. South Big Horn County Water Supply Joint Powers Bd., 41 P.3d 1261, 1267–68 (Wyo. 2002) (finding no breach when defendant acted in accordance with the contract terms). If the parties intended that CGU represent the Elworthys’ interests in any related counterclaim they may have had, they were 5 In fact, had CGU unreasonably failed to settle the claims against the Elworthys, it could have been liable in tort for denying a compensable claim in bad faith. See Ahrenholtz v. Time Ins. Co., 968 P.2d 946, 950–51 (Wyo. 1998). 6 The Elworthys claim that though the contract did not provide that CGU represent them in pursing their counterclaims against Cosner, CGU assumed a contractual duty to do so because the Elworthys’ claims were inextricably intertwined with Cosner’s claims. The Elworthys provide no relevant authority for the notion that an insurer can assume a contractual duty to represent an insured in pursuit of counterclaims. Indeed, there is authority to the contrary. See Suchta v. Robinett, 596 P.2d 1380, 1384 (Wyo. 1979). As such, we find that this argument is without merit. -7- required to state expressly that intention in the contract itself. See id.; see also Suchta v. Robinett, 596 P.2d 1380, 1384 (Wyo. 1979) (holding that an insurer owes no duty—in either contract or tort—to advise or represent the insured on counterclaims that survive a settlement agreement); Shoshone First Bank v. Pac. Employers Ins. Co., 2 P.3d 510, 517 (Wyo. 2000) (holding that absent language in the policy to the contrary, an insurer has no obligation to assume expense of prosecuting counterclaims). We cannot infer “that such a duty existed absent clear language in the contract indicating that was the parties’ intent.” Whitlock Constr., 41 P.3d at 1268 . Moreover, the settlement did not affect the Elworthys’ ability to recover on their counterclaims against Cosner. The settlement agreement expressly provided that the dismissal of Cosner’s claims against the Elworthys “should not be construed as hindering the right of [the Elworthys] to pursue all of their claims against any and all parties in this Lawsuit.” Nonetheless, the Elworthys argue that the attorneys retained by CGU withdrew from the case immediately prior to trial which rendered the Elworthys unable to prosecute their counterclaims. The record reveals, however, that the Elworthys’ personal attorney was involved in the underlying case at all times and that the Elworthys could have retained the same attorneys that CGU hired to represent them for their defense. See Shoshone First Bank, 2 P.3d at 517 (Wyo. 2000) (insurer has no obligation to assume expense of prosecuting counterclaims). In addition, the fact that Elworthys’ claims were -8- dismissed as a sanction for failing to comply with discovery orders appears to be solely due to the Elworthys’ conduct. In sum, CGU acted in accordance with the clear language of the contract, and in so doing did not impinge on the Elworthys’ right to prosecute their counterclaims against Cosner. In other words, CGU in no way injured the Elworthys’ right to receive the benefit of their agreement. See Scherer Constr., 18 P.3d at 653. Accordingly, the District Court appropriately granted summary judgment to CGU on this issue. See Whitlock Constr., 41 P.3d at 1267.