Court Opinion

ID: 9366637
Source: CourtListenerOpinion
Date Created: 2023-01-27 16:03:58.964289+00
Date Added: 2024-06-11T17:15:54.071233
License: Public Domain

IN THE SUPREME COURT OF THE STATE OF KANSAS

                                        No. 123,684

 NANCY GRANADOS, Individually, as Heir-at-Law of Francisco Granados, Decedent, and
    as Class Representative of All Heirs-at-Law of Francisco Granados, Decedent,
                              Appellee/Cross-appellant,

                                              v.

                                       JOHN WILSON,
                                         Defendant,

                                             and

                                KEY INSURANCE COMPANY,
                                 Appellant/Cross-appellee.

                              SYLLABUS BY THE COURT

1.
       On appeal from a garnishment award, an appellate court conducts a mixed review
of law and fact. Under that framework, an appellate court reviews the district court's legal
conclusions independently, with no required deference to the district court. But review of
the district court's factual findings is deferential. The appellate court must accept those
findings if they are supported by substantial competent evidence.

2.
       Under established Kansas precedent, an insurer owes its insured two legal duties
when handling third-party liability claims against the insured: the duty to act with
reasonable care and the duty to act in good faith. These two legal duties are implied
contractual terms incorporated into liability insurance policies in our state.

                                              1
3.
        An insurer's failure to fulfill its implied contractual duties to act with reasonable
care and in good faith gives rise to an action for breach of contract, rather than an action
in tort, because an insurance policy is typically a contract. Even so, Kansas law applies
tort concepts to evaluate whether an insurer has breached the implied contractual terms to
act with reasonable care and in good faith. Thus, plaintiffs asserting such claims must
prove four well-known elements: a duty owed to the plaintiff; a breach of that duty;
causation between the breach of duty and the injury to the plaintiff; and damages suffered
by the plaintiff.

4.
        Generally, a court commits legal error by articulating the insurer's implied
contractual duty to act with reasonable care or the implied contractual duty to act in good
faith in a more particularized, fact-specific manner because it conflates the question of
duty, a question of law, with the question of breach, a question typically reserved for the
trier of fact.

5.
        For an insurer to be liable for a judgment exceeding the coverage limits under the
policy of insurance, there must be a causal link between the insurer's breach of duty and
the excess judgment.

6.
        When a party fails to meet its burden of production and persuasion, remand is not
generally an appropriate remedy.

                                               2
        Review of the judgment of the Court of Appeals in 62 Kan. App. 2d 10, 505 P.3d 794 (2022).
Appeal from Wyandotte District Court; BILL KLAPPER, judge. Opinion filed January 27, 2023. Judgment
of the Court of Appeals reversing the district court is affirmed. Judgment of the district court is reversed,
and the case is remanded with directions.

        James P. Maloney, of Foland, Wickens, Roper, Hofer & Crawford, P.C., of Kansas City,
Missouri, argued the cause, and Kevin D. Brooks, of the same firm, and James D. Oliver, of Foulston
Siefkin, LLP, of Overland Park, were with him on the briefs for appellant/cross-appellee.

        Michael W. Blanton, of Gerash Steiner Blanton P.C., of Evergreen, Colorado, argued the cause,
and Jared A. Rose, of The Law Office of Jared A. Rose, of Kansas City, Missouri, was with him on the
briefs for appellee/cross-appellant.

        Richard L. Budden, of Shamberg, Johnson & Bergman, Chtd., of Kansas City, Missouri, and
Jakob Provo and James R. Howell, of Prochaska, Howell & Prochaska LLC, of Wichita, were on the
brief for amicus curiae Kansas Trial Lawyers Association.

        Cynthia J. Sheppeard, of Goodell Stratton Edmonds & Palmer LLP, of Topeka, was on the brief
for amicus curiae Kansas Association of Defense Counsel.

The opinion of the court was delivered by

        WALL, J.: This garnishment action arises from tragic circumstances. In October
2017, John Wilson was driving inebriated and ran a red light, striking another car and
killing the driver. The driver's wife, Nancy Granados, brought a wrongful-death lawsuit
against Wilson, and the district court entered a judgment against Wilson for
$3,353,777.52.

        To collect on that judgment, Granados filed a garnishment action seeking payment
from Key Insurance Company under the automobile liability insurance policy it had
issued to Wilson. Under that policy, Key limited its coverage for bodily injuries caused
by Wilson to $25,000 per person or $50,000 in the aggregate. Despite these policy limits,

                                                      3
Granados alleged Key's negligent and bad-faith handling of Wilson's claim rendered it
liable for the entire judgment. After conducting a bench trial, the district court agreed
with Granados and entered judgment against Key for $3,481,901.29.

       But on appeal, a panel of the Court of Appeals reversed the district court's
judgment. The parties ask us to resolve two issues central to the panel's holding:
(1) whether an insurer has a legal duty to settle with an injured third-party before that
party has formally demanded compensation for injury; and (2) whether Granados proved
that Key's negligence and bad faith caused the excess judgment against Wilson.

       As to the first question, we reject the framing of the issue below. We decline the
invitation to define an insurer's legal duties more narrowly, or in a more particularized
manner, than established under our precedent. And under that precedent, insurers do not
have a discrete legal duty to settle. Rather, when handling claims against its insureds,
insurers have an implied contractual duty to act in good faith and to act with reasonable
care under the circumstances. Whether specific acts or omissions related to the insurer's
investigation, evaluation, communication, or settlement strategy breach either of these
two legal duties is a question typically reserved for the trier of fact. By trying to define
the contours of an insurer's purported "duty to settle" under Kansas law, the panel
transformed a question of fact into a question of law, thereby invading the province of
the fact-finder.

       When a court applies an incorrect legal standard or framework, we often remand
the case so the court can apply the correct one. But such a remand would be futile here
because, as to the second question, we hold Granados failed to meet her burden to prove
that Key's handling of the claim caused the judgment exceeding policy limits. Whether an
insurer's conduct was the proximate or legal cause of the judgment is a question of fact.
And as an appellate court, we typically defer to the district court's findings on such
matters. But our deference is not absolute—a district court's findings must be supported

                                               4
by substantial competent evidence. The record before us contains no evidentiary support
for the district court's finding that Key's conduct caused the excess judgment against
Wilson. And because causation is an essential element of Granados' claim against Key,
we affirm the panel's decision, albeit under a different rationale, and remand the matter to
the district court to enter judgment for Key.

                           FACTS AND PROCEDURAL BACKGROUND

         The facts relevant to the issues before our court occurred after Key learned of
the October 2017 crash that killed Granados' husband. Thus, we do not focus on the
circumstances leading to the crash. Suffice it to say there is no dispute Wilson was at
fault.

         Wilson notified Key about the crash the day after it happened. Based on this
notice, Granados was identified as a claimant in Key's claim management system. This
notice also triggered Key's claim liability review. As part of that review, Key obtained
the police report, which revealed Wilson had run the light and appeared to be under the
influence of alcohol or drugs or both. Thus, Key concluded Wilson was at fault and
damages would exceed the $25,000 per-person coverage limit for bodily injuries under
the automobile liability policy.

         But Key never informed Wilson that it had reached that conclusion. It never
contacted Granados to discuss settlement. Nor did it inform Wilson he would be
responsible for any judgment exceeding policy limits if the case did not settle within
those limits. Key eventually closed its claim file, believing Granados would not pursue
any claim against Wilson.

         In June 2018, about eight months after the accident, Granados filed a wrongful-
death suit against Wilson. Key learned of the suit in early July. Three weeks later, it

                                                5
offered to settle Granados' claim against Wilson for the $25,000 policy limit. But
Granados rejected that offer, explaining Key's failure to offer the policy limit pre-suit
constituted negligence and bad faith because insurers have a duty to promptly begin
settlement negotiations when liability is clear and damages exceed policy limits. Whether
insurers have a discrete legal duty under Kansas law to initiate settlement negotiations
would come to frame much of the ensuing litigation, including the issues before our
court.

         After rejecting Key's settlement offer, the parties entered a "Settlement Agreement
and Covenant not to Execute." Under that agreement, Granados promised not to execute
on any judgment she obtained against Wilson in the wrongful-death action. In exchange,
Wilson assigned to Granados any claims he had against Key under the automobile
liability insurance policy. Following a September 2019 bench trial in the wrongful-death
action, the district court entered judgment for Granados and against Wilson for nearly
$4.5 million. The district court later granted a joint motion to amend the judgment,
reducing the judgment amount to $3,353,777.52.

         Several months later, Granados tried to collect on that judgment by filing a
garnishment action against Key in Wyandotte County District Court. Standing in the
shoes of Wilson in that garnishment action, Granados alleged Key had breached several
implied contractual duties that it owed to Wilson. Granados alleged Key breached its duty
to investigate the claim, its duty to evaluate the claim and consider the insured's interests,
its duty to communicate the results of the investigation and evaluation to the insured, and
its duty to negotiate a settlement. Granados argued these discrete legal duties, implicit in
the automobile liability policy, required Key to contact Granados before the wrongful
death suit was filed and settle for policy limits. Granados alleged she would have
accepted that offer to avoid hiring a lawyer and suing. Thus, Granados claimed Key's
breach of these implied contractual duties caused the judgment exceeding the $25,000
policy limit.

                                              6
       Both parties moved for summary judgment. Consistent with Granados' framing of
the case, the summary-judgment filings focused on the scope of an insurer's discrete legal
duties under Kansas law. The district court denied both motions and set the case for trial.

       The matter proceeded to a two-day bench trial in November 2020. While several
people testified, the testimony from two witnesses is particularly relevant to our analysis.
First, Granados testified that before she engaged counsel and filed the wrongful death
suit, she would have settled within policy limits, even if it were only $2,000 or $5,000, to
avoid taking the case to trial and paying attorney fees. Second, a Key employee testified
that many injured third parties never pursue recovery and about two-thirds (66%) of
potential bodily-injury claimants never receive any payment from Key.

       The district court issued its ruling from the bench. As the Court of Appeals panel
observed, the "district court's comments about the case were somewhat meandering, and
the court did not delineate explicit findings of fact and conclusions of law." Granados v.
Wilson, 62 Kan. App. 2d 10, 17, 505 P.3d 794 (2022). That said, the district court's
comments established several relevant findings, including: (1) Granados was a credible
witness and would have settled for the $25,000 policy limit if Key had pursued settlement
pre-suit; (2) it was reasonable under the circumstances for Key not to initiate settlement,
so Key did not have a duty to do so; (3) Key breached its duty to communicate the results
of its evaluation to Wilson and advise him of his personal liability for a judgment
exceeding the policy limits; and (4) Key's breach of its duty to communicate with Wilson
caused the excess judgment. Based on those findings, the district court entered judgment
for Granados in the amount of $3,481,901.29.

       Both parties sought review at the Court of Appeals. In Key's appeal, it argued
Granados had failed to present evidence showing that Key's failure to communicate with
Wilson had caused the excess judgment against him. In Granados' cross-appeal, she

                                             7
objected to the district court's ruling on Key's duty to settle. She claimed Key—like all
insurers faced with clear liability and damages exceeding policy limits—had a duty to
initiate settlement negotiations and its breach of this duty exposed Wilson to the excess
judgment.

         A panel of the Court of Appeals reversed the district court's judgment for
Granados and remanded the matter with directions to enter judgment for Key. The panel
first held that reversal was warranted because, after reviewing the record, it was clear that
"the excess judgment was more the result of [Granados'] actions after the lawsuit was
filed, rather than Key's conduct before the lawsuit was filed." 62 Kan. App. 2d at 39. The
panel then considered whether Key had a legal duty to settle. It affirmed the district court
on that point, holding that in the context of third-party claims, insurers have no legal duty
to begin negotiations before the injured third party has filed a claim. 62 Kan. App. 2d at
39-49.

         Following the panel's decision, we granted Granados' petition for review. We
heard oral argument from the parties in October 2022. Jurisdiction is proper. See K.S.A.
60-2101(b) (providing for Kansas Supreme Court review of Court of Appeals decisions).

                                          ANALYSIS

         Granados raises two challenges to the decision of the Court of Appeals panel.
First, she contends the panel concocted a new rule of law by holding that an insurer's duty
to settle with an injured third party is not triggered until the third party has filed a claim.
Granados argues an insurer's duties—including the duty to settle—begin once the insurer
has notice of the claim. Second, Granados contends the panel improperly disregarded the
district court's factual findings when it found that her conduct, not Key's breach of duty,
had caused the excess judgment against Wilson. Key defends the panel's holdings.

                                               8
       And in an amicus brief, the Kansas Association of Defense Counsel urges us to
affirm the panel's holding that the purported duty to settle does not begin until a third
party has made a claim against the insured. In another amicus brief, the Kansas Trial
Lawyers Association urges us to reverse the panel's decision and hold that the insurer's
duty to settle arises when the injury occurs.

       To resolve these issues, we first explain the legal standard appellate courts use
when reviewing an appeal from a garnishment order. Second, we identify the two implied
contractual duties insurers owe their insureds and carefully distinguish questions of legal
duty from those related to a breach of such duty. Third, we evaluate the panel's holding,
ultimately concluding the panel applied an incorrect legal framework. Finally, we address
the question of causation and explain why it is appropriate for our court to resolve this
appeal without a remand to the panel.

I.   On Appeal from a Garnishment Order, We Defer to the District Court's Factual
     Findings but Review Legal Conclusions Independently

       On appeal from a garnishment award, an appellate court conducts a mixed review
of law and fact. Geer v. Eby, 309 Kan. 182, 190, 432 P.3d 1001 (2019). Under that
framework, an appellate court reviews the district court's legal conclusions
independently, with no required deference to the district court. But our review of the
district court's factual findings is deferential. We must accept those findings if they are
supported by substantial competent evidence. Substantial competent evidence is relevant
evidence that a reasonable person might accept as supporting a conclusion. 309 Kan. at
190-91. When making that determination, an appellate court must not weigh conflicting
evidence, pass on the credibility of witnesses, or redetermine questions of fact. 309 Kan.
at 190-91.

                                                9
       This case requires us to review both legal conclusions and factual findings. The
legal conclusions before us are those related to the legal duties that insurers owe to their
insureds. See Montgomery v. Saleh, 311 Kan. 649, 653, 466 P.3d 902 (2020) ("Whether a
duty exists is a question of law."). When we review those conclusions, we need not defer
to the conclusions of the district court or panel. The factual findings before us are those
related to Key's breach of its legal duties and the cause of the excess judgment against
Wilson. See 311 Kan. at 655-56, 659 ("[W]hether [a] duty has been breached" and
"[w]hether a causal connection exists between a breached duty and the plaintiffs' injuries"
are questions of fact.). When we review those findings, we defer to the district court so
long as substantial competent evidence supports its findings.

II. When Handling Claims Against the Insured, Insurers Owe the Insured an Implied
    Contractual Duty of Reasonable Care and an Implied Contractual Duty to Act in
    Good Faith; Whether an Insurer Has Breached Those Duties Is a Question for the
    Trier of Fact to Determine Under the Specific Circumstances of Each Case

       Legal duties can arise by express contractual provision, by statute, or by court-
made common law. Wicina v. Strecker, 242 Kan. 278, 286, 747 P.2d 167 (1987). Here,
we are concerned with Key's court-made, common-law duties. Under our established
precedent, these legal duties are incorporated into Kansas liability insurance policies
as implied contractual terms. To be sure, Wilson's insurance policy imposes various
express contractual duties on both him and Key. See Aves v. Shah, 258 Kan. 506, 511,
906 P.2d 642 (1995) ("In Kansas, insurance policies are typically considered contracts.").
And the Legislature has also imposed legal duties on insurers by statute. See, e.g., K.S.A.
40-2404(9) (identifying duties of the insurer related to claims-settlement process). But
Granados has asserted no claim arising from an alleged breach of an express contractual
or statutory duty that Key owed Wilson. Thus, our focus is on the implied contractual
duties that Kansas courts have read into liability insurance contracts and applied to
insurers operating in this state.

                                             10
   The leading decision establishing the implied contractual duties of an insurer when
handling third-party claims against the insured is Bollinger v. Nuss, 202 Kan. 326, 449
P.2d 502 (1969). There, our court recognized that a conflict of interest between the
insurer and the insured arises when there is a claim that exceeds the coverage limits in the
policy. The conflict arises because the insurer is interested in minimizing the amount paid
while the insured is interested in preventing personal liability by keeping recovery within
policy limits, regardless of the merits of the claim:

                 "The provisions of the policy requiring the insurer to defend also encompass the
         negotiation of any settlement prior to trial. When a claim is made against the insured for
         an amount in excess of the policy coverage, the insurer's obligation to defend creates a
         conflict of interest on its part. On the one hand, its interests lie in minimizing the amount
         to be paid; on the other, the insured's interests, which the insurer is supposedly defending,
         lie in keeping recovery within policy limits, so that he will suffer no personal financial
         loss." 202 Kan. at 336.

         To resolve that conflict of interest, Bollinger held that an insurer has two legal
duties in handling claims against its insured: the duty to act with reasonable care and the
duty to act in good faith. 202 Kan. at 332-33. An insurer breaching either duty may
expose itself to liability beyond the policy limits in the insurance contract. 202 Kan. at
332-33. Since Bollinger, Kansas courts and federal courts applying Kansas law have
continued to recognize these two, broad implied contractual duties set out in that
decision. See, e.g., Associated Wholesale Grocers, Inc. v. Americold Corp., 261 Kan.
806, 845, 934 P.2d 65 (1997); Castoreno v. Western Indemnity Co., Inc., 213 Kan. 103,
109, 515 P.2d 789 (1973); Wade v. EMCASCO Ins. Co., 483 F.3d 657, 660 (10th Cir.
2007); Ins. Co. of North America v. Medical Protective Co., 768 F.2d 315, 321 (10th Cir.
1985).

         That said, courts have not always described an insurer's implied contractual duties
in broad terms, which has created some confusion here about whether insurers owe more

                                                      11
particularized, fact-specific duties. For example, in Blann v. Rogers, 22 F. Supp. 3d 1169,
1178-80 (D. Kan. 2014), a case that Granados frequently cited in the district court and
the Court of Appeals, the United States District Court for the District of Kansas asserted
that insurers owe four narrower implied contractual duties under the umbrella of good
faith and reasonable care: (1) to investigate; (2) to evaluate and consider the interests of
the insured; (3) to communicate with the insured; and (4) to negotiate settlement. The
parties, panel, and amici have assumed that Kansas law recognizes such particularized
duties, which has led them to analyze whether a yet narrower implied contractual duty
exists: must an insurer explore settlement with an injured third party who has not yet
sued or otherwise conveyed that they intend to pursue recovery from the insured? See
Granados, 62 Kan. App. 2d at 39-49.

       This framing of the issue reflects a recent tendency—which we noted in Reardon
v. King, 310 Kan. 897, 904, 452 P.3d 849 (2019)—to characterize the legal duty in "ever
narrower and more particularized ways." The problem with that approach is that "duty
rules are not meant to be fact specific. Rather, they are to set broadly applicable
guidelines for public behavior." 310 Kan. at 904 (citing Cardi, Purging Foreseeability, 58
Vand. L. Rev. 739, 754 [2005]). When duties are framed narrowly and in a particularized
fashion, the element of legal duty is conflated with the element of breach. As a result, this
narrow, fact-specific framing of the insurer's implied contractual duties invades the
province of the fact-finder. 310 Kan. at 904-05.

       The existence of a duty is a question of law, but whether specific conduct satisfies
or breaches that duty is a question of fact. Montgomery, 311 Kan. at 655-56, 659. And
our court has long recognized that the trier of fact must decide whether the specific
conduct in any given case breaches a broadly applicable legal duty. See, e.g., W. & W.
Rld. Co. v. Davis, 37 Kan. 743, 749, 16 P. 78 (1887) ("'The natural instinct of self-
preservation ordinarily will lead to the employment of all the precaution[s] which the
situation suggests to an individual; and whether they are such as would occur to or be

                                             12
adopted by men of ordinary care and prudence, must necessarily, in most cases, be left to
the jury. The intelligence and judgment, as well as the experience, of twelve [jurors],
must settle a question of that character as one of fact, and not of law.'") (quoting Weber v.
Railroad Co., 58 N.Y. 451, 456 [1874]).

       Reardon cautions against defining general legal duties in a more fact-specific,
discrete manner in tort cases. And this rationale applies equally to Granados' breach of
contract claims against Key in this garnishment action. Granted, a plaintiff seeking
damages from an insurer based on its failure to act with reasonable care or in good faith
must bring a breach-of-contract claim, not a tort claim, because an insurance policy is
typically a contract. Aves, 258 Kan. at 511. And we have held that an insurer's broad legal
duties to act with reasonable care and in good faith are implied contractual terms
incorporated into liability insurance policies issued in our state. Gilley v. Farmer, 207
Kan. 536, 543, 485 P.2d 1284 (1971); Glen v. Fleming, 247 Kan. 296, 311, 799 P.2d 79
(1990). Even so, we apply tort concepts to evaluate whether an insurer has breached the
implied contractual terms to act with reasonable care and in good faith. See Glenn, 247
Kan. at 313 ("We have adopted, in our development of the substantive case law, the
principle that the insurer's duties are contractually based and then approved a tort
standard of care for determining when the contract duty has been breached."). Thus,
plaintiffs asserting such claims must prove four well-known elements: a duty owed to the
plaintiff; a breach of that duty; causation between the breach of duty and the injury to the
plaintiff; and damages suffered by the plaintiff. See Shirley v. Glass, 297 Kan. 888, 894,
308 P.3d 1 (2013) (setting out four elements of a negligence tort claim).

       Because the existence of a legal duty is a question of law while breach, causation,
and damages are questions of fact, the court's primary role in these cases is to articulate
the legal duty the fact-finder must apply to the facts. Reardon, 310 Kan. at 903. Bollinger
did just that and articulated two broad duties that an insurer owes when handling claims
against the insured: reasonable care and good faith. 202 Kan. at 332-33. By defining

                                             13
those duties broadly, Bollinger reserved the question of breach for the trier of fact to
decide under the specific circumstances of each case. See 202 Kan. at 338 ("In the final
analysis, the question of liability depends upon the circumstances of the particular case
and must be determined by taking into account the various factors present, rather than on
the basis of any general statement or definition.").

       And to assist the trier of fact in that determination, Bollinger even identified
several factors that may be relevant to the factual inquiry:

       "'[T]he following factors should be considered: (1) the strength of the injured claimant's
       case on the issues of liability and damages; (2) attempts by the insurer to induce the
       insured to contribute to a settlement; (3) failure of the insurer to properly investigate
       the circumstances so as to ascertain the evidence against the insured; (4) the insurer's
       rejection of advice of its own attorney or agent; (5) failure of the insurer to inform the
       insured of a compromise offer; (6) the amount of financial risk to which each party is
       exposed in the event of a refusal to settle; (7) the fault of the insured in inducing the
       insurer's rejection of the compromise offer by misleading it as to the facts; and (8) any
       other factors tending to establish or negate bad faith on the part of the insurer.'" 202 Kan.
       at 338 (quoting Brown v. Guarantee Ins. Co., 155 Cal. App. 2d 679, 689, 319 P.2d 69
       [1957]).

Whether any of these factors have been established is, again, a question of fact reserved
for the fact-finder. Medical Protective Co., 768 F.2d at 321.

    The bottom line is that under Kansas law, whether certain conduct satisfies or
breaches the implied contractual duties of reasonable care and good faith is a question
reserved for the trier of fact (usually a jury). And federal courts, relying on Bollinger,
have also emphasized that point, though not always consistently. See Wade, 483 F.3d at
670 (applying Bollinger factors to assess whether evidence supported breach of legal
duties); Medical Protective Co., 768 F.2d at 321("[T]he question of liability depends

                                                     14
upon the circumstances of the particular case and must be determined by taking into
account the various factors present, rather than on the basis of any general statement or
definition."); but see Blann, 22 F. Supp. 3d at 1178 (applying particularized and discrete
legal duties). With that framework in mind, we now turn to the panel's holding addressing
an insurer's purported duty to settle.

III. Because the Only Implied Contractual Duties Insurers Owe when Handling Claims
     Against the Insured Are the Broad Duties of Reasonable Care and Good Faith, the
     Panel Erred by Recognizing and Defining the Parameters of a Particularized Legal
     Duty to Settle with Third-Party Claimants

       Granados cross-appealed to the Court of Appeals on the issue of Key's purported
legal duty to settle. She argued to the panel, as she had to the district court, that Kansas
law imposes four specific duties on an insurer under the umbrella of reasonable care and
good faith, including the legal duty to negotiate settlement. More specifically, Granados
contended insurers have a legal duty to pursue settlement with an injured third party on
behalf of the insured whenever liability is reasonably clear and damages exceed policy
limits, even if the third party has yet to demand compensation.

       After carefully reviewing the Kansas and federal cases Granados and Key cited,
the panel affirmed the district court's ruling that Key did not have to initiate settlement
negotiations under the circumstances. But the panel's holding was not limited to the
specific circumstances of this case. Instead, the panel held, as a matter of law, that
"an insurer owes no affirmative duty to initiate settlement negotiations with a third party
before the third party makes a claim for damages." Granados, 62 Kan. App. 2d at 49.

       Under the Bollinger framework discussed above, we conclude the panel
committed legal error by defining the scope of a narrower, fact-specific legal duty to
settle under the umbrella of reasonable care and good faith. Under Kansas law, when
handling claims against the insured, an insurer has no implied contractual duty to settle.

                                              15
Nor does it have implied contractual duties to investigate or to communicate with the
insured, as Granados has suggested based on her reading of Blann. See 22 F. Supp. 3d at
1178 (identifying particularized and discrete legal duties of insurers).

       Rather, our established precedent makes clear that insurers have an implied
contractual duty to act with reasonable care and in good faith when handling claims
against the insured. A failure to properly investigate or evaluate claims, communicate
with the insured, or settle with the injured party may (or may not) breach those duties,
just as other specific facts may (or may not) constitute a breach. But those are fact
questions to be decided by the trier of fact under the many circumstances that may give
rise to an excess-judgment claim against an insurer. See Guarantee Abstract & Title Co.
v. Interstate Fire & Cas. Co., 228 Kan. 532, 539, 618 P.2d 1195 (1980) (under facts of
the case, whether reasonable care and good faith required the insurer to settle was a
question of fact for the jury to determine in an action brought for bad faith and
negligence). All of which is to say, it is error to characterize an insurer's implied
contractual duties more narrowly than pronounced in Bollinger.

       We addressed a similar error in Reardon. There, the client of a trust company filed
a negligence action against the company based on the conduct of one of its employees, a
licensed attorney employed as a trust officer. Although company policy prohibited the
employee from practicing law, the employee represented the client in legal matters during
his employment. And, in his capacity as trust officer, the employee transferred funds
from the client's trust account to pay his flat rate legal fee of $5,000 per month. The
client's negligence action sought to impose direct liability on the trust company for
breaching the common-law duty that employers owe to third parties who encounter their
employees. At trial, the district court instructed the jury on several negligence theories,
including negligent failure to supervise the employee and negligent failure to train the
employee. These instructions defined the company's legal duty in a fact-specific,

                                              16
particularized manner, and the articulation of the legal duty in these instructions was
narrower than the general legal duty established at common law. The jury found the
company liable for negligent training.

       On appeal, we held the jury instructions had misstated Kansas law by recognizing
"specific, discrete duties 'to train' and 'to supervise.'" Reardon, 310 Kan. at 904.
"Employers in Kansas do not have a duty to third parties to train or to supervise their
employees," we held. 310 Kan. at 904-05. Instead, they have a broad duty to use
"reasonable care under the circumstances to prevent harm to third parties caused by its
employees when those employees are acting within the scope of their employment." 310
Kan. at 904. Whether specific conduct relating to the training or supervision of an
employee satisfies or breaches that broad duty is a question of fact properly reserved for
the trier of fact. 310 Kan. at 904-05.

       The same rationale applies here. Bollinger established that an insurer owes its
insureds an implied contractual duty to act with reasonable care and in good faith when
handling claims. The insurer does not have a specific, discrete legal duty to settle (or to
investigate, evaluate, or communicate). An insurer's specific conduct surrounding
settlement strategy may (or may not) breach the insurer's general legal duties, but that
determination is for the fact-finder to make under all the circumstances of each case. By
holding that insurers owe no legal duty to explore settlement with an injured third party
before that person demands compensation, the panel effectively recast a question of fact
into a question of law for the court to decide in every case. In doing so, the panel
conflated the element of legal duty (a question of law) with the element of breach (a
question of fact), thereby invading the traditional province of the fact-finder. See
Marshall v. Burger King Corporation, 222 Ill. 2d 422, 443-44, 856 N.E.2d 1048 (2006)
("It is inadvisable for courts to conflate the concepts of duty and breach in this manner.
Courts could, after all, 'state an infinite number of duties if they spoke in highly particular
terms,' and while particularized statements of duty may be comprehensible, 'they use the

                                              17
term duty to state conclusions about the facts of particular cases, not as a general
standard.' 1 D. Dobbs, Torts § 226, at 577 [2001]. . . . Thus, the issue in this case is not
whether defendants had a duty to install protective poles, or a duty to prevent a car from
entering the restaurant, or some such other fact-specific formulation. Because of the
special relationship between defendants and the decedent, they owed the decedent a duty
of reasonable care. The issue is whether, in light of the particular circumstances of this
case, defendants breached that duty.").

       The panel here was not alone in that error. In Roberts v. Printup, 422 F.3d 1211,
1215-16 (10th Cir. 2005), a panel of the United States Court of Appeals for the Tenth
Circuit reached a similar conclusion. Printup held that an insurance company owes no
duty to initiate settlement negotiations prior to a claim being made. But that holding, like
the holding of the panel here, is founded on the erroneous premise that Kansas law
recognizes and incorporates more narrow, discrete, and fact-specific legal duties under
the umbrella of good faith and reasonable care. Printup's holding also improperly focused
its inquiry on the conduct of the injured third party, rather than the conflict of interest
between the insurer and the insured. See Rector v. Husted, 214 Kan. 230, 239, 519 P.2d
634 (1974) (whether an insurer's duties require an attempt to settle is not contingent on a
claimant's offer to settle); Bollinger, 202 Kan. at 336. Whether the injured party has
demanded compensation or filed a claim with the insurer may be a fact relevant to
deciding whether the insurer breached its implied contractual duties of reasonable care
and good faith. But that inquiry is reserved for the trier of fact.

       Granted, if the duties of reasonable care and good faith do not, under any set of
circumstances, require an insurer to explore settlement before a third-party files a claim
or demands compensation, then a court could declare that principle as a matter of law.
See Deal v. Bowman, 286 Kan. 853, 859, 188 P.3d 941 (2008) (breach becomes a legal

                                              18
question for the court "'when the facts are such that reasonable [persons] must draw the
same conclusion'"). But we hesitate to conclude that the implied contractual duties of
reasonable care and good faith never require such conduct.

       Take the following hypothetical scenario, for example. A company insures a
driver involved in an automobile accident. And a third-party passenger who is related to
the insured-driver is severely injured in the crash. The insured reports the loss under the
notice-of-claim provision of the insurance policy, and the insurer's investigation reveals
that the insured is at fault and the third party's damages clearly exceed policy limits.
Moreover, based on the familial relationship with the injured third party, the insured
knows the passenger plans to consult an attorney in three weeks. But the insured also
knows the passenger would settle within policy limits before consulting the attorney
because of an urgent financial obligation. And the insured shares this information with
the insurer.

       Under this hypothetical, both the insurer and insured know liability is clear and
the claim filed by the insured exceeds policy limits, creating a conflict of interest that
requires the insurer to exercise reasonable care and to act in good faith. See Bollinger,
202 Kan. at 336 (The rationale for the common-law duties of reasonable care and good
faith is to address the conflict of interest that exists when a claim exceeds policy limits.).
They also know the claim can be settled within policy limits if they act quickly, even
though the third party has not made formal demand. We cannot conclude, as a matter of
law, that the insurer could never breach the duties of reasonable care and good faith by
failing to explore settlement under these (or any other possible set of) circumstances
simply because the third party has not yet made a formal demand. See, e.g., Keeton and
Widiss, Insurance Law § 7.8(c), 889-90 (1988) ("In most circumstances the insurer,
having reserved to itself the right to control the defense and the decision

                                              19
whether to agree to a settlement, should be obligated to explore the possibility of a
settlement even in the absence of actions by the third-party or an express request by the
insured.").

       Even here, Wilson reported the accident to Key in compliance with the notice-of-
claim provision in the contract of insurance. Based on that report, Key designated
Granados as a claimant in its system and initiated its claim-handling procedures. Key
conducted a liability review and determined Wilson was at fault and that damages would
exceed policy limits. This conclusion suggests a conflict of interest existed between the
parties, arising from Key's desire to minimize any payment under the policy of insurance
and Wilson's desire to settle within policy limits.

       As these examples show, whether an insurer has breached the implied contractual
duties of reasonable care and good faith is a fact-intensive inquiry. We cannot conclude
that in every case, regardless of the circumstances, the duties of reasonable care and good
faith never require an insurer to explore settlement before the injured third party makes a
formal demand for payment or otherwise pursues a claim. See Ostrager & Newman,
Handbook on Insurance Coverage Disputes, § 12.05[b], at 979 (20th ed. 2020)
(collecting cases explaining that "[w]hether an insurer has acted in bad faith in failing to
settle is generally held to be a question of fact"). Thus, we hold the panel erred by
defining, as a matter of law, the contours of an insurer's purported duty to settle.

IV. Although the Panel Applied the Incorrect Legal Standard, We Need Not Remand
    the Matter for the Panel to Apply the Correct One

       In the previous section, we held the panel committed legal error by defining the
contours of an insurer's discrete, fact-specific duty to settle with third-party claimants.
Kansas law recognizes only the broad duties of reasonable care and good faith in this
context, and it is error to try to define an insurer's implied contractual duties more

                                              20
narrowly. When a lower court applies the wrong legal standard, we often remand for it to
apply the correct one. See, e.g., State v. Herring, 312 Kan. 192, 202, 474 P.3d 285 (2020)
("We reverse the panel's decision and remand the case to the district court with directions
to reassess the first Edgar factor under the lackluster advocacy standard . . . ."); Littlejohn
v. State, 310 Kan. 439, 446, 447 P.3d 375 (2019) ("[T]he Court of Appeals applied the
wrong standard in determining whether the district court erred in summarily denying
Littlejohn's 60-1507 motion as being an abuse of remedy. . . . We remand to the Court of
Appeals to apply the correct standard.").

       But remand is not required here for two reasons. First, the district court did not
conflate the factual question of breach with the legal question of duty. Instead, it held
Key to the general implied contractual duties established in Bollinger—reasonable care
and good faith. The district court found that Key did not breach its duty of reasonable
care or good faith under the circumstances by failing to begin settlement discussions with
Granados. And this finding is supported by substantial competent evidence. Second,
although the district court found that Key breached its implied contractual duty of
reasonable care and good faith by failing to communicate with Wilson, Granados failed
to prove this omission caused the excess judgment. And the district court's causation
findings to the contrary are not supported by substantial competent evidence. We address
these points in turn.

       A. The District Court's Ruling Did Not Conflate the Question of Duty with
          the Question of Breach

       Granados' framing of her claim in the district court conflated the factual question
of breach with the legal question of duty. Even so, a careful reading of the district court's
rulings on summary judgment and at trial confirms it did not do the same.

                                              21
       In ruling on the cross motions for summary judgment from the bench, the district
court identified the legal duties implicit in Kansas liability insurance contracts, explaining
that "in all cases that arise under contract of insurance" an insurer owes the insured a
"good faith duty, a reasonable man standard, a requirement that one acts in such a manner
to protect the interest of the insured." The court then made findings about the breach of
these implied contractual duties of reasonable care and good faith. It found Granados'
evidence created a genuine issue of material fact as to whether good faith and reasonable
care required Key to investigate and evaluate the claim and communicate the risks of an
excess judgment to Wilson. But the district court also found that reasonable care and
good faith did not require Key to settle with Granados under the circumstances.

       But ambiguity remained after summary judgment. Although the district court's
bench ruling seemed to foreclose Granados' "failure to settle" claim, the journal entry
merely denied both parties' motions for summary judgment. If the district court had
dismissed that theory of liability against Key, it should have granted Key's summary
judgment motion, in part, and denied it, in part. Thus, it is unclear whether the district
court made a definitive ruling at summary judgment on Key's "failure to initiate
settlement" theory of liability.

       After the bench trial, the district court again made findings from the bench related
to Granados' "failure to initiate settlement" theory. The court found Key did not contact
Granados to explore settlement because it believed she, like many other potential
claimants, would never pursue recovery. While such a practice "might turn some people's
stomach," the district court found it was "a magnificent strategy" and "sound business
judgment." Based on these findings, the district court concluded Key did not breach the
duty of reasonable care or good faith by failing to settle with Granados.

                                             22
       Neither party challenges these factual findings on appeal. See Montgomery,
311 Kan. at 655-56 (breach of duty is a question of fact). And they are supported by
substantial competent evidence. Key's employee testified that many injured parties never
pursue recovery and 66% of potential bodily injury claimants never receive any payment
under the insurance policy. And Key had no evidence suggesting Granados intended to
pursue a claim. In short, the district court identified and held Key to the implied
contractual duties established in Bollinger. And it made findings of fact supporting its
conclusion that Key did not breach the duty of reasonable care or act in bad faith by
failing to explore settlement here. Thus, despite the panel's legal error, Granados is not
entitled to judgment on its "failure to settle" theory for the reasons set forth in the district
court's uncontested findings, which supported its conclusion that Key did not breach any
legal duty by failing to initiate settlement under the circumstances.

       B. Substantial Competent Evidence Does Not Support the District Court's
          Finding of Causation

       To prevail on her claim against Key, Granados had to prove a causal link between
the insurer's conduct and the excess judgment. See Hawkins v. Dennis, 258 Kan. 329,
347, 905 P.2d 678 (1995); Gruber v. Estate of Marshall, 59 Kan. App. 2d 297, 315, 482
P.3d 612 (2021), rev. denied 313 Kan. 1040 (2021). In this garnishment action, Granados
stands in the shoes of Wilson. See Geer, 309 Kan. at 191. Thus, Granados had the burden
to prove by a preponderance of evidence that Key's breach of its implied contractual
duties was the proximate cause of the excess judgment against Wilson. See Williams v.
C-U-Out Bail Bonds, 310 Kan. 775, 788, 450 P.3d 330 (2019) (noting that in any
negligence action, the plaintiff must prove causation by a preponderance of the evidence).

               "There are two components of proximate cause: causation in fact and legal
       causation. To establish causation in fact, a plaintiff must prove a cause-and-effect
       relationship between a defendant's conduct and the plaintiff's loss by presenting sufficient
       evidence from which a jury can conclude that more likely than not, but for defendant's

                                                   23
       conduct, the plaintiff's injuries would not have occurred. To prove legal causation, the
       plaintiff must show it was foreseeable that the defendant's conduct might create a risk of
       harm to the victim and that the result of that conduct and contributing causes was
       foreseeable." Drouhard-Nordhus v. Rosenquist, 301 Kan. 618, 623, 345 P.3d 281 (2015).

       The district court found Key had breached its implied contractual duties only by
failing to advise Wilson of the risks and consequences of a judgment exceeding the
policy limits. And because the district court granted judgment for Granados, it necessarily
(though implicitly) found Key's failure to communicate with Wilson had caused the
excess judgment against him. See In re Guardianship and Conservatorship of B.H., 309
Kan. 1097, 1108, 442 P.3d 457 (2019) ("When no objection is made, this court presumes
the district court found all facts necessary to support its judgment.").

       Causation is a question of fact. Montgomery, 311 Kan. at 659. And under our
standard of review, we defer to the district court's causation findings if they are supported
by substantial competent evidence. See Geer, 309 Kan. at 190-91. When making that
determination, an appellate court must not weigh conflicting evidence, pass on the
credibility of witnesses, or redetermine questions of fact. 309 Kan. at 191.

       Based on our review of the record, we hold that the district court's causation
findings are not supported by substantial competent evidence. To establish causation,
Granados had to show that, but for Key's failure to communicate with Wilson, a
judgment exceeding policy limits would not have been entered against him. Drouhard-
Nordhus, 301 Kan. at 623.

       At trial, Granados testified that she would have settled within policy limits had
Key made such an offer before she hired a lawyer and filed her wrongful death action
against Wilson. The district court found Granados' testimony credible, and we defer to
this credibility determination on appeal.

                                                   24
       But there is no evidence to suggest Key would have settled with Granados but for
its failure to advise Wilson that he was personally obligated to pay any judgment
exceeding policy limits. Neither party presented testimony from Wilson or his personal
representative at trial. Thus, we simply do not know how Wilson would have responded
if Key had advised him of this potential excess judgment liability. There is no evidence
Wilson would have instructed Key to contact Granados to negotiate a settlement within
policy limits. We acknowledge that it is possible, perhaps even likely, Wilson would have
insisted on a pre-suit settlement, but that conclusion requires speculation and has no
evidentiary basis in the record. Nor is there any evidence suggesting Key had to heed
such an instruction or directive from Wilson. Likewise, there is no evidence that Wilson,
upon being informed of his potential exposure, would have engaged independent,
conflict-free counsel to negotiate a pre-suit settlement within policy limits. Thus,
Granados failed to establish causation, and the district court findings to the contrary are
not supported by substantial competent evidence.

       The Court of Appeals panel likewise concluded that Granados failed to establish
causation. While we agree with the panel's conclusion, we depart from its reasoning.
Rather than review the district court's finding for substantial competent evidence, as the
standard of review demands, the panel found that "the record reflects that the excess
judgment was more the result of [Granados'] actions after the lawsuit was filed, rather
than Key's conduct before the lawsuit was filed." Granados, 62 Kan. App. 2d at 39. And
in reaching that conclusion, the panel discounted Granados' testimony, finding that her
"argument that she reasonably rejected the post-suit policy-limit settlement offer because
of the fees she incurred by filing the lawsuit is unpersuasive." 62 Kan. App. 2d at 37. The
panel's reasoning does not follow our well-established standard of review. When an
appellate court reviews a district court's findings of fact, it must not substitute its own

                                              25
judgment of the facts and assessment of witness credibility for that of the district court,
even when it reasonably finds witness testimony "unpersuasive." See Khalil-Alsalaami v.
State, 313 Kan. 472, 476, 486 P.3d 1216 (2021).

       Even so, we may affirm the decision of a Court of Appeals panel when we agree
with its conclusion but depart from its reasoning. See State v. Williams, 311 Kan. 88, 91,
456 P.3d 540 (2020) (affirming Court of Appeals as right for the wrong reason). Here, we
disagree with the panel's reasoning because it deviates from the applicable standard of
review. But we agree with the panel's conclusion because Granados failed to carry her
burden to prove causation and the district court's findings to the contrary are not
supported by substantial competent evidence.

       Thus, we affirm the panel's decision to reverse the judgment for Granados and
remand the matter to the district court with instructions to enter judgment for Key. See
State v. Dailey, 314 Kan. 276, 279, 497 P.3d 1153 (2021) (holding that party bearing the
burden of production and persuasion not entitled to remand for new trial after failing to
sustain its burden of proof—"its case should ordinarily have to stand or fall on the record
it makes the first time around") (quoting United States v. Dickler, 64 F.3d 818, 832 [3d
Cir. 1995]).

       Judgment of the Court of Appeals reversing the district court is affirmed.
Judgment of the district court is reversed, and the case is remanded with directions.

       BILES, J., not participating.

                                             26