Court Opinion

ID: 4699678
Source: CourtListenerOpinion
Date Created: 2021-06-29 22:01:23.262974+00
Date Added: 2024-06-11T08:06:04.978325
License: Public Domain

FILED
                                                                     United States Court of Appeals
                      UNITED STATES COURT OF APPEALS                         Tenth Circuit

                            FOR THE TENTH CIRCUIT                            June 29, 2021
                        _________________________________
                                                                         Christopher M. Wolpert
                                                                             Clerk of Court
 OWNERS INSURANCE COMPANY,

       Plaintiff - Appellee,

 v.

 JACOB TAYLOR DOCKSTADER,

       Defendant,

 and

 THOMAS BROOKS,

      Third-Party Plaintiff Counter
 Defendant - Appellant,

 v.                                                          No. 19-4156
                                                   (D.C. No. 2:18-CV-00173-DAK)
 OWNERS INSURANCE COMPANY,                                    (D. Utah)

      Third-Party Defendant Counter
 Claimant - Appellee.
                      _________________________________

                            ORDER AND JUDGMENT *
                        _________________________________

Before TYMKOVICH, Chief Judge, BRISCOE, and CARSON, Circuit Judges.
                 _________________________________

       *
         This order and judgment is not binding precedent, except under the doctrines
of law of the case, res judicata, and collateral estoppel. It may be cited, however, for
its persuasive value consistent with Fed. R. App. P. 32.1 and 10th Cir. R. 32.1.
      Under Utah law, insurers owe their insureds a fiduciary duty to defend which

generally requires they accept settlement offers within the policy limits. See

Campbell v. State Farm Mut. Auto. Ins. Co., 840 P.2d 130, 138 (Utah Ct. App. 1992).

But the requirement to settle is not absolute. An insurer does not have to accept a

settlement offer if no coverage exists—even if the insurer first tendered a defense.

      In this case arising under Utah law, Thomas Brooks (“Brooks”), a third-party

plaintiff, sued Owners Insurance Company (“Owners”) for failing to accept

settlement offers made after Owners filed a declaratory judgment action disputing

coverage. Because it disputed coverage, Owners accepted Brooks’ settlement offers

contingent on the district court determining coverage existed. The district court

ultimately found the insurance policy did not cover Brooks’ injuries and so Owners

owed no duty to defend. Brooks argues that during the declaratory judgment action,

Owners had a duty to settle whether or not coverage existed. We disagree.

Exercising jurisdiction under 28 U.S.C. § 1291, we affirm the district court’s grant of

summary judgment in Owners’ favor.

                                           I.

      Brooks suffered a traumatic brain injury during a fight in a Utah gym when

Jacob Dockstader (“Dockstader”) hit him in the head with a dumbbell. The blow left

Brooks permanently disabled and Dockstader pleaded guilty to aggravated assault

(the “criminal case”).

                                           2
      Following the criminal case, Brooks sued Dockstader for assault and battery

and negligence (the “civil case”). 1 Dockstader demanded that Owners defend and

indemnify him under a homeowner’s insurance policy the company issued to his

parents (the “Policy”).

      Owners accepted Dockstader’s defense but did not believe its Policy covered

his conduct. The Policy covered up to $500,000 for “damages . . . arising out of

bodily injury . . . caused by an occurrence.” It defined “occurrence,” in pertinent

part, as “an accident that results in bodily injury.” (emphasis added). The Policy

also excluded coverage for intentional acts causing “bodily injury or property damage

reasonably expected or intended by the insured. This exclusion applie[d] even if the

bodily injury or property damage [was] of a different kind or degree, or [was]

sustained by a different person or property than that reasonably expected or

intended.” (emphasis added).

      Dockstader argued he did not intend to hit Brooks. Instead, the theory was

that Dockstader just “swung a dumbbell in Brooks’ general direction to ward him

off.” So because he did not intend to make contact, the Policy covered this

accidental injury.

      Unpersuaded, Owners sent Dockstader a reservation of rights letter in

February 2018. The letter provided:

      If it is determined that the injury was intentional, then there is no
      coverage under the insurance policy. Brooks has maintained that the

      1
         After Owners filed a complaint for declaratory relief, Brooks and Dockstader
stipulated to dismiss the assault and battery claim.]
                                           3
      attack was intentional. We are still investigating this claim as you
      know. As there is the potential that some or all of this loss is not
      covered, you may wish to retain separate counsel to defend yourself.

Later that month, Owners filed a complaint for declaratory relief requesting a

declaration that the Policy did not cover Dockstader’s conduct and so it had no duty

to defend or indemnify him (the “declaratory judgment action”). Owners’ complaint

alleged coverage did not exist for two reasons. First, Owners alleged Dockstader’s

conduct did not meet the Policy’s definition of “occurrence” because Dockstader pled

guilty to aggravated assault and so this was not an accident. Second, Owners alleged

the Policy’s intentional acts exclusion precluded coverage because Dockstader

reasonably expected or intended to hit Brooks.

      After Owners sent the reservation of rights letter and filed its complaint,

Brooks made three settlement demands for the Policy limit of $500,000. In each of

his offers, Brooks noted that his actual damages far exceeded the Policy limit.

Owners conditionally accepted Brooks’ first offer. It referenced the declaratory

judgment action and said, “[i]f there is coverage, [Owners] will pay the policy limit

of $500,000 to Mr. Brooks.” When Brooks made a second offer to settle for the

policy limits, Owners reiterated its position. When Brooks made a third offer with

the same terms, Owners declined to respond.

      About one month after Brooks’ third settlement offer, Owners filed a motion

for summary judgment in the declaratory judgment action. In support of its motion,

Owners argued again that no coverage existed because the incident was not an

                                           4
accident and the intentional acts exclusion applied. 2 With Owners’ motion for

summary judgment pending and without including Owners, Brooks and Dockstader

began independent settlement negotiations and entered into a stipulation and

assignment agreement (the “Agreement”). Under the Agreement, Dockstader

admitted liability on Brooks’ negligence claim and agreed to an immediate judgment

of $5,000,000. Brooks agreed not to execute the judgment against Dockstader

personally in exchange for assignment of all Dockstader’s rights, benefits, interests,

and claims against Owners.

      Brooks then intervened and filed a third-party complaint alleging that Owners

breached its fiduciary duties and the implied covenant of good faith and fair dealing

by failing to settle within Policy limits even though Dockstader faced a significant

likelihood of judgment in excess of those limits. 3

      The district court granted Owners’ motion for summary judgment, holding that

“the bodily injury in this case was nonaccidental as a matter of law,” because “the

average adult would expect the probability of nontrivial harm as a result of swinging

      2
         In making this argument, Owners relied on findings of fact in the criminal
case that “there was a punch thrown, and then as several witnesses testified, that Mr.
Dockstader got the 15-pound weight and finished [Brooks] off.” The district court
also found that Dockstader’s admission to police suggested “Mr. Dockstader knew
that there would be consequences for his actions, and he [was] willing to accept
them.”
      3
        Brooks’ complaint alleged four causes of action: (1) bad faith-breach of
fiduciary duties; (2) breach of contract and the covenant of good faith and fair
dealing; (3) promissory estoppel; and (4) waiver.
                                           5
a dumbbell close enough to someone’s head to scare them.” 4 Thus, “[b]ecause there

[was] no coverage under the Policy, Owners[] [sic] had no duty to defend.” The

district court also held no basis existed for a bad faith claim for refusal to settle

because Owners followed Utah law which requires an insurer, under these

circumstances, to accept the insured’s defense and then seek declaratory judgment as

to coverage.

       Owners next moved for summary judgment on Brooks’ third-party complaint.

The district court granted Owners’ second motion for summary judgment holding

there was “no basis for a bad faith claim for refusal to accept a policy-limit

settlement demand.” The district court reiterated that Owners followed Utah

Supreme Court precedent and “[n]one of the case law Brooks cite[d] establishe[d] a

duty for an insurance company to pay out policy limits in a situation where coverage

is debated and a declaratory judgment action is pending.”

                                            II.

       We review the district court’s grant of summary judgment de novo and view

the facts in the light most favorable to the nonmoving party. Birch v. Polaris Indus.,

Inc., 812 F.3d 1238, 1251 (10th Cir. 2015) (citation omitted). Summary judgment is

appropriate when “there is no genuine dispute as to any material fact and the movant

is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a).

       4
         Brooks did not appeal the district court’s holding that the Policy did not
cover Dockstader’s conduct. So for purposes of this appeal we must accept the
district court’s conclusion that Owners has no duty to indemnify Dockstader under
the Policy.
                                             6
       Because this case arises out of diversity, we apply Utah substantive law.

Barrett v. Tallon, 30 F.3d 1296, 1300 (10th Cir. 1994) (“A federal court sitting in

diversity applies the substantive law . . . of the forum state.” (citation omitted))

                                           III.

       Brooks argues the district court erred in holding Owners had no duty to accept

Brooks’ settlement offers. In effect, Brooks asks us to establish a rule holding that

insurers who have accepted a defense must also accept settlement offers within the

policy limits—even where the insurer has filed a declaratory judgment action

disputing coverage and the district court ultimately finds none. 5 Brooks then asks us

to apply that rule here.

       We begin our analysis by explaining the duty to defend under Utah law. We

then analyze whether the duty to defend includes an absolute duty to settle if an offer

falls within the policy limits—even where the insurer has filed a declaratory

judgment action disputing coverage and the district court ultimately finds none.

       5
        The dissent suggests we improperly re-framed Brooks’ argument. But his
own brief demonstrates the contrary. Brooks asks us to adopt a “rule” that an insurer
“has a duty to accept a reasonable settlement offer on behalf of the insured as long as
[the insurer] retains control of the insured’s defense, regardless of whether there is
ultimately coverage under the insurance contract.” App. Br. at 18. And under that
rule, Brooks argues, “Owners still had a duty to settle, even though the Declaratory-
Judgment Action was pending and even if there [wa]s ultimately no coverage under
the Policy.” Id. at 20 (emphasis added).

       And to the extent the dissent invites us to ignore facts concerning the
non-existence of coverage because they do not fit Brooks’ narrative on appeal, we
decline that invitation because doing so would allow Brooks “to control [the outcome
of this appeal] by omitting record facts from his brief.” United States v. Taylor, 514
F.3d 1092, 1098–99 (10th Cir. 2008) (Gorsuch, J.).
                                            7
Because we agree with the district court that under Utah law the duty to settle is not

absolute, our analysis ends there.

                                           A.

      Under a typical insurance policy issued in Utah, an insurer owes an insured

two distinct duties: (1) the duty to indemnify, and (2) the duty to defend.

Summerhaze Co., L.C. v. Fed. Deposit Ins. Corp., 332 P.3d 908, 920 (Utah 2014)

(citation omitted). And within that duty to defend exists an implied good faith duty

to settle. Campbell, 840 P.2d at 138. To determine whether an insurer owes a duty

to defend, we look at two documents, the insurance policy and the complaint, and

assess whether the complaint alleges a risk covered by the policy. Benjamin v.

Amica Mut. Ins. Co., 140 P.3d 1210, 1214 (Utah 2006). But to determine whether an

insurer owes a duty to indemnify, we look at the facts of the case. Summerhaze Co.,

L.C., 332 P.3d at 920. So the duty to defend is “antecedent to and independent of the

duty to indemnify.” Simmons v. Farmers Ins. Grp., 877 P.2d 1255, 1258 n.3 (Utah

Ct. App. 1994). And for that reason, the duty to defend is broader than the duty

indemnify because “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. Estate of

Therkelsen, 27 P.3d 555, 560 (Utah 2001). Even still, both duties are “tied to the

existence of covered claims.” Benjamin, 140 P.3d at 1216 (“Like the duty to defend,

the duty to indemnify is tied to the existence of covered claims.”).

      So the default rule is “‘[w]hen in doubt defend,’” because even if a coverage

dispute exists “the insurer must defend until those uncertainties can be resolved

                                           8
against coverage.” Id. at 1215 (quoting Appleman on Insurance Law and Practice §

136.2[C] (2d ed. 2006)). An even greater duty to defend exists in the third-party

context “because in a third-party situation, the insurer ‘controls the disposition of

claims against its insured, who relinquished any right to negotiate on his own

behalf.’” 6 Campbell, 840 P.2d at 138 (quoting Beck v. Farmers Ins. Exch., 701 P.2d

795, 799 (Utah 1985)). Because an insured depends on the insurer to protect his

interests, an insurer must “protect the insured’s interests as zealously as it would its

own.” Id. at 138 (quoting Beck, 701 P.2d at 799). This default rule protects

insureds and insurers alike because “if an insurer does not defend an action, and a

court finds ‘facts which give rise to the potential of liability under the policy,’ the

insurer faces significant claims for damages.” 7 See Fire Ins. Exch. v. Oltmanns, 416

       6
         Brooks and the dissent contend that because Owners controlled Dockstader’s
defense and he could not negotiate on his own behalf, Owners had to accept Brooks’
settlement offers even if no coverage existed. But their position tells only part of the
story. After Brooks made his first policy limits demand, Owners provided
Dockstader with a reservation of rights letter advising him: “you may wish to retain
separate counsel to defend yourself. Both Rick Glauser and Owners would cooperate
with your counsel.” Dockstader then retained counsel, who negotiated a stipulation
and assignment with Brooks which relieved Dockstader of any personal liability for
the injuries he inflicted upon Brooks. So to the extent Brooks and the dissent claim
Owners exercised exclusive control over the defense and settlement of the claims, the
record belies their position.
       7
         If an insurer fails to provide a defense, an insured may bring a claim for
breach of the contract term promising to defend and for breach of an insurer’s
fiduciary duty. See Beck, 701 P.2d at 799–801. Thus, “an 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.” Oltmanns, 416 P.3d at
1162 (Durham, J., concurring) (citation omitted).
                                             9
P.3d 1148, 1162 (Utah 2018) (Durham, J., concurring) (quoting Deseret Fed. Sav. &

Loan Ass’n v. U.S. Fid. & Guar. Co., 714 P.2d 1143, 1146 (Utah 1986)).

      If an insurer accepts a defense but disputes coverage, it has two options: (1) it

may “defend the suit under a reservation of its right to seek repayment later”; or (2) it

may “‘protect its interests through a declaratory judgment proceeding’ asking the

court to determine coverage under an insurance policy.” Summerhaze Co., L.C., 332

P.3d at 921 (quoting Hartford Accident & Indem. Co. v. Gulf Ins. Co., 776 F.2d

1380, 1382 (7th Cir. 1985)). An insurer can only proceed under option one if the

insurance policy contains a clause specifically allowing reimbursements. U.S. Fid. v.

U.S. Sports Specialty, 270 P.3d 464, 468 (Utah 2012). If the policy has no

reimbursement clause, the insurer should “tender a defense and seek a declaratory

judgment as to coverage under the policy.” Summerhaze Co., L.C., 332 P.3d at 921

n.89 (quoting Gen. Agents Ins. Co. of Am., Inc. v. Midwest Sporting Goods Co., 828

N.E.2d 1092, 1102 (Ill. 2005)).

      Owners believed the Policy did not cover Dockstader’s conduct but it abided

by the default rule and accepted his defense. In theory, Owners then had two

options: (1) it could settle the suit and seek repayment later; or (2) it could seek a

declaratory judgment on the Policy’s coverage. But Owners could not pursue option

one because the Policy did not have a reimbursement clause. See U.S. Fidelity, 270

P.3d at 468. Brooks concedes as much but argues that Owners “must bear the

consequences” of its decision to not include such a clause. We reject Brooks’

                                            10
argument because Utah law does not require that insurers include reimbursement

clauses in their policies.

       So to avoid liability and avoid a claim of bad faith, Owners had to proceed

under option two and it did—Owners brought a declaratory judgment action asking

the district court to determine coverage. Although Utah law requires that an insurer

defend until uncertainties are resolved against coverage, the fundamental question

becomes: does the duty to defend include an absolute duty to settle even where the

insurer has filed a declaratory judgment action disputing coverage and the district

court ultimately finds none? We conclude it does not.

                                           B.

       “Stated generally, an insurer owes its insured a duty to accept an offer of

settlement within the policy limits when there is a substantial likelihood of a

judgment being rendered against the insured in excess of those limits.” Campbell,

840 P.2d at 138 (citation omitted). But Utah qualifies this duty to settle within policy

limits. “The test of the insurer’s conduct is one of reasonableness.” Id. (citation

omitted). And Utah recognizes that it would be unreasonable to require an insurer

“to accept any offer below the policy limits, regardless of circumstances, and

however questionable the issues of liability and damage may be.” Ammerman v.

Farmers Ins. Exch., 430 P.2d 576, 579 (Utah 1957) (emphasis added). Instead, Utah

gives an insurer “a reasonable latitude of discretion to decide whether it will accept a

proposed settlement.” Id. When making this determination an insurer may consider

“the certainty or uncertainty as to the issues of liability, injuries, and damages.” Id.

                                           11
Because there are many variables to consider, we do not automatically equate failure

to settle with bad faith. Id. Brooks in essence argues that where an insurer provides

a defense under a reservation of rights, it must accept settlement offers within the

policy limits—even if the insurer has filed a declaratory judgment action disputing

coverage and the district court ultimately finds no coverage exists. Brooks cites no

Utah authority supporting this rule.

       Brooks relies on general principles from Campbell to argue that Owners

unreasonably failed to settle his case within policy limits. But Campbell does not

advance the ball for Brooks because no one in Campbell disputed coverage. And

multiple authorities establish that an insurer has no duty to settle if no coverage

exists. 8 We are also unaware of any cases finding the opposite and extending the

       8
         We recognize that various courts have addressed this issue in circumstances
which may not be factually identical to this case. Even still, those courts’
commonsense holdings reach the same general conclusion—when coverage does not
exist, an insurer does not owe a duty to settle. See DeWitt v. Monterey Ins. Co., 138
Cal. Rptr. 3d 705, 719 (Cal. Ct. App. 2012) (“[A]n insurer has a duty to accept a
reasonable settlement offer only with respect to a covered claim.” (internal citations and
quotation marks omitted)); Am. Physicians Ins. Exch. v. Garcia, 876 S.W.2d 842, 848
(Tex. 1994) (“[A]n insurer has no duty to settle a claim that is not covered under its
policy.”); Ambassador Ins. Co. v. St. Paul Fire & Marine Ins. Co., 753 F.2d 824, 826
(10th Cir. 1985) (holding that, under New Mexico law, where the insured had no
coverage the insurer did not act in bad faith or negligently by failing to pay, because with
“no duty to settle a claim, there can be no negligent or bad faith refusal to settle”).

                                            12
duty to settle as far as Brooks and the dissent suggest. 9, 10 Moreover, the Campbell

court noted that when determining reasonableness of a decision not to settle, “[t]he

      9
         Neither Brooks nor the dissent draw our attention to a single case where a
court held that an insurer owed a duty to settle an uncovered claim, and this
undermines their position. In fact, Brooks’ own authorities—a California Supreme
Court case and the Restatement of the Law of Liability Insurance—undercut his
arguments. Both provide that if an insurer declines “a reasonable settlement offer
within the policy limits because it does not believe the policy provides coverage,”
then the insurer “assumes the risk it will be held liable for all resulting damages
including a judgment that exceeds policy limits.” Blue Ridge Ins. Co. v. Jacobsen,
22 P.3d 313, 318 (Cal. 2001). See also Restatement of the Law of Liability Insurance
§ 25 cmt. (a) (“Reservation of rights does not eliminate the duty to make reasonable
settlement decisions, but there is no such duty for noncovered actions.”). At bottom,
this case presents nothing more than an issue of risk because if an insurer “makes an
unreasonable settlement decision . . . the insurer will be responsible for any excess
judgment that results at the trial of the legal action along with other appropriate
damages, provided that the action is determined to be covered.” Restatement of the
Law of Liability Insurance § 25 cmt. (a).

       The dissent argues that Blue Ridge is contrary to our position because the
California Supreme Court specified that “in determining whether a settlement offer is
reasonable, an insurer may not consider the issue of coverage.” Blue Ridge Ins. Co.,
22 P.3d at 318 (citing Johansen v. Cal. State Auto. Ass’n Inter-Ins. Bureau, 538 P.2d
744 (Cal. 1975)). The dissent also argues that our holding runs contrary to § 24 of
the Restatement of the Law of Liability which provides that “[a] reasonable
settlement decision is one that would be made by a reasonable insurer that bears the
sole financial responsibility for the full amount of the potential judgment.” But the
dissent’s reliance on select portions of these authorities is misplaced. We are not
tasked with determining the reasonableness of Brooks’ settlement offers. Instead we
must determine whether Owners owed an absolute duty to settle during the pendency
of a declaratory judgment action disputing coverage and where the district court
ultimately found none. Because Utah law specifies that the duty to defend is tied to
the existence of a covered claim, Owners owed no duty to defend where the court
determined no coverage existed.
      10
         The dissent wishes to ignore the district court’s determination that the Policy
did not cover Dockstader’s conduct and instead focus on “whether, considering the
circumstances that existed at the time of Brooks’ settlement offers, Owners acted
reasonably in rejecting those offers.” Dissent at 11. But entirely ignoring coverage

                                          13
proper focus is on the insurer’s decision to reject offers of settlement and instead

proceed to trial.” See 840 P.2d at 141.

      Here, Owners embraced its rights under Utah law in seeking declaratory relief.

And with the declaratory judgment action pending, Owners conditionally accepted

Brooks’ settlement offer. It said, “[i]f there is coverage, will pay the policy limit of

$500,000 to Mr. Brooks.” Owners did not gamble in deciding whether to accept an

offer or take the case to trial. If the Policy covered Dockstader’s conduct, Owners

agreed to pay Brooks the Policy limit—trial was never a consideration. Moreover, in

pursuing a declaratory judgment action, Owners bore the risk that the district court

would determine coverage existed and it might be on the hook for any judgment in

excess of Brooks’ settlement offers—even if the excess exceeded the Policy limits.

So the risks associated with Owners’ conditional acceptance of Brooks’ settlement

would run contrary to Utah law, which specifies that the duty to defend “is tied to the
existence of covered claims.” Benjamin, 140 P.3d at 1216. Because the Policy did
not cover Dockstader’s conduct, Owners did not owe a duty to defend and so Owners
did not owe an implied good faith duty to settle.

       And if we follow the dissent’s logic to its natural conclusion, an insurer would
have to pay an uncovered claim so long as a third-party claimant made a settlement
offer before a district court rendered a decision about coverage. The dissent’s
approach would undermine Utah law by making the insurer’s right to seek a
declaratory action illusory.

                                           14
offers were borne by Owners not Dockstader. 11, 12 Owners’ risk paid off as it later

received a court judgment, which Dockstader did not appeal, declaring that the policy

at issue provided no coverage.

      Contrary to Brooks’ assertions, Utah has “never held that an insurer must

defend against all third-party claims that could ‘conceivably’ fall within insurance

coverage.” Oltmanns, 416 P.3d. at 1154. Although Brooks relies on the Oltmanns

concurrence for the following rule: “the right to bring a declaratory judgment action

to determine a coverage question does not relieve the insurer of the duty to defend

      11
          The dissent is correct that Utah law views a conditional acceptance as a
counteroffer. But that distinction is purely semantic and does not affect the outcome
of this case. Whether or not we characterize Owners’ responses as conditional
acceptances or counteroffers, Owners had filed a declaratory judgment action
disputing coverage by the time Brooks made any settlement offers. And the district
court ultimately found the Policy did not cover Dockstader’s conduct. Our
characterization of Owners’ responses does not alter either of those relevant facts.
      12
        We offer no opinion on whether Owners would have owed a duty to accept
Brooks’ settlement offers outright had the district court ultimately found coverage,
because those are not the facts before us. We merely recognize that insurers who
make unreasonable settlement decisions may be responsible for any excess judgment,
provided coverage exists. See Jacobsen, 22 P.3d at 318. See also Restatement of the
Law of Liability Insurance § 25 cmt. (a).

       The dissent argues Dockstader bore the risk of excess judgment, not Owners.
The dissent is correct that Owners’ liability for an excess judgment is not automatic.
For Owners to be liable, the court would have to find the Policy covered
Dockstader’s conduct and that Owners breached the duty it owed Dockstader. See
Restatement of the Law of Liability Insurance § 25 cmt. (a); Beck, 701 P.2d at 802–
03. But if the district court did, then Owners would have been liable for damages
associated with its failure to settle—“including a judgment that exceeds the policy
limits.” See Beck, 701 P.2d at 802–03 (holding that an insurer may be liable for
more than the policy limits if it has breached the duty of good faith).

                                          15
during the pendency of the declaratory judgment action if there is a potentially viable

third-party liability claim,” the Utah Supreme Court disavowed the concurrence’s

dicta. Id. at 1154 (majority opinion), 1164 (Durham, J., concurring).

         In the end, Utah law requires reasonableness, and Owners acted reasonably.

Owners reasonably believed the Policy did not cover Dockstader’s conduct because it

knew Dockstader pled guilty to aggravated assault and it knew Brooks’ complaint, in

part, alleged intentional conduct. So rather than accept Brooks’ settlement offer

outright, Owners qualified its acceptance. Given the latitude afforded insurers in

deciding whether to accept a proposed settlement, Owners responded within the

bounds of Utah law. And the reasonableness of Owners’ position was confirmed by

the district court’s uncontested determination that the Policy provided no coverage

for the injuries Dockstader caused Brooks. So, Owners ultimately owed no duty to

defend or indemnify Dockstader at all and therefore no duty to settle under these

facts.

         AFFIRMED.

                                           Entered for the Court

                                           Joel M. Carson III
                                           Circuit Judge

                                          16
No. 19-4156, Owners Insurance Co. v. Dockstader
BRISCOE, Circuit Judge, dissenting.

       I respectfully dissent. In my view, reasonable jurors could find that defendant

Owners Insurance Company (Owners) acted in bad faith by placing its own interests

above those of its insured, Jacob Dockstader, and rejecting the three policy-limits

settlement offers that were made by Thomas Brooks. Consequently, I conclude that the

district court erred in granting summary judgment in favor of Owners on the bad faith

claim asserted against it by Brooks.

                                              I

       Because the chronology of events is key here in understanding each parties’

relative rights and duties, I begin by outlining in detail the underlying facts. 1 On March

12, 2014, Owners issued a Homeowners Insurance Policy (the Policy) to Dockstader’s

parents, Steve and Jill Dockstader. The Policy, number 48-819-745-11, was effective

from April 20, 2014, to April 20, 2015.

       The Policy contained the following relevant coverage provisions:

       a. Coverage E – Personal Liability

       (1) We will pay all sums any insured becomes legally obligated to pay as
       damages because of or arising out of bodily injury or property damage
       caused by an occurrence to which this coverage applies.

       1
         The majority does not dispute any of these facts. Curiously, however, the
majority asserts that the dissent “ignore[s] facts concerning the non-existence of coverage
because they do not fit Brooks’ narrative on appeal.” O&J at 7 n.5. But the majority fails
to identify precisely what facts it is referring to.
                                                     1
      ...

      We will settle or defend, as we consider appropriate, any claim or suit for
      damages covered by this policy.

Aplt. App., Vol. I at 133–34. The phrase “bodily injury” was defined in the Policy to

mean “physical injury, sickness or disease sustained by a person including resulting death

of that person.” Id. at 116. “Occurrence” was defined as “an accident that results in

bodily injury or property damage and includes, as one occurrence, all continuous or

repeated exposure to substantially the same generally harmful conditions.” Id. at 117.

      The Policy contained the following relevant exclusion to personal liability

coverage:

      a. Coverage E – Personal Liability . . . do[es] not apply:

      ...

      (12) to bodily injury or property damage reasonably expected or
      intended by the insured. This exclusion applies even if the bodily
      injury or property damage is of a different kind or degree, or is
      sustained by a different person or property than that reasonably
      expected or intended.

Id. at 134–35.

      On October 14, 2014, Dockstader, who was 21 years old at the time, was

exercising at a gym in St. George, Utah. Dockstader became involved in an altercation

with Brooks, who was also exercising at the gym. The altercation allegedly began with

an exchange of words. At some point thereafter, Dockstader swung a fifteen-pound

dumbbell at Brooks. The dumbbell struck Brooks in the head, rendering him

                                                2
unconscious. Brooks was transported to a local hospital, where he remained for

approximately one week. As a result of the blow to his head, Brooks suffered a

permanent traumatic brain injury and is permanently disabled.

       Dockstader was charged in Utah state court with aggravated assault, a

second-degree felony under Utah state law. On July 15, 2015, Dockstader was tried and

found guilty of that charge. The state trial judge who heard the evidence found that

Dockstader was not acting in self-defense when he struck Brooks with the dumbbell, and

that Dockstader was guilty beyond a reasonable doubt of aggravated assault. On August

25, 2015, Dockstader was sentenced to an indeterminate term of imprisonment of one to

fifteen years. The 210 days that Dockstader served in jail awaiting trial were credited to

his sentence, and the remainder of the sentence was suspended.

       On February 6, 2017, Brooks filed a civil complaint in Utah state court against

Dockstader (the state tort case). Brooks alleged in his complaint that Dockstader either

negligently struck him with the dumbbell or, alternatively, that Dockstader intentionally

struck him with the dumbbell.

       On March 1, 2017, Dockstader sent a letter to Owners requesting that Owners

defend and indemnify Dockstader from Brooks’s complaint under the Policy. Owners

agreed to assume the defense of Dockstader and hired a law firm to defend Dockstader

against Brooks’ tort action.

       On February 1, 2018, nearly a year after assuming the defense of Dockstader,

Owners issued a reservation of rights letter, noting that if Dockstader intentionally struck

                                                 3
Brooks, the claim would not be covered under the Policy. On February 26, 2018, Owners

initiated these federal proceedings by filing a complaint for declaratory relief against

Dockstader. Owners sought a declaration that the Policy did not cover Dockstader’s

conduct and that Owners consequently had no duty to defend or indemnify him.

       Dockstader testified during his deposition in the state tort case that he did not

intentionally strike Brooks with the dumbbell, and that he believed he had sufficient

strength and control to stop the dumbbell from hitting Brooks (this testimony was

contrary to the factual findings made by the state trial court that presided over

Dockstader’s criminal trial). Following Dockstader’s deposition, Brooks dismissed his

intentional tort claim and pursued only his negligence claim against Dockstader.

       On June 5, 2018, Brooks made a written offer “to fully and finally release his

claims against . . . Dockstader in exchange for $500,000,” i.e., the limits of the Policy.

Aplt. App., Vol. III at 574. Brooks asserted that his “damages far exceed[ed]” the Policy

limits. Id. In particular, he noted that his “injury-related past medical expenses

exceed[ed] $214,000,” his “loss of future earnings substantially exceed[ed] $800,000,”

and his “non-economic damages [we]re enormous.” Id. at 580–81.

       On June 27, 2018, Owners responded by letter to Brooks’ settlement offer. In its

letter, Owners stated, in pertinent part:

               As you know, [Owners] does not believe there is any coverage for
       this incident based upon the findings . . . in the criminal case. * * *

              In light of that, [Owners] is willing to agree as follows:

                                                 4
                1. The parties will agree that this underlying tort case should be
                   dismissed.
                2. The parties will see the declaratory action through to a
                   conclusion either by settlement or by a decision. If there is
                   coverage, [Owners] will pay the policy limit of $500,000.00 to
                   Mr. Brooks. Mr. Brooks would have to agree to sign a complete
                   release of all claims against Mr. Dockstader and against
                   [Owners]. Mr. Brooks would also be responsible for satisfying
                   any and all liens from the policy proceeds.
                3. If there is no coverage, the case will be concluded.

                It seems to [us] that one of the most germane issues in this case is
         one of coverage and it makes sense to proceed as outlined above. Would
         you be kind enough to let [us] know if that is acceptable to you.

Id. at 588–89.

         On June 29, 2018, Brooks responded by letter to Owners’ suggested settlement

terms:

                 We have received your June 27, 2018 letter refusing our offer to
         settle now for the policy limit, instead offering to pay the policy limit only
         after the conclusion of the declaratory action. We ask you to reconsider.
         Your offer seeks to transfer risk of coverage from the insurer to a
         third-party, [Brooks]. Not only is this inappropriate, but this is counter to
         Utah law.

                 As detailed in our June 5, 2018 letter, liability and causation are
         clear, and . . . Brooks’ damages far exceed . . . Dockstader’s personal injury
         policy limit of $500,000. Your letter can be interpreted as nothing short of
         a denial of a good faith offer to settle this matter. See Hawaiian Equip. Co.
         v. Elmco Corp., 115 Utah 590, 604, 207 P.2d 794, 801 (1949) (explaining
         that an acceptance which imposes terms or conditions not present in the
         original offer is not acceptance).

                Under the totality of the circumstances in this case, a reasonable
         insurer would settle this matter within its policy limit, thereby protecting its
         insured from a judgment in excess of the policy limit. Owners . . . should
         do the same on behalf [of] . . . Dockstader. Should you refuse this offer, we
         will ask for an excess of the policy limit at trial.

                                                    5
             This offer to reconsider and settle for the policy limit shall remain
       open until July 4, 2018.

Id. at 591.

       On July 3, 2018, Owners responded by letter. Owners denied “asking any party to

assume any risk in this case other than those created by the facts of the case,” and

asserted that it was “handling the case in accordance with Utah law” by “commenc[ing] a

declaratory judgment action” and “continu[ing] to defend [Dockstader] throughout this

process.” Id. at 593. Owners further stated in its letter:

              The intent of Owners’ offer was to relieve the parties of extra
       expense and time by focusing on the declaratory judgment action which
       much [sic], of necessity, be resolved at some point. Both Mr. Brooks and
       Mr. Dockstader has [sic] the right to proceed with the personal injury action
       before moving onto the coverage action. But to suggest that Owners must
       abandon its reasonable defense that Mr. Dockstader’s actions were
       intentional, particularly when supported by a jury verdict beyond a
       reasonable doubt to that fact, is inconsistent with Utah law and the
       obligations imposed on an insurer.

             Owners[’s] . . . position as outlined in the June 27, 2018 letter
       remains unchanged. We look forward to hearing from you.

Id.

       Approximately two months later, on September 4, 2018, Brooks sent a third letter

to Owners. At the outset, Brooks noted that he had “twice proposed to settle” the case for

the Policy limits, but that both “offer[s] ha[d] been rejected” by Owners. Id. at 595. He

noted, however, that at no time did Owners “dispute that a settlement for the Policy limits

[wa]s reasonable,” nor did it “challenge[] liability, the proposition that damages w[ould]

                                                 6
exceed Policy limits,” or “request[] additional information to evaluate the reasonableness

of [his] offer.” Id. Brooks disagreed with Owners’ assertion that it “should be free to

resolve its purported coverage dispute with . . . Dockstader before settling [Brooks’ suit]

for the Policy limits,” and thus “ma[de] a final offer to resolve th[e] case” for the Policy

limits “before proceeding with the Lawsuit and obtaining a judgment against . . .

Dockstader in excess of the Policy’s limits.” Id. Brooks asserted in support of his offer

that “a high likelihood exist[ed] that [he] w[ould] obtain a judgment against Dockstader

. . . well above Policy limits,” and that “a verdict in excess of $5 million [wa]s not only

obtainable but . . .likely.” Id. at 596. Brooks rejected as “unreasonable” Owners’ attempt

“to condition the payment of policy limits on the resolution of [its] declaratory judgment

action,” and he noted that Owners “must continue to discharge its duties” to Dockstader

“during the pendency of the declaratory judgment action.” Id. Brooks stated that “[t]his

final offer to settle for the Policy’s limits [would] expire[] on September 6, 2018,” and

that Owners’ “[f]ailure to accept” the offer “w[ould] force [him] to seek a judgment

against . . . Dockstader in excess of the Policy’s limits.” Id. at 597. “To this end,”

Brooks stated, he “[wa]s willing to enter into a settlement with . . . Dockstader in which

. . . Dockstader w[ould] stipulate to liability, causation, and judgment in the amount of $5

million and w[ould] assign any and all claims he may have against [Owners] relating to

[its] handling of the claim under the Policy.” Id.

                                                  7
       Owners did not respond to Brooks’ September 4, 2018 letter. Instead, on

September 21, 2018, Owners filed a motion for summary judgment in this federal

declaratory judgment action which had pended since February 26, 2018.

       On September 25, 2018, Brooks and Dockstader, who were acting independently

of Owners, entered into a written stipulation and assignment. Id., Vol. I at 209. Under

the terms of that stipulation and assignment, Dockstader “agree[d] to an immediate

judgment by confession against him . . . in the total amount of $5 million,” representing

“the limit of liability of . . . Dockstader to . . . Brooks for [Brooks’] [l]awsuit.” Id. at

210–11. Dockstader also “assign[ed] to . . . Brooks any and all rights, benefits, and other

interests to and under the . . . Policy and any and all claims that he m[ight] have against

. . . Owners arising out of or relating to” Brooks’s negligence claim against him,

“including but not limited to the claim pertaining to . . . Owners’ defense of [Brooks’s

lawsuit].” Id. at 211. Brooks in turn represented that he would only seek to execute the

judgment “through the pursuit of the” claim assigned to him by Dockstader. Id.

       On October 18, 2018, Brooks moved to intervene in this federal action. The

district court granted Brooks’ motion and, on November 5, 2018, Brooks filed a

third-party complaint against Owners. Brooks alleged in his third-party complaint, in

part, that “[u]nder Utah Code § 31A-26-303(3)(h), Owners did ‘not attempt[] in good

faith to effectuate a prompt, fair, and equitable settlement of claims in which liability

[was] reasonably clear,’” and instead “continually elevated its interests above

Dockstader’s interests,” thereby “plac[ing] Dockstader at risk for a judgment in excess of

                                                   8
the” Policy. Id. at 155. Brooks asserted four claims for relief against Owners: (1) bad

faith – breach of fiduciary duties; (2) breach of contract and the covenant of good faith

and fair dealing; (3) promissory estoppel; and (4) waiver. Brooks sought actual damages

in excess of $5,000,000, as well as punitive damages.

       On March 14, 2019, the district court granted summary judgment in favor of

Owners on the claims for declaratory relief asserted in its complaint. The district court

concluded that, under Utah state law, “the bodily injury in this case was nonaccidental as

a matter of law.” Id., Vol. II at 465. The district court in turn concluded “that the Policy

did not provide coverage for [Dockstader’s] actions” and that “Owners’ [sic] had no duty

to defend.” Id. at 466. Lastly, the district court concluded that, under Utah state law,

“there [wa]s no basis for a bad faith claim” against Owners “for refusal to settle a claim

while a declaratory judgment action [wa]s pending regarding coverage.” Id. at 467.

       Shortly thereafter, Owners moved for summary judgment with respect to the

claims asserted by Brooks in his third-party complaint. On October 3, 2019, the district

granted Owners’ motion. The district court again concluded that “Owners was acting in

accordance with the Utah Supreme Court’s recommendations in filing a declaratory

judgment action” and that, “while the declaratory judgment action was pending and

Owners’ obligations to defend and indemnify Dockstader were unclear, there could be no

basis for a bad faith claim for refusal to accept a policy-limit settlement demand.” Id.,

Vol. III at 651.

                                                 9
                                              II

       Brooks argues in his appeal that “[t]he District Court erred in holding Owners had

no duty to accept [his] settlement offers.” Aplt. Br. at 11. Brooks asserts that “[w]hen

the insurer takes control of the insured’s defense, the insurer has a duty to act in the

insured’s best interest in negotiating a settlement” and that, “[u]nder Utah law, the insurer

must therefore accept a settlement offer within the policy limit when there is a substantial

likelihood of a judgment in excess of the policy limit.” Id. “In other words,” he argues,

“the duty to settle depends on whether the insurer controls the defense, not on whether

the insurer disputes coverage or whether coverage in fact exists.” Id. at 11–12. “Because

Owners controlled Dockstader’s defense,” Brooks argues, “it had a duty to accept

Brooks’ reasonable settlement offers, and there is a genuine dispute regarding whether

Owners breached that duty.” Id. at 12.

                                              A

       The majority reframes the arguments made by Brooks. According to the majority,

“[i]n effect, Brooks asks us to establish a rule holding that insurers who have accepted a

defense must also accept settlement offers within the policy limits—even where the

insurer has filed a declaratory judgment action disputing coverage and the district court

ultimately finds none.” O&J at 7. And, in turn, the majority states that “the fundamental

question” in this case is: “does the duty to defend include an absolute duty to settle even

where the insurer has filed a declaratory judgment action disputing coverage and the

district court ultimately finds none?” Id. at 11 (emphasis in original).

                                                   10
       These are not the arguments made by Brooks, nor are they consistent with the

undisputed facts that are before us. 2 The undisputed facts establish that all three of

Brooks’ offers to settle the state tort action occurred well before the district court in this

case ruled in favor of Owners on the issue of coverage. More specifically, Owners

rejected the third and final of Brooks’ offers by failing to respond on or before September

6, 2018. The district court in this declaratory judgment action did not rule on the issue of

coverage until six months later, on March 14, 2019. Thus, the district court’s ultimate

ruling on the issue of coverage is irrelevant to the question of whether Owners acted in

bad faith in the interim in rejecting Brooks’ settlement offers. The real “fundamental

question” posed in this case, as Brooks argues in his appellate brief, is whether,

considering the circumstances that existed at the time of Brooks’ settlement offers,

Owners acted reasonably in rejecting those offers. 3

       2
          The majority denies reframing Brooks’ arguments and asserts that Brooks’ “own
brief demonstrates the contrary.” O&J at 7 n.5. Specifically, the majority points to the
assertion in Brooks’ brief “that an insurer ‘has a duty to accept a reasonable settlement
offer on behalf of the insured as long as [the insurer] retains control of the insured’s
defense, regardless of whether there is ultimately coverage under the insurance
contract.’” Id. (quoting Aplt. Br. at 18). This quoted portion of Brooks’ brief, however,
illustrates my point. The gist of Brooks’ argument is that the outcome of a related
declaratory judgment action is irrelevant to the question of whether the insurer, in the
course of defending its insured against a claim brought by a third party, should have
accepted a reasonable settlement offer.
       3
         The majority also ignores the facts and the law in two other respects. To begin
with, the majority erroneously suggests that “Owners conditionally accepted Brooks’
settlement offer.” O&J at 14. As Brooks himself aptly noted in his June 29, 2018 letter
to Owners, Utah law clearly provides that an acceptance must unconditionally assent to
                                                11
       I conclude, as to this fundamental question, that Owners was not entitled to

summary judgment in its favor.

                                              B

       Under Utah state law, a “typical liability insurance policy” imposes several duties

on the insurer. Summerhaze Co., L.C. v. Fed. Deposit. Ins. Corp., 332 P.3d 908, 920

(Utah 2014). “First, an insurer has a duty to indemnify the insured, up to the limits of the

policy, for the payment of a judgment based on a liability claim which is covered.” Id.

(quotations omitted). “Second, the insurer has a duty to defend the insured against a

liability claim which is covered or which is potentially covered.” Id. (quotations

omitted). “These are two distinct duties, with an insurer’s duty to defend [being] broader

than its duty to indemnify.” Id. (quotations omitted). The insurer’s “duty to indemnify

[is] determined by the underlying facts of the case, [while] the duty to defend [is]

all material terms presented in the offer or it is a rejection of the offer. In other words, a
so-called conditional acceptance constitutes a counteroffer. E.g., Lebrecht v. Deep Blue
Pools and Spas Inc., 374 P.3d 1064, 1069 (Utah Ct. App. 2016). Thus, Owners, by
refusing to agree to the terms offered by Brooks and suggesting alternative terms of
settlement, rejected Brooks’ first two offers and made its own counteroffer, which Brooks
rejected. And Owners also rejected the third offer by not responding to it.
        Further, the majority erroneously states that “in pursuing a declaratory judgment
action, Owners bore the risk that the district court would determine coverage existed and
it might be on the hook for any judgment in excess of Brooks’ settlement offers—even if
the excess exceeded the Policy limits.” O&J at 14. That statement is neither consistent
with the language of the Policy or Utah law. Any judgment in excess of the Policy limits
would have, absent a subsequent and successful bad faith action asserted by Dockstader
against Owners, been borne by Dockstader, not Owners. Indeed, that is the very reason
why Utah state law imposes a duty on an insurer who has assumed its insured’s defense
to act in the insured’s best interests in considering settlement offers.
                                                   12
controlled by the allegations in the complaint against the insured.” Id. (quotations

omitted). “The duty to defend is a continuing duty that is triggered when the insured

tenders the defense of an action against it which is potentially within the policy

coverage.” Id. (quotations and footnote omitted). “If the underlying complaint alleges

any facts or claims that might fall within the ambit of the policy, the insurer must offer a

defense.” Id. (quotations omitted).

       If an insurer is “presented with a tender of defense” but “believes it is not liable

for coverage,” “[t]he insurer may either protect its interest through a declaratory

judgment proceeding asking the court to determine coverage under” the policy at issue,

“or it may defend the suit under a reservation of its rights to seek repayment later.” Id. at

921 (quotations omitted). “[A]n insurer may not refuse the tendered defense of an action

unless a comparison of the policy with the underlying complaint shows on its face that

there is no potential for coverage.” Id. (quotations omitted). If an insurer “is uncertain

over insurance coverage for the underlying claim, the proper course is for the insurance

carrier to tender a defense and seek a declaratory judgment as to coverage under the

policy.” Id. at 921 n.89 (Utah 2014). In other words, “[w]hen 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). But 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, 26 Utah 2d 195, 487 P.2d 852, 855 (1971), overruled on other

                                                 13
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 such time as it obtains a declaratory judgment holding that there is no

coverage for the loss under the policy.

       When an insurer assumes a tendered defense of a third-party claim, it has a duty to

its insured to “diligently investigate[]” and “reasonably evaluate[]” the third-party claims

“to determine their validity.” Black v. Allstate, 100 P.3d 1163, 1168 (Utah 2004).

“[T]his duty to investigate and reasonably evaluate a third-party claim does not require

that the insurer’s evaluation ultimately prove to be correct.” Id. at 1169. “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.

       In defending its insured against a third-party claim, the insurer “controls the

disposition of claims against its insured . . . .” Beck v. Farmers Ins. Exch., 701 P.2d 795,

799 (Utah 1985). “In essence, the contract [of insurance] itself creates a fiduciary

relationship because of the trust and reliance placed in the insurer by its insured.” Id.

“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.” Id. “In addition, when dealing

with third parties, the insurer acts as an agent for the insured with respect to the disputed

claim.” Id. Part of the “insurer’s implied duty to its insured is to zealously guard the

insured’s interests when deciding whether to accept an offer of settlement of the third-

party’s claim or to take the case to trial.” Campbell v. State Farm Mut. Auto. Ins. Co.,

                                                 14
840 P.2d 130, 138 (Utah Ct. App. 1992). “Stated generally, an insurer owes its insured a

duty to accept an offer of settlement within the policy limits when there is a substantial

likelihood of a judgment being rendered against the insured in excess of those limits.” Id.

“The test of the insurer’s conduct is one of reasonableness.” Id. “As regards offers of

settlement, the insurer must give the insured’s interests at least as much consideration as

it gives its own.” Id. at 139. “If the insurer breaches this duty, Utah law provides the

insured with a cause of action in tort” (i.e., bad faith). Id.

       Applying these principles to the undisputed facts that are before us, I agree with

the district court and the majority that Owners acted appropriately by first assuming the

tendered defense of Dockstader and then, after conducting additional investigation,

issuing a reservation of rights letter to Dockstader and filing this declaratory judgment

action. 4 In other words, up until the time that Brooks made his first settlement demand to

Owners, it cannot be seriously disputed that Owners acted reasonably and in good faith

with respect to Dockstader, its insured.

       The crux of Brooks’ bad faith claim, however, is that Owners acted improperly at

the time it rejected his three settlement offers. As to that issue, the district court

concluded as a matter of law that Owners was not obligated to accept Brooks’ settlement

       4
          Almost a year passed between Owners’ acceptance of Dockstader’s defense and
its filing of this declaratory judgment action. Had Owners acted earlier in filing this
declaratory judgment action, it may well have had a decision on the issue of coverage
before Brooks made a settlement offer in the state tort action.
                                                 15
offers because of the pendency of Owners’ own declaratory judgment action disputing

coverage. The majority takes things a step further by concluding that Owners had “no

duty to settle under these facts” because Owners ultimately prevailed in its declaratory

judgment action and thus “owed no duty to defend or indemnify Dockstader at all.” O&J

at 16. Both of these conclusions, I submit, are contrary to Utah state law.

       As previously discussed, the fiduciary duties that are imposed on an insurer who

assumes the defense of its insured exist until such time as the insurer obtains relief from

those duties “by way of a declaratory judgment.” Kay, 487 P.2d at 855. Here, that means

that, at the time Brooks made his three settlement offers in June and September of 2018,

Owners was still obligated to “zealously guard” Dockstader’s interests in deciding

whether to accept or reject Brooks’ offers. Campbell, 840 P.2d at 138. Under clearly

established Utah law, that required Owners to consider the strength of Brooks’ claims

against Dockstader in the state court action. 5 Based upon the limited evidence that is

contained in our record on appeal, it appears nearly certain that, at the time Brooks made

his three settlement offers to Owners, Dockstader would be found liable in the state tort

action for Brooks’ injuries and the only real questions in the state tort action would have

been (a) whether Dockstader acted intentionally or negligently (Brooks dropped his

intentional tort claim following Dockstader’s deposition), and (b) the extent of Brooks’

       5
        This is not to say that the strength of the third-party claims is the only factor an
insurer may consider. Instead, the point is that the strength of the third-party claims
cannot be ignored by an insurer in considering a settlement offer.
                                                  16
damages. As to the question of Brooks’ damages, it likewise appears fairly certain, given

the record in this case, that they would exceed, possibly substantially, the limits of the

Policy.

       Given my search of the record, there is nothing to suggest that Owners considered

these factors in rejecting Brooks’ offers. Instead, the record suggests that Owners’

rejection of the three offers was motivated solely by Owners’ belief that it might prevail

on the coverage issue and its interest in waiting for a decision on that issue. That interest,

however, was clearly for Owners’ own benefit, not Dockstader’s. In other words, the

record strongly suggests that Owners acted in its own interests, and contrary to the

interests of Dockstader, in rejecting Brooks’ three settlement offers. And, by doing so,

Owners exposed Dockstader to liability substantially in excess of the Policy limits.

       Unfortunately, the majority’s holding turns the duties imposed on an insurer under

Utah law on their head by authorizing an insurer to consider only the strength of its

declaratory judgment action in deciding whether to accept or reject settlement offers in

the third-party action that it is defending its insured against. 6 In other words, the

       6
         The majority states that “[n]either Brooks nor the dissent” point “to a single case
where a court held that an insurer owed a duty to settle an uncovered claim.” O&J at 13
n.9. That is not surprising given the fact that it is well established that “in determining
whether a settlement offer is reasonable, an insurer may not consider the issue of
coverage.” Blue Ridge Ins. Co. v. Jacobsen, 22 P.3d 313, 318 (Cal. 2001). The majority
also, curiously, suggests that the decision in Blue Ridge authorizes “an insurer [to]
decline[] ‘a reasonable settlement offer within the policy limits because it does not
believe the policy provides coverage.’” O&J at 13 n.9 (quoting Blue Ridge, 22 P.3d at
318). Blue Ridge does not so hold. Indeed, the quoted language from Blue Ridge is taken
                                                  17
majority’s holding effectively frees an insurer, in considering a settlement offer, from any

fiduciary duties it owes to its insured, and instead allows an insurer to consider only its

own interests regarding coverage. 7

       For these reasons, I conclude that Owners was not entitled to summary judgment

on Brooks’ bad faith claim, and I would therefore remand that claim to the district court

for further proceedings.

out of context. What the Supreme Court of California actually stated is that it had
previously “held an insurer that fails to accept a reasonable settlement offer within the
policy limits because it does not believe the policy provides coverage, assumes the risk it
will be held liable for all resulting damages including a judgment that exceeds the policy
limits.” 22 P.3d at 318 (citing Johansen v. Cal. State Auto. Ass’n Inter-Ins. Bureau, 538
P.2d 744 (Cal. 1975)). Just as importantly, and a fact ignored by the majority in this case,
is that the Supreme Court of California emphasized in Blue Ridge “that in determining
whether a settlement offer is reasonable, an insurer may not consider the issue of
coverage,” and can instead consider only “whether, in light of the victim’s injuries and
the probable liability of the insured, the ultimate judgment is likely to exceed the amount
of the settlement offer.” Id. (quotation marks omitted).
       7
         This is also directly contrary to § 24 of the Restatement of the Law of Liability
Insurance, which provides, in pertinent part, that “[a] reasonable settlement decision is
one that would be made by a reasonable insurer that bears the sole financial responsibility
for the full amount of the potential judgment.” Restatement of the Law of Liability
Insurance § 24(2). Notably, the majority ignores § 24 altogether and instead looks only
to § 25 of the Restatement, which addresses the effect of a reservation of rights on
settlement rights and duties. See O&J at 13 n.9.
                                                  18