Fire Insurance Exchange v. Oltmanns
2016 UT App 54
Utah Ct. App.2016Background
- In 2006 Oltmanns piloted a personal watercraft and injured his brother-in-law; a negligence lawsuit later produced a judgment against Oltmanns.
- Oltmanns contacted his insurer, Fire Insurance Exchange; after investigation Fire Insurance obtained an outside coverage opinion concluding it had a substantial chance of prevailing because the policy excluded coverage for "jet skis."
- Fire Insurance filed a declaratory judgment action seeking a coverage determination; the district court granted summary judgment for Fire Insurance; this Court reversed in 2012, finding the term "jet ski" ambiguous and construing the exclusion against the insurer.
- Fire Insurance settled the underlying tort judgment and reimbursed some defense fees but refused to pay Oltmanns’s fees for litigating coverage (including the 2012 appeal); Oltmanns then filed a counterclaim alleging breach of the covenant of good faith and fair dealing.
- On remand Fire Insurance again moved for summary judgment relying on its outside counsel opinion and investigation; the district court granted summary judgment, and this appeal followed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether insurer’s denial/ action was "fairly debatable" such that no bad-faith liability attaches | Oltmanns: interpretation was not fairly debatable as a matter of law; insurer acted in bad faith in pursuing declaratory action and refusing fee reimbursement | Fire Insurance: exclusion interpretation was fairly debatable; it reasonably relied on outside counsel and pursued declaratory relief in good faith | Court: Held insurer’s position was fairly debatable as a matter of law; summary judgment for insurer affirmed |
| Whether insurer’s loss on appeal forecloses finding the claim fairly debatable | Oltmanns: appellate loss shows insurer’s position unreasonable | Fire Insurance: prevailing in earlier proceedings and reasonable investigation support fairness of debate | Court: appellate loss does not preclude finding a reasonable, debatable position; insurer’s process was reasonable |
Key Cases Cited
- Prince v. Bear River Mut. Ins. Co., 56 P.3d 524 (Utah 2002) (sets the "fairly debatable" standard for insurer reasonableness)
- Billings v. Union Bankers Ins. Co., 918 P.2d 461 (Utah 1996) (discusses insurer debate entitlement when coverage is uncertain)
- Morris v. Health Net of Cal., Inc., 988 P.2d 940 (Utah 1999) (reiterates that insurers may deny claims that are fairly debatable)
- Fire Insurance Exchange v. Oltmanns, 285 P.3d 802 (Utah Ct. App. 2012) (prior appellate decision finding the term "jet ski" ambiguous and construing exclusion against insurer)
- United States Fidelity & Guar. Co. v. Sandt, 854 P.2d 519 (Utah 1993) (rules that limiting/excluding provisions should be strictly construed against insurer)