515 P.3d 406
Utah2022Background
- Dr. Renato Saltz (plastic surgeon) provided unredacted pre/post-op photos of patient Conilyn Judge to a Fox affiliate; Judge sued Saltz and Fox for invasion of privacy and related torts.
- UMIA (Saltz’s professional liability carrier) defended Saltz for many years, negotiating and controlling defense and settlement strategy; Fox settled separately early in the litigation.
- After an appellate reversal in 2016 and renewed settlement demand for policy limits, Saltz retained independent counsel and UMIA for the first time questioned whether the Judge suit was covered and issued a reservation of rights; UMIA then filed a declaratory judgment action denying coverage.
- Saltz counterclaimed, alleging coverage by the policy or alternatively by promissory estoppel and waiver, and asserting UMIA breached its duty of good faith (seeking compensatory and punitive damages); the jury found for Saltz on estoppel and bad faith and awarded $500,000 reimbursement plus attorney fees.
- The district court had dismissed Saltz’s punitive damages claim on summary judgment and excluded his waiver claim at trial; UMIA appealed and Saltz cross-appealed several rulings.
- The Utah Supreme Court affirmed the jury verdicts on promissory estoppel and bad faith, upheld admission of settlement-evidence (UMIA failed to carry burden on appeal), reversed dismissal of punitive damages and waiver (holding waiver is viable in third-party context), and remanded for further proceedings including appellate attorney fees.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Promissory estoppel: Did UMIA’s delay in contesting coverage estop it from denying coverage? | Saltz: UMIA defended and controlled the case for eight years; its delay deprived Saltz of settlement opportunities and therefore prejudiced him. | UMIA: Prejudice cannot be presumed; Saltz failed to show actual prejudice from the delay. | Affirmed: Jury could find prejudice under State v. Kay because expert evidence supported lost settlement opportunities. |
| Waiver: Is waiver available against a third-party insurer and does it require prejudice? | Saltz: UMIA’s conduct (control of defense, assurances) constituted waiver without need to prove prejudice. | UMIA: Kay requires prejudice; waiver should not apply in third-party context. | Reversed dismissal: Waiver is viable in third-party context and does not require proof of prejudice (court did not decide if elements were met here). |
| Breach of duty of good faith: Was there sufficient evidence and were jury instructions proper? | Saltz: UMIA delayed, refused reasonable settlements, and acted to Saltz’s detriment—breaching duties to act promptly, settle reasonably, and protect insured. | UMIA: Saltz failed to prove bad faith; several jury instructions were erroneous and prejudicial. | Affirmed: Sufficient evidence supported bad faith; instructional errors were minor/harmless and did not warrant a new trial. |
| Admission of June 2017 settlement-evidence (Rule 408): Was evidence of UMIA’s settlement conduct inadmissible? | Saltz: Evidence of UMIA’s conduct in the June 2017 talks was probative of bad faith and estoppel. | UMIA: Rule 408 barred admission of settlement offers/negotiations to prove liability. | Affirmed (procedural): Court upheld admission because UMIA failed to carry its appellate burden to show error and had opened the door by admitting other settlement evidence. |
| Punitive damages & appellate fees: Did Saltz preserve punitive damages and is he entitled to fees on appeal? | Saltz: Evidence permitted punitive damages; he is entitled to appellate fees because he prevailed on the bad-faith claim that gave rise to the fee award. | UMIA: District court properly dismissed punitive damages on summary judgment. | Mixed: Reversed dismissal of punitive damages (jury could find knowing/reckless indifference); Saltz entitled to reasonable attorney fees on appeal. |
Key Cases Cited
- State Farm Mut. Auto. Ins. Co. v. Kay, 487 P.2d 852 (Utah 1971) (prejudice required when insurer withdraws or disclaims before settlement/final judgment; prejudice can be shown by lost settlement opportunities)
- Beck v. Farmers Ins. Exch., 701 P.2d 795 (Utah 1985) (third-party insurers owe a heightened, fiduciary-like duty to insureds because insurer controls defense)
- Ammerman v. Farmers Ins. Exch., 430 P.2d 576 (Utah 1967) (insurer must be zealous in protecting insured’s interests; insurer not required to accept any inadequate settlement)
- U.S. Fidelity & Guar. v. U.S. Sports Specialty, 270 P.3d 464 (Utah 2012) (enumerating insurer duties under duty of good faith)
- Black v. Allstate Ins. Co., 100 P.3d 1163 (Utah 2004) (insurer’s duty to settle fairly and reasonably; circumstances requiring acceptance of settlement within policy limits)
- Boulet v. Millers Mut. Ins. Ass’n of Ill., 362 F.2d 619 (8th Cir. 1966) (discussing waiver/estoppel when insurer conducts defense to settlement or final judgment)
- Billings v. Union Bankers Ins. Co., 918 P.2d 461 (Utah 1996) (attorney fees may be consequential damages for insurer’s breach)
- Mounteer Enters., Inc. v. Homeowners Ass’n for the Colony at White Pine Canyon, 422 P.3d 809 (Utah 2018) (standards for reviewing denial of judgment as a matter of law)
- USA Power, LLC v. PacifiCorp, 372 P.3d 629 (Utah 2016) (appellate standard for overturning jury verdict/judgment as a matter of law)
- Meadowbrook, LLC v. Flower, 959 P.2d 115 (Utah 1998) (rules for awarding appellate attorney fees when fee award was preserved and upheld)