## Facts

- Wayne Beck was injured in a hit-and-run accident involving a vehicle owned by Ann Kirkland, who denied responsibility and asserted the vehicle was stolen.
- Kirkland’s insurer denied Beck’s claim.
- Beck had an automobile policy with Farmers Insurance Exchange providing no-fault benefits and uninsured motorist (UM) coverage.
- Farmers paid Beck no-fault benefits, including $5,000 in medical expenses (policy limit) and $1,299.43 in lost wages.
- Beck later submitted a UM claim and demanded the $20,000 UM policy limits; Farmers rejected the demand without explanation.
- Beck sued Farmers for (1) breach of contract for failing to pay UM benefits, (2) “bad faith” breach of the implied covenant of good faith and fair dealing for failure to investigate, negotiate, or settle, and (3) intentional infliction of emotional distress, seeking punitive damages.
- During litigation, Farmers offered $15,000 to settle the UM claim; Beck accepted, alleging financial pressure from delay.
- Beck submitted an affidavit from a former insurance adjuster stating a prudent insurer would have valued the claim up to $40,000 and that Farmers’ delay reflected bad faith; Farmers did not submit evidence directly rebutting it for summary judgment purposes.
- The trial court granted summary judgment for Farmers on the bad-faith and emotional-distress tort claims, treating the dispute as contractual; Beck appealed.

## Issues

1. In a first-party insurance relationship, does breach of the implied covenant of good faith and fair dealing create an independent tort claim, or only a contract claim?
2. On the summary judgment record, did Beck present a triable claim that Farmers breached the implied covenant in handling the UM claim?

## Decision

- The Utah Supreme Court held that, in first-party insurance disputes, breach of the implied covenant of good faith and fair dealing sounds in contract, not tort.
- The court rejected recognition of an independent tort claim for first-party “bad faith” based solely on claim-handling misconduct.
- The court concluded Beck alleged and supported a viable contract-based claim for breach of the implied covenant.
- The court reversed summary judgment in relevant part and remanded for further proceedings consistent with treating the claim as contractual.

## Legal Principles

- Every contract, including an insurance policy, includes an implied covenant of good faith and fair dealing.
- In first-party insurance claims, duties of fair dealing and good faith in investigation, evaluation, negotiation, and payment arise from the insurance contract as obligations imposed by law as part of the agreement.
- Breach of the implied covenant in a first-party setting yields contract remedies, not tort remedies or punitive damages merely for “bad faith” claim handling.
- Contract damages for breach of the implied covenant may extend beyond policy benefits to foreseeable consequential damages caused by the breach, if adequately proved.
- On summary judgment, a dispute over whether an insurer acted reasonably in rejecting or delaying payment may require trial when the insured presents evidence supporting breach and the insurer does not establish reasonableness as a matter of law.

## Conclusion

Utah confined first-party insurer “bad faith” to a contract theory: the implied covenant is enforceable as part of the policy, allowing recovery of proven foreseeable consequential damages, while rejecting a standalone tort claim; because Beck produced evidence that could support a finding of contractual breach, the case was remanded for further proceedings.


Beck v. Farmers Ins. Exch., 701 P.2d 795 (Utah 1985)