concurring as to Part II and dissenting as to Part I:
It has long been the law in this state that non-performance of contractual obligations does not give rise to an action in tort. In Carroll v. United States, 107 Idaho 717, 629 P.2d 361 (1984), Justice Huntley, writing for four members of the Court, expressly stated:
“Under Idaho law it is settled that an alleged failure to perform a contractual obligation is not actionable in tort. As Justice Bakes observed in his special concurrence in Dunbar, supra, Idaho case law establishes that mere breach of contract does not ordinarily constitute a tort. In Taylor v. Herbold, 94 Idaho 133, 483 P.2d 664 (1971), we stated, ‘To found an action in tort, there must be a breach of duty apart from the non-performance of a contract.’ In Just’s, Inc. v. Arrington Construction Co., 99 Idaho 462, 583 P.2d 997 (1978), we again acknowledged that ‘a tort requires the wrongful invasion of an interest protected by the law, not merely an invasion of an interest created by the agreement of the parties.’ ... Mere non-feasance, even if it amounts to a willful neglect to perform the contract, is insufficient to establish a duty in tort.” Id. at 719, 629 P.2d at 363.
It is readily apparent that the sine qua non of plaintiff’s claim against Unigard is the non-performance of a contractual obligation, i.e., failure to pay benefits allegedly due under the contract for which plaintiff has paid premiums. While it has been said that “every contract imposes upon each party a duty of good faith and fair dealing in its performance and its enforcement,” Restatement (Second) Contracts, § 205 (1979), such a duty does not exist independent of the contract itself. The duty of “good faith and fair dealing” acquires meaning only when considered in the context of the underlying contract. The duty arises only in the performance and enforcement of a contract.
Thus, any breach of this duty, which is nothing more than a breach of an implied contractual covenant, gives rise to an action on the contract. It does not give rise to an action in tort. Taylor v. Herbold, 94 Idaho 133, 483 P.2d 664 (1971). An action in tort lies only for breach of a duty imposed by law apart from a contract, e.g., duty to use ordinary care so as to avoid injury to another. The Court’s opinion has failed to grasp this fundamental distinction between tort and contract law. “There is *102no tort liability for ... failing to do what one has promised to do in the absence of a duty to act apart from the promise made.” Prosser, Torts § 92 (1984). In other words, if the alleged obligation to do or not to do something does not exist except for the contract, then breach of such an obligation is answerable only on a contract theory. Id.; Taylor v. Herbold, supra.
The fact that a contractual covenant, such as a covenant of good faith and fair dealing, is implied does not mean that violation of such gives rise to an action in tort. A covenant of good faith and fair dealing is not a duty that exists independent of the contract. An adequate remedy exists in an action on the contract for breach of the covenant of good faith and fair dealing. There simply is no need for this Court to now create an additional action in tort. If breach of the covenant is so egregious so as to constitute “an extreme deviation from reasonable standards of conduct, performed with an understanding of its consequences,” Linscott v. Rainier National Life Ins. Co., 100 Idaho 854, 860, 606 P.2d 958, 964 (1980), then the injured party may properly seek punitive damages for such a “bad faith” breach of a covenant of good faith and fair dealing.
Those jurisdictions which have created the tort of bad faith breach of an insurance contract apparently have done so because those same jurisdictions prohibit an injured party from seeking punitive damages in a contract action for such egregious, bad faith conduct. The leading case relied on by the majority, Gruenberg v. Aetna Ins. Co., 9 Cal.3d 566, 108 Cal.Rptr. 480, 510 P.2d 1032 (1973), was just such a case. California courts are prohibited from awarding punitive damages in breach of contract actions.
“The statute providing for exemplary or punitive damages authorizes the recovery of such damages only in an action for the breach of an obligation not arising from contract. Thus, an award of exemplary or punitive damages may not be granted to the plaintiff in an action based on a breach of contract, even though the defendant’s breach was willful, fraudulent, or malicious.” 23 Cal.Jur.3d, Damages § 121 (1975).
Thus, the California Supreme Court in Gruenberg had no remedy other than creating the bad faith tort in order to redress the alleged unconscionable actions of the insurance company in that case. Contrary to the law in California, the law in Idaho permits recovery of punitive damages in breach of contract actions. Therefore, the Gruenberg rationale is not applicable in this jurisdiction. The same is true in Montana where, as the majority opinion itself recognizes, punitive damages are prohibited in contract actions by statute. That explains why the court in Lipinski v. Title Ins. Co., 202 Mont. 1, 655 P.2d 970 (1983), created the new tort of “bad faith” breach of the duty of fair settlement. However, in Idaho, a party alleging unconscionable conduct on the part of an insurance company in settling a claim may properly seek punitive damages in an action on the contract for such egregious or bad faith conduct. Linscott v. Ranier Natl. Life Ins. Co., supra. Thus, in Idaho, an action in tort is unnecessary. It adds nothing by way of possible recovery that is not already available by way of an action on the contract.
Plaintiff may sue on the contract and seek damages based on her expectation interest under the contract. Damages based on her expectation interest may be measured by “the loss in the value to [her] of [Unigard’s] performance caused by its failure or deficiency, plus any loss, including incidental or consequential, caused by the breach.” Restatement (Second) Contracts, § 347 (1981). Plaintiff’s alleged damage of loss of credit and foreclosure of her property may be compensable in an action on the contract if such damages were foreseeable, or within the contemplation of the parties, at the time the contract was formed. Hadley v. Baxendale, 9 Exch. 341, 156 Eng.Rep. 145 (1854); McCormick, Damages §§ 137, 138 (1935); Lamb v. J.T. Robinson, 101 Idaho 703, 620 P.2d 276 (1980); J.B. Traylor v. Henkels & McCoy, Inc., 99 Idaho 560, 585 P.2d 970 (1978); Nora v. Safeco Ins. Co., 99 Idaho 60, 577 *103P.2d 347 (1978) (McFadden, J., dissenting). Any damages resulting from breach of the covenant of good faith and fair dealing would be recoverable to the extent that the party in breach had reason to foresee that such loss would be the probable result of the breach at the time the contract was made. A foreseeable loss is one which follows from the breach of a contract in the ordinary course of events, or even if not in the ordinary course of events a loss which the party in breach had reason to know would result from a breach of the covenant. Restatement (Second) Contracts § 351 (1981). Accordingly, the plaintiff’s contract remedies are adequate and there is no reason for this Court to create another new tort.
The majority also errs in its assertion that a fiduciary relationship exists between an insurer and its insured when suit is brought by the insured based on a claim under the terms of the policy. The majority purports to find support for its position in our recent case of Sullivan v. Allstate Ins. Co., 111 Idaho 304, 723 P.2d 848 (1986). The majority paraphrases language from Sullivan, but does so out of context. The Court in Sullivan specifically declined to “decide the legal relationship which exists between an insured and an insurance carrier when the insured makes a claim under an uninsured motorist clause of an [automobile] insurance policy, i.e., whether that relationship is adversarial or fiduciary.” Sullivan v. Allstate Ins. Co., Id. at 306, 723 P.2d at 850 (emphasis added). The majority now elevates that deliberate nondecision to the level of controlling precedent.
The Sullivan decision dealt solely with the unique issues of coverage “under an uninsured motorist clause.” It was only under those unique circumstances that we stated, “It is sufficient to say we do not agree with those courts who hold that in all circumstances the relationship is adversarial in nature and no obligation or liability rests upon the insurance carrier until the ‘legal liability’ of the uninsured motorist has been either admitted or adjudicated.” Id. Here, we are not involved with uninsured motorist coverage or any remotely analogous circumstance. It is therefore clear that when Mrs. White asserts a claim against Unigard for which coverage is denied, an adversarial relationship exists between the two. A first party claim, as is the case here, establishes a relationship between insured and insurer entirely distinct from that established when the claim is asserted by a third party. As was adequately stated by the Kansas Supreme Court in Spencer v. Aetna Life & Cos. Ins. Co., 227 Kan. 914, 611 P.2d 149 (1980):
“The first party relationship is distinguishable from the third party situation. In third party claims, the absolute control of the trial and settlement is in the hands of the insurer. That control gives rise to a fiduciary relationship between the insurer and its insured. In first party claims the insurer is not in a position to expose the insured to a judgment in excess of policy limits through its unreasonable refusal to settle a case nor is the insurer in exclusive control of the defense. Although an insurer must make a good faith attempt to settle claims [K.S.A. 40-2404(9)(F) ], the insured and insurer in a first party relationship have an adversary relationship, rather than a fiduciary relationship.” Id., 611 P.2d at 155.
The majority’s attempt to cast the relationship between plaintiff and Unigard as one between principal and fiduciary is unsupportable in law or logic.1 Again, the entire thrust of plaintiff’s claim against Unigard is the non-performance of Unigard’s alleged contractual obligation. If in fact plaintiff is able to establish that failure to perform was the result of willful or malicious or “bad faith” conduct on the part of *104Unigard, then her remedy is to seek punitive damages. Linscott v. Rainier Natl. Life Ins. Co., supra.2 Therefore, there is absolutely no need to create another new tort, as the majority does today.
The action of the Court today is particularly inappropriate given the present public perception that there is a crisis in our tort law system which requires immediate legislative tort law reform. Today’s decision can only fan the flames of legislative tort law reform.
SHEPARD, J., concurs.. The majority’s assertion that the insurance contract between Unigard and White is "personal” and not commercial in nature is likewise unavailing. The interests insured by Unigard are clearly commercial in nature. Mrs. White was insuring against economic loss, i.e., loss of her place of business by fire, etc. She was not insuring her life or health.
. The majority purports to find support in the Linscott case for the existence of an independent tort of bad faith breach of insurance contract. There is no basis for such a conclusion. Linscott specifically recognized that the remedy for bad faith breach of contract was an action on the contract and, under appropriate circumstances, recovery of punitive damages. Justice McFadden, writing for the Court in Linscott, specifically noted that a tort action would only lie for conduct independent of the underlying contract. Linscott v. Rainier Natl. Life Ins. Co., 100 Idaho at 860, n. 6, 606 P.2d 958.