dissenting:
The question before the court is whether an employee who is covered under the Utah Workers’ Compensation Act (“Act”) may assert a separate claim in the courts against her company’s workers’ compensation insurance carrier for alleged acts of bad faith which occurred during the processing and payment of her claim. Because I conclude that our case and statutory law support recognition of such an action, I respectfully dissent.
The majority relies on our holding in Beck v. Farmers Insurance Exchange, 701 P.2d 795 (Utah 1985), to “construe” Savage’s claim as one “for breach of the covenant of good faith and fair dealing which inheres in every contract.”1 Having done so, the majority applies principles of contract law to hold that the lack of contractual privity between Savage and Educators Insurance Company (“Educators”) prevents Savage from stating a claim for bad faith against Educators. By analyzing the claim solely under the principles of contract law espoused in Beck, the majority fails to give adequate deference to our prior jurisprudence in the area of bad faith claims involving the settling of insurance claims.
In Ammerman v. Farmers Insurance Exchange, 19 Utah 2d 261, 430 P.2d 576, 578 (1967), we held that an insured party could bring a tort cause of action against his insurance company for the company’s failure to bargain in good faith with a third party. We stated that a “cause of action for bad faith, though arising because of the policy, is not, strictly speaking, an action on the policy.... [I]t is properly regarded as a separate cause of action for a wrong done to the insured by violating a fiduciary duty owed him.” Id., 430 P.2d at 578 (footnote omitted). We reached this conclusion, as the majority notes, because of the relationship of trust and reliance between the insurer and the insured in third-party settings. Beck, 701 P.2d at 799-800 (discussing Ammerman). Following Ammerman, we held in Beck, without overruling the tort cause of action acknowledged in Ammerman, that in first-party settings, contract law rather than tort law should apply to bad faith claims. We explained that in a first-party setting, “the reasons for finding a fiduciary relationship and imposing a corresponding duty are absent. No relationship of trust and reliance is created by the contract; it simply obligates the insurer to pay claims submitted by the insured in accordance with the contract.” Id. at 800.
Hence, following Ammerman and Beck, bad faith claims against insurers may properly be brought as either tort or contract causes of action — the distinguishing factor being whether a relationship of trust and reliance exists between the insurer and the plaintiff such that the courts will recognize a tort-based duty of good faith and fair dealing on the part of the insurer. Cf. Aranda v. Insurance Co. of N. Am., 748 S.W.2d 210, 212 (Tex.1988) (bad faith claims against insurance providers may sound in tort as well as in breach of contract). Thus, in the present ease, the court’s focus should be the entire relationship between Savage and Educators, not simply whether the parties are in contractual privity. This accords with our recent acknowledgement, in Broadwater v. Old Republic Surety, 854 P.2d 527, 536 (1993), that “something other than a contractual relationship may impose a duty on an insurer to deal fairly with a third party.” I would conclude that the relationship between Savage and Educators is precisely the type of relationship in which such a duty should be imposed.
The relationship between a workers’ compensation insurer and an injured employee is clearly different from the relationship between an insurance company and a normal third party. In fact, some courts examining the relationship have concluded that it involves the same level of intimacy as does the relationship between an insurer and a first-party insured. See, e.g., Travelers Ins. Co. v. Savio, 706 P.2d 1258, 1272 (Colo.1985) (holding that “covered employee stands in the same position as an insured in a private insurance contract”). The roots of *869this relationship are grounded in the purpose of workers’ compensation statutes, which is to provide speedy, equitable relief to injured employees. See State Tax Comm’n v. Industrial Comm’n, 685 P.2d 1051, 1058 (Utah 1984); Wilstead v. Industrial Comm’n, 17 Utah 2d 214, 216, 407 P.2d 692, 693 (1965). Under such statutes, employees relinquish their common law claims against their employers in return for the promise that employers and their workers’ compensation insurers will fairly compensate them for injuries sustained in the course of employment. From the time of injury, employees in most areas rely on workers’ compensation insurers for protection from the severe financial adversity associated with disabling injuries. Aranda, 748 S.W.2d at 212. This reliance, combined with the exclusive control workers’ compensation insurers exercise over the processing of claims, creates a considerable disparity in bargaining power. See id. Thus, injured employees are particularly vulnerable to delaying tactics and other bad faith acts by workers’ compensation insurers. See Scott Wetzel Servs., Inc. v. Johnson, 821 P.2d 804, 810 (Colo.1991); Aranda, 748 S.W.2d at 212; Savio, 706 P.2d at 1273.
In addition, Utah law requires that all workers’ compensation insurance policies contain a provision allowing employees to “enforce, in their own names, the liability of the insurer.” Utah Code Ann. § 31A-22-1004. Thus, the insurance contract between Educators and Savage’s employer requires Educators to bargain directly with Savage. This statutory provision, together with the structurally inclusive nature of workers’ compensation insurance, creates a relationship of trust and reliance between injured employees and workers’ compensation insurers. I would hold, as have several other courts, that this relationship places a tort-based duty on insurers to deal in good faith with injured employees. See Savio, 706 P.2d at 1272-74 (nature of workers’ compensation insurance, combined with section of workers’ compensation statute requiring that insurance policies contain clause making insurer primarily liable to employee, creates tort duty on part of insurer to deal in good faith with employee); see also Case v. Toshiba Am. Info. Sys., Inc., 7 F.3d 771, 773 (8th Cir.1993) (recognizing duty to deal in good faith in workers’ compensation setting); Hollman v. Liberty Mut. Ins. Co., 712 F.2d 1259, 1262 (8th Cir.1983) (same); Southern Farm Bureau Casualty Ins. Co. v. Holland, 469 So.2d 55, 58 (Miss. 1984) (same); Falline v. GNLV Corp., 107 Nev. 1004, 823 P.2d 888, 894 (1991) (same); Aranda, 748 S.W.2d at 212-13 (same).
Having concluded that workers’ compensation insurers owe a duty of good faith to injured employees, the question remains as to what standard of care should apply. I would conclude, as have most other courts addressing the issue, that this standard should include two elements: (1) unreasonable conduct and (2) knowledge that the conduct is unreasonable or a reckless disregard for the fact that the conduct is unreasonable. Savio, 706 P.2d at 1272; Falline, 823 P.2d at 891; Aranda, 748 S.W.2d at 213. The Texas Supreme Court has discussed the purpose of this standard as follows:
The first element of this test requires an objective determination of whether a reasonable insurer under similar circumstances would have delayed or denied the claimant’s benefits. The second element balances the right of an insurer to reject an invalid claim and the duty of the carrier to investigate and pay compensable claims. This element will be met by establishing that the carrier actually knew there was no reasonable basis to deny the claim or delay payment, or by establishing that the carrier, based on its duty to investigate, should have known that there was no reasonable basis for denial or delay. Under the test, carriers will maintain the right to deny invalid or questionable claims and will not be subject to liability for an erroneous denial of a claim. Carriers that breach the duty of good faith and fair dealing, however, will be subject to liability for their tortious conduct.
Aranda, 748 S.W.2d at 213. Thus, the need of injured employees to have their claims adjusted in good faith is balanced with the need of workers’ compensation insurers to *870diligently investigate claims.2 After reviewing Savage’s complaint, I would conclude that she has met the elements necessary to state a claim for bad faith. When ruling on a motion to dismiss for failure to state a claim, we “must construe the complaint in the light most favorable to the plaintiff and indulge all reasonable inferences in [her] favor.” Mounteer v. Utah Power & Light Co., 828 P.2d 1055, 1058 (Utah 1991). Savage’s first amended complaint alleges that Educators’ denial of her claim was unreasonable and that Educators acted “with a reckless disregard of a reasonable basis for denial, despite the validity of the claim.” The complaint further alleges that Educators’ unreasonable and intentional acts caused Savage to suffer economic, physical, and mental injuries. Under the applicable standard, I would hold that Savage has stated a claim upon which relief may be granted.
The majority warns that recognizing a cause of action in favor of injured employees such as Savage “could do substantial harm to the workers’ compensation system” and could result in “many and manifold” suits. This warning, in my view, suggests a basic misunderstanding of the Workers’ Compensation Act. Section 35-1-60 of the Act states that the workers’ compensation scheme shall be the exclusive remedy for injuries employees sustain “in the course of or because of or arising out of [their] employment.” Utah Code Ann. § 35-1-60 (emphasis added). We addressed this section in Mounteer, 823 P.2d at 1056-58, where we held that the exclusivity provision applied only to injuries covered by the Act and thus did not prevent an employee from bringing a claim for slander in state court. After reviewing the entire Act and finding no provision for compensation for damage employees sustained as a result of defamation, we stated, “It would be an erroneous oversimplification for us to lump together all of plaintiffs claimed damages ... and hold that since all of his damages stemmed directly or indirectly from the [accident] ..., workers’ compensation should be his sole remedy.” Id. at 1057.
Similarly, after reviewing the Act, I find no provision indicating that claims against workers’ compensation insurers for bad faith in handling claims for compensation are covered by its provisions. The Act applies only to injuries arising out of the course of employment; if the injury is not contemplated by the Act, the exclusivity provision does not apply. See id. The basis of Savage’s claim is not the industrial injury upon which her workers’ compensation claim is based, but rather the injuries she suffered as a result of Educators’ alleged bad faith in settling her claim. Indeed, the majority of courts addressing the issue have concluded that exclusivity provisions do not prevent injured employees from stating claims against workers’ compensation insurers where the basis of the claims are intentional acts. See Hollman, 712 F.2d at 1262 (“The weight of the case law clearly supports causes of action for such intentional torts and does not recognize exclusivity provisions of worker’s [sic] compensation statutes to be a bar to the action.”); Holland, 469 So.2d at 58 (listing eases).3 In addressing the contention that recognizing a cause of action for bad faith will “substantially harm” the workers’ compensation system, the Colorado Supreme Court stated:
The concern that permitting state court tort actions to proceed will produce serious and manifold conflicts between rulings of the courts of law and worker’s [sic] compensation agencies arises only when the same legal issue is committed to both systems for resolution. Such overlap does not exist between our statutes and the tort of bad faith. The duty of an insurer under the [Workers’ Compensation] Act to pro*871vide benefits and compensation is factually and analytically distinct from its duty to deal in good faith with claimants....
Savio, 706 P.2d at 1270.4 Furthermore, the duty of care standard I have proposed will not create a windfall for injured employees and will not result in a flood of litigation as the majority suggests. Injured employees will recover only if they can demonstrate that the workers’ compensation insurer acted unreasonably and with knowledge of or reckless disregard for the fact that no reasonable basis existed for denying the claim. This standard places a significant burden on injured employees and protects workers’ compensation insurers who deny claims in good faith. Accordingly, I would hold that section 35-1-60 does not bar Savage from bringing a claim in the courts for the alleged bad faith of Educators in settling her compensation claim.5
Finally, the majority states that its decision to uphold the dismissal of Savage’s claim “does not give workers’ compensation insurers free rein to act in a dilatory manner in resolving the claims of injured employees.” As support, the majority points to portions of the Utah Code and the Utah Rules of Administrative Procedure which provide for penalties against workers’ compensation insurers who withhold payment without good cause. While these penalties may deter some bad faith behavior on the part of the workers’ compensation insurer, they provide no relief to injured employees who may suffer great hardship as a result of the bad faith delay or denial of their benefits. The availability of tort damages under the standards I suggest will provide relief to injured employees and further serve to deter bad faith behavior by workers’ compensation insurers.
In conclusion, in the absence of an obligation to deal in good faith, workers’ compensation insurers may create obstacles to payment and may indeed have economic incentives to do so. This kind of delaying tactic l’uns counter to the goals of the workers’ compensation system and creates substantial hardships for injured employees. Accordingly, I would hold that Educators owes a duty of good faith to Savage when investigating and processing her workers’ compensation claim, even though it is not in contractual privity with her. I would reverse the judgment of the Utah Court of Appeals.
STEWART, Associate C.J., concurs in Justice DURHAM’S dissenting opinion.. Savage actually stated the issue in her petition for a writ of certiorari as follows: "Is there a remedy at law against a workers [sic] compensation insurance carrier for bad faith adjusting of a workers [sic] compensation claim in the state of Utah by an injured worker?”
. The majority states that requiring Educators to deal in good faith with Savage creates an "unresolvable conflict” because Educators cannot be expected to "zealously protect” the interests of both Savage and Savage’s employer. I disagree. The standard I have suggested allows Educators to fully investigate employee claims but also requires them to deal in good faith with injured and vulnerable employees. As noted, Utah law requires workers’ compensation insurers to deal directly with employees — the standard I suggest simply requires them to do so in good faith.
. Of the courts holding that actions for bad faith are barred by exclusivity provisions, most have found that relevant workers’ compensation acts provide a specific remedy for the asserted injury. Savio, 706 P.2d at 1271 n. 17 (citing cases from eight different jurisdictions).
. The majority notes that "the workers' compensation system contemplates the situation where a claim for medical benefits is denied by the workers’ compensation insurer” and that Savage took advantage of this system. It is true that Savage eventually received the medical relief she desired; however, the tort of bad faith depends on the conduct of the insurance compensation carrier regardless of the ultimate resolution of the underlying claim for compensation. Savio, 706 P.2d at 1270. The fact that Savage eventually received the dorsal column stimulator does not compensate her for the injuries, including pain and suffering, allegedly resulting from Educators' bad faith.
. In a footnote, the majority, citing Broadwater, 854 P.2d at 536, and Beck, 701 P.2d at 800 n. 3, states that it would not "foreclose the possibility” that a claimant such as Savage could state a cause of action for an independent tort under Utah law. I would go one step further to hold that Savage has stated a cause of action for the tort of bad faith.