dissenting.
Today the majority announces a new civil duty (giving rise to a tort claim for damages) that is neither implied in contract, mandated by statute, nor recognized at common law. In what I consider to be a misconstruction of our prior holdings, the majority finds that certain claims adjusters owe a duty directly to insured parties, despite the absence of any existing contractual or other legal relationship between them, based solely on the amount of influence the adjusters actually exercise over the ultimate decision to allow or not allow coverage. It does so to protect the insured party by providing a disincentive for wrongful behavior by agents of the insurer, but also by providing an alternate source of recovery. |
'While its goal may be laudable, I do not believe the majority's conclusion arises out of a legal theory. Social policy is clearly an important consideration in the interpretation and development of the law, but it cannot be the primary basis for judicial resolution of individual cases and controversies. Because I believe that such policy-driven holdings create unworkable rules of law and generally undermine confidence in the judicial process, I would leave public policy initiatives of this kind to the General Assembly. I therefore respectfully dissent.
Initially, it must be understood that the liability created by the majority today is separate and distinct from liability for insurance coverage under the terms of a contract. It is of course the insurer who is contractually liable to provide coverage under the terms of an insurance contract. Along with about half the other jurisdictions in this country, Colorado has also allowed that an insurer may be separately liable in tort for damages it causes by wrongfully denying insurance coverage.1 Without disputing the district *470court's judgment that Cary is not a third-party beneficiary of the contract between the City and United, however, and without suggesting that the legal relationship between the City and United is a sham or that United is actually liable to Cary for coverage on his contract with the City, the majority holds that certain agents of an insurer, depending upon their contractual agreements with the insurer and their actual participation in the claims process, may also be directly liable to a policyholder for damages caused by the insurer's denial of coverage.
The majority suggests that it does no more than apply existing "exceptions to the privity requirement" of a claim for bad faith breach of contract, and it likens its approach to other instances in which we have found a duty of care in the absence of a contractual relationship. See maj. op. at 466-467 & n. 7. In my view, this characterization not only misconstrues our prior holdings but highlights a fundamental difference in our understanding of the theoretical underpinnings of the tort of bad faith breach. While a tort by its very nature is an injury or wrong that is independent of contract, the tort of bad faith breach is unusual in that it recognizes liability for the wrongful breach of a duty to comply with the terms of an insurance contract. Unlike other duties of care that are independent of contractual relationships, the duty created by the majority in this case subjects non-contracting parties to liability for the denial of insurance coverage under the terms of a contract.
We have held that all contracts contain an implied duty of good faith and fair dealing, see Transamerica Premier Ins. Co. v. Brighton School Dist. 27J, 940 P.2d 348 (Colo.1997), but even a wrongful breach does not always give rise to a claim for damages in tort. It is only the "special nature of the insurance contract and the relationship which exists between the insurer and the insured" that can give rise to tort liability for a wrongful breach. Farmers Group Inc. v. Trimble, 691 P.2d 1138, 1141 (Colo.1984). We have also recognized that insurance-like relationships can be created and corresponding duties imposed by statute rather than con-
tract, similarly giving rise to an action in tort for wrongful breach of those duties. Whether the special duty is implied by a contractual relationship or imposed by statute, however, a breaching party can be liable only for damages suffered by someone to whom it owes a duty.
Our holdings that are characterized by the majority as "exceptions" to the privity requirement of a bad faith breach of contract claim are, to my mind, not exceptions at all. Some of the examples cited by the majority do not alter the privity requirement in any way, while the others do not even involve a bad faith breach of contract. In Trans-america, for instance, the contractual relationship of the parties was never in doubt. The issue before the court concerned only the question whether the duty owed by a surety to its beneficiary is sufficiently like that of an insurer to its insured to implicate similar consequences for a breach. Trans-america, 940 P.2d at 349. Largely because the legislature chose to classify a suretyship agreement as an insurance contract, we held that a wrongful breach of the surety's similar contractual duty to its beneficiary should also give rise to an action in tort for bad faith breach of the contract. Id. at 358-54.
By contrast, neither Travelers Ins. Co. v. Savio, 406 P.2d 1258 (Colo.1985), nor Scott Wetzel Servs., Inc. v. Johnson, 821 P.2d 804 (Colo.1991), was based on the breach of a contract. In Savio, we found that because the statutory workers' compensation regulatory scheme had much in common with insurance and because the statutory scheme created a duty, the wrongful breach of that duty should give rise to an action in tort just like the wrongful breach of the contractual duty owed by an insurer to its insured. Savio, 706 P.2d 1258. In Wetzel, we made even more clear that the duty giving rise to a tort claim was created by statute, by finding a legislative intent to impose the duty to injured workers not only on employers and their workers' compensation carriers but even on independent claims adjusters. Wet-gel, 821 P.2d at 811. To be sure, the nature of the functions actually performed by workers' compensation claims adjusters was an *471important factor in determining that their involvement was contemplated by the regulatory scheme and therefore that they fell within the class upon which the statute imposed a duty of fair dealing in processing workers' compensation claims. We did not, however, even remotely suggest that mere involvement in the processing of insurance claims creates a legal relationship that includes a special duty of good faith and fair dealing to insured parties.
By deriving a duty to an insured person from the adjuster's separate relationship with the insurer and actual participation in the claims process, the majority, in my opinion, confounds the existence of a legal duty with the questions of causation and culpability; contravenes well-accepted ageney principles; and imposes liability without advance notice or consistent application of the law.
First, despite acknowledging that a "special relationship" is essential, the majority actually eliminates the need for any legal relationship between the claims adjuster and insured, premising its new duty instead on "the power, motive, and opportunity to act unserupulously in the investigation and servicing of the insurance claims." Maj. op. at 463-464. Motive and opportunity to see that coverage is denied may be relevant to the question whether United acted in good faith, but they clearly do not imply a duty to deal in any particular way with someone whom it does not insure. The significant question is not whether United owes a duty of good faith and fair dealing to someone, but to whom it owes such a duty. Similarly, the significance of United's involvement in processing claims for the City is not that it is acting like an insurer but rather that it is acting for an insurer. To the extent that it insures the City with a stop-loss or reinsurance policy, it has a "semi-fiduciary" relationship with the City, its insured, and owes the City a special duty that potentially conflicts with a similar duty to the City's insured.
Second, by creating a legal relationship that is neither implied by the agreement of the parties nor mandated by statute, the majority resolves this pending controversy by creating duties and liabilities that never before existed, in this jurisdiction or virtually anywhere else, and that were not reasonably foreseeable. Although a significant number of jurisdictions recognize a separate recovery in tort for bad faith breach of contract, far fewer join our readiness to extend a similar cause of action to the denial of statutory workers' compensation claims.2 Virtually none has found an insurance-like duty not grounded in either contract or statute.
In Wolf v. Prudential Ins. Co., 50 F.3d 793 (10th Cir.1995), upon which the majority heavily relies, a panel of the Tenth Circuit Court of Appeals found the relationship between an insured and an independent claims adjuster to be a question of fact, not subject to summary judgment, where the adjuster was not only an insurance company itself but reinsured the nominal insurer, a church, and provided the church with the very insurance policy under which the coverage at issue was written. Even then, however, the Tenth Circuit did not find such a duty to exist in federal law but only predicted that the Oklahoma Supreme Court would impose such a duty if faced with a similar situation. The foresight of the federal court in this regard is at least questionable in light of Oklahoma's subsequent rejection of the Weigel! rationale and refusal to extend the bad faith tort even to a statutory workers' compensation claim. See Kuykendall v. Gulfstream Aerospace Technologies, 66 P.3d 374 (Okla.2002).
Finally, because I cannot find any theoretical basis for this duty, its seope is also unclear to me. Despite its reference to the broad legislative declaration in § 10-1-101, 8 C.R.S. (2002), the majority appears to reject the petitioners' argument that an action in tort should be permitted against all persons involved in the provision of insurance services, limiting the sweep of its holding instead to insurance claims adjusters having a reinsurance relationship with the actual insurer. It is unclear to me, however, the *472extent to which the holding rests on a virtual abdication of its role by the actual insurer, which the majority clearly implies was the case here. Furthermore, although the majority does not discuss or assign any particular weight to the implications of governmental immunity in this case, it makes clear that in "the typical case" an insured is adequately protected by the non-delegable duty of his insurer. Maj. op. at 466. Unless the unavailability or inadequacy of recovery from the insurer is a consideration, however, it remains unclear to me why the insured is not adequately protected by the well-accepted principles of agency law.
I would be considerably more reticent than the majority about judicially creating duties and liabilities, not heretofore recognized at law, especially when they conflict with other policy choices of the legislature and seem to rest so heavily on the equities of individual cases. Because I disagree with both the majority's rationale and its judgment, I respectfully dissent.
I am authorized to state that Justice KOURLIS joins in this dissent.
. See Douglas R. Richmond, The Two-Way Street of Insurance Good Faith: Under Construction, But Not Yet Open, 28 Loy. U. Chi. L.J. 95, 107 n. 74 (1996)(citing twenty-nine states that have recognized a common law tort for bad faith breach of a first-party insurance contract); see also Dominick C. Capozzola, First-Party Bad Faith: The Search for a Uniform Standard of Culpability, 52 Hastings LJ. 181, 182 n. 5 (2000)(finding twenty-five states that explicitly allow common law tort recovery, but citing five others that have allowed for "similar damages on expanded no*470tions of contract law," and two more that have enacted statutes covering bad-faith actions).
. See, e.g., Natividad v. Alexsis, Inc., 875 S.W.2d 695 (Tex.1994). See also Kuykendall v. Gulfstream Aerospace Technologies, 66 P.3d 374 (Okla.2002), Hodges, J., dissenting, at n. 33 (surveying jurisdictions that have decided whether or not to recognize common law tort claims for bad faith in the workers' compensation context).