IN THE SUPREME COURT OF THE STATE OF KANSAS

No. 123,684

NANCY GRANADOS, Individually, as Heir-at-Law of Francisco Granados, Decedent, and as Class Representative of All Heirs-at-Law of Francisco Granados, Decedent, Appellee/Cross-appellant,

v.

JOHN WILSON, Defendant,

and

KEY INSURANCE COMPANY, Appellant/Cross-appellee.

SYLLABUS BY THE COURT

1. On appeal from a garnishment award, an appellate court conducts a mixed review of law and fact. Under that framework, an appellate court reviews the district court's legal conclusions independently, with no required deference to the district court. But review of the district court's factual findings is deferential. The appellate court must accept those findings if they are supported by substantial competent evidence.

2. Under established Kansas precedent, an insurer owes its insured two legal duties when handling third-party liability claims against the insured: the duty to act with reasonable care and the duty to act in good faith. These two legal duties are implied contractual terms incorporated into liability insurance policies in our state.

4. Generally, a court commits legal error by articulating the insurer's implied contractual duty to act with reasonable care or the implied contractual duty to act in good faith in a more particularized, fact-specific manner because it conflates the question of duty, a question of law, with the question of breach, a question typically reserved for the trier of fact.

5. For an insurer to be liable for a judgment exceeding the coverage limits under the policy of insurance, there must be a causal link between the insurer's breach of duty and the excess judgment.

6. When a party fails to meet its burden of production and persuasion, remand is not generally an appropriate remedy.

James P. Maloney, of Foland, Wickens, Roper, Hofer & Crawford, P.C., of Kansas City, Missouri, argued the cause, and Kevin D. Brooks, of the same firm, and James D. Oliver, of Foulston Siefkin, LLP, of Overland Park, were with him on the briefs for appellant/cross-appellee.

Michael W. Blanton, of Gerash Steiner Blanton P.C., of Evergreen, Colorado, argued the cause, and Jared A. Rose, of The Law Office of Jared A. Rose, of Kansas City, Missouri, was with him on the briefs for appellee/cross-appellant.

Richard L. Budden, of Shamberg, Johnson & Bergman, Chtd., of Kansas City, Missouri, and Jakob Provo and James R. Howell, of Prochaska, Howell & Prochaska LLC, of Wichita, were on the brief for amicus curiae Kansas Trial Lawyers Association.

Cynthia J. Sheppeard, of Goodell Stratton Edmonds & Palmer LLP, of Topeka, was on the brief for amicus curiae Kansas Association of Defense Counsel.

The opinion of the court was delivered by

WALL, J.: This garnishment action arises from tragic circumstances. In October 2017, John Wilson was driving inebriated and ran a red light, striking another car and killing the driver. The driver's wife, Nancy Granados, brought a wrongful-death lawsuit against Wilson, and the district court entered a judgment against Wilson for $3,353,777.52.

To collect on that judgment, Granados filed a garnishment action seeking payment from Key Insurance Company under the automobile liability insurance policy it had issued to Wilson. Under that policy, Key limited its coverage for bodily injuries caused by Wilson to $25,000 per person or $50,000 in the aggregate. Despite these policy limits,

But on appeal, a panel of the Court of Appeals reversed the district court's judgment. The parties ask us to resolve two issues central to the panel's holding: (1) whether an insurer has a legal duty to settle with an injured third-party before that party has formally demanded compensation for injury; and (2) whether Granados proved that Key's negligence and bad faith caused the excess judgment against Wilson.

As to the first question, we reject the framing of the issue below. We decline the invitation to define an insurer's legal duties more narrowly, or in a more particularized manner, than established under our precedent. And under that precedent, insurers do not have a discrete legal duty to settle. Rather, when handling claims against its insureds, insurers have an implied contractual duty to act in good faith and to act with reasonable care under the circumstances. Whether specific acts or omissions related to the insurer's investigation, evaluation, communication, or settlement strategy breach either of these two legal duties is a question typically reserved for the trier of fact. By trying to define the contours of an insurer's purported "duty to settle" under Kansas law, the panel transformed a question of fact into a question of law, thereby invading the province of the fact-finder.

When a court applies an incorrect legal standard or framework, we often remand the case so the court can apply the correct one. But such a remand would be futile here because, as to the second question, we hold Granados failed to meet her burden to prove that Key's handling of the claim caused the judgment exceeding policy limits. Whether an insurer's conduct was the proximate or legal cause of the judgment is a question of fact. And as an appellate court, we typically defer to the district court's findings on such matters. But our deference is not absolute—a district court's findings must be supported

FACTS AND PROCEDURAL BACKGROUND

The facts relevant to the issues before our court occurred after Key learned of the October 2017 crash that killed Granados' husband. Thus, we do not focus on the circumstances leading to the crash. Suffice it to say there is no dispute Wilson was at fault.

Wilson notified Key about the crash the day after it happened. Based on this notice, Granados was identified as a claimant in Key's claim management system. This notice also triggered Key's claim liability review. As part of that review, Key obtained the police report, which revealed Wilson had run the light and appeared to be under the influence of alcohol or drugs or both. Thus, Key concluded Wilson was at fault and damages would exceed the $25,000 per-person coverage limit for bodily injuries under the automobile liability policy.

But Key never informed Wilson that it had reached that conclusion. It never contacted Granados to discuss settlement. Nor did it inform Wilson he would be responsible for any judgment exceeding policy limits if the case did not settle within those limits. Key eventually closed its claim file, believing Granados would not pursue any claim against Wilson.

In June 2018, about eight months after the accident, Granados filed a wrongful- death suit against Wilson. Key learned of the suit in early July. Three weeks later, it

After rejecting Key's settlement offer, the parties entered a "Settlement Agreement and Covenant not to Execute." Under that agreement, Granados promised not to execute on any judgment she obtained against Wilson in the wrongful-death action. In exchange, Wilson assigned to Granados any claims he had against Key under the automobile liability insurance policy. Following a September 2019 bench trial in the wrongful-death action, the district court entered judgment for Granados and against Wilson for nearly $4.5 million. The district court later granted a joint motion to amend the judgment, reducing the judgment amount to $3,353,777.52.

Several months later, Granados tried to collect on that judgment by filing a garnishment action against Key in Wyandotte County District Court. Standing in the shoes of Wilson in that garnishment action, Granados alleged Key had breached several implied contractual duties that it owed to Wilson. Granados alleged Key breached its duty to investigate the claim, its duty to evaluate the claim and consider the insured's interests, its duty to communicate the results of the investigation and evaluation to the insured, and its duty to negotiate a settlement. Granados argued these discrete legal duties, implicit in the automobile liability policy, required Key to contact Granados before the wrongful death suit was filed and settle for policy limits. Granados alleged she would have accepted that offer to avoid hiring a lawyer and suing. Thus, Granados claimed Key's breach of these implied contractual duties caused the judgment exceeding the $25,000 policy limit.

The matter proceeded to a two-day bench trial in November 2020. While several people testified, the testimony from two witnesses is particularly relevant to our analysis. First, Granados testified that before she engaged counsel and filed the wrongful death suit, she would have settled within policy limits, even if it were only $2,000 or $5,000, to avoid taking the case to trial and paying attorney fees. Second, a Key employee testified that many injured third parties never pursue recovery and about two-thirds (66%) of potential bodily-injury claimants never receive any payment from Key.

The district court issued its ruling from the bench. As the Court of Appeals panel observed, the "district court's comments about the case were somewhat meandering, and the court did not delineate explicit findings of fact and conclusions of law." Granados v. Wilson, 62 Kan. App. 2d 10, 17, 505 P.3d 794 (2022). That said, the district court's comments established several relevant findings, including: (1) Granados was a credible witness and would have settled for the $25,000 policy limit if Key had pursued settlement pre-suit; (2) it was reasonable under the circumstances for Key not to initiate settlement, so Key did not have a duty to do so; (3) Key breached its duty to communicate the results of its evaluation to Wilson and advise him of his personal liability for a judgment exceeding the policy limits; and (4) Key's breach of its duty to communicate with Wilson caused the excess judgment. Based on those findings, the district court entered judgment for Granados in the amount of $3,481,901.29.

Both parties sought review at the Court of Appeals. In Key's appeal, it argued Granados had failed to present evidence showing that Key's failure to communicate with Wilson had caused the excess judgment against him. In Granados' cross-appeal, she

A panel of the Court of Appeals reversed the district court's judgment for Granados and remanded the matter with directions to enter judgment for Key. The panel first held that reversal was warranted because, after reviewing the record, it was clear that "the excess judgment was more the result of [Granados'] actions after the lawsuit was filed, rather than Key's conduct before the lawsuit was filed." 62 Kan. App. 2d at 39. The panel then considered whether Key had a legal duty to settle. It affirmed the district court on that point, holding that in the context of third-party claims, insurers have no legal duty to begin negotiations before the injured third party has filed a claim. 62 Kan. App. 2d at 39-49.

Following the panel's decision, we granted Granados' petition for review. We heard oral argument from the parties in October 2022. Jurisdiction is proper. See K.S.A. 60-2101(b) (providing for Kansas Supreme Court review of Court of Appeals decisions).

ANALYSIS

Granados raises two challenges to the decision of the Court of Appeals panel. First, she contends the panel concocted a new rule of law by holding that an insurer's duty to settle with an injured third party is not triggered until the third party has filed a claim. Granados argues an insurer's duties—including the duty to settle—begin once the insurer has notice of the claim. Second, Granados contends the panel improperly disregarded the district court's factual findings when it found that her conduct, not Key's breach of duty, had caused the excess judgment against Wilson. Key defends the panel's holdings.

To resolve these issues, we first explain the legal standard appellate courts use when reviewing an appeal from a garnishment order. Second, we identify the two implied contractual duties insurers owe their insureds and carefully distinguish questions of legal duty from those related to a breach of such duty. Third, we evaluate the panel's holding, ultimately concluding the panel applied an incorrect legal framework. Finally, we address the question of causation and explain why it is appropriate for our court to resolve this appeal without a remand to the panel.

I. On Appeal from a Garnishment Order, We Defer to the District Court's Factual Findings but Review Legal Conclusions Independently

On appeal from a garnishment award, an appellate court conducts a mixed review of law and fact. Geer v. Eby, 309 Kan. 182, 190, 432 P.3d 1001 (2019). Under that framework, an appellate court reviews the district court's legal conclusions independently, with no required deference to the district court. But our review of the district court's factual findings is deferential. We must accept those findings if they are supported by substantial competent evidence. Substantial competent evidence is relevant evidence that a reasonable person might accept as supporting a conclusion. 309 Kan. at 190-91. When making that determination, an appellate court must not weigh conflicting evidence, pass on the credibility of witnesses, or redetermine questions of fact. 309 Kan. at 190-91.

II. When Handling Claims Against the Insured, Insurers Owe the Insured an Implied Contractual Duty of Reasonable Care and an Implied Contractual Duty to Act in Good Faith; Whether an Insurer Has Breached Those Duties Is a Question for the Trier of Fact to Determine Under the Specific Circumstances of Each Case

Legal duties can arise by express contractual provision, by statute, or by court- made common law. Wicina v. Strecker, 242 Kan. 278, 286, 747 P.2d 167 (1987). Here, we are concerned with Key's court-made, common-law duties. Under our established precedent, these legal duties are incorporated into Kansas liability insurance policies as implied contractual terms. To be sure, Wilson's insurance policy imposes various express contractual duties on both him and Key. See Aves v. Shah, 258 Kan. 506, 511, 906 P.2d 642 (1995) ("In Kansas, insurance policies are typically considered contracts."). And the Legislature has also imposed legal duties on insurers by statute. See, e.g., K.S.A. 40-2404(9) (identifying duties of the insurer related to claims-settlement process). But Granados has asserted no claim arising from an alleged breach of an express contractual or statutory duty that Key owed Wilson. Thus, our focus is on the implied contractual duties that Kansas courts have read into liability insurance contracts and applied to insurers operating in this state.

"The provisions of the policy requiring the insurer to defend also encompass the negotiation of any settlement prior to trial. When a claim is made against the insured for an amount in excess of the policy coverage, the insurer's obligation to defend creates a conflict of interest on its part. On the one hand, its interests lie in minimizing the amount to be paid; on the other, the insured's interests, which the insurer is supposedly defending, lie in keeping recovery within policy limits, so that he will suffer no personal financial loss." 202 Kan. at 336.

To resolve that conflict of interest, Bollinger held that an insurer has two legal duties in handling claims against its insured: the duty to act with reasonable care and the duty to act in good faith. 202 Kan. at 332-33. An insurer breaching either duty may expose itself to liability beyond the policy limits in the insurance contract. 202 Kan. at 332-33. Since Bollinger, Kansas courts and federal courts applying Kansas law have continued to recognize these two, broad implied contractual duties set out in that decision. See, e.g., Associated Wholesale Grocers, Inc. v. Americold Corp., 261 Kan. 806, 845, 934 P.2d 65 (1997); Castoreno v. Western Indemnity Co., Inc., 213 Kan. 103, 109, 515 P.2d 789 (1973); Wade v. EMCASCO Ins. Co., 483 F.3d 657, 660 (10th Cir. 2007); Ins. Co. of North America v. Medical Protective Co., 768 F.2d 315, 321 (10th Cir. 1985).

That said, courts have not always described an insurer's implied contractual duties in broad terms, which has created some confusion here about whether insurers owe more

This framing of the issue reflects a recent tendency—which we noted in Reardon v. King, 310 Kan. 897, 904, 452 P.3d 849 (2019)—to characterize the legal duty in "ever narrower and more particularized ways." The problem with that approach is that "duty rules are not meant to be fact specific. Rather, they are to set broadly applicable guidelines for public behavior." 310 Kan. at 904 (citing Cardi, Purging Foreseeability, 58 Vand. L. Rev. 739, 754 [2005]). When duties are framed narrowly and in a particularized fashion, the element of legal duty is conflated with the element of breach. As a result, this narrow, fact-specific framing of the insurer's implied contractual duties invades the province of the fact-finder. 310 Kan. at 904-05.

The existence of a duty is a question of law, but whether specific conduct satisfies or breaches that duty is a question of fact. Montgomery, 311 Kan. at 655-56, 659. And our court has long recognized that the trier of fact must decide whether the specific conduct in any given case breaches a broadly applicable legal duty. See, e.g., W. & W. Rld. Co. v. Davis, 37 Kan. 743, 749, 16 P. 78 (1887) ("'The natural instinct of self- preservation ordinarily will lead to the employment of all the precaution[s] which the situation suggests to an individual; and whether they are such as would occur to or be

Reardon cautions against defining general legal duties in a more fact-specific, discrete manner in tort cases. And this rationale applies equally to Granados' breach of contract claims against Key in this garnishment action. Granted, a plaintiff seeking damages from an insurer based on its failure to act with reasonable care or in good faith must bring a breach-of-contract claim, not a tort claim, because an insurance policy is typically a contract. Aves, 258 Kan. at 511. And we have held that an insurer's broad legal duties to act with reasonable care and in good faith are implied contractual terms incorporated into liability insurance policies issued in our state. Gilley v. Farmer, 207 Kan. 536, 543, 485 P.2d 1284 (1971); Glen v. Fleming, 247 Kan. 296, 311, 799 P.2d 79 (1990). Even so, we apply tort concepts to evaluate whether an insurer has breached the implied contractual terms to act with reasonable care and in good faith. See Glenn, 247 Kan. at 313 ("We have adopted, in our development of the substantive case law, the principle that the insurer's duties are contractually based and then approved a tort standard of care for determining when the contract duty has been breached."). Thus, plaintiffs asserting such claims must prove four well-known elements: a duty owed to the plaintiff; a breach of that duty; causation between the breach of duty and the injury to the plaintiff; and damages suffered by the plaintiff. See Shirley v. Glass, 297 Kan. 888, 894, 308 P.3d 1 (2013) (setting out four elements of a negligence tort claim).

Because the existence of a legal duty is a question of law while breach, causation, and damages are questions of fact, the court's primary role in these cases is to articulate the legal duty the fact-finder must apply to the facts. Reardon, 310 Kan. at 903. Bollinger did just that and articulated two broad duties that an insurer owes when handling claims against the insured: reasonable care and good faith. 202 Kan. at 332-33. By defining

And to assist the trier of fact in that determination, Bollinger even identified several factors that may be relevant to the factual inquiry:

"'[T]he following factors should be considered: (1) the strength of the injured claimant's case on the issues of liability and damages; (2) attempts by the insurer to induce the insured to contribute to a settlement; (3) failure of the insurer to properly investigate the circumstances so as to ascertain the evidence against the insured; (4) the insurer's rejection of advice of its own attorney or agent; (5) failure of the insurer to inform the insured of a compromise offer; (6) the amount of financial risk to which each party is exposed in the event of a refusal to settle; (7) the fault of the insured in inducing the insurer's rejection of the compromise offer by misleading it as to the facts; and (8) any other factors tending to establish or negate bad faith on the part of the insurer.'" 202 Kan. at 338 (quoting Brown v. Guarantee Ins. Co., 155 Cal. App. 2d 679, 689, 319 P.2d 69 [1957]).

Whether any of these factors have been established is, again, a question of fact reserved for the fact-finder. Medical Protective Co., 768 F.2d at 321.

The bottom line is that under Kansas law, whether certain conduct satisfies or breaches the implied contractual duties of reasonable care and good faith is a question reserved for the trier of fact (usually a jury). And federal courts, relying on Bollinger, have also emphasized that point, though not always consistently. See Wade, 483 F.3d at 670 (applying Bollinger factors to assess whether evidence supported breach of legal duties); Medical Protective Co., 768 F.2d at 321("[T]he question of liability depends

III. Because the Only Implied Contractual Duties Insurers Owe when Handling Claims Against the Insured Are the Broad Duties of Reasonable Care and Good Faith, the Panel Erred by Recognizing and Defining the Parameters of a Particularized Legal Duty to Settle with Third-Party Claimants

Granados cross-appealed to the Court of Appeals on the issue of Key's purported legal duty to settle. She argued to the panel, as she had to the district court, that Kansas law imposes four specific duties on an insurer under the umbrella of reasonable care and good faith, including the legal duty to negotiate settlement. More specifically, Granados contended insurers have a legal duty to pursue settlement with an injured third party on behalf of the insured whenever liability is reasonably clear and damages exceed policy limits, even if the third party has yet to demand compensation.

After carefully reviewing the Kansas and federal cases Granados and Key cited, the panel affirmed the district court's ruling that Key did not have to initiate settlement negotiations under the circumstances. But the panel's holding was not limited to the specific circumstances of this case. Instead, the panel held, as a matter of law, that "an insurer owes no affirmative duty to initiate settlement negotiations with a third party before the third party makes a claim for damages." Granados, 62 Kan. App. 2d at 49.

Under the Bollinger framework discussed above, we conclude the panel committed legal error by defining the scope of a narrower, fact-specific legal duty to settle under the umbrella of reasonable care and good faith. Under Kansas law, when handling claims against the insured, an insurer has no implied contractual duty to settle.

Rather, our established precedent makes clear that insurers have an implied contractual duty to act with reasonable care and in good faith when handling claims against the insured. A failure to properly investigate or evaluate claims, communicate with the insured, or settle with the injured party may (or may not) breach those duties, just as other specific facts may (or may not) constitute a breach. But those are fact questions to be decided by the trier of fact under the many circumstances that may give rise to an excess-judgment claim against an insurer. See Guarantee Abstract & Title Co. v. Interstate Fire & Cas. Co., 228 Kan. 532, 539, 618 P.2d 1195 (1980) (under facts of the case, whether reasonable care and good faith required the insurer to settle was a question of fact for the jury to determine in an action brought for bad faith and negligence). All of which is to say, it is error to characterize an insurer's implied contractual duties more narrowly than pronounced in Bollinger.

We addressed a similar error in Reardon. There, the client of a trust company filed a negligence action against the company based on the conduct of one of its employees, a licensed attorney employed as a trust officer. Although company policy prohibited the employee from practicing law, the employee represented the client in legal matters during his employment. And, in his capacity as trust officer, the employee transferred funds from the client's trust account to pay his flat rate legal fee of $5,000 per month. The client's negligence action sought to impose direct liability on the trust company for breaching the common-law duty that employers owe to third parties who encounter their employees. At trial, the district court instructed the jury on several negligence theories, including negligent failure to supervise the employee and negligent failure to train the employee. These instructions defined the company's legal duty in a fact-specific,

On appeal, we held the jury instructions had misstated Kansas law by recognizing "specific, discrete duties 'to train' and 'to supervise.'" Reardon, 310 Kan. at 904. "Employers in Kansas do not have a duty to third parties to train or to supervise their employees," we held. 310 Kan. at 904-05. Instead, they have a broad duty to use "reasonable care under the circumstances to prevent harm to third parties caused by its employees when those employees are acting within the scope of their employment." 310 Kan. at 904. Whether specific conduct relating to the training or supervision of an employee satisfies or breaches that broad duty is a question of fact properly reserved for the trier of fact. 310 Kan. at 904-05.

The same rationale applies here. Bollinger established that an insurer owes its insureds an implied contractual duty to act with reasonable care and in good faith when handling claims. The insurer does not have a specific, discrete legal duty to settle (or to investigate, evaluate, or communicate). An insurer's specific conduct surrounding settlement strategy may (or may not) breach the insurer's general legal duties, but that determination is for the fact-finder to make under all the circumstances of each case. By holding that insurers owe no legal duty to explore settlement with an injured third party before that person demands compensation, the panel effectively recast a question of fact into a question of law for the court to decide in every case. In doing so, the panel conflated the element of legal duty (a question of law) with the element of breach (a question of fact), thereby invading the traditional province of the fact-finder. See Marshall v. Burger King Corporation, 222 Ill. 2d 422, 443-44, 856 N.E.2d 1048 (2006) ("It is inadvisable for courts to conflate the concepts of duty and breach in this manner. Courts could, after all, 'state an infinite number of duties if they spoke in highly particular terms,' and while particularized statements of duty may be comprehensible, 'they use the

The panel here was not alone in that error. In Roberts v. Printup, 422 F.3d 1211, 1215-16 (10th Cir. 2005), a panel of the United States Court of Appeals for the Tenth Circuit reached a similar conclusion. Printup held that an insurance company owes no duty to initiate settlement negotiations prior to a claim being made. But that holding, like the holding of the panel here, is founded on the erroneous premise that Kansas law recognizes and incorporates more narrow, discrete, and fact-specific legal duties under the umbrella of good faith and reasonable care. Printup's holding also improperly focused its inquiry on the conduct of the injured third party, rather than the conflict of interest between the insurer and the insured. See Rector v. Husted, 214 Kan. 230, 239, 519 P.2d 634 (1974) (whether an insurer's duties require an attempt to settle is not contingent on a claimant's offer to settle); Bollinger, 202 Kan. at 336. Whether the injured party has demanded compensation or filed a claim with the insurer may be a fact relevant to deciding whether the insurer breached its implied contractual duties of reasonable care and good faith. But that inquiry is reserved for the trier of fact.

Granted, if the duties of reasonable care and good faith do not, under any set of circumstances, require an insurer to explore settlement before a third-party files a claim or demands compensation, then a court could declare that principle as a matter of law. See Deal v. Bowman, 286 Kan. 853, 859, 188 P.3d 941 (2008) (breach becomes a legal

Take the following hypothetical scenario, for example. A company insures a driver involved in an automobile accident. And a third-party passenger who is related to the insured-driver is severely injured in the crash. The insured reports the loss under the notice-of-claim provision of the insurance policy, and the insurer's investigation reveals that the insured is at fault and the third party's damages clearly exceed policy limits. Moreover, based on the familial relationship with the injured third party, the insured knows the passenger plans to consult an attorney in three weeks. But the insured also knows the passenger would settle within policy limits before consulting the attorney because of an urgent financial obligation. And the insured shares this information with the insurer.

Under this hypothetical, both the insurer and insured know liability is clear and the claim filed by the insured exceeds policy limits, creating a conflict of interest that requires the insurer to exercise reasonable care and to act in good faith. See Bollinger, 202 Kan. at 336 (The rationale for the common-law duties of reasonable care and good faith is to address the conflict of interest that exists when a claim exceeds policy limits.). They also know the claim can be settled within policy limits if they act quickly, even though the third party has not made formal demand. We cannot conclude, as a matter of law, that the insurer could never breach the duties of reasonable care and good faith by failing to explore settlement under these (or any other possible set of) circumstances simply because the third party has not yet made a formal demand. See, e.g., Keeton and Widiss, Insurance Law § 7.8(c), 889-90 (1988) ("In most circumstances the insurer, having reserved to itself the right to control the defense and the decision

Even here, Wilson reported the accident to Key in compliance with the notice-of- claim provision in the contract of insurance. Based on that report, Key designated Granados as a claimant in its system and initiated its claim-handling procedures. Key conducted a liability review and determined Wilson was at fault and that damages would exceed policy limits. This conclusion suggests a conflict of interest existed between the parties, arising from Key's desire to minimize any payment under the policy of insurance and Wilson's desire to settle within policy limits.

As these examples show, whether an insurer has breached the implied contractual duties of reasonable care and good faith is a fact-intensive inquiry. We cannot conclude that in every case, regardless of the circumstances, the duties of reasonable care and good faith never require an insurer to explore settlement before the injured third party makes a formal demand for payment or otherwise pursues a claim. See Ostrager & Newman, Handbook on Insurance Coverage Disputes, § 12.05[b], at 979 (20th ed. 2020) (collecting cases explaining that "[w]hether an insurer has acted in bad faith in failing to settle is generally held to be a question of fact"). Thus, we hold the panel erred by defining, as a matter of law, the contours of an insurer's purported duty to settle.

IV. Although the Panel Applied the Incorrect Legal Standard, We Need Not Remand the Matter for the Panel to Apply the Correct One

In the previous section, we held the panel committed legal error by defining the contours of an insurer's discrete, fact-specific duty to settle with third-party claimants. Kansas law recognizes only the broad duties of reasonable care and good faith in this context, and it is error to try to define an insurer's implied contractual duties more

But remand is not required here for two reasons. First, the district court did not conflate the factual question of breach with the legal question of duty. Instead, it held Key to the general implied contractual duties established in Bollinger—reasonable care and good faith. The district court found that Key did not breach its duty of reasonable care or good faith under the circumstances by failing to begin settlement discussions with Granados. And this finding is supported by substantial competent evidence. Second, although the district court found that Key breached its implied contractual duty of reasonable care and good faith by failing to communicate with Wilson, Granados failed to prove this omission caused the excess judgment. And the district court's causation findings to the contrary are not supported by substantial competent evidence. We address these points in turn.

A. The District Court's Ruling Did Not Conflate the Question of Duty with the Question of Breach

Granados' framing of her claim in the district court conflated the factual question of breach with the legal question of duty. Even so, a careful reading of the district court's rulings on summary judgment and at trial confirms it did not do the same.

But ambiguity remained after summary judgment. Although the district court's bench ruling seemed to foreclose Granados' "failure to settle" claim, the journal entry merely denied both parties' motions for summary judgment. If the district court had dismissed that theory of liability against Key, it should have granted Key's summary judgment motion, in part, and denied it, in part. Thus, it is unclear whether the district court made a definitive ruling at summary judgment on Key's "failure to initiate settlement" theory of liability.

After the bench trial, the district court again made findings from the bench related to Granados' "failure to initiate settlement" theory. The court found Key did not contact Granados to explore settlement because it believed she, like many other potential claimants, would never pursue recovery. While such a practice "might turn some people's stomach," the district court found it was "a magnificent strategy" and "sound business judgment." Based on these findings, the district court concluded Key did not breach the duty of reasonable care or good faith by failing to settle with Granados.

B. Substantial Competent Evidence Does Not Support the District Court's Finding of Causation

To prevail on her claim against Key, Granados had to prove a causal link between the insurer's conduct and the excess judgment. See Hawkins v. Dennis, 258 Kan. 329, 347, 905 P.2d 678 (1995); Gruber v. Estate of Marshall, 59 Kan. App. 2d 297, 315, 482 P.3d 612 (2021), rev. denied 313 Kan. 1040 (2021). In this garnishment action, Granados stands in the shoes of Wilson. See Geer, 309 Kan. at 191. Thus, Granados had the burden to prove by a preponderance of evidence that Key's breach of its implied contractual duties was the proximate cause of the excess judgment against Wilson. See Williams v. C-U-Out Bail Bonds, 310 Kan. 775, 788, 450 P.3d 330 (2019) (noting that in any negligence action, the plaintiff must prove causation by a preponderance of the evidence).

"There are two components of proximate cause: causation in fact and legal causation. To establish causation in fact, a plaintiff must prove a cause-and-effect relationship between a defendant's conduct and the plaintiff's loss by presenting sufficient evidence from which a jury can conclude that more likely than not, but for defendant's

The district court found Key had breached its implied contractual duties only by failing to advise Wilson of the risks and consequences of a judgment exceeding the policy limits. And because the district court granted judgment for Granados, it necessarily (though implicitly) found Key's failure to communicate with Wilson had caused the excess judgment against him. See In re Guardianship and Conservatorship of B.H., 309 Kan. 1097, 1108, 442 P.3d 457 (2019) ("When no objection is made, this court presumes the district court found all facts necessary to support its judgment.").

Causation is a question of fact. Montgomery, 311 Kan. at 659. And under our standard of review, we defer to the district court's causation findings if they are supported by substantial competent evidence. See Geer, 309 Kan. at 190-91. When making that determination, an appellate court must not weigh conflicting evidence, pass on the credibility of witnesses, or redetermine questions of fact. 309 Kan. at 191.

Based on our review of the record, we hold that the district court's causation findings are not supported by substantial competent evidence. To establish causation, Granados had to show that, but for Key's failure to communicate with Wilson, a judgment exceeding policy limits would not have been entered against him. Drouhard- Nordhus, 301 Kan. at 623.

At trial, Granados testified that she would have settled within policy limits had Key made such an offer before she hired a lawyer and filed her wrongful death action against Wilson. The district court found Granados' testimony credible, and we defer to this credibility determination on appeal.

The Court of Appeals panel likewise concluded that Granados failed to establish causation. While we agree with the panel's conclusion, we depart from its reasoning. Rather than review the district court's finding for substantial competent evidence, as the standard of review demands, the panel found that "the record reflects that the excess judgment was more the result of [Granados'] actions after the lawsuit was filed, rather than Key's conduct before the lawsuit was filed." Granados, 62 Kan. App. 2d at 39. And in reaching that conclusion, the panel discounted Granados' testimony, finding that her "argument that she reasonably rejected the post-suit policy-limit settlement offer because of the fees she incurred by filing the lawsuit is unpersuasive." 62 Kan. App. 2d at 37. The panel's reasoning does not follow our well-established standard of review. When an appellate court reviews a district court's findings of fact, it must not substitute its own

Even so, we may affirm the decision of a Court of Appeals panel when we agree with its conclusion but depart from its reasoning. See State v. Williams, 311 Kan. 88, 91, 456 P.3d 540 (2020) (affirming Court of Appeals as right for the wrong reason). Here, we disagree with the panel's reasoning because it deviates from the applicable standard of review. But we agree with the panel's conclusion because Granados failed to carry her burden to prove causation and the district court's findings to the contrary are not supported by substantial competent evidence.

Thus, we affirm the panel's decision to reverse the judgment for Granados and remand the matter to the district court with instructions to enter judgment for Key. See State v. Dailey, 314 Kan. 276, 279, 497 P.3d 1153 (2021) (holding that party bearing the burden of production and persuasion not entitled to remand for new trial after failing to sustain its burden of proof—"its case should ordinarily have to stand or fall on the record it makes the first time around") (quoting United States v. Dickler, 64 F.3d 818, 832 [3d Cir. 1995]).

Judgment of the Court of Appeals reversing the district court is affirmed. Judgment of the district court is reversed, and the case is remanded with directions.

BILES, J., not participating.

26