R&R v. Utah Property and Casualty

2008 UT 80
This opinion is subject to revision before final
publication in the Pacific Reporter.
IN THE SUPREME COURT OF THE STATE OF UTAH
----oo0oo----
R&R Industrial Park, L.L.C.; 	Nos. 20070107
AlumaTek, Inc.; and Repair 	20070100
Express, Inc., 	20070131
Plaintiffs,
Appellees/Cross-Appellants,
v.
The Utah Property and Casualty
Insurance Guaranty Association, 	F I L E D
Defendant,
Appellant/Cross-Appellee. 	November 21, 2008
---
Third District, Salt Lake
The Honorable J. Dennis Frederick
No. 000901303
Attorneys: 	Andrew M. Morse, Richard A. Vazquez, Robert G.
Gilchrist, Jeffrey D. Eisenberg, David A. Cutt,
Salt Lake City, for plaintiffs
Tim Dalton Dunn, Gerry B. Holman, Salt Lake City,
for defendant
---
DURHAM, Chief Justice:
INTRODUCTION
¶1 	This case comes to us on appeal from summary judgment
and an order invalidating a settlement agreement between the
parties. 	We are presented with two questions in this case:
(1) whether the district court correctly interpreted Utah Code
sections 31A-28-201 to -222 (the Guaranty Act), and (2) whether
the district court properly invalidated the parties’ settlement
agreement (the Settlement Agreement). 	We affirm the district
court’s interpretation of the Guaranty Act, but reverse its
holding regarding the Settlement Agreement.

1 No substantive changes have been made to the Guaranty Act
since 2002; therefore we cite the newest version of the Act. 	See
Utah Code Ann. §§ 31A-28-2-1 to 222 (2005 & Supp. 2008).
2 Repair Express settled with UPCIGA and is no longer
involved in this case.
Nos. 20070107, 20070100, 20070131 	2
BACKGROUND
¶2 	In 1999, a fire occurred at the R&R Industrial Park,
L.L.C. (R&R) property in Salt Lake City, destroying a significant
portion thereof. 	At the time of the fire, AlumaTek, Inc.,
(AlumaTek) was leasing a portion of the property damaged by the
fire, and CDR Enterprises (CDR) was occupying another portion of
the property. 	The evidence indicated that material stored by CDR
caused the fire.
¶3 	At the time of the fire, CDR was insured by Reliance
Insurance Company (Reliance) with a liability insurance policy of
$1,000,000 per occurrence as well as an excess liability policy
of $5,000,000. 	However, Reliance was liquidated on February 21,
2002. 	Subsequently, the Utah Property and Casualty Insurance
Guaranty Association (UPCIGA) assumed the role of CDR’s insurer
pursuant to its statutory obligation under Utah Code sections
31A-28-202, -207 (2005 and Supp. 2008). 1
¶4 	R&R collected $1,517,609.86 from its insurance carrier
CNA. 	Of that amount, $1,343,382.86 was for its first-party
property damage, and $174,227 was for lost rent. 	AlumaTek
received $272,000 from its insurance carrier, St. Paul Insurance
Company, for property damage.
PROCEDURAL HISTORY
¶5 	In November 2000, R&R filed suit against CDR for
negligence and breach of contract. 	On January 11, 2001, AlumaTek
filed its own action against CDR for negligence, claiming over
$500,000 in property and inventory damages and $700,000 for
losses stemming from interruption of business.
¶6 	CDR turned its defense over to its insurance company,
Reliance. 	Subsequently, Reliance was liquidated by order of the
Commonwealth Court of Pennsylvania, and, pursuant to its duties,
UPCIGA took over defense of the case.
A. 	THE SETTLEMENT AGREEMENT
¶7 	On February 21, 2003, R&R, AlumaTek, Repair Express 2,
and UPCIGA attended a mediation. 	During the mediation, UPCIGA

3 	Nos. 20070107, 20070100, 20070131
argued that it only had a maximum $300,000 obligation to R&R and
AlumaTek respectively, as it only had to respond to “one covered
claim per claimant” on behalf of Reliance. 	In addition, UPCIGA
argued that it should not have to pay any sum because of the
offset clause in Utah Code section 31A-28-213 (Supp. 2008), which
it argued requires the deduction from UPCIGA’s obligation of any
recovery from third-party insurers.
¶8 	To resolve the issue, the parties agreed to file a
declaratory action to determine UPCIGA’s rights and obligations
under the Guaranty Act in relation to the “one covered claim per
claimant” and the offset clause provisions of the statute. 	The
Settlement Agreement was drafted and submitted to all parties on
May 2, 2003, and was signed on May 21, 2003.
¶9 	The relevant part of the Settlement Agreement reads as
follows:
UPCIGA will pursue declaratory judgement
[sic] action regarding its rights and
obligations in this matter. 	More
specifically, this declaratory judgment
action will address, among other issues,
UPCIGA’s argument that the UPCIGA Act
provides the amounts payable by UPCIGA on
covered claims are to be reduced or offset by
amounts recovered under other insurance
policies. 	At issue is whether the offset is
subtracted from the $300,000.00 statutory
limit or whether the offset is subtracted
from a claimant’s damages. 	UPCIGA agrees
that if the judicial pronouncement in the
declaratory judgment action requires the
UPCIGA to calculate the offset from the
amount of a claimant’s damages and not from
the $300,000.00 statutory limit, UPCIGA will
automatically pay R&R Industrial Park,
Alumatek, and Repair Express $300,000.00 each
for and on behalf of the respective claims
against CDR Enterprises. 	Additionally, R&R
Industrial Park, Alumatek, and Repair Express
will assert claims that there are two
separate policies applicable to the claims in
this action. 	If the second/excess policy is
adjudicated to increase the statutory limit
to $600,000.00 per claimant, R&R Industrial
Park, Alumatek, and Repair Express will be
required to prove damages only in excess of
$300,000.00 each.

Nos. 20070107, 20070100, 20070131 	4
(Emphases added).
B. 	SUMMARY JUDGMENT
¶10 	Pursuant to the Settlement Agreement, a third-party
complaint was filed against UPCIGA by R&R and AlumaTek on July 1,
2003. 	UPCIGA answered the third-party complaint on April 1,
2004, arguing it was not required to pay excess coverage claims
and arguing that it was entitled to an offset on its statutory
indemnification obligation against funds received by R&R from its
first-party insurer.
¶11 	R&R and AlumaTek filed a joint motion for summary
judgment on whether the Guaranty Act provides one or two layers
of $300,000 coverage for liability and excess policies, and
whether UPCIGA was entitled to an offset against funds received
from other insurance carriers.
¶12 	A hearing was held on February 7, 2005. 	On February
14, 2005, the court granted summary judgment to R&R and AlumaTek,
ruling that UPCIGA must provide coverage of $300,000 for each
liability policy as well as up to an additional $300,000 for each
excess policy. 	In addition, the court ruled that UPCIGA could
not subtract or offset the amount the plaintiffs received from
their first-party property insurers.
C. 	EVIDENTIARY HEARING
¶13 	The Settlement Agreement provided that if the district
court found that UPCIGA was obligated to provide coverage for
excess policies, an evidentiary hearing would be held to
determine R&R and AlumaTek’s damages. 	At the evidentiary
hearing, one of R&R’s experts testified that R&R had suffered
$862,000.31 in damages, and AlumaTek’s expert testified that
AlumaTek had suffered $918,494 in damages.
¶14 	In response, UPCIGA presented its own expert who
testified that R&R’s damages, including offsets for insurance
proceeds received from other sources and prejudgment interest,
were between $214,789.14 and $394,796.18. 	UPCIGA’s expert also
submitted evidence that AlumaTek suffered no uncompensated
damages from the fire.
¶15 	The district court awarded R&R $262,490.77, plus
$137,407.90 in prejudgment interest. 	AlumaTek was awarded no
damages.

5 	Nos. 20070107, 20070100, 20070131
D. 	INVALIDATION OF THE SETTLEMENT AGREEMENT
¶16 	Five days before the evidentiary hearing, UPCIGA filed
a hearing brief in which it argued, among other things, that the
court should set aside the entire Settlement Agreement. 	At the
conclusion of the evidentiary hearing, the court invalidated the
Settlement Agreement in its Amended Findings of Fact and
Conclusions of Law because it found that R&R and AlumaTek made
“less than accurate representations regarding insurance
proceeds.”
E. 	THE APPEAL
¶17 	Alumatek filed a notice of appeal on January 25, 2007,
to contest the invalidation of the Settlement Agreement. 	UPCIGA
filed a notice of appeal on January 26, 2007, contesting the
granting of summary judgment on the issues of whether the
statutory cap applied to multiple policies and whether UPCIGA was
entitled to an offset to its liability for payments from third-
party insurers. 	R&R also filed a notice of appeal on February 8,
2007, contesting the invalidation of the Settlement Agreement.
The Utah Supreme Court has jurisdiction in this matter pursuant
to Utah Code section 78A-3-102(3)(j) (Supp. 2008).
ISSUES AND STANDARD OF REVIEW
¶18 	Whether summary judgment is proper is a question of
law. 	“An appellate court reviews a trial court’s ‘legal
conclusions and ultimate grant or denial of summary judgment’ for
correctness, and views ‘the facts and all reasonable inferences
drawn therefrom in the light most favorable to the nonmoving
party.’” 	Orvis v. Johnson, 2008 UT 2, ¶ 6, 177 P.3d 600 (quoting
Higgins v. Salt Lake County, 855 P.2d 231, 233 (Utah 1993)).
¶19 	Whether the district court correctly interpreted the
Guaranty Act is a question of law. 	See Rushton v. Salt Lake
County, 1999 UT 36, ¶ 17, 977 P.2d 1201. 	Therefore, “we accord
no deference to the legal conclusions of the district court but
review them for correctness.” 	Id.
¶20 	Whether the invalidation of a settlement agreement is
proper can be both a question of law and a question of fact.
“Settlement agreements are governed by the rules applied to
general contract actions . . . .” 	Butcher v. Gilroy, 744 P.2d
311, 312 (Utah Ct. App. 1987). 	The standard of review on the
validation or invalidation of a contract “turns on whether the
claim is one of fact or law.” 	Cal Wadsworth Constr. v. City of
St. George, 865 P.2d 1373, 1375 (Utah Ct. App. 1993). 	In the
present case, the district court invalidated the Settlement
Agreement based on an interpretation of law and findings of fact.

Nos. 20070107, 20070100, 20070131 	6
However, we reverse that decision based on the district court’s
interpretation of law, which we review for correctness, giving no
deference to its legal conclusions. 	See Rushton, 1999 UT 36,
¶ 17.
ANALYSIS
¶21 	We will address the questions at issue in the following
order: 	first, whether the district court correctly interpreted
the Guaranty Act, and second, whether the district court properly
invalidated the Settlement Agreement.
I. 	THE GUARANTY ACT
¶22 	The district court granted summary judgment to R&R and
AlumaTek on the questions of whether the Guaranty Act applied to
multiple claims and whether UPCIGA’s liability could be offset by
recovery from R&R’s and AlumaTek’s first-party insurers.
“Summary judgment is appropriate only when there is no genuine
issue of material fact and the moving party is entitled to
judgment as a matter of law.” 	IHC Health Servs., Inc. v. D&K
Mgmt., Inc., 2008 UT 36, ¶ 15, __ P.3d. __. 	The district court
in the declaratory action found that there were no issues of fact
and the parties do not argue otherwise.
A. 	The Guaranty Act and Multiple Claims
1. 	Ambiguity of the Statute
¶23 	In construing the meaning of a statute we begin by
analyzing the plain language. 	Evans v. State, 963 P.2d 177, 184
(Utah 1998). 	We examine the purpose of the statute, its plain
language as a whole, and its relation to other statutes. 	State
v. Barrett, 2005 UT 88, ¶ 29, 127 P.3d 682. 	If the plain
language is unambiguous then we need not look beyond it, Evans,
963 P.2d at 184, and no other interpretive tools are needed in
analyzing the statute. 	Barrett, 2005 UT 88, ¶ 29. 	We have held
that a statute is ambiguous “‘if the terms used to express the
intention of the parties may be understood to have two or more
plausible meanings.’” 	Alf v. State Farm Fire & Cas. Co., 850
P.2d 1272, 1274 (Utah 1993) (quoting Vill. Inn Apartments v.
State Farm Fire & Cas. Co., 790 P.2d 581, 583 (Utah Ct. App.
1990)).
¶24 	The relevant part of the Guaranty Act states that
“[t]he association is obligated on the amount of the covered
claims: 	(i) existing prior to the order of liquidation; and
(ii) arising: 	(A) within 30 days after the order of
liquidation.” 	Utah Code Ann. § 31A-28-207(1)(a) (Supp. 2008).
The Guaranty Act defines a covered claim as “an unpaid claim

7 	Nos. 20070107, 20070100, 20070131
. . . if: 	(i) the claim arises out of the coverage; (ii) the
claim is within the coverage; (iii) the claim is not in excess of
the applicable limits of an insurance policy to which this part
applies.” 	Id. § 31A-28-203(4) (2005). 	In addition, the Guaranty
Act states its purpose is “to protect resident policyowners and
insureds under all types of direct insurance.” 	Id. § 31A-28-202
(2005).
¶25 	We conclude that the phrase “[t]he association is
obligated on the amount of the covered claims,” found in section
31A-28-207(1)(a), is ambiguous because it can be interpreted to
apply either to multiple claims or to multiple parties. 	When a
statute is ambiguous, we use extrinsic interpretive tools such as
policy and legislative intent to guide our analysis. 	Utah Pub.
Employees Ass’n v. State, 2006 UT 9, ¶ 60, 131 P.3d 208.
2. 	Extrinsic Interpretive Tools: 	Legislative History, Model
Codes, and Other States’ Legislation
¶26 	“When viewing the act as a whole does not eliminate
duplicative yet plausible meanings, the statute is ambiguous, and
we may resort to extrinsic interpretive tools to resolve the
ambiguity.” 	Id. 	These extrinsic tools are used to ”discover the
underlying intent of the legislature.” 	Hansen v. Salt Lake
County, 794 P.2d 838, 841 (Utah 1990). 	This discovery is “guided
by the meaning and purpose of the statute as a whole and the
legislative history,” id., “and relevant policy considerations.”
In re Kunz, 2004 UT 71, ¶ 8, 99 P.3d 793 (internal quotation
marks omitted).
¶27 	In 1985, the legislature rewrote much of the Utah
Insurance Code and passed the Guaranty Act. 	The new Act controls
the rules, operation, role, and duties of UPCIGA. 	Under the Act,
UPCIGA is comprised of all insurers licensed to transact
insurance business in the State of Utah. 	Utah Code Ann. § 31A-
28-205(1)(b) (2005). 	UPCIGA steps into the shoes of the
insolvent insurer and “has all the rights, duties, and
obligations of the insolvent insurer as if the insurer had not
yet become insolvent, including the right to pursue and retain
salvage and subrogation recoverable on paid covered claim
obligations.” 	Id. § 31A-28-207(1)(f)(ii) (Supp. 2008). 	In
addition, “[t]he association may assert all defenses available
including defenses applicable to determining and enforcing the
association’s statutory rights and obligations to a claim.” 	Id.
§ 31A-28-207(1)(i)(iii). 	The legislative history of the Guaranty
Act, except for stating that the legislation is “to protect
resident policyowners and insureds under all types of direct
insurance,” is silent on legislative intent. 	Id. § 31A-28-202
(2005).

3 This Court has, for example, previously adopted
interpretations from federal law for sections of the Utah Code
that are identical to or modeled on federal acts. 	See, e.g., W.
Coating, Inc. v. Gibbons & Reed Co.,788 P.2d 503, 505-06 (Utah
1990); Se. Furniture Co. v. Indus. Comm’n, 111 P.2d 153, 154
(Utah 1941).
4 “[The NAIC] is the organization of insurance regulators
from the 50 states, the District of Columbia and various U.S.
territories.” 	Donald J. Walters, Effecting Efficient Marketplace
Change: 	The Important Role of Independent Standard-Setting
Organizations, in PLI, Commercial Practice, Course Handbook
Series No. 11153, 802-03 (2007). 	“The NAIC, while not a
governmental body with regulatory authority, assists state
insurance regulators . . . to achieve fundamental insurance
regulatory goals . . . through development of Model Laws and
Regulations.” 	Id.
Nos. 20070107, 20070100, 20070131 	8
¶28 	Where legislative history is absent or unclear, model
codes can be a useful resource in determining the intent of the
legislature and underlying policy issues. 3 	See Beckstead v.
Deseret Roofing Co., 831 P.2d 130, 134 (Utah Ct. App. 1992)
(using a provision of the Model Code of Professional
Responsibility to interpret a similar Utah rule). 	Consistent
with this reasoning, we turn to an analysis of the National
Association of Insurance Commissioners (NAIC) 4 Model Laws,
Regulations and Guidelines, on which the Guaranty Act is heavily
based. 	Compare Nat’l Assoc. Ins. Comm’rs Model Laws, Regulations
and Guidelines, Vol. III 540-1 (2007) [hereinafter NAIC Model
Guaranty Act], with Utah Code Ann. § 31A-28-202 to -222 (2005 &
Supp. 2008).
¶29 	While the Utah Guaranty Act is substantially identical
to the NAIC Model Guaranty Act, the NAIC Model Guaranty Act is
more thorough in its explanation of the intent and purpose of the
legislation. 	NAIC Model Guaranty Act, Vol. III 540-1 § 2. 	The
NAIC Model Guaranty Act clarifies that its purpose is to
“minimize financial loss to claimants . . . because of the
insolvency of an insurer.” 	Id. 	In addition, the NAIC Model
Guaranty Act states that this purpose will “constitute an aid and
guide to interpretation,” thus emphasizing the importance of the
purpose of the NAIC Model Guaranty Act as an interpretive tool.
Id. § 4. 	Clearly, the NAIC Model Guaranty Act supports an
interpretation of the Guaranty Act that will minimize financial
loss to insureds whose carriers have become insolvent. 	An
interpretation limiting coverage to single claims would run
counter to that purpose because primary carriers, absent
insolvency, would enjoy no such limits. 	The NAIC Model Guaranty

5 “All fifty states have adopted some form of the model
act.” Zhou v. Jennifer Mall Rest., Inc., 699 A.2d 348, 351 (D.C.
Cir. 1997) (citing Paul G. Roberts, Insurance Company
Insolvencies and Insurance Guaranty Funds, 74 Iowa L. Rev. 927,
934 (1989)).
9 	Nos. 20070107, 20070100, 20070131
Act clearly emphasizes that targeted losses include all losses
attributable to the insolvency of an insurer. 	Id. § 5.
¶30 	We next turn to other states’ interpretation of similar
legislation for further guidance. 	On the question before us,
many states with substantially similar legislation have already
dealt with the issue of whether their Guaranty Act covers
multiple claims and have held that it does. 5 	See Conn. Ins.
Guar. Ass’n v. Union Carbide Corp., 585 A.2d 1216, 1222-23 (Conn.
1991) (holding that there can be multiple covered claims for each
occurrence); CD Inv. Co. v. Cal. Ins. Guar. Ass’n, 101 Cal. Rpt.,
2d 806, 810-11 (Cal. Ct. App. 2000) (holding each of the five
policies issued by two insolvent insurers gave rise to a covered
claim). 	For example, the court in CD Investment Co. stated:
As the courts of other states have recognized
in applying their own insurance guaranty
laws: 	“[The statute] does not use the word
‘occurrence.’ 	It expressly applies the
[monetary cap] to ‘claims.’ 	There is no
basis for substituting the word ‘occurrence’
for ‘claim’ in order to aggregate multiple
claims arising from a single accident.”
CD Inv. Co., 101 Cal. Rptr.2d at 813 (alterations in original).
¶31 	The court went on to conclude that:
A finding that only one claim may arise out
of a single occurrence would largely defeat
the remedial purpose of the . . . Guaranty
Association Act--to protect claimants and
policyholders from financial losses
associated with the insolvency of an
insurance company. 	Recovery against losses
resulting from the insolvency of insurance
carriers, which the Legislature intended to
provide, would often prove illusory. 	Both
the language of [the statute] and the
Legislature’s expressed intent align us with
those courts holding that multiple claims may
arise from a single occurrence.

Nos. 20070107, 20070100, 20070131 	10
Id. (quoting Oglesby v. Liberty Mut. Ins. Co., 832 P.2d 834, 840
(Okla. 1990)(alterations in original)(emphasis added)); see also
Wash. Ins. Guar. Ass’n v. McKinstrey Co., 784 P.2d 190, 193
(Wash. Ct. App. 1990)(holding that the casualty insurance
guarantor remained liable even when the insured had excess
insurance policies).
¶32 	We agree with these courts that an interpretation that
only one claim may arise out of a single occurrence would defeat
the remedial purpose of the Guaranty Act. 	This is true whether
the multiple claims arise from primary or excess insurers. 	This
interpretation fits the plain language of the Guaranty Act and is
supported by the history of the Guaranty Act, the NAIC Model
Guaranty Act, and the interpretation given to similar legislation
by other states. 	Thus we hold that the Guaranty Act applies to
multiple claims.
B. 	The Offset Provision of the Guaranty Act
Applies Only After Full Recovery
¶33 	We now address whether, as UPCIGA claims, the Guaranty
Act may offset UPCIGA’s statutory obligations by the amount of
recovery from a third-party insurer. 	We hold that an offset is
not permitted under the Act.
1. 	Ambiguity of the Statute
¶34 	The Utah offset provision is found in Utah Code section
31A-28-213 (Supp. 2008):
(1)(a) Any person who has a claim against an
insurer, whether or not the insurer is a
member insurer, under any provision in an
insurance policy, other than a policy of an
insolvent insurer that is also a covered
claim, is required to first exhaust that
person’s right under that person’s policy.
(b) Any amount payable on a covered claim
under this part under an insurance policy is
reduced by the amount of any recovery under
the insurance policy described in Subsection
(1)(a).
(emphasis added).
¶35 	There are two competing interpretations of the offset
provision, as argued by the parties in this case. 	UPCIGA’s view
is that the offset provision applies even in the absence of total
recovery of a party’s loss. 	UPCIGA claims the plain meaning of

11 	Nos. 20070107, 20070100, 20070131
subsection 1(b) therefore allows it to subtract from its $300,000
covered claim obligation any amount the claimant has recovered
from any other insurance policy. 	This would mean that UPCIGA
would be allowed to deduct the $1,517,609.86 paid by CNA to R&R
from UPCIGA’s $300,000 obligation on Reliance’s liability policy,
and its $300,000 obligation on Reliance’s excess policy. 	Id.
This would result in no liability for UPCIGA for CDR’s
insolvency. 	The competing interpretation, as asserted by R&R, is
that the offset provision applies only after an insured has
received total recovery for its loss. 	Accordingly, 	R&R’s
reading of the statute would allow UPCIGA to offset CNA’s payout
only from R&R’s total loss.
¶36 	While the language of the provision is susceptible to
both interpretations and is therefore ambiguous, our review of
the entire statute persuades us that UPCIGA’s interpretation is
counterintuitive and, in fact, undermines the purpose of the
statute, which is to protect the insured from the risks of
insolvency of insurance carriers. 	Offsetting any recovery, no
matter how great the loss to the insured, would eliminate much,
if not all, of the obligation of UPCIGA and deprive insureds of
coverage they secured from their insolvent carriers. 	In the
statutory scheme insureds pay premiums that, in part, contribute
to UPCIGA’s fund. 	An insured should benefit from those
contributions to UPCIGA and of course from the payments of the
premiums themselves and should not be penalized for having
purchased multiple coverage for large losses.
2. 	Legislative History, Model Codes, and Other State Legislation
¶37 	Once again, the plain language of the Guaranty Act and
the NAIC Model Guaranty Act give us guidance on the intent of the
legislature, but they do not conclusively resolve the ambiguity
of the offset provision. 	However, other states have been helpful
in exploring the context for a proper interpretation of the
offset provision.
¶38 	There are two connected, but separate concepts at play
in the offset provision: 	the exhaustion concept and the
nonduplication of recovery concept. 	The Guaranty Act states that
a party “is required to first exhaust that person’s right under
that person’s policy.” 	Utah Code Ann. § 31A-28-213(1)(a) (Supp.
2008). 	This means that a party must first recover losses from
all other available sources, such as other insurance carriers,
before seeking relief from the guaranty association. 	Since most
courts agree that the guaranty association should be the last
resort for recovery, there is not much debate over the meaning of
the exhaustion principle. 	Wash. Ins. Guar. Ass’n, 784 P.2d at
193; Int’l Collection Serv. v. Vermont Prop. & Cas. Ins. Guar.
Ass’n, 555 A.2d 978, 980 (Vt. 1988).

6 For example as reasoned by the California Court of
Appeals:
[U]nder CIGA’s [California Insurance
Guarantee Association] view, a company could
purchase two successive policies, each from a
(continued...)
Nos. 20070107, 20070100, 20070131 	12
¶39 	The next principle of guaranty associations is that of
“nonduplication of recovery” or the prohibition of “double-
recovery.” 	In Zhou, 699 A.2d 348 (D.C. 1997), the court
clarified that the nonduplication of recovery principle prevents
“a situation in which an insured collects the amount of the total
loss from one insurance company and then gets an additional sum
from [the guaranty association].” 	Id. at 352 (internal quotation
marks omitted)(emphasis added). 	We agree with the court in Zhou
that nonduplication of recovery means there is no recovery beyond
the total loss. 	This makes certain that parties are not better
off under the Guaranty Act than they would have been if the
insurer had not become insolvent. 	Much of the confusion in this
area arises from parties arguing, as UPCIGA has here, that any
recovery from any source, while at the same time recovering from
the guaranty association, will lead to “double recovery” even if
the total recovery is less than the total loss. 	We reject this
argument.
¶40 	Other courts have reached this same conclusion. 	The
Connecticut Supreme Court held in Union Carbide Corp. that “[t]he
evident purpose of providing . . . for a reduction of a covered
claim ‘by the amount of any recovery’ from other available
insurance was to prevent a person from twice receiving benefits
for the same loss or otherwise obtaining a windfall, not to
reduce the amount of a claim for a loss that remains partially
unsatisfied.” 	585 A.2d at 1224-25 (emphasis added). 	Similarly
the California Court of Appeals agreeing with the Nevada Supreme
Court, noted in CD Investment Co., “that ‘the purpose of the
[insurance guaranty] act is to place the insured in a position to
recover the same amount available under the insured’s policy, as
if the insurer had not become insolvent, subject only to certain
limitations.’” 	101 Cal. Rptr. 2d at 816 (quoting Cimini v. Nev.
Ins. Guar. Ass’n, 915 P.2d 279, 282 (Nev. 1996))(alteration in
original).
¶41 	Many courts have noted that to allow a guaranty
association “to offset its obligation as guarantor of the
insolvent policies by amounts paid by solvent insurers that fall
short of satisfying a claim for indemnification would seriously
undercut the protection that the legislature intended to
provide.” 6 	Union Carbide Corp., 585 A.2d at 1225. 	“Such a

(...continued)
different insurer, and each providing
$500,000 in coverage. 	The insured is sued
for several million dollars in a case
alleging continuous and progressive property
damage. 	One of the insurers has become
insolvent, so the insured files a claim with
CIGA. 	The insured also files a claim with
the solvent insurer. The case settles for $1
million (a reasonable sum), and the solvent
insurer pays its policy limits of $500,000.
CIGA could then refuse to pay anything on the
ground that the insured had already recovered
$500,000. 	In addition, the insured would
sustain a loss on the premiums paid to the
insolvent insurer.
CD Inv. Co., 101 Cal. Rptr. 2d at 816.
7 The court in Union Carbide also concluded that
CIGA’s [Connecticut Insurance Guaranty
Association] proposed interpretation
effectively reduces the coverage afforded by
the insolvent policies to the extent of
coverage available under the solvent policies
even though the loss remains partially
unsatisfied. 	Thus, it would encourage
placing the entire amount of liability
coverage with a single carrier in order to
make CIGA’s resources fully available in the
event of insurer insolvency. 	In such a
situation, the impact of the insolvency on
CIGA would not be diminished by the
availability of other solvent insurers to
respond to a portion of the loss and would
result in greater depletion of CIGA’s
resources.
Union Carbide Corp., 585 A.2d at 1225.
13 	Nos. 20070107, 20070100, 20070131
result would penalize the prudent practice of dividing portions
of the total liability coverage among different insurers, whether
collateral or excess, in order to lessen the risk of insurer
insolvency.” 7 	Id.; see also Aztec Well Servicing Co. v. Prop. &
Cas. Ins., Guar. Ass’n of New Mexico, 853 P.2d 726, 731 (N.M.
1993) (“Moreover, to interpret the Act as the Association does
would eviscerate its express purpose of avoiding financial loss
to a legitimate claimant as a result of the insolvency of its
insurer to which the claimant paid premiums.”); Wash. Ins. Guar.
Ass’n, 784 P.2d at 194 (finding that allowing the guaranty
association to offset the primary insurer’s payment would
contravene the purpose of the statute); Ins. Guar. Ass’n v. Nat’l

Nos. 20070107, 20070100, 20070131 	14
R.R. Passenger Corp., 721 F. Supp. 1378, 1382 (D.D.C. 1989)
(holding first and second level excess insurers were not deducted
from Association’s liability after one of the four second level
excess insurers became insolvent).
¶42 	In allowing an offset of primary insurance from excess
insurance recovery, the New Mexico Supreme Court stated: 	“To
require an offset, as the Association urges, of the amount
recovered from the primary insurance carrier against the
Association’s liability would be absurd because it was that
recovery which triggered the application of [the plaintiff’s]
excess insurance policy in the first place.” 	Aztec Well
Servicing Co., 853 P.2d at 731. 	The New Mexico Supreme Court
also stated: 	“Bound to interpret the Act to implement the
Legislature’s intent without making its application an absurdity,
we hold that payment from the primary insurer cannot be used to
offset the Association’s pecuniary obligations for the insolvent
excess insurer.” 	Id.
¶43 	We find the analysis of these cases persuasive, and
hold that the offset provision of the Guaranty Act applies to
prevent double recovery of amounts above an insured’s total loss.
UPCIGA may not deduct or offset any recovery from a third-party
insurer from its obligation before the insured has been fully
paid for its loss.
II. 	INVALIDATION OF THE SETTLEMENT AGREEMENT
A. 	The Invalidation of the Settlement Agreement
Was Not Properly Raised Before the District Court
¶44 	The challenge to the validity of the Settlement
Agreement was not properly raised before the district court. 	We
have long held that a settlement agreement can only be set aside
for “illegality, fraud, duress, undue influence, or mistake.” 	In
re Estate of Chasel, 725 P.2d 1345, 1348 (Utah 1986). 	In
addition, rule 9(b) of the Utah Rules of Civil Procedure is clear
that “[i]n all averments of fraud or mistake, the circumstances
constituting fraud or mistake shall be stated with
particularity.” 	Utah R. Civ. P. 9(b). 	No motion to set aside
the agreement was ever made before the district court, and no
claims of illegality, fraud, duress, undue influence, or mistake
were raised by UPCIGA.
¶45 	The first mention of the invalidity of the Settlement
Agreement in the record is found in UPCIGA’s October 13, 2006
brief for the evidentiary hearing, where UPCIGA argued that the
agreement was “no longer enforceable because it was based on less
than accurate and complete representations from R&R and AlumaTek
about their damages and insurance compensation.” 	During the

8 There is some dispute as to when R&R provided information
on the amount of $174,227 in compensation for lost rents.
However, the record shows that R&R provided this information to
CDR five months before UPCIGA entered into the Settlement
Agreement. 	UPCIGA had complete access to all the documents
already exchanged in the underlying lawsuit, and had access to
this data.
15 	Nos. 20070107, 20070100, 20070131
subsequent hearing, there was no testimony offered, argument
made, or indeed any discussion at all about the enforceability of
the Settlement Agreement. 	As R&R correctly pointed out in its
brief before this court, “[n]o cause of action or counterclaim
for rescission based upon illegality, fraud, duress, undue
influence or mistake was ever properly before the Court, or even
properly pled as a defense for that matter.” 	UPCIGA failed to
state in any context the basis for its challenge to the
Settlement Agreement with sufficient particularity and merely
mentioned “less than accurate and complete representations” as a
basis for the invalidation of the agreement in its brief to the
trial court. 	UPCIGA failed to lay out the claim with sufficient
clarity 	and failed to even use the words fraud, mistake, or
duress--let alone their required factual components--in its
argument on the invalidity of the Settlement Agreement. 	Because
of this, UPCIGA’s assertion that the Settlement Agreement was
unenforceable did not comport with rule 9(b), and thus it was not
properly before the court.
B. 	The Invalidation of the Settlement Agreement Was Improper
¶46 	Settlement agreements “are encouraged to promote
harmony and to prevent the waste of assets.” 	In re Estate of
Chasel, 725 P.2d 1345, 1348 (Utah 1986). 	We have upheld the
importance of settlement agreements and have ruled that ”[o]nce
formally entered, [a settlement agreement] cannot be set aside
merely because one party discovers new evidence which could make
the outcome more favorable to that party.” 	Id.; see also Bohlman
v. Big River Oil Co., 124 N.W.2d 835, 839 (N.D. 1963). 	UPCIGA
entered into the Settlement Agreement in May 2003; however, it
cites interactions with R&R after the agreement was entered into
as providing a basis for the invalidation of the agreement.
UPCIGA’s first discovery request regarding compensation to R&R
from other insurers occurred more than three years after the
Settlement Agreement was signed. 8 	The receipt of information
after the fact cannot be used to invalidate the agreement. 	It
was the responsibility of UPCIGA to ascertain information
relevant to its decision to settle before entering into the
agreement, and there is no evidence that it attempted to do so.
UPCIGA cannot invalidate the Settlement Agreement merely because
damages did not end up where it expected they would. 	“Rather,

Nos. 20070107, 20070100, 20070131 	16
the agreement can be set aside only for reasons generally
available to set aside a [settlement] agreement, i.e.,
illegality, fraud, duress, undue influence, or mistake.” 	In re
Estate of Chasel, 725 P.2d at 1348.
¶47 	The district court cited Quinn v. City of Kansas City,
for the principle that “[t]he Court has discretion to either
enforce or reject a settlement agreement entered into by the
parties while the litigation is pending.” 	64 F. Supp. 2d 1084,
1091 (D. Kan. 1999). 	While this is true, the invalidation of the
contract must still be based upon one of the required factual
bases for setting aside a contract. 	In addition, Quinn is
distinguishable because it involved fraud and deception told by
the plaintiff in a deposition. 	No such claims have been made in
this case. 	Id. at 1093. 	UPCIGA did not claim fraud and the
district court did not rely on fraud or any other provision of
Rule 9(b) to invalidate the Settlement Agreement. 	UPCIGA’s brief
references the word fraud only once in relation to R&R when
UPCIGA states that it “does not contend the representations by
R&R and AlumaTek were as malicious or fraudulent as the plaintiff
in Quinn.” 	The trial court’s finding of “less than accurate
representations regarding insurance proceeds” does not meet the
standard for setting aside a settlement agreement.
¶48 	In summary, UPCIGA failed to allege or prove a factual
basis for setting aside the Settlement Agreement under Rule 9(b).
We therefore reverse the trial court’s grant of summary judgment
on that issue.
C. 	R&R and AlumaTek Were Not Obligated to Prove
the First $300,000 in Damages
¶49 	While the plaintiff usually has the burden of proof
regarding damages, see Carlson Distrib. Co. v. Salt Lake Brewing
Co., 2004 UT App. 227, ¶ 19, 95 P.3d 1171, in this case the
Settlement Agreement altered that requirement. 	The Settlement
Agreement stated that “UPCIGA will automatically pay R&R
Industrial Park, AlumaTek, and Repair Express $300,000.00 each
for and on behalf of the respective claims against CDR
Enterprises” if R&R and AlumaTek won in the declaratory action
involving the interpretation of the Guaranty Act.
¶50 	Therefore, R&R and AlumaTek do not have to prove any
damages to recover their first $300,000 in damages. 	Any recovery
in excess of this amount must be proved. 	The district court
erroneously ruled that “R&R and AlumaTek must meet their burden
of proof before they are entitled to any damages.”

17 	Nos. 20070107, 20070100, 20070131
CONCLUSION
¶51 	R&R and AlumaTek are entitled to UPCIGA’s statutory
limit of $300,000 under both the primary and excess policy issued
by Reliance to CDR under the Guaranty Act. 	In addition, R&R and
AlumaTek are entitled to have the Settlement Agreement they
entered into with UPCIGA enforced as written, as no claim for
invalidation was ever properly before the district court, and
there was no factual or legal basis for invalidation. 	We hold
that because the Settlement Agreement is enforceable, $300,000
will automatically be paid to R&R and AlumaTek as to the first
policy claim. 	In addition, because R&R alone has proven
$99,898.67 in additional damages, R&R is entitled to that amount
under the excess policy claim because the Guaranty Act applies to
multiple claims. 	We reverse and remand to the district court for
entry of judgment.
---
¶52 	Associate Chief Justice Durrant, Justice Wilkins,
Justice Parrish, and Justice Nehring concur in Chief Justice
Durham’s opinion.