The Kansas Supreme Court ruled in *Stroud v. Ozark National Life Insurance Co.* (Kan. 2025), establishing important legal standards for fiduciary duty claims and procedural requirements for bringing lawsuits under the state's real party in interest statute.
The case, designated No. 124,348, involved appellant Cathy L. Stroud against Ozark National Life Insurance Co. and Stephen I. Guinn. The court's syllabus provides seven key legal principles that will guide future litigation involving fiduciary relationships and procedural standing issues.
Regarding procedural requirements, the court clarified that K.S.A. 2024 Supp. 60-217, Kansas's real party in interest statute, requires actions to be prosecuted by the party who holds the substantive legal right being enforced. Importantly, the court held that this statute "neither enlarged nor restricted" substantive rights to recover in particular actions, meaning the procedural requirement does not create or eliminate underlying legal claims.
The court established a three-part test for proving breach of fiduciary duty claims. Plaintiffs must demonstrate: first, the existence of a duty arising from a fiduciary relationship; second, a breach of that duty; and third, an injury resulting proximately from the breach. This framework provides courts and litigants with clear guidance for evaluating such claims.
The ruling distinguishes between questions of law and fact in fiduciary duty analysis. The court held that defining the essential characteristics of fiduciary relationships and the duties arising from them presents a question of law for courts to decide. However, determining whether specific facts establish those characteristics presents a question of fact that, in summary judgment proceedings, requires courts to resolve all facts and inferences in favor of the party opposing summary judgment.
Defining what constitutes a fiduciary relationship, the court explained that such duties arise "when one party is in a position of peculiar or special confidence that allows the person to have and exercise influence over another." In these relationships, "the property, interest, or authority of the other is generally entrusted to the fiduciary."
The court noted that fiduciary duties can arise in two ways: as a matter of law in certain established relationships, or as a question of fact when implied based on the specific circumstances surrounding the parties' transactions and relationships. This dual approach allows courts flexibility in recognizing fiduciary duties while maintaining predictable legal standards.
In a notable limitation on fiduciary duty claims, the court emphasized that competent parties cannot unilaterally create fiduciary relationships. The ruling states that those "who are competent and able to protect their interests may not abandon all caution and responsibility for their own protection and unilaterally impose a fiduciary relationship on another without a conscious assumption of such duties by the person alleged to be a fiduciary."
This principle protects potential defendants from having fiduciary duties imposed upon them without their knowledge or consent, requiring evidence that the alleged fiduciary consciously assumed such responsibilities.
The court also addressed procedural requirements for appellate review, noting that under Supreme Court Rule 8.03(b)(6)(C)(i), parties must properly raise adverse rulings or unaddressed questions through petitions, cross-petitions, or conditional cross-petitions for review. Failure to follow these procedures typically means the issues are waived for appellate consideration.
The *Stroud* decision provides significant guidance for practitioners handling insurance disputes and other cases involving alleged fiduciary relationships. The three-part test for breach of fiduciary duty claims offers clarity for both plaintiffs seeking to establish such claims and defendants challenging them.
For insurance law specifically, the ruling clarifies when insurance companies and their agents might owe fiduciary duties to policyholders or beneficiaries, requiring courts to examine the specific facts of each relationship rather than presuming such duties exist.
The decision also reinforces Kansas's approach to real party in interest requirements, confirming that procedural standing rules do not alter substantive legal rights. This principle ensures that procedural requirements serve their intended purpose of identifying proper parties without affecting the underlying merits of legal claims.
Legal practitioners should note the court's emphasis on conscious assumption of fiduciary duties, which may require additional evidence in cases where fiduciary relationships are not established by law. This standard protects against expansive interpretations of fiduciary duty that could impose unexpected obligations on business relationships.
The ruling demonstrates the Kansas Supreme Court's commitment to providing clear legal standards while maintaining flexibility for fact-specific determinations. By distinguishing between legal and factual questions in fiduciary duty analysis, the court ensures consistent application of legal principles while allowing appropriate consideration of individual circumstances.
This decision will likely influence how lower courts in Kansas analyze fiduciary duty claims across various contexts, including insurance, business relationships, and professional services, providing a framework for both establishing and defending against such claims.