Claimant is Not Third-Party Beneficiary Under Med-Pay Coverage “C” in CGL Policy: Utah Court of Appeals

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In Carmona v. Travelers Prop. & Cas. Ins. Co. of America, 2018 UT App 128 (Utah Ct. App. June 28, 2018), the Utah Court of Appeals held that an injured third-party claimant was not a third-party beneficiary for purposes of Med-Pay Coverage “C” under the tortfeasor’s CGL policy, and therefore could not directly state a claim against the tortfeasor’s liability insurer.

The claimant slipped and fell in a common area of the insured apartment complex. She sued the complex for her injuries. She subsequently discovered that the apartment complex’s CGL policy contained a med-pay provision under Coverage “C” in which it agreed to “pay medical expenses” up to $5,000 “for ‘bodily injury’ caused by an accident” on the insured’s premises and that it would “make these payments regardless of fault.” She subsequently moved to amend her complaint to add the apartment complex’s CGL insurer as a defendant. The court denied her motion to amend as futile. She then brought a separate lawsuit against the complex’s CGL insurer, alleging breach of contract and bad faith. She claimed that she was an intended third-party beneficiary of the CGL policy, and that the insurer breached its duties to her by failing to disclose that Med-Pay coverage was available, and failing to either properly investigate or pay the claim. The district court granted the insurer’s motion to dismiss that lawsuit for failure to state a claim, and the claimant appealed.

The Utah Court of Appeals acknowledged that while other jurisdictions may recognize claimants as third-party Med-Pay coverage beneficiaries, Utah does not. There is nothing in the Coverage C provision affirmatively suggesting that the CGL insurer and its apartment complex insured intended that the contract directly benefit people injured on the insured’s property. Rather, the Court of Appeals found the Med-Pay provision provided for limited coverage in favor of the apartment complex insured for certain small claims. The fact that the Coverage C provision provided for payment regardless of fault did not affirmatively demonstrate the parties’ clear intention to benefit individuals injured on the insured’s premises. Instead, the provision was intended to avoid costly litigation by allowing for hassle-free payment of small claims regardless of fault, with the prospect of reimbursement or partial reimbursement from the insurer. Thus, the purpose of the provision based on the plain language of the contract is to indemnify the apartment complex insured.

After reaching this conclusion, the Court of Appeals reiterated Utah’s longstanding rule that injured claimants may not state a claim for breach of contract or the breach of the covenant of good faith and fair dealing directly against their tortfeasor’s liability insurer, and affirmed the district court’s dismissal.

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Richard A. Vazquez