In Bailey v. State Farm Mutual Automobile Insurance Company, the Court dismissed an insured’s bad faith complaint with prejudice based on a claim for extraordinary medical benefits under his mother’s insurance policy.
In November, 2012, the insured was “critically and permanently injured in a motor vehicle collision while he was an occupant of a third party’s vehicle.” At the time of the accident, the insured was covered as a named insured under a motor vehicle policy which did not cover extraordinary medical benefits. The insured lived with his mother at the time of the accident, so was considered an “insured” under his mother’s policy, but not a “named insured.” The policy issued to the insured’s mother provided for $5,000 in coverage for first party medical benefits and $1,000,000 for extraordinary medical benefits.
After the accident, the insured submitted a claim for first party benefits under his mother’s policy. Plaintiff’s insurer reimbursed the mother’s insurer for the previously paid medical benefits because Plaintiff’s policy had higher priority on this point. Subsequently, “because Plaintiff’s medical expenses were in excess of the $100,000 threshold required to claim extraordinary medical benefits, Plaintiff made a claim for extraordinary medical benefits” under his mother’s policy. The mother’s insurer denied Plaintiff’s claim, and Plaintiff thereafter sued for breach of contract and bad faith for the failure to pay extraordinary medical benefits.
The Court first noted that because “a claim of bad faith denial of insurance benefits only remains if there is a breach of the insurance contract, the Court will first discuss whether Plaintiff’s claim for the breach of the insurance contract fails to state a claim as a matter of law.” The mother’s insurer argued that “both the MVFRL (Pennsylvania Motor Vehicle Financial Responsibility Law) and the policy preclude Plaintiff from recovering extraordinary medical benefits under the [mother’s] policy and it has therefore not breached any contract.” Specifically, the mother’s insurer claimed that “Plaintiff’s [own] policy is the highest priority because he is the “named insured” on that policy and is not a named insured on his mother’s policy which makes [his mother’s] policy a lower priority than the [Plaintiff’s] policy.”
In ruling in favor of the insurer, the Court pointed to the MVFRL and the explicit terms of the mother’s insurance policy, which stated that “if there is a higher priority level policy, that policy is the only policy that is obligated to pay benefits.” Because Plaintiff was a named insured on his own policy, and only an “insured” under his mother’s policy, his own policy had a higher priority than that of his mother’s, and therefore he was unable to recover extraordinary medical benefits under his mother’s policy. Accordingly, the mother’s insurer was not obligated to pay these benefits, and did not breach its contract in failing to do so. Because no breach of contract was found, the bad faith claim failed as well because the insurer had a reasonable basis for denying coverage.
Date of Decision: April 14, 2015 (Report and Recommendation), adopted by District Court on May 13, 2015.
Bailey v. State Farm Mut. Auto., Civil Action No. 15-07, 2015 U.S. Dist. LEXIS 63209 (W.D. Pa. April 14, 2015) (Mitchell, M.J.), adopted 2015 U.S. Dist. LEXIS 62716 (W.D. Pa. May 13, 2015) (Conti, C.J.)