When Are Family Members Excluded From Insurance Claims?

People with insurance policies in Grand Prairie, Fort Worth, Dallas, Saginaw, Keller, Grapevine, Mesquite, or anywhere else in Texas would be surprised to learn that there are situations where family members are excluded from insurance claims. Here is one example of that.
The case is styled Rumley v. Allstate Indemnity Company. The opinion was issued by the Beaumont Court of Appeals in 1996. Here are some facts:
Joyce Rumley (“Wife”) sustained personal injuries in a one car vehicle accident in which her husband, Wilburn Rumley, was the driver. Mrs. Rumley filed a claim for benefits under their insurer, Allstate. Allstate paid Personal Injury Protection (PIP) benefits but refused to pay liability because the policy contained a family member exclusion. At the time, the Texas Supreme Court had granted writ of error but had not yet issued an opinion in National County Mutual Insurance Company v. Johnson. In that decision, the Texas Supreme Court invalidated the family member exclusion. Wife sued Allstate and Ted Pate, a senior staff claims representative for Allstate, for breach of duty of good faith and fair dealing, violations of the Texas Insurance Code and violations of the Texas DTPA.
Allstate filed a Motion for Summary Judgment on the grounds that Wife’s claim was a third-party claim for which Defendants owed no duty of good faith and fair dealing; there was a reasonable basis for denying the claim in that the family member exclusion was an unsettled issue of law; and there was no special or contractual privity between Pate and Rumley. The trial court granted summary judgment. Wife appealed.
In upholding the grant of summary of summary judgment in favor of the claim representative the court explained –
A third-party claimant cannot pursue an action against an insurer for unfair claims settlement practices under the Insurance Code.
Although Wife was a named insured on the policy and premiums were paid from community funds thereby establishing Wife’s contractual relationship with Allstate, when Wife asserted a liability claim against her spouse, she assumed a posture of a third-party claimant.
In the context of her claim based upon her husband’s negligence, Wife was antagonistic to both insurer and spouse. She did not rely upon Allstate’s good faith any more than any other injured party would.
As a third-party claimant, Wife had no standing to assert extra-contractual and statutory claims against Allstate or the claims representative for denial or delay in the payment of her claim.
This case is yet another example of a case that should be confusing to most people. And it serves as yet another example why an experienced Insurance Law Attorney needs to be involved in these cases.