Homeowners Insurance And Medical Payments Coverage

Most homeowners in Grand Prairie, Arlington, Irving, Fort Worth, Dallas, Duncanville, De Soto, Cedar Hill, Mansfield, and other Dallas County and Tarrant County cites will have a policy of insurance on their home. Most of the time that homeowners policy is going to have a medical payments coverage in the policy.
Medical payments coverage will usually provide payments for “reasonable and necessary” medical expenses up to the limits of the coverage which is usually $1,000 to $5,000. It is coverage that should pay medical bills without regards to who is at fault for the injuries sustained.
Here is a case dealing with the coverage. The case is styled, Cynthia Farris, as next friend of Vidal de Jesus Farias, a minor v. Allstate Insurance Company and Allstate Property and Casualty Insurance Company. This opinion was issued by the Corpus Christi Court of Appeals on June 2, 2011.
Here is some background.
The dispute pertains to an incident where Farias’s eleven year old son was bitten by a dog owned by Jose Ocanas, an insured of Allstate. Farias alleged the following:
On or about October 3, 2005, 11 year old Vidal de Jesus Farias was walking his family dog near his home. Without provocation, defendant Ocana’s dog attacked Vidal and bit him several times in the legs and buttocks. Defendant Ocanas’ housekeeper watched the whole thing and did nothing to get the dog off of Vidal even though Vidal was screeming for help.
Farias sued the homeowner Ocanas for allegations of inappropriate conduct in this matter and further alleged that Allstate was liable for breach of contract, breach of the duty of good faith and fair dealing, negligence, and violating several provisions of the Texas Insurance Code, including sections 542.003, 542.055, 542.056, 542.057, and 542.058.
Allstate entered entered a general denial denying all of the allegations contained in Farias’s original petition. Allstate later filed a traditional motion for summary judgment, alleging that Farias had failed to state a cause of action under Texas law. Specifically, Allstate contended that Farias’s lawsuit “fails because Texas law does not recognize a direct cause of action in a third-party scenario against the insurer for the mishandling of a third-party claim.” Allstate argued that: (1) violations of chapter 542 of the insurance code do not apply to third-party scenarios; (2) Farias’s breach of the duty of good faith and fair dealing causes of action do not apply in a third-party scenario; (3) Farias cannot maintain a breach of contract action against Allstate because there is no privity between Farias and Allstate and because Farias is not a third-party beneficiary; and (4) Farias’s negligence cause of action must fail because Allstate did not owe a duty to either Farias or Vidal.
Allstate also argued that Farias was not a third-party beneficiary under the insurance contract between Allstate and Ocanas and that “there is no distinction between medical payments coverage and other insurance coverage which entitles a third party to bring a direct cause of action against the insurer for denial of medical benefits payments.”
The court began its analysis by examining the “Medical Payments Coverage” clause of the insurance contract between Ocanas and Allstate. The clause provides as follows:
COVERAGE D (Medical Payments to Others)
We will pay necessary medical expenses incurred and medically determined within three years from the date of an accident causing bodily injury. Medical expenses means reasonable charges for medical, surgical, x-ray, dental, ambulance, hospital, professional nursing, prosthetic devices and funeral services. This coverage does not apply to you and regular residents of your household. This coverage does not apply to residence employees. As to others this coverage applies only:
1. to a person on the insured location with the permission of an insured.
2. to a person off the insured location, if the bodily injury:
a. arises out of a condition on the insured location or the ways immediately adjoining.
b. is caused by the activities of an insured.
c. is caused by a residence employee in the course of the residence employee’s employment by an insured.
d. in caused by an animal owned by or in the care of an insured.
Farias argued that this language expressly provides a benefit for Vidal as a third-party beneficiary and, thus, confers standing upon her to sue Allstate for breach of contract on behalf of Vidal.
In discussing this issue regarding third-party beneficiaries the court said the following.
A stranger to a contract may enforce the contract as a third-party beneficiary if the parties to the contract intended to secure a benefit to that third party and entered into the contract directly for the third party’s benefit. The person claiming to be a third-party beneficiary must establish the existence of a contract and standing as a third-party beneficiary. A party is presumed to contract only for its own benefit; thus, any intent to benefit a third party must be clearly apparent. There is a presumption against, not in favor of, third-party beneficiary agreements. Once some evidence has been produced to show a contract and standing as a third-party beneficiary, it is incumbent upon the opposing party to prove any defenses that would limit or bar recovery by the third-party beneficiary.
Here, the “Medical Payments Coverage” clause does not specifically mention Farias or Vidal, nor does the plain language of the insurance policy indicate that Farias or Vidal were contemplated when Ocanas and Allstate entered into the insurance contract so that Farias or Vidal could bring any direct claim against Allstate. Moreover, the Texas Supreme Court has held that “an injured party cannot sue the tortfeasor’s insurer directly until the tortfeasor’s liability has been finally determined by agreement or judgment.”
In making its ruling the court stated, “The record does not reflect that Ocanas’s ‘liability has been finally determined by agreement or judgment.'” Because Ocana’s liability had not been finally determined by agreement or judgment and because the language of the “Medical Payments Coverage” clause does not overcome the strong presumption against conferring third-party beneficiary status to Farias, the court concluded that Farias lacked standing in this matter.
The writer of this blog, who is an experienced Insurance Law Attorney, does not agree with all the issues in this opinion. Maybe an appeal to the Texas Supreme Court will result in a different outcome.