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In McGuckin v. Allstate Fire and Casualty Insurance Company, the Court denied the insurer’s motion to dismiss breach of contract and bad faith claims brought by an insured’s wife, based upon the insured husband’s involved in an automobile accident.

In the underlying action, the insured husband alleged that he met with an agent of the insurer to discuss a potential purchase of automobile insurance. The agent suggested that the insured purchase additional, extraordinary benefits for an increased premium price, and that the additional coverage would pay his or other insureds’ benefits when medical bills from an automobile accident exceeded $100,000.

In his complaint, the insured alleged that the insurance agent “knew or reasonably should have known that: (1) the representation was false; (2) the policy contained a requirement that the medical bills be for ‘reasonable and necessary’ medical treatment of the policyholder’s accident related injuries before [the insurer] would cover the bills; and (3) a determination of whether medical treatments were reasonable and necessary would be made, not by [the insured’s] treating physicians, but by a peer review conducted by third parties selected by [the insurer].” The insured purchased the extraordinary benefits policy, under which the insured’s wife was also named as an insured.

While the policy was still in force, the insured husband was involved in an automobile accident. The insureds sued the driver and settled the case with the insurer’s consent, but the settlement was insufficient to cover the insured husband’s medical bills. The insureds then filed a claim against the insurer for underinsured motorist coverage, and alleged that the insurer failed to make a reasonable offer to settle the claim. The parties ultimately resolved this issue through arbitration.

The insured husband subsequently filed claims for coverage under the extraordinary benefits policy after his medical bills exceeded $100,000. The insurer paid the claims for medical expenses at first, but refused to pay later bills. The insurer conducted an independent medical examination (“IME”) of the husband in connection with the claim, but allegedly failed to conduct a subsequent examination “in connection with its denial of his extraordinary benefits claims or rely upon the prior examination in reaching its decision to deny his claims.”

The insurer denied the claims “on the grounds that a peer review had concluded that [the medical bills] were not reasonable and necessary.”

The insured husband alleged that as a result of the denial, he was forced to pay excess costs and incur liens of medical providers. The insured husband further claimed that when his own financial resources were insufficient to cover his medical expenses, his wife had to contribute her own funds. The insurer also refused to pay certain claims for lost earnings.

The insured husband and wife both brought claims against the insurer, including bad faith claims. The insurer moved to dismiss all of the claims asserted by the insured wife. The insurer contended that the insured wife lacked standing to bring any claims “because she was not injured in the accident, did not incur her husband’s medical bills and did not file a claim for extraordinary medical expenses insurance coverage.”

In support, the insurer pointed to 23 Pa. Cons. Stat. § 4102, which the insurer claims makes the insured wife’s potential liability for her husband’s medical bills “contingent upon the creditors obtaining judgments and her husband’s assets being inadequate to pay the judgments.” The insured wife responded that “the statute makes her ultimately responsible for the payment of her husband’s medical expenses,” and that she has contributed financially to her husband’s expenses when his resources were insufficient to fully pay for them. In response, the insurer argued that the insured wife was under no obligation to make any payments and did so as a volunteer.

The Court stated that a volunteer is someone “who, having no interest to protect, without any legal or moral obligation to pay … pays the debt of another.” Here, even though the insured husband’s medical providers could not execute on the insured wife’s personal assets until they had obtained judgment and were unable to collect from the husband, the applicable Pennsylvania statute also states that creditors may sue and obtain a judgment against both insureds.

Thus, it could not be said that the insured wife “has no interest to protect” or that she is “without any legal or moral obligation to pay.” The Court concluded that for purposes of a motion to dismiss, the insured wife’s allegation was sufficient to establish that she has standing to pursue her claims, and denied the insurer’s motion to dismiss the insured wife’s claims.

Date of Decision: July 30, 2015

McGuckin v. Allstate Fire & Cas. Ins. Co.No. 15-2173, 2015 U.S. Dist. LEXIS 99376 (E.D.Pa. July 30, 2015) (Beetlestone, J.)