Can injured parties sue insurers directly as third-party beneficiaries? Carmona v. Travelers Casualty Insurance Company Explained

The Utah Court of Appeals in Carmona v. Travelers Casualty Insurance Company addressed whether an injured party can sue an insurer directly as a third-party beneficiary to a property owner’s insurance policy. The court’s analysis provides important guidance on the stringent requirements for establishing third-party beneficiary status under Utah law.

Background and Facts

Fabiola Carmona sustained injuries when she slipped on ice at an apartment complex owned by Badger Creek Associates. The property owner carried liability insurance through Travelers that included a medical payment provision (Coverage C) promising to pay up to $5,000 in medical expenses for bodily injuries caused by accidents on the premises, “regardless of fault.” After learning of this provision, Carmona sued Travelers directly, claiming she was an intended third-party beneficiary entitled to direct payment of her medical bills.

Key Legal Issues

The central issue was whether Carmona qualified as an intended third-party beneficiary to the insurance contract between Travelers and Badger Creek. The court also addressed whether Travelers owed Carmona a duty of good faith and fair dealing, even if she were a third-party beneficiary.

Court’s Analysis and Holding

The Court of Appeals affirmed the dismissal, applying Utah’s strict standard for third-party beneficiary status. Under Utah law, “the intention of the contracting parties to confer a separate and distinct benefit upon the third party must be clear,” and the contract must be “undertaken for the plaintiff’s direct benefit.” The court found that the medical payment provision was merely an indemnity clause designed to protect Badger Creek from small claims, not to directly benefit injured parties. Although other jurisdictions recognize such claims, Utah requires affirmative evidence of clear intent to benefit third parties, which the “no-fault” language alone could not provide.

Practice Implications

This decision reinforces that Utah takes a restrictive approach to third-party beneficiary claims in insurance contexts. Practitioners should carefully examine contract language for explicit provisions favoring specific beneficiaries rather than general indemnity provisions. The court also confirmed that even if third-party beneficiary status existed, Utah law limits the duty of good faith and fair dealing to first-party insureds only.