Can injured parties claim bad faith against homeowners insurers? Cannon v. The Travelers Indemnity Company Explained

The Utah Court of Appeals addressed whether an injured person seeking medical payment benefits under a homeowners insurance policy can pursue bad faith claims against the insurer in Cannon v. The Travelers Indemnity Company.

Background and Facts

Carla Cannon was injured when her ten-year-old niece jumped on her at the Andersons’ home, causing back problems that eventually required surgery. Cannon delayed reporting the incident for months due to family concerns about unrelated litigation. She eventually submitted a claim under the Andersons’ homeowners policy for medical payment benefits under Coverage F. After initial resistance and investigation, Travelers ultimately paid the full $10,000 medical payment limit but Cannon sued for breach of contract, breach of the duty of good faith and fair dealing, and violations of Utah’s Unfair Claims Settlement Practices statutes.

Key Legal Issues

The central issue was whether Cannon qualified as an insured under the policy, which would determine her right to pursue bad faith claims. The court also addressed whether Utah’s Unfair Claims Settlement Practices statutes create a private cause of action.

Court’s Analysis and Holding

The court applied principles of contract interpretation to analyze the policy language. The policy clearly distinguished between “named insureds” (the Andersons), “insureds” (household residents and relatives), and “injured persons” seeking Coverage F benefits. The medical payments provision specifically referred to claimants as “injured persons,” not insureds. The court concluded that Cannon was neither a first-party insured nor an “unnamed insured” under the policy. Because the duty of good faith and fair dealing runs only to parties to an insurance contract or their privies, Cannon could not pursue bad faith claims. Additionally, Utah Code Ann. § 31A-26-303(5) explicitly states that the Unfair Claims Settlement Practices statute “does not create any private cause of action.”

Practice Implications

This decision establishes important boundaries for insurance bad faith claims in Utah. Practitioners should carefully examine policy definitions when advising clients about potential claims against insurers. The distinction between insureds and beneficiaries is crucial for determining available remedies. The ruling also confirms that Utah’s regulatory statutes governing insurer conduct do not provide private remedies for injured parties.