INSURANCE
Standing to Sue

Bonos v. State Farm Insurance Company, U.S.D.C. (E.D.Pa.), opinion by Sanchez, J., filed 10/10/07 (PICS NO. 07-1716).

Six siblings were heirs to property upon the death of their mother. The property was titled to all six, but only two were named insureds under a fire policy issued by State Farm.

A fire destroyed the property and a State Farm claims manager wrote a letter to one of the siblings assuring her that a check for payment of the loss would be issued to all six siblings. However, State Farm issued the check to the two named insureds only. The four other siblings sued State Farm for breach of contract, negligence and fraud and sought reformation of the insurance contract. State Farm moved to dismiss the claims.

The District Court held that the plaintiffs had no claims for breach of contract or reformation stating that the plaintiffs were not parties to the insurance contract and were not insureds because they did not reside on the premises. In Pennsylvania, an insurance policy benefits only the insureds. The court continued that therefore those siblings had no standing to claim breach of contract or request reformation because they were not insureds.

However, the court denied dismissal of the counts for fraud and negligence. The court stated that issues of fact remained as to the negligence and fraud counts. Noting that in Pennsylvania a plaintiff acquires a cause of action against its insurance broker or agent if the agent or broker fails to act with the proper and customary skill and care generally used by those in a like business. The court explained that fact finding would determine whether the agent negligently wrote the policy and whether that negligence was attributable to State Farm.