A Kansas appeals court found that an insurer owed no duty of good faith and fair dealing to a third party who was a stranger to an insurance contract in Benchmark Ins. Co. v. Atchison, No. 94,266, 2006 WL 2191049 (Kan. App. Aug. 4, 2006).

 

Kayla Mell was one of four passengers in a car driven by Candi Atchison. Driving at excessive speed and attempting to avoid a truck stopped in the road, Candi lost control of the vehicle and hit a bridge abutment, which caused the vehicle to turn over and catch fire. Three of the passengers (including Mell) were injured and one was killed.

 

Atchison was insured by Benchmark Insurance on a policy that contained a $25,000 per person bodily injury limit and a $50,000 per accident bodily injury aggregate.

 

Mell's attorney sent a letter to Benchmark offering to settle her case for the per person limit of $25,000. Benchmark sent a letter to the attorney, as well as the parents of the other crash survivors, advising them of the policy limits and urging them to reach an agreement on dividing the total policy limits of $50,000. The letter stated that if an agreement could not be reached among the parties, Benchmark would consider filing an action with the court to make the decision.

 

Mell asserted that “Benchmark acted negligently or without good faith in failing to accept Mell's settlement demand.” Benchmark and Mell each filed motions for partial summary judgment, and the district court ruled in favor of Benchmark.

 

On appeal, Mell stated that “because her medical expenses clearly exceeded the $50,000 aggregate policy limit, Benchmark acted negligently and in bad faith in failing to settle.” Benchmark argued that it followed the Kansas Supreme Court's guidelines by filing an action with the court to determine the division of the policy limits.

 

The court pointed out that Mell was a third-party claimant—not an insured—and that Benchmark owed her no duty. Atchison did not assign her rights to Mell, and the court said that “the duty of good faith and fair dealing in the handling of claims runs only from the insurance company to its insured.” Thus, summary judgment in favor of Benchmark was appropriate.