Family sues for bad faith when insurer refuses uninsured motorist claim for wrongful death; insurer further claims that Medicare lien had to first be satisfied, and so interpleads disputed policy limits.
The three adult plaintiffs (each in their 50s) were the children of Kathleen Murray, who was struck as a pedestrian by an uninsured motorist in May of 2009 and died a month later.
Plaintiffs made a claim for the uninsured motorist benefits
of $1,500,000, under their mother’s auto policy. The primary carrier eventually paid its $500,000 limits. The excess carrier, Defendant USLI, refused (or delayed in paying), claiming that, because excess UM policies are not subject to the Insurance Code,
that wrongful death damages were not covered and that the policy only covered the (substantial) medical and funeral expenses.
Defendant USLI also argued that it couldn’t pay the medical expenses because of a Medicare lien which plaintiffs
refused to resolve. Plaintiffs sued USLI for the benefits and for bad faith. USLI filed an interpleader action against the plaintiffs and Medicare, impleading the disputed policy limits. Medicare removed that action to federal court. The federal court eventually remanded the interpleader action back to the state court, where it and the bad faith action proceeded to trial.
USLI unreasonably denied and then delayed payment of the UM benefits.
It was reasonable to question whether wrongful death benefits were covered under the policy given the controlling policy language. Moreover, USLI owed a direct duty to Medicare to protect Medicare’s interest and it would have been a violation of that duty to pay the benefits only to the plaintiffs.