The Wisconsin Court of Appeals acknowledged that the third-party beneficiary of a policy has a right to sue the insurer for bad faith. See Meleski v. Schbohm LLC, 2012 Wis. App. LEXIS 343 (Wis. Ct. App. May 1, 2012)
Plaintiff fell and injured herself on the insured's property. The insured's policy promised to "pay medical expenses for 'bodily injury' caused by an accident" on premises owned by the insured. Therefore, through its policy, the insurer promised the plaintiff that it would pay the medical expenses regardless of fault. Nevertheless, plaintiff alleged that the insurer refused to make payment.
Plaintiff sued the insured and the insurer, asserting bad faith against the insurer. The trial court dismissed the bad faith claims because Plaintiff was not in "privity of contract" with the insurer.
The Court of Appeals reversed, noting that insurance policies can create third-party beneficiary duties running from the policy to a non-insured. A policy that agreed to "pay all reasonable medical expenses . . . that were caused by the accident" covered by the policy made the insurance company susceptible to suit by an injured non-insured to recover those medical expenses.
Accordingly, the plaintiff's entitlement to her medical expenses under the policy was fixed the moment she fell in the area covered by the policy. Her right to medical expenses did not depend on who was a fault. Therefore, the insurer was subject to plaintiff's bad faith action because she became, at the moment she fall, a fixed third-party beneficiary of the insurer's policy with its insured.
