Opinion ID: 1190836
Heading Depth: 1
Heading Rank: 6

Heading: JONI McCLELLAND'S STANDING

Text: The jury awarded Joni $73,000 in compensatory damages for emotional distress due to the denial of benefits for Kenneth. Appellants argue that Joni had no standing to sue them since she was neither a contracting party nor a claimant under the certificate issued by United Fire. We agree. Liability for bad faith is strictly tied to the implied-in-law covenant of good faith and fair dealing arising out of an underlying contractual relationship. K Mart Corp. v. Ponsock, 103 Nev. 39, 48, 732 P.2d 1364, 1370 (1987). When no contractual relationship exists, no recovery for bad faith is allowed. Austero v. Nat. Cas. Co. of Detroit, Mich., 62 Cal. App.3d 511, 133 Cal. Rptr. 107, 110 (1976); see also Lowe v. American Medical Intern., 494 So.2d 413 (Ala. 1986) (holding that the cause of action for the tort of bad faith refusal to pay was created to protect only the person for whose benefit insurance payments were made). The McClellands respond that even though Joni was not a named insured under the certificate, she became an insured as a dependent. However, a wife's coverage as a dependent under her husband's health insurance policy does not give her standing to enforce her husband's contract rights for bad faith denial of health care benefits. Hatchwell v. Blue Shield of California, 198 Cal. App.3d 1027, 244 Cal. Rptr. 249, 253 (1988). In Hatchwell, the court reasoned that even though the wife is an insured person and an express beneficiary regarding her own health care benefits, she is merely an incidental beneficiary in regard to her husband's benefits. Id. We adopt the reasoning of Hatchwell. Next, the McClellands argue that Joni has standing because United Fire jeopardized community property by its refusal to pay medical bills. Medical creditors could seek payment from Joni's portion of the community property as well as from her separate property. NRS 123.110; NRS 450.390(2). A South Carolina Supreme Court case supports the McClellands' contention, holding that a spouse who is individually liable for her husband's medical expenses has sufficient interest in enforcement of the health insurance policy to enable her to maintain a cause of action for breach of contract and punitive damages. Ateyeh v. Volkswagen of Florence, Inc., 288 S.C. 101, 341 S.E.2d 378, 379-380 (1986). We decline to follow the principles endorsed in Ateyeh. Instead, we follow Hatchwell which held that a wife did not acquire standing to sue her husband's medical insurer for bad faith based on her community property interest in the contract and community property liability for the medical expenses incurred by her husband. 244 Cal. Rptr. at 254. We agree with Hatchwell which refused to expand tort liability for breach of contract since it concluded that the rights of the covered spouse sufficiently protect the community interest. Id. Therefore, we continue to require a contractual basis for the tort of bad faith. We determine that Joni had no standing to bring a bad faith claim against appellants because a contractual basis did not exist between her and the insurer. Consequently, the district court erred by submitting her claims to the jury. Accordingly, we reverse as to the $73,000 in compensatory damages for Joni's emotional distress.