Thereafter, he asserted that his auto insurer, USAA Casualty Insurance, had not paid the full amount of personal injury protection ("PIP") benefits to which he was entitled under the policy.

In response, USAA alleged that it only was obligated to pay an amount that it considered reasonable for the services rendered.

Mr. Fosnaught and USAA engaged in arbitration proceedings to resolve the matter.

On April 15, 2019, a Department of Insurance arbitration panel awarded Mr. Fosnaught $2,394 in unpaid PIP expenses. USAA appealed this decision on May 8, 2019.

In his complaint on appeal, Mr. Fosnaught alleged that USAA's conduct constituted a breach of contract and violated 21 Del. C. §§ 2118 and 2118B. He claimed that he was entitled to special and statutory damages.

USAA moved to dismiss, for lack of standing. USAA cited the Delaware Department of Insurance's Bulletin 10 in support of its argument that Mr. Fornaught lacked standing. Specifically, USAA contended that Bulletin 10 gave standing only to medical providers to bring a claim for lack of payment.

Mr. Fosnaught replied that he had standing to bring his claim as a matter of contract law. He further contended that Bulletin 10, as an advisory opinion, could not trump Delaware's statutorily-created financial responsibility laws.

Mr. Fosnaught also pointed to the existence of Department of Insurance regulations creating an arbitration process for actions between an insured and an insurer as further proof of his standing to bring a breach of contract claim against his insurer.

The Court's Decision

The court denied USAA's motion.

In its decision, the court explained that Delaware courts "consistently recognize and uphold the principle" of "freedom of contract" and permit contracting parties to bring claims to enforce contractual obligations.

The court then noted that Mr. Fosnaught had contracted with USAA for automobile insurance coverage and that in exchange for a certain level of PIP coverage, Mr. Fosnaught paid USAA monthly premiums.

Accordingly, the court ruled, Mr. Fosnaught has a right to enforce his contract with USAA in a court of law and had standing to bring a claim for breach of contract against USAA.

The court also ruled that, in addition to a general contractual right, Mr. Fosnaught had a statutory right to recover payment of medical expenses from USAA.

In the court's opinion, Bulletin 10 did not shift the right to bring a breach of contract claim from the insured to medical providers. Instead, the court found, Bulletin 10 reflected the Delaware Department of Insurance's "preference" for litigation about the "reasonableness" of medical expenses to occur between medical providers and insurance carriers only.

The court concluded that the preferences outlined in Bulletin 10 did not usurp an insured's statutory right to recover the cost of all "reasonable and necessary" medical expenses from his or her insurance carrier.

The case is USAA Casualty Ins. Co. v. Fosnaught, No. N19C-05-054 CLS (Del. Super. Ct. Oct. 14, 2019). Attorneys involved include: Dennis A. Mason H, Esquire, The Freibott Law Firm, P.A., Wilmington, DE, Attorney for Plaintiff Below/Appellee. Lisa M. Grubb, Esquire, Marshall Dennehey Warner Coleman & Goggin, Wilmington, DE, Attorney for Defendant Below/Appellant.