Glen Hanson, a Minor, by and Through His Guardian Ad Litem, Catherine Hanson, and Duane Hanson v. The Prudential Insurance Company of America

The Hansons, insured under a group medical insurance policy issued by Prudential Insurance Company (Prudential), filed an action against Prudential to recover poli-ey benefits for treatment received by Glen Hanson at Clear Water Ranch Children’s House (Clear Water Ranch), a residential treatment facility. The Hansons appeal a judgment for Prudential, contending that (1) the district court erred in finding that Clear Water Ranch was not a “hospital” within the meaning of the insurance policy; and (2) Prudential acted in bad faith in failing to investigate the claim thoroughly. The district court had jurisdiction under 28 U.S.C. § 1332 (a)(1). We reverse the district court’s judgment on the Hanson’s contractual claim and affirm its judgment on the bad faith claim.

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Prudential issued a group medical insurance policy to employees of Pitney-Bowes. In February 1975, Glen Hanson, stepson of Duane Hanson, a Pitney-Bowes employee, was accepted as a patient at Clear Water Ranch, a residential treatment facility specializing in the treatment of preadolescent children suffering from functional nervous disorders. The staff at Clear Water Ranch included one registered nurse, who was on duty…