The U.S. Court of Appeals for the Third Circuit affirmed a district court's summary judgment ruling in favor of State Farm Mutual Automobile Insurance Company in a case involving breach of contract and bad faith claims brought by a bankruptcy estate trustee.
In the nonprecedential opinion decided Jan. 23, 2026, Circuit Judge Chung wrote for the three-judge panel that included Judges Matey and Ambro. The case, *Jill E. Durkin v. State Farm Mutual Automobile Insurance Co.* (3d Cir. 2026), arose from a 2015 automobile accident with devastating financial consequences.
The underlying incident occurred on July 18, 2015, when Kevin Parkhurst was driving his father Ralph Parkhurst's vehicle and caused an accident that seriously injured another driver. Two days later, on July 20, 2015, Ralph Parkhurst filed an insurance claim with State Farm seeking coverage for the incident.
State Farm denied the claim the following day, citing a named driver exclusion that specifically excluded Kevin Parkhurst from coverage under his father's policy. The exclusion had been put in place in September 2009 at the request of Parkhurst's State Farm agent. Kevin Parkhurst had no other insurance coverage at the time of the accident.
Without insurance coverage, Ralph Parkhurst faced the consequences alone when the injured driver filed a lawsuit against him on March 24, 2017. State Farm, having denied coverage, did not provide a legal defense for Parkhurst. The litigation resulted in a substantial $5.29 million judgment against Parkhurst.
Unable to satisfy the multi-million-dollar judgment, Ralph Parkhurst filed for bankruptcy protection. The case then moved into the bankruptcy system, where Jill E. Durkin was appointed as trustee for Parkhurst's bankruptcy estate.
Acting in her capacity as bankruptcy trustee, Durkin filed suit against State Farm in the Bradford County Court of Common Pleas, asserting claims for breach of contract and bad faith under Pennsylvania law. The bad faith claim was brought pursuant to 42 Pa. Cons. Stat. § 8371, Pennsylvania's bad faith insurance statute.
The case was subsequently removed to the U.S. District Court for the Middle District of Pennsylvania, where it was assigned to Judge Karoline Mehalchick. State Farm moved for summary judgment on all claims brought by the bankruptcy trustee.
The district court granted State Farm's motion for summary judgment, ruling in favor of the insurance company on both the breach of contract and bad faith claims. The trustee appealed the decision to the Third Circuit Court of Appeals.
The Third Circuit heard the case under Local Appellate Rule 34.1(a), which allows for submission without oral argument when the court determines that oral argument would not be helpful to the decisional process. The case was submitted on Jan. 12, 2026, and decided 11 days later.
In affirming the district court's judgment, the Third Circuit panel upheld the lower court's conclusion that State Farm was entitled to summary judgment on all claims. The appeals court's opinion was designated as nonprecedential, meaning it does not establish binding precedent under the Third Circuit's Internal Operating Procedures.
The case highlights the importance of named driver exclusions in automobile insurance policies and the potential consequences when excluded individuals operate covered vehicles. Insurance companies routinely use such exclusions to manage risk by removing high-risk drivers from coverage, often at the request of policyholders seeking to reduce premiums.
The exclusion in this case proved particularly consequential given the severity of the accident and the substantial damages awarded to the injured party. The $5.29 million judgment represents one of the larger personal injury awards that led directly to a bankruptcy filing.
Bankruptcy trustees often pursue insurance coverage as a means of maximizing recovery for creditors and the bankruptcy estate. In this case, the trustee's efforts to challenge State Farm's coverage denial were unsuccessful at both the district court and appellate levels.
The case also demonstrates the intersection between insurance law and bankruptcy proceedings, as injured parties and bankruptcy trustees seek to identify all possible sources of recovery. When insurance coverage is denied, policyholders may face personal liability that can result in financial ruin, as occurred with Ralph Parkhurst.
The Third Circuit's affirmance of the summary judgment suggests that the named driver exclusion was properly applied and that State Farm's denial of coverage was legally justified. The court's decision to issue a nonprecedential opinion indicates that the legal issues presented were not novel or of broad precedential value.
For insurance practitioners, the case serves as a reminder of the importance of clearly documented exclusions and proper claims handling procedures. For policyholders, it underscores the need to understand policy exclusions and their potential ramifications, particularly regarding household members who may have access to covered vehicles.