The medical payments coverage of personal auto policies are very similar to those of homeowners policies. This coverage is essentially a low-limit, no-fault coverage that applies to bodily injury claims arising out of use of covered vehicles. The limits of automobile medical payments coverage under most personal automobile policies are only a few thousand dollars. $5,000 is a common limit; $10,000 is sometimes seen.
Auto medical payments provisions often provide for coordination between policies for certain things. These things include the coordination of benefits payable with other benefits available to the insured person, such as workers compensation, or proceeds of insurance policies of other persons who may also have been involved in the accident and who are legally responsible for the injured person’s injuries.
The ISO personal automobile policy medical payments insuring agreement provides that the insurer will pay reasonable medical and funeral expenses because of bodily injury caused by an accident and sustained by an insured. Coverage applies for expenses incurred within three years of the date of the accident.
Insured, for purposes of the automobile medical payments coverage, includes the named insured and any family member while occupying a motor vehicle designed for use principally on public roads. It also includes a pedestrian struck by such a vehicle while it is occupied by an insured, and any other personwhile occupying your covered auto.
Since the auto medical payments coverage applies to the named insured and family members while occupying covered vehicles, the medical payments coverage is a first-party coverage. Insofar as coverage extends to two categories of other persons, pedestrians struck by and any other person while occupying your covered auto, the medical payments coverage is also, in part, a third-party coverage.
As with all coverages, auto medical payments coverage is subject to a number of exclusions, several of which are similar to exclusions applicable to auto liability coverages, including injury:
arising out of transporting passengers for hire;
covered by workers compensation benefits; or,
arising out of racing or speed contests.
This medical payments exclusion precludes coverage for any injury sustained while occupying a motorized vehicle having less than four wheels. Technically, this exclusion would therefore also apply to other motor vehicles with less than four wheels, if such vehicles come within a given policy’s definition of motor vehicle. Potentially, this could include snowmobiles and scooters that have become popular in recent years.
This is a provision in which insurers’ policies often vary. Because of this potential variation, you should check to see what your policy does or does not cover if you have such an exposure. Nonetheless, if you own motorcycles or other such vehicles, a policy that is specifically applicable to such vehicles should apply first.
Public or Livery Conveyance Exclusion
This medical payments exclusion precludes coverage for bodily injury to an insured arising out of the transport of goods or persons for hire, with the exception of shared expense carpools. The reasons for this exclusion are the same as discussed with respect to the similar auto liability coverage exclusion. Persons engaged in such businesses need to purchase appropriate commercial policies.
Use of Vehicle as Residence or Premises Exclusion
This medical payments exclusion precludes coverage for bodily injury to an insured sustained while occupying any vehicle located for use as a residence or premises. The intent of this exclusion is to apply, for example, when a motor home or trailer is being used as a primary residence or an office or business premises. When the primary or exclusive use of such a vehicle is as a residence or premises, it is more properly the subject of a variant of homeowners policy whose medical payments coverage should apply in such circumstances.
This is again an example of an exclusion intended to avoid duplicative and overlapping coverage when another type of policy is intended to apply to the particular kind of risk presented.
Workers Compensation Exclusion
This auto medical payments exclusion precludes coverage for bodily injury to an insured occurring in the course of employment if workers compensation benefits are required to be provided or are available to cover that bodily injury in question.
An issue that may arise is whether the workers compensation exclusion precludes coverage when the injured party has not sought or received workers compensation benefits. The view of most states’ courts is that the entitlement to workers compensation benefits is the controlling question, and the exclusion applies even if workers compensation benefits were neither sought nor received by the injured person.
Unrated Vehicles Exclusion
The definition of your covered vehicleencompasses not only the rated and described vehicles in the declarations, but also rented and borrowed vehicles. Your covered vehicle does not include owned vehicles that are not rated (described), newly acquired vehicles, or nonowned vehicles that are furnished to or regularly available for the use of an insured. This exclusion precludes medical payments coverage arising out of the latter categories of vehicles.
Family Member Owned Vehicles Exclusion
This exclusion is, in effect, an exception to the previous exclusion with respect to bodily injury sustained by an insured while occupying or struck by a vehicle other than your covered vehicle that is owned by, furnished to, or regularly available to a family member. This provision is commonly included in policies of insurers that do not use the ISO policy form.
This exclusion does not apply to the named insured or his or her spouse. This means that, if a family member owns or uses a vehicle that is not covered under the policy and the named insured or his or her spouse is injured while occupying or struck by such a vehicle, medical payments coverage will exist.
Nonpermissive Use Exclusion
This exclusion precludes medical payments coverage for bodily injury to an insured sustained while occupying a vehicle without a reasonable belief that the insured is entitled to do so. The goal of this exclusion is to defeat medical expense claims in circumstances where no reasonable person should expect insurance to apply. This exclusion’s applicability will be highly dependent on the facts of a given claim, but some examples can illustrate the intent of this exclusion.
EXAMPLE1:Your son steals a car and is injured while using it. No coverage would apply.
EXAMPLE2:Your son or daughter is in a stolen car operated by one of their acquaintances and is injured. No coverage would apply.
In both cases, the injuries arise out of nonpermissive use of motor vehicles. Insurers exclude coverage for certain kinds of losses in order to create a deterrent to certain kinds of conduct that are likely to lead to loss. Common human experience teaches that in circumstances such as the previous examples, efforts to flee the scene of the crime or to escape the pursuit of law enforcement authorities are likely to result in accidents.
EXAMPLE:You forbid your child, another resident relative, or even your spouse from using a particular owned vehicle—the reason does not matter. Yet the prohibited person uses the vehicle or lets another person use it, and is injured. No medical payments coverage would apply in this circumstance.
The purpose behind this exclusion is to encourage responsible entrustment of vehicles and to avoid providing insurance coverage for persons who are perpetrators or participants in illegal or criminal activities.
Given the dual purposes of the average insured’s use of vehicles, this exclusion is actually fairly limited in its scope. Recall, businessis broadly defined as any trade, profession, or occupation. The medical payments business exclusion precludes coverage for bodily injury to an insured while occupying a vehicle when it is used in the business of an insured. The exclusion, however, contains an exception for injuries sustained while the insured is occupying:
a private passenger auto;
an owned pickup or van; or,
a tractor attached to either category of vehicles.
If the injury arises out of occupying a private passenger auto, in an insured’s business, the exclusion does not apply. Nor does the exclusion apply to injuries sustained while occupying owned pickups or vans used in an insured’s business.
Well, what’s left?—occupying a vehicle not owned by an insured, and used in the insured’s business? This exclusion applies to injuries sustained while an insured is occupying nonowned vehicles other than private passenger autos (pickups, vans, or other vehicles), while such vehicles are being used in the insured’s business. This means rented, borrowed, or employer-owned, nonprivate-passenger vehicles used in an insured’s business.
Insurance policies are intended to cover risks of loss arising from the normal incidents of life. The nuclear war, civil war, insurrection, rebellion, or revolution exclusions have long been held to be essentially uninsurable.
Governmental Coverage Exclusion
This exclusion appears in the ISO personal auto policy sold in some, but not all, states. This exclusion precludes automobile medical payments coverage for bodily injury to an insured who normally receives services or benefits for bodily injury from any agency, hospital, or other facility operated by any military or government. There is an exception if the person is legally required to pay for such services.
An exclusion of this nature has some pretty obvious purposes. The most apparent one is that of avoiding a double recovery by an insured who is entitled to free medical care as part of the conditions of his or her employment. A second, less obvious, purpose relates back to the reasonable expensesterm used in the auto medical payments insuring agreement. Aside from what may or may not constitute reasonable expenses from the standpoint of a health maintenance organization or a managed care plan, what may or may not be a reasonable expense incurred in a military or governmental hospital or healthcare facility may be so afflicted with proof problems that determining whether the cost, care, or services provided are reasonablecan be impossible.
Finally, when services are provided to an insured by a government entity as part of that individual’s employment, it is simply improper for other policyholders of that insurer to foot the bill through their insurance premiums when they are already footing the bill for those medical services as taxpayers.
Racing Competition Exclusion
The ISO personal auto policy auto medical payments coverage excludes bodily injury losses while an insured is occupying any vehicle located in a facility designed for racing.
This exclusion, when read fairly, is pretty limited. It applies only to bodily injury incurred within facilities designed for racing. It should come as a surprise to no one that racing and practicing for competition, would be excluded from coverage under an ordinary personal automobile policy. What needs to be understood, however, is that auto medical payments coverage terminates for anyone occupying the vehicle while it is located within a facility designed for racing.
EXAMPLE:An insured drives into the facility in a covered personal vehicle towing the trailer holding the racing vehicle and collides with another similar vehicle. An insured occupying the insured’s personal vehicle injured in that collision would not be entitled to auto medical expense coverage. That does not mean, however, that the policy’s auto liability coverage would not apply.
AUTO MEDICAL PAYMENTS LIMITS OF LIABILITY
There is fairly wide variation from one insurer to the next in regards to auto medical payments limits of liability. For example, the auto medical payments limit of liability provision of the ISO personal automobile policy addresses:
the maximum limit of liability per accident;
the interaction between the automobile medical payments coverage, the automobile liability coverage, and the uninsured and underinsured motorist coverage; and,
the interaction between the auto medical payments limits of liability and the applicable limits of liability of coverages under other policies.
The first of these three provisions states that the limits of liability for the auto medical payments coverage in the policy’s declarations is the maximum limit of liability for each person in any one accident,regardless of the number of insureds, claims made, vehicles involved, or premiums shown in the declarations. The auto medical payments limits apply on a per-person/per-accident basis.
EXAMPLE:A policy has a $5,000 auto medical payment limit of liability.
When a couple is involved in an accident in which both are injured, they would be entitled to recover up to $10,000 (i.e., up to $5,000 each). Limitations are discussed in the following paragraphs.
The second of these three provisions states that no one will be entitled to duplicate payments under the auto medical payments coverage for the same elements of loss for which that person recovers under the auto liability, uninsured, or underinsured motorist coverage. This is an example of a policy provision that reflects that coverage under insurance policies is intended to compensate an insured for injury (i.e.,to make the insured whole), not to provide an opportunity for profit by way of multiple recoveries.
The third of the auto medical payments limit of liability provisions is the other insuranceclause. This provision states that if there is other applicable auto medical payments coverage, the insurer will pay only its share of the loss in the proportion that its auto medical payments limit of liability bears to the total applicable limits of all policies. This provision further states that the auto medical payments coverage applicable to any vehicle not owned by the insured will be applicable over any other auto medical payments insurance collectable by the insured. This latter provision reflects the general principle that the coverage of a policy as to a specifically described and rated vehicle applies as primary coverage. Where that circumstance does not exist, the coverage will apply only on an excess basis.
Some policies contain provisions intended to define reasonablemedical expenses for purposes of the auto medical payments coverage. Their definitions use such terms as reasonable charges for medical, surgical, X-ray, dental, ambulance, hospital, professional nursing, prosthetic devices, and funeral services.
Some insurers’ policies further provide that medical expenses other than funeral expenses will be reduced by:
amounts payable under a workers compensation law or similar law;
any amounts received from others, including their insurers, who may be legally responsible for the injuries; and,
amounts of any other similar auto medical payments benefits payable to the injured person.
Some insurers’ policies also include provisions in the nature of an exclusion for unreasonable or unnecessary medical expenses. Unreasonable medical expenses are defined in terms of fees for medical services that are substantially higher than the usual and customary charges for those services. Unnecessary medical expenses are defined in terms of fees for medical services that are not usually and customarily performed for treatment of the injury, including fees for an excessive number, amount or duration of medical services.
These provisions are not exclusions per se, because the provisions do not state that unreasonable or unnecessary medical expenses are not covered, but rather, that the insurer reserves the right to contest such charges and to refuse to pay them. These provisions further state that the insurer will defend the insured if the insured is sued by a medical service provider because the insurer has refused to pay contested medical expenses and will pay any resulting judgment. These provisions state that the insurer will select defense counsel, establish the same duties of cooperation on the part of the insured as applied under the personal liability coverage, and establish coverage for the same categories of Supplementary Paymentsas apply to the liability coverage.
These latter provisions are intended to address the problem of excessive and unnecessary medical expenses. They also put the burden of proof of reasonableness and necessity on the medical service provider, while not leaving the insured caught without coverage between the insurer’s and medical service provider’s respective positions. This is shown by the promise to defend the insured and to pay any resulting judgment in a suit to collect fees for med ical services. This latter provision means that the medical service provider’s bills will be paid if that service provider can, in fact, prove that the services rendered were reasonable and necessary.
Provisions of this nature seek to reduce claims costs without prejudice to the insured. When claims costs are held in check, premiums for all policyholders can be kept from escalating.