What is it?
Assume you are a car owner or are about to be one. You're concerned about who will pay your medical bills if you have an accident. You have a personal auto policy (PAP). The "med pay" portion of your PAP pays the medical expenses for you or your family members involved in a car accident regardless of fault.
The purpose of med pay is to provide payment for immediate medical treatment of people injured in an auto accident without waiting to see who is at fault and ultimately liable. Medical payments coverage is located in Part B of your PAP and contains the following sections: the Insuring Agreement, Exclusions, Limit of Liability, and Other Insurance.
The insuring agreement
The insuring agreement is the most important part of each section of your PAP. It sets forth the circumstances under which the insurer will pay benefits to you, or on your behalf, for med pay coverage.
Your med pay coverage typically pays reasonable expenses incurred for necessary medical and funeral services because of "bodily injury" caused by an accident that is sustained by an "insured." The benefits of med pay coverage are available up to the specified limit per person.
The insuring agreement also imposes a time limit after which the med pay coverage is no longer available. The time limit is typically one to three years after the accident. Check your policy for the specific time limit.
Insurance companies impose a time limit on med pay for two reasons: (1) closure--the insurer wants to know what the total payments are in a reasonable amount of time, and (2) protection against fraud--after a number of years it may become difficult to determine whether the treatment requested is for the covered injury or for a later-occurring injury that is not covered. A time limit gives insurance companies some protection on med pay claims.
Definition of "insured"
The definition of "insured" is very important. Whether a person is insured determines if they are covered under your policy. The med pay section of your PAP has its own definition of "insured." It typically defines "insured" as:
- You or any "family member":
- While "occupying" "your covered auto"
- As a pedestrian when struck by a motor vehicle designed for use mainly on public roads or a trailer of any type.
- Any other person while "occupying" "your covered auto": As in Part A: Liability Coverage, "you" refers to you as the named insured and your spouse. "Family member" is defined as any person related to you who lives in your home. "Your covered auto" is any vehicle that is listed on the Declarations Page of your PAP.
To be covered by med pay, you have to be a person occupying a motor vehicle. The key term is occupying. Not surprisingly, there has been plenty of litigation surrounding the interpretation of that term. Your PAP probably defines "occupying" as "in, upon, getting in, on, out, or off" a motor vehicle at the time of the accident.
Med pay coverage is also extended to any pedestrian who is hit by "your covered auto." This reflects the no-fault nature of med pay coverage. If anyone is injured by your vehicle, med pay will cover his or her medical bills no matter who is at fault.
The definition itself limits coverage to vehicles designed for use mainly on public roads. Therefore, Part B does not provide coverage for injuries inflicted by bicycles and many other types of vehicles.
The exclusions section of your insurance policy specifically sets out the limitations and restrictions on the coverage provided by the insuring agreement. Your PAP excludes med pay coverage for 11 specific causes of loss. Generally, coverage is excluded to avoid duplication with other, more suitable insurance coverages, for business uses, and to eliminate nonstandard (even catastrophic) risks.
Med pay coverage typically will not cover "bodily injuries" sustained by an insured that are covered by workers' compensation. Workers' compensation is better suited to cover such losses.
Generally, med pay will not cover you for "bodily injuries" sustained while using a vehicle for business purposes. Commercial policies are better suited for that type of coverage. The business exclusions in the PAP include:
- Your PAP will not provide med pay coverage when you are occupying "your covered auto" as a public or livery conveyance (i.e., transporting people or goods for a fee).
- Med pay excludes coverage for injuries sustained while occupying a vehicle when it is being used in the business of an insured. This exclusion does not apply to injuries sustained in:
- A private passenger auto
- A pickup or van that you own
- A "trailer" being used with one of the above
Hal has a PAP and uses his pickup truck for his job as a copier technician. The job requires Hal to drive from site to site servicing copiers. Hal has an accident and sustains "bodily injury." Result: Hal is eligible for med pay coverage under the preceding exceptions.
There are some nonstandard risks that your insurer does not intend to cover. Your med pay policy excludes many nonstandard risks that you could subject yourself to. Med pay coverage is excluded for:
- Unlawful use--Anyone who uses your vehicle without a reasonable belief that they are entitled to do so is not covered (e.g., when a thief or joyrider steals your car).
- Vehicles with fewer than four wheels--Med pay will not provide coverage for any injuries you sustain while "occupying" a vehicle with fewer than four wheels. Vehicles such as motorcycles present additional risks that your med pay does not intend to cover. You can purchase additional insurance to cover these types of risks.
- Vehicles located for use as a residence or premises--If you are injured in the equivalent of someone's "house," your auto insurance isn't really the best place to look for payment. A homeowners insurance claim may be more appropriate. For example, coverage is excluded if you are injured in a trailer that has been set up as a campsite.
- Autos not listed on the PAP--Any auto that you own or that is owned by a family member not listed on your PAP Declarations Page is not covered under med pay. This exception does not apply to you (or your spouse) if you're in a vehicle that is owned by a different "family member."
Your son Pat owns a car. He is 18, lives with you at home, and has his own insurance. If you take the car for a test ride around the block and have an accident, your medical expenses are covered under your own med pay policy. If Pat's friend, Bobby, has an accident while taking the same test ride, your med pay coverage will not cover him for his medical expenses.
Insurers can calculate risks only on your known vehicles. If a vehicle is not listed on your policy, injuries sustained while using it will not be covered.
- Racing--You guessed it: no med pay coverage when you compete in, practice, or prepare for any prearranged or organized racing or speed contest. If you're a race-car driver you should purchase insurance that is designed to cover the obvious risks of race-car driving.
The med pay section of your PAP also excludes coverage for various catastrophic exposures that cause "bodily injury" to an insured. These are so catastrophic that calling them "nonstandard risks" just doesn't seem to be appropriate. They are:
- Discharge of a nuclear weapon, a nuclear reaction, radiation, or radioactive contamination (even if accidental)
- War (declared or undeclared)
- Civil war
- Rebellion or revolution
These exceptions are designed to protect the insurer from a situation in which a large number of claims result from a single catastrophic incident.
Limit of liability
Your PAP is not an unlimited source of funds for you to draw on in case of an accident. There are limits to how much coverage your insurer will provide. The limit of liability for med pay coverage is listed on the Declarations Page of your PAP. It can be in any dollar amount but is typically $5,000 or $10,000. This limit is the maximum amount of med pay coverage that will be paid by the insurance company, per person, for any one accident.
Total per accident
The med pay limit on the Declarations Page is the maximum dollar amount that the insurance company will pay any one person for any one accident. It's the most the insurance company will pay regardless of the number of:
- Claims made
- Vehicles or premiums shown on the Declarations Page or
- Vehicles involved in the auto accident
The insurance company is responsible for paying up to the specified limit and no higher. That limit does not change depending on how many insureds there are or how many of your covered vehicles are involved in the accident.
No duplicate damages
Your insurer will not pay med pay benefits when some other person or organization will do so. The first example of this is when other sections of your PAP cover the loss.
You will not receive duplicate med pay payments for the same loss that is covered under Part A: Liability, Part C-: Uninsured Motorist (UM) Coverage, or any underinsured motorists coverage provided by your PAP. The same rule applies to duplicate med pay benefits under another person's policy.
You are injured as a passenger in Ron's car. You receive $5,000 in med pay coverage from Ron's PAP. Later, it is proven that Ron is liable for your injuries. Any amount you are awarded from the Part A: Liability section of Ron's policy will be reduced by the amount you were paid under the med pay coverage.
When you're in a car accident, it's likely that more than one auto insurance policy is in effect. The other insurance clause limits your insurer's liability when there is another policy that might also cover your loss.
Generally, your PAP insurer will pay its pro rata share of the loss. That share is the proportion that your policy's med pay limit bears to the total amount of any other med pay policies in effect.
Ron is a passenger in Tammy's car when she has an accident. Tammy's policy provides for $10,000 per person in med pay coverage. Ron is considered an "insured" under Tammy's policy because he's in her car. Let's say that Ron has his own PAP that provides med pay coverage of $5,000. Which policy pays, and how much? The total amount of med pay is $15,000. Each has to pay only their pro-rated fair share of any losses that are less than the total. Tammy's share is two-thirds ($10,000 of $15,000) and Ron's share is one-third ($5,000 of $15,000). So, under the general rule, if Ron's medical bills add up to $6,000, Tammy's insurer has to pay $4,000 (two-thirds) and Ron's insurer has to pay $2,000 (one-third).
The second part of the other insurance clause limits liability even further. When your insurer is providing med pay coverage for a vehicle that you do not own, it will make payment only if the primary med pay coverage on the vehicle is insufficient. In the preceding example, Ron's med pay coverage will have to pay only his medical bills that exceed Tammy's med pay limit of $10,000.