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Personal Auto Coverage
Chapter 06 - MEDICAL PAYMENTS COVERAGE


Insuring agreement

(This section is often called “Part B – Medical Payments Coverage)  The Insuring Agreement under this section parallels the preceding sections, except this section makes arrangements to pay reasonable expenses insured for necessary medical and funeral services because of bodily injury caused by an accident and sustained by an insured.  Medical Payment coverage is a single peril (automobile accident) health insurance coverage for the covered person.

This section covers the insured or any other person while “occupying” the covered automobile.  It covers expenses incurred within 3 years of the date of the accident, and also includes an insured or family member who was a pedestrian struck by a motor vehicle, and covers any other person while occupying the insured vehicle.

Note the three year rule.  Many medical expenses resulting from automobile related injuries may be incurred over a long period of time.  As an often-quoted example, a child that suffers injury to teeth as the result of an auto accident, may have to wait more than one year for the permanent teeth to be grown to the state to where Orthodontia services are necessary.  The 3-year is generous as most medical treatments can be completed within that period of time.

INSURING AGREEMENT
A. We will pay reasonable expenses incurred for necessary medical and funeral services because of “bodily injury:”
1.      Caused by accident; and
2.      Sustained by an insured. 
We will pay only those expenses Incurred within 3 years from the date of the accident.
B. “Insured” as used in this Part means:
1.  You or any “family member” (a). while occupying;  or (b). as a pedestrian when struck by a motor vehicle designed for use mainly on public roads or a trailer of any type.
2.      Any other person while, occupying “your covered auto.”

This definition of “motor vehicle” used in this section can be a large truck or even a bus, however, large machinery, such as mobile cranes, which are not designed to be primarily used on public roads, are excluded.

Also note the inclusion of a “pedestrian” is used  only when the named insured or family members is struck by a motor vehicle (only if the covered person is a “pedestrian.”)

Exclusions

The exclusions are those included in other sections, such as while occupying a vehicle with less than 4 wheels or used as a residence, used during the course of employment, struck by owned-but-not-insured-under-this-policy auto, or being used as a business vehicle or livery vehicles, etc.

Exclusions
We do not provide Medical Payments Coverage for any person for “bodily injury:”
1. Sustained while occupying any motorized vehicle having fewer than four wheels.
2. Sustained while "occupying" your covered auto when it is being used as a public or livery conveyance. This exclusion (2.) does not apply to a share‑the‑expense car pool.
3. Sustained while “occupying” any vehicle located for use as a residence or premises.
4. Occurring during the course of employment if workers' compensation benefits are required or available for the “bodily Injury.”
5. Sustained while “occupying” or when struck by any vehicle (other than your covered auto) which is:
a. owned by you; or
b. furnished or available for your regular use.
6. Sustained while “occupying,” or when struck by any vehicle (other than your covered auto) which is:
a. owned by any “family member”  or
b.  furnished or available for the regular use of any family member.
However, this exclusion (B.) does not apply to you.
7.  Sustained while occupying a vehicle without a reasonable belief that that person is entitled to do so.
8. Sustained while “occupying” a vehicle when it is being used in the business of an insured.   This exclusion (8.) does not apply to “bodily injury” sustained while “occupying” a:
a.            private passenger auto;
b.            pickup or van that you own; or
c. “trailer” used with a vehicle described in
   a. or b. above.
9. Caused by or as a consequence of
a.  discharge of a nuclear weapon  (even if accidental);
b.  war (declared or undeclared);
c.  civil war;
d.  insurrection; or
e.  rebellion or revolution.
10.    From or as a consequence of the following, whether controlled or uncontrolled or how­ever caused:
a. nuclear reaction;
b. radiation; or
c. radioactive contamination.

Limits of liability

Payments under the Medical Payments Section of the policy, will be coordinated with the benefits payable under the Liability (Part A) or Uninsured Motorists (Part C) of the same policy.  Payments under this Medical Payments section will be reduced by any payments will be paid under Parts A or C.  Interestingly, the claimant must promise in writing that any amounts paid under this Part B (Medical Payments) will be credited if any future payment is made under parts A and C.

The specter of “stacking” is prevalent in discussing Medical Payment benefits.  “Stacking” is defined as an attempt to collect multiples of the policy limits based on the existence of multiple autos covered, claims made, vehicles involved, etc.  Any insurance company is willing to pay full benefits but not multiples of a Medical Payment limit.  Note, however, in some states, Uninsured Motorists limits may be stacked by Endorsement (see discussion later in text).

LIMIT OF LIABILITY
A., The limit of liability shown in the Declarations for this coverage is our maximum limit of liability for each person injured in any one Accident. This is the most we will pay regardless of the number of
1.      “Insureds”;
2.      Claims made;
3.      Vehicles or premiums shown in the Declaration
 or
4.      Vehicles involved in the accident.
B. Any amounts otherwise payable for expenses under this coverage shall be reduced by any amounts paid or payable for the same expenses under Part A or Part C.
C. No payment will be made unless the injured person or that person's legal representative agrees in writing that any payment shall be applied toward any settlement or judgment that person receives under Part A or Part C.


MEDICAL PAYMENTS COVERAGE 

This information indicates who is entitled, and who is not entitled, to receive Medical Payments benefits under a named insured’s Personal Automobile Policy.  The following assumes that the insured named on the PAP does not own or have furnished to him on a regular basis, any vehicle which is not a “covered auto” as defined in the PAP.

________________________________________________________________________
                                                            Person Injured
                                                   ______________________________________________
   How Injury Occurred                               Named                               Relative              Other
                                                                     Person
________________________________________________________________________

  • While occupying named

Insured’s auto                                              x    x   x
________________________________________________________________________

  • As a pedestrian by

the named insureds
covered automobile.                          x   x
________________________________________________________________________

  • While occupying or as a

pedestrian by an auto that is not
owned by or regularly furnished
to a relative.                                                       x    x
________________________________________________________________________

  • While occupying or as a

pedestrian by an auto that is
owned by or regularly furnished
to a relative.                                                       x  x
________________________________________________________________________

  • While occupying a vehicle that

has less than 4 wheels.                                       x   x
________________________________________________________________________

  • Struck by a vehicle with

less than 4 wheels, while
a pedestrian.                                                       x   x


NON-STACKED OPTION COVERAGE

While it is a fundamental rule in Automobile insurance that “stacking” is not allowed, in some states an Option is offered in conjunction with Uninsured Motorists Coverage.  In fact, it can be an automatic coverage which can be removed from the policy by the action of the insured, in which case there is a lower premium given for the reduction in coverage.

As stated in this Coverage “Option”, Uninsured Motorists Coverage provides protection for bodily injury sustained by an insured in an accident caused by an uninsured driver, which includes:

  • Drivers with no liability insurance.
  • Hit-and-Run drivers.
  • Drivers insured by insurance companies that deny coverage.
  • Drivers insured by insurance companies that are unable to meet their obligations within 4 years from the date of the accident.
  • Drivers other than the insured or a relative residing in the household, excluded from liability coverage under the policy, whose operation of an insured vehicle caused bodily injury to the insured or a relative residing in the household.
  • Drivers whose liability limits are less than the amount of the insured’s damages.

The coverage may be selected in an amount equal to the policy limits for Bodily Injury Liability Limits or they may select Uninsured Motorists limits lower than the Bodily Injury Limits, or the coverage may be rejected.

The Option allows the purchase, at a reduced rate, a non-stacked (limited) type of Uninsured Motorists Coverage.  Under that form, the Coverage limits will not be added together to pay for damages sustained by the insured in an accident.  Therefore, if the policyholder is injured in a vehicle insured under this policy, the Coverage provides the insured with protection only to the extent of the coverage limits shown on the Declarations page for that vehicle.  If the insured is injured in someone else’s vehicle, or struck as a pedestrian, the insured may select the highest limits for the coverage on any one vehicle insured under the policy.

If the insured does not elect to purchase the non-stacked coverage, the Coverage limits for each vehicle insured under the policy are added together (stacked) to pay for damages sustained by the insured in an accident.  Thus, the coverage limits available to the insured would automatically change during the policy period if the insured increases or decreases the number of autos insured under the policy.

Please note that this is a “reverse” presentation, i.e. the policy provides the Stacking Option unless there is an action to cancel the option by purchasing a “Non-stacking” option. 

Additional wording in regards to the Stacking provision is added in the policy which states that regardless of whether the insured chose stacked or non-stacked limits, if bodily injury is sustained in a motor vehicle accident by any person other than the insured or a resident relative, the insurers maximum limit of liability for all damages arising out of bodily injury to any person other than the insured or the resident relative, is the limit of liability shown on the declarations page applicable to the vehicle the person was occupying at the time of the motor vehicle accident.  This is the most the insurance company will pay regardless of the number of claims made, vehicles or persons stated on the declarations page or vehicles involved in the accident.

Damages payable will be reduced by all amounts paid by the owner or operator of the uninsured auto, or anyone else responsible, including all money paid under the BI coverage of this or any other policy.  They will also be reduced by all amounts payable under any worker’s compensation law, disability benefits law, or similar law, and Auto Medical Payments, or any similar automobile medical payments coverage, or no-fault benefits provided under this or any other auto policy.

If there is other insurance when limits of two or more insured autos may be stacked:

  • If the injured person was in, on, getting into or out of a vehicle which is insured for this coverage under another policy, this coverage will be excess.  If more than one policy applies to the accident on a primary basis, the insurer will bear their proportionate share of the damages payable.
  • When limits of two or more insured autos may not be stacked:  If the injured person was in, on getting into or out of a vehicle they did not own insured under that particular coverage under another policy, that coverage will be excess.  This means that when the injured person is legally entitled to recover damages in excess of the other policy limit, the insurer will pay up to the policy limit, except for damages consisting of pain, suffering, mental anguish, or inconvenience unless contrary to state law or regulation.  If more than one policy applies to the accident on a primary basis, the total benefits payable to any one person will not exceed the maximum benefits payable by the policy with the highest limit for uninsured motorists benefits.  The insurer will bear their proportionate share, regardless of how many autos or auto policies may be involved whether written by this insurer or another company.

LIMIT OF LIABILITY
A. The limit of liability shown in the Declarations for this coverage is our maximum limit of liability for each person injured in any one Accident. This is the most we will pay regardless of the number of

  • “Insureds”;
  • Claims made;

3.      Vehicles or premiums shown in the Declaration
 or
4.      Vehicles involved In the accident.
B. Any amounts otherwise payable for expenses under this coverage shall be reduced by any amounts paid or payable for the same expenses under Part A or Part C.
C. No payment will be made unless the injured person or that person's legal representative agrees in writing that any payment shall be applied toward any settlement or judgment that person receives under Part A or Part C.

Other insurance

Medical Payment benefits are excess when the insured is operating a non-owned automobile. If a policy that covers a vehicle not owned by the insured, does not provide Medical Benefits or if the Medical Benefits are exhausted, then the insured’s policy would be primary.

If there is other applicable auto medical payments Insurance we will pay only our share of the loss. Our share is the proportion that our limit of liability bears to the total of all applicable limits. However, any Insurance we provide with respect to a vehicle you do not own shall be excess over any other collectible auto insurance providing payments for medical, or funeral expenses.

UNINSURED MOTORISTS COVERAGE

Uninsured Motorist’s Coverage (usually referred to as “Part C.”)  is a result of Financial Responsibility laws requiring motorists to have liability coverage.  Part of these laws require insurance companies to provide coverage for those who are uninsured.  Some states allow the insureds to either accept or reject this coverage, and if nothing else, calls it to the attention of the insured. 

Insuring agreement

The insurer will pay compensatory damages which an insured is legally entitled to recover from the owner or operator of an uninsured motor vehicle because of bodily injury sustained by an insured and caused by an accident.  Again, the policy makes it clear that any judgement for damages arising out of a suit brought without the explicit and written consent, is not binding on the insurance company.  The insurance company is concerned with protecting its own interests as well as the interests of the insured and therefore, the insurer wishes to have a voice in any decision by their insured to sue the uninsured motorist.  It does not necessarily follow, that if an agreement is made between the insured and an injured party with the approval of the insurance company, the insurance company will definitely decline to participate.  It is possible that the arrangement propagated by the insured may be superior to any solution available to the insurer, and in that case, the insurer will acquiesce to the settlement. 

CONSUMER APPLICATION
Bernard resides in Georgia and has liability limits of 10/20.  Roger resides in a neighboring state where the Financial Responsibility laws dictate that minimum liability limits should be 25/50.  If Bernard is responsible for an accident involving Roger, Bernard’s care would be considered as uninsured for purposes of the Uninsured Motorists law.  Further, the accident happens in another state, other than where Bernard and Roger reside.  Based upon these assumptions, it would not matter where the accident occurred, as the laws of the state where Roger’s vehicle is garaged apply.

An uninsured motor vehicle may also be a “hit-and-run” vehicle which hits the insured or family member, or any vehicle in which the insured or family member is “occupying”, or the auto covered under the policy.

An uninsured motor vehicle can also be a vehicle on which the insured has a bond or policy, but the bonding or insuring company denies coverage or becomes (or is) insolvent.

Other than autos owned &/or operated by the insured(s) or family members, other vehicles not considered “uninsured” are those owned or operated by a self-insurer (except if the self-insurer is insolvent), any government-owned vehicle, vehicles operated on rails or crawler treads, designed mainly for use off public roads (while not on public roads), or such a vehicle that is used as a residence.

A. We will pay compensatory damages which an Insured is legally entitled to recover from the owner or operator of an uninsured motor vehicle because of “bodily injury”
1.      Sustained by an “insured”  and
2.      Caused by an accident.
The owner's or operators liability for these damages must arise out of the ownership, maintenance or use of the “uninsured motor vehicle.”
Any judgment for damages arising out of a suit brought without our written consent is not binding on us.
B. “Insured" as used in this Part means,
1.      You or any "family member."
2.      Any other person “occupying” your covered auto.
3.      Any person for damages that person is entitled to recover because of “bodily injury” to which this coverage applies sustained by a person described in 1. or 2. above.
C. “Uninsured motor vehicle” means a land motor vehicle or trailer of any type:
      1. To which no bodily injury liability bond or policy applies at the time of the accident.
2. To which a bodily injury liability bond or policy applies at the time of the accident. In this case its limit for bodily injury liability must be less than the minimum limit for bodily injury liability specified by the financial responsibility law of the state in which your covered auto is principally garaged.
3. Which is a hit‑and‑run vehicle whose operator or owner cannot be identified and which hits
a. you or any “family member;”
b. a vehicle which you or any “family member “ are “occupying;” or
c. “Your covered auto.”
4. To which a bodily injury liability bond or policy applies at the time of the accident but the bonding or insuring company;
a. denies coverage; or
b. is or becomes insolvent.
However, “uninsured motor vehicle” does not include any vehicle or equipment:
1. Owned by of furnished or available for the regular use of you or any “family member.”
2. Owned or operated by a self‑insurer under any applicable motor vehicle law, except a self insurer which is or becomes insolvent.
3. Owned by any governmental unit or agency.
4. Operated on rails or crawler treads.
5. Designed mainly for use off public roads while not on public roads.
6. While located for use as a residence or    premises.

CONSUMER APPLICATION
Morris caused a traffic accident that injured his best friend Bernie.  Morris agreed to take care of Bernie’s medical expenses and fix his car, but Bernie said the he had a brother-in-law that was a Doctor who would take car of him for practically nothing, and he wasn’t worried about the car as it was an old car.  Morris notified his insurer, who at first indicated they would not cover any of the expenses as the arrangements were made without their approval.  However, upon examining the details of the agreement and satisfying themselves that Bernie agreed to the terms, they were more than happy to agree with the arrangement.

Exclusions

As with the Liability section, this section also has “exclusions.”  If any person sustains bodily injury while occupying or struck by any vehicle owned by the insured or a family member, but which is not insured under the policy for uninsured motorists coverage, including a trailer of any type used with that vehicle.  Also, if any uninsured motorists claim is not approved by the insurance company, the insurer will not be liable for the claim.  If the insured(s) is occupying one of the vehicles listed on the Declarations page, and if it is being used as a public or livery conveyance, it will not be covered under this provisions – except if it is being used in a car pool where expenses are shared.  Also, if a vehicle (trailer) is located for use as a resident or premises, it is not covered.

There also is a provision that states that the uninsured motorists coverage will not apply to the benefit of any insurer (or self-insurer) under Workers Compensation laws or Disability benefits laws.

Uninsured motorists coverage is not provided for any punitive or exemplary damages.

Exclusion B addresses a problem unique to Uninsured Motorists coverage inasmuch as some States do permit a Workers’ Compensation or Disability Income insurer to sue a negligent uninsured motorist to recover any benefits that has been paid to their injured insured.  The purpose of this exclusion is to prevent the insurers from subrogating and claiming any benefit under Uninsured Motorists coverage as an offset against what they paid in compensation benefits.

We do not provide Uninsured Motorists Coverage for “bodily injury” sustained by any person:
1.     While “occupying,” or when struck by, any motor vehicle owned by you or any “family member" which is not insured for this coverage under this policy. This includes a trailer of any type used with that vehicle.
2.     If that person or the legal representative settles the bodily injury claim without our consent.
3.     While occupying “your covered auto” when    it is being used as a. public or livery conveyance. This exclusion (A.3.) does not apply to a share‑the‑expense car pool.
4.     Using a vehicle without a reasonable belief      that that person is entitled to do so.
B. This coverage shall not apply directly or indirectly to benefit any insurer or self‑insurer under any of the following or similar law:
1. Workers' compensation law; or
2. Disability benefits law.
We do not provide Uninsured Motorists Coverage for punitive or exemplary damages.

CONSUMER APPLICATION
Barry lives in a trailer in a mobile home park.  Therefore, the trailer would not be covered under the Uninsured Motorists provision.  Barry has a pickup that is not insured.  He decides to move his trailer from one mobile home park, to another closer to his work.  While pulling the trailer, the trailer drifts off the roadway and strikes Henry as he is getting into his car parked on the side of the road.  Therefore, the trailer would then be treated as an “uninsured vehicle” under the Uninsured Motorists provisions.

Limits of liability

As under the Liability section of the policy, the same limits of liability will apply, regardless of number of insureds, claims made, etc.  Also, any damage amount shall be reduced by any money paid on behalf of persons or organizations who may not be legally liable.  Also any amounts paid under the Liability portion of the policy will reduce the payments under this section.

To reiterate, the purpose of the Uninsured Motorists provision is that the insured has elected to protect himself, family member, and others riding in their vehicles, from losses due to bodily injury suffered in an auto accident involving an uninsured motorist.  Further, it must be proven that the other driver was responsible for the accident and they do not have insurance on their vehicle.  Since liability is involved, the limits of the Uninsured Motorists coverage chosen by the insured will be in a format which matches their liability limits.  In some states, the insured will have to choose Uninsured Motorist limits equal to their liability limits.  In other states, they may choose Uninsured Motorist limits in amounts less than or equal to their liability limits.  For example, in an “equal to” state, if the insured has 100/300 liability limits, they must also have 100/300 Uninsured Motorist limits.  In a state where one can have Uninsured Motorist limits less than or equal to their liability limits, the insured may choose Uninsured Motorist coverage of 25/50, 50/100, or 100/300 if those coverage options are offered by their company.

The Uninsured Motorist limit is expressed as a per/person – per/accident amount; the first number indicating the maximum amount the company will pay per person.  This is applied to each separate accident individually.  Therefore, if the same person were involved in more than one Uninsured Motorist claim for different accidents, the limit would be renewed for each one.  The same applies for the per/accident amount.

Regardless of the number of people filing claims, or how many claims they actually file for any one accident, the amount of coverage chosen by the insured will be the maximum the company will pay for that particular loss.

Uninsured Motorist limits cannot be added together (or “stacked”) regardless of how many vehicles are shown in the Declarations or how many vehicles are involved in the accident.  Therefore 100/300 does not become 300/900 when there are three vehicles on the policy. (See previous discussion of Stacking Option offered in some states)

LIMIT OF LIABILITY
A., The limit of liability shown in the Declarations for this coverage is our maximum limit of liability for each person injured in any one Accident. This is the most we will pay regardless of the number of
1.      “Insureds;”
2.      Claims made;
3.      Vehicles or premiums shown in the Declaration
 or
4.      Vehicles involved In the accident.
B. Any amounts otherwise payable for expenses under this coverage shall be reduced by any amounts paid or payable for the same expenses under Part A or Part C.
C. No payment will be made unless the injured person or that person's legal representative agrees in writing that any payment shall be applied toward any settlement or judgment that person receives under Part A or Part C.

Other insurance

This section duplicates the “Other Insurance” section under the Liability section, except that any insurance provided with respect to a vehicle not owned by the policyholder, shall be excess of any other collectible insurance.

OTHER INSURANCE
If there is other applicable auto medical payments Insurance we will pay only our share of the loss. Our share is the proportion that our limit of liability bears to the total of all applicable limits. However, any Insurance we provide with respect to a vehicle you do not own shall be excess over any other collectible auto insurance providing payments for medical, or funeral expenses.

CONSUMER APPLICATION
Cynthia is the driver of an auto involved in an accident.  She has Uninsured Motorist limits of 25/50.  Al is her passenger and has 100/300 Uninsured Motorist limits on his policy.  Cynthia’s Uninsured Motorist coverage will pay for his injuries and can also pay for Al’s injuries since he was a passenger in Cynthia’s car.  Based on the “Other Insurance” clause, Cynthia’s portion would be: 25/(25+100) + 25/(125) = 1/5 of Al’s bills.
Al’s portion would be: 100/(25+100) = 100/(125) = 4/5 of his bills. (Continued next page)
Therefore, if Al’s injuries totaled $20,000, Cynthia’s insurance would pay $4,000 and Al’s would pay $16,000.
HOWEVER, because the statement of Other Insurance usually ends with “shall be excess of any other collectible insurance, (or words to that effect), if Al's policy is going to be used, it will be excess to the coverage of Cynthia’s policy.  If Cynthia has a PAP, then the Other Insurance clause does apply and her policy will only pay $4,000 for Al’s injuries.  Al’s policy would pay the balance of $16,000 (as indicated above).

Arbitration

This section has provisions for arbitration, which is very common and typical of such contracts.  Basically, if the insurance company and the insured(s) do not agree as to whether the person is legally entitled to receive damages, or as to the amount of damages, then either party can make a (written) demand for arbitration.  Each party will then select an “arbitrator”, and the two of them select the third arbitrator.  If they cannot agree within a specified period (usually 30 days) as to whom the third arbitrator will be, either of the appointed arbitrators can request a judge to appoint the third.  Each party pays the expenses it incurs and shares equally the expenses of the third arbitrator.

The decisions of the arbitrators are binding unless the amount exceeds the minimum limit required under the financial responsibility laws of the state. In that case, within 60 days, either party can demand the right to a trial.

Usually, the arbitration hearings are held somewhere in the home county of the insured, whose laws pertaining to arbitration apply.

ARBITRATION
A. If we and an “insured” do not agree:
1. Whether that person is legally entitled to recover damages under this. Part; or
     2. As to the amount of damages;
either party may make a written demand for arbitration. In this event, each party will select an arbitrator. The two arbitrators will select a third.
If they cannot agree within 30 days, either may request that selection be made by a judge of a court having jurisdiction.
B. Each party will:
1.      Pay the expenses it incurs; and
2.      Bear the expenses of the third arbitrator equally.
C. Unless both parties agree otherwise, arbitration will take place in the county in which the insured lives.  Local rules of law as to procedure and evidence will apply. A decision agreed to by two of the arbitrators will be binding as to:
1.      Whether the “Insured” is legally entitled to recover damages, and
2.      The amount of damages. This applies only if the amount. does exceed the minimum limit for Bodily Injury liability specified by the financial responsibility law of the state in which your covered auto is principally garaged. If the amount exceeds that limit, either party may demand the right to a trial. This demand must be made within 60 days of the arbitrators' decision. If this demand is not made, the amount of damages agreed to by the arbitrators will be binding.

CONSUMER APPLICATION
Ron Hobson recently sold his car, so he borrows his brother Tom’s pickup to transport firewood that he had purchased locally.  On the way home, he runs a stop sign and hits a car driven by Ernie Johnson, who is hospitalized with his resultant injuries.

Ernie has a PAP with AIC, with Uninsured Motorists Coverage limits of 100/300.  Tom does not have any insurance on his pickup as he had planned to give it to charity soon, but he has insurance on 2 other cars that he owns. 

The AIC adjuster decides that although Tom has auto insurance, AIC cannot file a claim against that company because they do not insure the truck.  Therefore, Ernie’s medical bills will be paid for out of his uninsured motorist coverage, up to $100,000.  Therefore, AIC will make payment for their client’s injuries, even though someone else was negligent, caused the accident, and should have been responsible for the doctor’s bills.

CONSUMER APPLICATION
Martha Cunningham is involved in an accident and blames the other person, who is uninsured.  Because she is furious, she hires her family attorney to sue the other driver.  The court determines that Martha is right, and awards her $25,000 for her medical bills.

Martha then contacts her insurance company and asks for the money from her uninsured motorists coverage.  Her company refused to pay her because the policy stated that the company must agree in writing to any lawsuit.

Had Martha gone to her company first, they would probably have come to the same conclusion as the court, and would have paid her medical bills under the uninsured motorists coverage.

CONSUMER APPLICATION
Arnie and his wife, Ellen, took their family to the beach in their minivan.  In the van with them were their three children Arnie II, Lois and Melissa, Ellen’s mother Helen, and 3 friends of the children:  Ricky, Michelle and Nicole.  As they exited to the highway near the beach, their van was struck in the rear by an uninsured teenager driving a pickup.  The van was pushed into a station wagon containing the driver and 2 passengers.  There were no serious injuries, but all persons involved had at minor injuries.  The insurance situation was:
                     Pickup                        no liability insurance
                     Minivan                     100/300 BI and 10/20 Uninsured Motorist
                     Station Wagon           100/300 and 10/20 Uninsured Motorist

The cost of each person’s injuries:
                     Pickup Driver                                      3,000
                     Arnie                                                   1,500
                     Ellen                                                    2,500
                     Arnie II                                               2,500 (Continued on next page)
                     Lois                                                     1,500
                     Melissa                                                3,000   
                     Helen                                                   3,000
                     Ricky                                                   2,500
                     Michelle                                              3,000
                     Nicole                                                  1,500
                     Station Wagon driver                          2,000
                     Station Wagon passenger #1               1,500
                     Station Wagon passenger #2               2,500

The driver of the pickup was responsible for the accident, however, since he does not have insurance, he will have to pay for his own medical bills.  (If he had a PAP, his Medical Payments coverage would have paid for his injuries).

Arnie’s Uninsured Motorists coverage will be used to pay for the injuries of the people in his van.  Although he only has 10/20 limits, the medical bills for each person fall below the per/person limit ($10,000) it is sufficient to cover these medical expenses.

The total of all of the expenses of those of whom Arnie is responsible total $21,000, $1,000 over the per/accident maximum.  If these expenses are paid in order (as presented above) only $500 of Nicole’s expenses can be paid under Arnie’s Uninsured Motorist coverage.

If Nicole’s parents have a PAP, their Uninsured Motorist coverage would be excess over Arnie’s and could pay for the balance of Nicole’s expenses.  Otherwise, they will have to pay for it or try to get the money from the pickup driver.  They might sue Arnie, however since he was not responsible for the accident, they may not succeed. 

The driver of the Station Wagon has Uninsured Motorist coverage and the medical bills for everyone in that car are below the limits of liability, both on a per/person and a per/accident basis.  Therefore, that policy should pay for all of the medical expenses for the passengers and driver of the Station Wagon.

UNDERINSURED MOTORISTS COVERAGE

While Uninsured Motorists coverage will pay only if an Uninsured motorist is liable for damages, the uninsured motorist is defined as one who either has no insurance, or has an amount less than the state’s minimum financial responsibility limits – or also can be a hit-and-run driver. 

The Personal Automobile Policy can be endorsed (in most states) to provide Underinsured Motorists coverage, which pays up to the difference between the Part A (Liability) limits on the covered vehicle, and the Liability limits on the vehicle who was at-fault, even if the vehicle who was at fault in the accident, had limits in excess of the minimum requirements of the financial responsibility law.

CONSUMER APPLICATION
Smith negligently crashes his auto into Jone’s pickup, injuring Jones.  Both Smith and Jones have policy limits in excess of the State’s minimum financial responsibility limits.  Smith’s liability limit is $50,000, while Jones has Underinsured Motorists coverage with a limit of $300,000.  The court awards Jones $150,000.  Smith’s liability insurer pays its limit of $50,000.  However, Jone’s Underinsured Motorists Coverage would pay the remaining $100,000, since Smith’s limit was less than Jone’s limit.  (Jone’s policy would have paid up to $250,000 if the judgement had been more $300,000 or more).

Uninsured Motorists Coverage would not pay anything, as Smith did not qualify as an uninsured motorist.

STUDY QUESTIONS

1. Under a PAP, the Medical Payments Coverage covers
A. only the insured or a member of his family.
B. only pedestrians.
C. the insured or any other person occupying the covered automobile.
D. only injuries requiring surgery.

2 Morrie purchased a 3-wheel All Terrain Vehicle (ATV) for use on his farm. The day he bought it, he took his girlfriend for a ride. The ATV hit a large rock, throwing them both off the vehicle, breaking Morrie’s arm, and his girlfriend’s leg. Morrie made a claim under his PAP for medical expenses incurred as a result of the accident.
A. His PAP would normally pay for such an accident.
B. His PAP would not pay as the vehicle had less than 4 wheels.
C. His PAP would not pay for his girlfriend’s expenses, but only for his.
D. His PAP would pay only if they both had individual or group health insurance.

3. Under an Uninsured Motorists Coverage, the insurer will pay ____________ damages which an insured is legally entitled to recover from the owner or operator of an uninsured motor vehicle because of bodily injury sustained by an insured and caused by an accident.
A. ancillary
B. compensatory
C. punitive
D. descriptive

4. The purpose of ________is the protection of the insured from losses due to bodily injury suffered in an automobile accident which involves a person who does not have insurance.
A. medical liability insurance
B. uninsured motorist coverage
C. underinsured motorists coverage
D. no-fault insurance

5. Paul’s auto was hit by a red Audi while Paul was legally crossing an intersection on a green light. Paul did not have a chance to get the license number and the owner of the Audi was never discovered. Paul had Uninsured Motorists coverage on his PAP.
A. Since the Audi may have had insurance, the Uninsured Motorists coverage would not apply.
B. Paul’s PAP would cover compensatory damages.
C. The PAP usually excludes any hit-and-run damages as there is no way to determine contributory negligence.
D. Paul’s PAP would only cover what his personal health insurance did not cover.

6. In a covered accident, Ken’s wife suffered some back strain. Two years later, her back pain continually worsened, and it was discovered that she had a ruptured disc. What would the Medical Payments Coverage under his PAP cover?
A. All claims must be made within a 90 day period.
B. They will not make any more payments as it pertained to a family member.
C. Claims for Medical Payment are made at one time by law, therefore there are no subsequent claim payments made,
D. It would pay the usual Medical Payments for the treatment or surgery of her back pain as the claim was made within a 3 year period.

7. Brent is a member of a cost-sharing car pool. While driving to work, Brent had an accident and Mary, one of his car-pool members was injured.
A. Brent’s PAP excludes injuries sustained when the car is being used as a public conveyance so they will not pay for any of Mary’s medical bills.
B. Each car pool member that has a PAP, will share equally in Mary’s Medical Bills.
C. Brent’s PAP would pay only the excess over what Mary’s private health insurance paid.
D. Brent’s PAP would cover all of Mary’s medical bills as provided under the policy.

8. It is possible for an individual to be covered for Medical Payments under the Liability and the Uninsured Motorists section of the PAP also. What happens if claims are made under one or both of these sections for a loss covered under Medical Payments?
A. The insurance company will only pay claims under one provision, A, B, or C, and will pay
only the lesser amount.
B. Payments under Medical Payments will be reduced by any payments made under Section A
or C.
C. Only the Medical Payments will be made.
D. Section A is the “prominent” Section, so in this case, only liability claims will be paid.

9. “Stacking” creates concern when paying claims under a PAP. “Stacking” means
A. having more than one automobile policy in force at time of claim.
B. providing excess coverage if the insured feels the liability amounts are too small under a
policy.
C. subtracting any outstanding claims against premiums due.
D. an attempt to collect a multiple of policy limits based on existence of multiple autos covered,
claims made, vehicles involved, etc.

10. When a claim is made and the insured and the insurer cannot agree as to whether the insured should recover damages or as to the amount of damages, either party may make a written demand for Arbitration. What does this mean?
A. It must go to court for settlement.
B. Each side picks an Arbitrator and the two then pick a third. Both parties share in expenses
of the third Arbitrator. Decisions of the Arbitrators as to whether the insured is legally liable
to recover damages and the damage amount.
C. The insurance company appoints an Arbitrator who presents the situation to the State Bar
Association who will be the second Arbitrator. The Bar Association will make the final
decision.
D. The insurer must automatically make a settlement in favor of the insured with the settlement
amount at 50% of the claim.

ANSWERS TO STUDY QUESTIONS

1C 2B 3B 4B 5B 6D 7D 8B 9D 10B


Personal Auto Coverage