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Someone who is injured after an accident often experiences pain, stress and confusion about what happens next. It is easy to be caught in a maze of confusing and contradicting information from medical providers and auto and health insurance providers. This series of posts in Stein Sperling’s Resource Center explains different sources of payment for medical bills (and the interplay between them); compares how those sources differ in Maryland, Virginia and D.C.; and outlines the priority of payments that exists via statute and, where no priority exists, the priority that is most beneficial for the injured victim. This first post outlines important terms involved in the process of getting medical expenses paid, as well as common sources of first- and third-party auto insurance coverage.

Collateral Source Rule

 

This refers to a doctrine that dates back to 1854 as a means to promote justice and assess remedies for fault against the wrongdoer or “tortfeasor.” The tortfeasor usually is not allowed to admit any evidence that the accident victim has received payments for medical bills from another source to avoid their own responsibility to compensate the victim for those expenses. Therefore, in a personal injury case, evidence that the accident victim’s medical bills were paid by health insurance, other auto insurance, or by workers' compensation, is usually inadmissible.

Subrogation

 

This refers to an equitable remedy that comes out of a body of law known as “unjust enrichment,” which seeks to prohibit someone from recovering more than the whole of what was lost. Subrogation often comes up in auto accident cases because health insurers will seek to be reimbursed for medical bills they have paid once the tortfeasor also pays.  

First Party Insurance

 

This is the accident victim’s own auto insurance coverage that protects them as a named insured and usually also extends to others in the victim’s vehicle at the time of accident, and the insured’s household resident relatives, depending on the jurisdictional statute and insurance contract provisions.

Two of the most common first party coverages are:

Personal Injury Protection (PIP)

Maryland PIP is an opt-out benefit that exists on all Maryland auto policies, unless affirmatively waived, and provides a minimum of $2,500 in coverage, regardless of fault, unless more is purchased. It pays 100% of medical bills incurred and/or 85% of gross lost wages, up to the insurance limit purchased. In Maryland, this benefit is not subrogatable (i.e., it never has to be repaid to the insurance company). See MD Code Sec. 19-505

D.C. has PIP as well, and it is mandatory that an insurer offer the coverage; however, it is optional for the insured to purchase the coverage. D.C. PIP provides benefits for medical and rehabilitation expenses, work loss and funeral benefits, and an insured may obtain, solely at his or her option, any one or combination of the three coverages. This benefit is subrogatable (i.e., once the victim has settled with the third party insurance company, they have to refund the PIP insurer from the settlement or judgment proceeds). Also, D.C. PIP is secondary to health insurance. Furthermore, if you elect to use your PIP coverage following an accident, you cannot maintain a separate tort claim for pain and suffering and other compensatory damages unless your injuries qualify as a sufficiently "serious injury," or if the medical treatment/rehab expenses or wage loss exceed the available PIP coverage. See DC Code Sec. 31-2404

Virginia auto insurance policies do not offer PIP coverage.

Medical Payment Coverage (MedPay)

This benefit is most common in Virginia and is not available in D.C.; however, it can be purchased in Maryland. It’s an opt-in benefit for auto policies that pays 100% of medical bills incurred, regardless of fault, up to the insurance limit purchased. This benefit is not subrogatable (i.e., it never has to be refunded to the insurance company if third party benefits are obtained). See VA Code Sec. 38.2-2201

Third Party Insurance

 

This is the tortfeasor’s auto coverage that pays the claim of an accident victim and protects the tortfeasor when they have caused an accident. When people are in an accident, most people think the policy of the person who caused the accident “should pay for everything.” There are a lot of myths surrounding this coverage, a few of which will be addressed here.

MYTH: “The accident was not my fault, so the other driver’s liability policy has to pay my medical bills as they are incurred.”

FACT: Third party insurance usually will not pay an accident victim’s medical bills as they are incurred. The tortfeasor’s third party insurance coverage pays a settlement of all claims (excluding property damages) that are the result of the accident, usually in one payment once the victim is ready to settle the claim. The third party insurance will settle the claim in exchange for a full and final release of the tortfeasor and their insurance company. Once the release is signed, and the insurance company has paid, it will not pay for additional claims.

MYTH: “The other driver’s insurance company will pay for every expense I submit.”

FACT: Third party insurance companies are only going to pay up to a maximum policy limit that the tortfeasor purchased, even if your costs and bills exceed the policy limit. Also, insurance companies highly scrutinize all bills that are submitted to determine if they are reasonable, necessary and related to the accident. Unlike health insurance, there is no “pre-approval” for treatment, so the accident victim has no way of knowing if the treatment he or she is receiving will ultimately be paid as part of the settlement.

Our next post of this series will list the four most common types of health insurance and how subrogation, or reimbursing the health insurer for accident-related medical expenses, works with each. If you have questions about information in this series of posts related to Paying Medical Bills Post-Accident, or to speak with a lawyer from our Injury Law department, call 301-340-2020.

More in this Series:

Paying Medical Bills Post-Accident: Health Insurance

Paying Medical Bills Post-Accident: A Roadmap through VA, MD and DC


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