In Washington State, different types of insurance coverage come into play in most auto accidents. To avoid being taken advantage of, it is important for you to have an understanding of the types of coverage that may be available in a given situation. It's also important to have an understanding of the rights and responsibilities of all parties involved.
Differences between first-party and third-party insurance
Generally, there are two types of insurance related to automobile accidents: first party and third party. The terms "first party" and "third party" refer to your relationship with an insurance company. An insurance company is considered a first-party insurer if it is your insurance company, the one that you have a contractual relationship with and pay premiums to. Typical first-party insurance types are personal injury protection (PIP), uninsured motorist coverage (UM), underinsured motorist coverage (UIM), or health insurance coverage. In some instances, labor and industries (L&I) can also be considered a first-party insurer. Additionally, if you are a passenger in someone else's vehicle, his or her PIP coverage can be first party, even though you don't pay premiums to them. Similarly, if you are a pedestrian hit by a vehicle, that vehicle's PIP coverage will apply to you. First-party companies owe a high legal duty to the people they insure.
An insurance company is considered a third-party insurer if it does not have a relationship with you directly, but the people it insures may be liable to you for damages of some kind. A third-party insurer is usually the insurance company of the other person or people involved in the accident.
When a first-party insurer can be reimbursed
An insurance company (first-party PIP, health insurance, or L&I) must be reimbursed for amounts paid for medical bills when the injured person receives payment from the at-fault person. By way of example, when Insurance Company A pays PIP benefits for your injury claim and you recover a settlement from Insurance Company B, then Insurance Company A is entitled to be repaid the amount they paid in PIP benefits on your behalf.
Under Washington State law, the first-party insurer must bear a pro-rata share of the attorney's fees and costs incurred in recovering its reimbursement. This discounts the amount that the first party is repaid, typically by more than one third. In other words, if the PIP insurer pays $10,000 in medical bills, when the case is settled they may only be entitled to get $6,500 back. This discount is only available to people represented by an attorney.
Navigating the different types of insurance is not an easy task. The types of available insurance will be different in every case, depending on what types of coverage everyone involved in the accident has. Other factors to consider are whether health insurance is available and whether the accident occurred while you or the other driver was on the job.
To help sort out this complicated situation, it is advisable to contact an attorney. Most attorneys that handle auto accidents will give a free initial consultation.