Written by attorney Jonathan Neal Portner

Important Things to Consider about PIP or Med-Pay Insurance Coverage

If you are practicing personal injury law in Maryland, you must understand ins and outs of PIP coverage (Personal Injury Protection). In addition, although not an easy task, you must learn how to convince your client’s insurance company to process the PIP bills you submit "in full." Lastly, you need to understand why the liability carrier can never use PIP payments as a means to discount the settlement offer.

PIP insurance is not required by law, and therefore is an elected insurance benefit that a person pays additional insurance coverage for. In Maryland, those who obtain PIP coverage are entitled to the payment of reasonable and necessary medical expenses and/or a percentage of lost wages. After the medical expenses are submitted to the plaintiff’s carrier, plaintiff’s attorneys are often surprised when the bills are audited, then rejected and/or paid at a reduced amount. Further, while negotiating the claim, inexperienced attorneys in states such as Maryland and Virginia incorrectly allow the liability carrier to take into consideration amounts paid by the plaintiff’s insurance carrier for medical payments or lost wages.

Although PIP is an elected benefit, and usually for just $2,500 , it should neither be a factor in settlement negotiations, nor subject to medical payment reductions as a matter of course. In Maryland PIP is regulated by statute. See Maryland Code Ann., Ins. §19-505. In Virginia, the Medical Payments Provision (Med-Pay) in automobile policies is similar and is also regulated under the Virginia Code. See Virginia Code §38.2-124(B), 38.2-2201. In both states, liability insurance companies cannot factor payments made under PIP or Med-Pay into what is offered to settle the claim. See Virginia Code §8.01-66.1 and Maryland Code Ann., Ins. § 27-1001, Maryland Code Ann., Cts. & Jud. Proc. § 3-1701. In other words, if the plaintiff’s medical expenses were $2,500, and were paid in full by his or her own carrier under the PIP or Med-Pay portion of the policy, the liability carrier cannot take that fact into consideration. Basically, in these states the plaintiff is entitled to recover twice for his or her medical expenses. Liability insurance companies have tried unsuccessfully in states such as Maryland and Virginia to get this changed and have argued that plaintiff’s are in a sense "double dipping". Often out-of-state insurance adjusters who handle claims will note what has been paid by the plaintiff’s carrier. When this occurs they should be immediately apprised on the law in these jurisdictions. Specifically, adjusters should be informed of the relevant state jury instruction regarding the "collateral source" rule, which states that these PIP and Med-Pay payments may not be taken into account when evaluating the value of the claim. In Maryland, see Maryland Civil Pattern Jury Instructions 10:8.

As noted above, disputes typically occur with the liability carrier as a result of credits for PIP and/or Med-Pay payments. Amazingly, an equal amount of disputes occur with the plaintiff’s own carrier over the payment of these PIP bills. Insurance carriers know that many plaintiff’s injury firms do not litigate cases, or do not get a fee if they litigate PIP or Med-Pay disputes. Additionally, they take the position that more often than note a plaintiff’s firm will shy away from litigating a minor $1,000 PIP bill dispute. Hence, often these medical bills are audited by the PIP carrier and paid only in part.

The question then is how can the leverage of the insurance company be taken away in circumstances where these adjusters know it is not advantageous for plaintiff’s attorneys to litigate these claims. First, a plaintiff’s attorney must take the position that each of these claims has significant value not just in the case at hand, but to his or her practice as a whole. In todays world, with the advent of the Colossus case evaluation system, insurance carriers know which firms litigate issues and which ones roll over. If you do not fight PIP or Med-Pay disputes with the carriers, you will see more audited and reduced bills for your clients in future cases.

A second way to attempt to gain leverage with the carriers in these situations is to sue not just for the amount owed, but also sue for "bad faith" and attorneys fees.

A recent case in Virginia, Kraft vs. USAA Casualty Ins. Co. (VLW012-10-01) illustrates what happens when plaintiff’s lawyers get aggressive in these cases. In Kraft, the plaintiff had $10,000 in medical-payments coverage. Bills exceeded the coverage amount. Bills were submitted to USAA and after several denials, plaintiff sued for breach of contract. As is often the case, USAA first asked for more information on several occasions before denying. The breach of contract action included a request for punitive damages under Virginia Code §8.01-66.1, the bad faith statute.

Once suit was filed the company offered to pay the bill in exchange for withdrawing the punitive claims. Plaintiff did not withdraw the claim. The Court found for the plaintiff and indicated that USAA had no "legitimate reason for not paying under the policy". The company was ordered to pay 100% of the remaining bills, plus attorney’s fees, and punitive damages for "it’s failure to respond in a timely manner".

Clearly, awards on punitive damages and/or attorneys fees in these cases will force the carriers to change their delay and denial tactics. Plaintiff’s attorneys therefore should keep the outcome in Kraft in mind the next time unreasonable denials in these claims cross their desk. A form PIP or Med-Pay suit that seeks both punitive damages and attorneys fees should be part of every plaintiff’s attorneys arsenal.

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