Medical Payments Coverage: A Hedge Against Lawsuits
Medical Payments Coverage is included in most general liability policies. It is often designated Coverage C. This article will explain what this coverage is and why it is important.
No Lawsuit Required
Medical Payments coverage pays medical expenses incurred by a person who has been injured as a result of your business activities. It is a no-fault coverage. This means that the injured person's medical expenses are paid under your policy without a lawsuit. These expenses are covered whether or not you are liable for the injury. In this respect, Coverage C is very different from Coverage A, Bodily Injury and Property Damage Liability, and Coverage B, Personal and Advertising Injury Liability. Coverages A and B apply only if you (or another insured) are liable for the injury, and the injured party has filed a claim or suit.
Medical Payments Coverage can serve as a hedge against lawsuits. An injured person who might otherwise sue you for bodily injury may be less inclined to sue if his or her medical expenses are paid promptly.
Medical Payments coverage pays "reasonable" expenses for first aid rendered at the time of an accident. For example, suppose that Jim, a customer of your, falls on your property and breaks his arm. You rush Jim to a doctor, who provides first aid. The physician diagnoses a broken arm and directs Jim to a hospital. The cost of the office visit would likely be covered as a first aid expense. Also covered are any necessary medical, surgical, x-ray and dental services, including prosthetic devices. If Jim incurs costs for an X-ray and medical treatment at a hospital, those costs should be covered.
Medical Payments coverage includes the cost of an ambulance as well as any hospital or nursing services that are required. If the injured party dies, the cost of funeral services is covered.
Where Coverage Applies
Coverage C covers medical expenses for bodily injury caused by an accident that happens:
- On your premises: In the previous example, Jim's injury occurred on your premises.
- In an area immediately adjacent to your premises: For example, Jim's injury might have occurred on a sidewalk approaching your business or in a parking lot next to it.
- Away from your premises: An injury that takes place off-premises is covered if the accident occurs because of your operations.
Here is an example of a covered injury that occurs off-premises. Jill operates an electrical contracting business. Jill is at a job site stringing electrical cord when Susan, a visitor to the site, accidentally trips over the cord. Susan falls and sprains her ankle. Because Susan's injury was caused by an accident that resulted from Jill's operations, her medical expenses should be covered by Jill's liability policy under Coverage C.
For expenses to be covered under Coverage C, the accident must take place in the coverage territory and during the policy period of your policy. In addition, the expenses must be incurred and reported to the insurer within one year of the accident date. For example, suppose that Susan's accident took place on April 1, 2016. To be covered under Jill's policy, Susan's medical expenses must be incurred by April 1 of 2017. Jill must submit these expenses to her insurer by April 1, 2015.
Intended for Minor Injuries
Medical Payments coverage is subject to a limit that applies to each person. This limit is typically low, such as $10,000. Thus, Medical Payments coverage is intended for relatively minor injuries, such as an ankle sprain resulting from a slip-and-fall.
In addition to the Each Person limit, medical expenses are subject to both the Each Occurrence and the General Aggregate limits in your liability policy. For example, suppose that Susan incurs $8,900 in medical costs related to her sprained ankle. Your insurer pays these costs under your Medical Payments coverage. Susan then files a property damage suit against your company that seeks $25,000 in damages. She claims that some valuable equipment she was carrying in her briefcase was damaged when she fell.
Any damages or settlement your insurer pays as a result of the lawsuit will reduce both the Each Occurrence and the General Aggregate limits in your policy. The $8,900 your insurer paid under Medical Payments will reduce these limits as well. The $8,900 in medical expenses will also reduce the Each Person limit scheduled in your policy for Medical Payments.
Medical Payments coverage is subject to all of the exclusions listed under Coverage A, Bodily Injury and Property Damage Liability. Examples are the employers liability and contractual liability exclusions. The following exclusions also apply:
Injury to an Insured
Medical expenses incurred by anyone who qualifies as an insured under your liability policy are not covered. Note that your employees are insureds under the policy, so this exclusion applies to them. However, an exception applies to medical expenses incurred by volunteer workers. Medical expenses incurred by volunteers are covered.
Anyone Hired by You
No coverage applies to injuries incurred by someone hired by you or any other insured.
Occupier of the Premises
If a person normally occupies premises you own or rent and is injured on those premises, any expenses resulting from that injury are not covered. For example, suppose that Fred leases office space in a building you own. If Fred is injured in his rented space, your Medical Payments coverage will not cover medical expenses related to his injuries.
Injuries Covered by Workers Compensation
If the injured party is entitled to workers compensation benefits under a policy purchased by you or anyone else, the injury is not covered by your Medical Payments coverage. In most states, workers compensation benefits are intended to serve as an exclusive remedy for employment-related injuries.
No coverage applies to anyone injured while practicing, instructing or participating in any physical exercises or games, sports, or athletic contests. For instance, suppose that Fred is an employee of yours. Beth, Fred's wife, is injured while playing softball on a team sponsored by your company. Any medical expenses Beth incurs as a result of her injury won't be covered under your Medical Payments coverage.
No coverage applies to injuries to third parties if the injuries are caused by accidents arising our of your products or completed work. Such injuries are covered by products-completed operations coverage, which is included under Coverage A.