Medical Payments Coverage: A Hedge Against Lawsuits
Medical Payments coverage pays medical expenses incurred by a third party for an injury sustained in an accident that arises from your business activities. It is included in a general liability policy and applies regardless of fault. This coverage reimburses the injured person for his expenses without a lawsuit.
Medical Payments, called Coverage C, is automatically included in the standard ISO liability policy. It covers an injured person's medical expenses whether or not you are responsible for the injury. In this respect, Coverage C differs substantially 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.
Medical Payments Coverage can serve as a hedge against lawsuits. An injured person may be less inclined to sue your business for bodily injury if his medical expenses have been paid promptly.
What Expenses Are Covered?
Medical Payments coverage pays "reasonable" expenses for first aid rendered at the time of an accident. It also covers necessary medical, surgical, X-ray, and dental services including prosthetic devices. Necessary ambulance, hospital, professional nursing and funeral services are covered as well. The following example demonstrates how this coverage applies.
Mark owns Magnificent Materials, a building supply business he operates out of a warehouse. Magnificent Materials is insured under a general liability policy that includes Medical Payments coverage. One day, a customer named Jim slips-and-falls at the warehouse, breaking his arm. Mark rushes Jim to a hospital, where his arm is X-rayed and placed in a cast. Jim is discharged with a prescription for pain medication and directions to follow up with his personal physician.
Mark's Medical Payments coverage should cover all of Jim's medical costs including expenses for the following:
- The X-ray and other medical treatment Jim received at the hospital
- Prescription medications to treat his injury
- Follow-up medical treatment Jim receives from his personal physician
- Other necessary treatment such as physical therapy
Where and When 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 at Mark's warehouse.
- In an area immediately adjacent to your premises. Jim's injury would also have been covered had it occurred on a sidewalk approaching Mark's warehouse 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. For example, Mark delivers building supplies to a construction site. While at the site he accidentally drops a bag of concrete on the site owner's foot, causing an injury.
For expenses to be covered under Coverage C, the accident must take place in the coverage territory and during the term of the policy. In addition, the expenses must be incurred and reported to the insurer within one year of the accident date. In the previous example, suppose that Jim's accident took place on April 1, 2018. Mark's liability policy runs from January 1, 2018, to January 1, 2019. Jim's accident took place during the policy period. For Jim's expenses to be covered, they must be incurred and reported to Mark's insurer by April 1 of 2019.
Intended for Minor Injuries
Medical Payments coverage is subject to a limit that applies to each person. Because the coverage is intended for minor injuries, the limit is usually low (such as $5,000).
Expenses covered under Medical Payments are also subject to the Each Occurrence and General Aggregate limits in a liability policy. For example, suppose that Jim incurs $4,500 in medical costs related to his broken arm. Mark's insurer pays these costs under his Medical Payments coverage because they do not exceed his $5,000 limit. The payment will reduce both the Each Occurrence and the General Aggregate limits in his policy.
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 additional exclusions also apply:
Injury to an Insured
Medical Payments does not cover medical expenses incurred by anyone (including your employees) who qualifies as an insured under your liability policy. An exception applies to medical expenses incurred by volunteer workers (these expenses are covered).
Anyone Hired by You
No coverage applies to injuries incurred by someone hired to do work for you or any other insured or a tenant of any insured. For example, Mark hires an independent contractor to paint his warehouse. If the painter falls off a ladder and is injured, his medical expenses aren't covered under Mark's Medical Payments coverage.
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 aren't covered. For example, suppose that Mark leases half of his warehouse to Paul. If Paul is injured in his rented space and obtains treatment, his medical expenses won't be covered by Mark's Medical Payments insurance.
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 isn't 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 Steve is employed by Mark. Steve and his wife (Beth) play softball on a team sponsored by Mark's company. If Beth is injured while playing softball, any medical expenses she incurs as a result of her injury won't be covered under Mark's Medical Payments coverage.
No coverage applies to injuries to third parties if the injuries are caused by accidents arising out of your products or completed work. Such injuries are covered by products-completed operations coverage, which is included under Coverage A.