Most of us are well aware of the basic provisions of our automobile insurance policies. For example, we know that if we back into something in a parking lot and damage our bumper, insurance will fix it. We also know that if we have an accident that’s our fault and cause damage to someone else, or insurance covers it. What most people are not as familiar with is what insurance adjusters and lawyers refer to as “Med Pay” coverage. Not everyone has elected to pay for this coverage, but if Med Pay exists on your policy it can be a very important and beneficial coverage. You need to know if you have “Med Pay” when you are involved in an accident.
A typical Med Pay provision in a standard auto policy generally provides the insurance company will pay (subject to some exclusions, of course) reasonable medical expenses for necessary medical services because of bodily injury sustained by an insured person, including family members and others in your car. This can be a very valuable coverage, depending on the policyholder’s circumstances following an accident.
While this coverage may seem fairly straightforward, bad faith litigation may arise from it. Insurance companies are only obligated to pay “reasonable” and “necessary” medical bills under the Med Pay provision of the policy. The questions of what medical treatment is “necessary” and what medical bills are “reasonable” can lead to disputes between insurance companies and policyholders. After an accident, a policyholder will often receive treatment from his doctors and incur medical bills as a result and make a claim under his “Med Pay” coverage, only to find his insurance company claims the treatment and/or bills are not “reasonable and necessary.”
As in other claim situations, the insurance company has a duty of good faith in handling Med Pay claims. So, the insurance company has to have a good faith basis for denying payment of Med Pay benefits. The insurance company has to investigate fully and fairly and evaluate the evidence even-handedly. Unfortunately, some insurance companies have attempted to deny and/or reduce payments under the Med Pay coverage by utilizing doctors and/or nurses (who often market themselves as cost savers to the industry) to evaluate the “reasonableness” and “necessity” of their policyholders’ Med Pay claims. When done inappropriately, this practice amounts to an effort to create the appearance of a “legitimate dispute” to avoid bad faith liability. If bad faith litigation results in a situation like this, the focus is often on the qualifications of the doctors/nurses hired by the insurance company, the quality of their analysis and the evidence of the insurance company’s cost-saving motive in sending claims to such doctors.
Insurance companies are entitled to analyze claims closely, including using outside experts if needed, but they are not entitled to manufacture disputes using biased experts in an effort to save money they otherwise owe their policyholders. The way some insurance companies deal with Med Pay claims crosses this line.