Medical Payments: Not Based on Fault but Limited in Scope

Medical Payments is what is known as “goodwill” coverage – a promise to pay expenses associated with injury or damage that occurs on the insured’s premises or as a result of the insured’s business operations, regardless of fault or whether or not the insured is legally liable for the injury or damage. Adjusters like using the availability of medical payments coverage to create goodwill early in the claim. The ability to offer such payment can have two beneficial effects:

1. It can mitigate the ultimate expense associated with injury or damage by allowing first-response medical treatment or property repair without the delay of initiating an insurance claim.
2. It can preserve business relationships between the insured and guests, clients and customers by “doing the right thing” rather than pleading non-liability and resorting to litigation. Hence the name goodwill coverage.

Limits

Typically limits for medical payments coverage are low – $1,000; $5,000; $10,000 or $15,000 with $10,000 being the most common medical payments limit and $15,000 typically the highest limit. Due to the nature of the coverage, it is typically written with no deductible.

Coverage

Coverage is limited in scope. It only pays the reasonable expenses for:

·  First aid administered at the time of an accident

·  Necessary medical, surgical, X-ray and dental services, including prosthetic devices

·  Necessary ambulance, hospital, professional nursing and funeral services

Who is Covered?

“Who” is covered is also limited. Medical payments coverage is primarily intended to pay for injuries sustained by members of the general public. It excludes the injuries to the following:

·  Any Insured except volunteer workers. This category of injured person comprises the name insured, relatives and business partners. Insureds are not persons with respect to whom a goodwill assumption of medical expenses should be necessary as a way of mitigating liability claims.

·  Vendors / Independent Contractors - A person hired to do work for or on behalf of any insured or a tenant of any insured. Business relationships with independent contractors do not create the sort of “goodwill” obligations contemplated by medical payments coverage. The name insured’s obligations to such a person is usually defined by the work agreement or contract, and injury in the course of work for the named insured will in most cases be the subject of workers compensation insurance.

·  Tenants - A person injured on that part of premises you own or rent that the person normally occupies. In essence, this exclusion applies to injuries to the named insured’s tenant. The named insured’s obligations in connection with injury to a tenant will be dealt with in the lease or rental agreement under which the tenant “normally occupies” part of the name insured’s premises. To the degree that legal liability for such injuries might exist despite the lease or rental agreement, the premises owner would have coverage for that liability under general liability coverage.  Despite this clear exclusion, our experience is that insurance carrier adjusters routinely apply medical payments coverage to claims from tenants. 

·  Workers Compensation or similar laws whether or not an employee of the insured. If injuries are work-related, then they come within the scope of workers compensation insurance. Workers compensation is always primary.

·  Athletic Activities – Excludes coverage to a person injured while practicing, instructing or participating in any physical exercises or games, sports, or athletic contests.

·  Products-Completed Operations Hazard – included within the “products-completed operations hazard”

There is a misunderstanding about how medical payments applies. Many real estate firms do not want to include the coverage as it is widely believed it can be used to provide small settlements to tenants for nuisance claims. They feel if this information became known among other tenants, they would have a rash of small claims. However, tenants are excluded from coverage and medical payments is only used to reimburse the specific costs outlined above.  It cannot be used to provide small settlements of nuisance claims.

Payments under Medical Payments coverage will be made regardless of the facts surrounding the incident – even if the business is not legally liable or negligent for the accident. When making a payment under Medical Payments coverage, the insurance company cannot request or obtain a liability release from the injured party, so the injured party can still take civil action.

A claims adjuster will reimburse an injured party for medical costs under a covered general liability claim but the adjuster will also only pay in exchange for a signed release to settle and close the claim – certainly more desirable.

The AssuredPartners Real Estate team is well versed in medical payments coverage.  To learn more about our coverage review and risk management services, contact the AssuredPartners Real Estate professionals.