Medical Expenses coverage, commonly referred to as “Med Pay,” is an optional coverage included on many policies. As stated in the policy excerpt below, this coverage pays for medical expenses, regardless of fault. ICC offers this coverage at various limits from $0 to $10,000.
Medical Expenses
a) We will pay medical expenses as described below for “bodily injury” caused by an accident:
- On “premises” you own or rent; or
- Because of your operations;
- Provided that:
- The accident takes place in the “coverage territory” and during the policy period;
- The expenses are incurred and reported to us within one year of the date of the accident; and
- The injured person submits to examination, at our expense, by physicians of our choices, as often as we reasonably require.
b) We will make these payments regardless of fault. These payments will not exceed the applicable Limit Of Insurance. We will pay reasonable expenses for:
- First aid administered at the time of an accident;
- Necessary medical, surgical, x-ray, and dental services, including prosthetic devices; and
- Necessary ambulance, hospital, professional nursing, and funeral services
The theory (now myth) behind Med Pay is that if someone was injured on the insured’s premises, the insured could offer to pay small medical expenses as a “goodwill” gesture. The intent was to prevent the injured person from filing suit.
There are two basic flaws with this initial premise. First, in today’s litigious society, offering to pay small medical expenses does not seem to impact the retention of counsel and filing suit. Claimants may actually end up using this money to finance their lawsuits if they do not have to turn the money over to a lienholder. Second, Medicare and Medicaid have discovered that Med Pay is not subject to fault and those organizations have begun actively subrogating for payment.
What was originally intended as a “goodwill” coverage, designed to reduce claims, has now turned into a problem, especially for the retail food and beverage industry. For example, a small family restaurant may have a BOP policy with a premium of $4,800 and a Med Pay limit of $5,000. This restaurant is located near a senior citizen center and has an elderly clientele. While getting out of his seat, a customer feels faint and falls to the floor, breaking his hip. He is taken by ambulance to a hospital and incurs substantial medical bills, paid by Medicare. Medicare subsequently subrogates for the $5,000 Med Pay limit, which is payable in this situation. The restaurant now has a loss ratio over 100% without doing anything wrong. Over the next three years, they have three other similar claims and their insurance is non-renewed due to the high loss ratio.
Agents who do not specialize in our niche may be unfamiliar with this problem with Med Pay. We still see small restaurants that carry Med Pay limits of $5,000 and even $10,000. The uninformed agent may believe he is providing better coverage because of the high Med Pay limits, when in reality, he is doing a disservice to their insured customer.
ICC offers a liability premium credit for Med Pay limits of $1,000 or $0 and increases the total liability premium for limits above $2,000. If you are competing for restaurant business that has a higher Med Pay limit, you can reduce your overall premium, while demonstrating your knowledge of the niche, with a low or no Med Pay limit.
Please contact your ICC Agent with any questions or Find an Agent in your area.
