Auto Accident: Which Insurance Pays?

Being involved in a car accident is a very scary thing regardless of who’s at fault. What makes matters worse is the insurance “headache” that follows thereafter, especially if you were not at fault.

The general assumption is that the insurance company of the guy that hit you (which is referred to as the “third-party insurer”) should pay to repair/replace your car, as well as pay for your medical bills. (This of course assumes that the other guy had insurance.) However, it’s not always that simple.

Auto Accident with Glass Shattering

For example, if you carry comprehensive/collision coverage on your car (often referred to as “full coverage”), then in many cases your insurance has the primary duty to pay to repair or replace your vehicle, after which the other guy’s insurance will reimburse your insurance company directly. Sometimes this reimbursement process occurs through something called “inter-company arbitration,” in which a neutral arbitrator resolves the reimbursement issue. Luckily, that’s not something in which you generally would have to be involved. But the reason your insurance company is the first one on the hook to pay is that it’s a “first-party insurer,” meaning it is the insurance company of the person (you) requiring payment of insurance benefits.


Ok, but what about your medical bills?

Okay, so the property damage is being taken care of – but what about your medical bills? This is where things can get even more complicated. Again, the general assumption is that you should be able to show up at the emergency room, hand the triage nurse the insurance info for the guy that hit you, and the hospital automatically bills his insurance for your injuries. But this assumption is flat wrong. You’re welcome to provide the third-party insurer’s info, but they’ll probably deny payment because, unlike property damage, medical treatment for personal injuries is subjective and (according to many insurance companies) possibly unnecessary. So while the third-party insurer may eventually compensate you for your medical bills, they typically will not pay the bills upfront.

So who pays, then? As with the damage to your car, the first insurance company on the hook is your own insurance company. But does that mean your auto insurer or your health insurer? If you carry PIP/medical payments coverage under your auto insurance policy, then such coverage would be the first in line to pay your medical bills up until you hit the coverage limit. Once you hit the limit, your auto insurer will send an “exhaustion letter” to your health insurer letting them know that they (the health insurer) are now responsible to cover your medical treatment.

However, yet another complicating factor arises if the guy that hit you also carries PIP/medical payments coverage, because you are also entitled to receive those benefits through his plan in addition to the benefits available through your plan. So if you both carry such coverage, then yours will pay first until it’s exhausted; then his will pay until it’s exhausted, and then your health insurer will cover any remaining treatment. If you have no health insurance, then you are personally responsible to pay your bills (with the idea that the third-party insurer will eventually reimburse you). This can result in financial hardship for you, including collection agency action. But it’s the unfortunate reality, given that your treatment providers are entitled to payment for their services regardless of who was at fault in the auto collision.

Once all of your medical treatment is complete, you (or your attorney) will need to enter into some sort of negotiation dialogue with the third-party insurer regarding final compensation for your medical treatment and injuries. Bear in mind that when you settle your case, your auto and health insurers are entitled by law to be reimbursed for all payments they made for your medical treatment (this is called “subrogation”) That’s why it’s important to wait until you’re finished with your treatment, as you want to ensure that you receive full and fair compensation from the third-party insurer for all your treatment and injuries.

The moral of this story is that dealing with the insurance aftermath of any car accident can be a nightmare, aside from the fact that you’re also in pain from your injuries. A competent personal injury attorney can deal with this nightmare for you, so you can focus on getting better and taking care of your family.

If you have recently been in an auto accident and would like to know more about how a personal injury attorney at James, Vernon & Weeks, P.A. can help you, contact us today.