Auto Insurance Exclusions

Insurance lawyers can tell prospective clients that most pages in an insurance policy are pages explaining exclusions and limitations to what a policy will pay.  This is no different when it comes to auto insurance.

The standard auto policy does not provide med pay coverage for any person for bodily injury occurring during the course of employment if worker’s compensation benefits are available for the bodily injury.  This exclusion is discussed in the 1963, San Antonio Court of Appeals opinion styled, Williams v. Employers Mutual Casualty Co.  Thus, med pay coverage will apply only if the insured does not have worker’s compensation benefits available to him or her.

Like the liability coverage, med pay coverage does not extend to the named insured while he or she is occupying a vehicle, other than his or her covered auto, which is owned by him or her or furnished or available for his or her regular use.  This was discussed in the 1965, Tyler Court of Appeals opinion styled, Vaughn v. Atlantic Insurance Company.  To extend such coverage would force the carrier to accept a greater risk without receiving a corresponding premium.

The United States Fifth Circuit, in 1996, in the opinion styled, United Services Automobile Association v. Perry, held the federal government was entitled to med pay benefits under the Federal Medicare Recovery Act.  This statute gives the military the right to be reimbursed by insurance carriers for medical expenses it incurs in treating soldiers who were the carrier’s insured.  The statute allows reimbursement only from no-fault coverage.  The Fifth Circuit held that med pay was no-fault coverage, and therefore the government claims for reimbursement made against an insured’s med pay would be enforced for the reasonable value of the medical care.  This lien can be directly enforced against the insurance carrier regardless of the insured’s desire to use the med pay benefits.  Likewise, the Fifth Circuit held personal injury protection coverage was no-fault coverage and therefore subject to the same lien.

The auto policy provides a general subrogation right to the insurer for all payments, except payments made under the personal injury protection coverage.  This specific right to subrogation of med pay benefits was recognized in the 1970, Dallas Court of Appeals opinion styled, Foundation Reserve Insurance Company v. Cody.