MEDICAL PAYMENTS COVERAGE

As noted, the medical payments coverage is virtually a no-fault, low-limit bodily injury coverage. In order to be entitled to payment under the medical payments coverage, the injured person must comply with certain requirements. These are to: ◆ give the insurer written proof of claim, including under oath at the insurer’s request, as soon as is practicable; ◆ authorize the insurer to obtain copies of the injured person’s medical records and reports; and, ◆ submit to physical examination by a doctor of the insurer’s choice when and as often as the insurer reasonably requires. Payment of Claim This condition provides that payment of benefits under medical payments coverage does not constitute an admission of liability by either the insurer or the insured. This condition is very important. Many claims handled under the medical payments coverage never evolve into lawsuits. In some cases, however, a lawsuit does follow, often where the injured party’s damages exceed the limits of liability of the medical payments coverage. Because of that risk, it would be imprudent for either an insured or an insurer to agree to make a payment under the medical payments coverage. That is, unless it is understood that such a payment does not constitute an admission of liability and cannot be used as evidence by the injured party. SUITS AGAINST US This is actually a set of three conditions. The first condition provides that no action can be brought against the insurer unless there has been full compliance with the terms and conditions of the liability coverages. As with the similar property condition, this provision cannot prevent an insured from suing his or her insurer. This provision provides the insurer with the con136 The Complete Book of Insurance tractual basis for relying on the insured’s failure to comply with all the insured’s obligations, such as under the notice and voluntary payment provisions, as a defense to the lawsuit. The second of this set of conditions provides that no one has the right to join the insurer as a party to a lawsuit against any insured. This condition serves two similar purposes. Under the law of most states, evidence that a defendant has insurance that may respond to and pay a judgment is inadmissible in the lawsuit against the insured. Consideration of such evidence could cause a jury to award damages against a defendant when the evidence does not support liability, merely because the dollars to pay the judgment would not be coming directly out of the defendant’s pocket. The third of this set of conditions provide that no action can be brought against the insurer until the insured’s obligation to the claimant has been determined by final judgment or settlement agreement that has been signed by the insurer. This condition is intended to protect the insurer from claims in which the claimant and insured have acted in collusion to the detriment of the insurer, as well as the insurer’s right to control the defense and settlement of claims and lawsuits. BANKRUPTCY OF AN INSURED This provision is required to be included in liability policies in many states. It provides that the bankruptcy or insolvency of an insured will not relieve the insurer of its obligations under the policy. A claimant can seek relief from the automatic stay afforded to a debtor in bankruptcy to continue to press his or her lawsuit against the insured as long as the claimant limits any recovery to proceeds of the insured’s insurance policies. OTHER INSURANCE This condition addresses the question of which policy should pay, and in what order, when multiple policies afford coverage for the same loss. The ISO Liability Coverage Conditions 137 HO 3 homeowners policy purports to provide that the coverage afforded applies in excess of that of any other policy, except for coverage that is written specifically to apply as excess insurance over the ISO HO 3 policy’s coverage. In many cases in which there are true conflicts between the other insurance clauses of multiple policies that apply to the same loss, the result is that the insurers are held to share responsibility for the judgment on a pro rata basis. Each shares responsibility in the proportion that the policy limit of the respective insurer’s policy bears to the total policy limits of all the involved policies. Such conflicts between the other insurance clauses in the homeowners policy context are relatively rare. This is an issue that arises far more commonly in the commercial liability context. POLICY PERIOD This condition states the policy’s coverage applies only to bodily injury or property damage that occurs during the policy period. Under the personal injury coverage endorsement, this condition is deleted as to the personal injury coverage. This is because the trigger of personal injury coverage is the insured’s commission of a personal injury offense during the policy period. The personal injury endorsement substitutes a condition that so states. CONCEALMENT OR FRAUD This is an important and broad condition that has the effect of voiding the policy completely for an insured who, whether before or after a loss, has: ◆ intentionally concealed or misrepresented any material fact or circumstance; ◆ engaged in fraudulent conduct; or, ◆ made false statements relating to the insurance. Any false statement or concealment can have the effect of completely voiding the policy. 138 The Complete Book of Insurance The concealment or fraud condition of the liability coverage thus differs significantly from that applicable to the property coverages. Under the concealment or fraud condition of the property conditions, the concealment or fraud of one insured will not necessarily void coverage as to other insureds.

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