Part B: Medical Payments Coverage for Fortune 500 Employees and Retirees

What Is It?

Because you are a Fortune 500 employee, we will presume you own a vehicle. You are worried about who will cover your medical expenses in the event of an accident. A personal auto policy (PAP) is in effect. The "med pay" portion of your PAP covers your or your family's medical expenses in the event of an accident, regardless of culpability.

The purpose of med pay is to pay for the immediate medical treatment of individuals injured in an automobile accident, without waiting to determine who is ultimately at fault and liable. The medical payments coverage is located in Part B of your PAP and includes the Insuring Agreement, Exclusions, Limit of Liability, and Other Insurance sections.

The Insuring Agreement

In General

We do not expect Fortune 500 employees and retirees to be experts on insurance contracts and their nuances. The insurance contract is the most essential component of each section of your PAP. It specifies the conditions under which the insurer will pay benefits to you or on your behalf under your medical payment coverage. Your med pay coverage typically pays for reasonable medical and funeral expenses incurred due to "bodily injury" caused by an accident and sustained by a "insured." Up to the specified limit per individual, medical expense coverage benefits are available.

Time Limit

We believe it is essential to remind all Fortune 500 employees and retirees that these types of insurance contracts are subject to a time limit. The insurance policy stipulates a time limit after which medical payment coverage is no longer available. Typically, the time limit is between one and three years after the accident. Check your policy to determine the exact time limit.

Insurance companies impose a time limit on med pay for two reasons: (1) closure--the insurer wants to know what the total payments are within a reasonable time; and (2) protection against fraud--after a number of years, it may be difficult to determine whether the requested treatment is for the covered injury or a later-occurring injury that is not covered. A time limit protects insurance companies from medical payment claims.

Definition of "Insured"

It is vital that we provide our Fortune 500 customers with a precise definition of "insured." Whether or not a person is insured determines whether or not they are covered by your policy. The medical coverage section of your PAP contains its own definition of the term "insured." Typically, "insured" is defined as:

1. You and any other "family member":

2. While "occupying" "your covered auto"

3. As a pedestrian when struck by a vehicle designed primarily for use on public roads or any form of trailer.

4. Any other individual while "occupying" "your covered auto": As in Part A: Liability Coverage, "you" refers to both you and your spouse as the named insured. The term "family member" refers to anyone related to you who resides in your residence. "Your covered auto" refers to any vehicle listed on the Declarations Page of your PAP.

To be eligible for medical coverage, you must be a passenger in a motor vehicle. The essential word is occupying. Unsurprisingly, there has been a great deal of litigation surrounding this term's interpretation. Your PAP presumably defines "occupying" as "in, upon, getting in, on, out, or off" a motor vehicle at the time of the accident.

Coverage for medical expenses is also extended to any pedestrian struck by "your covered vehicle." This illustrates the no-fault character of medical payment coverage. If someone is injured by your vehicle, regardless of who is at fault, medical payments coverage will cover their medical expenses. The definition itself restricts coverage to vehicles that are primarily designed for use on public highways. Consequently, Part B does not cover injuries caused by bicycles and numerous other categories of vehicles.

Exclusions

In the spirit of diligence, we would like to inform all Fortune 500 employees and retirees about the exclusions section of your insurance policy.

In General

The exclusions section of your insurance policy specifies the limitations and restrictions applicable to the coverage provided by the insurance contract. Your PAP excludes medical coverage for eleven particular causes of loss. In general, coverage is excluded to avoid duplication with other, more appropriate insurance coverages, for business uses, and to eradicate nonstandard (and even catastrophic) risks.

Workers' Compensation

Since many Fortune 500 employees are covered by workers' compensation, we believe it is important to discuss how Med pay manages injuries covered by workers' compensation. Workers' compensation typically precludes coverage for "bodily injuries" sustained by an insured individual. It is more appropriate for workers' compensation to compensate for such losses. 

Business Use

In most cases, medical payments will not cover "bodily injuries" sustained while driving for business purposes. This kind of coverage is best suited for commercial policies. The PAP's commercial exclusions include the following:

1. Your PAP will not provide medical payment coverage if you are operating "your covered auto" as a public or livery conveyance (i.e., for hire).

2. Injuries sustained while a vehicle is being used for an insured's business are not covered by medical payment coverage. This exclusion does not apply to injuries sustained in the following situations:

3. A private passenger auto

4. A cargo truck or commercial van that you own.

5. A "trailer" used with any of the preceding.

Example(s): Hal possesses a PAP and employs his pickup vehicle as a copier technician. Hal must travel from location-to-location servicing copiers. Hal is involved in an accident and sustains a "bodily injury." Hal is eligible for medical coverage based on the aforementioned exceptions.

Nonstandard Risks

It is important for all Fortune 500 employees and retirees to realize that your insurer will not cover certain nonstandard risks. Your medical insurance policy excludes many nonstandard hazards to which you may be exposed. Exclusions from Med Pay coverage include:

1. Anyone who uses your vehicle without a reasonable belief that they are authorized to do so is not covered (for example, a car burglar or joyrider).

2. Injuries sustained while "occupying" a vehicle with fewer than four axles are not covered by medical payments. Motorcycles pose additional hazards that your medical insurance does not intend to cover. These types of hazards may be covered by purchasing additional insurance.

3. If you are injured in the equivalent of someone's "house," your auto insurance is probably not the best place to seek compensation. A claim for homeowners insurance may be more applicable. For instance, if you are injured in a trailer that has been set up as a campsite, you are not covered.

4. Autos not noted on the PAP - Any vehicle you or a family member owns that is not listed on your PAP Declarations Page is not covered by medical pay. This exception does not apply to you (or your spouse) if you are a passenger in a vehicle owned by a distinct "family member."

Example(s): Pat, your son, possesses a car. He is 18 years old, resides with you, and has his own insurance. If you take the car for a demonstration drive around the block and are involved in an accident, your own med pay policy will cover your medical expenses. If Bobby, Pat's companion, has an accident while taking the same test ride, he will not be covered by your medical payments coverage.

Insurers can only assess hazards associated with your known vehicles. Injuries sustained while driving a vehicle not listed on your policy will not be covered.

Racing--You predicted it: there is no coverage for medical expenses when you compete, train, or prepare for any prearranged or organized racing or speed contest. If you are a race car driver, you should acquire insurance designed to cover the risks associated with racing.

Catastrophic Exposure

In addition, the medical payments section of your PAP excludes coverage for a variety of catastrophic exposures that result in "bodily injury" to an insured. These are so catastrophic that the term "nonstandard risks" seems inappropriate. The following are:

1. Nuclear weapon detonation, nuclear reaction, radiation, or radioactive contamination (even unintentional)

2. Declared or undeclared war

3. Civil war Rebellion

4. Rebellion or revolution

These exceptions are intended to protect the insurer in the event that a singular catastrophic event results in a large number of claims. Although most Fortune 500 employees do not need to be concerned with this section of the agreement, it is included to provide a comprehensive view of the agreement.

Limit of Liability

The Limit of Liability section of their agreement is something that Fortune 500 employees and retirees must bear in mind.

In General

Your PAP is not an inexhaustible source of funds in the event of an accident. There are coverage limits imposed by your insurance company. On the Declarations Page of your PAP, you will find the maximum amount of coverage for medical payments. It can be any dollar quantity, but typically ranges between $5,000 and $10,000. This limit represents the maximum quantity of medical payment coverage that the insurance company will pay per person, per accident.

Total Per Accident

The med pay limit on the Declarations Page is the maximum dollar amount the insurance company will pay for a single accident to a single individual. It is the maximum amount the insurance company will pay regardless of:

1. Insureds

2. Claims made

3. Vehicles or premiums shown on the Declarations Page or

4. Vehicles involved in the auto accident

The insurance company is responsible for paying up to and no further than the specified limit. This limit is unaffected by the number of insureds or the number of your covered vehicles involved in an accident.

No Duplicate Damages

Fortune 500 employees and retirees should be aware that the insurer will not pay medical pay benefits if another party will. When other sections of your PAP cover the loss is the first example. You will not receive duplicate med pay payments for the same loss covered by your PAP's Part A Liability, Part C-: Uninsured Motorist (UM) Coverage, or any underinsured motorist coverage. The identical rule applies to duplicate med pay benefits under another individual's policy.

Example(s): You are injured while riding as a passenger in Ron's vehicle. Ron's PAP provides $5,000 in medical coverage. Eventually, it is determined that Ron is responsible for your injuries. Any amount you are awarded under Part A: Liability of Ron's policy will be reduced by the amount you received under med pay.

Other Insurance

In General

In the event of a car accident, it is probable that multiple auto insurance policies are in effect. The other insurance clause limits the liability of your insurer when another policy may also cover your loss. Your PAP insurer will typically pay its proportionate share of the loss. This proportion represents the relationship between your policy's med pay limit and the total amount of all other med pay policies in effect.

Example(s): Ron is a passenger in Tammy's car during the collision. Tammy's policy provides medical payment coverage of $10,000 per person. Because he is in Tammy's car, Ron is deemed "insured" under her policy. Consider that Ron has a PAP that provides $5,000 in medical coverage. Which insurance policy pays out, and how much? The total cost of medical coverage is $15,000. Each party is responsible for paying only their proportional share of losses that are less than the total. Ron's share is one-third ($5,000 of $15,000), while Tammy's is two-thirds ($10,000 of $15,000). If Ron's medical expenses total $6,000, Tammy's insurer must pay $4,000 (two-thirds) and Ron's insurer must pay $2,000 (one-third) in accordance with the general rule.

The second portion of the other insurance clause further restricts liability. When providing med pay coverage for a vehicle you do not own, your insurer will only pay if the primary med pay coverage on the vehicle is inadequate. In the foregoing example, Ron's med pay coverage will only cover his medical expenses that exceed Tammy's $10,000 med pay limit.

This is a document that explains the medical payment coverage section of a personal auto policy (PAP). The purpose of med pay is to cover medical expenses in the event of an accident, regardless of culpability. The document explains the insuring agreement, time limit, definition of "insured," and exclusions of med pay coverage. The document provides definitions and examples for key terms such as "insured" and "occupying." The exclusions section is discussed in detail, including exclusions for workers' compensation, business use, and nonstandard risks. The document is written for Fortune 500 employees who may not be experts in insurance contracts and their nuances.

Conclusion

Imagine retirement planning is like preparing for a long-distance road trip. You need to have a solid plan in place to ensure a smooth and successful journey. Just as you would map out your route, calculate your estimated expenses, and pack everything you need, retirement planning requires careful consideration of your financial goals and needs, as well as the lifestyle you want to maintain. You want to make sure you have enough money to cover your expenses, enjoy your retirement, and leave a legacy for your loved ones. Without proper planning, just like a road trip, retirement can be a bumpy and stressful ride. But with the right plan and mindset, you can enjoy a comfortable and fulfilling retirement journey.

This material was prepared by Broadridge Investor Communication Solutions, Inc., and does not necessarily represent the views of The Retirement Group or FSC Financial Corp. This information should not be construed as investment advice. Neither the named Representatives nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information or call 800-900-5867.