Many are not aware that the law allows an insurance company to apply a “set-off” based on moneys received from a different portion of the defendant’s insurance policy. A “set-off” is a provision in the contract language that allows the insurance company to reduce coverage in one section of insurance policy when payments are made in a different section of the policy. For example, if the defendant’s insurance policy provides medical payment coverage, the amount you receive pursuant to that provision will be subtracted from the amount you can receive under the bodily injury provision.
Bodily injury coverage applies when the at-fault driver in an accident causes your injuries. The at-fault driver is liable for paying the cost of those injuries in the form of medical bills, pain and suffering or even lost-wages. https://www.dmv.org/insurance/bodily-injury-and-property-damage-liability-coverage.php On the other hand, medical payments coverage is purchased in connection with the car insurance, but carries a separate premium for the coverage. This coverage will pay for medical bills someone incurs in the car accident regardless of who is found at fault for the accident. Although the benefits will differ depending on the policy, typically, a medical payments provision will cover funeral expenses, and/or medical expenses incurred by you, passengers or even the at-fault driver. https://www.dmv.org/insurance/medical-payments-coverage.php
The “set-off” issue usually arises when one attempts claim both the full amount of coverage for bodily injuries and additional coverage pursuant to the medical pay provisions of the insurance policy. And naturally, one must make such a claim when the insurance coverage is not enough to cover your claimed losses.
For example, let us say you are in a car accident and your medical bills exceed the bodily injury coverage limits. In other words, the defendant’s insurance only provides $50,000 for bodily injuries and $10,000 for medical bills, but your medical bills alone are $58,000.00.
At first glance, it appears that you have $60,000 in coverage available to you (i.e. $50,000 in bodily injury + $10,000 in medical payments). However, many insurance policies provide for “set offs.”
An example of “set-off” language is: “… any payment to anyone under coverages in Section 1 will reduce any amount that person is entitled to receive under Sections 2 or 3 of this policy.”
You would have to know:
1) which persons are covered under this policy;
2) read section 1;
3) read section 2;
4) read section 3;
5) read the declarations page to find your cover limits; and
6) have a few minutes to digest and ask questions of your insurance rep to understand the interplay between who is covered, for what type of injuries and how much money is available for an accident.
In today’s world, you are able to purchase the car insurance contracts online and click the “I agree and have read the contents of the contract” button in order to get coverage without help from an insurance representative to explain the coverage.
The courts allow “set-offs” with the rationale that the defendant, as a consumer, has the duty to read and understand the contract. There are very limited exceptions when the court will invalidate “set-offs” in insurance contracts. The next time you sit down to buy insurance keep in mind that there are likely “set-offs” in most policies so ask the broker or representative where the set-offs are and how they work, BEFORE you agree to the contract. This way, in the event you are the at-fault driver, you can purchase enough coverage so your assets are not at stake. And, you can purchase an “underinsured” policy of insurance that ensures that there is enough coverage if the defendant did not purchase adequate insurance.
–Thomas M. Seymour
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