By Cory Bilton
Following my post last week on Hubb v. State Farm, I’ve been thinking about how complicated PIP and MedPay claims can get in the Washington, DC, Maryland, and Virginia area. It’s not complicated because the laws themselves are complex, but rather, it’s complex because each jurisdiction’s laws are different and many accidents involve more than one jurisdiction (e.g. a DC accident involving a Virginia resident). One of the issues we face in deciding whether to file a PIP claim for one of our clients is whether the insurer has subrogation rights (and/or the right to be reimbursed) for PIP benefits. This post will explain how each jurisdiction treats PIP or Med Pay subrogation.
First, a note about terminology. Personal Injury Protection (“PIP”) and Medical Payments (“Med Pay”) coverage under an automobile insurance policy are very similar in a lot of ways. Both are intended to cover medical expenses of the policyholder. There are some differences between the two, but they are not important for this article. Each jurisdiction’s statutes deal only with one of the two (so the rules for the other type depend solely on the policy language). DC law deals only with PIP. Virginia has no provisions for PIP, but policies may offer Med Pay. Maryland requires PIP to be offered, but has no statutory guidance about Med Pay. Likewise, the terms “subrogation” and “right of reimbursement” are related concepts that have different definitions. The differences are not too important for this article. Courts and legislators sometimes don’t respect the different meanings, anyway. For this discussion, consider both terms to mean that an injured person has to repay her own insurance company for the PIP benefits received.
One important consideration in our multi-jurisdictional metropolitan area is that PIP or Med Pay coverage is generally governed by the law of the place where the insurance contract was issued (“lex loci contractus,” in legalese). So Maryland PIP coverage purchased by a Maryland resident is governed by Maryland law, even if the collision occurred in Virginia. Starting with this principle, here are the statutes and cases dealing with PIP and Med Pay subrogation in the DC metro area:
(1) An insurer shall have a right of reimbursement from any other insurer, based upon determination of fault, for any personal injury protection benefits paid . . .
So if an insurer A pays out PIP to an injured person, the insurer can demand to be repaid those PIP benefits from insurer B because the injury was their insured’s fault.
But what if the liability insurer has already paid the injured person to settle the claim? Can the PIP insurer still be paid back out of the funds the injured person now holds? Hubb says yes, the PIP insurer can still be repaid. The decision rests on DC Code § 31-2406(f)(5), which says:
(f) Mandatory uninsured motorist insurance . . . .
(5) To the extent of any payment made to any person by the insurer under the coverage required by this section and subject to the terms and conditions of the coverage, the insurer is entitled to the proceeds of any settlement or judgment resulting from the exercise of any rights of recovery of any person against any other person legally responsible for the bodily injury . . . .
The majority in Hubb says that this statute provides PIP insurers the right to reimbursement from the insured after the insured has settled with the liability insurer.
Either way you look at it, if the PIP insurance is coming from a DC policy, then the PIP insurer has the right to be repaid from a settlement or judgment against the wrongdoer. (The insurance policy itself would also need to provide this right to subrogation and reimbursement. However, almost all of them do as a practical matter.)
In Maryland, there is a statute that denies a PIP insurer the right to subrogate or be reimbursed from a settlement or judgment. Maryland Insurance Code § 19-507(d) says:
(d) Subrogation. — An insurer that provides the benefits described in § 19-505 of this subtitle does not have a right of subrogation and does not have a claim against any other person or insurer to recover any benefits paid because of the alleged fault of the other person in causing or contributing to a motor vehicle accident.
(§ 19-505 is the statute that talks about PIP generally.)
So a PIP insurer does not have the right to be repaid from a liability insurer for the PIP benefits it pays out. This means that injured Maryland residents with PIP coverage can collect PIP under their own policy and the full amount of their damages from the wrongdoer.
However, if there are two PIP insurers (let’s say the owner’s policy and an injured passenger’s own policy), can the two PIP insurers subrogate against each other? Yes, they can, according to Bishop v. State Farm, 757 A.2d 783, 791 n.5 (Md. 2000). There is an order of priority among PIP insurers, with the vehicle’s insurance carrier bearing primary responsibility for PIP. Id. at 790. However, if the secondary PIP insurer paid benefits first, it could subrogate against the primary PIP carrier because it was not paying benefits “because of the alleged fault of the other person in causing or contributing to a motor vehicle accident.” § 19-507(d). Instead, the PIP insurers owe benefits just because an accident has happened, without any fault determination at all. Thus, the subrogation prohibition does not apply between PIP insurers, only between a PIP insurer and a liability insurer.
Virginia has Med Pay instead of PIP. Like Maryland, Med Pay insurers in Virginia cannot subrogate against a third party liability insurer. The statute is Virginia Code § 38.2-2209 which states:
No policy or contract of bodily injury or property damage liability insurance that contains any representation by an insurer to pay all reasonable medical expenses incurred for bodily injury caused by accident to the insured … shall be issued or delivered by any insurer … if the insurer retains the right of subrogation to recover amounts paid on behalf of an injured person under the provision of the policy from any third party.
This statute clearly prohibits subrogation of Med Pay coverage provided by an automobile liability policy. The Virginia Supreme Court reiterated this prohibition in Collins v. Blue Cross of Virginia, 193 S.E.2d 782, 785 (Va. 1973) (referring to the statute by its previous code section Virginia Code § 38.1-381.2).
However, in another case, Berczek v. Erie Insurance, 529 S.E.2d 89, 91 (Va. 2000), the Virginia Supreme Court cites a different statute as a bar to Med Pay subrogation. The other statute, Virginia Code § 38.2-3405(A) says:
No insurance contract providing hospital, medical, surgical and similar or related benefits … shall contain any provision providing for subrogation of any person’s right to recovery for personal injuries from a third person.
This statute was clearly intended to apply the same anti-subrogation principle to health insurance. But Berczek cites as the bar to Med Pay subrogation, too. See Berczek, 529 S.E.2d at 91. Since both Med Pay and health insurance provide medical benefits, presumably both statutes could apply equally to prohibit a Med Pay insurer from seeking reimbursement against a liability settlement or judgment. So even though it’s redundant, it’s not illogical to conclude that either statute could achieve the anti-subrogation result for Med Pay.
Since both statutes only prohibit subrogation from third party recoveries, can multiple Med Pay insurers subrogate against each other? No. There is no statutory or case law in Virginia mandating a priority of coverage when there is more than one Med Pay insurer. However, the standard policy in Virginia makes Med Pay either pro rata or “excess” coverage (thus one coverage does not displace another). Furthermore, Virginia Code § 38.2-2211 clears this up by saying that no automobile insurer may get a “credit against the medical expense coverage for any other medical expense insurance to which the injured person may be entitled.” This comes with the limitation that a person may not collect “more than his actual medical expenses” from any one or a combination of policies. Id.
Without knowing whether PIP or Med Pay benefits must be repaid, it is tough to advise someone injured in an accident whether they should file a claim. The basic conclusion to draw from the citations above is that if the policy is from Maryland or Virginia, the PIP or Med Pay insurer generally is not repaid. Thus an injured person can file a PIP claim through her own insurer and make a liability claim against the wrongdoer. But in DC, PIP insurers generally do get repaid. So a DC resident must consider his options a little more carefully before filing a PIP claim (this is especially true due to the lawsuit restriction in DC Code § 31-2405). Again, this complexity arises not because the laws are complicated, but rather due to often having accidents that involve multiple jurisdictions at the same time.