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Insuring agreement

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Insuring Agreement

We will pay reasonable expenses incurred for necessary medical and funeral services because of "bodily injury":

1.     Caused by accident; and

2.     Sustained by an "insured".

We will pay only those expenses incurred for services rendered within three years from the date of the accident.

Analysis

Several of the phrases in the quoted portion of the provision seem self-explanatory. Thus, "reasonable expenses" is a term not likely to encompass recuperation at a resort; "necessary medical services" would usually rule out cosmetic surgery as an accompaniment to a simple fracture; "caused by accident" can ordinarily eliminate recovery for funeral services for a known suicide. Each of the foregoing statements is qualified because the circumstances of a particular case can have a bearing on interpretation but, in general, the phrases are not really troublesome.

"Expenses incurred for services rendered within three years from the date of the accident" is a phrase that needs further elaboration.

"Expenses incurred" is not new language in any way unique to the personal auto policy. In fact, it appears in earlier medical payments insuring agreements and its meaning has been the subject of many legal actions between insurance companies and claimants. For example, suppose a young child sustains injury to the mouth and gums and an oral surgeon prudently defers final repairs until such time as the child's permanent teeth appear, perhaps for a number of years which exceeds the time period fixed by the policy. Are the eventual charges for the deferred surgery considered "expenses incurred," or must the actual repairs take place within the fixed period stated in the policy in order to be considered "expenses incurred"?

In some jurisdictions, courts have held that the medical services must be performed within the fixed period. In one case, an insured was struck by an automobile and received continuous medical care from the date of the accident until a date after the time limit set by the policy. The North Carolina supreme court decided in favor of the insurance company. The company was not liable for any expenses for treatment provided after the expiration of the time limit on "expenses incurred." The case from North Carolina is Czarnecki v. American Indemnity Co., 131 S.E.2d 347 (N.C. 1963).

In other jurisdictions, courts have held that performance of medical services need not take place during the fixed time period in order for expenses to be incurred. Expenses are incurred if within the fixed time period the insured and the attending physician agree on the need for deferred treatment and the insured either agrees to pay the physician at the time services are rendered or actually pays the physician before the expiration of the fixed period. For example, the nine-year-old son of an insured received injuries to his mouth and teeth, and the attending dentist recommended that final repairs be deferred until a future stage in the boy's development—which would certainly occur outside of the fixed period of the policy. After obtaining an estimate of the total cost of repairs and establishing its reasonableness, the father paid the dentist in full and notified the insurer within the time limit provided. Although the repairs had not taken place within the time period, a Texas court found that expenses had nevertheless been incurred within this time and the insurer was liable up to the appropriate limits of the policy. This case is Maryland Casualty Co. v. Thomas, 289 S.W.2d 652 (Tex. Civ. App. 1956).

These cases, while admittedly several years old, are still good law in the affected jurisdictions. They did deal with a fixed time limit that was different from the one in the current PAP since today, as noted above, the medical payments coverage applies to those expenses incurred within three years from the date of the accident. Nevertheless, the point remains: namely, the fixed time period for medical payments is subject to judicial review and interpretation.

Of course, the addition of the phrase "for services rendered" to this insuring agreement in this edition of the PAP would seem to be an attempt to clarify the point that medical payments are for a definite limited time period. The "for services rendered" phrase dictates that such services have to be rendered (actually given or delivered) within three years from the date of the accident to be paid as medical payments. If, for example, in the Maryland Casualty Company case, the dentist rendered the services to the injured boy when the boy's physical development allowed for such services, and this was ten years after the accident, then the new version of medical payments coverage would not apply and the decision in the Czarnecki case would be the norm. Indeed, a phrase such as this has been upheld and enforced in some courts.

A court of appeals in Louisiana held that the insurer was not obligated under medical payment coverage provisions to pay medical bills for treatment rendered more than one year following the auto accident. The policy clearly stated that med pay would be paid for all reasonable expenses incurred for medical treatment that was actually rendered within one year after the accident. All the bills for medical expenses the claimant incurred due to the auto accident were for treatment after the one year period had elapsed. The court said that the policy language limitation was not ambiguous; medical treatment had to be rendered within one year of the accident. The court went on to declare that such policy language was not against public policy. The case is Guillory v. Trinity Universal Insurance Company, 520 So. 2d 1071 (La. App. 3 Cir. 1987).

In Johnson v. State Farm Mutual Automobile Insurance Company, 396 N.E.2d 1190 (Ill. App. 1 Dist. 1979), an appeals court in Illinois said that the language in the medical payments provision of the auto policy was clear and unambiguous. Medical services had to be furnished within one year from the date of the accident to be covered. Here, the claimant had surgery about thirteen months after the auto accident and even though this was at the recommendation of the doctor, the insurance policy language required the medical services to be rendered (performed) within one year after the accident. The court found for the insurer; no medical payments coverage was required.

Insureds