Have you ever checked your business policy to see if it covers medical payments (med-pay)? In all likelihood, it does (unless you’ve specifically opted not to carry this coverage).
The med-pay coverage referenced in your business’ commercial general liability policy can best be compared to the med-pay coverage found in your homeowner policy. It provides payment for first aid; necessary medical and dental treatment; ambulance, hospital, professional nursing, and funeral services to persons other than the insured. The intent is to compensate people injured on the insured’s premises or due to the insured’s operations, regardless of fault.
Because fault is not a factor, medical payments coverage is not a liability protection. It also cannot be applied to claims by the insured or any of the insured’s employees (or anyone eligible for workers’ compensation).
Med-pay coverage was originally developed as a “goodwill” gesture intended to give business owners a way to compensate customers suffering minor injury (a slip-and-fall, etc.) while on the insured premises.
In other words, it allowed the business owner to take care of the customer without opening up a liability claim.
However, it is becoming increasingly clear that this coverage may not necessarily foster goodwill with customers, who often receive no monetary benefit, and it does not discourage litigation.
Often, med-pay coverage simply becomes a risk transfer. Instead of billing a healthcare provider or Medicare, the medical provider bills the P&C carrier.
As a business owner, carrying med-pay can reduce your options. Once the coverage is on the policy, it must be activated in the event of an incident. As a result, you no longer have a choice in how to handle the loss, even if you might prefer to compensate the customer in another manner or make some other goodwill gesture.
For that reason, omitting the coverage actually gives you more choices and does not impact protection. After all, you and your customers are protected by true liability coverage where it is warranted.
In lieu of carrying med-pay, you might opt to fund goodwill gestures in the form of a gift card, discount or other service to the customer.
Impact to your insurance
With med-pay, there is no differentiation between at-fault and not-at-fault claims, so any type of med-pay claim could affect how your insurance company views your account. Loss activity in general triggers an account review, and that means med-pay claims could contribute to an increase in premium or a nonrenewal.
With these facts in mind, you may find it worthwhile to discuss med-pay coverage with your independent agent to determine if it is necessary. Once you have the facts, you might prefer to forego med-pay, knowing protection is still afforded but that you have more choice when the coverage is not automatically included on the policy.
About the Author
Tony Piloseno is the Northeast Ohio Claims Leader for Westfield Insurance. A graduate of The Ohio State University, Tony has been a claims professional since 1987.
Tony has experience dealing with property, casualty and workers’ compensation in numerous jurisdictions as both a claims representative and claims leader. He is active in local claims associations and Political Action Committees to address issues important to the insurance industry.