What is PIP?
Personal Injury Protection, also known as PIP, is a no-fault insurance coverage included in every Massachusetts automobile insurance policy. PIP was established by Massachusetts General Laws Chapter 90, Section 34M. PIP will provide an injured party with either $2,000.00 or $8,000.00 in coverage for either medical expenses, lost wages, and/or replacement services. It is important to note that a claim for PIP benefits must be made within two years of the date of the incident.
PIP and the Massachusetts Tort Threshold
In Massachusetts, in order to bring a personal injury claim that is based on a motor vehicle collision, the medical expenses must exceed $2,000.00. There are five notable exceptions when the tort threshold will not apply: (1) the incident results in death; (2) the incident consists of the loss of a body member; (3) the incident involves permanent and serious disfigurement; (4) the incident results in certain types of loss of sight or loss of hearing; or (5) the injuries consist of a fracture.
If none of those exceptions apply, and the medical bills are less than $2,000.00, then in Massachusetts, you cannot move forward with a personal injury claim. The reason for this threshold is PIP. Every motor vehicle crash in Massachusetts should have some sort of PIP coverage available. Thus, since PIP will typically pay at least the first $2,000.00 regardless of fault, your medical bills must be higher than that to have a personal injury claim.
Determining the Amount of PIP Coverage
Depending on the circumstances and applicable insurance coverages, PIP benefits available to the plaintiff will be either $2,000.00 or $8,000.00. If there is private health insurance (such as Blue Cross Blue Shield, United Healthcare, Aetna, etc.) then PIP will only provide $2,000.00 in benefits. The one exception to this is if the private health insurance is an ERISA plan. If it is an ERISA Plan then there will be $8,000.00 in PIP benefits available.
If the client has Medicare, Medicaid, or does not have health insurance then the full $8,000.00 in PIP benefits are available to the client.
You should determine early on the amount of PIP coverage that your client has available. This will affect the amount of money available to the client and the amount that will need to be subrogated at the time of settlement. Generally, insurance carriers will assume your client has full $8,000.00 coverage in PIP until they are shown otherwise. If your client is not entitled to the $8,000.00 in coverage then this must be addressed immediately.
Unlike Medical Payments coverage, PIP payments are subject to subrogation. This is generally referred to as the PIP offset. This is the reason that it is critical that you determine the amount of benefits available to your client as well as knowing the amount that PIP has actually paid out. The PIP carrier will maintain a PIP log which will reflect payments made. It is imperative that you obtain a copy of that log prior to settling to ensure that the bodily injury carrier is taking the proper offset amount.
Oftentimes, when an insurance carrier is making an offer in Massachusetts, that offer already includes the PIP offset. You must confirm with the adjuster the amount of the offset that they are taking when the offer is made.
For instance, if your client has private health insurance that is not an ERISA plan, then that client has $2,000.00 available in PIP benefits. That means if the insurance carrier makes an offer of $10,000.00, then that offer really is $12,000.00 minus the $2,000.00 paid by PIP. It is important to understand this so you can appropriately advise your client about what the settlement offers mean.
Something to keep an eye out for that makes settling cases much more difficult are PIP deductibles. Policyholders in Massachusetts can elect to have a PIP deductible in order to have a lower premium payment. PIP deductibles can range all the way up to $8,000.00. When there is a PIP deductible in play, that means PIP will not provide benefits until beyond the deductible, if anything. For instance, if your client has $8,000.00 in PIP coverage because they are a Medicare beneficiary, and they opt for a $2,000.00 PIP deductible. Then they will only have PIP coverage of $6,000.00 starting after the initial $2,000.00 in medical bills. Your client (or possibly their health insurance) will be responsible for the first $2,000.00 in medical bills before PIP will start paying for anything.
The most important piece for a practitioner to understand about PIP deductibles is that the insurance carrier can still take the offset of whatever PIP coverage would have been available notwithstanding the deductible. In the example above of a $10,000.00 settlement, that offer would remain the same even if your client had a PIP deductible of $2,000.00 and had to pay for the initial medical expenses out of pocket.
There are situations where, because of the PIP deductible, the final offer may not even fully compensate for all the medical bills. Unfortunately, the case laws supports the application of the PIP offset even where there is a deductible. If you are in this situation, you need to try and reduce all the bills as much as possible. If that is not enough, then litigation may be necessary.