So let's say you're driving into Seattle and unfortunately someone behind you is paying more attention to their Blackberry than driving, and rearends you. You're injured and need medical care, but at least you have Personal Injury Protection (PIP) which will take care of your medical bills. Did you know that in some circumstances you have to reimburse your insurance company for any payments made under PIP coverage? That's right, you pay them a premium, they provide PIP coverage, and then you pay it back.
Ok, it sounds a little counter-intuitive, but it really does make sense. Lets take a couple different senarios. Number 1 - You are injured in a car accident, you use your PIP coverage to pay for your medical care and you do not pursue a claim against the other driver. Maybe you don't want to. or perhaps the accident was your fault. In this senario, you do not have to reimburse your insurance company because you did not receive a settlement from another party. To put it another way, your insurance company does not have a right of subrogation (right of reimbursement) in this case. Lets look at senario Number 2 - You are in a car accident, it's not your fault, you are injured and use your PIP for your medical care. You then settle your claim against the at fault driver. Your insurance company will have a right of subrogation.
Your insurance company has a right of subrogation because part of what you are recovering is the amount of your medical bills. If you didn't reimburse your insurance company you would be receiving double recovery, once from PIP and once from the at fault driver. Double recovery is generally frowned upon...
There are situations though, when you are represented by an attorney, when you either do not have to repay anything or if you do, it's a reduced amount. I'll leave those details for a later post.
