Understanding personal injury protection (PIP) is a crucial yet often overlooked aspect of accurate underwriting for medical and legal funders.
PIP is important to understand whether you run a medical or plaintiff funding business because PIP status directly affects the total amount of liens that could inhibit recovery, and therefore, your potential investment.
With no or low PIP coverage, there is a higher likelihood of medical liens on the case. This creates more opportunity for medical funders, but reduces the claim’s potential value for legal funders.
Conversely, with higher PIP coverage, there is a lower possibility of medical liens being attached to the claim. While this may preserve value for legal funders, it reduces the opportunity for medical funders.
The rest of this post will provide answers to the following questions:
Before diving into some of the nuances of PIP coverage, let’s first briefly review the various parties involved in a PIP claim, as these are terms used throughout the remainder of this post.
First Party (insured / client / plaintiff)
The person initiating the claim and who was injured by an accident. This party is eligible for PIP coverage under their own policy.
Second Party (plaintiff’s insurance company)
This company provides the PIP/No-Fault Coverage to the injured person (first party).
Third Party (the Defendant / Insurance Carrier)
This party is represented by a different company and possesses bodily injury coverages necessary to pay a “third party claim” from the plaintiff in the case of serious injuries. The third party has nothing specific to do with No-Fault/PIP.
“PIP” or “No-Fault” insurance are terms used interchangeably to refer to an extension of car insurance offered in some but not all states under which the insured is indemnified for his/her losses by his/her own insurance company. This insurance coverage helps pay the driver’s and/or passenger’s medical bills if either party was injured in a car accident, regardless of fault. As touched on above, PIP is considered 1st-party coverage.
The following terms are used interchangeably in the insurance/litigation world, but are generally referring to the same things:
What does PIP cover?
What is excluded from PIP?
Why does it exist?
There are two primary types of damages to consider in all personal injury cases, and PIP introduces a bit of a wrinkle to keep an eye out for.
The two key types of damages are:
In no-fault states, special damages are not part of the negotiation for settlement as the client has not incurred any losses for his/her medical bills, lost wages, or replacement services (if he/she has, a separate “1st party action” would be needed).
When assessing a claim for funding, there are a number of PIP-specific questions your team should consider. Here’s a few to get you started:
Finally, to research state-specific PIP legislation, nothing beats a simple Google search with keywords such as “Utah PIP legislation” or “Utah No Fault.”
As exampled by this article, PIP coverage adds nuance to your underwriting and due to the state-by-state differences, can be very confusing.
If you’re still unclear about the topic, don’t fear! We’ve compiled a “101” level Powerpoint slide deck to help arm you with the right information.
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