Kentucky When covered by two insurance plans, is one obligated to act as secondary if the other pays as primary?

[Ollonii]

Jurisdiction

Kentucky

The following came up in a discussion with one insurance plan administrator who felt strongly that, unless a plan specifically stated it was willing to act as a secondary payer, it was only obligated to act as a primary payer and then only when no other plan acted, or was willing to act, as a primary payer.

A person is covered for a medical claim by two insurance contracts, both of which allow
(or cover) the specific claim: call them Plan1 and Plan2. If Plan1 pays on the claim as the
primary payer but does not cover the entire cost of the claim, must Plan2 then act as a
secondary payer?

That is, are either of the insurance contracts obligated to review the claim for secondary
payment if the other contract has already paid a portion (but not all) of the claim as
primary?​

My instinct is that, unless a plan specifically precludes acting as a secondary or paying on a claim that someone else has partially paid as primary, there is a reasonable expectation that the plan will, in fact, at least have to review the rump of the claim for secondary payment.

Any comments? References in precedent or in law?

Thanks for any feedback!

 

[army judge]

A person is covered for a medical claim by two insurance contracts, both of which allow
(or cover) the specific claim: call them Plan1 and Plan2. If Plan1 pays on the claim as the
primary payer but does not cover the entire cost of the claim, must Plan2 then act as a
secondary payer?

I suggest you direct your questions to each insurer.

There is no way anonymous entities operating on the internet could know more about what each insurer is mandated to pay for services you might require if you're injured or ill.

 

[army judge]

Any comments? References in precedent or in law?

Your concerns have very little to do with legal precedents. The insurer and you (the insured) are each bound by your contract of coverage, specifically the insurance policy you appear to have purchased and/or are paying periodic premiums to remain actively insured.

 

[Ollonii]

Thank you for the responses.

I meant the example to indicate that the terms of both contracts stated that the contract will pay the claim (not stated in my example is that neither plan appears to envisage the possible existence of other plans owned by the beneficiary). I apologize if I haven't used clear legal terminology - I was trying to be clear but obviously wasn't. I thought this might be along the lines of two parties both contract with a beneficiary as follows: "I promise to do A if B happens" (no exclusions or qualifiers). Are both parties obligated to do A if B occurs? (I would have guessed "yes".)

I expect these would be considered extremely poorly constructed contracts and probably don't exist, but I was trying to isolate what happens when two contracts specify a benefit under the same circumstances to one beneficiary.

Clearly, actual insurance contracts will have a multitude of conditions and qualifiers and I'm certainly not asking that anyone comment on what "might" otherwise be in them. But, does Contract Law not say anything about these cases such as the above? Or am I missing the point entirely?

Thank you again for any input.

 

[army judge]

Insured's Obligation To Read the Insurance Policy

Most people do not read their insurance policy. Barry Zalma explains why they should.

www.irmi.com

Insurance Policy vs Insurance Contract: Understanding the Difference

ByAlex Johnson

Insurance plays a crucial role in safeguarding individuals, businesses, and assets from potential risks and uncertainties. When it comes to insurance, two terms that are often used interchangeably are "insurance policy" and "insurance contract." Although they share similarities, they also have distinct characteristics that set them apart. In this article, we will explore the differences between an insurance policy and an insurance contract, shedding light on their definitions, components, and key variations.

Introduction

Insurance, at its core, involves a contractual relationship between two parties: the insurer (the insurance company) and the insured (the policyholder). This contractual agreement outlines the terms, conditions, and coverage provided by the insurer in exchange for premium payments made by the insured. Understanding the nuances between an insurance policy and an insurance contract is essential for both policyholders and insurers.

Definition of Insurance Policy

An insurance policy can be thought of as a written document that serves as evidence of the insurance agreement between the insurer and the insured. It outlines the terms and conditions of the coverage provided, as well as the obligations and rights of both parties. The insurance policy is a legally binding contract that specifies the scope of coverage, premium amounts, deductibles, and any other relevant details.

Components of an Insurance Policy

To better understand the structure of an insurance policy, let's explore its key components:

Declarations

The declarations section of an insurance policy provides essential information about the insured, such as their name, address, policy number, and other identifying details. It also includes the effective date of the policy and any specific instructions or requests made by the insured.

Insuring Agreement

The insuring agreement is the heart of the insurance policy. It outlines the risks or perils covered by the insurance policy and the extent of that coverage. This section defines the obligations of the insurer and specifies the circumstances under which the insured can make a claim.

Exclusions and Limitations

Insurance policies often include exclusions and limitations that clarify what is not covered under the policy. These exclusions are typically specified to avoid ambiguity and prevent the insured from claiming for risks that fall outside the intended scope of coverage.

Conditions

The conditions section of an insurance policy sets forth the responsibilities and obligations of both the insurer and the insured. It includes provisions regarding premium payment, cancellation, policy renewal, claims procedures, and other contractual requirements.

Importance of an Insurance Policy

An insurance policy is of utmost importance to both the insurer and the insured. For the insured, it provides peace of mind by clearly defining the coverage and benefits they are entitled to in the event of a loss. It also helps in understanding the responsibilities and obligations associated with the insurance agreement. For the insurer, the insurance policy serves as a legal document that establishes their liability and obligations to the insured.

Definition of Insurance Contract

While an insurance policy represents the written documentation of the insurance agreement, an insurance contract refers to the broader legal relationship between the insurer and the insured. The insurance contract encompasses the entire agreement, including the policy, any endorsements or riders, and any other associated documents.

Elements of an Insurance Contract

To be legally enforceable, an insurance contract must fulfill certain requirements. Let's explore the essential elements of an insurance contract:

Offer and Acceptance

Like any other contract, an insurance contract requires an offer and acceptance. The insurer makes an offer through the issuance of the insurance policy, and the insured accepts the offer by paying the premium and complying with the terms and conditions.

Consideration

Consideration refers to the exchange of something of value between the insurer and the insured. In the case of an insurance contract, the insured provides consideration in the form of premium payments, while the insurer provides coverage in return.

Legal Capacity

Both parties involved in the insurance contract must have the legal capacity to enter into a contract. This means they must be of legal age and mentally competent.

Legal Purpose

The insurance contract must have a legal purpose. It cannot involve illegal activities or provide coverage for unlawful actions.

Key Differences between an Insurance Policy and an Insurance Contract

While an insurance policy and an insurance contract are closely related, there are several key differences to consider:

Nature

An insurance policy refers to the specific written document that outlines the terms and conditions of the coverage. On the other hand, an insurance contract encompasses the broader legal relationship between the insurer and the insured.

Binding Effect

The insurance policy becomes effective once it is issued and accepted by the insured. However, the insurance contract is binding from the moment the offer is accepted, even if the policy document itself is not immediately available.

Mutuality

An insurance policy is a unilateral contract, meaning it is an agreement in which only the insurer makes legally enforceable promises. However, an insurance contract is a bilateral contract, where both parties make promises and have enforceable rights and obligations.

Level of Detail

An insurance policy is typically more detailed and specific compared to an insurance contract. The policy outlines the coverage, exclusions, conditions, and other relevant details. The contract, on the other hand, covers the broader legal relationship and may reference the policy for specific terms.

Role of Insurance Agents and Brokers

Insurance agents and brokers play a crucial role in facilitating the insurance process. They act as intermediaries between the insurer and the insured, helping individuals and businesses understand their insurance needs, choose appropriate coverage, and navigate the complexities of insurance policies and contracts.

Conclusion

In conclusion, while an insurance policy and an insurance contract are interconnected, they have distinct characteristics. An insurance policy represents the written documentation of the insurance agreement, outlining the specific terms and conditions of coverage. On the other hand, an insurance contract encompasses the broader legal relationship between the insurer and the insured. Understanding these differences is crucial for individuals and businesses to ensure they have the necessary coverage and legal protection.

FAQs

Can an insurance contract exist without a written policy?

No, an insurance contract typically requires a written policy to serve as evidence of the agreement between the insurer and the insured.

Is an insurance contract enforceable in a court of law?

Yes, an insurance contract is a legally binding agreement and can be enforced in a court of law if the terms and conditions are not upheld.

Can the terms of an insurance policy be modified during the contract period?

In some cases, insurance policies may be modified through endorsements or riders. However, any modifications must be agreed upon by both parties and documented in writing.

What happens if an insurance policy is canceled?

If an insurance policy is canceled, the coverage provided under the policy will no longer be in effect. The insurer may provide a refund of the premium paid, subject to any applicable terms and conditions.

Are insurance policies and contracts the same worldwide?

While the fundamental principles of insurance apply globally, specific regulations and practices may vary from one jurisdiction to another. Insurance policies and contracts can have variations depending on the legal framework and local requirements.

Insurance Policy vs Insurance Contract: Understanding the Difference

Learn the difference between an insurance policy and an insurance contract. Get insights on coverage, terms, and legal aspects.

thepolicypal.com

 

[Ollonii]

Thanks. Very helpful. I have actually read both policies and one contract. The other contract I only have in summarized form although I've requested the full contract. But my contracts and policies are not what I intended to ask about.

I'm still curious about the simplified contract I mentioned above: "if A happens, I will do B", etc. I can't see how the above document addresses that example.

 

[Ollonii]

Never mind. I'll read up on Contract Law and see if I can find any cases in my Law School library with similar conceptual questions.

 

[cbg]

Every insurance plan has included a section how it will coordinate benefits with another carrier. This will also determine which plan is primary and which is secondary. The insured does not get to choose.

Neither plan has any obligation to pay anything that is not determined by that coordination of benefits clause.