Personal Injury Protection (PIP) is a key part of auto insurance coverage in some states, offering financial protection for medical costs and other related expenses after an accident, regardless of who is at fault. If you’re involved in medical or legal funding, understanding how PIP works is crucial since it directly affects the value of claims.

What Is Personal Injury Protection (PIP)?

PIP, also known as No-Fault Insurance, ensures that medical bills, lost wages, and other expenses are covered by your own insurance company after an accident. It applies even if you are not the person at fault. This coverage is required in some states, but it may be optional in others.

Here are a few terms that are often used interchangeably with PIP:

• PIP (Personal Injury Protection): A preset or chosen coverage amount provided by the insurance company.
• NF (No-Fault): A regulation that requires coverage for medical expenses regardless of fault.
• Med Pay: Alternative coverage that may supplement or replace PIP.

You can find more information about PIP and no-fault insurance here and here.

What Does PIP Cover?

PIP helps cover the following expenses:

• Medical bills related to the accident
• Lost wages due to injuries
• Substitute services (like household help)
• Funeral expenses
• Replacement benefits

What Is Excluded from PIP?

PIP doesn’t cover:

• Vehicle damage
• Property damage
• Medical expenses beyond your coverage limit
• Compensation for pain and suffering (in most cases)

Why Was PIP Created?

PIP was designed to:

• Reduce the number of minor lawsuits related to accidents
• Speed up the payment of personal injury claims
• Lower legal costs associated with personal injury cases

In states with no-fault laws, certain thresholds must be met before a person can sue for additional damages (like pain and suffering). These thresholds can be based on the severity of the injury or the total cost of medical care.

More details on the purpose and benefits of PIP can be found here.

Key Types of Damages in Personal Injury Cases

There are two main types of damages to consider in personal injury cases:

1. Special Damages: These are measurable costs like medical bills or lost wages.
2. General Damages: These are subjective and aim to compensate for pain and suffering.

In states with PIP coverage, special damages (like medical bills) are often covered by the policy, which can limit the opportunity for additional compensation unless certain injury thresholds are met.

Important Questions for Underwriting

If you are evaluating a claim for funding, here are some PIP-related questions to consider:

1. Is the claim in a state that requires PIP?
2. Does the plaintiff have PIP coverage? (It may be optional in some states.)
3. How much coverage is available?
4. Has the PIP coverage been exhausted?
5. Are there any existing medical liens, and how much are they?
6. Is the plaintiff still receiving medical treatment, and will those liens grow?
7. How does this information affect the value of the case?

How to Find State-Specific PIP Information

PIP laws can vary greatly from state to state. A quick online search (e.g., “Utah PIP legislation”) can help you find the specific laws that apply to your jurisdiction.

Final Thoughts

Understanding PIP is important for anyone involved in personal injury cases. It can add complexity to underwriting, and the rules can be confusing since they differ by state. If you need more in-depth information, we’ve created a PIP 101 PowerPoint to help you get started.

Download the PIP 101 PowerPoint here.