Consumers : Examine Fine Print in the ‘Other Insurance’ Clause

Question: I’ve appreciated your Consumer Views column for its real help to so many readers, so perhaps you can give me some understanding of the following:

Last February, my 31-year-old daughter was crossing the street near her office and reached the center divider in the crosswalk when she was hit by an uninsured driver. She was severely injured, spent 18 days in the hospital and has had many months of physical therapy. She had two operations and is facing a third.

The group hospitalization she carried covered some of the expense, but there were many bills she had to pay. Her auto insurance, after nine months, has finally paid the limit of her policy for an uninsured motorist.

Now, the medical insurance company wants to be reimbursed for the amount she received from the auto insurance company, and the auto insurance company has requested a release that states if she receives any further recompense that she will return what they have paid out.

She suffered long pain, faces the third operation in the spring and is devastated to learn that she will not have anything to make up for it all. Her left leg was broken in nine places (as well as her kneecap), and she has eight metal plates and rods in it. There will be problems with her leg as she grows older, she has been told.

Do you have any information that might help her? It does seem that all those premiums we pay, year after year, mean nothing when we need their protection.--R.D.T.

Answer: It defies logic to believe that any amount of money would really compensate your daughter for what she’s been through and is continuing to experience. A cool $100,000 for each of those eight metal plates wouldn’t really do it.

Unfortunately, the situation here is woefully commonplace. Robert Hunter, president of the Alexandria, Va.-based National Insurance Consumer Organization, referred to it as “program interrelationship,” which he conceded is a rather stuffy phrase to describe a situation in which insurance companies try to limit multiple claims for the same accident.

“In the name of interrelationship of cost,” he added, “we’ve created a Frankenstein under which nobody knows who’s supposed to pay what. As a result, we end up with all sorts of disputes with the little guy in the middle. What we really need, ultimately, is some sort of comprehensive, universal national health insurance.

“In other words, a program,” he continued, “that will take care of the person who’s hurt and then, if there’s somebody at fault, and if there are resources, we’ll sort it all out later. But, of course, that’s not what we’ve got.”

The key to all this is found in every hospitalization and accident policy written, and it’s under the heading called, simply enough, “Other Insurance.”

“What this does,” Hunter explained, “is to spell out who the primary carrier is and what his relationship is to any secondary carrier--who, if anyone, has to be paid back. It can be very complex.”

It’s a problem that also worries the insurance industry itself, according to Kate Breen, San Francisco area manager for the Western Insurance Information Service.

“We know that it’s the source of a lot of misunderstanding and hardship,” Breen said, “which is why we continually urge agents to make absolutely sure that this paragraph covering ‘Other Insurance’ is gone over, word for word, with the buyer of the policy. Hopefully, of course, before the fact.

“There’s supposed to be a mutual understanding between the company and the policyholder, but a lot of the time, unfortunately, that’s not the case.”

At the same time, Breen added, a lot of people “are overinsured; they are buying more coverage than they really need. They may have as many as three similar policies with overlapping coverage, not realizing that one is going to cancel out another. It’s not supposed to be a lottery sort of thing.”

The “program interrelationship” to which NICO’s Hunter referred is the insurance industry’s way of protecting itself from, as Breen put it, “double dipping.” This is a situation in which two or more companies end up paying double, or triple, the costs for relatively minor accidents--which, obviously, is not applicable in your daughter’s case.

So, on the assumption that no one, before the fact, explained to your daughter the meaning of this “Other Insurance” clause in her policy, is there anything she can do after the fact?

“I’d suggest,” Hunter said, “that she, or preferably her lawyer, reread that ‘Other Insurance’ clause very carefully.

“If there are any ambiguities in it, if it turns out to be what I’d call a ‘contract of adhesion’--in other words, the company writes it and you’re stuck with it--then she’s got a good chance of taking it into court and having the court find in her favor.”

Courts, Hunter added, generally tend to take a liberal position on these “Other Insurance” clauses. That is to say, if a reasonable person reads such a clause, and if it raises reasonable expectations that the two insurance companies involved are reimbursing each other at the policyholder’s expense, then she’s got a pretty good chance of a decision in her favor.

“I’ve seen hundreds of people who were about to give up on getting full compensation until I told them about the courts’ attitudes toward such ambiguities,” Hunter said.

So, have your daughter and her lawyer go over that key clause in the policy with a fine-tooth comb. It may not yet be the end of the line.

Campbell cannot answer mail personally but will respond in this column to consumer questions of general interest. Write to Consumer VIEWS, You section, The Times, Times Mirror Square, Los Angeles 90053.