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Insurance companies claiming that personal injury protection benefits have been exhausted may still be obligated to pay certain claims. Insurance companies commonly rely on the exhaustion rule to deny outstanding claims for PIP. Once an insurance company has paid all valid claims for PIP, the benefits are then exhausted and an insurer is no longer obligated to pay any further claims or litigate those claims so long as bad faith is not alleged.

It is important for medical providers and patients to understand that once an insurer has claimed that benefits have been exhausted, there may still be reason for litigation to ensue. One reason is that the insurer might have made a gratuitous payment. A gratuitous payment is a payment made by the insurer made a payment to a provider who sent in their bills late. When a provider submits bills late, the insurer would be wise to raise exhaustion of benefits as the reason for not paying those bills. It is not uncommon, however, for insurance companies to pay late bills. These gratuitous payments effectively prevent the insurance company to claim that benefits have been exhausted.

A second reason that insurance companies may be raising the exhaustion defense improperly involves emergency services and care that the insured party received. For PIP, Florida Law requires that insurers hold $5,000.00 aside for payment of emergency services and care. This portion of the benefits is to be used to reimburse providers of emergency services and cannot be paid out for any other reason until those providers have been paid. If any portion of the deductible is applied to the emergency services provided, then the insurer may not properly raise exhaustion of benefits as a defense to paying claims.

The case of Emergency Physicians of Central Florida, LLP v. Progressive, illustrates the scenario in which an insurer improperly claimed that benefits had been exhausted due to an emergency care provider not properly being paid. In that case, Progressive applied the bill from Emergency Physicians to the remaining deductible on the policy. The court ruled that exhaustion of benefits is not a defense to a claim by a medical provider of emergency care when the emergency care provider submits the bill on time to the insurer who then applies it to the PIP deductible. IN essence, the court held that in order to ensure that emergency care providers are able to get paid for their services, Progressive could not have exhausted benefits by making payments to non-emergency care providers. The courts holding requires that the deductible be applied to non-emergency services provided and that once that deductible is met, the emergency care providers that have rendered services are entitled to payment on their bills that have been submitted.

Given this holding by the 9th circuit, it is important for emergency care providers to submit their bills timely per Florida Statues to be protected from application of the deductible. Assuming that their treatment is reasonable, related and necessary, exhaustion will not be available as a valid defense where the insurer has applied an emergency care providers bills to the deductible. When the exhaustion of benefits defense is raised by an insurance provider, it is important for emergency care providers to consult an attorney about whether or not that claim is valid.