PIP Limits, Wage Loss, and the Tort Threshold
On a rainy October night, a Minnesota insured was driving home from work when another driver ran a red light and struck the driver's side. The insured's policy has $20,000 in medical expense benefits and $20,000 in wage-loss benefits, with no coordination-of-benefits election. The insured's treating clinic billed $27,500; her health plan paid $12,000 and the provider wrote off $3,000. She missed 10 weeks of work at a gross salary of $1,400 per week. Her employer paid $5,000 in sick leave, which she was not required to repay. The other driver carries Minnesota minimum liability limits of $30,000 per person/$60,000 per accident. The insured's medical records show a cervical strain and two months of physical therapy; she has not yet returned to work. She asks the adjuster why PIP does not pay the full $27,500 and whether she can sue the other driver. The claim is 30 days old; the adjuster has received bills but no wage-loss verification.
1. Calculate the medical and wage-loss benefits payable, and explain coordination and offsets.
Read the worked answer
Medical: the policy has a $20,000 medical-expense limit. The clinic billed $27,500; the health plan paid $12,000, and the provider wrote off $3,000, leaving $12,500 unpaid. Because the policy has no coordination election, PIP is primary, but the insured cannot recover the same expense twice. The adjuster should pay the unpaid balance, subject to any copay or deductible, and determine whether the health plan has a subrogation right. Total PIP medical payments cannot exceed $20,000; here they would be $12,500, leaving $7,500 available for future treatment. If the health plan paid more than the remaining balance, PIP would reimburse the plan or insured only to prevent double recovery. Wage loss: gross lost wages are 10 × $1,400 = $14,000. The policy benefit is 85% of lost income, or $11,900, subject to the $20,000 limit. The $5,000 sick leave was not repayable, so it reduced her actual income loss to $9,000; 85% of $9,000 = $7,650. If the sick leave must be repaid, the offset would not apply. The adjuster needs employer verification and the sick-leave policy before paying.
2. Can the insured pursue a third-party claim against the other driver? Explain the Minnesota no-fault tort threshold and the effect of the liability limits.
Read the worked answer
The tort threshold is met when medical expenses exceed $4,000 or the injury causes 60 days of disability. Her $27,500 in medical bills clearly exceeds $4,000, so she may pursue a third-party liability claim against the other driver for noneconomic damages and other damages not paid by PIP. The other driver has $30,000 per-person liability coverage. Her claim may include pain and suffering, future medical expenses, and lost earnings above PIP, but PIP benefits are collateral and may be subject to reimbursement. The adjuster should also evaluate underinsured motorist coverage if her damages exceed the tortfeasor's limits. The fact that she has not returned to work may support a disability claim, but the medical records must support it. Do not tell her she cannot sue just because PIP paid; explain the threshold and the liability limits.
3. What documentation should the adjuster require before paying wage loss and medical benefits?
Read the worked answer
Required documentation includes medical bills, the health-plan explanation of benefits, the provider write-off statement, an employer wage statement, the sick-leave policy, tax returns or pay stubs, and medical records supporting disability. The adjuster should obtain a signed authorization and wage-loss form, verify the 10-week absence, and confirm whether the sick leave is repayable. A recorded statement can clarify return-to-work status. The file should document why medical payments were limited and how the wage-loss offset was calculated. If the insured disputes the offset, explain the policy definition of 'loss of income' and provide a written breakdown.