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Health & Fitness

Wisconsin Supreme Court Rules for Crash Victim

Wisconsin Supreme Court determines underinsured motorist insurance must pay victim's entire medical bill.

The case of Orlowski v. State Farm Mut. Auto. Ins. Co. began with a tragic car accident. The at-fault driver’s insurance was insufficient to cover all of Orlowski’s damages, so she filed an underinsured motorist claim with her own car insurance company.

Pursuant to the insurance policy, an arbitration panel was called to determine what Orlowski was owed. The panel awarded her $11,500 for medical payments, $2,000 for out-of-pocket expenses, $2,325 for lost wages and $42,500 for past and future pain and suffering. What the panel didn’t award her was the $61,500 that the hospital and other medical providers had charged her, but written off under the insurance contract.

How does that work? Well, the amount a hospital charges you is almost never what they’re actually paid. They might charge you $100,000, but under the deals they have worked out with the health insurance companies, the insurance company will actually pay a reduced rate — typically 20 to 30 percent less for a private insurance company and literally pennies on the dollar for Medicaid and Medicare. So, your health insurance company pays the hospital $70,000, you might pay a $5,000 deductible, and the hospital writes off the remaining $25,000.

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Now when the law gets involved, it’s a little more complex. There’s a rule called the “collateral source rule” meaning that a negligent driver (or their insurance) has to pay you the full amount of the hospital bill, not the reduced amount. The idea is that bad guy shouldn’t benefit from the deals the hospital works out.

The question in this case is, does that rule apply when dealing with your own insurance company for underinsured motorist coverage instead of the other driver’s insurance company?  The Supreme Court unanimously decided yes.  So, Orlowski’s insurer will have to pay an additional $61,500 on her claim.

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