Medical Expense (Med Pay)

Overview

Medical Expense coverage, commonly called "Med Pay," is a no-fault provision in a Commercial General Liability (CGL) policy that pays for the medical costs of a person injured on the insured's premises or due to the insured's operations. Unlike standard liability coverage, Med Pay does not require the insured to be legally at fault — it pays regardless of who caused the injury, up to a specified per-person limit.

How It Works

Med Pay coverage is designed to be a goodwill provision that handles minor injuries quickly, preventing them from escalating into costly liability lawsuits. When a third party is injured, the insured (or the insurer) can offer to pay the person's medical bills up to the Med Pay limit without any admission of liability.

Key characteristics of Med Pay:

• No-fault: Payment is made regardless of whether the insured was negligent.
• Per-person limit: The limit applies to each injured person individually, not per occurrence. Common limits are $5,000 or $10,000 per person.
• Voluntary: The insured can choose to offer Med Pay, but neither the insured nor the injured party is obligated to use it.
• Time limit: Medical expenses must be incurred within a specified period from the date of the accident — typically one year.
• Exclusions: Med Pay does not cover the insured's own employees (that is workers' compensation territory), persons on the premises for athletic activities in some cases, or intentional injuries.

Med Pay claims are paid from a separate limit that does not erode the Each Occurrence or General Aggregate limits. The per-person Med Pay limit appears on the ACORD 25 certificate in the General Liability section.

Compliance Relevance

Med Pay is a standard feature of CGL policies and appears on virtually every certificate. Its compliance implications include:

• Standard limits: Most contracts do not specify a Med Pay requirement because the limits are relatively low ($5,000 to $10,000). However, some lease agreements or vendor contracts may specify a minimum.
• Certificate review: The Med Pay limit on the ACORD 25 should be verified for completeness. A $0 or blank Med Pay field may indicate the coverage was excluded, which could be a concern if the contract requires it.
• Claim prevention value: While the dollar amounts are small, Med Pay can prevent larger claims. A building visitor who receives prompt payment for a $3,000 emergency room bill is less likely to pursue a six-figure lawsuit.
• Not a substitute for liability coverage: Med Pay should never be confused with the liability coverage limits. It is supplemental and limited to medical costs only.

Example

A visitor trips over uneven pavement in a commercial building's parking lot and sprains their ankle. The emergency room bill is $4,500. The property manager's CGL policy has a $5,000 Med Pay limit. Rather than waiting for a liability investigation, the insurer offers to pay the medical bill under Med Pay. The visitor accepts, the bill is paid promptly, and no lawsuit is filed — saving both parties the cost and time of litigation.