In a case from the South Carolina Supreme Court it was determined that an auto-insurer cannot reduce their obligation to pay no-fault personal injury protection (PIP) insurance benefits to an insured who has already received workers’ comp benefits to cover their medical expenses after a crash.

Wadette Cothran was injured in an automobile accident which was within the scope of her employment so her insurer’s workers’ comp carrier paid for her medical expenses, around $40,000. She and her husband had auto insurance with State Farm Mutual Automobile Insurance Company, their policy provided PIP coverage with a $5,000 limit.

State Farm refused to pay her PIP benefits for medical expenses based on a “Coordination” portion of the policy which states that the PIP benefits apply as “excess over any benefits recovered under workers’ compensation law”.

They filed a suit against State Farm alleging breach of contract and bad faith refusal to pay insurance benefits. The trial court determined the “Coordination” provision violated South Carolina Code 38-77-144, which states “if an insurer sells no-fault insurance coverage providing personal injury protection, medical payment coverage, or economic loss coverage, the coverage shall not be assigned or surrogated and is not subject to a setoff”. The state Supreme Court upheld that decision.

The state Supreme Court found that section 38-77-144 of the South Carolina Code prohibited State Farm from reducing PIP benefits. They said, “when an insurer seeks to reduce its obligation to pay benefits based on a third party’s previous payment for the same claim, it is a setoff.” The point of 38-77-144 was to prevent an insurance company from reducing PIP they are obligated to pay because the insurer received a third-party payment. If the “Coordination” provision has this effect, it is a setoff, which violates that section. They reinstated summary judgment in the Cothran’s favor.

Read more here and read the case here.