What Do You Mean It's Not Covered: Co-ordination of Benefits

The state supreme court defined the dispute as one over whether the CMER, as a form of excess insurance, fell under the terms of a coordination of benefits (COB) provision of state law. Under a COB provision, if a policyholder's benefits under more than one policy exceeded his medical expenses, each insurer's liability was determined on a pro rata basis. This permitted an insurer to apportion liability between or among other valid coverage, whether provided by other insurers or the same insurer. However, automobile medical payments were expressly excluded from "other valid coverage." "A COB clause is, essentially, a non-duplication of benefits provision. The primary characteristic of a COB provision is a structure of priority of claims payments enabling insurers to reduce liability and preventing double recovery by an insured," the court wrote. "By contrast, an excess clause provides for the payment of a loss to the extent the loss exceeds other available insurance. An excess insurer becomes liable once the primary insurer's policy limits have been exhausted." The court ruled that the purpose of a catastrophe policy was to provide additional coverage to meet substantial medical expenses not paid by other insurance. Coverage under a catastrophe policy didn't come into effect until after lesser policies were exhausted. "The CMER is more appropriately construed as excess coverage," the court ruled. "The unambiguous terms of the CMER provide for payment of medical expenses which exceed the sum of benefits paid by other medical coverage and $1,500 in out-of-pocket medical expenses not covered by other insurance." Since CMER provided excess coverage, it didn't fall under the set-off proscription of Nevada law. So, State Farm properly denied Cramer additional coverage under the CMER.