In Security Health Plan v. American Family (2017AP1914), the Court of Appeals District IV concluded that American Family’s automobile insurance policies’ medical expense coverage was not a “plan” under Wis. Admin. Code § INS 3.40. Therefore, American Family did not owe Security reimbursement for medical expenses of 42 claimants insured by both entities.

Wis. Admin. Code § INS 3.40 states that, if an insured holds two “plans” with medical expenses coverage, the primary plan would pay the insured’s medical expenses first; the secondary plan would pay after the primary plan limits are exhausted. The issue before the court was whether the medical expense coverage in the American Family policies constituted a “plan” invoking this coordination of coverage.

The court held that the American Family medical expense coverage was not a “plan” as defined in the insurance administrative code because the medical expense coverage is not “required by law” (Wis. Admin. Code § INS Appendix A, II(C)(ii)). While Wis. Stat. § 632.32(4)(a)(2) requires automobile policies to include medical expense coverage, an exception in the subsequent § 632.32(4)(bc) allows insureds to reject that coverage. Therefore, medical expenses coverage is not required by law.

Another definition of “plan” in the insurance administrative code states that, for traditional automobile insurance contracts like American Family’s, only group medical benefits contracts are included as “plans” (Wis. Admin. Code § INS 3.40(6)(f)). The court rejected Security’s argument that American Family’s medical benefits coverage policies were “‘no-fault’ contracts” included in the definition.

Because American Family’s medical expense coverage is not a “plan,” the court ruled American Family was excluded from the coordination of coverage requirements in Wis. Admin. Code § INS 3.40 and did not owe reimbursement to Security for the claimants’ medical expenses.