<i>Hoffman v. Travelers</i>

For decades, courts throughout the country interpreting the “reasonable expenses incurred” language in automobile MedPay clauses have distinguished between payments made on an insured's behalf by a private healthcare insurer, and medical services that an insured receives free of charge. The former are deemed to have been “incurred” and recoverable under a MedPay policy because the insured is legally liable for them even though a collateral source made the payment. The latter do not equate to “incurred expenses” because the insured neither paid the expenses nor became legally liable to pay them. The Superior Court of New Jersey detailed the difference in its 1977 decision in Sanner v. Government Employees Insurance Company, in which a National Guardsman sought coverage from his insurer for medical bills he claimed he incurred after receiving free medical treatment in a veterans facility:

[T]here exists a valid distinction between “benefits received by an injured person pursuant to some private medical payment insurance purchased by him and benefits received [from the Federal Government]. Under a private policy the insured becomes liable for, and therefore incurs, the expenses which he must pay if his private carrier for some reason declines to do so; as a serviceman receiving medical treatment to which he is absolutely entitled with no obligation of reimbursement, he does not become liable for the reasonable value of the treatment. Hence, under the private policy, medical expenses are incurred by the insured; when treatment is afforded by the Federal Government with no obligation to reimburse, such expenses are not incurred.