An Explanation of the Differences Between First Party Claims and Third Party Claims

Here is an basic explanation of first party claims vs. third party claims for bodily injury or personal injury. Occasionally, insurance policy holders who have been injured in accidents that they were at fault for call their insurance company or their attorney to ask: how much money will I get for my pain and suffering? The answer is usually; nothing. Here is why.

A first party claim is made by a policy holder to his or her own insurance company. These claims are contractual; meaning that they arise out of a contract (the insurance policy) between the insurance company and the policy holder. They may be claims again the policy-holder’s own Medical Payment coverage or Personal Injury Protection coverage, or the like. These policy provisions pay up to the policy limits, which are usually low, for incurred medical expenses and/or lost wages due to injuries caused by the accident. They do not pay additional monies for pain and suffering. Legal speak: one cannot be liable to oneself. One of the more obvious common-sense reasons behind this is that if we were able to make pain and suffering claims against our own policies, then some of us with insurance policies might veer off the road to hit trees whenever we needed some extra cash.

A third party claim is made by an injured person against the insurance policy that covers the at-fault person. Usually, there is no contract between the insurance company and the injured party in this case. A third-party claimant may recover medical expenses, lost wages and additional monies for pain and suffering or inconvenience. This is also called a liability claim because someone else is liable (responsible) at least in part for the injured person’s damages. (Liability coverage policy limits tend to be much higher than first party coverages.)

Liability is another word for responsibility or obligation: the at-fault driver (or their insurance carrier) has an obligation to pay for the injured party’s claim. Not only does the ability to recover compensation for pain, suffering and/or inconvenience presumably make things right with the innocent party, but there is hopefully some punishment or deterrent to the at-fault party.

An injured person might in some cases make both a first-party and a third-party claim against the same insurance company. An example of this would be a person who is injured while riding in their own vehicle as a passenger. In that instance, however, both the first party and third party claims should be handled on their own merit.

This article is written for informational purposes and is not intended to take the place of competent local legal counsel.

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