What Every Michigan Driver Should Know About the New No-Fault Insurance Law
June 22, 2020
For decades, Michigan drivers have paid the highest insurance rates in the country, especially within the City of Detroit. These steep premiums are mostly attributable to the unlimited Personal Injury Protection (PIP) coverage that all vehicle owners were required to purchase. However, the new Michigan No-Fault law creates important changes for you and your auto insurance.
In an attempt to offer lower-cost options to motorists, the Michigan legislature made sweeping changes to the No-Fault insurance law in 2019.
As a result, starting after July 1, 2020, Michigan motorists will be able to choose lesser amounts of medical coverage with corresponding reductions in policy rates.
The new law includes several other measures, such as increasing the minimum required liability coverage for non-economic damages such as pain and suffering. Notably, the coverage is no longer limited to non-economic damages; it now includes economic damages associated with the PIP medical coverage the injured party has chosen. Specifically, excess medical bills and liens from health insurance companies, including Medicare and Medicaid.
While many of the reforms are effective after July 1, 2020, some of the changes took effect June 11, 2019. Here is an overview of everything you should know about the new Michigan No-Fault law and how it will influence your auto insurance options.
What are Personal Injury Protection (PIP) benefits?
To understand the significance of the new law, let’s take a look at how PIP medical coverage works.
Prior to July, 2020, Michigan vehicle owners were required to purchase a No-Fault policy that included unlimited lifetime Personal Injury Protection (PIP) benefits.
These benefits covered unlimited “necessary and reasonable” medical and related services, including attendant care, for vehicle owners and their spouses and resident relatives. These benefits continued as long as the victim required the services, for life if necessary.
In addition, PIP benefits also pay 85% of lost wages and up to $20/day for replacement services such as housework, meal preparation or yard work for up to three years.
And, if a victim died as a result of an auto accident, the dependents of the deceased may receive survivors’ loss benefits.
These expenses are covered by the vehicle owner’s insurance company, regardless of who was at fault for the accident.
What are the new options for Personal Injury Protection (PIP) coverage?
For the first time, effective after July 1, 2020, vehicle owners can choose the amount of Personal Injury Protection (PIP) coverage they wish to carry. Options range from the original unlimited medical coverage to a complete opt-out for those with certain health insurance plans.
The six options under the new Michigan No-Fault insurance law are as follows:
Option 1 – Unlimited PIP Coverage (same as current law)
This option provides the most complete coverage. It pays for all allowable medical and related expenses for an injured person’s care, treatment, recovery and rehabilitation. This is the same level of coverage provided by all Michigan No-Fault policies prior to July, 2020.
Option 2 – Limited PIP Coverage of $500,000
If you choose this coverage limit, your insurance company will cover up to $500,000 per person per accident in PIP benefits for medical and related expenses.
Option 3 – Limited PIP Coverage of $250,000
This coverage option will limit PIP coverage to $250,000 per person per accident for medical and related expenses.
Option 4 – Limited PIP Medical Coverage of $250,000 with Exclusions
This option allows policy holders who choose limited coverage of $250,000 to opt out of PIP medical coverage for themselves, a spouse or resident relative. The excluded person(s) must have their own qualified health care coverage – other than Medicare or Medicaid – that covers motor vehicle accident injuries. Anyone who is excluded will have no PIP medical coverage under the No-Fault policy.
Option 5 – Limited PIP Coverage of $50,000 – for Medicaid Recipients
This option, which caps PIP benefits at $50,000 per person per accident, is only available to applicants or named insureds who are enrolled in Medicaid. In addition, the policy holder’s spouse and resident relatives must have their own qualified health care coverage that covers auto accident injuries. This coverage can be provided by Medicaid, private insurance or a separate No-Fault policy that includes PIP medical coverage.
Option 6 – No PIP Medical Coverage
This option is only available to applicants or named insureds who are covered under Medicare Parts A and B. In addition, the policy holder’s spouse and any resident relatives covered by the policy must have their own qualified health care coverage that covers auto accident injuries. This includes private insurance or another auto policy with PIP medical coverage.
What are the pros and cons of choosing less Personal Injury Protection (PIP) medical coverage?
The most obvious advantage of selecting an option with less Personal Injury Protection (PIP) medical coverage is a lower premium rate. However, it’s important to know that your insurance company will not pay medical costs that exceed your policy limits. Therefore, if you elect one of the limited PIP medical coverage options, you could be faced with devastating medical bills in the event of a catastrophic injury.
Moreover, there are certain medical expenses that are covered by PIP medical coverage that are not covered by most health insurance plans. For example, PIP medical coverage includes the cost of home and/or vehicle modifications required due to accident related injuries.
What are the new Michigan No-Fault law requirements for liability coverage?
As referenced above, the third party claim is no longer limited to non-economic damages. The bodily injury claims now include economic damages which, for Michigan residents, do not require a threshold injury.
No-Fault policies also provide for “third-party,” or non-economic benefits such as pain and suffering. To the extent the injured party has reduced or opted out of PIP medical coverage, the third party claim is now an economic claim as well. This compensation is usually paid by the at-fault driver or their insurance company.
Effective after July 1, 2020, these compensation minimums increase from up to $20,000 per person and up to $40,000 per accident to up to $50,000 per person and $100,000 per accident. However, the new policy will show a default liability coverage amount of $250,000 per person and $500,000 per accident. Vehicle owners will be able to select other amounts as long as their coverage meets the new $50,000/$100,000 minimums.
However, motorists should be aware that their insurance company will not pay more than the liability coverage limit they have selected. Therefore, an at-fault driver who is found liable for damages greater than the policy limit may have to use personal assets to make up the difference.
Is there a new “threshold injury” standard for pain and suffering compensation?
“Threshold injury” refers to the degree of harm a victim must suffer in order to sue for non-economic damages such as pain and suffering. The No-Fault law defines this as “death, serious impairment of a body function or permanent serious disfigurement.” While the basic definition remains the same, the definition of “serious impairment of a body function” was changed.
Under the new law impairment must be noticeable to an objective observer and severe enough to affect the person’s general ability to lead their normal life. There is no requirement for how long the impairment has to last. Therefore, someone who suffers a temporary injury serious enough to impair body function and alter their lifestyle may be able to collect third-party damages.
Will my insurance company be able to use my zip code to determine premiums?
Under the old law, insurers were allowed to use non-driving factors such as zip codes to determine premium rates. As a result, many motorists, such as Detroit residents, paid considerably higher rates than suburbanites with comparable driving records.
Additionally, insurance companies used other factors unrelated to driving to set premium rates. These included gender, occupation, home ownership, education and credit scores. Under the new system, insurance companies are not allowed to use these kinds of non-driving factors to establish rates. However, insurers are still permitted to consider a policy holder’s age when determining rates.
What are the new No-Fault laws for out-of-state residents injured in Michigan?
Previously, out-of-state residents could claim PIP benefits if their auto insurance company had certification to write policies in Michigan.
Effective June 11, 2019, non-Michigan residents who are injured in Michigan are not eligible for PIP (Personal Injury Protection) benefits unless their vehicle is both registered and insured in Michigan.
Furthermore, if the out-of-state resident is found to be more than 50% at fault for the accident, they cannot sue for third-party damages. Additionally, out-of-state residents suing for economic damages must establish a threshold injury (whereas Michigan residents do not).
Maximum limit for mini tort claims increases from $1,000 to $3,000
Mini tort claims are used to cover vehicle repair costs or deductibles for drivers who do not have full collision coverage. These expenses are paid by the insurance company of the at-fault driver.
Drivers may only recover damages not covered by their own insurance policies.
In addition, uninsured drivers cannot claim compensation under the mini tort law.
The new law, which takes effect after July 1, 2020, raises the maximum recovery amount from $1,000 to $3,000.
Changes in the “one-year back” rule
Under the old law, accident victims had one year from the date of service to sue an insurance company for unpaid medical expenses. If the injured person failed to meet this deadline, the insurance company was not obliged to pay these costs. As a result, patients were often billed for these unpaid balances.
Effective June 11, 2019, the one-year time period does not begin until the claim has been processed and the insurance company formally denies payment.
What are the “orders of priority” under the new Michigan No-Fault law in 2020?”
The term “order of priority” refers to the order for determining which party’s insurance company pays for Personal Injury Protection (PIP) benefits after an accident. Typically, an injured party receives PIP benefits from their own auto insurance company or the company that covers their spouse or another resident relative. This has not changed.
What has changed is the order of priority when the injured person is not covered by a No-Fault policy. Under the old law, victims without their own insurance filed claims first against the vehicle owner’s insurance company and then against the vehicle operator’s insurer.
Under the new law, these insurers are no longer responsible for the payment of PIP benefits to uninsured occupants and non-occupants. Instead, anyone who is not covered by a No-Fault policy must turn to the Michigan Assigned Claims Plan (MACP) to cover their accident-related medical costs. This applies to drivers, passengers, bicyclists and pedestrians.
Furthermore, the new law caps PIP benefits paid by the Michigan Assigned Claims Plan at $250,000, with the exception of wage loss and replacement services. These benefits were unlimited under the old system.
Is there a new Michigan No-Fault law for motorcycle accidents?
Motorcycles are not considered “motor vehicles” under Michigan law. Therefore, the rules are different for motorcycle accidents.
The order of priority is the same as it was under the old law. An injured motorcyclist first turns to the insurance company that covers the motor vehicle involved in the accident. If the owner or driver of that vehicle does not have No-Fault insurance, or has a no-fault policy under which they have opted out of PIP medical, the automobile No-Fault policy that covers the owner or operator of the motorcycle will provide PIP benefits. If none of the above is covered by a Michigan No-Fault policy or has a no-fault policy that opts out of PIP medical, up to $250,000 will be paid by the Michigan Assigned Claims Plan (MACP).
Under the old statute, any individual receiving PIP medical benefits was entitled to unlimited coverage. Under the new law, any individual receiving PIP medical from any no-fault policy with limited PIP medical benefits (excluding those that opt out entirely), is bound by the limited PIP medical benefits provided for under the policy.
Are there other changes to the Michigan No-Fault law I should know about?
Some of the other No-Fault reforms include:
- Doctors who perform independent medical exams (IMEs) will have to meet stricter professional requirements.
- A new anti-fraud investigative unit will be created, along with new online resources to help drivers with insurance issues.
- Effective June 11, 2019, if a medical expense is submitted to the insurance company more than 90 days from the date of service, insurance companies will have an additional 60 days, or a total of 90 days (increased from 30 days) before the bill is considered overdue.
Prior to the new Michigan No-Fault law, our law was among the most complex insurance systems in the country. Now, the rules and regulations governing No-Fault are even more bewildering.
That’s why you need a legal team that understands Michigan’s unique No-Fault law inside and out. With our combined decades of experience and track record for winning, our lawyers know what it takes to win the compensation you deserve.
Michigan No-Fault law is complicated, but finding the right lawyer is simple.
Call 1-800-CALL-SAM today for a free, no-obligation remote consultation from the safety of your home.