New No-Fault Law
NEW MICHIGAN NO-FAULT LAW: WHAT EVERY DRIVER NEEDS TO KNOW
To lower notoriously high insurance premiums for Michigan drivers, the Michigan legislature made sweeping changes to the Michigan No-Fault insurance law in 2019. These reforms provide lower-cost options for Personal Injury Protection (PIP) medical coverage. They also raise the minimum liability limits for bodily injury claims for non-economic damages such as pain and suffering as well as excess economic damages that may now arise due to your choice of limited PIP medical coverage
Although certain changes took effect June 11, 2019, many of the reforms are effective after July 1, 2020. There are additional provisions of the law that will take effect in 2021.
Here is an overview of what you should know about the new No-Fault insurance law.
Important Changes in Personal Injury Protection (PIP) coverage
One of the most noteworthy changes in the new No-Fault law is that vehicle owners will be able to choose from one of six levels of Personal Injury Protection (PIP) medical coverage.
To understand why this is significant, it helps to understand how PIP benefits worked prior to the reforms.
Before July 1, 2020, every Michigan vehicle owner was required to purchase a No-Fault policy that included unlimited lifetime Personal Injury Protection (PIP) coverage.
These benefits paid for “reasonably necessary” medical and related services for vehicle owners and their spouses and resident relatives. These medical and related services include attendant care, home and vehicle modifications, medical mileage to and from doctor appointments and case management services. 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.
If a victim died as a result of an auto accident, the dependents of the deceased may receive survivors’ loss benefits.
Generally, if you are injured in an accident, you turn to your own insurance company for payment of these expenses, regardless of who was at fault for the accident.
In addition, Michigan no-fault insurance policies also include Personal Property Protection (PPI) benefits. This coverage typically pays up to $1,000,000 for damage to other people’s property or legally parked vehicles.
New Personal Injury Protection (PIP) Medical Coverage Options
Under the new law, motorists can choose from one of six Personal Injury Protection (PIP) coverage options. While less PIP coverage may be less expensive, it’s important to know that insurance companies will no longer pay unlimited lifetime benefits; they will only pay those benefits up to the limit of coverage purchased. Therefore, a policy holder who suffers a catastrophic injury and has limited coverage may be faced with prohibitively high medical bills.
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 1, 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 medical 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. Anyone in the household who is not eligible for the opt out and is specifically identified in the policy, will have up to $250,000 per accident for medical and related expenses.
Option 5 – Limited PIP Coverage of $50,000 – for Medicaid Recipients
This option, which caps PIP medical and related expense 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 with an annual deductible of less than $6,000 or another auto policy with PIP medical coverage.
Minimum liability limits increase for non-economic damages such as “pain and suffering”
No-Fault policies also provide for “third-party,” or non-economic benefits such as pain and suffering. This compensation is usually paid by the at-fault driver or their insurance company. Non-economic benefits may also include compensation for bodily injury, including death.
Effective after July 1, 2020, minimum liability limits for No-Fault policies will increase from $20,000 per person and $40,000 per accident to default coverage of $250,000 per person and $500,000 per accident. However, you will be able to select greater or lesser coverage amounts as long as you don’t go below the new mandatory minimum of $50,000/$100,000. Additionally, after July 1, 2020, you will now be able to include excess economic damages in your “third party” claim. These damages may consist of excess medical expenses not covered as a result of your PIP medical coverage choice.
You should be aware that your insurance company will not pay more than the policy limit you select. 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. And, if someone is seriously injured, the at-fault driver could end up with a devastating financial obligation.
New definition of a threshold injury for pain and suffering compensation
To sue an at-fault driver or their insurance company for non-economic damages such as pain and suffering, the victim must suffer “death, serious impairment of a body function or permanent serious disfigurement.” This is also referred to as a “threshold injury.”
The new statute amended the definition of “serious impairment of a body function.”
Under the new law, the impairment must be noticeable to an objective observer and 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.
Additionally, under the new law, Michigan residents seeking economic damages (i.e. excess medical expenses) after July 1,2020, do not have to meet any threshold to recover on their claim for excess economic damages.
However, out-of-state residents must meet the threshold to recover economic AND non-economic damages.
Non-driving factors will no longer affect premium costs
While a policy holder’s driving record is taken into consideration when determining premium rates, insurance companies also used factors that were unrelated to driving.
These included zip code, gender, marital status, occupation, education, credit score and whether the driver owned a home. Effective after July 1, 2020, insurers can no longer use these kinds of non-driving factors to determine premium rates.
Maximum limit for mini tort claims increases from $1,000 to $3,000
Mini tort claims are most often used to cover vehicle repair costs or deductibles for drivers without full collision coverage. The expenses are paid by the insurance company of the at-fault driver.
Drivers may only recover damages that are 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 July 2, 2020, raises the maximum recovery amount from $1,000 to $3,000.
New rules for out-of-state residents injured in Michigan
These rules apply to all motor vehicle accidents occurring on or after June 11, 2019. Claims for accidents before this date will be handled according to the previous no-fault laws.
Previously, out-of-state residents could claim Michigan 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 Michigan PIP (Personal Injury Protection) benefits unless their vehicle is both registered and insured in Michigan.
Therefore, under the new law, out-of-state residents are limited to the “PIP’ coverage provided under their own policy. Additionally, they can sue the driver responsible for the accident for economic and non-economic damages.
To file a lawsuit, the out-of-state resident’s injuries must meet the new definition of a “threshold” injury. (see above section “New definition of a threshold injury for pain and suffering compensation”) This threshold injury must be met in order for an out-of-state resident to recover economic and non-economic damages.
In addition, if the out-of-state resident is found to be more than 50% at fault for the accident, they cannot recover for third-party damages.
Changes in No-Fault “order of priority” for PIP benefits (Michigan residents)
Generally, an injured party receives PIP benefits from their own auto insurance company. If the injured person does not have a No-Fault policy, Michigan law sets forth an order of priority that determines which insurer is responsible.
The order of priority differs depending upon the type of vehicle involved and whether the injured person is a driver, passenger or pedestrian. The Michigan Assigned Claims Plan (MACP) is always the insurer of last resort.
Driver or Passenger(s)
1st – driver’s or passenger’s own insurance policy
2nd – insurance policy of a spouse or resident relative
3rd – Michigan Assigned Claims Plan
Pedestrian or bicyclist
1st – injured person’s own insurance policy
2nd – insurance policy of a spouse or resident relative
3rd – Michigan Assigned Claims Plan
Previously, if neither the victim(s) nor their spouse nor resident relative had no-fault coverage, claims were made against the vehicle owner’s insurer and the vehicle operator’s insurer. These insurers are no longer responsible under the new law.
Motorcycle Accident Order of Priority
Motorcycles are not considered “motor vehicles” under Michigan law. Therefore, the order of priority is different for motorcycle accidents.
In a motorcycle/auto collision the order of priority is as follows:
1st – the insurer of the motor vehicle owner involved in the accident, provided they have not opted out of PIP medical
2nd – the insurer of the motor vehicle operator involved in the accident, provided they have not opted out of PIP medical
3rd – the No-Fault auto policy of the motorcycle operator, provided they have not opted out of PIP medical
4th – the No-Fault auto policy of the motorcycle owner (if different from the motorcycle operator) provided they have not opted out of PIP medical
5th – Michigan Assigned Claims Plan.
NOTE: The Michigan Assigned Claims Plan caps allowable expenses (not including wage loss and replacement services) at $250,000.
Changes in the “one-year back” rule
This rule (MCL 500.3145) allowed accident victims 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.
Under the new statute, the one-year time period does not begin until the claim has been processed and the insurance company formally denies payment.
Independent medical exams
As of June 11, 2019, physicians hired by insurance companies to perform independent medical exams (IMEs) must now meet more stringent professional requirements.
Increased time period for “overdue” benefits
Previously, benefits were considered overdue if not paid within 30 days from the date the provider or injured party submitted the claims to the insurance company.
As of June 11, 2019, if a benefit is submitted to the insurance company more than 90 days from the date of service, the insurance company will have an additional 60 days, for a total of 90 days, before the benefit is considered overdue.
Establishment of consumer anti-fraud unit and new online resources
A new unit will be created to investigate criminal and fraudulent insurance activities. In addition, the Michigan Insurance Commissioner will create a new web page where consumers can report insurance fraud and unfair practices online. Further, a new page on the Department of Insurance and Financial Services (DIFS) website will inform consumers how to obtain assistance from the Insurance Commissioner.
The following changes to the Michigan No-Fault law are scheduled to take effect after July 1, 2021:
Attendant care provided by a friend or family member will be capped at 56 hours per week. (Currently the hours are unlimited.)
Most Providers will have to comply with new Medicare-based fee schedules limiting the amount they can charge for accident-related services.
Let Our No-Fault Experts Win the Compensation You Deserve
The new Michigan No-Fault law is extremely complex, with strict filing deadlines, a multitude of rules and procedures and challenging legal issues. And one small mistake can cause big problems.
Our firm has decades of experience and a proven track record of winning large settlements and verdicts for our clients. We understand the ins and outs of Michigan’s unique No-Fault law and we know what it takes to win the compensation you deserve.
And, every case comes with our No Fee Guarantee…no recovery, no fee.
Michigan No-Fault law is complicated, but finding the right lawyer is simple.
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