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 while raising the minimum liability limits for non-economic damages such as pain and suffering.
Many of the reforms are effective July 1, 2020, although certain changes took effect June 11, 2019. Some other provisions of the law take effect in 2021.
Here is an overview of what you should know about the new No-Fault insurance law.
BODILY INJURY LIABILITY COVERAGE LIMITS
Bodily injury liability insurance covers claims made against you for injuries to others if you are at fault.
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 "necessary and reasonable" medical and related services, including attendant care, for vehicle owners and their spouses and resident relatives. 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.
The vehicle owner's insurance company covers 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, unlike before, insurance companies will not pay medical costs that exceed the policy limits. 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 your 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 coverage to $250,000 per person per accident for medical and related expenses.
OPTION 4 - LIMITED PIP MEDICAL COVERAGE OF $250,000 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
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 benefits.
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.
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, as well as property damage.
Effective 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, they will be able to select greater or lesser coverage amounts as long as they don't go below the $50,000/$100,000 minimums.
You should be aware that your insurance company will not pay more than the policy limit they 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."
Effective June 11, 2019, the definition of "serious impairment of a body function" was amended.
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.
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. As of 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 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.
Therefore, under the current law, the only legal option available is for the out-of-state resident to sue the driver responsible for the accident.
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")
In addition, 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.
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
2nd | The insurer of the motor vehicle operator involved in the accident
3rd | The No-Fault auto policy of the motorcycle operator (if one exists)
4th | The No-Fault auto policy of the motorcycle owner (if different from the motorcycle operator)
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.
Effective May 30, 2019, 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 30 days after the provider or injured party submitted the claims to the insurance company.
As of June 11, 2019, the insurance company has 90 days from the date the claim is submitted to consider the bill for payment.
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 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.)
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.
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