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The Basics of Michigan’s No-Fault Reform

Michigan No-Fault Reform Explained

Large changes to the Michigan No-fault Law were made in May of 2019.  Parts of the law have already taken effect while the costs savings and other provision will take effect on July 1, 2020.  This law is going to drastically change the way Michiganders are insured for their automobiles.  New Categories of insurance were created and caps to important benefits were put in place.  To protect yourself and your family it is critical that you understand what types of insurance will be available.  Additionally, it will be important that you understand not only what type of insurance to buy, but what your rights will be when faced with an accident.  This website will be a resource to help you navigate Michigan’s No-fault reform and all the important legal updates that will affect your rights.

Michigan No-Fault Changes

On May 30, 2019 the Michigan No -Fault Law was passed (Here is the full Act).  Major changes have been made to Michigan’s long-standing law.  Beginning on July 1, 2020 you will have to choose what type of coverage you want to purchase.  This can be a daunting task without knowing the full spectrum of your rights and choices.  Here is an overview of the major changes that you need to know.

PIP Coverage Options

Michigan used to give each individual unlimited No-Fault benefits. Unlimited lifetime benefits are no longer mandatory. Now there will be varying levels of PIP benefits that you will be able to choose from.  Presumably, the less coverage you choose the less expensive the insurance will be (see savings section below).  However, whether the reduced coverage is worth it will be a very important question.  There will be several overages to choose from:

  • No PIP Coverage – this will be available to individuals who are covered by Medicare. To choose this option spouses and any relatives living in the household would have to also have a qualified health coverage plan or their own PIP policy.
  • 50,000 PIP Coverage – individuals on Medicaid can choose this option. Again to choose this option if you have a spouse or any relatives living with you they must either (1) be enrolled in Medicaid (2) Have qualified health coverage (3) Have their own PIP policy.
  • 250,000 PIP Coverage, 500,000 PIP Coverage, or Unlimited PIP Coverage

Liability Coverage Options

PIP coverage describes the benefits you receive from you own insurance company when you are in an accident. However, liability coverage refers to the amount of money you are insured for if you hurt someone else.  The minimum amount of coverage for your own liability for other persons damages is increasing from a $20,000 to $50,000.  However greater amounts of liability insurance will also be available.

Excess Medical Benefits – because the new law proposes caps on your own PIP medical benefits, starting July 1, 2020 you will be able to sue the at fault driver for excess medical benefits. For example, if you have the $50,000 PIP coverage option, but your medical bills exceed that amount, you will be able to sue the at fault driver for your excess medical bills.

Attendant Care – in home, family provided attendant care will be limited to 56 hours per week starting after July 1, 2021.

Mini Tort – the Michigan’s mini tort recovery limit will raise to $3,000. The previous limit was $1,000.

Serious Impairment of a Body Function

In order to sue the at fault party for your pain and suffering, your injuries must first meet a threshold which is usually referred to as serious impairment. Because we are a no-fault State, this threshold is a trade-off for the benefits we receive from our own insurance company when there is an accident.  The new No-Fault Law is going to codify the standard of serious impairment of a body function as defined in McCormick v. Carrier, 487 Mich 180 (2010).  Essentially this means that the standard is going to stay the same and will not be able to be changed in the courts.  See our page for more information on serious impairment of a body function.

Statute of Limitations

Previously, when you were cut off or denied no-fault benefits you could only obtain damages for losses that occurred up to 1 year prior to the date the lawsuit was filed against the insurance company. MCL 500.3145(1).  This created a multitude of problems.  Sometimes insurance companies would delay by investigating a claim and only decide to cut you off after 1 year had passed from your major medical bills or wage loss.  This left lots of people without a remedy.  The Reformed No-Fault Act states that the “one year back” rule “is tolled from the date a specific claim for payment of benefits until the date until the date the insurer formally denies the claim”.  This takes effect on June 11, 2019.

Independent Medical Exams

Insurance companies love sending you to their doctors so that they can tell you that you are not hurt or that your injuries were not related to your accident. Frequently insurance companies used doctors that were not qualified and who devoted most of their medical practices to doing the bidding of the insurance companies.  The new law that takes effect on June 11, 2019 states that the doctor must be of the same specialty as your treating physician and must devote a majority of their professional time to a clinical practice or teaching at a medical school.

Will This Bill Be Saving You More Money?

The whole idea behind this reform is to reduce the cost of car insurance in Michigan. Currently, Michigan has the highest cost of car insurance in the county.  The law is stating that drivers who opt out of PIP coverage will get a 100% saving on the PIP portion of their bill.  45% saving for those who opt for the $50,000 cap.  35% savings for those choosing the $250,000 cap.  20% savings for those that choose the $500,000 cap and 10% percent savings for those who choose the unlimited or no cap option.  While this sounds pretty good, the issue is that these percentages only apply to the PIP portion of your insurance bill.   Right now, the PIP portion only accounts for about 35% to 45% percent of your total car insurance bill.  So this Reform is not really the earth shattering savings that we have all been waiting for.   Moreover, these “savings” percentages are not guarantees forever.  After 8 years there becomes no mandate for savings.  Consequently, insurance companies can go right back to jacking up the rates after 2028.  To make matters worse insurance companies have a kill switch option to circumvent the savings all together.  If they can prove to the insurance commissioners that the law is too onerous then they don’t have to pass on any savings at all.

Medical Fee Schedule

a new fee schedule is going to be put into place after July 1, 2021 that will limit payment to doctors, facilities, and providers for their services to no-fault first party patients. These savings must be passed along to the drivers and will be over seen by the Insurance Commissioner starting in 2022.

Michigan Catastrophic Claims Association

Under the New Law, the MCCA will pay benefits to those policies that were issued before July 2, 2020 and to drivers who decide that they want unlimited or non-capped PIP benefits.  Even If you decide that you want to cap your benefits will still have to pay an MCCA fee to make sure that the MCCA will be able to cover its deficits.  However, the MCCA is supposed to refund drivers fees if they have enough assets on hand. (if assets exceed 120% of their liabilities).

Factors That Cannot Be Used

This is reform sounds better than it really is. It is no surprise that Detroit’s rates have sky-rocketed with the rampant number of uninsured drivers, fraud, break inns and accidents.  Under the new law, Insurers are not supposed to use postal zones, sex, martial status, home ownership, credit score, and occupation in determining rates.  However, insurance companies can still use “territory” and underlying credit data as long as it is not an actual FICO score in making rates.  So really this reform falls way short of helping Detroiters and those similarly situated with unfair higher costs.

Anti-Fraud Unit

A new Anti-Fraud Unity will be created and investigate all “criminal and fraudulent activities in the insurance market.”

Consumer Protections

A new website will be maintained by the department of insurance so that those that have not properly received their benefits can receive assistance and leave complaints. It will also allow people to obtain information regarding their insurance rights while also containing information regarding changes in the law.

 This a brief overview the changes that have been made by the Michigan No-Fault Reform.  We will be continually updating our page to give you an in-depth look at each of these new reforms and any new laws or court decisions which affect the Act.