Coverage Changes After No Fault Insurance Reform

posted in: Auto Accidents


In June of 2019, the Michigan legislature enacted significant changes to the Michigan No-Fault Insurance Act MCL 500.3101 et seq allowing individuals more choices in the amount of coverage they will have in the event they are injured in an automobile accident. The No-Fault Insurance reform which creates more coverage choices became effective July 2, 2020. However, these new choices do create new risks, too.

Drivers now have a choice to purchase less coverage. Consequently, the thrifty car insurance shopper who elects to purchase a policy with less coverage may very likely find himself in a situation where he now has to bring a lawsuit to have expenses paid that were covered under his older, so-called more expensive policy. Likewise, anyone who accidentally causes a serious motor vehicle accident may find they are now personally responsible for huge medical and rehabilitation expenses that the injured party previously had insurance coverage for under his or her old Michigan No-Fault policy.

What do Michigan No-Fault policies cover?

Michigan No-Fault insurance policies cover three broad areas: 1) Personal Injury Protection (PIP), which typically includes payments of medical expenses, wage loss, and replacement services, regardless of fault; 2) Property Protection Insurance (PPI), which includes payment of up to $1,000,000 when a motor vehicle damages someone else’s real estate, such as a house, building or fence; and 3) Residual Liability Insurance coverage, which protects a driver who causes a motor vehicle accident that results in serious injury, death or permeant serious disfigurement to another person.

Michigan automobile insurance differs from most other states because Michigan enacted a so-called no-fault system in the 1970s. This system removes the issue of who is at fault for the accident regarding the payment of PIP and PPI benefits. Essentially, the legislature wanted to make sure that every person injured in an automobile accident, regardless of who caused the accident, was insured for medical coverage and would have an opportunity to heal without going broke when their auto injuries prevented them from doing their normal job. The legislature did not want the court system overloaded with cases involving minor injuries and fender benders. Rather than having to start a court case whenever there was a car accident, the government took away the right to sue for minor injuries but in exchange required universal coverage for any medical expense and wage loss arising out of a motor vehicle accident regardless of fault. For example, the drunk driver who runs into a tree has the same medical coverage for any injuries he sustains as the person who is injured when she is rear-ended through no fault of her own. In both examples, each person looks first to their own auto insurance company for coverage of their auto accident related medical expenses and wage loss. There is no need to sue whoever caused the accident. Coverage exists to treat the injuries of the negligent driver as well as the innocent victim. Prior to July 2, 2020, this coverage for medical benefits had no limits.

What type of medical benefits are no-fault insurers required to provide?

According to MCL 500.3107(1)(a) a no-fault insurer has to provide coverage for all “reasonable necessary products, services and accommodations for an injured person’s care, recovery, or rehabilitation.” Examples of necessary products, services and accommodations include hospital bills, doctor’s appointments, medical tests, physical therapy, prescriptions, appliances, transportation to and from medical care, vans need to accommodate disabilities, wheelchairs, home modifications, and home or residential care. Prior to July 2, 2020, these benefits were unlimited and payable for life.

In addition to medical benefits, a person injured in a car accident regardless of fault may also be eligible for work loss benefits when an auto related injury prevents a person from working. These benefits are payable for three years or until the person is able to return to work, whichever event comes first. The benefit amount is approximately 85% of the injured person’s pre accident monthly wage subject to the monthly maximum statutory amount of approximately $5718. In other words, an auto insurer does not have to pay more than the current monthly statutory amount even when the injured party’s loss exceeds this amount. The work loss benefit is reduced to 85% of the pre accident wage because the work loss benefit is not taxable income. See MCL 500.3107(1)(b).

When a person is injured or killed in an automobile accident, the injured party or those who were dependent on the deceased person may be eligible for reimbursement of replacement services. These are household services that the injured or deceased party use to be able to perform and now because of a car accident the injured party or her survivors must pay a third party to perform Such services cover typical household tasks that the injured party or deceased party provided to those who were dependent on him or her, such as yard work, home maintenance, childcare, transportation of children, housekeeping, lawncare, meal preparation, etc. The law requires a no-fault insurance carrier to pay up to $20 per day for a maximum of three years from the date of the accident as reimbursement when there is a loss of these type of services.

Additionally, Michigan law does require no-fault insurance companies to provide reimburse for a portion of the funeral and burial expenses when a person dies as a result of an auto accident. The reimbursable amount ranges from $1750 up to $5000 depending the policy purchased.

How has Michigan No-Fault Insurance reform changed policy coverage after July 2, 2020?

Prior to July 2, 2020, all drivers with valid Michigan No-Fault policy had unlimited coverage for Personal Injury Protection (PIP) benefits – payments of medical expenses, wage loss, and replacement services regardless of fault. Now, although unlimited coverage is still an option, budget-minded consumers can choose to cap their coverage in amounts of $500,000, $250,000, and $50,000, or completely opt-out of PIP benefits in return for reduced premiums. However, these initial savings cause all drivers to incur potentially life-changing risk when serious automobile accidents occur. For example, when a motor vehicle accident results in a person becoming wheelchair bound the lifetime costs to care for and accommodate the disabled person can be staggering and potentially bankrupt the unprepared. Such costs include medical care, physical and occupational rehabilitation, rehabbing homes to make them accessible via ramps, lifts and elevators, and purchasing handicap accessible vehicles, such as specially modified vans. Lifetime expenses for serious injuries can easily exceed $500,000 or even $1,000,000.

Consequently, if you accidentally run a red light and cause permanent life changing injuries to someone who decided to save on car insurance by not purchasing enough coverage, you are going to be sued for damages that would have been covered by the injured party’s insurance prior to July 2, 2020. What can you do to protect yourself? Be a very careful driver. Purchase an umbrella insurance policy. Continue to pay for your own unlimited coverage for Personal Injury Protection (PIP) benefits.

Barry Lemmen is an auto accident attorney in Grand Rapids. One of his specialties is auto accident injuries and insurance claims associated with an accident. If you or someone you know has been in an accident and would like to talk to an attorney, contact Lemmen & Lemmen, PLC.

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