Michigan’s New No Fault Law
Michigan’s new no-fault insurance reform law was touted as the solution to some of the highest insurance rates in the country. What has emerged from the legislature and the governor’s office is more like a runaway train about to strike thousands of Michigan’s accident victims, with potential disastrous results. Put together quickly and passed without public hearings, the legislation is full of holes that leave gaps of uncertainty regarding changes to Michigan’s no-fault insurance legacy.
As you review this information pertaining to the new law remember, at the Mike Morse Law Firm we are watching these changes very carefully and recognize that many of the provisions will ultimately have to be litigated so new legal precedent can be set. Perhaps some of those case results will be favorable to accident victims in the future. In the meantime, we will continue to fight hard for our clients and stand up for their rights every step of the way.
Here is a summary of what you need to know.
CLAIMS FOR NO FAULT BENEFITS
Choose your coverage:
Michigan drivers will choose how much No-Fault medical benefit coverage to purchase starting on July 1, 2020. Prior to the new law if you were injured in an auto accident, you were entitled to lifetime medical coverage for your care, recovery and rehabilitation after an accident. Now, your benefits will typically be capped, and your savings will be minimal.
For auto insurance policies purchased or renewed after July 1, 2020, drivers will choose between a $50,000 capped benefit (if the driver is enrolled in Medicaid); a $250,000 capped benefit; a $500,000 capped benefit; or “no limit.”
*Drivers with Medicare may also choose to go without coverage for No-Fault PIP medical benefits for auto insurance policies issued or renewed after July 1, 2020.
How much will you save?
Savings for drivers:
For policies effective after July 1, 2020 the new Michigan No-Fault law will provide:
- 45% savings for drivers who choose the $50,000 cap on No-Fault PIP medical benefits;
- 35% savings for drivers who opt for the $250,000 cap;
- 20% savings for drivers who choose the $500,000 cap and
- 10% savings for drivers who wish to have “no limit” and keep the unlimited No-Fault medical benefits they’ve always had.
- If you choose to completely opt out of No-Fault PIP medical benefits, you will see 100% savings on the No-Fault PIP medical portion of your auto insurance bill.
It is important to consider that these savings are limited only to the No-Fault PIP portion of your auto insurance bill, not to your entire auto insurance bill. The PIP portion (where you may see savings) is estimated to be 35% to 44% of your total auto insurance premium. The bottom line is the new No-Fault law will not create much at all in the way of consumer savings. Michiganders who can’t afford auto insurance now, will see little if any difference when shopping for a new policy in the summer of 2020.
After July 1, 2020 MCAA will only pay catastrophic injury benefits to drivers who decided to keep the unlimited No-Fault PIP medical benefits they have now. Any drivers who decide to cap their No-Fault benefits as an attempt to save money or opt-out altogether will be required to pay annual MCCA assessments (charges) to cover deficits.
- One of the only positive changes slated to occur as of July 1, 2020 is auto insurers can no longer base premium rates on non-driving factors such as: sex, marital status, home ownership, education level attained, occupation, the postal zone in which the insured resides and credit score.
No-Fault medical-provider fee schedule: A No-Fault fee schedule based on the Medicare fee schedule will be created and will govern charges from doctors, hospitals, medical clinics, rehabilitation facilities and any other medical providers who care for and treat car accident victims. Depending on the type of facility involved – whether a large portion of its patients are poverty stricken, whether it is a freestanding rehabilitation facility or a Level I or II Trauma Center – reimbursement will range from 190% to 250% of the amount payable under Medicare. The new Medicare-based, No-Fault medical-provider fee schedule will apply to “treatment or rehabilitative occupational training” provided after July 1, 2021.
Passing along savings from No-Fault medical-provider fee: The savings that Michigan car insurance companies stand to gain as a result of the No-Fault medical provider fee schedule must be passed along to drivers in form of lower premium rates. Auto insurers will have to document these savings with the Director of the Department of Insurance and Financial Services (DIFS). Eventually, Michigan’s Insurance Commissioner will have to start checking to make sure that auto insurers are passing along fee-schedule-generated savings to drivers but not until after July 1, 2022.
Mini Tort: The Michigan mini tort law’s maximum recovery limit for reimbursement of your deductible by the at fault drivers insurance company will increase from $1,000 to $3,000 for accidents occurring after July 1, 2020.
Tolling of the one-year-back rule: Under our existing No-Fault law, when a car accident victim has been denied or cut-off from No-Fault benefits and then sues an insurance company to collect these overdue benefits, he or she cannot recover for any services or expenses incurred more than 1 year before the date on which the lawsuit is filed.
The new Michigan No-Fault law provides that this limitation is tolled from the date you make your claim for benefits until the date the insurance company denies the claim. Tolling will be available immediately. However, the new law cautions that tolling “does not apply if you fail to pursue the claim with reasonable diligence.”
Independent medical examinations:
Thousands of Michigan accident victims are painfully familiar with the insurance companies’ practice of “independent” medical evaluations. This is the mechanism they all use to stop paying you the benefits you’re entitled to.
The new Michigan No-Fault law sets out the following rules for medical evaluations of car accident victims that are done by insurance company doctors:
- The doctors must be licensed in Michigan;
- If an accident victim is being treated by a specialist the insurance company doctor must specialize in the same area of medicine as the doctor who is already caring for the patient. If the doctor already providing your care is board certified in any specialty, the examining insurance doctor must also be board certified in that specialty;
- For one year before your evaluation with an insurance doctor, that doctor must have devoted a majority of professional time to clinical practice of medicine/specialty or teaching in an accredited medical school.
Attendant Care: Auto insurers will no longer be required to pay for more than 56 hours per week of in-home, family-provided attendant care. Prior to this legislation, attendant care was provided by families to care for their injured loved ones, often 24 hours per day, 7 days per week. These new restrictions are sure to cause tremendous financial hardship to thousands of Michigan accident victims who prefer to have their family members care for them. This limitation applies after July 1, 2021.
Anti-Fraud Unit: The new Michigan No-Fault law will create an Anti-Fraud Unit to investigate all “criminal and fraudulent activities in the insurance market.” This will take effect immediately.
Insurance Commissioner involvement when insurers refuse to pay No-Fault benefits: Michigan’s new No fault law requires the Insurance Commissioner to create a page on the Department of Insurance and Financial Services website (DIFS) describing how the Insurance Commissioner can assist accident victims who believe their insurance company is not paying benefits, not making timely payments, or otherwise not performing as it is required to do under your insurance policy. The Insurance Commissioner will also be required to create a website page that allows consumers to report insurance fraud and unfair settlement and claims practices. These requirements will take effect immediately.
CLAIMS FOR PAIN AND SUFFERING
Higher liability limits: Liability limits refers to the Michigan car insurance you purchase to protect yourself in case you cause a car accident and injure someone else. Before the new law, drivers were required to purchase a minimum of $20,000 per person/$40,000 per occurrence for this coverage. However, the new law will increase those mandatory minimum limits to $50,000 per person and $100,000 per occurrence. A new “default” residual bodily injury limit of $250,000 and $500,000 will be offered to drivers, who will be able to choose more or less coverage if they want to, but no less than the new mandatory minimums of $50,000/$100,000. The new minimum liability limits take effect after July 1, 2020.
Suing for excess medical benefits: Under the new Michigan No-Fault law, if you are injured in an accident, you may have to sue the at fault driver for excess medical costs and economic expenses. These excess costs are medical bills and expenses that can easily exceed the dollar amount of the No-Fault PIP cap you have selected.
Example: if you have $300,000 in medical costs and you’ve elected a $250,000 cap on PIP benefits, you will have to sue the other driver for the excess $50,000 of medical costs. This excess claim will now be lumped in to your claim for pain and suffering and will not be resolved until the conclusion of that litigation.
Michigan will become like most other states now and the amount of coverage available in the insurance policy liability limits of the negligent driver becomes much more important. Suing for excess medical benefits will become an issue only when the new No-Fault PIP Choice levels are available after July 1, 2020.
Serious Impairment of Body Function threshold for pain and suffering compensation: Under the new Michigan No-Fault law, accident victims will be required to meet the new definition of a “serious impairment of body function” in order to be able to sue for pain and suffering. The new Michigan No-Fault law defines a “serious impairment of body function” as:
- an impairment that is “objectively manifested”, meaning it is observable or perceivable from actual symptoms or conditions by someone other than the injured person”;
- an impairment of an “important body function”, which is a body function of great value, significance or consequence to the injured accident victim and
- An impairment that affects the injured person’s general ability to lead his or her normal life, meaning it has had an influence on some of the victim’s capacity to live in his or her normal manner of living
There is no requirement for how long an impairment must last. This criteria is specific to the facts and circumstances of each injured person and must be conducted on a case-by-case basis and demands comparison of the accident victim’s life before and after the accident. This new definition of “serious impairment of body function” will take effect immediately.
As it stands, this new law is a boon for insurance companies and a devastating blow for Michigan drivers. The onslaught of lawsuits will be agonizing for many, but far worse will be the substandard care and financial ruin that may ensue from this “reform” law, further injuring those who need and deserve better than this.
On June 11, 2019, Gov. Whitmer signed House Bill 4397.
June 11, 2019 is the official effective date for the new statutory definition of “serious impairment of body function,” discussed above, as well as the new rules for out-of-state residents who are injured in car accidents in Michigan. The new rules for independent medical examinations also went into effect on June 11, 2019. Other new changes, such as the tolling of the one-year-back rule; the new consumer anti-fraud unit; and the new mandate that the Insurance Commissioner/Department of Insurance and Financial Services create an online consumer page had an effective date of May 30, 2019.