Michigan’s new no-fault legislation, passed in spring 2019, becomes effective in July 2020. The legislation eliminates the mandatory lifetime benefits previously provided under the Michigan No-Fault Act and introduces tiered personal injury protection (PIP) coverage. Further, the reform includes changes related to tort liability that will transform Michigan into a mixed no-fault and tort state as of July 1, 2020.
This article discusses three significant changes that will take effect on July 1, 2020.
- PIP Benefits
“Personal injury protection” (PIP) benefits is a component of automobile insurance that covers medical expenses and other related expenses regardless of who is at fault. The current law requires drivers to carry unlimited PIP coverage, but this will change in July. Effective July 2, 2020, drivers can choose from five different coverage options under MCL 500.3107(c):
|PIP Coverage Option||Requirements|
|Unlimited Coverage||Default coverage if option not selected|
|$250,000 Limit||Available only for drivers with qualified health coverage (not Medicaid or Medicare).|
|$50,000 Limit||Available only for drivers enrolled in Medicaid.|
|Opt-out of PIP Coverage||Only available with Medicare or qualified health insurance.|
The PIP coverage option applies to the named insured, their spouse, and/or relatives domiciled in the same household, and “to any other person with a right to claim PIP benefits under the policy.” MCL 500.3107(5). Significantly, the capped limits only apply to allowable expenses, not wage loss, household service, or funeral benefits. Michigan No-Fault coverage will continue to include wage loss (with monthly maximums), household service (still at $20.00 per day), and funeral benefits. MCL 500.3107(1)(a)(b) and (c).
Claims Handling Caution: Adjusters are on the front line of No-Fault claims, tasked with processing claims for appropriate reimbursement and denial. A prompt initial determination of effective dates of the applicable insurance policy and date of loss is imperative to avoid improper payment of benefits.
- Bodily Injury Liability Limits
Bodily injury coverage is insurance coverage that pays for injuries a driver causes to other people, including other drivers, passengers, and pedestrians. These claims often result in third-party negligence lawsuits against the insurer and its insured. While these lawsuits routinely resolve for amounts that do not exceed policy limits, insureds risk exposure of being responsible for amounts exceeding policy limits, such as accidents that result in catastrophic injuries. Currently, such claims are limited to non-economic damages for pain and suffering, and the mandatory minimum liability limits are $20,000 per person/ $40,000 per occurrence.
Under the new law, an injured person can now seek economic damages in excess of the allowable expense limits available. MCL 500.3135(3)(c). The mandatory minimum limits under the new No-Fault Law will increase liability limits to $250,000/$500,000. Though insureds can elect a lower coverage amount of $50,000/$100,000 by completing a form that acknowledges and accepts the risk of lower liability policy limits, they would be wise to elect increased limits to avoid personal liability or collection of personal assets. Additionally, because medical bills incurred after PIP coverage has been exhausted can now be claimed in such lawsuits, it is anticipated that the new law will generate more third-party negligence lawsuits.
Claims Handling Caution: The larger policy limits not only increase exposure to insureds, but also insurers, making it imperative for adjusters to recognize when specialty-specific independent medical examinations and/or medical peer-physician reviews are appropriate in litigation.
- Mini Tort Limit
“Mini tort” is an exception to “no fault” in Michigan. Under mini-tort, if a driver is 50% or more at fault in an accident, and damages to the other driver’s car are not completely covered by his or her insurance, a driver may be sued and may have to pay up to $1,000 in damages. MCL 500.3135(3)(e). Mini tort recovery only applies “to the extent that the damages are not covered by insurance.” Id. The new law taking effect next month will increase the maximum recovery limit to $3,000, effective July 2, 2020. The increase applies to all car accidents that result in vehicle damage that happen after July 1, 2020.