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Legally Reviewed and Edited by: Terry Cochran

As Michigan is a no fault state when it comes to car accidents, many people think there is generally no need for lawyers as they believe that the no fault insurance will cover medical bills, lost wages, and other related expenses with no complications. In fact, the entire process of pursuing a claim after a motor vehicle accident can produce many hurdles that need to be dealt with as well as the potential of pursuing third party claims.

Engaging with a good law firm from when the accident happens can help protect you from low settlement offers based on your insurance coverage as well as being the best way to prepare any case against a liable driver. But with changes coming to Michigan’s car insurance system, what will that mean for drivers?

Why No Fault Insurance Doesn’t Always Work

While in theory, no fault insurance looks like a great idea, in practise it does not always work as well as it should. In fact, a number of states have repealed no fault laws and gone back to a traditional tort system.

Here in Michigan, where we pay the highest car insurance rates in the U.S., there have been several attempts to bring in new legislation. And as of July 2020, there will be radical new changes to how your no fault insurance (or Personal Injury Protection insurance works). There have been several recurring issues that have led to these changes:

  • No allowance for pain and suffering or for other non-economic damages except where there is provable liability on the part of another driver and you pursue a claim against them.
  • Insurance rates have actually been shown to be higher in no fault states. In 2019, the average annual car insurance premium in Michigan was $2,693. It is also one of the highest states – at 20% – for uninsured drivers.
  • While it was thought that a no fault system would reduce litigation costs and time, the reality is that instead of traditional claims, insurance companies now spend their time negotiating or defending claims over low settlement claims.
  • Many people think that the system fails to punish negligent drivers and fails to reward good drivers. Unless there is some proof that one driver is the more liable, all cases are based on the idea of blame being shared 50-50.
  • There can be limitations placed on the policy which means that some future medical costs will not be entirely covered for accident victims.

What Will the Changes Mean?

The new bill, Senate Bill 1, radically changes the state of Michigan’s no fault laws that have been in place for over 40 years. The main effect of the changes will mean that drivers in Michigan will be able to choose from six different options for Personal Injury Protection insurance coverage. The six new options are spread across two categories.

  • PIP options that anyone can choose:
    i. Unlimited coverage.
    ii. $500,000 limit to coverage.
    iii. $250,000 limit to coverage.
  • Low cost options. To take out these options, you must have qualified healthcare coverage or be on Medicaid or Medicare:
    i. $250,000 limit with some PIP exclusions.
    ii. $50,000 limit. Medicaid only.
    iii. Allowable expenses exclusion: Medicare only.

These changes may see a fall in insurance premiums for many Michigan drivers but at what costs? There are several qualifying clauses accompanying each of these new options. Many people may rush to change their PIP insurance but then may find that if they suffer a severe incident in a car accident, such as traumatic brain injury, that their coverage is insufficient to provide the long-term medical treatment and home care they may need.

And another part of the new law will limit the amount of personal care provided in the victim’s home by a relative, member of the same household, or someone with a close relationship with the victim. This will now be capped at 56 hours per week. While this is in line with similar limits under Workers’ Compensation Law and does not affect how much care can be provided by a professional carer or nursing agency, some commentators worry that the financial implications of this may be overwhelming if the victim has chosen one of the low cost options. Where your new PIP coverage does not cover current or projected medical costs, will your health insurance be adequate to cover any additional expenses?

Workers’ Compensation Law

The Insurers Still Win

Ironically, but unsurprisingly, the insurance companies still win big with these changes. While one of the main driving forces behind the changes, or reforms to the existing law was the extortionate premiums paid by the state’s drivers, that is not really going to change that much.

Your premiums will, of course, be reduced if you opt for one of the policies with lower coverage. But if you decided to stick with the policy you have now, then you will see no significant change in the premium you pay.

Why is that happening? The focus was always going to be savings for drivers. Many in the state saw no fault problems outweighing no fault benefits. If for example, a driver chooses the $500,000 cap policy, then it is estimated they will save around 20% on their PIP insurance costs.

Take the $50,000 cap, with all the potential financial risks inherent with that low coverage, and you will save as much as 45%. Stick with your old policy and you may see, if you are lucky, between 5-10% savings.

That all sounds great but people also need to realize that PIP is only one part of your whole auto insurance policy, perhaps around 35-40% of that total. So for those who struggle with current insurance costs, will it make any real difference? And for the 20% of drivers on Michigan roads who are uninsured, will it make a difference at all?

There is a loophole in the new bill that allows any Michigan insurance companies to not reduce premiums if they can show that any mandatory reduction in premiums would either violate their constitutional rights or restrict their capital flow to a critical extent.

The total lack of transparency in how these companies operate, or in what profits they have been making in recent years, means that they can pretty much continue to rake in the money from Michigan’s car owners.

Given the aptitude of these companies in using small print and clauses to reduce or avoid paying out on car accident claims, it comes as little surprise that they will use constitutional law and legal bypasses to retain high levels of profits and avoid passing on savings to motorists.

One area where the insurance companies will be held to account is when they do not pay out entitled benefits or do not pay them in a timely manner. When this happens with accident cases under this new Michigan law, the claimant will be able to report the company to a new page on the state’s Department of Insurance and Financial Services’ website. Such reports, and reports of other unfair or fraudulent practises by insurance companies, will now require investigation by the Insurance Commissioner.

How Does all This Affect You?

How well some of this new law works for the ordinary driver in Michigan remains to be seen. The general opinion across the state seems to be that this law benefits insurers more than it does drivers.

And how it will work for those in motorcycle accidents seems ambiguous for now but not ideal. It is also unclear if truck accidents will be affected as although they are governed by Michigan’s no fault laws, they are also overseen by the National Highway Traffic Safety Administration who are currently looking at some changes including speed limiters.

The Takeaway

There are still a few gray areas surrounding how claims resulting from Michigan car accidents will be dealt with. It is unlikely at this stage that the need, and benefits of engaging a lawyer immediately after an auto accident will decrease.

If anything, there may be a greater need for experienced legal advice due to the complexity of some of the clauses in the new options as well as a continuing need to pursue claims against liable third parties where viable.

As one of the leading law firms in Michigan dealing with car accident claims, Cochran, Kroll & Associates, P.C. have been, and will continue investing a lot of time in studying these new laws and how they will affect current and future clients.

If you wish to discuss how this new law will affect you, or if you wish to talk about anything else relevant to a car accident related claim, then call us at 1-866-MICH-LAW to schedule a free consultation.

Disclaimer : The information provided is general and not for legal advice. The blogs are not intended to provide legal counsel and no attorney-client relationship is created nor intended.

Steve is a former criminal justice worker. With degrees in psychology and social work, he spent most of his life helping those with addiction issues before switching to criminal justice. He was responsible for writing court reports and advising judges on sentencing. He also supervised offenders, including sex offenders, in the community and carried out risk assessments and probation appraisals. He now lives in SE Asia and is working on his 5th novel.



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