At Serafini, Michalowski, Derkacz & Associates, P.C., one of our areas of expertise is representing and fighting for those who have been injured as a result of a motor vehicle collision, whether that be against your own personal insurance company or the person whose negligence caused the collision in the first place.
On June 11, 2019, the Governor of Michigan, Gretchen Whitmer, approved and filed with the Secretary of State Act No. 21, Public Acts of 2019, commonly referred to as No-Fault Reform. Based upon our years of experienced and reading of the new law, we want to offer our guidance regarding your coverage choices as you are no doubt receiving information from your automobile insurer about renewing your policy, and the options at your disposal.
This legislation has brought significant changes to the Michigan No-Fault Act, which is the law that governs Michigan automobile insurance and the rights and duties of those Michigan residents who own and drive vehicles on our highways, as well as those who are unfortunately involved in a motor vehicle collision. You should understand that these changes only relate to the portions of your automobile insurance policy relating to Personal Injury Protection (PIP) benefits in the event you are injured in an accident.
The PIP benefit covers the cost of “allowable expenses” which usually consist of your expenses for medical treatment, prescriptions, durable medical equipment and transportation. In addition, for those seriously injured and unable to take care of their own personal needs such as bathing and dressing, it also pays for in-home or inpatient personal care. For most of us, these new caps do not affect other benefits such as an injured person’s entitlement to three (3) years of lost wages, as well as up to $20 per day for three years for help with household chores.
Most importantly, for now, while several changes implemented by our Legislature went into effect immediately upon the filing of the Act, the biggest change for you, the consumer, takes effect on July 2, 2020. Until now, every person involved in a motor vehicle accident has been entitled to unlimited lifetime medical benefits and other “allowable” expenses. As of July 2, 2020, the law will allow you to select the amount of PIP coverage you wish to carry. The alleged purpose of this change was to provide you, the consumer, with a “reduced” premium.
While your automobile insurer may tell you that this new law provides you with an opportunity to save money on your premiums, as noted, we feel there will be very little reduction in your premiums by choosing one of the limited coverage options. Moreover, in our experience, in general, insurance companies are not your friends. In fact, in our experience, it is clear that despite all those years of paying your premiums on-time, after you are injured in a collision, many insurance companies will often do everything they can to find a way to AVOID paying your claims. What they do not want you to realize is that THEY are the big costs savers under this new law. If you accept less coverage in exchange for a slightly lower premium, the insurance company is dramatically reducing their potential risk for payment in the event you are seriously injured in a motor vehicle accident. This No-Fault Reform was a HUGE win for the insurance companies while the consumer receives very little benefit in the way of premium reductions in exchange of the risk of exhausting your medical coverage before you have recovered from your injuries.
That is why, we acknowledge that you can change (meaning reduce) your level of Personal Injury Protection benefits as of July 2, 2020, however, we feel compelled to point out that YOU ARE NOT REQUIRED TO DO THIS AND WE RECOMMEND AGAINST IT. The PIP benefit options you may choose as of July 2, 2020 are as follows:
- Maintain your unlimited benefits per person, per occurrence (recommended);
- $500,000.00 cap per person, per occurrence;
- $250,000.00 cap per person, per occurrence;
- $50,000.00 per person, per occurrence. If you are a Medicaid recipient and your spouse and other resident relatives have other qualified (health) coverage;
- $0. Complete opt out if you are a Medicare recipient, or you, your spouse and other resident relatives have other qualified (health) coverage that would cover injuries sustained in a motor vehicle accident with an annual deductible of $6,000 or less per individual.
Everyone currently has the unlimited option. This is and remains in effect for anyone who was involved in a collision prior to July 2, 2020. We strongly urge everyone to stay with the benefits you currently have by choosing the unlimited option. We know it may seem tempting to choose the lower coverage to reduce your premium, but we urge you to resist that temptation. The relatively minor potential premium reduction is simply not worth the risk of giving up the unlimited benefits you now have in the case of a serious injury. Additionally, while you may think you don’t need these benefits if you are covered by your employer’s health insurance and/or disability pay, it is important to note that you cannot go back and add coverage after an accident if you lose your benefits or your employment due to an inability to perform your duties from injuries you have sustained.
Your agent may also discuss the option of lowering your premium by electing the “managed care” option. This option essentially acts as an HMO and allows the insurance provider to choose which doctors you are allowed to go to for treatment. We strongly suggest that you DO NOT choose this option. As previously discussed, insurers are doing everything they can NOT to pay your claim. The physicians within their system will not be “independent” or “neutral” like your doctor is, but will rather keep the insurers happy by telling the insurers that you do not need any additional treatment and/or that you can return to your employment despite your obvious injuries and limitations.
Finally, the No-Fault Reform imposes higher Bodily Injury (BI) coverage requirements. This is the coverage you have in case you are the cause of an accident that results in injuries to others so that they do not come after you personally. Previously the minimum limits you had to purchase to insure your car in Michigan were $20,0000 per person and $40,000 per collision (typically referred to as 20/40 coverage). Under the new law, the minimum limits are now $250,000/$500,000. Obviously, you should expect that the cost for that increased BI coverage to increase and, it may in fact, offset any other savings you may receive.
There is a big reason why we are required to have increased Bodily Injury limits. Previously, when a person was injured in an accident, their OWN insurance company paid for all of their medical bills and three (3) years of wage loss, regardless of fault (Thus the name No-Fault Insurance). Now, suppose you, or someone driving a vehicle you own, accidently cause a collision with another vehicle and the other person is badly injured. What happens once they exhaust all of the Personal Injury Protection benefits available under their new policy, but they are still in need of additional medical treatment? You will now be responsible for the cost of that additional medical treatment. Your insurer will pay it out of the bodily injury coverage limits in your policy. However, once those limits are exhausted, they will look to you to personally pay those bills. Thus, obviously, the higher your limits, the lower chance you have of your limits being exhausted to the point an injured person could conceivably come after your personal assets.
Because of this, we recommend that everyone purchase at least $500,000.00 in liability insurance AND we also recommend that you purchase what is known as an “Umbrella Policy.” An Umbrella Policy is usually fairly inexpensive, and it provides additional coverage over and above the liability limits of your automobile insurance, as well as the liability limits in your other insurance policies, such as your homeowner’s policy. Because of the change in the law, your financial assets are now seriously at risk if you cause a car accident that seriously injures or kills another person. If you aren’t properly insured, you could potentially expose yourself to significant financial harm.
Therefore, as of July 2, 2020, WE STRONGLY RECOMMEND that everyone:
- Choose/maintain the unlimited allowable PIP expense option;
- DO NOT choose the managed care option;
- Choose at least $500,000.00/$1,000,000.00 in Uninsured and Underinsured Motorist Coverage if available;
- Choose at least $500,000.00/$1,000,000.00 in Bodily Injury liability coverage; and
- Purchase an Umbrella Policy to protect yourself and your assets in the case of a serious injury/loss sustained by another.
The No-Fault Reform law that was enacted last year is complicated, poorly written, and ultimately has the potential to have a serious negative effect on the consumer. Navigating this mess will be difficult. That is why we sent you this letter. We are also here to help you, your family and your friends with your questions or concerns regarding your policies in any way we can. If you have questions regarding these issues or any other legal matters, please feel free to call to talk to one of our experienced attorneys or schedule an in-person consultation.
For your convenience we have attached a more detailed synopsis of the changes including the available coverage options from the Michigan Association For Justice for your review.
Thank you for your time and attention to this matter and stay safe.
SERAFINI, MICHALOWSKI, DERKACZ & ASSOCIATES, P.C.
SWEEPING CHANGES – IMPORTANT CHOICES
With sweeping changes to Michigan’s new auto insurance law set to begin on July 1, 2020, every Michigan motorist will be required to make critically important choices regarding how best to protect themselves and their families.
Under the new law, car crash victims no longer have guaranteed lifetime coverage for medical and rehabilitation expenses unless they specifically purchase that coverage. Moreover, all drivers will face increased liability in certain situations for the medical expenses they caused others to incur.
Every driver (and passenger) in Michigan now faces an elevated level of risk and liability. Michigan drivers now have to make potentially life-altering choices with possibly dramatic financial implications. With the stakes so high, Michigan motorists should make it a priority to educate themselves and understand their options.
The biggest change for Michigan motorists is that mandatory comprehensive lifetime no-fault personal injury protection (PIP) insurance coverage has been replaced by a tiered system that allows individuals to opt-out or purchase as little as $50,000 worth of PIP coverage for medical expenses under certain circumstances. Other options include $250,000, $500,000, and No-Limit.
The most significant decision that Michigan drivers will make is selecting a level of PIP coverage:
OPTION 1 – NO LIMIT PIP OPTION – RECOMMENDED
- This option is available to anyone purchasing No-Fault Insurance and is the closest to what we all had under the Old Law. This option covers all reasonable expenses incurred for the care, recovery, and rehabilitation of the injured person. Under this Option the new law mandates premium reductions to be “an average of 10% or greater per vehicle.” These premium reductions are not guaranteed for each policyholder. This reduction only applies to the PIP portion of your insurance premium. Other portions of your premium may actually increase. The insurance company is only required to reduce its statewide average premium charges, meaning you may not get it. Insurance companies can also apply for an exemption.
OPTION 2 – $500,000 PIP OPTION
- This option is also available to anyone purchasing No-Fault Insurance. This option only covers up to $500,000 incurred for the injured person’s care, recovery, and rehabilitation. Under this option the new law mandates premium reductions to be “an average of 20% or greater per vehicle.” These premium reductions are not guaranteed for each policyholder. This reduction only applies to the PIP portion of your insurance premium. Other portions of your premium may actually increase. The insurance company is only required to reduce its statewide average premium charges, meaning you may not get it. Insurance companies can also apply for an exemption.
OPTION 3 – $250,000 PIP OPTION
- This option is available to anyone purchasing No-Fault Insurance. This option only covers up to $250,000 incurred for the injured person’s care, recovery, and rehabilitation. Under this option the new law mandates premium reductions to be “an average of 35% or greater per vehicle.” This reduction only applies to the PIP portion of your insurance premium. Other portions of your premium may actually increase. These premium reductions are not guaranteed for each policyholder. The insurance company is only required to reduce its statewide average premium charges, meaning you may not get it. Insurance companies can also apply for an exemption.
OPTION 4 – $50,000 PIP MEDICAID OPTION (LIMITED AVAILABILITY)
- This option is only available to persons covered under Medicaid and whose spouse and household relatives are also either on Medicaid, have other health insurance, or have other PIP coverage through a different policy. Under this option the new law mandates premium reductions to be “an average of 45% or greater per vehicle.” This reduction only applies to the PIP portion of your insurance premium. Other portions of your premium may actually increase. These premium reductions are not guaranteed for each policyholder. The insurance company is only required to reduce its statewide average premium charges, meaning you may not get it. Insurance companies can also apply for an exemption.
OPTION 5 – OPT OUT (LIMITED AVAILABILITY)
- This option is only available if you and your spouse and household relatives meet certain criteria including that you and household relatives are “qualified persons” under either Medicare Parts A and B or other qualifying health insurance policies narrowly defined in the No-Fault Act. If you select this option you will also have very strict notification requirements if you or any of your household relatives ever lose qualified health coverage.
BODILY INJURY COVERAGE
Under both the Old and New No-Fault Systems all motorists must purchase a minimum amount of bodily injury coverage. This coverage is the amount an insurance company will cover the driver and owner of a motor vehicle who is negligent and injures another person. Under the Old No-Fault System, the minimum amount all motor vehicle owners had to purchase was coverage for $20,000 because of bodily injury or death of 1 person in any 1 accident and $40,000 because of bodily injury or death of 2 or more persons in any 1 accident. These were known as 20/40 policies.
After July 1, 2020, all motor vehicle owners must purchase higher bodily injury coverage amounts. The new coverage minimum amounts are $250,000 per person and $500,000 per accident. When applying for insurance, if you want less coverage, an option will exist to reduce this coverage to $50,000 per person and $100,000 per accident. To exercise this option to reduce coverage, insurance companies will require motorists to sign a form approved by the Director of Insurance and Financial Services. This form is required because making this election for lower coverage is very financially risky, especially because drivers and owners of motor vehicles are now potentially liable for the medical bills of a person they injured.
Under the New No-Fault System all owners and drivers are potentially responsible for millions of dollars in damages they were never responsible to pay before. Because motorists are now potentially responsible for someone else’s medical expenses, they would be wise to select the highest coverage best suited to protect their assets, including their home, cars, and bank accounts.
UNINSURED MOTORIST & UNDERINSURED MOTORIST COVERAGE
This coverage provides protection for anyone hit by a driver without insurance—or without sufficient insurance to cover your damages. While there are no minimum amounts mandated in Michigan, most motorists would be wise to purchase as much Uninsured Motorist and Underinsured Motorist Coverage as they can afford.
Anyone who selects one of the non-Lifetime Options for no-fault coverage and is subsequently struck by someone with either no or low Bodily Injury coverage could be left with no means to pay their bills—unless they have purchased Uninsured Motorist and Underinsured Motorist Coverage (and provided that they were not more than 50% at fault for causing the crash).
BE CLEAR ON THE “SAVINGS” EXPECTED
It is important to note that the mandated savings for each of the coverage options above do not apply to the entire policy, but only to the PIP portion (around 45%) of the total insurance cost. For example, if you paid $2,000 for your total automobile insurance in May, 2019, under the new law, if you picked a $500,000.00 PIP policy, your savings would likely only be $180.00. Meanwhile, you and your family are now exposed to possible bankruptcy if you are involved in a crash resulting in catastrophic loss and can now be sued for the other person’s medical expenses if you cause the crash.
Also, the new law “does not prohibit an increase for any individual insurance policy premium if the increase results from applying rating factors,” so it is quite possible if your insurance company “re-rates” you or your family members, your premium will increase.
There is one final note on the “savings” supposedly built into the new law. The language of the statute very carefully states the new premiums “must result, as nearly as practicable, in an average reduction per vehicle from the premium rates for personal protection insurance coverage that were in effect for the insurer on May 1, 2019.” Essentially, the intent of the clause is to not mandate a specific savings for motorists but to provide for an average savings for everyone insured by a particular insurance company. However, expect insurance companies to simply claim it isn’t “practicable” to make the reductions. Remember, the reductions refer to the insurance company’s average, not your policy.
NOTES & COVERAGE CONSIDERATIONS
- A Managed Care Option is available to anyone purchasing No-Fault Insurance if offered by their insurance company. This option would impose insurance company-mandated limitations on doctor and treatment options.
- Motorists can also select a Coordination of Benefits Option, which are “deductibles and exclusions reasonably related to other health and accident coverage.” This option has always been available, but the cost-savings for coordinated policies have been altered by the changes to the No-Fault law. Under the old law this coverage was sold at “appropriately reduced premium rates” but now it is to be offered at “a reduced premium that reflects reasonably anticipated reductions in losses, expenses, or both.”
- WARNING TO MOTORCYCLE RIDERS– The new No-Fault law has changed the amount of No-Fault benefits available to a motorcyclist who has been injured in a crash with a car or truck. An injured motorcyclist’s No-Fault medical benefits are limited by whatever No-Fault coverage level exists in the auto insurance policy from which they are seeking benefits – which could be $50,000 (for drivers on Medicaid), $250,000, $500,000 or unlimited. (MCL 500.3107c(5)) This means that even if the motorcyclist has his or her own unlimited No-Fault auto insurance policy on his or her own motor vehicle, the level of No-Fault PIP medical benefits to which he or she will be entitled is limited by the coverage levels chosen by the owner or driver of the motor vehicle or motorcycle involved in the crash.
- WARNING TO PEDESTRIANS AND BICYCLISTS– Under the new law, the amount of insurance coverage for No-Fault PIP medical benefits available to a pedestrian or bicyclist injured by a vehicle through a spouse’s or resident relative’s insurance policy has changed. In the past, a pedestrian or bicyclist would be entitled to “unlimited” medical benefits under these policies.
Now – after July 1, 2020 – a pedestrian’s No-Fault PIP medical benefits will be limited to whatever coverage levels were chosen in the pedestrian’s policy or the policies of his or her spouse and/or resident relative. If No-Fault coverage is not available to a pedestrian or bicyclist involved in a car accident through his or her own auto insurance policy or the policies of a spouse or resident relative, then the new No-Fault law requires that the pedestrian apply for benefits through the Michigan Assigned Claims Plan. The new No-Fault law limits the pedestrian’s PIP medical benefits coverage to $250,000. Under the old law, the accident victim would have been eligible for unlimited, life time PIP benefits.
Information above provided by Liss Seder & Andrews, Michigan Auto Law, and the Coalition Protecting Auto No-Fault