Understanding the Changes in the No Fault Act
In July of 2020 Michigan’s No-Fault Statute, the law that governs auto accidents, underwent some big changes. An individual involved in a motor vehicle accident no longer has unlimited medical benefits. Similarly, an insured, at-fault driver no longer has complete immunity from liability for the “victim’s” medical treatment. The impact of these changes is not fully yet known, it will take a number of appeals until the dust settles.
However, below is an overview of the changes.
Michigan’s New No-Fault Law and what it means for you.
The following is an overview of the new law.
- Benefit Coverage Options (for Medical, Attendant Care, etc.
The Michigan No-Fault Act will no longer require a lifetime of medical expense benefits. Beginning on July 1, 2020, individuals can select the following levels of coverage, depending on eligibility:
- $50,000 PIP coverage limit, if the person was enrolled in Medicaid, or if the person’s spouse and any resident relative has Medicaid.
- $250,000 PIP coverage limit;
- $500,000 PIP coverage limit;
- Unlimited PIP coverage.
The new law allows certain people to “opt-out” of purchasing PIP benefits entirely if the named insured has “QUALIFIED HEALTH INSURANCE” coverage, or a spouse and/or any resident relative also has qualified health insurance. Qualified health insurance includes MediCARE and private health insurance plans that explicitly states that they cover auto accidents.
In addition, an applicant will be able to “opt out”* of no-fault coverage and coordinate benefits based upon “other health or accident coverage.” This would apply if the named insured, his or her spouse and all resident relatives have accident and health coverage that will cover them should they be injured in a motor vehicle accident.
- Changes in the order of priority
The new law also makes extensive changes to who pays no-fault claims and how much PIP coverage is provided to certain individuals. The most notable change pertains how injured individuals who do not have auto insurance themselves, or live with a resident relative with auto insurance, are treated.
Under the new law, injured individuals who do not have auto insurance coverage, or do not have auto insurance coverage through a resident relative must now seek PIP coverage through the Michigan Automobile Insurance Placement Facility (MAIPF), better known as the Assigned Claims.
The amount of PIP coverage afforded to individuals going through Assigned Claims also changes significantly. Going forward, the MAIPF will only have to pay claimants up to $250,000 in PIP benefits in most situations.
The new law now contains a managed care option. For some undetermined reduction in a premium, the auto insurance company can sell the policyholder a “managed care plan to direct care”. This option will give the auto insurance carrier/company the ability to monitor and direct medical treatment following a car accident.
Managed care options will include co-pays and deductibles. This is a dangerous part of the new law as it will give companies like State Farm and Allstate the ability to direct their customer’s medical treatment from the beginning of the claim until the end.
- Non-Driving Rating Factors
Auto insurance companies have for years used inappropriate non-driving factors to set rates for auto insurance premiums. Something that has commonly been referred to as “redlining”. These factors included, marital status, ZIP code, credit score, home ownership, education level, gender, and occupation. Under the new no-fault law, these non-driving factors can no longer be considered when setting rates.
This is a step in the right direction but the insurance carriers have carved out huge exceptions to circumvent these changes so they may continue to charge disadvantaged applicants more for auto coverage. These include rates determined by territory, which may be an area as small as a census tract (i.e., roughly the size of a neighborhood) and they can also consider credit history or what is commonly being referred to as “Insurance scores” which is based on credit information.
- Changes in Third-Party Negligence Claims
The mandatory minimum coverage for bodily injury (BI) claims increases from $20,000 per person/$40,000 per occurrence to $50,000 per person/$100,000 per occurrence. However, the default rate for BI coverage will be set at $250,000 per person/$500,000 per occurrence.
These increases are needed because medical bills and wage loss that exceed the new caps in PIP coverage can now be applied to a third-party negligence claim. Originally, 3rd party claim or “pain and suffering” claims only covered non-economic damages and were not part of the PIP/medical portion of an auto accident claim. But now, the changes that have passed allows an injured person to seek economic damages in excess of the allowable expense limits available. Now, medical bills that have been incurred after PIP coverage has been exhausted can now be claimed under the negligence case/claim.
The law has now changed the threshold definition for “serous impairment of a body function”, sealing into law the standard that was held in the Michigan Supreme Court case McCormick v. Carrier. To obtain money from an at fault driver for Pain and Suffering, an injured person must have what is referred to as a “threshold injury.”
The definition of what is a “serious impairment”, is now:
- It is objectively manifested, meaning it is observable or perceivable from actual symptoms or conditions by someone other than the injured person.
- It is an impairment of an important body function, which is a body function of great value, significance, or consequence to the injured person.
- It affects the injured person’s general ability to lead his or her normal life, meaning it has had an influence on some of the person’s capacity to live in his or her normal manner of living.
This examination is fact and circumstance specific to each injured person and case, must be conducted on a case-by-case basis, and requires comparison of the injured person’s life before and after the incident.
- Other Important Changes to the Law
Limitations on Attendant Care – The new law limits family provide attendant care to 56 hours per week. Currently, there is no limitation. This will force families to hire outside companies to come into the home when providing round-the-clock care to their catastrophically injured loved ones. This provision of the no-fault law begins on July 1, 2021.
Tolls the one-year back rule found in MCL 500.3145 – Under the new law, this limitation is tolled until the date the insurer formally denies the claim. However, this tolling “does not apply if the person claiming the benefits fails to pursue the claim with reasonable diligence.” It is unclear what reasonable diligence means.
Mini Tort Claims – The amount allowed for mini-tort claims (vehicle damage reimbursement) increases from $1,000 to $3,000.
IMEs – When injured in an auto accident in Michigan, at some point during the claim or case, the automobile insurer will inevitably have you attend what is called Independent Medical Examination or IME. These IME’s are by the insurance’s own doctor of choice, paid for by the insurance company. Michigan No-Fault law now imposes the following rules as it relates to IME’s.
- The IME doctors being hired by the insurance companies must be licensed in Michigan.
- If you are being provided care by a specialist, then the IME doctor that is examining you must also specialize in that specialty as well as be board certified as well in that specialty.
- During the year before an IME, the chosen IME doctor must have devoted a majority of his or her professional time to the clinical practice/specialty or teaching in an accredited medical school.
Anti-Fraud Unit – Michigan No-Fault law now will crackdown on automobile insurance fraud and as such, has created a new Anti-Fraud Unit to investigate all “criminal and fraudulent activities in the insurance market”.
- My Opinions About Some Available Options Resulting From Changes to the Law
If you have a qualified health insurer you can “Opt Out” of Auto Accident Benefit Coverage. DON’T Do This. Some health insurance plans only cover 5 PT visits a year. Some none. Others may have a 45% co-pay. I have a client presently, who inadvertently “opted out” of medical coverage because he has health insurance. He requires a cervical fusion surgery. It has been canceled twice because the health insurer has no approved same. IF they do approve it, my client will have to pay $2700.00 out of pocket for the surgery, and if the doctor requires another MRI (which often occurs immediately prior to the surgery to determine if there has been movement, or following the procedure, to make sure alignment is proper), my client will be responsible for same personally. Moreover, he will be responsible for any physical therapy after 4 visits due to a yearly cap.
Perhaps the worst part for my client is that his health insurer is a Self Funded ERISA Plan, which arguably allow them to assert a lien for reimbursement of medical payments on any recovery he receives. Meaning, his health insurer is going to try to take his Pain and Suffering settlement, and arguably they have the right to do it.
Moral to the story, Think hard before Opting Out.
only 6 PT visitshe will only ’s health insurer will not havphe will With auto No-Fault coverage, there are no co-pays.