Car Insurance Laws Are Changing In Michigan

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The new Michigan No-Fault law was passed by the Michigan Legislature today.

Lawmakers in the House of Representatives voted 94 to 15 in favor the No-Fault reform plan in Senate Bill 1 and the Senate concurred by a vote of 34 to 4.

Senate Bill 1 now goes to Gov. Gretchen Whitmer, who is expected to sign the bill into law.

In an early morning statement on May 24th, Gov. Whitmer stated she was looking “forward to working with the legislature to pass and sign this important [bipartisan auto no-fault reform] legislation into law.”

In the late afternoon, after the House and Senate had passed Senate Bill 1, Gov. Whitmer praised the Legislature’s “truly historic . . . vote,” which resulted in the the “passage” of the new Michigan No-Fault law:

“This plan will help drivers from Detroit all the way to the U.P. It guarantees lower auto insurance rates for eight years, protects people’s choice to pick their own insurance and coverage options while preserving the safety net, and bans insurance companies from using discriminatory non-driving factors when setting rates.”

Michigan’s auto No-Fault law has now undergone substantial and very significant changes that will affect every driver in Michigan.

Here’s what has changed with the new Michigan No-Fault law:

  • No-Fault PIP Choice: No longer will all drivers be required by law to purchase unlimited No-Fault Michigan PIP benefits. Drivers now will have the choice of the following No-Fault medical benefit coverage levels: $50,000 (if a driver is enrolled in Medicaid); $250,000; $500,000; or “no limit.”
  • Opt-Out of No-Fault PIP medical benefits: Drivers with Medicare may “elect to not maintain coverage” for No-Fault PIP medical benefits.
  • Savings for drivers: The driving force behind today’s new No-Fault law has been the public outcry over the high costs of auto insurance. That pressure got to politicians on both sides to do something to lower auto insurance prices. For policies effective after July 1, 2020 and before July 1, 2028, the new Michigan No-Fault law promises 45% savings for drivers who opt for 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 maintain their unlimited No-Fault medical benefits. Meanwhile, for drivers who opt-out of No-Fault PIP medical benefits altogether, they will see 100% savings on the No-Fault PIP medical portion of their auto insurance bill. It is important to note that all of 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 is estimated to be approximately 35% to 44% of your total auto insurance premium. Therefore it is reasonable to expect that for most drivers who currently find auto insurance to be unaffordable, this new No-Fault law will fail to make any meaningful difference.
  • Savings for auto insurance companies: There was always going to be a carve-out for the insurance companies. The new Michigan No-Fault law allows insurers to avoid reducing their premiums if they can demonstrate to the Insurance Commissioner that the new law’s mandatory rate reductions would violate their constitutional rights and/or leave them at risk of having too little “capital.”  While these significant changes have now been made to our auto law, there is still no transparency on what insurance companies profit margins have been these many years. The adage to “measure twice, cut once” has been ignored by both the House and Senate Republicans and Democratic Governor Whitmer.
  • Michigan Catastrophic Claims Association: Under the new Michigan No-Fault law the MCCA would continue to be liable for catastrophic injury benefits payable under policies issued or renewed before July 2, 2020 and for policies after July 1, 2020 where drivers have opted to maintain unlimited No-Fault PIP medical benefits. Drivers who decide to cap their No-Fault benefits or opt-out altogether will still be required to pay annual MCCA assessments to cover deficits. Finally, the MCCA will pay refunds to drivers if actuarial examination shows that MCCA assets exceed 120% of the MCCA’s liabilities. The refund will be the difference between excess and 120% of liabilities.
  • No-Fault medical-provider fee schedule: A No-Fault fee schedule based on the Medicare fee schedule would be created and it would govern charges from doctors, hospitals, clinics, rehabilitation facilities and any provider who cares for and treats car accident victims. Depending on the type of facility involved – whether a substantial portion of its patients are indigent, 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.
  • Passing along savings from No-Fault medical-provider fee: The savings that auto insurance companies realize 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 be required to document these savings in their rate filings to the Director of the Department of Insurance and Financial Services (DIFS).
  • Auto insurance premium rates and pricing factors that cannot be considered: Auto insurers cannot base premium rates on such non-driving factors as: sex, marital status, home ownership, education level attained, occupation, the postal zone in which the insured resides and credit score.
  • Mini Tort: The Michigan mini tort law’s maximum recovery limit will increase from $1,000 to $3,000.
  • 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 sues to recover for unpaid and overdue benefits, he or she “may not recover benefits for any portion of the loss incurred more than 1 year before the date on which the action was commenced.” (MCL 500.3145(1)) The new Michigan No-Fault law provides that this “limitation . . . is tolled from the date the person claiming the benefits makes a specific claim for the benefits until the date the insurer formally denies the claim.” However, the bill cautions that tolling “does not apply if the person claiming the benefits fails to pursue the claim with reasonable diligence.”
  • Independent medical examinations by insurance company doctors: The new Michigan No-Fault law imposes the following rules for IMEs of car accident victims by insurance company-hired IME doctors: (1) The IME doctors must be licensed in Michigan; (2) The examining IME doctor must be a licensed, board certified, or board eligible physician qualified to practice in the area of medicine appropriate to treat the car accident victim’s condition; (3) During the year before an IME, the IME 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 are not required to pay for more than 56 hours per week of No-Fault in-home, family-provided attendant care.
  • 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.”
  • Insurance Commissioner involvement when insurers refuse to pay No-Fault benefits: The new Michigan No-Fault law requires the Insurance Commissioner to create a page on the Department of Insurance and Financial Services (DIFS) website describing how the Insurance Commissioner “may be able to assist a person who believes that an automobile insurer is not paying benefits, not making timely payments, or otherwise not performing as it is obligated to do under an insurance policy.” Additionally, the Insurance Commissioner would be required to create a website page that “allows a person to report insurance fraud and unfair settlement and claims practices.”
  • Higher liability limits: Liability limits refer to the insurance you take out to protect yourself if you cause a car accident and injure another driver. Before today, drivers were required to carry liability bodily injury insurance with mandatory minimum limits of $20,000 for bodily injury or death to one person in one car crash or $40,000 for two or more persons in one car crash. The new Michigan No-Fault law would increase those minimum limits to $50,000 and $100,000 respectively.  A new “default” residual bodily injury limit of $250,000 and $500,000 will be offered to drivers, with drivers able to elect more or less liability coverage should they so choose, but not less than the new mandatory minimums of $50,000/$100,000.
  • Suing for excess medical benefits: Under the new Michigan No-Fault law, a person injured in a car accident can sue for excess medical costs and economic expenses, i.e., those medical costs and expenses that will exceed the dollar amount of the No-Fault PIP cap amount they have selected. Michigan now becomes like most other states in this regard, and the amount of coverage available in the insurance policy liability limits of the wrongdoer negligent driver becomes much more important. 
  • Serious Impairment of Body Function threshold for pain and suffering compensation: Under the new Michigan No-Fault law, a car accident victim will be required to satisfy the new definition of a “serious impairment of body function” in order to be able to sue for pain and suffering compensation. Specifically, 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”; “is an impairment of an important body function, which is a body function of great value, significance or consequence to the injured person”; “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. Although temporal considerations may be relevant, there is no temporal requirement for how long an impairment must last. This examination is inherently fact and circumstance specific to each injured person, must be conducted on a case-by-case basis, and requires comparison of the injured person’s life before and after the incident.”

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