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HB 4936 – What the new bill will do to Michigan's No-Fault insurance protections

Michigan insurance attorneys break down consequences of this No-Fault “reform” proposal

HB 4936 was recently proposed by Republican state Rep. Pete Lund. This bill, or whatever builds on HB 4936, will make seismic changes to Michigan’s auto No-Fault insurance laws. Even if HB 4936 does not become law, insurance lawyers see this bill as likely serving as the framework for future No-Fault “reform” legislation.

Here’s my first synopsis in a series of blogs on the new HB 4936 bill. Today I will discuss how the bill will affect Michigan drivers, car accident victims, order of No-Fault priorities, what happens to people injured in accidents driving an employer’s vehicle, and strangely, why the new bill absolves auto insurance agents who have made mistakes causing harm to their own customers.

Medical expenses for Michigan auto accident victims now capped

o The crown jewel of the Michigan No-Fault law has always been lifetime coverage of medical expenses for reasonably necessary products, services and accommodations. This will be eliminated. The coverage will simply cease to exist, and no one will be able to buy unlimited medical protection any longer.

o The new coverage for medical expenses will be available in incremental coverage levels of $250,000, $500,000, $1 million, or $5 million [?3107(l)(a)]

o If a person injured in an auto accident does incurs medical expenses in excess of his or her selected PIP coverages, the accident victim will have no other recourse than to file a lawsuit against the at-fault party to recover the unpaid balance. [?3135(3)(d)]

Comment: As I stated in my Michigan Lawyers Weekly interview on this bill in the September 19, 2011 issue, I foresee this will increase litigation over small medical claims in the courts. I fail to see how forcing people to file a lawsuit to cover physical therapy bills or MRIs is a positive thing. Most people will choose the lowest (read:most inexpensive) coverage they can purchase. The Anderson study: Impact of Proposed PIP Choice Law in Michigan estimates that 75-90 percent of people will choose the lowest possible coverage amounts.

This will also raise the cost of insurance for people who want full protection. If 75-90 percent of people are choosing the lowest auto insurance coverage they can buy, this will drive up the cost of insurance for those who desire greater protection with higher limits, because the insurance pool will shrink considerably.

Order of Priority – Who pays for No-Fault benefits after an auto accident in Michigan

Insurance will be made applicable to an insured person, his or her spouse and then any relative of either living in the same household, including children, regardless of whether they were able to participate in the insurance coverage elected by the insured person. [?3107(l)(a)]

Insurance coverage – How your health insurance would come into play

Individuals who do not have auto insurance available to them in their household are limited to the minimum auto insurance coverage level available, but only after an auto accident victim first exhausts his or her health insurance coverage or other benefit sources. [?3107(3)]

Employer furnished vehicles – When you get into a car accident in your work vehicle

Employees driving vehicles furnished by their employers are limited to the coverages selected by the employer, regardless of whether the injured employee purchased higher coverages on his or her personal auto. [?3114(3)]

Insurance agent liability

Insurance companies and their agents have no liability whatsoever if they sell incorrect or inadequate insurance coverage to policyholders, regardless of the instructions, requests, or needs of the policyholder. [?1245(1)]

Comment: There seems to be no good public policy rationale for this provision. When an insurance agent fails to adequately protect someone they owe a fiduciary duty to, and as a result great harm results to that person, the agent now is protected from any liability.

This seems to be the result of a desire to protect an insurance industry that spends a great deal in political campaign contributions to certain legislators, particular Republicans, rather than any rationale this writer can fathom that would consider protecting the public.

I’ll be blogging about HB 4936 all this week, including on how it will greatly reduce attendant care benefits and how there are no guidelines on how insurance companies can charge for the reduced PIP coverage.

Steven Gursten is recognized as one of the nation’s top insurance lawyers handling serious auto accident lawsuits. He frequently writes about Michigan No-Fault and the consequences of “reform” for drivers, and is available for comment.

Related information to protect yourself:

New study highlights dangers of so-called No-Fault “reform”

FAQs – How does the No-Fault law apply to my car accident?

Your 3 potential cases after a Michigan car accident

Michigan Auto Law is the largest law firm exclusively handling car accident, truck accident and motorcycle accident cases throughout the entire state. We have offices in Farmington Hills, Detroit, Ann Arbor, Grand Rapids and Sterling Heights to better serve you. Call (800) 777-0028 for a free consultation with one of our Michigan insurance lawyers.

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