Advising clients injured
in auto accidents

Understanding The ‘Serious Impairment’ Threshold

An auto agent is often the first person an insured calls after being involved in a car accident.

As such, the agent should be prepared to answer questions and provide sound advice.

One important question the insured might ask is, “Can I recover anything for my pain and suffering, or am I limited to medical expenses and lost wages?” In other words, the insured is wondering whether “noneconomic” damages might be available for his or her injuries.

This question is obviously best answered by an attorney who specializes in no-fault auto claims, but agents should also have some basic understanding of this concept in order to better serve their clients.

At this point — because of a controversial Michigan Supreme Court decision that makes collecting noneconomic damages more difficult — providing sound, timely advice to clients is more important than ever.

The law says an insured may collect “noneconomic” damages only when he or she has suffered a “serious impairment of body function” under Michigan’s No-Fault Act.

For the last several years, courts have held that an injured person had suffered a serious impairment whenever the injury affected that person’s general ability to lead his or her normal life.

However, just this summer, the Michigan Supreme Court changed the rules, interpreting the serious impairment threshold in a way that negatively impacts victims seeking noneconomic damages.

The controlling case is Kreiner v. Fischer, released by the high court in July.

Not Serious Enough

In Kreiner, an insured injured his lower back, right hip and right leg in an auto accident. Medical tests revealed mild nerve irritation, degenerative disc disease, and other problems.

As a result of the accident, the insured, who worked as a carpenter, could no longer perform the same tasks for the same number of hours per day. However, he never missed any significant time from work.

Mr. Kreiner sued the other driver seeking noneconomic damages under the No-Fault Act.

The trial court dismissed the case, finding that Mr. Kreiner’s life was not affected seriously enough.

But the Court of Appeals disagreed, holding that the law explicitly required only that the impairment “affect the person’s general ability to lead his or her normal life.”

The Supreme Court vacated this ruling, however, and sent the matter back to the Court of Appeals for a determination of whether the insured’s impairment affected “his general ability to lead his normal life.”

According to the Court of Appeals, it did.

“One’s general ability to lead his or her normal life can be affected by an injury that impacts the person’s ability to work at a job, where the job plays a significant role in that individual’s normal life, such as the case at bar,” the Court of Appeals stated, allowing the insured to recover noneconomic damages.

The Supreme Court then granted leave to appeal and, in July, reversed the Court of Appeals, finding that the insured did not suffer a serious impairment.

“Although some aspects of a plaintiff’s entire normal life may be interrupted by the impairment, if, despite those impingements, the course or trajectory of the plaintiff’s normal life has not been affected, then the plaintiff’s ‘general ability’ to lead his normal life has not been affected and he does not meet the ‘serious impairment of body function’ threshold,” wrote Justice Clifford W. Taylor.

While the insured could no longer work to full capacity, the court said he was nevertheless generally able to lead his normal life.

How Serious is Serious?

But what is serious enough?

To answer this question, a judge must now follow a four-step test.

The first step is determining whether there is a material factual dispute over whether the insured has suffered a serious impairment. If there is, the judge may not decide the issue as a matter of law. If there is not, the judge may continue to the next step.

Next, the judge must decide whether an “important body function” has been impaired. If not, the insured has not suffered a serious impairment. If so, the judge may proceed to the next step.

Third, the judge must determine whether the impairment is objectively manifested. If not, the insured has not suffered a serious impairment. If so, the judge may proceed to the last step.

Finally, the judge must decide whether the impairment affects the insured’s general ability to lead his normal life. To decide this question, the judge must apply an objective analysis to whether the insured is still generally able to conduct the “course” of his or her normal life. Factors such as the duration of the impairment, the type of treatment and the eventual prognosis can be considered. If the judge answers this question in the affirmative, the insured has met the serious impairment threshold and is eligible for noneconomic benefits.

The Need For Advice

The Supreme Court has been roundly criticized for its “judicial activism” in going beyond the plain meaning of the statute as it was drafted by an already conservative, Republican legislature.

However, this is now the law and agents must explain this to their clients when they call.

And because it is difficult even for a judge or lawyer to determine when an insured might be eligible to recover noneconomic damages in today’s day and age, it is now even more important for agents to understand the challenges faced by accident victims and their legal representatives, and to lead those victims in the right direction.

Sending your injured client to an attorney who specializes in no-fault is now more important than ever. And staying on top of developing legal news that affects your practice will keep you on the cutting edge.

A quick review of the applicable law every now and then will help those in the insurance industry better serve their clients and themselves.

Auto Law ‘Snapshot’

Advising Injured Clients

Important charts, statutes and cases regarding the “serious impairment” threshold in Michigan:

Statute: MCL 500.3135(7)

Language: “[A serious impairment of body function is] an objectively manifested impairment of an important body function that affects the person’s general ability to lead his or her normal life.”

Court Interpretation: The words “general ability” have been the source of much debate in Michigan’s courts. In Kreiner, the Supreme Court explained that, where the “course” or “trajectory” of one’s normal life has not been affected, then the person’s “ general ability” to lead his normal life has not been affected and he does not meet the “serious impairment of body function” threshold.

Impact On Insurance: By using the words “course” and “trajectory,” the court has made it much more difficult for auto accident victims to recover noneconomic damages such as pain and suffering. As such, it is more important than ever that auto accident victims seek help from a no-fault specialist.

Case: Kreiner v. Fischer

Facts: An insured suffered injuries to his lower back, right hip and right leg in an auto accident. As a result, he was no longer able to perform the same tasks or work the same number of hours per day at his job as a carpenter. He sued the other driver seeking noneconomic damages under Michigan’s No-Fault Act.

Ruling: The Michigan Supreme Court found that the insured did not suffer a serious impairment of body function and therefore could not recover noneconomic damages.

Impact On Insurance: This ruling provides an example of an injury that is no longer compensable in terms of noneconomic damages under the No Fault Act. However, it is now more difficult to meet the “serious impairment threshold” and recover such damages. But what it takes to meet that threshold remains to be seen.

Case: Straub v. Collette (this case was consolidated with Kreiner)

Facts: An insured suffered a “boxer’s fracture” to his hand when his motorcycle collided with a car that turned in front of him. As a result of his injury, he could not work or play guitar in his band for several months. He sued the other driver seeking noneconomic damages under Michigan’s No-Fault Act.

Ruling: The Michigan Supreme Court found that the insured did not suffer a serious impairment of body function and therefore could not recover noneconomic damages.

Impact On Agents: This ruling provides a second example of an injury that is no longer compensable in terms of noneconomic damages under the No-Fault Act. Again, it is now more difficult to meet the “serious impairment threshold” and recover such damages, but where the line is drawn remains to be seen.