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Devastating Michigan Auto No-Fault Decision Will Affect Thousands

January 6, 2009 by Steven M. Gursten

The worst Michigan no-fault insurance case of 2008 snuck in with only two days of the year remaining. In Moore v. Secura, the Michigan Supreme Court issued an opinion that will destroy the rights of thousands of people injured in motor vehicle accidents.

The two worst parts of the decision are as follows:

Michigan auto insurance companies will use notorious “cut-off” doctors now more than ever to suspend and terminate people’s no-fault insurance benefits.

Why? Because Michigan insurance companies are no longer required to resolve conflicting medical opinions before suspending or terminating no-fault insurance benefits.

Before Moore, insurance companies had a duty to resolve conflicting medical opinions before cutting off benefits. Here is an example of a typical conflict: A treating doctor says a person was injured, while a one-time insurance medical exam (IME) doctor who was hired by the no-fault insurer contends the person was not injured after a typical 10-minute physical examination.

After Moore and now that Michigan insurance companies are no longer required to resolve conflicting opinions before terminating no-fault benefits, it’s arguable that Michigan insurance companies have a direct financial incentive to find the worst, most notorious cut-off doctors (some use more colorful language when referring to these types of insurance doctors) to say the car accident victim is not hurt and can return to work. Then these doctors can suspend benefits based upon a one-time IME, regardless of how badly an auto accident victim is truly hurt or how many treating doctors say the person is still disabled.

When reading the decision, the majority of the Court actually seems to put the onus on the insured — not the insurance company — to resolve a conflicting medical opinion. This is completely ludicrous. How can you get an insurance company doctor, who is making a million dollars a year performing 10- to 15- minute cut-off exams to change his or her opinion? Isn’t this exactly why insurance companies choose these doctors to begin with?

The Ramifications of Moore for Michigan Accident Victims

1. In a state without bad faith insurance laws or punitive damages, insurance companies now have a direct financial incentive to find the worst insurance doctors around to suspend insurance benefits. There is no downside for these insurance companies: The worst prospect is that the insurance company has to pay the no-fault benefits that they had to pay back regardless. In other words, without a “big stick” to deter bad behavior like in many other states, there is little reason to expect Michigan automobile insurance companies treat people fairly.

2. The Michigan Supreme Court rejected the Michigan Court of Appeals finding that an insurer’s initial refusal to pay no-fault insurance benefits can be deemed unreasonable, even though it is later determined the insurance company is not required to pay those no-fault benefits.

This defeats the “Mend the Hold” doctrine. “Mend the Hold” is basically a common law defense that holds parties accountable for their actions. So if a party violates an insurance contract, for instance, the scope of inquiry is limited to the initial reason for violating the contract. A party cannot buttress or add new defenses and new arguments, and the scope of inquiry is limited to the reasons the party gave originally for violating the contract.

Again, thanks to Moore, insurance companies will continue adding new excuses and defenses, including IME exams right up to trial, for cutting-off people’s no-fault insurance benefits. This is terrible public policy for Michigan insurance companies. If an insurance company doesn’t want to provide benefits, they can now come up with as many excuses as they want to avoid having to pay valid no-fault claims, interest and attorney fees.

In practice, this means that insurance companies can continue sending people to a batch of “cut-off” exams on the eve of a PIP (no-fault first-party) trial, just in case the original excuse on why the insurance company suspended no-fault benefits does not work. The insurance company can then fall back on the later “cut-off” IME exams to then avoid having to pay the claim, interest and attorney fees

This opinion represents a perfect storm, as Justice Michael F. Cavanaugh, a well-respected victim’s rights judge, had to abstain from the ruling because his daughter works as an attorney for Secura Insurance Company. Sadly, this means that even though Judge Diane Hathaway is replacing the fiercely pro-insurance Chief Justice Clifford Taylor on the Michigan Supreme Court, the Moore v. Secura holding will likely remain the law in Michigan for the foreseeable future.

Related information:
Michigan Personal Injury Protection (PIP) Benefits

Protecting Yourself with Michigan Auto Insurance

Uninsured and Underinsured Motorist Coverage

Michigan No-Fault Insurance Law

Michigan Auto Law exclusively handles car accident, truck accident and motorcycle accident cases throughout the entire state of Michigan. We have offices in Farmington Hills, Detroit, Ann Arbor, Grand Rapids and Sterling Heights.

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4 Replies to “Devastating Michigan Auto No-Fault Decision Will Affect Thousands”

  1. I don’t understand why it is that the average Joe cannot hold insurance companies accountable in Michigan. We need new laws that not only hold insurance companies accountable, but severely punish insurance companies for wrongfully denying benefits. Otherwise, the insurance companies have an incentive to always cut-off benefits, and the insurance company abuses will not only continue, but get even worse. There is no good reason why Michigan residents should have the least amount of protection from insurance companies among all of the states.

    If the media payed some attention to how the little guy always seems to get the short end of the stick in the Michigan courts, then maybe things would change for the better.

    Keep fighting for us!!!!!

  2. I was involved in an auto accident that left me with TBI,rotor cuff wired jaw, broken nose 3 annular tears and a mediscus tear, and a fusion at the L5-S1
    My accident was 10-29-07, i was just awarded SSID ant State Farm is Asking me for all the paper work that SSI has sent so they figure out how much back back pay I owe them for loss wages. In the last 3 years iI had to jump thru hoops to get these checks.I have perscriptions my Doctores wrote for slip on shoes, a vibratating pad and MBT shoes. But State farm Bonni Childs the adjuster wants me to purchase these first senr in the reciets and then she’ll decide if they will reiburse me.
    my question is, I’m going to buy these items with SSI check that im suppose to pay the PIP Office one lump sum. How much trouble am I’m goinging to get i with State Farm. Because it’s about $500.00 dollers worth Of items that i need Because of the TBI. Wont it cost more money to take me to court to get theses perscribed items?

  3. Tim,
    In Michigan, the No-Fault (PIP) carrier has a statutory set-off for any governmental benefits that resemble PIP benefits (i.e. SSD, SSI, etc.). You will have to pay State Farm for any lump sum paid to you by the Social Security Administration, but only for those benefits paid for the period prior to 10-29-2010. That is the three year anniversary of your accident. Anything paid in the lump sum for disability after that date is yours. However, there have been situations where people receiving SSD or SSI have received tax statements. If you are sent any tax statements, you must make sure that before you pay State Farm, that that agree in writing, to pay any taxes due or leave you with enough money so that you can pay for any taxes due. With regard to your other expenses, if you have prescriptions for reasonable and necessary auto accident related medical treatment or supplies, I would discuss this with the adjuster’s supervisor before sending the them the money. They want the lump sum, so they may be more willing to work something out with you, allowing you can retain some of the money as reimbursement for those costs. Unfortunately, accident related expenses have to be incurred before State Farm is obligated to pay, so you may have to buy the items outright first and then pursue reimbursement.

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