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Redeeming future No-Fault benefits: What to do when your auto insurance company offers to cash in your PIP claim

October 4, 2011 by Steven M. Gursten

Insurance lawyer offers advice on redemptions of future No-Fault insurance benefits

Here’s my short answer on what to do when insurance companies start talking settlement on your No-Fault futures — especially if you have suffered a traumatic brain injury (TBI), spinal cord injury, or a disc injury such as a herniated disc that may require future back surgery or neck surgery — DON’T DO IT!

Here’s the long answer: Michigan No-Fault (PIP) insurance allows unlimited, lifetime medical care and treatment for personal injury caused by auto accidents (note this may change later this year with pending legislation). Auto insurers don’t like to keep claims open, so claims adjusters will often offer you a future “lump sum” settlement amount to buy out and close out your insurance claim.

I have many claims adjusters tell me they receive a year-end bonus based upon how many claims they can close- ie. how many cases they can buy-out and redeem people’s future claims.

This financial incentive for the insurance companies to close claims and for adjusters to make supervisors happy leads many insurance companies and adjusters to cross the line. Some adjusters have implied to my clients that they will “cut-off” their future insurance benefits, so why not settle the claim now? There are even some insurance companies today, like Progressive Insurance, that are unusually aggressive about settling out futures. There is one particular Progressive adjuster I know who says to her own insured customers that if they don’t take the money she is offering , she will investigate them!

Insurance company scare tactics, such as “speculating openly” on the phone with you that it is probably time to send you to an insurance medical exam (IME), are meant to intimidate people and lead people to redeem their No-Fault insurance futures.

To redeem or not to redeem, that is the question…

As long as proper compensation is being paid for what looks like a well-resolved injury where there is little need for future medical treatment, there is nothing wrong with settling out your futures. Our own insurance lawyers have been able to redeem tens of thousands in extra dollars for our own clients in these limited and very fact-specific circumstances.

What a No-Fault lawyer shouldn’t do is to settle out futures on certain types of personal injury cases – such as traumatic brain injuries from car accidents, or serious spinal cord injuries. The risk is too great. Our own insurance lawyers always advise strongly against redemption of No-Fault in these types of injury cases. With TBI, your risk of a catastrophic future skyrockets relative to the normal population, as people develop dementia, early-onset Alzheimers, Parkinson’s and serious clinical depression. With any type of herniated disk or spinal cord injury, the risk is that an already injured disk could further rupture, causing the need for extremely expensive spinal surgery that far outweighs the extra money that can be made by redeeming No- Fault benefits.

I like to say to my own clients when the subject comes up: broken arm, OK. Broken brain, not OK.
So when the subject of redeeming future No-Fault insurance benefits comes up, it’s best to discuss your future prognosis and medical care and treatment needs with your doctors, and evaluate the insurance company’s settlement offer with an experienced Michigan No-Fault insurance lawyer to see if the redemption offer is fair or unfair.

And never be intimidated by insurance company adjuster threats – either overt or implied.

Why auto accident injury victims should not settle or redeem No-Fault insurance claims on brain injury cases

Remember, any offer to settle futures will often be at a healthy discount to what they might have to pay in the future. Without an experienced No-Fault insurance lawyer, I’ve seen some insurance companies literally offer mere pennies on the dollar in very serious injury claims.

And since Michigan has no bad faith insurance laws or punitive damages, these insurance companies can get away with doing this. Some of the things that I have heard claims adjusters say to settle out futures on No-Fault are shocking. But although these remarks would be completely illegal in most states, they are not here.

If the amount of money the insurance company is offering is extremely small, and the risk of you having future medical issues that require care is likely, I would strongly suggest that on a risk/reward basis, it is almost never worth giving up your right under Michigan’s No-Fault insurance laws of being able to receive lifetime future medical care and treatment, and No-Fault attendant care for a serious medical injury.

Remember, it isn’t how you are right now that should be the sole factor in making your decision to settle or redeem future No-Fault benefits. It is what the future holds or may hold that should be the guiding factor behind your decision. Using my example above on brain injury, since it is so common in truck accidents and car accidents, even though a traumatic brain injury may be well-managed at present, it is the long-term consequences and the need for lifetime medical care and attendant care that is critical. I recently wrote a blog about the connection between TBI and dementia and Alzheimer’s.

Spinal injuries, such as herniated discs are another great example. A herniated disk can be medically stable at present, but many will require expensive treatment and back surgery or neck surgery at some point in the future.

Remember, you always have the option of hiring an injury lawyer and filing a No-Fault PIP lawsuit against your auto insurance company, so do not be intimidated by veiled threats from your adjuster that your benefits may be cut-off if you don’t take the offer.

When you should consider settling a case for futures on No-Fault

Every case is fact-specific, so it is always best to consult with an insurance attorney before you settle a No-Fault insurance case for futures. I should note that I have served as an expert witness on several legal malpractice cases now, mostly with lawyers who seemed solely motivated by making a few extra dollars than the welfare of their clients. That being said, here are a few examples of when you might want to consider settling and redeeming your future No-Fault claim:

o If you have, and know you will have excellent health insurance in the future that can cover future medical bills and treatment (make sure there is no exclusion for past auto accidents).

o If your injury has fully resolved.

A well-healed fracture is a good example. Usually the risk of future serious problems is very low. But be careful, because even in this example, if you lose your job and your health coverage with it, you could one day need your No-Fault PIP benefits to pay for medical care if you suffer serious post-traumatic arthritis, develop Reflexive Sympathetic Dystrophy (RSD) or other problems – even from that seemingly simple and innocuous bone fracture.

If you think you have specific facts that justify it, discuss your injury with your doctors and the amount being offered with an experienced injury attorney who is very familiar with No-Fault beforehand.

FINAL WARNING: There are, sadly, many Michigan injury lawyers out there today who routinely settle out their client’s futures, often for only a couple hundred extra dollars. This makes no sense to me, especially on serious injury cases. I predict many of these injury lawyers, in an effort to add a few dollars to their own attorney fee, will face certain legal malpractice claims one day when these clients have catastrophic – and foreseeable – medical consequences and are out of luck.

Remember, in the majority of injury and accident cases, it just isn’t worth it to redeem futures, especially when the insurance companies are offering literally pennies on the dollar.

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 is available for comment.

Related information to protect yourself:

Michigan’s 6 worst insurance companies

Your 3 potential cases after an auto accident

Uninsured and underinsured motorist coverage – A must have

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. Call (800) 968-1001 for a free consultation with one of our Michigan insurance lawyers.

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