Why it’s not a good idea for you to cash out your No-Fault claim after a car accident, even when your attorney wants to
Insurance companies want to close out no fault PIP claims. And for years they have offered a little “sweetener” – some additional sum of money – to people injured in car accidents in Michigan who have received no fault benefits, so they can close the file.
But now it is getting much more aggressive, with claims adjusters and defense insurance lawyers really pushing people to settle out and waive future benefits.This is done through offering a one-time settlement of normally a couple hundred or a couple thousand dollars on an open No-Fault insurance (PIP) claim.
This means that an auto insurance company would pay you a lump sum monetary settlement and in exchange, you would no longer receive your No-Fault PIP benefits, which include medical expenses, attendant care (nursing services), household replacement services and lost wages.
Some insurance adjusters will try to intimidate people, telling an auto accident victim that if they don’t accept the offer to settle out the claim, they will set them up for an Independent Medical Exam (IME) and suggesting they will get cut-off anyways, so they may as well take the money now.
Complicit in this practice are many Michigan plaintiff lawyers. Since these lawyers have signed up the claim on a contingency fee of 1/3, there are way too many lawyers willing to push their clients to settle out future no fault benefits so they can take an extra 1/3 of this additional settlement money that the insurance company will offer to settle out the claim.
This is also one of the worst things you can ever do. I routinely advise my own clients NOT to do this, and I have only had two clients in almost 20 years as an insurance attorney in Michigan agree to settle out and waive future no fault PIP benefits.
So, by this point, you may be asking yourself, why this is such a bad idea? I’ve seen people with neck and back injuries that require expensive surgery that costs tens of thousands of dollars – and they couldn’t get it paid for by no fault because they settled out their open claim with their insurance companies for a few thousand dollars.
Yes, I recognize that this can seem like a lot of “free money” at the time, but it comes with a big-time price. Especially when you consider that you are waiving your future rights to lifetime medical care and to up to three years of lost wages if your injuries flare up, get worse, or become aggravated in the weeks or months after you sign the release of future no fault benefits. It just makes no sense to do this, and it will leave you very vulnerable.
Bottom line: DO NOT settle your open No-Fault PIP claim. In Michigan under no fault, all necessary future medical benefits are unlimited, and they will cover all accident-related injuries – including the brain injury that requires later treatment for dementia or the spinal disk that later requires surgery – for your entire life!
In the event you have no other health insurance or lose your health insurance at some date in the future, you will always have your No-Fault PIP claim to fall back on and protect you. This is an invaluable protection and one of the great crown jewels of the Michigan no fault system. Again, do not settle it away for a few hundred or a few thousand dollars with your insurance company, even if your own attorney wants you to.
What about Medicare or Medicaid? You are also not supposed to shift medical costs from treatment for injuries from a car accident onto Medicare or Medicaid, which are by Michigan law considered payers of last resort (meaning Medicare and or Medicaid would pay you if there is no other insurance to cover you).
Here’s my lawyer caveat (hey, I am a lawyer so you can’t blame me for the caveat, right?):there may always be very unique circumstances where settling an open claim is a correct decision. But it is so rare that it must be discussed with an experienced insurance attorney before proceeding. And my default answer is still always to pass on settling out and waiving your future insurance claim.
If your auto insurer – or your own lawyer – is pressuring you to cash in your No-Fault claim, take a minute and think about some of the possible complications you may face in the future from your injury. It’s just not worth the risk.