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The ‘warning’ nearly says it all about Sen. Virgil Smith’s ‘low-cost automobile insurance’ plan

April 28, 2015 by Steven M. Gursten

Fails to mention how much consumers will save; no provision that medical benefits are provided on No Fault basis; no coverage if health or disability is available; can’t sue for medical expenses over $50,000; pain and suffering damages limited to $20,000; loss of right to a jury trial

Sen. Virgil Smith

The “warning” nearly says it all about Sen. Virgil Smith (D-Detroit)’s proposed “low-cost automobile insurance” plan.

Under Sen. Smith’s “low-cost automobile insurance pilot program,” which he introduced on April 22, 2015, in Senate Bill 288 (co-sponsored by Sen. Joe Hune (R-Fowlerville), auto insurance companies that provide low-cost policies must warn their low-cost insureds about what the policies do and don’t cover.

In SB 288, this is called the “Warning” and it warns “low-cost” insureds of the following coverage limitations:

  • Auto accident-related “medical coverage” is capped at $50,000. (SB 288, Page 31)
    Only the low-cost insured is covered – not passengers, pedestrians or other persons. (SB 288, Page 31)
  • Coverage under a low-cost auto insurance policy excludes many of the protections and “benefits that are provided under a policy of No-Fault insurance in this state,” such as “wage-loss benefits,” “survivor’s benefits,” “funeral expenses” and “replacement services.” (SB 288, Page 31; see also Page 17)

Despite its thoroughness, however, the “Warning” needs very much to be expanded to include the following critical points:

  1. There’s no guarantee of how much low-cost insureds will actually save.
  2. There’s no provision stating that “first-party medical benefits” under the low-cost auto insurance plan shall be provided and/or “are payable” on a “no fault” basis, i.e., “without regard to fault” – as is the case with benefits and protections under Michigan No Fault auto insurance policy. (See SB 288, Pages 27-28; see also MCL 500.3105(2): “Personal protection insurance benefits are due under this chapter without regard to fault.”) IMPORTANT: That means that low-cost insureds may only be entitled to “first-party medical benefits” if they were NOT at-fault in causing the crash that resulted in their injuries.
  3. A $50,000 cap on crash-related medical expense coverage is “irresponsible and unrealistic.” (See below for details)
  4. Neither a spouse nor a resident relative of the low-cost insured can claim benefits under the insured’s low-cost policy. (See SB 288, Pages 20-21)
  5. Pain and suffering damages (which are also known as non-economic loss) are capped at $20,000 in the event the low-cost insured suffers a “serious impairment of body function” in a crash caused by another person. (See SB 288, Pages 22-23)
  6. If a low-cost insured’s crash-related medical expenses exceed the $50,000 cap, he or she is prohibited from suing the at-fault driver to collect “excess” medical coverage. (See SB 288, Page 24)
  7. “[F]irst-party medical benefits” are “payable only if there is no other health and accident coverage available to [low-cost] insured for the medical expenses incurred.” (See SB 288, Pages 27-28)
  8. Low-cost insureds have no right to a jury trial in the event they have a dispute with an auto insurer over the “reasonableness” of a medical charge and/or whether certain medical benefits are “medically appropriate.” (See SB 288, Page 33)

$50,000 cap on medical benefits is ‘irresponsible and unrealistic’

This is not the first that Sen. Smith has proposed capping car crash victims’ medical benefits at $50,000.

When he did it before, The Detroit Free Press was not impressed.

In a June 7, 2011, editorial, the newspaper observed:

“To be sure, a $50,000 minimum for medical care might be irresponsible and unrealistic, given today’s medical costs.”

To read more, please check out Michigan Auto Law’s blog post, “Virgil Smith’s No Fault reform bill is irresponsible and unrealistic.”

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