The new Michigan No-Fault law will have drastic, unprecedented, long-term and, in many cases, life-altering consequences for thousands of car accident victims and millions of drivers throughout Michigan. Car accident victims will be tragically denied necessary catastrophic injury coverage to ensure their medical care and treatment needs are met. Drivers will likely never see the car insurance premium “savings” that politicians promised. Here is the definitive statement on what you need to know about Michigan’s new No-Fault auto insurance law.
On June 11, 2019, the new No-Fault law known as Senate Bill 1, which was passed by the Michigan Legislature and signed by Gov. Gretchen Whitmer, took effect. It fundamentally transforms Michigan’s auto No-Fault insurance law, resulting in substantial and very significant changes that will affect every driver in Michigan now and for decades to come.
Here’s what has changed with the new Michigan No-Fault law:
- No-Fault PIP Choice: No longer will all drivers be required by law to purchase unlimited No-Fault Michigan PIP benefits. For auto insurance policies issued or renewed after July 1, 2020, drivers now will have the choice of the following No-Fault medical benefit coverage levels: $50,000 (if a driver is enrolled in Medicaid); $250,000; $500,000; or “no limit.” Learn more about PIP insurance.
- Opt-Out of No-Fault PIP medical benefits: Drivers with Medicare may “elect to not maintain coverage” for No-Fault PIP medical benefits for auto insurance policies issued or renewed after July 1, 2020.
- Savings for drivers: The driving force behind today’s new Michigan car insurance law has been the public outcry over the high costs of auto insurance. That pressure got to politicians on both sides to do something to lower auto insurance prices. For policies effective after July 1, 2020 and before July 1, 2028, the new Michigan No-Fault law promises 45% savings for drivers who opt for the $50,000 cap on No-Fault PIP medical benefits; 35% savings for drivers who opt for the $250,000 cap; 20% savings for drivers who choose the $500,000 cap; and 10% savings for drivers who wish to have “no limit” and maintain their unlimited No-Fault medical benefits. Meanwhile, for drivers who opt-out of No-Fault PIP medical benefits altogether, they will see 100% savings on the No-Fault PIP medical portion of their auto insurance bill. It is important to note that all of these savings are limited only to the No-Fault PIP portion of your auto insurance bill, not to your entire auto insurance bill. The PIP portion is estimated to be approximately 35% to 44% of your total auto insurance premium. Therefore it is reasonable to expect that for most drivers who currently find auto insurance to be unaffordable, this new Michigan No-Fault law will fail to make any meaningful difference.
- Savings for car insurance companies: There was always going to be a carve-out for the Michigan car insurance companies. The new Michigan No-Fault law allows insurers to avoid reducing their premiums if they can demonstrate to the Insurance Commissioner that the new law’s mandatory rate reductions would violate their constitutional rights and/or leave them at risk of having too little “capital.” While these significant changes have now been made to our auto law, there is still no transparency on what Michigan car insurance companies profit margins have been these many years. The adage to “measure twice, cut once” has been ignored by both the House and Senate Republicans and Democratic Governor Whitmer.
- Michigan Catastrophic Claims Association: Under the new Michigan No-Fault law the Michigan Catastrophic Claims Association (MCCA) would continue to be liable for catastrophic injury benefits payable under policies issued or renewed before July 2, 2020 and for policies after July 1, 2020 where drivers have opted to maintain unlimited No-Fault PIP medical benefits. Drivers who decide to cap their No-Fault benefits or opt-out altogether will still be required to pay annual MCCA assessments to cover deficits. Finally, the MCCA will pay refunds to drivers if actuarial examination shows that MCCA assets exceed 120% of the MCCA’s liabilities. The refund will be the difference between excess and 120% of liabilities.
- No-Fault medical-provider fee schedule: A No-Fault fee schedule based on the Medicare fee schedule would be created and it would govern charges from doctors, hospitals, clinics, rehabilitation facilities and any provider who cares for and treats car accident victims. Depending on the type of facility involved – whether a substantial portion of its patients are indigent, whether it is a freestanding rehabilitation facility or a Level I or II Trauma Center – reimbursement will range from 190% to 250% of the amount payable under Medicare. Under the New Michigan No-Fault Law, the new Medicare-based, No-Fault medical-provider fee schedule will apply to “treatment or rehabilitative occupational training” rendered after July 1, 2021.
- Passing along savings from No-Fault medical-provider fee: The savings that Michigan car insurance companies realize as a result of the No-Fault medical provider fee schedule must be passed along to drivers in form of lower premium rates. Auto insurers will be required to document these savings in their rate filings to the Director of the Department of Insurance and Financial Services (DIFS). However, it’s not until after July 1, 2022 that Michigan’s Insurance Commissioner has to start checking to ensure that auto insurers are passing along fee-schedule-generated savings to drivers.
- Auto insurance premium rates and pricing factors that cannot be considered: Auto insurers cannot base premium rates on such non-driving factors as: sex, marital status, home ownership, education level attained, occupation, the postal zone in which the insured resides and credit score. The prohibition against these non-driving factors begins July 1, 2020.
- Mini Tort: The Michigan mini tort law’s maximum recovery limit will increase from $1,000 to $3,000 for accidents occurring after July 1, 2020. More on the Michigan mini tort law change
- Tolling of the one-year-back rule: Under our existing No-Fault law, when a car accident victim has been denied or cut-off from No-Fault benefits and sues to recover for unpaid and overdue benefits, he or she “may not recover benefits for any portion of the loss incurred more than 1 year before the date on which the action was commenced.” (MCL 500.3145(1)) The new Michigan No-Fault law provides that this “limitation . . . is tolled from the date the person claiming the benefits makes a specific claim for the benefits until the date the insurer formally denies the claim.” Tolling will be available immediately. However, the bill cautions that tolling “does not apply if the person claiming the benefits fails to pursue the claim with reasonable diligence.”
- Independent medical examinations by insurance company doctors: The new Michigan No-Fault law imposes the following rules for IMEs of car accident victims by insurance company-hired IME doctors: (1) The IME doctors must be licensed in Michigan; (2) If care is being provided to the person to be examined by a specialist, the examining IME physician must specialize in the same specialty as the physician providing the care, and if the physician providing the care is board certified in the specialty, the examining IME physician must be board certified in that specialty; (3) During the year before an IME, the IME doctor must have devoted a majority of professional time to clinical practice of medicine/specialty or teaching in an accredited medical school. It is expected that these rules will take immediate effect.
- Attendant Care: Under the new Michigan No-Fault law auto insurers are not required to pay for more than 56 hours per week of No-Fault in-home, family-provided attendant care. This limitation applies after July 1, 2021.
- Anti-Fraud Unit: The new Michigan No-Fault law will crackdown on car insurance fraud by creating an Anti-Fraud Unit to investigate all “criminal and fraudulent activities in the insurance market.” This will take effect immediately.
- Insurance Commissioner involvement when insurers refuse to pay No-Fault benefits: The new Michigan No-Fault law requires the Insurance Commissioner to create a page on the Department of Insurance and Financial Services (DIFS) website describing how the Insurance Commissioner “may be able to assist a person who believes that an automobile insurer is not paying benefits, not making timely payments, or otherwise not performing as it is obligated to do under an insurance policy.” Additionally, the Insurance Commissioner would be required to create a website page that “allows a person to report insurance fraud and unfair settlement and claims practices.” These requirements will take effect immediately.
- Higher liability limits: Liability limits refer to the Michigan car insurance you take out to protect yourself if you cause a car accident and injure another driver. Before the new law, drivers were required to carry liability bodily injury insurance with mandatory minimum limits of $20,000 for bodily injury or death to one person in one car crash or $40,000 for two or more persons in one car crash. However, the new Michigan No-Fault law will increase those minimum limits to $50,000 and $100,000 respectively. A new “default” residual bodily injury limit of $250,000 and $500,000 will be offered to drivers, with drivers able to elect more or less liability coverage should they so choose, but not less than the new mandatory minimums of $50,000/$100,000. The new minimum liability limits take effect after July 1, 2020.
- Suing for excess medical benefits: Under the new Michigan No-Fault law, a person injured in a car accident can sue for excess medical costs and economic expenses, i.e., those medical costs and expenses that will exceed the dollar amount of the No-Fault PIP cap amount they have selected. Michigan now becomes like most other states in this regard, and the amount of coverage available in the Michigan car insurance policy liability limits of the wrongdoer negligent driver becomes much more important. Suing for excess medical benefits will become an issue only after the new No-Fault PIP Choice levels become available after July 1, 2020.
- Serious Impairment of Body Function threshold for pain and suffering compensation: Under the new Michigan No-Fault law, a car accident victim will be required to satisfy the new definition of a “serious impairment of body function” in order to be able to sue for pain and suffering compensation. Specifically, the new Michigan No-Fault law defines a “serious impairment of body function” as an “impairment” that: “is objectively manifested, meaning it is observable or perceivable from actual symptoms or conditions by someone other than the injured person”; “is an impairment of an important body function, which is a body function of great value, significance or consequence to the injured person”; “affects the injured person’s general ability to lead his or her normal life, meaning it has had an influence on some of the person’s capacity to live in his or her normal manner of living. Although temporal considerations may be relevant, there is no temporal requirement for how long an impairment must last. This examination is inherently fact and circumstance specific to each injured person, must be conducted on a case-by-case basis, and requires comparison of the injured person’s life before and after the incident.” This new definition of “serious impairment of body function” will take effect immediately. Significantly, the new Michigan No-Fault law states that the new definition of “serious impairment of body function” “is intended to codify and give full effect to the opinion of the Michigan Supreme Court in McCormick v. Carrier, 487 Mich 180 (2010).”
UPDATE: On June 11, 2019, Gov. Whitmer signed House Bill 4397. That makes June 11, 2019, the official effective date for the new statutory definition of “serious impairment of body function,” which is the injury threshold law that people injured in car accidents in Michigan are required to meet, as well as the new rules for out-of-state residents who are injured in car accidents in Michigan. The new rules for independent medical examinations also took effect on June 11, 2019. Other new changes, including the tolling of the one-year-back rule; (2) the new consumer anti-fraud unit; (3) and the new requirement that the Insurance Commissioner/Department of Insurance and Financial Services create an online consumer page had an effective date of May 30, 2019, which was the day that Gov. Whitmer signed Senate Bill 1.