Michigan’s New Auto No-Fault Reform Insurance Law

Effective July 2, 2020, Michigan’s Auto No-fault Reform law takes effect. The new legislation provides numerous reforms to the auto insurance industry in Michigan. The following highlights important changes:

New PIP Medical Options for Personal and Commercial Auto Policies

Under the new law, you will no longer be required to carry unlimited Personal Injury Protection (PIP) coverage which pays for your medical expenses if you are injured in an auto accident.

PIP Coverage OptionsPersonal and Commercial Auto Stipulations
$50,000Medicaid enrollees only, subject to conditions (Personal Auto option only)
$250,000Option to exclude PIP Medical for Personal Auto*
$500,000
UnlimitedDefault if coverage options not selected

*Will allow an applicant or policyholder to “opt out” of PIP coverage if they have proof of a qualified health coverage or benefits payable from another Personal Auto Policy.

  1. All household members have Medicare; OR
  2. Applicant/Named Insured has Medicare and other household members are covered by a health or accident policy; OR
  3. Applicant/Named Insured has Medicare and other household members have another personal auto policy

*Exclusion to the $250,000 PIP medical coverage level if an applicant or named insured has qualified health coverage.

  1. All household members are covered by health or accident coverage; OR
  2. Applicant/Named Insured covered by health or accident coverage and spouse/relatives covered by Medicare; OR
  3. Applicant/Named Insured covered by health or accident coverage and some, but not all, spouse/relatives covered by health or accident coverage or Medicare

Requires a listing of household members to be excluded. Members not explicitly listed will have $250,000 PIP medical coverage.

Order of Priority for No-Fault Claims

The law also changes the order in which an injured person collects PIP benefits. Beginning July 2, 2020 an injured person will pursue PIP benefits in the following order:

  1. Insurer of the Named Insured
  2. Insurer of the spouse or resident relative domiciled in the same household; THEN
  3. Michigan Assigned Claims Plan – MACP ($250,000 benefit limit)

The law eliminates the owner, registrant and driver of the accident-involved vehicle from the order of priority for both occupants and non-occupants. Coverage is no longer extended to nonrelatives of the Named Insured who live in the household and relatives who do not reside in the household, even if they are listed as drivers. Out-of-state residents are no longer entitled to PIP benefits for injuries sustained in a Michigan motor vehicle accident unless the out-of-state resident has a vehicle both registered and insured in Michigan.

New Bodily Injury Options

New bodily injury limit options will need to be selected beginning July 2, 2020.

Bodily Injury LimitsPersonal AutoCommercial Auto
Split Bodily Injury/Property DamageCombined Single LimitCombined Single Limit
Default level if selection not made$250 / $500 / $10N/A$1,000,000
Bodily Injury and Uninsured Motorist (UM)/ Underinsured Motorist (UIM) - Minimum Financial Responsibility Limit$50 / $100 / $10Bodily Injury - $110,000 UM/UIM - $100,000Bodily Injury - $110,000 UM/UIM - $100,000

MCCA

The Michigan Catastrophic Claims Association (“MCCA”) is lowering the assessment charged per vehicle to $100 for the period beginning July 2, 2020 through June 30, 2021. This is a 55% reduction from this year’s $220 assessment. Insurance companies will charge this assessment only to people who choose to maintain unlimited lifetime personal injury protection (“PIP”) benefits. Those who choose lower limits under Michigan’s revised no-fault insurance law avoid the assessment altogether, as long as the MCCA is not in a deficit position.

Mini Tort

Under Michigan’s mini tort law, victims of car accidents can recover a maximum of $1,000 for vehicle damage from the at-fault driver who caused the crash, either through his or her automobile insurance company or from him or her personally.  For car accidents that occur after July 1, 2020, the maximum mini tort recovery amount will increase from $1,000 to $3,000.

 

Below are the answers to some common questions related to the reform:

 

Does my health insurance offer the same coverage as the medical coverage on my auto insurance policy?

Under an auto insurance policy, medical is covered through Personal Injury Protection (PIP). The coverage provided under an auto policy is broader than a health insurance policy. In addition to covering medical expenses it includes coverage for:

  • Wage loss
  • Attendant care (assistance with activities of daily living)
  • Replacement services (household activities you can no longer perform)
  • Survivor benefits
  • Funeral expenses

My auto policy currently has unlimited medical benefits. Can I choose lower limits in the future?

Currently every policy has unlimited benefits. As of July 2, 2020, auto insurers in Michigan will offer different limits for PIP. Going forward, unlimited coverage will still be available, along with options for lower limits.

Does my health insurance cover auto accidents and if so, do I still need to purchase PIP coverage under my auto policy?

Not all medical policies cover auto-related injuries. You will want to confirm this with your health carrier prior to making any decisions on PIP coverage. even if your medical policy covers auto-related injuries, you will want to take into consideration the additional coverage afforded by an auto policy’s PIP coverage before deciding, as you will be responsible for those costs if you change your PIP coverage.

If I choose a lower limit, will there be a fee schedule to help control medical costs?

Starting July 1, 2021, there will be a fee schedule which regulates what medical providers can charge, based on the procedure they perform, similar to workers’ compensation and health insurance. However, for the first year the law is in effect, the fee schedule will not apply. The effect is that medical costs will remain higher and a lower PIP limit won’t go as far.

Will I have more liability as a driver in Michigan on and after July 2, 2020?

YES. Under the current no-fault law, unlimited medical is mandatory. Currently, if you were at fault in an accident, you could only be sued for pain and suffering caused by serious injury, disfigurement, or death.

Under the new law, not only are you still responsible for those damages, but you can be responsible for the uncovered medical expenses of the other party.

For example, if an individual decides to purchase a $250,000 PIP limit and has bills totaling $1 million, you could now be responsible for the remaining $750,000. In addition, if you have an Umbrella policy which provides excess liability coverage over your business auto policy, the underlying limit requirement for the umbrella is $1 million. If you choose a lower underlying limit, there will be a gap in coverage for which you will be responsible. For these reasons, we would strongly encourage you to keep your $1 million liability limit.

In addition, today you can be liable for up to $1,000 for physical damage to another person’s vehicle if you are at fault in an accident and they do not carry collision insurance, or they have a deductible. This limit will be increased to $3,000 and can be covered under mini-tort coverage on your auto policy.

Will the same people still be covered under my policy PIP?

NO. Children who no longer call your home their residence or partners of people who live together, but are not married, may not find PIP coverage under your policy. If any of these circumstances apply to you, please talk to us about obtaining coverage.

Will I see a reduction in my auto insurance rates due to reform?

The law mandated that insurers lower their rates for the PIP portion of a policy depending on the limit selected. Consumers must remember that the percentage reduction mandated by the law only applies to the medical portion of the policy premium, and the out-of-pocket expenses related to choosing less coverage could far exceed any premium savings.

What should I expect at my next policy renewal?

If your auto policy renews prior to July 2, 2020, you are grandfathered into the current Michigan no-fault law until your policy renewal date in 2021.

Auto policies with a renewal date of July 2, 2020 and thereafter will receive PIP election forms three months in advance of your renewal date. Upon receipt of the election forms, we are happy to review the forms with you and answer any questions you might have. If your completed forms are not returned, the unlimited PIP will remain on your auto policy.