INFORMATION center FOR lawyers and the public
SWEEPING CHANGES - IMPORTANT CHOICES
With sweeping changes to Michigan’s new auto insurance law set to begin on July 1, 2020, every Michigan motorist will be required to make critically important choices regarding how best to protect themselves and their families.
Under the new law, car crash victims no longer have guaranteed lifetime coverage for medical and rehabilitation expenses unless they specifically purchase that coverage. Moreover, all drivers will face increased liability in certain situations for the medical expenses they caused others to incur.
Every driver (and passenger) in Michigan now faces an elevated level of risk and liability. Michigan drivers now have to make potentially life-altering choices with possibly dramatic financial implications. With the stakes so high, Michigan motorists should make it a priority to educate themselves and understand their options.
PIP CHOICE
The biggest change for Michigan motorists is that mandatory comprehensive lifetime no-fault personal injury protection (PIP) insurance coverage has been replaced by a tiered system that allows individuals to opt-out or purchase as little as $50,000 worth of PIP coverage for medical expenses under certain circumstances. Other options include $250,000, $500,000, and No-Limit.
The most significant decision that Michigan drivers will make is selecting a level of PIP coverage:
OPTION 1 – NO LIMIT PIP OPTION – RECOMMENDED
OPTION 2 – $500,000 PIP OPTION
OPTION 3 – $250,000 PIP OPTION
OPTION 4 – $50,000 PIP MEDICAID OPTION (LIMITED AVAILABILITY)
OPTION 5 – OPT OUT (LIMITED AVAILABILITY)
BODILY INJURY COVERAGE
Under both the Old and New No-Fault Systems all motorists must purchase a minimum amount of bodily injury coverage. This coverage is the amount an insurance company will cover the driver and owner of a motor vehicle who is negligent and injures another person. Under the Old No-Fault System, the minimum amount all motor vehicle owners had to purchase was coverage for $20,000 because of bodily injury or death of 1 person in any 1 accident and $40,000 because of bodily injury or death of 2 or more persons in any 1 accident. These were known as 20/40 policies.
After July 1, 2020, all motor vehicle owners must purchase higher bodily injury coverage amounts. The new coverage minimum amounts are $250,000 per person and $500,000 per accident. When applying for insurance, if you want less coverage, an option will exist to reduce this coverage to $50,000 per person and $100,000 per accident. To exercise this option to reduce coverage, insurance companies will require motorists to sign a form approved by the Director of Insurance and Financial Services. This form is required because making this election for lower coverage is very financially risky, especially because drivers and owners of motor vehicles are now potentially liable for the medical bills of a person they injured.
Under the New No-Fault System all owners and drivers are potentially responsible for millions of dollars in damages they were never responsible to pay before. Because motorists are now potentially responsible for someone else’s medical expenses, they would be wise to select the highest coverage best suited to protect their assets, including their home, cars, and bank accounts.
UNINSURED MOTORIST & UNDERINSURED MOTORIST COVERAGE
This coverage provides protection for anyone hit by a driver without insurance—or without sufficient insurance to cover your damages. While there are no minimum amounts mandated in Michigan, most motorists would be wise to purchase as much Uninsured Motorist and Underinsured Motorist Coverage as they can afford.
Anyone who selects one of the non-Lifetime Options for no-fault coverage and is subsequently struck by someone with either no or low Bodily Injury coverage could be left with no means to pay their bills—unless they have purchased Uninsured Motorist and Underinsured Motorist Coverage (and provided that they were not more than 50% at fault for causing the crash).
BE CLEAR ON THE “SAVINGS” EXPECTED
It is important to note that the mandated savings for each of the coverage options above do not apply to the entire policy, but only to the PIP portion (around 45%) of the total insurance cost. For example, if you paid $2,000 for your total automobile insurance in May, 2019, under the new law, if you picked a $500,000.00 PIP policy, your savings would likely only be $180.00. Meanwhile, you and your family are now exposed to possible bankruptcy if you are involved in a crash resulting in catastrophic loss and can now be sued for the other person’s medical expenses if you cause the crash.
Also, the new law “does not prohibit an increase for any individual insurance policy premium if the increase results from applying rating factors,” so it is quite possible if your insurance company “re-rates” you or your family members, your premium will increase.
There is one final note on the “savings” supposedly built into the new law. The language of the statute very carefully states the new premiums “must result, as nearly as practicable, in an average reduction per vehicle from the premium rates for personal protection insurance coverage that were in effect for the insurer on May 1, 2019.” Essentially, the intent of the clause is to not mandate a specific savings for motorists but to provide for an average savings for everyone insured by a particular insurance company. However, expect insurance companies to simply claim it isn’t “practicable” to make the reductions. Remember, the reductions refer to the insurance company’s average, not your policy.
NOTES & COVERAGE CONSIDERATIONS
Information above provided by Liss Seder & Andrews, Michigan Auto Law, and the Coalition Protecting Auto No-Fault
RESOURCES FOR DRIVERS
Recommended Car Insurance Coverage For New No-Fault Law
Making Smart Choices: A Summary Guide to the New Auto No-Fault Law ©
Coalition Protecting Auto No-Fault website
Department of Insurance and Financial Services website
RESOURCES FOR LAWYERS
2019 MAJ No-Fault Evening Forum Recordings & Materials
2019 No-Fault Institute Recordings & Materials
2019 Liens Evening Forum Recordings & Materials