No-Fault Insurance

in 1973, Michigan enacted one of the first “No-Fault” laws in the nation, in response to courts being clogged with minor cases, and preventing more serious cases from getting to judges and juries. Other states enacted no-fault different versions, that varied in their coverages. Under Michigan’s version of no-fault, auto accident-related medical bills would be covered without regard to dollar amount or time. What this meant is that catastrophically injured people could access needed medical care long after the trauma of their accidents.

For 46 years, the system worked fine, in that injured people were treated for their injuries; non-serious auto accident cases were weeded out of the court system, and despite a generous package of accident-related medical benefits under the Michigan No-Fault Act, automobile insurance companies made substantial profits (and that is a good thing, too!)

Although it did work for everyone, the substantial profits the auto insurance companies were making, were evidently not sufficient, and they pressured state government, literally, for 20 or more years. Finally, in 2019 the State of Michigan enacted changes to Michigan no-fault, violating the old rule that, “if it ain’t broke, don’t fix it.” Most of the changes to Michigan no-fault, do not benefit the auto accident victim.

However, like it or not, auto accident victims and their families have to deal with the changes, and so I am providing you with this overview of what I see as the three most important areas of change in Michigan no-fault (two of them bad, one good)

Medical Caps/”Choice”

Under the old law, MCLA §500.3107, there was a standard package of benefits that were payable to eligible automobile accident victims:

“Medical expenses” (actually broader than just that), paid without limit as to time or dollar amount;Wage loss (set usually at 85% of pre-accident gross earnings); and“Household service replacement” (or survivor’s loss), discussed elsewhere on this website.

The rules regarding wage loss and “household service replacement” remain essentially unchanged from the old law, so I will not discuss them here. The “PIP Limits” apply only to accident-related medical expenses.

I have provided a detailed chart explaining what are supposed to be new choices made available to consumers, who are now supposed to be able to save money by selecting automobile accident coverage with artificially set limits, or “caps” on coverage.

“Medical Choice” Is A Bad Choice

In my view, any savings will be short-lived, and will be illusory. Someone selecting, for example, a $250,000 cap, whose accident lands them in the hospital for 10-12 days, might find that they had no more coverage, under their automobile accident policy. This happens every day, and just about every lawyer in Michigan has had a client in that position. Not only that, but nothing will also prevent auto insurance companies in Michigan from jacking up the rates, after two years, and the novelty of the new law wears off.

The statute currently allows no-fault medical coverage to be capped at $50,000 (for persons and Medicaid); $250,000; $500,000; and finally, an “unlimited” coverage, similar to what the old law provided for. MCLA §500.3107c

What happens when medical expenses exceed the cap? Under the new law, you CAN sue for these “excess medical expenses”. That is both good news and bad news, mostly bad.

We trial lawyers will do just fine under these new rules.

However, while we lawyers are certainly grateful for the business created by being able to sue for excess medical bills, this is bad for consumers, medical providers and the courts.

Consumers will have unpaid medical bills hanging over their heads, and they will file liens on pain and suffering lawsuits. Medical providers may now have to await the outcome of these lawsuits, in order to get paid, and they will likely have to take a serious reduction in their billing. Finally, the Michigan No-Fault system was set up to unclog the courts; this new change will do nothing to unclog the courts. In fact, it will do just the opposite.

Worse, some people who cannot get a no-fault insurance carrier to pay their accident-related bills, will be forced onto Medicaid, or Medicare. You know who pays for that, Mr. & Mrs. Taxpayer.

The new law also allows for the selection of something called a “managed care option”, by which the consumers led to believe that she will save some money on insurance premiums. In exchange, the auto insurance she buys, with the “managed care option”, allows the auto insurance company to act essentially as an HMO, dictating to her where she gets treatment, and how much treatment she can get. MCLA §500.3181.

STAY AWAY FROM THIS “MANAGED CARE OPTION”. NO MATTER WHAT.

My Recommendation

I recommend to my clients that they opt for the “unlimited” coverage. The dollar differences in the insurance premiums (which may be temporary only, anyway) do not justify the exposure to the limited coverage that might be available when you might be forced into Medicaid… Or to no coverage at all. I carry the unlimited coverage myself, and I recommend that you do the same.

Constructive Ownership

In Michigan, you may well have a duty to insure a vehicle you do not own. How does that work? Why is that even remotely fair?

MCLA §500.3101(l) defines who an “owner” is, for the purpose of determining who has a responsibility to insure their vehicles. Under this statute, an “owner) is any of the following:

(i) A person renting a motor vehicle or having the use of a motor vehicle, under a lease or otherwise, for a period that is greater than 30 days.

(ii) A person renting a motorcycle or having the use of a motorcycle under a lease for a period that is greater than 30 days, or otherwise for a period that is greater than 30 consecutive days. A person who borrows a motorcycle for a period that is less than 30 consecutive days with the consent of the owner is not an owner under this subparagraph.

(iii) A person that holds the legal title to a motor vehicle or motorcycle, other than a person engaged in the business of leasing motor vehicles or motorcycles that is the lessor of a motor vehicle or

motorcycle under a lease that provides for the use of the motor vehicle or motorcycle by the lessee for a period that is greater than 30 days.

 (iv) A person that has the immediate right of possession of a motor vehicle or motorcycle under an installment sale contract.

If you are found to be a “constructive owner”, i.e., someone who the court says “owns” the vehicle, without really owning it, and if do not have insurance, there will be no no-fault coverage. No medical payments, no wage loss or other cash replacement available under the statute.

This is also important if you are looking to sue an at-fault party, for having caused an accident. A person driving a vehicle they “own”, without the required insurance, cannot collect monetary damages, no matter how at-fault, the at-fault driver is. MCLA §500.3135(2)(c),

The ban on collection of monetary damages to vehicle owners without insurance, includes “constructive owners”

Priority

No-fault insurance priority rules govern which insurance company is required to provide coverage; MCLA §500.3114 & MCLA §500.3115. You can appreciate, no insurance company wants to pay, and accordingly, there is frequently a game of “hot potato”, to see who gets stuck paying, when there are multiple insurance companies involved. The game of “hot potato” was there, both before and after the change in the rules.

However, there are relatively recent priority rules changes that stand out in my mind at least, for the purpose of sharing with you on this website. These are the rules that relate to uninsured passengers, occupying insured vehicles; and rules that relate to uninsured pedestrians, struck by insured vehicles. There are other changes, too, but these are the most significant, in my opinion.

Formerly, both uninsured passengers inside insured vehicles, and uninsured pedestrians being struck by insured vehicles would collect their no-fault medical expenses from the insurance company, insuring the vehicle. Now, both categories of injury victims have to go to a state agency called the “Assigned Claims Plan”, and apply for the assignment of an auto insurance company, to provide coverage for his auto accident -related medical expenses. This agency then tells an insurance company, that may have nothing to do with an accident, that they must provide coverage; this is part of the price they pay, for being able to reap profits from selling auto insurance.

EXAMPLES:

UNINSURED PASSENGER EXAMPLE: Jim does not have auto insurance and therefore relies on friends to drive him around. His friend Sally has State Farm Insurance, and while she is driving him around, there is an accident (it does not matter whether Sally is at fault, or not; that is why they call this “no-fault”).

OLD LAW: Jim would get his auto accident-related medical bills paid for by State Farm, Sally’s insurance company, without regard to time or dollar amount.

NEW LAW: Jim now has to apply to the “Michigan Assigned Claims Plan”, asking them to assign an auto insurance company, to cover his auto accident-related bills. Jim is also subject to a cap of $250,000, which in more serious auto accident cases may well limit his access to medical care.

UNINSURED PEDESTRIAN EXAMPLE: Jim does not have other insurance, and therefore walks around, more than the average person (in Michigan that is quite difficult). Crossing a sidewalk, Jim is struck by Sally, who has State Farm Insurance.

OLD LAW: Jim would get his auto accident -related medical bills paid for by State Farm, Sally’s insurance company, without regard to time or dollar amount.

NEW LAW: Jim has to apply now to the “Michigan Assigned Claims Plan”, asking them to assign an auto insurance company, to cover his auto accident-related bills. Jim is also subject to a cap of $250,000, which in more serious auto accident cases will limit his access to medical care.

Deadlines: Written Notice, Filing Suit, and the One-Year-Back Rule

Michigan no-fault deadlines are unusually strict, and they should not be reduced to a single rule. Under MCL 500.3145:

• You must give written notice to your no-fault insurer, that you had an accident, at least if you want them to pay accident-related expenses.

• if notice was given or payment was made, an action may generally be commenced within one year after the most recent allowable expense, work loss, or survivor’s loss was incurred;

• recovery is generally limited to losses incurred within the one-year preceding commencement of the action; and

• the applicable periods are tolled from submission of a specific claim for payment until the insurer formally denies that claim, unless the claimant fails to pursue it with reasonable diligence. Do not count on this “grace period”. If you can, file suit before one year goes by, after you incur an accident-related expense that should be the responsibility of the no-fault insurance company.

The written notice must identify the claimant and injured person and state the time, place, and nature of the injury in ordinary language. A general notice of the accident is not a substitute for documenting and submitting each specific expense or loss. Minors and legally incapacitated persons may be affected by additional statutory provisions. Many of the insurance companies use a form, standard enough to look similar from company to company. However, you will want to check what YOUR no-fault insurer requires.

Do not rely on an adjuster’s informal assurance that a bill remains under review. Preserve proof of when notice, bills, wage-loss documentation, replacement-service forms, and other claims were submitted, as well as every written denial. Obtain legal advice promptly if payment is delayed or denied. That is what I am here for; call Jon Frank at (586) 727-1900, or send me an email at www.jonfranklaw.com

EXAMPLE APPLICATION OF “ONE-YEAR BACK RULE”:

EXAMPLE: Jim has an automobile accident on January 1, 2020. His auto accident bills are paid without dispute until May 1, 2020. Therefore, the “one year back” date, meaning the date by which suit must be filed in order to protect the right to collect these bills from the insurance company is May 1, 2021.

Using Jim’s January 1, 2020 auto accident, let us say that he incurs $5000 in medical bills between May 1, 2020 and June 1, 2020. Let us say that suit is not filed until May 15, 2021.

In this example, only the bills incurred between May 15, 2020 and June 1, 2020 are “fair game”. The others are barred by this moving deadline, sometimes referred to as a “rolling statute of limitation”, imposed by Section 3145.

By using the date of the accident as the starting point, there will be no doubt that all medical bills and

Other no-fault compensable expenses will be included. However, sometimes it is just simply not possible.

Under Subsection (3) to MCLA §500.3145, this one-year looming deadline is “tolled”, or put on hold, during the time after a claim is submitted in writing to the insurance company, “until the date the insurer formally denies the claim”, assuming that the injury victim took all diligent steps to present his/her claim.

Please note that all of this depends on you first notifying the insurance company in writing of the accident. While MCLA §500.3145 can be interpreted to give you one year within which to file that written notice with your insurer, there is usually no good reason not to notify them IMMEDIATELY. Please do so, for your own protection.

Auto accident victims would frequently submit the bills themselves, for payment by the no-fault carrier, and the no-fault carrier within delay consideration, or otherwise sit on those bills, leaving the accident victim in a state of limbo.

Michigan no-fault was always a complex subject, and the recently enacted changes have only made it more complex. Give Jon Frank at The Frank Law Firm, PC a call anytime at 586-727-1900, and I will be happy to help you navigate the twists and turns of this complicated law

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Typically, health insurance pays “primary” to a coordinated no-fault policy, meaning that the health insurer pays first, and any remaining unpaid accident-related expense should then be paid for by no-fault. This is called “coordination of benefits”. There are exceptions to this for “ERISA-qualified plans”, discussed below.

Under Michigan law, insurers are required to offer insurance at reduced rates, where that insurance pays secondarily (or is “coordinated”) with health insurance. Uncoordinated coverage provides potentially a more generous stream of coverage, and because it does not cost that much more than coordinated coverage, some folks prefer that coverage. Also, where your No-Fault case is covered by someone else’s policy, due to priority issues under MCLA §500.3114 or MCLA §500.3115, those cases are by definition, “uncoordinated”.

This section also governs disability plans. Most commonly, no-fault insurance carriers get to set off from their coverage, the amounts paid by disability coverage.

“ERISA qualified plans” are plans set up under a federal statute called the “Employee Retirement Income & Security Act”, or ERISA. These are self-funded plans, usually set up by large employers, who get tax and other benefits by setting up these plans. Where there is an ERISA-qualified plan, No-Fault will pay primary to health insurance.

How to know whether your plan is an ERISA-qualified plan? There is a website devoted to this, www.freeerisa.com. NOTE: When Medicaid is the health insurance provider (in the case of lower income folks), or Medicare (usually with persons over 65, and those on Social Security disability), No-Fault pays primary to these programs.

Call me, if you are on Medicare, and find that your Medicare is paying auto accident-related expenses that should be paid by No-Fault, or if Medicare is denying coverage, because your No-Fault carrier should be paying. In those cases, there may be a penalty recovery available under the “Medicare Secondary Payer Act”, 42 USC §1395y(b)(2).

You should not be faced with a potential cutoff of your Medicare benefits, as one of my clients recently was, because his no-fault insurance carrier refused to pay their fair share.

I cannot stress enough the importance of cooperating with your insurance company, before you have to hire me as your attorney. If you do have to hire a lawyer, he/she (or I) will be your contact with the insurance company.

However, before you do hire me, make sure that all of your communications are in written form, and that you have retained a copy of your letters, faxes or emails to the insurance company. If there is one thing insurance representatives fear, it is “the paper trail”. Not only that, but when you do retain counsel, you will have documents to share with them that will help them in their work. Request mailing addresses, fax numbers, and email addresses from your insurer, and use them!

Make Written Record of Phone and Face-to-Face Conversations

Do not reject phone calls from your insurer, and if you need to have a face-to-face meeting with your claim rep, then don’t refuse that contact, either. You will only alienate your insurance representative, and make them suspicious. However, if you must field a phone call, or have a personal visit with your claim rep, write them a follow up note, starting something like this: “Thanks for talking with me (or meeting with me) on August 23, 2020. I wanted to write to confirm our conversation (by phone/in my home/in your office), on June 16, 2019, when we discussed the following….

”Two Forms of Cooperation with Your Insurer

There are two main forms of cooperation you will be called upon to provide your insurer. The first is to provide authorizations to the insurer, that will allow them to access your medical, wage and other records. You are required to cooperate with your insurer’s reasonable requests, and it is very reasonable for them to want to review your current and past medical records. Sign authorizations as requested, send it in with a covering letter, and keep a copy for your file.

The other form of cooperation you may be required to provide is to submit to a physical examination by a doctor of their choosing. The insurance companies call these exams, “independent medical exams”, or IME’s; I prefer to call them “defense medical examinations”, or DME’s, because the doctors doing the exams get so many of them referred by insurance companies, that the doctors themselves are often not independent at all.

Regardless of the potential bias of the doctors, you cannot simply refuse reasonable requests for a physical examination; do not rely on your own judgment as to whether an insurance company’s request for a medical exam is reasonable or not. Most insurance policies have provisions requiring you to cooperate. If you fail to cooperate in any manner whatsoever, you may find your benefits terminated.

However, if you are not currently represented by an attorney, and you have a DME coming up, give me a call, and I can give you some tips on how to most effectively conduct yourself, once you get to the DME examiner’s office.

Michigan PIP Medical Coverage Options – Click here to download.

Michigan No-Fault Priority Overview — Click here to download.

Application for Personal Injury Protection Benefits Through the Michigan Assigned Claims Plan — Click here to download.

Michigan law previously held that a custody order was determinative of a child’s domicile, for the purpose of No-Fault priority. “Domicile” (which traditionally means place of residence, plus an intent to remain at that address) is an important concept in No-Fault priority law. If a child is injured while visiting with the non-custodial parent, this could be important in determining who the responsible insurance company is. That is no longer the case; under Frownfelter v Esurance, a child’s domicile is now determined under the traditional factors of domicile set forth in other cases, Workman v DAIIE, being one example.

Abdulla v Progressive

Here, the Michigan Supreme Court held that a tractor-trailer driver could not collect no-fault benefits, because he “owned” the tractor-trailer, and did not have the requisite auto insurance on it. His “ownership” interest was determined by MCLA §500.3101, which includes among its definitions of “ownership”, someone who has unfettered access to a vehicle for 30 days or more in a given year.

Gorgis v Auto Club

This June 2026 case is another in the long line of cases, distinguishing between an “employee” and an “independent contractor”. Sometimes employers try to characterize “employees” (essentially workers whom they control in the manner of, and compensation for their work) as “independent contractors” (workers over whom the employer has no such control. In this case, the Michigan Court of Appeals held that traditional categories of control by the employer over the employees’ method/manner of work, apply in the no-fault context. Again, this could be important in determining no-fault priority.

There are certain people who are not entitled to collect first-party no fault benefits. Those people fall into 5 categories under the statute, MCLA §500.3113:

1. Those who willingly operate or use a motor vehicle/motorcycle that was taken unlawfully, and knew or should have known that the motor vehicle/motorcycle was taken unlawfully;

2. The person was the owner or “registrant” of a motor vehicle/motorcycle involved in the accident, and that motor vehicle/motorcycle did not have the insurance coverage required by law

3. The person was not a Michigan resident, unless that person owned a motor vehicle that was registered and insured in Michigan

4. The person was operating a motor vehicle/motorcycle, regarding which they were named as an excluded operator, under MCLA §500.3009 (dealing with named excluded drivers)

5. The person was the owner or operator of the motor vehicle for which coverage was excluded under MCLA §500.3017 (dealing with digitally based rideshare services, like Uber/Lyft), or MCLA §500.3018 (dealing with other shared vehicle scenarios).

Obviously, people who get into accidents in their own vehicles, but do not have insurance on that vehicle, cannot collect insurance benefits. MCLA §500.3113(b)

Perhaps just as obvious, if the claimant is excluded under the policy, the law allows the insurance company to deny that excluded driver first-party no-fault benefits (medical expenses, wage loss reimbursement, etc). MCLA §500.3113(d)

Somewhat unfairly, a recent revision to “Section 3113” excludes non-residents from collecting first-party no-fault benefits, unless that non-resident owned a motor vehicle that was registered and insured in Michigan. As you might suspect, there are not many people (even affluent people with multiple residences) who register and insure their vehicles in Michigan. MCLA §500.3113(c)

Of the five categories of people made ineligible for no-fault benefits, there are two remaining categories: 1) persons using their own vehicles in an Uber-Lyft situation, while the driver is providing a pre-arranged ride, or when they are logged into that company’s digital network; and 2) a more frequent example, unlawfully taken vehicles.

Unlawfully Taken Vehicles

Passengers in Stolen Vehicles

Section 3113 bars recovery to those who willingly operate or use a motor vehicle/motorcycle there was taken unlawfully, or known to be such.

What about passengers in such vehicles, where the passenger head no part in unlawfully taking the vehicle, and did not know it had been unlawfully taken? In Henry Ford Health System v Esurance, 288 Mich App 593; 808 NW2d 1 (2010), The court held that passengers injured in this scenario, are permitted to collect no fault benefits (again, typically, medical bills, wage loss, and other associated no fault benefits), because they were not involved in the unlawful taking of the vehicle. Moreover, the Court of Appeals in this case held that because the passenger never took control or possession of the vehicle, Section 3113 did not bar their recovery. However, such passengers might still be barred from recovery, if they knew of the unlawful circumstances, under which the vehicle was taken.

Joyriding

There used to be an exception, allowing persons injured in vehicles not their own, when it was a “joyriding” situation. The typical example involved an underaged son/daughter of the vehicle owner, who took the vehicle without their parents’ permission, and who then had an accident. Obviously, they did not mean to permanently deprive their parents of the car, as would a car thief. That exception was abolished in Spectrum Health v Farm Bureau Insurance, 492 Mich 503; 821 NW2d 117 (2012)

The Michigan No-Fault Act covers accidents involving “motor vehicles”, but there is another statutory scheme, called the “Transportation Network Company Act” (aka the TNC Act) that covers so-called “transportation network companies”, like Uber and Lyft.

Because Uber/Lyft drivers are typically driving their own vehicles, which would be covered by the general provisions of the No-Fault Act, when the person is not “driving Uber”, there are different rules that apply, when the person is “driving Uber”

The first question, under the TNC Act, is whether the driver is logged into the TNC (be it Uber, Lyft, or another rideshare app), has the rider in their vehicle, or if the driver is engaged in a pre-arranged ride. Under those circumstances, the TNC must provide PIP coverage. This of course, would be primary to the driver’s own policy. If the TNC does not provide the coverage required, they effectively become the no-fault insurance carrier, required to pay no-fault benefits. See MCLA §257.2123.

The TNC and its carrier should be notified of an accident involving a rideshare vehicle; do not allow yourself to be drawn into a dispute over whether the driver is/is not logged into the rideshare app. Similarly, the driver’s own insurer should be notified as well. They can afford the inevitable game of “hot potato”, each trying to saddle the other with the claim. You should not bear that burden; you have enough to worry about already. Depending on the circumstance, the driver’s own policy may have priority, under the traditional priority rules found in MCLA §500.3114 and MCLA §500.3115

MCLA §500.3101 of the Michigan No-Fault Act limits the requirement of placing no-fault insurance, on the “owners or registrants of motor vehicles”, and that same statute defines a “motor vehicle” as a “vehicle, including a trailer, that is operated or designed for operation on a public highway by power other than muscular power and has more than 2 wheels.”

Because a motorcycle only has two wheels, it is statutorily excluded from the definition of a “motor vehicle”, and if there is any doubt about that, the statute goes on to exclude motorcycles from the definition of motor vehicles.

The effect of this word salad, is that an owner/registrant of a motorcycle, is not required to maintain no-fault insurance coverage, although they certainly can (and should) do so.

So, in an accident involving a motor vehicle and a motorcycle, the priority rules allow the motorcyclist to get their no-fault coverage from the insurer of the motor vehicle. If the motorcycle was in a single-bike, or motorcycle-only crash, there would be no no-fault carrier to pursue, unless the motorcyclist obtained no-fault coverage.

There may also be coverage for PIP benefits, through the Assigned Claims Plan, discussed elsewhere on this site.