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:

1. “Medical expenses” (actually broader than just that), paid without limit as to time or dollar amount;
2. Wage loss (set usually at 85% of pre-accident gross earnings); and
3. “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.

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 in fact, I have a client right now who is in that position.  Not only that, nothing will 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.

Priority

Both the old law and the new law had/have rules regarding the priority, that governs 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 two 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.

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.

Deadline to Sue – The Dreaded “One Year Back” Rule

Under MCLA §500.3145, an auto accident claimant has one year from the date of the last unpaid no-fault expense, within which to sue. After that one year period of time lapses, their expense becomes unenforceable against the no-fault automobile insurance company, if it is not sued upon.  It is not always the date of the accident that starts this “one year”, although it is probably the most careful way to look at this deadline. Let me give you an example of how it works generally

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.

EXAMPLE: 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.

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.

In 1986, the Michigan state Supreme Court issued a decision in Lewis v DAIIE, 426 Mich 93; 393 NW2d 167 (1986), that prevented the fraud that insurance companies were trying to perpetrate. They would receive the bills, and tell the injury victim that they had to investigate; they would then delay the process past the one year back, which the insurance company would then use as a defense to payment.

A later decision by the same Michigan state Supreme Court in Devillers v Auto Club, 473 Mich 562 (2005), effectively reversed this more liberal and generous rule, holding that the “one year back” rule would be enforced, without grace or exception.

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.

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

Typically, health insurance pays “primary” to no-fault, 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 writ 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. Do not refuse reasonable requests for a physical examination; most insurance policies have provisions requiring you to cooperate. If you fail to cooperate in any manner whatsoever, you may find your benefits terminated.

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