The Michigan No-Fault insurance system is considered to be one of the best and most comprehensive systems in the United States in providing compensation for an individual injured in a car crash. Because of this, most efforts to change our No-Fault system or decrease benefits owed to injured individuals are initiated by the very insurance companies that profit by selling policies in Michigan. Their only motivation can be to further maximize their profits.
The Michigan No-Fault Insurance Act
On October 1, 1973, Michigan passed the No-Fault Insurance Act (MCL 500.3101). Before this, a person injured in a motor vehicle crash in Michigan could sue the driver of the vehicle that caused the crash for all injuries and damages. But this led to a number of injustices, including:
- Lengthy delays in receiving compensation. An individual’s medical bills and lost wages went unpaid for months or years because the injured person usually had to bring a lawsuit to recover damages.
- Inadequate compensation for severely injured people. The minimum statutory liability required in the State of Michigan was only $20,000/$40,000 (per person/per crash).
- Some people were forced to settle their claims prematurely. Not everyone could afford to wait while the insurance companies starved them out.
- People partly at fault for a crash (even 1%) were barred from bringing a claim. This meant that an injured person would not even be entitled to payment of his or her medical expenses.
The Michigan No-Fault Act was passed as an attempt to correct such problems under the prior tort system. The goal of the No-Fault system is to provide victims of motor vehicle crashes assured, adequate, and prompt reparation for certain economic losses. Shavers v Kelley, 402 Mich 554 (1979).
First Party No-Fault Claims
There are different types of claims that can be brought under Michigan’s No-Fault Act. One type is known as a First Party No-Fault claim (or PIP claim), where a qualifying individual seeks benefits against a specific insurance company who, by law or contract, is required to timely pay benefits to the injured individual. These can include payments for:
- Reasonable and necessary expenses for the care, recovery and/or rehabilitation of the injured person. (This is broader than just medical expenses).
- Wage loss for the first three years, up to a 30-day monetary maximum.
- Replacement services (payment to obtain services by others that the injured person formerly performed for himself or his dependents; e.g., lawn mowing, laundry, meal preparation).
- Survivor loss, funeral and burial expenses where the individual dies in the crash.
These benefits are generally payable when a person sustains an “accidental bodily injury, arising out of the ownership, operation, maintenance or use of a motor vehicle as a motor vehicle.” This can encompass situations beyond just a typical motor vehicle crash.
Advantages of First Party No-Fault
In a First Party claim, it does not matter who caused the crash, and there is no minimum level of injury that is necessary to be eligible for benefits. (People can be denied No-Fault coverage under limited situations, such as if they are driving an uninsured car that they own). Thus, an injured party does not have to wait until his or her case is finalized to receive these benefits. In most cases, this alleviates the financial hardship on the injured individual.
Another major advantage of Michigan No-Fault is that there are no annual or lifetime caps on the amount an injured person can receive for allowable expenses (including medical treatment). A person who suffers a serious lifelong injury will be entitled to receive medical treatment for his or her entire life for crash-related injuries. Without this lifetime coverage, once a person reached a periodic or lifetime maximum, that individual would be forced to go on Medicare, Medicaid, or other taxpayer-funded governmental insurance systems to receive additional care. Without Michigan No-Fault, taxpayers would be forced to subsidize the seriously injured party’s medical care instead of the insurance company. Further, under the Michigan No-Fault insurance coverage, a person should be able to receive higher quality care than if on a government-subsidized benefit.
Another distinct advantage of Michigan’s No-Fault system is that an insurance company that does not timely pay PIP benefits (and is later found to have unreasonably refused to pay) can be assessed 12% penalty interest and actual attorney fees on an overdue benefit. These sanctions are designed to ensure that an insurance company responsibly handles a claim and makes payments timely.
Lastly, a Michigan resident is entitled to collect PIP benefits even if in a motor vehicle crash in another state in the United States, U.S. territories or possessions, or Canada. Non-residents injured in Michigan automobile crashes also may qualify for benefits under specific situations.
Third Party No-Fault Claims
The next type of claim under Michigan No-Fault law is a “Third Party” claim. This type of claim is usually brought against the driver and/or owner of the vehicle that caused the crash. In exchange for the right to receive First Party benefits regardless of fault, the Michigan No-Fault Act imposes certain limitations on motor vehicle victims’ rights to recover Third Party damages.
A person must sustain a certain threshold level of injury in order to be able to recover compensation for non-economic damages such as pain and suffering, mental anguish, decreased enjoyment of life, and/or loss of consortium. An individual may also be entitled to compensation for the economic losses in excess of what is payable under a First Party claim without having to prove a threshold injury. When an individual dies in a motor vehicle crash, his or her Estate can seek damages for loss of love, society, companionship, and excess economic claims.
However, the at-fault driver is not liable for any medical expenses, wage loss, or other benefits that the injured party receives through his or her own insurance company (so long as the at-fault driver is insured and did not intentionally cause the injury).
If the injured party is 50% or less at fault in causing the crash, he or she can still recover compensation. Though he or she may be partly at fault, the claim is not completely barred as it was before the adoption of No-Fault. If the injured party is more than 50% at fault, the at-fault driver is not liable for non-economic damages.
Mini Tort Exceptions
Another potential type of claim is what is referred to as the “mini tort exception.” An at-fault driver is only liable for a maximum of $1,000.00 for uninsured damage to the other party’s vehicle under most circumstances. If your vehicle was legally parked and is struck by another vehicle, you are entitled to recover the lesser of the repair cost or fair market value of the vehicle that is totaled, even if you do not have collision coverage.
Michigan is one of 12 states that have No-Fault automobile insurance laws. Many of these states have very limited First Party benefits and differing thresholds, which result in numerous injustices to persons injured as a result of the negligence of other drivers. It is this author’s opinion that Michigan’s No-Fault system is the most comprehensive system in the United States because it provides significant protection for those injured in motor vehicle crashes.