Important choices for Michigan No-Fault car insurance in 2020

Michael Garris
Garris, Garris, Garris &?Garris, P.C.

The Michigan Automobile No-Fault Law, which first went into effect in October 1973, underwent major changes in May 2019. Some of those changes were implemented in June of 2019, but the most important changes go into effect on July 1, 2020. Those changes will have a significant impact on both the injured person and the at-fault driver in an injury incident involving a motor vehicle.

Here is why this matters—the type of Michigan No-Fault insurance coverage that you select will have a significant effect if you or a loved one are injured in a motor vehicle crash, struck by a car on a motorcycle, or hit by a car on a bicycle or as a pedestrian.

Purchasing car insurance is no different than obtaining life insurance or health insurance. You hope nothing bad happens to you or your family, but you obtain insurance to protect yourself and your family members in case something bad does happen.

It is important to understand that there are major differences between insurance companies in how they treat claimants. There are differences in the types of coverages that the different insurance companies offer. There are also differences in the amount of coverages that certain insurance companies will offer, such as Bodily Injury Limits, Uninsured Motorist Limits, Underinsured Motorist Benefits, and whether they offer Umbrella Coverage. Therefore, you need to shop around for price quotes from different insurance companies that can offer you the coverage that you need.

Under the new law, people will no longer automatically have guaranteed lifetime coverage for various allowable expenses, including hospital and medical bills, attendant care, car and home modifications, case management fees, physical and vocational rehabilitation, etc. The insurance companies will offer various options for reduced coverage, alleging that it will result in a lower premium. However, there are major problems with the new law.

Victims of automobile crashes who incur medical and rehabilitation expenses in excess of their own Personal Injury Protection (PIP) coverage could end up paying the excess hospital and medical expenses out of their own personal assets, go bankrupt if they do not have the funds to cover the expenses, or need to attempt to qualify for medical coverage through a government program such as Medicaid.

There are also serious consequences if you are the at-fault driver who causes victims to incur hospital and medical expenses in excess of the victim's No-Fault personal coverage, as you could become personally financially liable for those excess expenses. This type of liability did not exist under the old No-Fault law.

Under the new law, the only way drivers can protect against the new tort liability exposure is by purchasing a policy with higher liability coverage. Drivers also need to purchase a policy with higher Uninsured and Underinsured Motorist coverage to protect themselves and their family.

The choices that many people make will be affected by the amount of money that they have available to pay for automobile insurance. However, buying less coverage than you can reasonably afford could result in economic disaster down the road if the policy holder suffers a catastrophic injury that exceeds their PIP coverage or causes another person to suffer such an injury.

Here are recommendations to consider for purchasing Michigan car insurance:

(1) Select Lifetime Uncapped PIP Allowable Expense Benefit Coverage.

This is the same type of coverage that was afforded under the old Michigan No-Fault Law. It is not recommended that you choose any of the other PIP options for a number of reasons. For example, you should not consider the Medicare Opt-Out PIP exclusion, as Medicare does not provide for long-term care, case management fees, in-home attendant care, medical mileage, or vocational rehabilitation. It also may not provide for modifications of your home or car. These types of benefits are all available under Michigan No-Fault. It also is recommended that you not consider any of the other options, including the $50,000 Medicaid coverage.

(2) Increase Your Bodily Injury Liability Limits.

Due to the fact that you now have increased personal liability for a victim’s catastrophic excess medical expenses, it is recommended that you increase your Bodily Injury Liability coverage to at least $1,000,000. Additionally, if you have significant assets that would be at risk, you may want to consider purchasing an umbrella policy that provides $1,000,000 (or more) liability over and above your underlying $1,000,000 policy. This may sound like a lot of money, but with the increasing costs of hospital and medical services, many cases involve significant damages.

(3) Purchase Substantial Uninsured and Underinsured Motorist Coverages.

Most people have no idea what Uninsured and Underinsured Motorist coverage means. Unfortunately, there are a number of insurance companies and insurance agents that do not properly educate their customers as to the significance of these coverages. These types of coverages are extremely important, yet relatively inexpensive.

If the person who caused the crash has no car insurance and the victim has purchased Uninsured Motorist coverage, then that policy will provide compensation to the victim up to the policy limits purchased, just as if the at-fault driver had insurance.

If the at-fault driver has low liability coverage and the victim has purchased Underinsured Motorist coverage, that policy will provide compensation to the victim, up to the policy limits purchased, just as if the at-fault driver had the higher limits policy.

It is important that you carry at least $1,000,000 of BOTH Uninsured and Underinsured coverage (and you may want to consider having an additional $1,000,000 or more of Uninsured and Underinsured coverage in the umbrella policy).

(4) Avoid Managed Care Options.

There is a lot of uncertainty as to the details of this type of option, but it is expected that there will be limitations on the rights of patients to choose their own medical care providers. As such, you could be at the mercy of the insurance company.

(5) Avoid Step-Down Policies.

There are a few insurance companies in Michigan that insert clauses into their insurance policies that provides a Step-Down in coverage. These are also called intra-family exclusionary clauses. This clause basically says that a person related to the insured who is injured while riding in the insured's vehicle gets less coverage than a non-family member who also may be injured in the crash. Many times, it reduces the available liability coverage to the injured family member to the state minimum, which used to be $20,000 in Michigan and is rising to a $50,000 minimum. If there is a step-down in your policy, you could have purchased $1,000,000 in liability coverage but because it is a family member who is hurt, they will have only $50,000 of coverage available to them.

(6) Decide Whether to Coordinate or Un-coordinate Your No-Fault PIP Coverage.

This decision involves whether you want to purchase a No-Fault policy that is coordinated with your applicable health and/or disability insurance. In some situations, the premium reduction of a coordinated or excess policy may not be worth the disadvantages of purchasing full coverage. Some insurance companies are forcing the insured to select uncoordinated coverage where the health insurance plan excludes auto related injuries. This can be a complicated issue that should be explored further with a knowledgeable insurance agent and/or an attorney that is experienced in this area.

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The author is an attorney at Garris, Garris, Garris & Garris, P.C. in Ann Arbor.