Looking Down The Road At Changes To The Michigan No-Fault Act

• Published date: 17 August 2021
• Subject Matter: Insurance, Litigation, Mediation & Arbitration, Food, Drugs, Healthcare, Life Sciences, Transport, Rail, Road & Cycling, Insurance Laws and Products, Personal Injury
• Law Firm: Collins Einhorn Farrell
• Author: Matthew S. LaBeau

EXECUTIVE SUMMARY

It will likely take several years before the impact on premiums, claims, and litigation is fully determined. Certain provisions take effect immediately, while others, including regulatory changes, will take effect later. There are a few predictions that can be made at this time, however.

Providers will be able to bring their own cause of action against insurers. Once the fee schedule is implemented, however, insurers will no longer be litigating with claimants or providers as to the reasonableness of charges.

Lawsuits filed merely to prevent benefits from being barred by the one year back rule will no longer be necessary. It is now the obligation of the insurer to make a decision on a claim before it can be barred by the one year back rule. Insurers will now have more time to evaluate claims that are not submitted timely. Insurers and the state also have more tools in addressing potentially fraudulent claims.

It remains unclear whether this legislation will reduce the number of no-fault claims. If premiums are actually reduced, there may be more insured individuals on the roadways. It is also unknown how many people will opt out of allowable expenses coverage. Given that a large majority of no-fault claims fall below $250,000 or $500,000, it may not largely impact the value of most claims. Catastrophically injured claimants without lifetime allowable expenses will certainly be limited. As a result, one would expect that the MCCA would be pared down in both its assets and liabilities, as well as overall claims subject to involvement with the MCCA. As a result of the revamped order of priority, more claimants will now be required to seek coverage through the Michigan Automobile Insurance Placement Facility (MAIPF) and not from insurers of the motor vehicle involved.

Lastly, it is also entirely possible that claims for third party automobile negligence and uninsured/underinsured motorist benefits will increase. The minimum bodily injury policy limits are increasing substantially. Claimants can seek damages in the form of excess allowable expenses, including medical expenses and attendant care, in addition to seeking excess wage loss benefits. One would suspect that claimants will need to file these claims to get their bills paid, and may need to be creative in order to establish a liability argument. Also, with the prospect of economic damages in third party cases, one could also envision cases becoming more difficult to settle, resulting in more cases going to trial.

One thing is for certain: this will be an interesting few years as courts throughout the state interpret these new statutory provisions. Stay tuned!

INTRODUCTION

The Michigan No-Fault Act has remained largely unchanged from the time of its enactment in 1973. Over the years, rising insurance rates, especially in the City of Detroit, created a push for reforming the Act in order to provide relief to consumers. The Michigan legislature and the governor have agreed on bipartisan legislation that drastically alters the provisions of this statute. This article summarizes the major changes that will impact all aspects of claims under the No-Fault Act.

COVERAGE CHOICES FOR ALLOWABLE EXPENSES

The No-Fault Act provides for three primary categories of benefits: allowable expenses, work loss, and household replacement services. Allowable expenses includes a broad array of medical related benefits which were previously unlimited in amount and scope. This has now drastically changed. Insurers, under MCL 500.3107C and MCL 500.3107D, may now sell automobile insurance policies with coverage for allowable expenses in limited amounts. These limits do not apply to wage loss or household replacement services benefits. Coverage for allowable expenses will be available in the following amounts:

• $50,000 (only if the applicant or named insured is enrolled in Medicaid and any spouse and all resident relatives have qualifying health insurance or a no-fault policy with coverage for allowable expenses).
• $250,000 per individual and per loss occurrence.
• $500,000 per individual and per loss occurrence.
• Unlimited per individual and per loss occurrence.
• Opt out of coverage (i.e. no coverage) for allowable expenses (only if the named insured or applicant has Medicare, and the spouse, and any resident relative have qualified health coverage or a no-fault policy with coverage for allowable expenses).

An insurer must provide a prospective insured with a form that explains the benefits and burdens of each coverage option, allows them to choose their desired option, and acknowledges that they received and reviewed the form. The default option is unlimited coverage if the applicant or named insured does not make an effective selection. There is a presumption as to a given coverage level, however, if a policy is issued with a certain coverage level and the premium charged matches that coverage level.¹

For coverage levels that have limits on allowable expenses, carriers are required to reduce premiums a certain percentage at each level.² Carriers can be exempt from the premium reduction requirements if they can show that the premium reduction will result in a financial hardship or a constitutional violation as applied to the insurer.³ It should be noted that the regulatory changes for insurance carriers with regard to rates have changed so drastically that they should be reviewed for compliance.

In addition, automobile insurers may now offer a managed care option that provides for allowable expenses. This managed care option will operate like an HMO, with monitoring and adjudication of the injured person's care and the use of a preferred provider program. The option will include deductibles and co-pays in exchange for a reduced premium.⁴

COORDINATION OF BENEFITS

Under MCL 500.3109a, an insurer may offer personal protection insurance benefits at reduced rates, deductibles, and exclusions reasonably related to other health and accident coverage. This was commonly referred to as a coordination of benefits provision, and created a scenario where health or disability insurance would be required to pay medical or wage loss benefits first, with the automobile insurer only having a potential exposure for excess benefits.

MCL 500.3109a was amended...