The Small Print Taketh Away! Considerations For Settling Your Next Michigan No-Fault Auto Claim

• Published date: 20 September 2022
• Subject Matter: Insurance, Litigation, Mediation & Arbitration, Insurance Laws and Products, Arbitration & Dispute Resolution, Personal Injury
• Law Firm: Collins Einhorn Farrell
• Author: Matthew S. LaBeau

Introduction

A large majority of civil lawsuits settle before trial. While some statistics reflect that 95% of cases settle, the percentage is likely higher. This is especially applicable to first party No-Fault personal injury protection (PIP) cases in Michigan. Penalty interest and attorney fee provisions¹ provide a bad faith type component to these claims that creates a huge incentive for insurance carriers to resolve them. In addition, it is not unusual for plaintiff attorneys to have concerns over the causation of injuries, the reasonableness of claimed benefits, or other components of the claim. Therefore, these claims frequently head down the path to settlement.

Given the likelihood that any given PIP claim will settle prior to trial, it is important to have solid understanding of the benefits available and whether there is an opportunity to obtain a release of some, or all, future benefits. It is also important to be aware of the various pitfalls on settlements that appear to resolve the claim, only have to additional exposures arise. This article provides important things to keep in mind when attempting to settle your next PIP case.

The Standard First-Party No-Fault Settlement

In the instance of a Michigan PIP claim, an insurer is liable for benefits without regard to the fault of the parties involved in the accident². An insurer is liable to pay benefits for 'accidental bodily injury arising out of the ownership, operation, and use of a motor vehicle as a motor vehicle.³'

The default position on Michigan No-Fault claims is that personal injury protection insurance benefits are payable as the loss accrues⁴. In addition, benefits are required to be incurred in order to be payable⁵. Theoretically, if a matter were to proceed to trial with a result favorable to the plaintiff, it would only include no-fault benefits that had accrued/been incurred at that time, and would not include future benefits⁶. Therefore, unless stated otherwise, a Michigan PIP settlement generally includes benefits to present, only.

There are four main categories of benefits available to a claimant:

• Allowable expenses⁷. These benefits are defined as 'reasonable charges incurred for reasonably necessary products, services, and accommodations for an injured person's care, recovery, and rehabilitation.' While this broad definition includes medical testing and treatment it also includes medically related expenses such as attendant/nursing care, medical transportation/mileage prescriptions, home and vehicle modifications, and guardianship/conservator fees. Allowable expenses may be available for a lifetime, or subject to limited coverage levels of $50,000⁸, $250,000, or $500,000 chosen by the policy holder. In addition, treatment or testing provided after July 1 2021 may be subject to a fee schedule that caps the amount of reimbursement⁹.
• Work loss¹⁰. This benefit is defined as 'loss of income from work an injured person would have performed during the first 3 years after the date of the accident if he or she had not been injured.' This also includes individuals who were temporarily unemployed at the time of the accident¹¹. This is subject to a monthly cap and is only available for three years from the date of loss. It should be noted that this is not loss of earning capacity, actual loss of wages must be shown¹².
• Household replacement services¹³. These benefits are defined as...