New Michigan Auto Law

understand your options under Michigan auto insurance laws

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New Michigan auto law effective july 2020

Michigan’s Auto Laws Are Complicated

Auto liability laws in Michigan are somewhat complicated. Many Michigan drivers don’t understand who will pay the bills if they are injured or killed in an auto accident. Health Insurance? The injured motorist’s auto insurance? A third party at-fault driver (and/or their insurance?) Workers’ Compensation? It could be any one (or more) of these depending on the circumstances of the accident.

This article explains:

Michigan’s No-Fault Auto law
Changes to Michigan auto laws effective after 7/1/2020
Personal Injury Protection (PIP) options and their impact on your insurance costs
Potential for increased liability
Coordination with Health Insurance and Workers’ Compensation
Note: I get paid commissions if you get a quote through links in this post

How did No Fault Laws Work Prior to 7/2/2020?

Lawsuits against at-fault drivers were largely prohibited.

Lawsuits are only allowed in the most serious cases: death, permanent serious disfigurement, Serious Impairment of Body Function. Based largely on a 2010 Michigan Supreme Court Decision, McCormick v. Carrier, 487 Mich 180 (2010), Serious Impairment of Body Function is now defined as:

observable by someone other than the injured person
an impairment of an important body function
affects the injured person’s general ability to lead his or her normal life

Unlimited PIP Coverage Was Required

To replace medical costs and lost income previously recovered through the tort system, Michigan required that auto insurers offer unlimited PIP coverage, and all drivers were - prior to 7/2/20 - required to purchase it. This unlimited coverage provided the means for injured motorists to fund their own expenses resulting from automobile accidents through their own insurers.

How Is Unlimited PIP Coverage Funded?

The Michigan Catastrophic Claims Association (MCCA) reimburses insurers for large PIP losses. The MCCA is a private, non-profit association that provides reinsurance for all auto insurers who operate in Michigan. They reimburse insurance companies for Personal Injury Protection (PIP) claims that exceed a certain amount ($580,000 in $2020).

All Michigan drivers with unlimited PIP coverage pay an annual MCCA charge to fund this reinsurance. Prior to 7/1/2020, this annual fee was $220 per vehicle.

Changes to Michigan's auto insurance laws

Why did Michigan's auto insurance law change?

Personal Injury Protection (PIP) and the MCCA have largely succeeded in ensuring no Michigan resident is unable to pay for medical expenses and loss of income caused by an auto accident. However, they have also led to the highest costs for auto accidents in the US and to Michigan residents paying the highest auto liability insurance rates in the country.

In an effort to reduce the insurance premiums paid by Michigan insureds, the State will no longer require everyone to purchase unlimited PIP – and they will allow at-fault drivers to be sued for expenses in excess of the injured party’s PIP limit. Insureds who purchase lower PIP limits will pay lower premiums and will not have to pay MCCA charges, which were $220 per vehicle in 2019.

What are the new changes to Michigan’s Auto Laws?

Unlimited PIP is no longer required

Commercial and Individual insureds will be able to choose lower limit options

Reduced insurance costs

PIP premiums and MCCA charges will both be reduced

More lawsuits allowed & minimum liability limits are higher

Medicare based fee schedule

Not effective until 7/1/2021, then phased in over 3 years
Limits amount paid by auto insurers to medical providers between 200% and 250% of Medicare reimbursement

Attendant Care benefits are limited

Excess/expanded coverage will be offered for purchase

Rating Restrictions

Auto insurers may not use the following non-driving factors to set rates: Sex, Marital status, Home ownership, Education level, Occupation, ZIP Code, Credit Score

What is Personal Injury Protection (PIP)?

Personal Injury Protection covers the insured’s (you) and the insured’s (your) passengers’ expenses for:

Medical Care

Medical expenses are unlimited, lifetime benefit

Recovery, rehab, etc.

Lost Wages
85% of income for up to three years

Attendant Care & Replacement Services

People to help you at home
Attendant care means services to assist an injured person with tasks they would normally do for themselves (e.g., eating, bathing, dressing, grooming, and medication administration). It may also involve supervision or other types of support.
Replacement Services could include items like home maintenance and lawn care that you can no longer perform for yourself.

Home & Vehicle Modifications

Wheelchair accommodation, modified driving controls, etc.

Limited funeral expense and survivor’s benefits

Note: PIP Benefits are broader than those paid under health insurance plans. Health plan benefits will typically cover medical expenses and some rehabilitation costs; they will not cover wage loss or replacement services.

What are Michigan’s new Personal Injury Protection (PIP) options?

Effective July 2020, Michigan residents are no longer required to purchase unlimited PIP coverage.

Commercial Insureds have three options:

Unlimited coverage
$500k per person or accident
$250k per person or accident

Individuals have up to six options:

Unlimited coverage
$500k per person or accident
$250k per person or accident
$250k per person or accident with exclusions for named persons. Insureds who choose this option are required to have “Qualified Health Coverage” and to schedule the names and birthdays of the persons to be excluded from PIP. Qualified Health Insurance must not exclude or limit auto accident injuries and must have an individual deductible of no more than $6k.
$50k per person or accident. This option is only allowed for insureds enrolled in Medicaid whose resident relatives are also enrolled in medicaid, qualified health coverage, or other auto policy with PIP.
No PIP coverage. This option is only allowed for insureds enrolled in Medicare parts A & B whose resident relatives have qualified health coverage or are covered under another auto policy with PIP.

What are the cost reductions under the new Michigan auto law?

Personal Injury Protection (PIP) Premium Reductions

10% for unlimited PIP. Even if you maintain unlimited PIP, you should see a reduction in costs
20% for the $500,000 PIP option
35% for the $250,000 PIP option
45% for the $50,000 limit (those covered by Medicaid)
100% for no PIP Coverage (Option 6)

Lower MCCA Charges

$100 for insureds who choose unlimited PIP
$0 for all other insureds
MCCA assets not to exceed 120% of liabilities
MCCA will be audited every three years. If their assets exceed liabilities, then a refund will be issued to drivers who have chosen unlimited PIP coverage.

Cost Reductions Example

2019 PIP $300 & MCCA $220 = $520/year
New Unlimited: PIP $270 & MCCA $100 $370/year = $150 less than last year)
New $500k: PIP $240 & No MCCA $240/year = $130 less than Unlimited)
New $250k: PIP $195 & No MCCA $195/year = $175 less than Unlimited

Note: You will be required to sign a form certifying that you have read and understand all of the options before making your selection. These forms are detailed and provide definitions of relevant terms and outline the risks and benefits of choosing a reduced PIP option. If the form is not completed, then the default is unlimited PIP.

When will your insurance premiums be reduced under Michigan’s new insurance laws?

Per Bulletin 2020-31-INS, “Michigan drivers who want to make choices should not have to wait until their policy renews to do so.” All insurers must offer their customers either mid-term endorsements or the option to cancel and reissue their policies in order to capture the savings and flexibility offered under Michigan’s new auto law.

However, all auto insurers are not pricing their policies in the same way. Some insurers are offering larger PIP reductions than others. Some insurers are increasing liability (bodily injury and property damage) rates more than others. You should review quotes from multiple insurers now to find the most cost effective policy available for you.

Additional COnsiderations

How will these changes affect potential liability?

Lawsuits will be allowed for losses that exceed Personal Injury Protection (PIP) limits

No longer limited to death, permanent serious disfigurement, Serious Impairment of Body Function
If medical expenses and lost income exceed a driver’s PIP coverage, they can now sue the at-fault driver for un-insured losses

Minimum Liability limits increased from $20,000 person/$40,000 per accident to $50,000 person/$100,000 accident

The default option will be $250,000 person/$500,000 accident. You have to complete a form to buy a lower limit.
If you don’t make a choice, coverage will be issued at $250k person/$500k accident

Mini Tort limit increased from $1,000 to $3,000

The new law increases the amount of money that can be recovered in small claims court for uninsured damages.

How does PIP Coordinate With Other Coverage?

Health Insurance:

Does your employer provide Qualified Health Coverage? Per Bulletin 2020-01-INS, Health Plans need to share a document telling employees if their group health plan qualifies or not.
- If your employer offers qualified health coverage, then you may choose options 1-4. This includes the option to exclude PIP coverage for household members covered under their health insurance plan.
- If you do not have Qualified Health Coverage, then you are required to choose options 1-3, with a minimum PIP limit of $250k.

Workers Compensation:

Regardless of the PIP option chosen, Workers Compensation benefits will pay for the expenses of an insured worker injured in an auto accident first.
According to Section 500.3109 of the MI Insurance Code, “Benefits provided or required to be provided under the laws of any state or the federal government shall be subtracted from the personal protection insurance benefits otherwise payable…”

Why does Michigan Have No-Fault Auto?

The State of Michigan enacted No-Fault Auto Liability laws in 1973. Changing to a no-fault system was intended to assure that medical costs and lost income were paid quickly and equitably to injured motorists and to limit lawsuit volume.

“The act was designed to remedy problems with the traditional tort system as it relates to automobile accidents. These included that the contributory negligence liability scheme denied benefits to a high percentage of motor vehicle accident victims, minor injuries were overcompensated, serious injuries were under-compensated, long payment delays were commonplace, the court system was overburdened, and those with low income and little education suffered discrimination.” Lathan v. Citizens Ins. Co. of America, 1:12-cv-515-JMS-MJD, 2 (S.D. Ind. Aug. 7, 2012)

Can businesses require their employees to purchase PIP?

Many Michigan businesses are considering requiring their employees to purchase PIP coverage in order to reduce health care costs that are paid by the company health plan. Is it legal for employers to require their employees to purchase personal injury protection or to require a specific PIP Limit?

Michigan businesses do commonly require any employee who drives their personal automobile for business purposes to purchase auto liability insurance. They also commonly dictate the minimum limit that employees must carry. However, there is little clear guidance available to date about employers' ability to require Personal Injury Protection (PIP) coverage. This site will be updated as more information becomes available on this topic.