If you live in Michigan, chances are very good that you’ve heard about the new auto insurance law taking effect on July 2, 2020. Chances are also good that you’re not entirely sure what the changed law means to you if you’re the holder of a commercial auto policy.
The Michigan No-Fault Automobile Law was enacted in 1973 to make the claims process much less cumbersome and allow injured persons to receive benefits much faster and from their own carrier, regardless of which driver was responsible. Benefits coverage could now be found much more efficiently under Personal Injury Protection coverage (PIP). PIP pays for medical costs, wage loss (up to a certain amount), funeral costs, and other expenses if you’re injured in an automobile accident. (DIFS: Your Guide to Auto Insurance and Background of the Michigan No-Fault Act – Clark Law Office)
Five years after its inception, the no-fault law was amended by the introduction of the Michigan Catastrophic Claims Association (MCCA). The purpose of the MCCA is to reimburse insurance carriers for medical expenses, currently in excess of $580,000 per person. If an individual’s medical expenses as a result of an automobile accident exceed $580,000, the MCCA provides payment, and this sum can be unlimited for life (if necessary).
Over the years, continuous rising expenses have come not only at a great cost to insurance companies, but, more importantly, to consumers—individuals and businesses alike. Due to unlimited medical costs, Michigan has the most expensive insurance costs in the nation, something that surprises no one. (Detroit Metro Times January 2020)
Not only are medical expenses paid for, if the cost of retrofitting a vehicle or home is required, these costs are also reimbursed by the MCCA. Unfortunately, the premiums per person/business are not sustainable against rising medical costs. We’ve paid annual premiums to fund the MCCA fee, but it just hasn’t been sufficient. This has led us to where we are now – facing an opportunity to choose PIP coverage limits at a reduced cost. Going forward, however, the MCCA fee will be lowered for everyone, no matter what PIP option is chosen. (DIFS New Educational Resources to Help Michigan Drivers Navigate Auto Insurance Reforms)
After years and years of action committee rehash and review, in 2019 bi-partisan legislation was passed to amend the no-fault law. Effective July 2, 2020, consumers have the option to choose the limit of Personal Injury Protection coverage desired instead of automatically receiving unlimited benefits (which will still be available).
The other PIP options available are: $50,000 (if enrolled in Medicaid), $250,000, or $500,000 – unless the employer has qualified medical coverage which will provide coverage for employee injuries in an automobile accident. One important item to remember is that PIP provides additional expenses in addition to medical costs. It’s important to understand exactly what your private health care plan provides. Please see our Michigan Auto Law Changes for more details on PIP choices.
Although the Commercial Automobile Policy already provided Bodily Injury Liability, businesses and individuals will also be required to choose a minimum limit of Bodily Injury Liability – (Third Party Liability) for coverage in the event the business is sued. Under the No-Fault Law, there are still circumstances in which a driver/business can be held liable.
A Combined Single Limit (CSL) provides one limit for both bodily injury and property damage liability combined. It’s important to note that coverage under the new law defaults to $250,000/person and $500,000/accident (if your limit is under that amount). If you continue to choose a limit under $250,000, you will be required to sign a waiver for lower limits.
These new Bodily Injury Liability choices will have little impact on commercial automobile policyholders. This is because most commercial automobile policies for businesses have a $1,000,000 CSL limit. Many businesses also have written contracts with vendors which require the business to carry a minimum of $1,000,000 bodily injury liability. In addition, businesses with Umbrella/Excess policies are required to carry underlying limits of $1,000,000 for bodily injury coverage. This means that the No-Fault Auto Insurance law changes are less likely to significantly affect Commercial Automobile policies.
In addition to PIP and Bodily Injury changes, the Mini-Tort (limited property damage) provision is also changing. The new limit has been increased from $1,000 to $3,000. Mini-Tort allows the insured to sue the at-fault driver for uncovered physical damage to their vehicle (if they are insured and do not have physical damage coverage on their policy).
Insurance companies are requiring their customers to complete a standard form to choose their PIP and Bodily Injury limits. If no response is provided, the PIP coverage will default to unlimited (as is) and the Bodily Injury Liability will also remain as is (unless under the current minimum required).
(Sources: DIFS: Your Guide to Auto Insurance, Background of the Michigan No-Fault Act – Clark Law Office, Detroit Metro Times January 2020, DIFS New Educational Resources to Help Michigan Drivers Navigate Auto Insurance Reforms)
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