What is the no-fault allowable expense benefit?
Personal Injury Protection (PIP) Benefits for Injured Persons
Michigan’s No-Fault Act has the broadest and most generous medical-expense and patient-care provisions of any no-fault law in the country. Subsection 3107(1)(a) says that an injured person is entitled to recover “allowable expenses” consisting of “all reasonable charges incurred for reasonably necessary products, services and accommodations for an injured person’s care, recovery or rehabilitation.”
The no-fault law does not include any further definitions of the scope and extent of these “allowable expenses.”
Before 2019, these benefits were payable for life and without regard to any “cap” or “ceiling.” However, in 2019 Michigan’s No-Fault law was dramatically changed by the Legislature. Motorists are now allowed to choose various levels of PIP coverage for medical benefits. While unlimited coverage remains an option (and often a wise one, our attorneys believe) other coverages have hard-and-fast caps on benefits. The fees that healthcare providers may charge are often restricted, which has already impacted the availability of services for injured motorists.
Despite these changes in PIP coverage, the types of benefits available remained. essentially the same. Below is more information about the types of allowable expenses that may be covered.
Under Section 3107(1)(a) of the No-Fault Act, all reasonable charges for reasonably necessary hospital expenses, physician charges, prescriptions, medical equipment, prosthetic devices, chiropractic treatment, psychological services, in-home care, and other related expenses are compensable as an allowable expense. This can be a lifetime benefit if the motorist has chosen that option when purchasing insurance. This means that a patient is entitled to recover necessary medical expenses stemming from the automobile accident for the rest of his or her life. If the motorist has chosen a capped level of PIP medical coverage, he risks exhausting his medical benefits before the treatment he needs is complete. With medical expenses being as costly as they are, the unwary consumer may face daunting financial prospects in the event of a severe injury.
Although the standard for medical expenses seems broad, patients must take care to ensure that the medical care and treatment they receive will be considered “reasonably necessary.” This is an especially critical issue if the proposed treatment of a patient is considered experimental.
The Michigan Supreme Court has stated that, although experimental procedures may be “reasonably necessary, the proponent of the treatment must establish certain criteria to bring such treatment or procedure within the scope of compensable medical expenses.” Krohn v Home-Owners, 490 Mich 145 (2011). Specifically, the Supreme Court has said:
“We conclude that if medical treatment is experimental and not generally accepted within the medical community, an insured seeking reimbursement for this treatment must, at a minimum, present objective and verifiable medical evidence establishing that the treatment is efficacious. Treatment or procedure that has not been shown to be efficacious cannot be reasonable or necessary under the no-fault act. An insured’s subjective belief that medical treatment is efficacious, reasonable, and necessary is not enough to create a question of fact.”
It should be noted that under the 2019 no-fault reforms, people injured in crashes who are not insured under their own insurance policy or who do not live with a resident relative who has an insurance policy, will, in many cases, recover no-fault benefits with the Michigan Assigned Claims Plan (MACP). Benefits through MACP will be capped at $250,000 in total medical expense coverage for injuries.
In-Home Attendant Care Or Nursing Services
The No-Fault Act uses the word “services,” which the courts have interpreted to include both unskilled and skilled in-home attendant care and nursing services. As with any allowable expense, these services must be “reasonably necessary” and the amount claimed must be a “reasonable charge.”
As long as these requirements are established, court decisions have made it clear that in-home attendant care and nursing services rendered by family, friends, and neighbors of the injured person are compensable under the Act. In addition, the injured person has a right to hire a commercial in-home health care agency to render these services either in lieu of, or to supplement, family-provided attendant care.
The in-home attendant care benefit is extremely important for seriously injured accident victims and their families. The benefit lets them hire outside help or employ family members so that the injured person can remain at home rather than being institutionalized.
Attendant care covers a wide range of “hands-on services,” including bathing, dressing, feeding, personal assistance, meal preparation, personal hygiene, transportation to and from medical care, administration of medications, overseeing in-home therapies, etc. In addition, court decisions have made it clear that attendant care benefits go beyond “hands-on care” and include the monitoring and supervision of the patient.
The central issue in many attendant care cases is whether the patient can be left alone at any time during a 24-hour day. If not, then attendant care benefits are likely payable for any period of time during which the injured person requires someone to be in attendance.
However, the No-Fault changes of 2019 drastically restricted the amount of attendant care that automobile insurance must cover if the care provider is a family member. Compensation for a family member/caregiver is limited to only 56 hours per week. This could put a tremendous strain on attendant care resources for the many injured persons in need of 24-hour care. Insurance companies have even tried to apply this new standard to persons injured before 2019, thus putting these patients’ health and safety in jeopardy. Our firm, in representing persons injured prior to 2019, has fought hard to protect these vulnerable patients. The Michigan Court of Appeals has ruled that the 2019 restrictions do not apply retroactively, that is to persons like our clients who were injured before the 2019 changes took effect.
The Reasonableness Issues Associated With In-Home Attendant Care
Family-provided attendant care claims frequently result in disputes with no-fault insurance companies. These disputes typically involve two issues:
- How many hours of attendant care are “reasonably necessary”?
- What hourly or per diem rate is a “reasonable charge”?
The No-Fault Act does not specifically address these issues (although as noted above it now places a cap on family-provided care of 56 hours per week), and neither does any appellate court decision. Therefore, each case is evaluated on its own merits.
Regarding the reasonableness of the charges, several court decisions hold that it is appropriate to consider commercial rates charged by professional agencies for similar services. In Sharp v Preferred Risk Mutual Ins Co, 142 Mich App 499 (1985), the Court of Appeals said: “[C]omparison to rates charged by institutions provides a valid method for determining whether the amount of an expense was reasonable and for placing a value on comparable services performed [by family members].” In alignment with this concept, claims for family-provided attendant care are frequently based upon the commercial rate that would be charged by a professional agency rendering the same services.
However, it is rare for no-fault insurance companies to voluntarily pay attendant care claims at the commercial rate. Rather, insurers argue the hourly rate earned by the agency employee is a better indicator of the reasonable value of the services. Some Michigan court decisions have supported this position. Therefore, there are frequent disagreements between claimants and insurance companies regarding the reasonable value of family-provided attendant care.
In addition, insurers often dispute the number of hours that are reasonably necessary for a patient’s care. Therefore, these two issues, hours and rates, require careful thought and documentation.
It is also important to point out that, as with all allowable expenses, claims for family-provided attendant care are subject to the “incurred” requirement. In order for an expense to be deemed “incurred,” it must either be paid by or on behalf of the patient or the patient must become liable or obligated to pay the expense.
The Michigan Supreme Court has held that in cases involving family-provided attendant care, the caregiver must have an expectation of being compensated for rendering attendant care rather than simply providing the care out of a sense of obligation, duty, commitment, loyalty, or compassion.
Therefore, persons rendering attendant care to family members must be very clear that they are providing the attendant care with the full expectation of being paid in accordance with the provisions of the No-Fault Act.
The Court reaffirmed this position in 2012, stating:
“an injured person who seeks reimbursement for any attendant care services must prove by a preponderance of the evidence not only the amount and nature of the services rendered, but also the caregiver’s expectation of compensation or reimbursement for providing the attendant care. Because the no-fault act does not create different standards depending on who provides the services, this requirement applies equally to services that a family member provides and services that an unrelated caregiver provides.”
The No-Fault Act uses the word “accommodations” to describe the allowable expense benefit. Michigan courts have held this term obligates an insurance company to pay for renovations to make a home or apartment handicap accessible. Or, if necessary, to build a new residence for catastrophically injured persons where their prior residence cannot be reasonably adapted to provide for the injured person’s care, recovery, or rehabilitation.
In this regard, the Michigan Court of Appeals has held: “As long as housing larger and better equipped is required for the injured person than would be required if he were not injured, the full cost is an ‘allowable expense.’”
If an insurance company builds a new home for a catastrophically injured child, the courts may permit the insurance company or a court-appointed trustee to hold legal title to all or a portion of the home, depending on the details of the case. However, in Williams v AAA Michigan, 250 Mich App 249 (2002), the Court of Appeals held that when a no-fault insurance company builds a home for a catastrophically injured adult and the adult is willing to contribute the equity in their existing home toward the construction of the new home, then the injured adult is entitled to full legal ownership of the newly constructed residence.
Where the new home is fully titled in the name of the injured person, the courts have, in some circumstances, permitted the insurance company that paid for the home to have a security interest in the property for a reasonable period of time, so the insurer’s investment can be recouped and transferred to another home should the patient need to move in the future.
In addition to the cost of a residence, accommodation claims may also involve the following issues:
- whether insurance companies are obligated to pay the ongoing expenses related to homeownership, such as property taxes, homeowners insurance, maintenance expenses, utilities, etc.
- whether the family members of the injured person residing in the home are obligated to contribute to the expense of constructing and maintaining the residence as a form of “rent” for being able to live there.
Enforcing the right to the accommodation benefit can be a complicated matter involving the resolution of many issues that can have long-term implications for severely injured people.
Room And Board Expenses
In 1993, the Michigan Court of Appeals held that room and board expenses for a severely injured person cared for at home are compensable under section 3107(1)(a) of the No-Fault Act where the “injured person is unable to care for himself and would be institutionalized were a family member not willing to provide home care.”
However, the Michigan Supreme Court reversed the Reed decision in Griffith v State Farm, 472 Mich 521 (2005). The Court further held that the expense of non-medical food for persons cared for at home is not a recoverable benefit. Still, room and board charges incurred by institutionalized patients for any type of food served in a hospital or residential facility continue to be compensable under the no-fault law.
Michigan courts have held that the allowable expense benefit includes not only services for the physical rehabilitation of the injured person, but also the reasonable expense of vocational rehabilitation, job retraining, and job placement.
Furthermore, the courts have rejected the argument that a no-fault insurer is only obligated to restore the injured person to his or her “pre-accident status,” as opposed to elevating the victim to a higher functional level reasonably consistent with the person’s capabilities.
The fact that the Michigan no-fault system provides full physical, as well as vocational rehabilitation, is a very important benefit for seriously injured victims.
In certain situations, an insurance company may be obligated to pay for the purchase and/or modification of a motor vehicle for the transportation of a seriously injured person.
An example would be persons suffering spinal-cord injuries or serious brain injuries who, because of the nature of their disability, need a handicapped-equipped van or other specially adapted vehicles in order to be transported. Depending upon the facts of the case, the insurer’s obligation may be to equip an existing vehicle with handicapped equipment or to fully fund the purchase of a new vehicle outfitted with such equipment.
The issue of whether a new vehicle should be purchased or an existing vehicle specially equipped is determined by what is considered “reasonably necessary” for the injured person’s care, recovery or rehabilitation.
Insurance companies may be obligated to continue the payment of special vehicles for the lifetime of the injured person. In 2011, the Michigan Court of Appeals held that a wheelchair-bound plaintiff was entitled to recover the cost of both the purchase of a new van and the outfitting of that van for handicap use because the van “satisfies the statutory criteria of being sufficiently related to injuries sustained in a motor vehicle accident and … is a reasonable charge and reasonably necessary for the injured person’s care, recovery, or rehabilitation under MCL 500.3107(1)(a).”
In 2013, however, the Michigan Supreme Court reversed the Court of Appeals ruling in Admire, and held that the defendant-insurer was not obligated to pay the base price of a van for the injured plaintiff as well as the modifications made to the van to meet plaintiff’s post-accident needs. According to the Supreme Court, only the van modifications were “allowable expenses” under the no-Fault Act and the base price of the van was an “ordinary transportation expense” that is incurred by both uninjured and injured persons.
An insurance company is obligated to pay mileage to transport an injured person to and from necessary medical care or rehabilitation. There is some dispute as to the appropriate mileage rate, but some court decisions have held it is proper to utilize the State of Michigan mileage reimbursement rate as a guide.
Where a seriously injured person requires the Probate Court’s appointment of a guardian or conservator, the costs of appointing and maintaining the probate fiduciary are recoverable as an allowable expense.