Michigan No-Fault Work Loss Benefits
The No-Fault Act provides that where an injured victim cannot work as a result of an auto accident, work loss benefits are payable for up to a maximum of three years. The statute defines work loss benefits as compensation for “loss of income from work an injured person would have performed during the first three years after the date of the accident if he or she had not been injured.”
Under the statute, work loss benefits are payable at the rate of 85 percent of gross pay, including overtime. However, the work loss benefit cannot exceed a monthly maximum, which is adjusted in October of every year to keep pace with the cost of living. These cost-of-living adjustments, however, only apply to accidents occurring after each adjustment date. Therefore, the monthly maximum applicable at the time of the injured victim’s accident is the monthly maximum that continues to apply for the remainder of that person’s three-year benefit period. Set forth below are the monthly maximum benefit levels that have been in effect since 2001:
- October 1, 2019 – September 30, 2020: $5,718.00
- October 1, 2018 – September 30, 2019: $5,700.00
- October 1, 2017 – September 30, 2018: $5,541.00
- October 1, 2016 – September 30, 2017: $5,452.00
- October 1, 2015 – September 30, 2016: $5,398.00
- October 1, 2014 – September 30, 2015: $5,392.00
- October 1, 2013 – September 30, 2014: $5,282.00
- October 1, 2012 – September 30, 2013: $5,189.00
- October 1, 2011 – September 30, 2012: $5,104.00
- October 1, 2010 – September 30, 2011: $4,929.00
- October 1, 2009 – September 30, 2010: $4,878.00
- October 1, 2008 – September 30, 2009: $4,948.00
- October 1, 2007 – September 30, 2008: $4,713.00
- October 1, 2006 – September 30, 2007: $4,589.00
- October 1, 2005 – September 30, 2006: $4,400.00
- October 1, 2004 – September 30, 2005: $4,293.00
- October 1, 2003 – September 30, 2004: $4,156.00
- October 1, 2002 – September 30, 2003: $4,070.00
- October 1, 2001 – September 30, 2002: $4,027.00
The Applicable Disability Standard And The Duty to Mitigate
Under the statute, it is not necessary to prove that the injured person is completely disabled from performing any type of employment. On the contrary, the statute requires payment of work loss benefits if the injured person cannot perform the work the injured person “would have performed” had the accident not occurred.
In addition, the courts have held that wage loss benefits must include salary increases, overtime, and other merit raises that would have been received during the person’s disability. See Lewis v DAIIE, 90 Mich App 251 (1979) and Farquharson v Travelers Ins Co, 121 Mich App 766 (1982).
Any income earned by the injured person during a period of disability reduces the wage loss benefit otherwise payable for that same period. See Snellenberger v Celina Mutual Ins Co, 167 Mich App 83 (1988). The courts have also imposed an obligation on the injured person to “mitigate damages” by seeking alternative employment if such employment is available and if it is otherwise “reasonable” under the circumstances for the injured person to accept it. See Bak v Citizens Ins Co, 199 Mich App 730 (1993).
The Interplay Between Work Loss Benefits, Sick Leave, Vacation And Wage Continuation Benefits
Michigan courts have held that a no-fault insurance company cannot reduce wage loss benefits by an injured person’s sick leave, vacation time, or employer-paid wage-continuation benefits. Therefore, if an injured person is receiving sick pay or is drawing on vacation time during a period of disability, the no-fault insurer must pay full no-fault wage loss benefits. See Orr v DAIIE, 90 Mich App 687 (1979).
Similarly, where an employer continues paying wages under a wage continuation plan, the no-fault insurer must pay full no-fault wage loss benefits without regard to the wage continuation payments. See Brashear v DAIIE, 144 Mich App 667 (1985); Spencer v Hartford Accident & Indem Co, 179 Mich App 389 (1989); and Wesolek v City of Saginaw, 202 Mich App 637 (1993). However, if the injured person has purchased a coordinated benefits no-fault policy, a no-fault insurer may reduce no-fault wage loss benefits by the amount the person receives from wage continuation plans that are in the nature of “other health and accident coverage.” See Jarrad v Integon, 472 Mich 207 (2005).
Temporarily Unemployed Persons
The No-Fault Act contains a special provision for those persons who are considered “temporarily unemployed” at the time of an auto accident injury. Such individuals are entitled to no-fault wage loss benefits based upon the last month of full-time employment. This provision appears in Section 3107a, which states: “Work loss for an injured person who is temporarily unemployed at the time of the accident or during the period of disability shall be based on earned income for the last month employed full time preceding the accident.”
The statute does not define “temporarily unemployed.” Court decisions, however, have focused on a variety of factors including the length of time of the unemployment, the reasons for the unemployment, the injured person’s work history, and the subjective and objective evidence of the person’s intention to return to employment.
The courts have stated that a person who is completely physically disabled from working for reasons unrelated to a car accident is not entitled to no-fault work loss benefits. See MacDonald v State Farm Mut Ins Co, 419 Mich 146 (1984) and Williams v DAIIE, 169 Mich App 301 (1988).
Self-employed accident victims are entitled to recover wage loss benefits but, oftentimes, experience great difficulty with insurance companies in establishing the appropriate level of benefits.
Michigan courts have held that a self-employed person’s business expenses should be deducted from his or her gross receipts in order to determine the proper no-fault work loss benefit level. The courts, however, have rejected the principle that all business expenses reported on Schedule C of the individual’s tax returns are fully and automatically deductible from gross receipts.
Therefore, the question of which business-related expenses should be deductible from the gross receipts of a self-employed person to arrive at the proper wage loss benefit level payable under the no-fault law is a question of fact that is typically determined on a case-by-case basis. See Adams v Auto Club Ins Ass’n, 154 Mich App 186 (1986).