Motorcycles, Company Cars, and the No-Fault “Choice” Fallacy
Proponents of the auto no-fault insurance overhaul known as Publics Acts 21 & 22 heralded the era of “choice.” Supporters of the amended law argued that everyone will benefit when consumers can choose various monetary limits on no-fault PIP benefits for allowable expenses. While this claim might have been adept marketing, its premise and implementation are flawed.
The Risk of Loss from Car Accidents is Notoriously Unpredictable
Can a consumer accurately make an informed choice about auto insurance that provides coverage for medical care following a car accident,? For some insurance (e.g. homeowners or life insurance) the risk of loss is known, and a consumer can choose coverage accordingly. The same cannot be said for car accidents. None of us can predict whether we will be injured in a crash and, if we are, how severe our injuries might be. Who can foretell what medical care we will need and for how long?
Michigan’s auto no-fault insurance resembles health insurance. Given that analogy, consider whether you have ever heard of a $250,000 health insurance policy limit.
The No-Fault Choice Is Illusory for Motorcyclists and Occupants of Employer-Furnished Cars
In the context of auto no-fault insurance, “choice” really amounts to a guess at best, and a gamble at worst. Even granting that choice was a virtue for our no-fault system, the law’s drafters, in their haste, failed in implementing this concept in Public Acts 21 & 22. To understand this, you need to look no further than the plight of motorcyclists and occupants of company cars under the new scheme. They have no real choice under the new law about the level of coverage that applies should they suffer catastrophic injuries.
The problems for motorcyclists and company cars arise from the priority rules set out in MCL 500,3114. Section 3114(1) provides the general rule, familiar to Michigan motorists, that injured motorists draw their no-fault PIP benefits from their own auto insurer or the insurer of family members with whom the injured person lives. However, sections 3114(3) and 3114(5) create exceptions to this general rule for those occupying employer-furnished vehicles and motorcycles involved in motor vehicle accidents. Occupants of employer-furnished vehicles are required to draw PIP benefits from the insurer of the employer-furnished vehicle. Motorcyclists are required to look first for PIP benefits to the insurer of the owner, registrant, or operator of the motor vehicle involved in the accident.
The drafters of Public Acts 21 & 22, however, never addressed how these exceptions to the general priority rule issues would conflict with the idea of choice. Unfortunately, we are now facing a situation where many Michigan insurance consumers will not truly be able to make their personal choices about the PIP benefits they will actually receive..
How This Plays Out for Occupants of Employer-Furnished Cars
Suppose, for example, an employee chooses unlimited PIP coverage for her personal auto policy, but her employer chose a $250,000 limit for its policy. If the employee is injured while occupying the employer-furnished vehicle, she is likely stuck with the $250,000 cap, although her medical and other expenses may well exceed that limit.
How This Plays Out for Motorcyclists
If a motorcyclist selects unlimited PIP coverage for his own auto insurance but is struck by a motorist with a $250,000 policy, the motorcyclist may also be stuck with the $250,000 cap.
These problems could have been avoided by a more thoughtful and deliberative approach. to amending Michigan’s no-fault law. Unfortunately, that judicious process did not take place, and many Michigan residents will face negative consequences.