New Auto Liability Insurance Limits, New Complexities
2020 was so dizzying that it is hard to keep track of the many changes in our lives. You are thus in good company if you did not notice that automobile liability insurance limits underwent a historic change, courtesy of the auto no-fault overhaul known as Public Acts 21 and 22.
The Acts became law in 2019, but the most significant phase took effect on July 1, 2020. On that day, auto no-fault insurers could start issuing policies with limited no-fault PIP benefits. On that same day, auto insurers were required to issue new policies with substantially increased minimum liability requirements.
New Auto Liability Insurance Limits
For over 40 years, Michiganders could legally drive with liability insurance limits as low as $20,0000 per person/$40,000 per accident. Yet Public Acts 21/22 changed that rule for policies issued after July 1, 2020. The new law has a two-part paradigm. The first can be described as a “default” rule, and the second can be described as an “opt-out” rule.
The law creates a default limit of $250,000 per person/$500,000 per accident. Specifically, MCL 500.3009(1) states that after July 1, 2020, policies “must not be delivered or issued for delivery” without containing the following: “a limit, exclusive of interest and costs, of not less than $250,000.00 because of bodily injury to or death of 1 person in any 1 accident;” or “a limit of not less than $500,000.00 because of bodily injury to or death of 2 or more persons in any 1 accident.”
Yet the law permits motorists to select lower limits, but not less than $50,000 per person/$100,000 per accident. See MCL 500.3009(5). To select these lower limits, motorists must meet various requirements. First, motorists must complete a form issued by the Department of Insurance and Financial Services (DIFS). Second, the DIFS form must adhere to various particulars, including stating “in a conspicuous manner” the risks of choosing limits less than $250,000/$500,000, and an acknowledgment that the motorist understands those risks. MCL 500.3009(7).
Substantial New Liabilities for Motorists Under Public Acts 21/22
Why the need for such drastic changes in liability insurance limits? The most logical answer is because Public Acts 21/22 create substantial new liabilities for all Michigan motorists. For the first time since 1973, all Michigan motorists are now potentially liable for a victim’s medical expenses above the victim’s PIP limits. Specifically, MCL 500.3135(3)(c) was amended to subject tortfeasors to liability for “damages for allowable expenses. . . in excess of any applicable limit” for those victims who selected limited PIP or “without limit” for those victims who excluded PIP entirely. This liability attaches even if the victim does not sustain a so-called threshold injury because the threshold injury limitation applies to only “tort liability for noneconomic loss.” MCL 500.3135(1).
Many in the plaintiffs’ bar are quietly celebrating these changes as they envision larger contingency fees. The undersigned is not amongst them. That is because these changes not only create new complexities for auto liability claims, but also mean that victims will have lesser access to medical care and more uncertainty about their futures.