The Problem with Michigan’s New PIP Choice Auto Insurance Options

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We’ve previously shared an interview between WKTV Journal in Focus and Grand Rapids auto accident attorney, Tom Sinas. In the first installment of this lengthy interview, which spanned multiple topics, Tom discussed the significant changes no-fault medical providers can expect beginning July 1 under Michigan’s new auto no-fault law. You can read that full article here. In this second edition, Tom dives into the concerning problem with Michigan’s new PIP choice auto insurance options. Tom explains the many changes and concerns regarding the new levels of personal injury protection (PIP) benefits motorists can now purchase.

How Michigan Auto Insurance Claims Work – Before and After No-Fault Reform

First, Tom reminds us of how auto insurance claims worked in  Michigan before the 2019 auto no-fault reform. Prior to 2019, injured motorists were limited in the types of damages they could pursue from the person responsible for the accident that caused their injuries. Commonly called “pain and suffering damages,” injured motorists could recover these quality-of-life damages against the negligent driver through what is known as a liability claim. Liability claims against at-fault drivers are available avenues of compensation for injured motorists both before and after the no-fault reform. Tom points out, however, that prior to the 2019 no-fault reform, all drivers (barring disqualified individuals) had unlimited no-fault PIP benefits. Before our auto insurance system changed so significantly, those injured in motor vehicle accidents could have all of their necessary medical expenses paid for through the no-fault system. For the driver who caused the collision, this meant they were not responsible for those expenses. This is no longer necessarily the case in Michigan.

AAs a reminder, a person accesses no-fault PIP benefits through their own auto insurance provider. No-fault PIP benefits compensate for medical expenses incurred due to the accident. However, Consumers now have the option of choosing less than lifetime no-fault PIP benefits and can opt instead for capped medical expense reimbursement. In these instances, that could leave the driver responsible for the crash on the hook  for the other motorists’ excess medical bills. So, let’s look at the  example below to understand how this new scenario works.

Example: Sam and Paul get into an auto accident and Sam is injured.  Prior to the accident, Sam chose a limited medical expense coverage level of $250,000. Sam’s injuries are extensive and he accrues $500,000 in medical bills. If Paul is found to be at fault for the crash, Sam is able to pursue a claim against Paul for compensation for all of his medical bills in excess of $250,000 (which is his own policy limit) under Michigan’s new auto insurance law. Before 2019, he would have obtained full compensation for his medical bills through his own no-fault policy.

Tom Sinas’ interview with WKTV Journal in Focus

The Problem with Michigan’s New PIP Choice Options

When legislators proposed amending Michigan’s no-fault system, proponents  heralded as a new era of “choice.” Tom points out that, while the new levels of PIP benefits may seem beneficial on the surface, there is in fact a problem with Michigan’s new PIP choice options. Motorists must now make an educated guess regarding what type of car crash they may be involved in, how serious their injuries may be, and what levels of coverage they will need. Additionally, one driver cannot control another driver’s choice of coverage. Now with motorists on the road choosing less than lifetime benefits, all drivers face greater financial exposure and liability. The educated guess may seem more like rolling the dice.

Two-Handed System Made More Complex Under New Auto Law

Tom uses a two-hand analogy to represent how Michigan auto insurance claims used to function: in one hand you have the no-fault claim and in the other hand you have a liability claim. They used to be two separate claims that compensated for different damages. Now, under the new auto no-fault law, those two hypothetical hands warp around each other creating a hybrid and complex system. Medical compensation is no longer the responsibility of one entity, but now perhaps many entities, and this is the biggest and possibly the most concerning aspect to these changes. Further compounding the complexity, medical providers must now figure out where payment for their services to injured people must come from once an injured person’s own medical expense benefits are exhausted.

All Drivers Must Protect Themselves from Liability

The WKTV Journal interviewer went on to ask Tom a very significant question: is a driver who purchased an unlimited auto no-fault policy protected from personal financial loss if they cause a crash that injures another person?

Tom explains that the liability portion of your auto insurance policy is what protects a driver financially in these instances, not their selection of no-fault PIP benefit limit. So then the question becomes: did that driver purchase enough in liability insurance to protect themselves financially? Drivers who do not purchase enough liability coverage may be personally responsible for any medical expenses incurred by the injured person that (1) exhaust the injured person’s own no-fault PIP limits, and (2) exhaust the liability limit selected by the at-fault driver. Tom recommends every driver in Michigan purchase as much liability coverage as one can reasonably afford in order to best protect themselves financially.

Choice can sometimes be a good thing, but we hope this interview provides a clear overview of the problem with Michigan’s new PIP choice options. We have created many resources to help navigate consumers through the auto insurance purchasing process under the new law as well as provide our best recommendations for auto insurance coverages following the 2019 no-fault reform. We encourage you to explore your options further and call up your agent with any questions you may have or changes you may want to make.

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