Step-Down Auto Insurance Clause: Every Michigan Family’s Nightmare

Michigan drivers purchase no-fault insurance not only because state law requires it, but also to protect themselves and their loved ones in the event of a crash. When buying insurance, drivers usually think their policy will not only cover them in an accident but will also their family members covered by auto insurance who are injured while riding with them. Unfortunately, that’s not always the case — enter the step-down auto insurance clause.

Here’s the deal. Some auto insurance companies are inserting a “step-down” clause (also known as an “intra-family exclusionary” clause) in their policies. A step-down auto insurance clause basically says that a person unrelated to the insured, who is injured while riding in the insured’s vehicle, gets more coverage than the insured’s own family members who also may be injured in the crash.

Step-down language in a Michigan auto insurance policy might say something like:

“Coverage under this Part I, including our duty to defend, will not apply to any insured person for … 12. bodily injury to you or a relative. This exclusion applies only to damages in excess of the minimum limit mandated by the motor vehicle financial responsibility law of Michigan.”

The bottom line is this: Michigan auto insurance policies that include step-down clauses treat the insured’s own family members harsher than complete strangers.

That’s not all. Michigan residents likely don’t even know this limiting language is in their auto insurance policy. Why? Because insurance companies don’t say anything about it. In fact, insurance agents probably don’t know that a policy includes a step-down clause because it’s standard for certain insurance carriers to include them. But our Michigan personal injury lawyers see these clauses all the time, and, unfortunately, they oftentimes greatly diminish your family member’s recoverable compensation.

“Family step-down clauses are repugnant and reprehensible,” says Grand Rapids auto accident lawyer Tom Sinas. In this video, he warns Michigan families of the dangers presented by step-down clauses.

How A Step-Down Clause Works

Consider this hypothetical scenario. A driver has $500,000 worth of coverage on his Ford Focus. His policy includes a step-down clause. Suppose the driver is traveling in the Ford Focus with his 8-year-old son and his son’s 7-year-old friend in the backseat. Suppose that he causes a crash and the two boys are seriously injured. Both boys could make a claim for up to $500,000 under the policy, right?

Wrong. The step-down provision drastically limits recovery for the driver’s own son. Because of the step-down clause, the insurance company’s liability for the son is capped at the state-mandated minimum of $20,000. However, the 7-year-old friend may make a claim up to the policy limits.

That’s right — under the driver’s auto insurance policy, the 7-year-old friend is entitled to more compensation than the driver’s own family member.

This doesn’t seem right, does it? Tom Sinas doesn’t think so, nor do the other Michigan auto accident attorneys at the Sinas Dramis Law Firm. That’s why they’re pushing for step-down provisions to be eliminated.

Referring to the above hypothetical, Sinas notes the boys were both seriously injured. “Neither child did anything to cause or contribute to the collision,” Sinas points out. “Yet the son’s claim is limited to a tiny fraction of the friend’s claim, simply because of the insertion of one or two sentences in an insurance policy. Step-downs are both unfair and unjust.”

Why Are Step-Downs Legal?

Step-down clauses are allowed in Michigan auto insurance policies for two reasons:auto-no-fault-insurance-policy

  • when challenged, Michigan’s appellate courts have consistently upheld them.
  • the Michigan Insurance Commissioner has done nothing to get rid of them.

In fact, “the Insurance Commissioner could end this shameful insurance practice with the stroke of a pen,” Sinas notes.

The insurance companies that use step-down clauses assert they help prevent insurance fraud. “Perhaps this was true at one point in time,” Sinas says. “But that justification is now completely unwarranted for a number of reasons.”

According to Sinas, the argument for using step-down clauses no longer holds water because:

  • most auto insurance policies include language regarding fraudulent claims.
  • Michigan already makes it a crime to commit insurance fraud [MCL 500.4511(1)].
  • the injured person has the burden of proving their case and, to the extent that an insurance company believes a family member filing a claim against another family member’s policy is unsupported, the insurance company has plenty of legal tools at its disposal to dispute the claim.

Sinas also points out that, even if there’s an eyewitness to the car crash to support a family member’s injury claim, most insurance companies will still enforce the step-down provision.

In this WOOD TV 8 segment on step-down clauses, Sinas talks about the dangers that they present, and one Michigan family tells the story of how a step-down provision reduced their coverage after a car accident.


Which Insurers Use Step-Downs?

Based on standard auto insurance policies reviewed by the Sinas Dramis Law Firm, the following insurance companies tend to use step-down clauses — so beware if you have no-fault coverage with any of them:

  • USAA
  • Progressive
  • Farm Bureau
  • Grange

At this time, the following insurers do not include step-down provisions in their standard auto insurance policies:

  • Auto-Owners/Home-Owners
  • Liberty Mutual
  • Citizens
  • State Farm
  • AAA  (update: as of August 1, 2017, AAA Insurance uses step-down clauses)
  • Allstate

Ending An Unjust Practice

Since it appearcall-to-actions that Michigan’s appellate courts will not be eliminating the step-down auto insurance clause anytime soon, it’s up to the public to demand the insurance companies stop using them.

What can you do to help get rid of step-down provisions? Here are a few suggestions:

  • spread the word about step-down clauses and the dangers they present.
  • ask your friends and family to review their auto insurance policies to see if they include a step-down clause and, if they do, ask them if they are willing to take the risk that it presents.
  • if an auto insurance policy includes a step-down clause, seriously consider purchasing a new policy with an insurance company that does not use step-down clauses.

The Sinas Dramis Law Firm is dedicated to making sure Michigan residents understand their rights, including the auto insurance policies they purchase under Michigan’s auto insurance system. Join us in sending a clear message to the insurance industry that step-down clauses are a shameful practice.

Take action by calling the Michigan Insurance Commissioner at 877-999-6442 or by emailing the Michigan Department of Insurance and Financial Services at difs-ins-info@michigan.gov. Speak up and demand that step-down clauses be ABOLISHED!


If you’re uncertain whether your Michigan auto insurance policy includes a step-down provision, contact our firm. For more than 60 years, our team of experienced lawyers has represented injured individuals across the state, helping them get the compensation and insurance benefits they deserve.