Most drivers do not realize how many traffic accidents happen each year. In 2012 there were 273,891 traffic accidents in Michigan; over 70,000 people were injured in these accidents and 936 people died.1 If you are injured in an automobile accident, you may incur significant medical expenses, be unable to work for a time, suffer chronic or intermittent pain, and lose the ability to participate in the kinds of activities you routinely participated in before the accident. You may wonder: “How will I be able to pay the medical bills without going bankrupt?”; “How will I survive while I cannot work? Will my lost wages be covered during that time?”; “Am I entitled to reimbursement for my pain and suffering and the changes to my lifestyle?”
Michigan’s automobile no-fault law controls the answers to each of these questions, but that law is complicated and contains traps for those not familiar with its terms. The insurers responsible for paying your claims will often neglect to inform you of the pitfalls and might even actively resist paying you what they owe. For many people, dealing with insurance companies will be difficult, intimidating, and confusing. Anyone who has been seriously injured in an automobile accident should seek professional legal advice about his or her rights under Michigan’s automobile no-fault law.
At Buchanan & Buchanan our attorneys have decades of experience in handling claims arising out of serious automobile accidents. Our attorneys have the experience and knowledge to ensure you receive all the benefits your insurer agreed to pay when it sold you the policy. And, should it be necessary, we are prepared to defend your right to receive the reimbursements you are entitled to receive. Similarly, if your quality of life has been harmed because of an automobile accident, our attorneys will ensure the person responsible reimburses you for the harms and losses.
We prepared this overview of Michigan’s no-fault law to help you understand and navigate the complexities. The overview is not a substitute for a legal consultation, and will help you understand how an attorney will assist you after an accident.
Since this state’s founding, Michigan law has followed a simple rule: a person who injures another should take responsibility for his or her actions and reimburse the innocent, injured person. Many people refuse to take responsibility for their misconduct. With the dramatic increase in automobile ownership after the Second World War and increase in accidents, more and more injured people were forced to court to secure reimbursement for the harms and losses that others caused. Because some believed the court system was ill-equipped to ensure injured persons were timely and efficiently reimbursed, in 1972 the Michigan Legislature dramatically altered the legal framework for reimbursing persons injured in automobile accidents.
Under the new system, the Legislature required every driver to purchase no-fault automobile insurance and to seek reimbursement from his or her own insurer for an accident rather than from the person who caused the accident. Because the injured person’s own insurer was supposed to adequately and timely reimburse the injured person without a requirement of proving someone else was at fault, the law is called the automobile no-fault law.
Insurance Requirements Under Michigan’s No-Fault Law
After passing the no-fault law, every “owner or registrant of a motor vehicle” has to purchase no-fault insurance for his or her motor vehicle. The term “motor vehicle” is defined, in part, to mean a vehicle operated or designed to operate on a public highway by power (other than manpower) and which has more than two wheels. The term “motor vehicle” does not include motorcycles. The insurance must include “personal protection insurance, property protection insurance, and residual liability insurance.”2 Because it is easier, most attorneys refer to personal protection insurance as “PIP” insurance to distinguish it from property protection insurance, or PPI. Attorneys also frequently describe benefits provided by PIP as first-party benefits” because those claims are supposed to be paid by the injured person’s insurer, as opposed to by some third-party.
An insurer who issues a no-fault policy in Michigan must provide three basic types of coverage to the people insured under the policy: (1) allowable expenses, (2) work loss, and (3) replacement services.3 (Insurers are also required to provide a limited survivor’s benefit for the insured person’s dependents,4 but for brevity we limit this article to the injured person’s reimbursements.) The Legislature also authorized certain setoffs against the reimbursement benefits.
Benefit for Allowable Expenses
Allowable expenses are “all reasonable charges incurred for reasonably necessary products, services and accommodations for an injured person’s care, recovery, or rehabilitation.” This includes reimbursement of all reasonable medical expenses (for example, hospital costs, doctors’ office visits, surgeries, rehabilitation, and medical devices) related to the injured person’s recovery. If the injured person needs the assistance of others after leaving the hospital—called attendant care—the costs of that care is reimbursed at $20 a day, even if family members provide the care. If the injured person requires accommodations for care, recovery, or rehabilitation, such as home or vehicle modifications, the accommodations are reimbursed as allowable expense.
Edward Carroll suffered a serious head injury in an automobile accident in 1982. Because of the head injury, Carroll needed help managing his financial affairs. His wife handled his affairs until she died in 2008. After her death, the probate court appointed Alan May to manage Carroll’s financial affairs (such persons are conservators), but Carroll’s insurer refused to pay for May’s services because—it claimed—those services were unnecessary to Carroll’s care, recovery, or rehabilitation. May was forced to sue the insurer to get paid.
On appeal, the Michigan Court of Appeals agreed some of May’s services were not reimbursable expenses, but it disagreed that none were related to Carroll’s care, recovery, or rehabilitation. The Court explained that a conservator’s fees may be necessary:
But Carroll also clearly had, and presumably continues to have, additional estate management needs as a result of his head injury—needs that go far beyond those that he required before he was injured. Carroll requires someone to manage his medical bills, negotiate with medical providers and insurers, and marshal his assets and handle them in a way that will ensure that he can continue to receive the best possible physical and mental care. . . . Although these services will typically be related to the injured person’s physical care, we must emphasize that the Legislature did not define allowable expenses to include only those expenses that involve the direct application of care to the injured person. Rather, the Legislature provided that compensation must be made for “products, services and accommodations” for the “injured person’s care, recovery, or rehabilitation.” That is, the care need not be specifically directed to the care of injured person’s injury or disability, but rather must be related to his or her peculiar needs as an injured person.
Work Loss Benefit
Under Michigan’s automobile no-fault law, an injured person’s insurer must reimburse the injured person for “loss of income from work” he or she “would have performed” if there had been no injury. The insurer is only required to pay this benefit for work the injured person would have performed “during the first 3 years after the date of the accident.” The Legislature also directed the injured person’s reimbursement should be reduced by 15% because the work loss reimbursement is not taxed; in a typical case, the insurer reimburses 85% of the injured person’s normal wages. However, an injured person can offer “reasonable proof” his or her income tax is lower than 15%, in which case the insurer may only reduce the benefit by the lower percentage.
An injured person temporarily unemployed at the time of the accident is entitled to the work loss benefit. But the benefit is calculated using the income earned for the last month he or she was employed full time before the accident.
Although employers routinely reimburse their employees with benefits beyond an hourly wage, such as through retirement and health benefits, insurers argued they should not have to pay for those “fringe” benefits. The Michigan Supreme Court agreed and held the Legislature’s reference to income meant the injured person was entitled to reimburse only for lost wages or salary and not losing fringe benefits that would have been paid when the person could not work.7 The Michigan Supreme Court was apparently unaware the term “income” The Michigan Supreme Court was apparently unaware the term “income” can include the money or its equivalent value a person receives as compensation for his or her labors.
Replacement Services Benefit
The no-fault law also states an insurer must reimburse an injured person for expenses the injured person incurs for “ordinary and necessary services” that he or she would have performed if the injury had not happened. Ordinary and necessary services include normal, everyday chores a person typically performs for the household, such as washing laundry, household cleaning, car maintenance, chopping wood, balancing the books, and preparing food. This benefit should permit an injured person to hire someone to perform those ordinary and necessary tasks the injured person would have performed for the household, but can no longer perform because of injury.
Although the Legislature did not refer to this benefit as the replacement services benefit, Michigan courts typically do. The replacement services benefit has strict limitations that often prevent an injured person from obtaining full reimbursement: the insurer is only required to pay this benefit for the first three years after the accident that caused the injury and the expense may not exceed $20 per day.
With the enactment of the automobile no-fault law, the Legislature intended to create a system where persons injured in motor vehicle accidents primarily obtain injury reimbursement from their own insurers. The Legislature abolished “tort liability” “from the ownership, maintenance, or use” of a motor vehicle-that is, the Legislature took away an injured person’s right to sue the person who caused the injuries for reimbursement. However, the Legislature provided several important exceptions to the rule. Each exception is an area the Legislature determined it unfair to permit the wrongdoer to avoid responsibility. Because these exceptions involve claims against someone other than the injured person’s own insurer, the courts and attorneys refer to these claims as “third-party claims.”8
The Legislature determined a person who intentionally strikes another person with a motor vehicle remains fully liable for the wrongful act. An injured person may sue the wrongdoer for injury reimbursement.
The Legislature also recognized most people purchase insurance with a deductible and concluded it unfair to require a victim without fault to pay the deductible. The Legislature provided a person whose car was damaged in an accident may sue the person responsible for the damage to the extent the damage is not covered by the innocent person’s insurance policy. However, the amount cannot exceed $1,000; this amount should cover most deductibles, but it may leave a person without full coverage inadequate reimbursement to repair or replace a damaged vehicle. This exception is often referred to as the “mini-tort” exception.
The Legislature also determined an injured person should be able to seek reimbursement for allowable expenses, work losses, and survivors’ losses to the extent such losses exceed coverage provided by his or her own policy. If an injured person cannot work because of the injuries over three years after the accident, he or she may sue to recover reimbursement for the income that he or she would have earned. Insurance companies have aggressively-and successfully-attacked an injured person’s ability to obtain reimbursement for economic loss. It is therefore important to immediately retain a qualified attorney to ensure you receive the reimbursements you are entitled to under the no-fault law.
In Johnson v Recca, John Recca injured Penny Johnson with his car while Johnson was walking. Johnson sued Recca for the cost to replace those services she would have performed for herself over the $20 per day limit covered as a first-party benefit. Recca’s insurer argued that—even though Johnson’s expenses beyond the $20 per day limit constituted an economic loss-Recca should not have to reimburse Johnson for those losses. The Michigan Supreme Court agreed.
The Court determined the Legislature did not intend to allow an injured person to sue for reimbursement beyond the $20 per day limit because it did not refer to replacement services under the statute creating the exception to the abolition of wrongdoer responsibility. The Court made up this rule even though the Legislature never created a category of first-party benefits called replacement services—and although the Legislature under MCL 500.3107 had created an exception for benefits in “excess of the daily” limit if they were reasonable and necessary services.
After the decision in Johnson v Recca, an injured person cannot obtain reimbursement beyond the $20 per day coverage for reasonable and necessary services. Likewise, the injured person cannot obtain reimbursement from anyone-not even the person responsible for the injured person’s injuries-after the three-year period covered under the no-fault act.
Economic damages can be measured by objective criteria; an injured person can get an estimate for the cost to repair damaged property, present a bill for medical care, and offer a pay stub as proof of lost income. But, how do you measure the monetary worth of leading a life free from pain, from disfigurement, from depression or mental distress, from constant embarrassment or humiliation? If you were in danger of losing your ability to walk, what would you pay to preserve that vital ability? The losses for pain, disfigurement, mental anguish, and losing bodily function are referred to by attorneys as noneconomic losses.
Noneconomic losses are not covered by an injured person’s own insurance and the Legislature abolished responsibility for the ownership, maintenance, or use of a motor vehicle. An injured person normally cannot sue the person responsible for the injuries to recover reimbursement for noneconomic loss. However, the Legislature recognized it would be unfair to deny reimbursement to a person with severe injuries. The Legislature provided a person who causes an injury remains “subject to tort liability for noneconomic loss caused by his or her ownership, maintenance, or use of a motor vehicle,” but only if the “injured person has suffered death, serious impairment of body function, or permanent serious disfigurement.” The Legislature defined a “serious impairment of body function” to be an “objectively manifested impairment of an important body function that affects the person’s general ability to lead his or her normal life.”
Although insurers have accepted that noneconomic damages must be paid for death and permanent serious disfigurement, they have repeatedly and aggressively contested whether an injured person has suffered a serious impairment of body function that would entitle the injured person to reimbursement for noneconomic losses. Insurers typically contest whether the injury affects the injured person’s ability to lead his or her normal life.
Connie Moore suffered multiple rib fractures and a collapsed lung in an automobile accident. Although those injuries healed, she continued to suffer from neck and back pain. She also later suffered detached retinas in both eyes from the accident trauma. Moore had surgery to repair the detached retinas, and suffered complications with her right eye and suffered some permanent vision loss in that eye. Moore later sued for reimbursement for her noneconomic loss.
The insurer for the persons who caused the accident argued Moore’s injuries were not a serious impairment of body function because, though she lost some sight, she could still see in one eye and live a normal life with the aid of devices, special lighting, and retraining. The Court of Appeals disagreed these changes were minor:
[W]e do not believe that [Moore’s] inability to perform the activities she performed before the accident without the aid of special devices and significant retraining constitutes a “minor change” in how [she] performs those activities. By this standard, [Moore] could have lost her right eye entirely and the loss still would not have affected her general ability to lead her normal life because she could learn to perform the same activities with just one eye. The fact that [she] has had to take special steps to pursue the activities she routinely pursued in the past is clear evidence that her vision loss has affected her general ability to lead her normal life.
As you can see, whether and to what extent you recover reimbursement for your losses from a motor vehicle accident depends on correct application of Michigan’s no-fault law. Often, the insurance companie-even your own-will do everything in their power to avoid paying you what they owe; they will delay and employ legal tactics to deprive you of reimbursements you deserve. It is therefore important for anyone injured in a motor vehicle accident, and especially those who suffered serious injuries, to immediately seek help from an attorney experienced with the no-fault law. Even a relatively minor delay can cause you to lose the right to reimbursements.
If you or a loved one has been injured in a motor vehicle accident, please contact Buchanan & Buchanan today for help recovering the reimbursements to which you are entitled.
1See Michigan State Police Criminal Justice Information Center Crash Statistics for 2012.
2If you wish to read the law requiring automobile no-fault insurance, you will find it at MCL 500.3101.
3If you wish to read the law governing the benefits that are required under PIP, you will find it at MCL 500.3107.
4If you wish to read the law governing survivor’s benefits, you will find it at MCL 500.3108.
5See MCL 500.3109.
6In re Carroll (On Remand), 300 Mich App 513; 832 NW2d 276 (2013).
7See Krawczyk v DAIIE, 418 Mich 231; 341 NW2d 110 (1983).
8If you would like to read the statute that abolishes tort liability arising from the ownership, maintenance, or use of an automobile, you will find it at MCL 500.3135.
9Johnson v Recca, 492 Mich 169; 821 NW2d 520 (2012).
10See Moore v Cregeur, 266 Mich App 515; 702 NW2d 667 (2005).