A Quick Guide to Michigan Auto-Injury Law

• How Does the Auto No-Fault Law Work?
• What Are No-Fault PIP Benefits?
• Who Pays No-Fault PIP Benefits?
• What Are Tort Liability Claims?
• What Are the Legal Time Limits?

I. How Does the Auto No-Fault Law Work?

The basic concept of the Michigan auto no-fault insurance law is to assure payment of certain insurance benefits to all victims of motor-vehicle accidents regardless of who was at fault. In exchange for that right, the law imposes certain limitations on the rights of accident victims to pursue tort liability claims against the negligent parties who caused the accident. Under the Michigan no-fault Law, it is important to keep in mind that every motor-vehicle accident occurring in this state, has two separate and distinct claims: the first is for no-fault personal protection insurance (PIP) benefits, and the second is the tort liability claim against the party at fault for recovery of certain noneconomic and excess-economic-loss damages. Although the no-fault law was originally intended to simplify motor-vehicle accident claims, it has become a very complex law containing a number of important rules and requirements that must be followed to protect the legal rights of the auto-accident victim. This pamphlet is intended to provide a basic overview of the Michigan no-fault law but should not be considered a substitute for legal advice from an attorney who practices extensively in this area of the law.

II. What Are No-Fault PIP Benefits?

Under the Michigan No–Fault Act, there are four specific categories of no-fault personal protection insurance (PIP) benefits payable in motor-vehicle accidents resulting in bodily injury or death. These four PIP benefits are summarized below:

A. Allowable Expense Benefits – Section 3107(1)(a) of the Michigan No-Fault Act requires insurance companies to pay “allowable expenses” which are defined as “all reasonable charges incurred for reasonably necessary products, services and accommodations for an injured person’s care, recovery or rehabilitation.” These benefits are payable for life and do not have a monetary cap. They are very broad and include: medical expenses; in-home attendant care; barrier-free residential accommodations; vocational rehabilitation; special transportation and medical mileage; guardian/conservatorship expenses; and the services of an independent case manager.

B. Wage Loss Benefits – Section 3107(1)(b) provides that when an injured person cannot work as a result of an auto accident, work loss benefits are payable for up to three years for “loss of income from work an injured person would have performed . . . if he or she had not been injured.” These work loss benefits are payable at the rate of 85% of gross pay, including overtime. However, the work loss benefit cannot exceed the monthly maximum, which is adjusted every October to keep pace with the cost of living. The statute also provides for the payment of wage loss benefits to those individuals who are considered to be “temporarily unemployed” from full-time employment at the time of the injury.

C. Replacement Service Expenses – Section 3107(1)(c) of the Michigan no-fault law provides that an injured person may also receive reimbursement in an amount not to exceed $20 per day for expenses incurred in having others perform reasonably necessary services that the injured person would have performed for the benefit of themselves or their dependants. This benefit primarily consists of domestic-type services, such as housekeeping, lawn work, snow removal, etc.

D. Survivor’s Loss Benefits – When a motor vehicle accident results in death, dependants of the decedent are entitled to recover survivor’s loss benefits under Section 3108 of the statute, as well as funeral and burial expenses under Section 3107(1)(a). Survivor’s loss benefits are payable for three years and are subject to the same maximum monthly benefit ceiling applicable to work loss benefits. These survivor’s loss benefits essentially consist of the after-tax income earned by the decedent, the value of fringe benefits that are lost as a result of the death of the decedent, and replacement service expenses incurred because of the decedent’s death.

III. Who Pays No-Fault PIP Benefits?

Under the Michigan no-fault law, the owner or registrant of motor vehicles required to be registered in Michigan must purchase compulsory auto no-fault insurance coverage. The failure to purchase such coverage can result in the injured owner or registrant being disqualified from receiving any benefits under the statute. If the injured person is entitled to no-fault benefits, the general rule is that the injured person receives these no-fault PIP benefits from his or her own no-fault insurance company or from a no-fault insurance policy issued to the injured person’s spouse or a relative of either domiciled at the same household. This general rule applies regardless of whether the injured person is driving or occupying his or her own motor vehicle, is a passenger in another motor vehicle, or is a pedestrian or bicyclist. However, there are other important legal principles regarding who pays PIP benefits that are discussed below:

IV. What Are Tort Liability Claims?

Under the Michigan no-fault law, an accident victim has the right to pursue a tort liability claim against the at-fault driver to recover those damages that are not compensable with no-fault PIP benefits. The compensation recoverable in these tort liability claims includes damages for “noneconomic loss,” and “excess economic loss.” In addition, if the person causing the accident was uninsured or did not carry enough insurance to fully compensate the victim for these types of damages, the victim can recover these damages from their own insurance company if the victim purchased optional uninsured and/or underinsured coverage. These basic concepts are explained further below.

A. Claims for Noneconomic Damage – Under the Michigan no-fault law, noneconomic damages consist of those losses that affect a person’s quality of life, such as pain and suffering, disability, incapacity, loss of function, diminished social pleasure and enjoyment, mental anguish and emotional distress, scarring and disfigurement, etc. Under the law, an accident victim is only entitled to recover these noneconomic damages if the victim sustained a “threshold injury.” Under the law, a threshold injury consists of one or more of the following: (1) serious impairment of body function, (2) permanent serious disfigurement, or (3) death. Unfortunately, the law regarding what constitutes “serious impairment of body function” or “permanent serious disfigurement” has been unclear, confusing, and conflicting. Therefore, persons sustaining bodily injury in a motor-vehicle accident should seek competent legal advice in order to determine whether their injury is of sufficient severity to satisfy these threshold requirements. Under the law, victims who are more than 50% at fault for the accident are not entitled to recover noneconomic damages.

B. Claims for Excess Economic Loss Damages – The Michigan no-fault law provides that if an injured person suffers certain past, present, and future financial expenses that are not compensable by no-fault PIP benefits, the person can recover those damages in the tort liability claim against the driver who caused the accident. These are called “excess economic loss damages” and include loss of income that exceeds the monthly cap on wage loss benefits or extends beyond the no-fault three-year wage loss benefit period. Under the law, an injured person need not prove a threshold injury (serious impairment of body function or permanent serious disfigurement) to recover for these excess-economic-loss damages.

C. Uninsured/Underinsured-Motorist Claims – If the person who causes the accident does not have any auto insurance, the victim may be able to recover noneconomic and excess-economic-loss damages from their own insurance company if the victim purchased optional uninsured motorist coverage. Similarly, if the person who caused the accident does not have enough auto insurance liability coverage to fully compensate the victim for noneconomic and excess economic losses, the victim can recover the uncompensated balance for these damages if the victim purchased optional underinsured motorist coverage. If it is suspected that the person causing the accident has either no insurance or inadequate insurance, a thorough investigation should be conducted immediately to determine if the victim is covered by uninsured-underinsured-motorist benefits.

V. What Are the Legal Time Limits?

The no-fault law contains very strictly enforced time limitations for processing claims for no-fault PIP benefits and for pursuing tort liability claims. These time limitations will be discussed below.

A. No-Fault PIP Benefits – The law contains two separate time limitations for processing no-fault PIP claims. They are as follows:

(1) The 1-year-notice rule – This rule requires the victim to submit appropriately detailed written notice of a no-fault PIP claim to the correct insurance company within one year of the date of the accident. Failure to provide this notice within the one-year period will result in a complete forfeiture of PIP benefits, unless some legally recognized exception applies.

(2) The 1-year-back rule – This rule provides that any legal action that is filed to enforce payment of no-fault PIP benefits can only go back one year from the date the lawsuit is filed. Therefore, all expenses payable under the no-fault law have a short one-year enforcement period that runs from the date the expense is incurred. Failure to file suit within this one year will bar the claim, unless some legally recognized exception applies.

Currently, under Michigan law, neither the one-year-notice rule nor the one-year-back rule applies to children or those people who are considered mentally incompetent. Therefore, if the victim is either a child or a person who is considered to be mentally incompetent, the claim should be pursued even if these time limitations have expired.

B. Tort Liability Claims – The general rule under Michigan law is that tort liability claims have a three-year statute of limitations that runs from the date of the injury. This three-year limitations period applies to bodily injury as well as wrongful death claims. There are certain exceptions to this rule that apply to children or those who are mentally incompetent. However, it is best to assume that the statute of limitations for tort liability claims is always three years from the date of the accident without regard to these possible exceptions. Moreover, it is generally the case that if the victim intends to pursue a tort liability claim, the process should begin immediately so that valuable evidence is not lost or the claim is not otherwise weakened by the passage of time. Accordingly, accident victims who have potential tort liability claims should move quickly to protect their rights. Moreover, they should refrain from speaking with any investigators or insurance adjusters who represent the interests of the at-fault party.

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