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‘New’ No-Fault Law…What have they done?

By: BridgeTower Media Newswires//June 25, 2019//

‘New’ No-Fault Law…What have they done?

By: BridgeTower Media Newswires//June 25, 2019//

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By James McKenna

“New” Michigan No-Fault Law.

What have they done?

nofault-mainIf you have not read the “New” No-Fault Law yet, here are a few things to consider.

The “New” No-Fault Law only provides for rate reduction savings on the PIP portion of Michigan insureds’ insurance policies.

The “New” No-Fault Law increases the minimum third-party liability coverage a minimum of 2.5 times from $20,000 to $50,000. This will result in an automatic increase in the cost for liability coverage.

If the default third-party liability limits are selected, the liability limits will go from $20/$40,000 to $250/$500,000 with another increase in the cost of liability coverage to surely follow.

Proof of this can be found in a recent Detroit News article about an unintended early increase in no-fault rates due to the increase in liability limits. Apparently the Legislature “accidentally” increased the liability limits immediately and not next year as intended. Because of this, Michigan insureds were going to get an immediate rate increase. This is exactly what will occur next year because of the “New” No-Fault Law. We just were not supposed to see this until next year.

From The Detroit News (June 4, 2019):“The Michigan Legislature on Tuesday approved a “technical fix” that would prevent a one-year auto insurance price spike under a recent reform law intended to reduce rates that routinely rank among the highest in the nation.

“The law, as signed last week by Gov. Gretchen Whitmer, requires auto insurers to reduce personal injury protection premiums by July 2020, when motorists will be given the choice to purchase plans with less medical coverage than unlimited lifetime benefits.

But the law also requires that insurers increase automobile liability coverage for bodily injury, and that provision was “unintentionally” written to take effect immediately, Senate Majority Leader Mike Shirkey, R-Clarklake, told reporters after the proposed amendment cleared the upper chamber in a 33-4 vote.

“It was just an unintentional thing,” Shirkey said. “And actually, if we’d had let it go, it would have actually increased your insurance costs today, which is not what we were trying to achieve, of course.”

The “New” No-Fault Law will allow people to “buy” less PIP coverage, or go completely bare, (if covered by an eligible Medicare or Medicaid policy). When that coverage is exhausted, those injured people will be looking to the third-party defendants for the excess medical (Medicare/Medicaid will be filing liens and looking for future set asides on third-party liability claim settlements).

With the increased exposure for medical, including excess claims for family-provided attendant care over 56 hours per week, higher third-party limits and UM/UIM limits will be necessary.

People who want to continue to buy unlimited lifetime medical coverage will probably be priced out of the market. They will then need to try to buy whatever medical coverage they can afford and try to offset their exposure by purchasing as much UM/UIM coverage as possible. What will the new cost of increased UM/UIM limits be?

With the increased personal exposure for medical liability as an element of damages, significant increases in bankruptcy filings will most likely take place. Life care plans for seriously injured victims will now be commonplace in third-party claims for damages. If the defendant had minimal limits, the plaintiff will hopefully have purchased higher UM/UIM limits to cover the shortfall.

We are now essentially back to 1972, pre-no-fault. After the injured person has exhausted their limits for medical coverage, they will sue the third-party defendants for excess medical claims. Unfortunately, pre-no-fault allowed for claims against at-fault drivers without “No-Fault Thresholds.”

The no-fault scheme requested by the insurance industry in 1972 forced Michigan citizens to give up certain rights to jury trials for damages in exchange for unlimited lifetime medical from our own insurance companies. That bargain is now disavowed by the very same insurance industry that demanded this no-fault scheme. The insurance industry is now rewinding the clock to 1972 without giving us back our rights to sue without threshold injuries in third-party claims.

The cost of all the other coverages, excluding PIP, is more than likely going to increase. The people of Michigan are going to be fleeced by the insurance industry again. Some insurance adjusters are already claiming that this “New” No-Fault Law is retroactive for existing catastrophically injured insureds even though the law doesn’t actually provide for retroactivity.

On page 28 of this law SEC. 2111F.(12):

“If subsection (2) or the application of subsection (2) to any insurer is found to be invalid by a court, the remaining portions of the Amendatory Act that added this section are not severable and shall be deemed invalid and inoperable.”

Does this mean if the courts strike any part of this “New” No-Fault Law that the entire act is stricken?

What have they done? This new law will create more problems than it will solve. The insurance industry has just externalized the cost of underwriting automobile claims to all the people of this state. Victims of serious injury auto accidents are going to be forced onto the Medicaid rolls. The Michigan taxpayers and not the insurance companies will be paying for the care of these victims.

This legislation will result in net increases in the cost of automobile insurance policies and net losses across the board for victims of serious automobile accidents.

Where else could you buy an insurance policy for $200 per year that guarantees lifetime medical coverage? (The MCCA per-vehicle charge)

What have they done? Increased insurance rates, increased bankruptcy filings, increased financial exposure if you cause an accident, less money actually available for seriously injured victims (after the medical liens and Medicaid/Medicare liens are paid in settlements). The real losers are the people of our state.

Why did this legislation not have a punitive damage provision for unreasonable trade practices by insurance companies? Why does Chapter 63 Anti-Fraud Unit not specifically say it applies to the insurance industry itself? Why is it only consumer based? Not one insurance company in this state had a Special Investigations Unit (S.I.U.) that investigated fraudulent claims handling practices of its own adjusters or the company itself against their insureds. With this new law, the insurance industry still doesn’t have any fraud investigation unit to investigate them.

What have they done?

James McKenna is a partner at Thomas, Garvey and Garvey LLC in Saint Clair Shores.

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