By Roberta M. Gubbins
Legal News
“One of the hot issues among plaintiff’s personal injury lawyers are coverages,” said Steve Hicks at a recent Luncheon Lecture sponsored by the Ingham County Bar Association held at the State Bar of Michigan in Lansing.
“In Michigan,” he noted, “you have to show serious impairment of bodily function in order to recover non-economic loss in a motor vehicle accident case.”
For the last six years, Hicks said, “that has been the most restrictive interpretation of threshold that we have ever had.”
Because of tort reform in the 1990s, Hicks said, a new threshold was adopted that defined what serious impairment of bodily function “really meant.”
“Basically it is an objectively manifested impairment of an important body function that affects the injured person’s general ability to lead his or her normal life,” he said. “The first part is relatively easy — objectively manifested impairment — meaning if it shows up on any testing. “
“Important body function is a ‘no-brainer’ — use of the back, an arm, leg or brain, for example,” said Hicks. “The real rub in this new tort reform is the phrase ‘that affects the injured person’s general ability to lead his or her normal life.”
It is a combination of factors — “and is a subjective test,” he said. “What is general ability?”
As a result of numerous appeals, Hicks said, the Supreme Court held that the impairment “must affect the course or trajectory of a person’s life, which is a broad ruling.”
Hicks said the problems arose around what degree of injury “affected the course or trajectory of a person’s life — there may be pain, but the individual could still work — is that affecting the course or trajectory of a life?”
It got to the point, according to Hicks, where cases that normally would settle for six figures would not cross threshold anymore.
“At this point, coverage was not an issue,” he said. “But with the changes in threshold under the new case of McCormick v Carrier, there will be more and more focus on ‘how much liability coverage does a person have?’”
The issue that has arisen on coverage has been the existence of ‘step-downs’ in a policy.
A ‘step-down’ is any provision that typically shows up as an exclusion reducing the amount of liability, according to Hicks.
In Michigan, he said, a step-down will be to the statutory minimum limits — $20,000 per person; $40,000 per accident.
“For anyone with a serious impairment of bodily function, $20,000 will not be enough,” he said.
The insurance companies will ‘step-down’ the amount of coverage that the person has written in the declarations.
Step downs, said Hicks, usually show up in the exclusions section of the policy.
“Certain companies in Michigan don’t offer coverage for the ‘under-insured,’ which is a claim against your own company when the driver that hit you did not have to compensate you for your injuries,” he said. “For example he has only $20,000 so you could pick up the difference to $100,000 on your policy.
“With ‘step-down’ found in the exclusion section, for the uninsured, which is defined, they only give the statutory amounts of $20-$40,000,” Hicks said.
More often, he said, certain situations are described where coverage is reduced to the statutory minimums required by the state in which the accident occurred.
“To find that amount, one would have to look at the statute setting them for each state,” he said.
Scenarios where ‘step-downs’ occur, he said, are primarily ones in which the person only occasionally drives the car, like a college student.
“In that situation, the coverage could be the statutory minimum,” he said, meaning thats that regardless of the amount of injury, $20,000 (if the accident occurs in Michigan) is the maximum amount of recovery regardless of what is stated on the declarations page.
Hicks said the parties often will not challenge the insurance company due to the costs and time of litigation so “insurance companies know these (step-downs) work.”
“How do you fight step downs?” he asked. “While it is harder to attack the policies that say $20,000, it is easier to challenge the ones that use obtuse language such as limiting to the coverage in each state in the exclusions rather than on the declarations page. Those are more likely to fall.”
Hicks also noted that some policies have a two-year statute of limitations written in the policy, which must be followed.
“The real problem,” he said, “is when settlement issues delay filing of a claim and the insurance company won’t consent to the delay.”
Hicks practices in the areas of negligence/personal injury and labor and employment law.
He serves on the executive board of the Michigan Association for Justice and on the Council of the Negligence Law Section of the State Bar of Michigan.
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