Steve Gursten on changes to Michigan’s No-Fault Act
By Steve Thorpe
Legal News
The Michigan No-Fault Act remained fundamentally unchanged from the time of its enactment in 1973. Rising insurance rates, especially in the City of Detroit, created a push for reforming the Act. The changes that were recently passed are touted by some as providing that solution. It will likely be years before we know the full effect of No-Fault reform in Michigan. Some provisions take effect immediately, others will take effect on July 1, 2020. Attorney Steven M. Gursten of Michigan Auto Law in Farmington Hills focuses his practice on serious motor vehicle accident injury and wrongful death cases. He frequently lectures at legal seminars throughout the country on trial advocacy, trucking litigation, and traumatic brain injury cases. He is the annual moderator and speaker at the “Advanced Motor Vehicle Litigation Seminar” offered through 360 Advocacy. Gursten is also the President of the American Association for Justice’s (AAJ) Traumatic Brain Injury Litigation Group and past-president of both the Motor Vehicle Trial Lawyers Association and the AAJ Trucking Litigation Group. He recently spoke to the Michigan Association for Justice about the changes that will occur with the new law.
Thorpe: What do you see as the biggest change, procedural or otherwise, for attorneys?
Gursten: Our new auto No-Fault law will require attorneys to have a completely different approach to damages. We’ve just gone from being an unlimited first-party medical care state to now allowing people to elect various amounts of medical coverage. That means the “buckets” that lawyers are using to seek recovery must also now change. Under this new law we are now playing “Roulette” on our roads. If the people we represent have elected high PIP cap limits and are hurt by an at-fault driver with adequate insurance policy limits, they will still get the medical care and the legal compensation they deserve.
But this new law also means that for those people we represent who are seriously hurt in the exact same type of crash but who are injured by someone with very low liability policy limits and who have elected lower PIP cap levels, they may get only a fraction of what they deserve and face unpaid medical bills. Sadly, the catastrophically injured who are now injured by low policy limit drivers and who did not elect unlimited auto No-Fault will be the biggest losers under this new law. They will not be able to get the medical care they need. Michigan now becomes like 49 other states in this regard where there is a huge disparity on what people recover from identical motor vehicle accidents.
Thorpe: The new rules change how attorneys are paid. For example, an attorney cannot claim payment of a fee until a payment for claimed benefits is authorized and overdue. What other fee changes are there?
Gursten: Attorneys are still permitted to charge a “reasonable fee” for “advising or representing” car accident victims “in an action” (i.e., a lawsuit) to recover “overdue” No-Fault PIP benefits that an auto insurer “unreasonably refused to pay” or “unreasonably delayed” in paying. (MCL 500. 3142(1)) These so-called new “authorized” and “overdue” requirements aren’t really new at all. An attorney cannot — nor has an attorney ever been able to — collect penalty attorney fees for helping someone try to recover benefits that aren’t owed or overdue. There are other changes that do make it more difficult for attorneys to get paid for helping clients and giving them necessary legal advice that seem in direct conflict with Michigan caselaw.
For example, we have cases like Johnson v. Wausau, a case where an insurance company adjuster literally lied to her own insured for 16 years about benefits to which she was entitled, but the court blamed the insured for not seeking out an experienced lawyer and getting legal advice. These statutory changes now seem to make it harder for an attorney to get paid for this.
The new law also gives auto insurance companies more room to claim that No-Fault benefits they haven’t paid yet are not actually “overdue.” Under the old law, No-Fault PIP benefits were “overdue” if an auto insurer hadn’t paid them within 30 days of receiving “reasonable proof” that they were due. Now, auto insurers get an extra 60 days on medical bills if the bill wasn’t provided to the auto insurer within 90 days of the medical care or treatment. (MCL 500.3142(3)) Under the old law, one of the concerns shared by all legitimate stakeholders was that some unscrupulous attorneys were charging full attorney fees from day one on car accident victims’ medical and wage loss benefits even though these benefits were being voluntarily paid. The new law’s clarification that payment of benefits must be “overdue” before an attorney fee can be sought should limit this type of abuse.
Finally, the new law does create one very limited exception to the “overdue” requirement for attorneys fees. In a case where an attorney has helped a car accident victim recover No-Fault PIP medical benefits for attendant care or nursing services, attorney fees may be “awarded in relation to future payments” for up to three years. And, if the victim’s auto insurer cuts him or her off again in the future - which they most likely will - and his or her attorney successfully sues to restore the victim’s attendant care or nursing services benefits, then “attorney fees on future payments may be again awarded for not more than 3 years after a new trial court judgment or order is entered.” (MCL 500.3148(4))
Thorpe: Do you expect claims for third-party negligence and uninsured/underinsured motorist benefits to increase?
Gursten: They should if insurance agents are doing their job properly. If people have $500,000 in outstanding medical bills and they elected only $250,000 in PIP, then the only thing they can do is to sue the at-fault driver and hope the at-fault driver did not elect the new statutory minimum liability limits of $50,000 in insurance.
Uninsured and underinsured motorist coverage just became much more important as well. The new auto law will not make an appreciable difference in the cost of auto insurance for most people, despite what the politicians promised us. If people in Detroit couldn’t afford auto insurance before, they won’t be able to afford auto insurance now. The guaranteed rate reductions only apply to the PIP portion of our insurance premiums, not to the total cost of our auto insurance. This means the numbers of uninsured drivers in this state will stay very high. It also means now that we’ve lost unlimited No-Fault for our medical care and treatment that we are even more at the mercy of the insurance policy limits of the person who hits us, so you have to purchase very high limits of underinsured motorist coverage to fully protect ourselves and our families. Fortunately, both uninsured and underinsured motorist coverage are very inexpensive. Both types of coverage just became even more important in Michigan.
Thorpe: Coverage for out of state residents has changed radically. How?
Gursten: If you’re a “nonresident” and you drive your car here in Michigan for more than 30 days in a calendar year, then you must obtain a valid No-Fault auto insurance policy for your vehicle (MCL 500.3102(1)) or you will be considered an “uninsured” driver and, thus, subject to Michigan’s incredibly draconian sanctions for driving a car without insurance. This includes losing your legal right to bring a negligence lawsuit against a negligent, at-fault driver. Also, if a nonresident drives his or her car in Michigan “for a period exceeding 90 days,” he or she must get the car registered. (MCL 257.243(4)) A nonresident will now under the new law only be able to collect No-Fault benefits after being injured in a crash if he or she owns a motor vehicle that is both registered and insured in Michigan. (MCL 500.3113(c)) Similarly, a nonresident who has been injured in a Michigan car crash will be able to recover “economic loss” damages only if he or she can show that he or she suffered “a serious impairment of body function.”
The new law is still requiring an injured nonresident driver to meet an injury threshold even though they are barred from recovering No-Fault benefits and are forced to sue for all economic losses, which is an extraordinary change. The standard for recovering compensation after a crash has also changed, and all people injured in car accidents, including non-resident drivers, now fall under the new statutory definition of “serious impairment of body function” which codifies and gives “full effect to the opinion of the Michigan Supreme Court in McCormick v. Carrier, 487 Mich 180 (2010).”
Thorpe: Will this affect provider lawsuits?
Gursten: Yes. The new No-Fault law restores the right of providers to sue auto insurance companies for unpaid No-Fault benefits that they are owed. The Michigan Supreme Court ruling in Covenant Medical Center v. State Farm Mutual Automobile Insurance Company had created significant uncertainty about the future of provider litigation. The new law restores this direct action for providers but conditions this right on the benefits for which recovery is sought being “overdue” within the meaning of the No-Fault. (MCL 500.3112) and also imposes a new Medicare-based fee schedule that takes effect after July 1, 2021.
Thorpe: The old law had a one-year deadline for claims. How has that changed?
Gursten: Both the old law and the new have a “one-year-back rule.” What this means is that when a car accident victim has been denied or cut-off from No-Fault benefits and sues to recover for unpaid and overdue benefits, he or she “may not recover benefits for any portion of the loss incurred more than 1 year before the date on which the action was commenced.” (MCL 500.3145(1)) In the past, the one-year-back rule was interpreted to force a lot of unnecessary lawsuits to be filed to protect statute of limitations. But it was also being abused by many adjusters to deny legitimate claims by “investigating” claims until they were time-barred and it was too late for the victims to hire a lawyer and bring a lawsuit to sue. The new No-Fault law changes this. Specifically, the new law states that the one-year-back rule “is tolled from the date the person claiming the benefits makes a specific claim for the benefits until the date the insurer formally denies the claim.” (MCL 500.3145(3))
Tolling means that the one-year limitation stops running unless and until the insurer formally denies a claim. The bill also cautions that tolling “does not apply if the person claiming the benefits fails to pursue the claim with reasonable diligence.” I’m sure there will be considerable litigation defining what “reasonable diligence” will mean.
Thorpe: Priority of coverage has also changed. Tell us about that.
Gursten: The three most common priority issues involve vehicle occupants, non-occupants and motorcyclists, so I’ll talk about what their status is in the wake of the new No-Fault law.
For vehicle occupants, they will continue to claim through their own policy, that of their spouse or a resident relative and, if no coverage is available through those sources, then they will claim through the Michigan Assigned Claims Plan — though medical benefits will be limited to $250,000 in coverage. (MCL 500.3114(4); 500.3172(7)(a))
For non-occupants — such pedestrians, bicyclists, snowmobilers — the order of priority has now changed and it is now the same as for occupants. (MCL 500.3115; 500.3172(7)(a))
As for motorcyclists who are injured in a crash with a motor vehicle, there is also a very significant change. Motorcyclists will now first seek No-Fault benefits from the owner and, then, the operator of the motor vehicle involved in the accident. After that, they will turn to the owner and operator of the motorcycle that was involved in the crash. (MCL 500.3114(5)) If no insurance coverage is available through these sources, then the injured motorcyclist will have to file a claim for No-Fault benefits with the Michigan Assigned Claims Plan. (MCL 500.3114(6)) It’s also important to note that motorcyclists’ No-Fault medical benefits are limited by whatever No-Fault coverage level exists in the auto insurance policy from which they are seeking benefits. (MCL 500.3107c(5))
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