Auto accident victims continue to feel the devastating impact of the 2019 Automobile No-Fault Reform Act (“Reform Act”). While “fee schedules,” caps on medical expenses, and limitations on home attendant care have caused problems for injured motorists and health care providers, the “option menu” drivers are given when applying for auto insurance has left many people with either limited access to medical care or none at all.
Today, Michigan auto policy applications contain an option for drivers to exclude family members in their home from Personal Injury Protection (PIP) medical expense coverage, including attendant care benefits. Under the not-so-new law, drivers may elect to waive or reduce their medical coverage in consideration for a reduced premium payment. However, while the selection may be a personal choice for the named insured on the policy, the impact on other persons in their home, including, a driver’s spouse, can be devastating. The amended provisions of the Reform Act allow an “applicant or named insured” to decline medical expense coverage if they are Medicare eligible, or select minimum medical coverage under the policy if they (and every family member of their home) are covered by a qualified health care (QHC) plan. To make this election, the applicant must simply “certify” that all family members living with them are covered under a qualified health insurance plan.
However, there is nothing in the Reform Act that requires the applicant or named insured to produce a copy of the qualified health plan, declaration page or other proof that health care coverage exists when selecting the lower coverage limit and excluding family members from medical coverage under the policy. Nor does the law require certification or proof from the spouse or resident relatives that they are covered under a qualified plan. What is most concerning is that the applicant or named insured may exclude their spouse or resident relatives without their knowledge or consent.
While the legislature certainly did not foresee this problem when it hastily passed the Reform Act, the Department of Insurance and Financial Services (DIFS) has issued guidelines in an effort to prevent insurance companies from blindly ripping away coverage to family members who do not have a policy of their own. The DIFS bulletin states, “If an applicant or named insured has made an ‘effective selection’ under MCL 500.3107c (1)(b) ($250k of coverage), but seeks an exclusion under MCL 500.3109a(2) for any or all eligible household members and then fails to provide the requisite proof of QHC for any or all household members to qualify for the
exclusion, the insurer must issue a policy with $250,000 in PIP medical benefits for any or all household members that fail to provide the requisite proof of QHC; and must offer the exclusion to any or all household members that provide proof of QHC.” Of course, not all Michigan auto insurance companies make this a requirement for a driver to obtain coverage. Therein lies the problem.
The danger of allowing a named insured to exclude resident relatives from PIP medical coverage without proof that they are covered under a qualified health care plan is self-evident. An example of the devastating medical and economic impact of allowing insurance companies to issue policies excluding resident family members is ever present in the event of a pedestrian motor vehicle accident whereby an excluded family member sustains serious injury. While courts have recognized an insured’s limited right to elect bodily injury coverage limits under the default minimum where the insured does not “waive, release or compromise a claim or defense” belonging to a minor (See Clark v State Farm Mut Auto Insurance, 2022 U.S. Dist LEXIS 233476), it has not weighed in on the exclusion of a spouse or resident family member from PIP medical expense coverage.
Forecasting how the Michigan courts will address what appears to be a growing issue in prevalence, stare decisis suggests that the DIFS “model” will be treated like a bulletin. In cases where DIFS has provided clear direction on insurance law and regulation, courts — while acknowledging they are not required to follow them — have regarded the bulletins as persuasive authority. From a public policy standpoint, it seems counterintuitive to allow innocent third party beneficiaries of the no fault system to suffer the consequences of losing insurance coverage simply because a named insured either mistakenly believed them to be covered under a qualified health plan or fraudulently certified coverage when none exists. The purpose and intent of the Michigan “no fault” system is precisely as the name suggests, to protect victims of automobile accidents from the insufferable pain and expenses that grow out of an accident. Offering reduced premiums to drivers in exchange for excluding family members from the policy without proof they are covered by a qualified health plan is bad for families and should be addressed by state law makers or corrected by the courts.
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A.Vince Colella is a founding partner of Southfield-based personal injury and civil rights law firm Moss & Colella.
Today, Michigan auto policy applications contain an option for drivers to exclude family members in their home from Personal Injury Protection (PIP) medical expense coverage, including attendant care benefits. Under the not-so-new law, drivers may elect to waive or reduce their medical coverage in consideration for a reduced premium payment. However, while the selection may be a personal choice for the named insured on the policy, the impact on other persons in their home, including, a driver’s spouse, can be devastating. The amended provisions of the Reform Act allow an “applicant or named insured” to decline medical expense coverage if they are Medicare eligible, or select minimum medical coverage under the policy if they (and every family member of their home) are covered by a qualified health care (QHC) plan. To make this election, the applicant must simply “certify” that all family members living with them are covered under a qualified health insurance plan.
However, there is nothing in the Reform Act that requires the applicant or named insured to produce a copy of the qualified health plan, declaration page or other proof that health care coverage exists when selecting the lower coverage limit and excluding family members from medical coverage under the policy. Nor does the law require certification or proof from the spouse or resident relatives that they are covered under a qualified plan. What is most concerning is that the applicant or named insured may exclude their spouse or resident relatives without their knowledge or consent.
While the legislature certainly did not foresee this problem when it hastily passed the Reform Act, the Department of Insurance and Financial Services (DIFS) has issued guidelines in an effort to prevent insurance companies from blindly ripping away coverage to family members who do not have a policy of their own. The DIFS bulletin states, “If an applicant or named insured has made an ‘effective selection’ under MCL 500.3107c (1)(b) ($250k of coverage), but seeks an exclusion under MCL 500.3109a(2) for any or all eligible household members and then fails to provide the requisite proof of QHC for any or all household members to qualify for the
exclusion, the insurer must issue a policy with $250,000 in PIP medical benefits for any or all household members that fail to provide the requisite proof of QHC; and must offer the exclusion to any or all household members that provide proof of QHC.” Of course, not all Michigan auto insurance companies make this a requirement for a driver to obtain coverage. Therein lies the problem.
The danger of allowing a named insured to exclude resident relatives from PIP medical coverage without proof that they are covered under a qualified health care plan is self-evident. An example of the devastating medical and economic impact of allowing insurance companies to issue policies excluding resident family members is ever present in the event of a pedestrian motor vehicle accident whereby an excluded family member sustains serious injury. While courts have recognized an insured’s limited right to elect bodily injury coverage limits under the default minimum where the insured does not “waive, release or compromise a claim or defense” belonging to a minor (See Clark v State Farm Mut Auto Insurance, 2022 U.S. Dist LEXIS 233476), it has not weighed in on the exclusion of a spouse or resident family member from PIP medical expense coverage.
Forecasting how the Michigan courts will address what appears to be a growing issue in prevalence, stare decisis suggests that the DIFS “model” will be treated like a bulletin. In cases where DIFS has provided clear direction on insurance law and regulation, courts — while acknowledging they are not required to follow them — have regarded the bulletins as persuasive authority. From a public policy standpoint, it seems counterintuitive to allow innocent third party beneficiaries of the no fault system to suffer the consequences of losing insurance coverage simply because a named insured either mistakenly believed them to be covered under a qualified health plan or fraudulently certified coverage when none exists. The purpose and intent of the Michigan “no fault” system is precisely as the name suggests, to protect victims of automobile accidents from the insufferable pain and expenses that grow out of an accident. Offering reduced premiums to drivers in exchange for excluding family members from the policy without proof they are covered by a qualified health plan is bad for families and should be addressed by state law makers or corrected by the courts.
—————
A.Vince Colella is a founding partner of Southfield-based personal injury and civil rights law firm Moss & Colella.
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