July 27, 2019

What is Personal Injury Protection (PIP) and How Does it Work?

Personal Injury Protection (PIP) is part of the no-fault auto and truck insurance law that provides for medical benefits to the people involved in an accident. In most accidents where people are injured, a car accident attorney at Cochran, Kroll & Associates, P.C. needs to be involved to make sure the victims receive adequate and fair compensation for the injuries sustained in the crash. Unfortunately, the victims of car crashes face many hurdles both on the journey to recovery and the maze of legal steps that they must take to receive a full settlement for their injuries.

In Michigan, a new law was passed on May 25, 2019, that changes the regulations and benefits that are included in the PIP insurance coverage. This new legislation goes into effect on July 1, 2020, and it will affect every driver in Michigan. Other changes will not go into effect until July of 2021, and it is important to be aware of the details and how each settlement may be regarded by the insurers and the attorneys. There are many important changes to the law that every driver should be aware of, mainly because of the cost saving benefits as well as the proposed coverages.

History of PIP in Michigan

It has been a long legislative road for the politicians and insurance companies in Michigan to maneuver as they worked to pass this new legislation. During the years of 2000 to 2013 the premiums for Personal Injury Protection rose 278% while medical costs rose 145% with an overall decrease by 20% of the motorists injured. This extreme rise in costs for PIP insurance made Michigan the state with the highest premiums for no-fault insurance.

The statistics further revealed that the cost for medical expenses for victims outpaced the cost of repairing the vehicles that were involved in the collision. At this time Michigan law required that all motorists purchase unlimited Personal Injury Protection, and as result the premiums skyrocketed. In fact, Michigan was in a crisis and something had to be done to address this problem. The premiums for Michigan drivers were higher than those premiums for drivers in New York, New Jersey, and Florida.

The New PIP Legislation

Under the new Michigan no-fault law there will be some changes. The first is that drivers will no longer need to buy unlimited Personal Injury Protection. For policies that are written after July 1, 2020 the driver may elect to purchase coverages in the amounts of $50,000, $250,000, $500,000 and also with “no limit.” The $50,000 coverage is for those drivers who have Medicaid coverage. In addition, drivers who are on Medicare can opt out of paying any premium at all.

Those who have developed the legislation estimate that there will be substantial savings for drivers in Michigan. For instance, the new law promises savings of up to 45% for those who choose the $50,000 option, savings up to 35% for the cap at $250,000, savings of up to 20% for those who choose the $500,000 limit, and savings of up to 10% for the “no-limit” coverage. It is a good idea to consult with a car accident lawyer at our law firm before you choose the plan that is right for you.

The Michigan Catastrophic Claims Association. (MCCA)

The Michigan Catastrophic Claims Association (MCCA) is a non-profit private organization created in 1978 to provide long term coverage for victims of automobile accidents. The MCCA reimburses auto insurance companies for the medical expenses incurred by a victim in a collision. Currently the amount of coverage per individual is $580,000, and the approximate cost per vehicle is $220.

Under the new no-fault insurance law for policies written after July 1, 2020, those drivers who elect to pay for unlimited PIP coverage will still receive the full benefit. The drivers who elect to accept a cap in PIP premiums will still be required to pay the annual vehicle fee for MCCA in order to offset the costs of this program.

If a driver does not have unlimited no-fault coverage, and they are involved in an accident, and the medical costs are beyond the coverage they have, they can sue the at-fault driver for the medical charges above their coverage.

Insurance Companies

Insurance companies stand to gain income from the savings of no-fault medical claims, but the law has stipulated that these savings must be passed on to consumers in the form of lower premiums. In addition, the insurance companies can no longer determine premiums based on non-driving factors such as sex, marital status, home-ownership, level of education, credit score, or postal zone.

PIP Coverages

Personal Injury Protection coverages for an auto or truck accident cover medical costs, the cost of a death, and other economic benefits. There is also a requirement for Property Protection Insurance, which has an additional premium attached to it.

The medical coverages that a victim can claim include, medical services and medication, surgical services and hospitalization, diagnostic services, rehab programs, ambulatory services, and treatment in accordance with an organized religion. PIP claims, once they are justified, can include the necessary benefits up until you fully recover. If you have a claim it is very important that you retain a car accident attorney from Cochran, Kroll & Associates, P.C. to make sure that the insurance companies do not impose restrictions on the benefits.

If you are disabled in an accident, even for a short amount of time, the PIP coverage will pay for lost wages until you go back to work. There is a time limit of three years. However, there are some limitations. The PIP coverage will pay only 85% of your normal salary or a maximum of $5,398 per week or whichever is less. You can also receive compensation for services that you cannot do because of physical limitations caused by the accident. For instance, mowing the lawn, doing the laundry, or shoveling snow will fall under this category.

In the case of death related to a car accident, the PIP insurance would cover the cost of burial and the funeral expenses. You, or your next of kin, are also entitled to $1,750 in benefits. Work loss benefits are also paid under the same guidelines as being disabled.

In the case of property damage, Michigan drivers are required to hold Property Protection Insurance (PPI) that is not included under PIP. This insurance covers buildings, fences, walls, and a stationary car up the limit of $1,000,000. This limit is mandatory, unlike the other provisions of the Personal Injury Protection coverage.

Diligence in Making a Claim

In Michigan under the new no-fault ruling, the victim must be diligent in making a claim for damages. A tolling period is an amount of time that the plaintiff and defendant agree on that gives them more time to resolve a claim or dispute without further litigation. The new no-fault law states that any claim is automatically “tolled” from the date of the claim until the insurer formally denies the claim. However, the claimant must be able to prove diligence in bringing a claim to the insured. This situation makes it more important than ever to have a competent car accident attorney involved in any claim to ensure that timelines and statutes of limitation are adhered to. This provision is spelled out in section MCL 500.3145 of the new Michigan law.

Other Provisions of the Law to Note

When any new comprehensive legislation is passed after many months of negotiations, there are usually provisions added to the underlying structure of the bill that fills out the intricate workings of the law’s intent. These things need to ne noted in order to completely understand the scope of the law, and to define when it might be necessary to engage the services of an independent car accident lawyer. These provisions often can seem unrelated to the section of the law that are most important to the layman, but nonetheless, they also carry weight and are imperative to a full understanding of the law.

The medical fee schedule and the managed care option are two important aspects of the law that the consumer should note. Under the medical fee option, the legislation creates a fee schedule for medical providers that caps the amount that they can charge insurance companies for medical care. This works in favor of the insurance companies in that they can budget for normal expenses, and this should also benefit the car owners because this savings can be passed to them in the form of lower premiums. The fee schedule is based on Medicare and Medicaid parameters, and the payments will reflect anywhere from $100 to $200 of normal payments under these programs. The fee schedule has not been developed as yet, and will be implemented as of July 2021.

Under the managed care option, insurance companies would be able to sell motorists their own “managed care health options” to further reduce premiums under the no-fault plan. The plans could include a co-pay or deductible and they would direct a driver to an independent provider to secure this coverage. This managed care plan would not apply to a situation where there is immediate injury due to a car crash.

Both of these provisions would be retroactive. Due to begin in July of 2021, these provisions would cover any victim who is suffering catastrophic injury from an accident that has occurred as of May, 2019. A car accident lawyer at our law firm will be up to date on any changes or modifications of this legislation, so it is imperative to keep in contact if you have a claim before July 2021.

Serious Impairment of Body Function

The new law does bring changes to the definition of a “serious impairment to body function.” This aspect of the no-fault law concerns the claim for “pain and suffering,” and states that a victim making this claim must have “observable and perceivable symptoms recorded by someone other than the injured victim.” The law requires that there is a distinct difference between the life the victim had before the accident, and the life they are experiencing after the accident. A car accident attorney, with detailed documentation, would be able to secure a settlement if there is the presence of pain and suffering.

Strengthening Anti-Fraud Laws

In September of 2108, the Michigan Legislature added language to the new law to increase its coverage of fraud in the insurance and financial industries. Although it is not directly included in the new no-fault legislation there is a correlation. The Michigan Department of Financial Services (DIFS) launched a new website to enable consumers and the insurance companies to publish instances of fraud. The National Association of Insurance Commissioners received 3,342 suspected claims for insurance fraud in Michigan last year.

This is important to remember because the Michigan no-fault law requires that the Insurance Commissioner investigate instances where they can assist a person who believes that their insurance carrier is not providing them a fair settlement. Even though the law does not take effect until 2021, this website is currently available.

Conclusion and Summary

The first no-fault car insurance legislation was passed in Michigan in 1978. It has taken until May of 2019 for the Michigan Legislature to recognize the financial burden that this mandated insurance has placed upon consumers and the smooth workings of the claims process. Much of the delay in bringing the new law to fruition was not so much the intent or motivation of the lawmakers, but also the fact that legislative seats changed as well as did Governors. Finally, in 2019, the legislature passed a comprehensive modification to the no-fault law and addressed the problems of high premiums and adequate medical coverage for victims.

The law office of Cochran, Kroll & Associates, P.C. at 1-866-MICH-LAW (1-866-642-4529) has been studying this law since its inception, and we are prepared to support any victim who has the misfortune of being involved in a car crash. You can contact our law firm at any time, and we will offer our professional advice and guidance as we support you through this difficult time. Call us today for a no obligation case evaluation. We never charge a fee unless we win your case!

Tim is a writer and editor who earned his Bachelor of Arts in Journalism from the University of Maryland and calls Washington, D.C., home after spending most of his adult life in the country’s capital. Although Tim spent most of his post-college years in the restaurant industry, he became interested in writing about legal matters after he recently moved to Colombia. Today, Tim writes professionally about medical malpractice, drug policies, and workplace injuries. Tim is focused on curating his freelancing career and plans to work remotely for as long he can.

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