What is No-Fault Law and What Does it Cover?
September 28, 2018
The Background of No-Fault Law
No-fault insurance was conceived of in the 1960s, when people were growing frustrated with the complex process involved in trying to obtain compensation after an auto accident. The underlying issue was the task of determining who was responsible, which was often time-consuming and fraught with challenges. One solution was developed by law professors Robert Keeton and Jeffrey O’Connell. It came to be known as the Keeton-O’Connell Proposal and formed the basis for no-fault insurance.
The following decade saw the passage of the first laws that enacted no-fault policies. The new regulations allowed people to collect compensation from their own insurance carriers after an accident, helping to reduce the time spent on identifying the liable party.
In the 1980s, a nonprofit group called Project New Start was formed. They wanted people to have a choice between no-fault or fault-based insurance, which would give consumers access to a wider variety of coverage options. The no-fault policy would come with a less expensive premium but require forfeiting the right to bring a lawsuit against another driver, while selecting a pricier fault-based plan would retain that ability.
People tried to make further improvements to the system in the 90s, including a hypothetical universal no-fault coverage plan that would have been funded by a fee paid when purchasing gasoline. One proponent described this idea as “No salesmen, no government, no lawyers” because it would have eliminated both the need to select a particular insurance and the possibility of litigation. This interesting concept failed to gain popularity, but it increased the visibility of no-fault plans wherein participants relinquish their rights to sue.
In Michigan, no-fault laws were adopted in October 1973. Since then, the system has been both praised and criticized. Our no-fault insurance laws provide generous benefits for those injured in an accident, but has also lead to heated debates about the overall affordability of the coverage. Certain areas of Michigan, such as the City of Detroit, have some of the highest insurance premiums in the country making it very difficult for residents to afford proper insurance. In fact, the mayor of Detroit, Mike Duggan, recently filed suit against the State of Michigan arguing that the no-fault system is unconstitutional because the rates are too high. The reality is that Mike Duggan’s reasoning is out of tune with reality and misses the true cause of the high premiums, which is the insurance companies unethical and possibly illegal use of “redlining” to set rates. The lawsuit will likely be dismissed for because it lacks true legal standing but it does highlight the need for thoughtful and fair changes to the no-fault system. However, until insurance companies are willing to be fair and just in negotiating changes that will protect injured individuals it is going to be difficult to see any real, effective changes to our system.
Whiting Law will keep you up-to-date on Michigan legislature, and we remain committed to fighting for you no matter what the future holds.
What Is and Isn’t Covered Under Current Law
As it presently stands, Michigan no-fault law covers the following:
- Treatment of injuries. Michigan residents have unlimited medical and rehabilitation benefits under Personal Injury Protection (PIP) insurance.
- Lost wages. PIP covers up to 85% of missing income caused by harm sustained in an auto accident for three years, with a maximum payout of $5,541 per month.
- Household replacement services, limited to $20 per day for a period of up to 3 years.
- Property damage. No-fault insurance will cover any destruction to assets such as a house, fence, or barn.
No-fault plans in Michigan do not cover any of the below:
- Damage to your car or another driver’s. This falls under your own collision coverage, if you choose to purchase it.
- Theft of a car or belongings inside it. This would be included in a comprehensive car insurance policy.
- The costs for having a car towed or obtaining a temporary replacement vehicle. These would be paid for by towing and rental coverage.
We hope this brief overview of no-fault insurance has been helpful. If you have any questions about these regulations or any other aspect of Michigan law, you are welcome to contact us at Whiting Law and we’ll be happy to help you.