Larry Norman, president and executive general adjuster of L.W. Norman & Associates in Michigan discusses recent changes to the Michigan no-fault insurance law and impact on claims.
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Best’s Insurance Law Podcast
Claims Impact of Michigan No-Fault Law Reformation
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John Czuba: Welcome to Best Insurance Law Podcast, the broadcast about timely and important legal issues affecting the insurance industry. I am John Juba, Managing Editor of Best Insurance Professional Resources. We are very pleased to have with us today, Larry Norman, from independent adjusting firm, L.W. Norman & Associates Michigan. Larry founded L.W. Norman & associates in 1975 and is the Firm President and Executive General Adjuster. Under his leadership, his team trained experienced professional technicians, represents insurance carriers, self-insured entities as well as third-party administrators in Michigan, Ohio and Indiana. For many years, Mr. Norman has been a proud member of the National Association of Independent Insurance Adjusters and the Honorable Order of the Blue Goose International. He has been admitted into the Society of Registered Professional Adjusters or PA as well. In 2018, having served on numerous appraisal dispute panels, Mr. Norman became a certificated insurance appraiser and a certificated insurance umpire. And, Larry, we are very pleased to have you join us this morning.
Larry Norman: Thank you, John. I appreciate the opportunity to speak with you guys.
John Czuba: Today’s podcast discussion is how the new Michigan No-Fault Law is impacting insurance claims.
Larry, for our first question, what insight can be gained by the traditional insurance provider or captive insurance carrier claims executives, risk managers, third-party administrators, and active frontline decision-making adjusters through this discussion on the Michigan No-Fault Law change?
Larry Norman: Well, I hope this presentation will provide the interested parties with a brief explanation regarding how the new no-fault system in Michigan has differed from the other states. In addition, I hope to explain some of the major changes in the new law.
Finally, it is my sincere desire that we can use the information gleaned through this discussion so that the claims professionals will have the necessary tools to appraise the new waters that are now being cast out in the Michigan No-Fault rules of the road.
John Czuba: Larry, can you give us some background on Michigan’s current no-fault law and share with us something about the reformed Michigan No-Fault Law that will be fully implemented on July 2nd of this year, 2020?
Larry Norman: Thank you, John. In 1973, Michigan adopted its current no-fault law which grants, among other things, personal injury protection, which includes medical expenses, lost wages, and replacement services that provide daily household assistance to individuals that are injured in traffic accidents.
Under the current statute, these benefits are granted to the eligible individuals regardless as to who was at-fault for the accident. By the way, I should mention that the benefits are unlimited. By that, I mean the medical expense provisions of the law is unlimited.
This is where Michigan departs from the other 12 states that have no-fault laws in place in that Michigan is the only state that guarantees unlimited medical expenses that are reasonable and necessary that are incurred by an injured party regardless of the duration and the amount of time they will be required to receive medical care following a traffic accident.
Now, in exchange for this benefit though, in Michigan, except in rare cases, can an injured party ever bring lawsuits for damages arising from a traffic accident. In other words, they are unable to sue the at-fault driver for accidents or injuries, or damages under the current law.
However, as of July 2, 2020, there will be a new law in effect that will require Michigan drivers to purchase limited medical expense benefits — or, I should not say require. Let me rephrase that – that will give them an opportunity to acquire medical expense benefits that are less than unlimited.
In other words, they will have a choice to purchase unlimited medical expense coverage or limited medical expense coverage based upon their individual selection.
Now, of course, there will be a corresponding reduction in the cost of premiums depending on the level of medical expense coverage the individual purchased. In other words, if a person secures a policy that has a very limited amount of medical expense coverage, they should receive a corresponding reduction in the cost of their insurance premiums.
However, everybody is not going to be entitled to this type of selection of medical expense coverage, because there are certain people such as individuals that are business owners that operate certain commercial vehicles, or people that use their private passenger automobiles in such endeavors as Lyft or Uber drivers, they will be unable to take advantage of this new, optional PIP program.
John Czuba: Larry, under the new plan, what happens in the case of a pedestrian or an occupant in a vehicle who does not have his or her own personal PIP policy and no one else in their household has PIP coverage either? Where do they turn to, to secure payments for their medical expenses and lost wages?
Larry Norman: Under the current law, a person who is injured while a pedestrian or a passenger inside an automobile that is involved in the traffic accident may recover their PIP benefits from the owner or registrant of the vehicle that was involved in the accident.
On the other hand, if the owner or registrant of the vehicle does not have their own personal automobile policy, then the victim, meaning the pedestrian or occupant of the car, will be able to obtain their PIP benefits from the insurance carrier of the driver of the automobile’s PIP carrier. Now, that is under the current law.
However, under this new law, the pedestrian or occupant that is injured in a traffic accident must secure their PIP benefits from their own individual PIP carrier. In other words, they have to first seek coverage from the insurance carrier that provides PIP protection in their own household.
So, if the pedestrian or the occupant of the car, unlike under the previous scheme of the no-fault system, would seek the coverage from the owner or operator’s insurance PIP carrier, they have to go to the insurance carrier within their own household, meaning the pedestrian or the occupant.
Now, assuming that there is no coverage available within the household of the pedestrian or occupant of the vehicle, that is when the injured party must turn to the Michigan Assigned Claims Plan to receive the benefit of the No-Fault Law, the PIP benefit.
John Czuba: Let us discuss the coverage issues. What are the implications that the healthcare provider in good faith renders treatment to an injured person related to an auto accident that occurs in Michigan?
Larry Norman: Under the old Michigan No-Fault Law, the Michigan Supreme Court ruled healthcare providers could only demand payment for their professional services through a cause of action brought under an appropriate assignment of benefits documented by the eligible injured party.
So, if somebody comes into the treating facility and desires treatment, under the old system, the healthcare provider is well advised to secure an assignment of benefits from the victim in order to guarantee payment for their services.
Nevertheless, under this new law, the healthcare provider who acts in good faith can assert an independent cause of action or an independent claim against the insurance carrier of the party that they rendered medical care to, involving a traffic accident, as long as it is shown that it was done in good faith.
In other words, the health provider no longer has to secure a document or an assignment of benefits from the injured or eligible party in order to secure or guarantee payment of their services. I should say secure the payment of their services.
Now, since we are on the subject of medical health providers, I would like to talk to you about another wrinkle that has occurred within the new law. Under the new law, there is a movement afoot to start the application of medical fee schedules.
By that, I mean the doctors, hospitals, clinics, and rehabilitation facilities and others who treat automobile accident victims will only be able to receive compensation for the specific duties or treatments that they rendered to accident victims under an appropriate schedule or an approved schedule.
Now, under the current system, the cost for the amount of charges that a doctor or a hospital or other healthcare providers make or render to an individual is just reasonable if they can show that the cost that they are charging the insurance carrier is reasonable in terms of the services rendered than the insurance carrier had. Unless they can prove that the charges are unreasonable, they have to pay them, but under this new system, the doctors, hospitals, and other people that I have outlined will be controlled or the cost will be contained based upon the schedule that is posted under the new law. In other words, there will be a cap on the doctor’s fees or the healthcare provider’s fees under the new system.
John Czuba: Larry, is there a possible remedy for individuals that incur large medical expenses higher than the PIP option that they select?
Larry Norman: Yes, there is. Under the new scheme of the no-fault system, I think this area is embraced in Section 3135 of the new law. An injured party may be able to sue the party that caused the traffic accident for their medical expenses, the victim’s medical expenses that exceed their limit of liable PIP benefits.
If the injured individual incurs medical expenses that exceed their selected policy limit for charges, then the overage or the amount that is not covered by their insurance policy can be recovered through a cause of action against the responsible party.
Now, this is a substantial departure from the current system where the insurance carrier for the injured party would be obligated to pay all the continuing medical expenses of the injured party forever until there is some measure of recovery. By that, I mean physical recovery by the innocent victim.
Incidentally, under this new plan, there could be a recovery brought by the eligible medical benefits individual that lacks coverage for future medical expenses against the at-fault drivers. But, I emphasize this, such general damages as pain and suffering is generally agreed that even under the new law, the injured party will not be able to sustain a cause of action against a responsible party unless there is a showing that they sustained a serious impairment of a bodily function, a serious disfigurement, or death as a result of a traffic accident.
John Czuba: I was just going to ask, are you aware of any changes under the new law related to third-party damage claims?
Larry Norman: Under the new law as provided as well as provided under the old law, an insurer is liable to a claimant property owner for accidental damage to their tangible, physical property, such as the building, and the loss of use of their property regardless of the degree of fault or lack of negligence on the part of the insured, unless it can be proven that the claimant intentionally caused the accident to occur.
For example, an insured is waiting at a traffic light. The traffic light is red for his or her direction of travel and before they were able to continue toward their destination, another vehicle comes along and strikes them in the rear.
The impact forces the innocent insured into a building and the adverse party does not collide with the structure at all. Under these circumstances, the carrier for the innocent insured would be responsible to respond to the building owners for the damages up to a limit of $1 million.
The test under the circumstances here is all the innocent building owner has to prove is that the insured, the innocent insured, actually came in contact with their structure. The innocent insured or carrier does not have a recourse to deny or resist the claim of the innocent building owners.
Now, by July 2nd, the vehicle owner without an insurance coverage or I should say without collision coverage, and his or her has a deductible up to $3,000, can collect the damages of the car from the party at fault as a part of general damages against the party at fault.
There has to be a showing on the part of the claimant party that they were not responsible for the accident, and/or if their negligence contributed to the accident at all, their negligence was less than 50%, a contributing factor to the accident.
If a claimant’s vehicle was legally parked, the responsible party’s insurance carrier would have to pay lesser of the replacement cost or repair, and including but not limited to a reasonable allowance for temporary transportation during the pending of a resolution of the claim.
John Czuba: Larry, can this change in Michigan law ultimately impact other states? I know your company does work in Ohio and Indiana. Can those states potentially be impacted by this?
Larry Norman: I do not think so, John. I think the changes in Michigan will not motivate Ohio or Indiana to adopt an auto insurance no-fault plan. Both of these states appear to have employed auto insurance financial responsibility laws that are more or less centered around the concept of tort liability.
In other words, these states generally speak to allotment of compensation to injured parties based upon the theories of negligence and damages. More to the point, I can say that it appears that under the methods that are employed by Ohio and Indiana, it appears that the automobile claims disputes are resolved in a timely fashion to the satisfaction of the majority of their citizenry because the overall cost of insurance coverage in Ohio and Indiana is currently less than the cost of insurance that is incurred by Michigan citizens.
So, I do not see either Ohio or Indiana adopting a system of no-fault in order to respond to their auto financial responsibility laws.
John Czuba: Larry, thank you so much for joining us today.
Larry Norman: Thank you, John. I appreciate the opportunity.
John Czuba: That was Larry Norman from L.W. Norman and Associates in Michigan. Special thanks to today’s producer, Scott VanDemark, and thank you all for listening to today’s podcast and for associating with Best’s Insurance Professional Resources.
I’m John Czuba, and now this message.
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