By Jon Fillmore
In 2019, the Michigan Legislature and Governor Whitmer put a new law on the books changing Michigan auto insurance significantly. It is the most significant auto law change since 1973, at which time all Michigan auto insurance policies had to begin providing unlimited Personal Injury Protection benefits (PIP). PIP includes financial protection for costs for lifetime medical treatment, care, recovery and rehabilitation. These costs can be significant. At Abbott & Fillmore, we have several claims going back as far as the 1970s with several millions paid out and continuing to pay for the rest of the insureds’ lives.
Most of the law becomes effective July 2, 2020, but certain components have already taken effect. Many people may have gaps in coverage that they don’t know about. This article, one in a series, focuses on a few of those important new aspects.
Main Change #1: The disappearing PIP trick.
Do you have or know of a “significant other” relationship in which individuals in a relationship are both driving a car (or cars) insured on just one insurance policy? Have children or know of children who have moved out of Mom and Dad’s house, but are still driving a car insured on their policy? Are you separated from your spouse and living apart? People in these situations may have a problem right now. And this part of the insurance law is in currently effect.
The new law changes the priority of who pays for PIP when someone is injured in an auto accident. It used to be that somehow or some way, eventually, the injured party would have the unlimited PIP coverage.
But now there are only three priority levels of PIP. Now, if you are injured in an auto accident, the policy that covers your medical bills will be:
a) your own policy in your name; or
b) if you do not have a policy in your name, then it goes to the policy of your spouse that you live with, or
c) if neither of those, then it goes to the policy of your “resident relative” (i.e. the policy of a person related to you that lives in your same household). And sorry, your first cousin once removed, by marriage, does not meet the definition of “relative.”
If none of those are applicable, then your PIP coverage goes to the Assigned Claims Plan AND HAS A LIMIT OF $250,000. Thus, you no longer have unlimited PIP.
Said another way, drivers or occupants of private-passenger automobiles and non-occupants, such as pedestrians, bicyclists, ORV operators, etc., involved in an auto accident, are no longer provided Personal Injury Protection (PIP) through the named insured’s policy unless they are one of the following:
– Named insured
– Named insured’s spouse
– Relative domiciled with a named insured
The best way for people in the above examples to protect themselves is to get a policy in their own name. Mom and Dad can kill two birds with one stone by titling the car over to the child that no longer lives at home. This will take some potential liability away from the parents. This is because, when there is an accident with serious injuries, the at fault driver will likely be sued AND the person on the title will also likely be sued. Removing Mom or Dad from title removes some of their liability exposure.
If a person in this situation does not own a car, they can get what is called a “Named Operator Policy” offered by some insurance carriers. This is basically a policy without a car, so it includes liability and PIP, but no coverage for damage to a vehicle.
In upcoming articles, we’ll discuss some of the other changes and how a reader’s cost of insurance will be affected. There IS good news!
Jon Fillmore is President of Abbott & Fillmore Agency, Inc.
CIC (Certified Insurance Counselor)
BA-Finance-Michigan State University
MBA-University of Michigan