No-Fault Auto Insurance Reform

Storm Insurance Services of Farmington answer common questions concerning this quickly-approaching change.

On May 30, 2019, Governor Whitmer signed an historic bipartisan no-fault auto insurance reform bill with the goal of “providing lower rates for Michigan drivers, protecting insurance coverage options and strengthening consumer protections” (michigan.gov). Since Michigan’s new auto insurance law will go into effect on July 2, and all insureds are subjected to it on this date, Storm Insurance Services of Farmington wanted to take the opportunity to answer common questions concerning this change.

According to Storm’s Licensed Insurance Agent: P&C, Life & Medicare Plans Jacqueline Everson, the new state minimum liability limits will change from $20,000 per person or $40,000 per accident to $250,000 per person or $500,000 per accident. However, lower limits of liability are available with signed consent from the insured.

“The reason for the increased liability limits is because drivers under the new law have additional liability risks that do not exist today,” Everson explained. “Today, if you are less than 50% at-fault in an accident in Michigan, you cannot be sued for any reason related to the accident. And if you are more than 50% at-fault in an accident, you realistically can only be sued for up to $1,000 worth of damage to the other driver’s vehicle, as well as pain and suffering, if it can be proved in court. The new law allows a visibly-injured party to sue any vehicle/driver/party involved in the accident even if the injured party is more than 50% at fault.”

Although you have the option to sign a form and keep your lower limits of coverage, agents at Storm Insurance Services are advising drivers to purchase personal umbrella liability insurance to protect against the heightened potential for lawsuits, both at-fault or not.

Everson provided three examples to consider:

  • “In four lanes of traffic (two in each direction), you and I are driving in the same direction (me on the inside lane, you on the outside lane) when a child runs across in front of you. You stop and avoid hitting the kid, but I’m on the inside lane and can’t see the child, so I keep going and hit him. The court determines injuries, trauma, etc. have a judgment of $8M. It is determined that the child is 80% at-fault, and each of us is 10% at fault because your stopped vehicle blocked visibility of the child, preventing me from knowing I needed to stop. We each have to pay our 10% or $800,000.”
  • “In two lanes of traffic (one in each direction), you are traveling in the opposite direction of me at about five miles per hour over the posted speed limit. I am drunk and going way over the posted speed limit when my right tires go off the road and onto the shoulder. I overcorrect, which causes me to cross the center line into your lane, glancing off your vehicle, which sends me straight into a tree while still speeding. I’m severely injured, causing permanent paralysis. You are uninjured because I barely glazed your vehicle, but the court determined that I would not have hit that tree had I not glanced off your vehicle, and I wouldn’t have glanced off your vehicle if you hadn’t been going five over. I was a medical student and am no longer able to complete college, let alone my future career as a physician. It’s determined my lifetime loss of income and medical expenses are $40M. You are determined to be 8% at fault in the accident, and you owe me $3.2M.”
  • “At a traffic light intersection, you are traveling west through the light, and I am traveling south through the light. I think I can make it through my light, which is already yellow, but you are still approaching the intersection when your light turns green, so you proceed through it, taking a sip of your coffee as you go, which is caught by the intersection cameras. I end up running the light on red, and you T-bone me. You are uninjured and walk away fine, but I received a direct hit into my driver’s door and am visibly injured. My injuries, etc. total $1.3M, and the court decides you are 35% at fault. You owe me $455,000.”

Everson said that in each of the above cases, all parties were Michigan residents and the not-at-fault driver was uninjured or injuries– soreness, headache, etc.– were not visible, and the at-fault party was the visibly-injured party.

“The new law does not take fault into account when determining if a party can be sued when all parties are Michigan residents,” Everson said. “The only factor is the severity of the injuries that determine suability. And let’s face it: people don’t sue for small amounts but rather millions. That’s why we’re recommending personal umbrella liability coverage.”

The cost for $1M liability is usually less than $200 per year for a household with two adult drivers, two vehicles and one house, according to Storm Insurance Services. Therefore, Everson said it’s money well-spent if you’re one of these drivers who find themselves sued under the new law.

Additionally, agents at Storm Insurance Services are also advising insureds to keep unlimited medical benefits despite lower limits of medical coverage with signed consent and a qualifying health plan being available. Everson said that the July 2 law change allows you to choose unlimited (which is currently required), $500,000 or $250,000.

“As with our current No-Fault laws, it can take years for the courts to decide what the law actually says and how it will be applied,” Everson explained. “We do not want any of our insureds caught in these ‘guinea pig’ situations, so we are encouraging them to let the dust settle over the next couple of years and then decide what’s best for them and their families.”

Storm Insurance Services is encouraging all insureds to avoid the July 2 mad dash, chaos and additional paperwork by increasing their liability limits and adding their umbrella policy now. The agency has actually created a mobile app, which will be available to the agency’s current insureds and prospective insureds to receive updates, information and documentation for the carriers it represents. The app will also allow insureds to access their policy documents, including declaration pages, ID Cards (proofs of insurance), request policy changes, upload documents and more.

Storm Insurance Services is located at 24001 Orchard Lake Rd (Suite #120) in Farmington, and the agents shop their insureds’ policies at every renewal. For more information, call (248)-987-1470.

Agent Advice
1. Be familiar with the reform
The new auto insurance law will go into effect on July 2.
2. Purchase ‘Personal Umbrella Liability’ insurance
Protect yourself/family against the heightened potential for lawsuits, both at-fault or not.
3. Keep unlimited medical benefits
Don’t be a guinea pig with the lower limits of medical coverage; let the dust settle first and then decide.
4. Act now
Avoid the July 2 mad dash, chaos and additional paperwork and add the ‘Umbrella’ policy now.
5. Download the Storm Insurance Services app
Receive updates, information and documentation for the carriers.

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