Auto Accidents in Michigan: No-Fault Law
Michigan automobile insurance is codified in the Michigan No-Fault Act. The purpose of the Michigan No-Fault Act is to address several public policy issues that had historically plagued the State when dealing with automobile accidents. Prior to October 1973, Michigan utilized a system where a person injured in an automobile accident would not be able to recover for any expenses associated with their injuries if they contributed in any way to the accident causing their injuries. Even if a victim of a motor vehicle accident could prove he or she did not contribute to the accident, then often times litigation delays and expense prevented them from receiving timely compensation. Besides the direct impact on the victims of motor vehicle accidents, the pre-1973 system was clumsy with litigation over minor issues clogging the court system. The pre-1973 system even had a disparate impact on lower income and minority populations.
To combat these troubling problems, the Michigan Legislature adopted the No-Fault Act. The key element contained in the Michigan No-Fault Act is that the issue of “fault” for causing an accident is largely unimportant. The theory behind the No-Fault Act was by removing “fault” for the accident, then victims would get the insurance benefits they so desperately needed in a timely fashion while removing those cases from the court system. At the time many believed that the Michigan No-Fault Act would reduce insurance premiums, too.
Unfortunately, the Michigan No-Fault Act has not achieved all of its’ desired goals. Michigan drivers are now paying the highest insurance rates in the United States even though rates decreased substantially in 2020 as the result of reforms. (TheZebra.com).
The Michigan No-Fault Act has led to a decrease in the litigation of smaller property based claims in the courts. Still, the Michigan No-Fault Act has given birth to an area of litigation by persons injured in a motor vehicle accident. There are principally two types of personal injury cases under the Michigan No-Fault Act: 1) First Party and 2) Third Party.
This article will address the importance of--and some of the common issues--in both First Party and Third Party No-Fault cases.
A “First Party” lawsuit is one where the insured sues his own insurer provider for no-fault benefits. In a First Party no-fault case, the insured has been denied no-fault benefits for an “accidental bodily injury arising out of the ownership, operation, maintenance or use of a motor vehicle.” MCL § 500.3105.
The “benefits” available to a First Party claimant are limited to those that are called “personal insurance protection” or “PIP” benefits. PIP benefits do not involve property. Rather, PIP benefits are economic damages sustained by the victim of a motor vehicle accident. Examples of recoverable damages in a First Party No-Fault case are: medical expenses, wage loss claims, replacement services, survivor loss, and funeral expenses.
There are several factual issues that can impact the success, or failure, of a First Party case. The seminal issue is whether or not the Michigan No-Fault Act applies to your case. In determining whether the Michigan No-Fault Act applies, the following questions need to be answered: Do you have a valid no-fault insurance contract? If you are the insured, then does your insurance contract entitle you to PIP benefits? If you are not the insured, then are you entitled to PIP benefits because you are a family member of the insured or are you specially excluded from no-fault coverage?
The next issue is establishing an “accident” with a “motor vehicle” caused you to have a “bodily injury”. This requires the ability to trace your bodily injury to an actual accident. Put differently, you must establish that a single event involving a motor vehicle caused you to suffer some injury to your physical person.
All of these issues may sound elementary in application. However, each term in the statute—“accidental”, “bodily injury”, and “motor vehicle”—create lightning rods for litigation by insurance companies looking to deny the payment of benefits. The statute even restricts what constitutes a “motor vehicle”. The following list is expressly not a “motor vehicle” under the Michigan No-Fault Act: motorcycles, mopeds, off road vehicles, golf carts, farm tractors, snowmobiles.
The point is that a First Party No-Fault case involves many issues of statutory definition and interpretation. Insurance companies use these statutory definitions to delay payments and fight against making payments at all. How these issues are managed will directly impact your chances of success.
A “Third Party” case involves the victim of a motor vehicle accident suing the driver of another vehicle who caused the accident. The idea of suing a Third Party may seem contrary to the policy of the Michigan Legislature to eliminate the importance of fault when enacting the No-Fault Act. But, the Legislature limited the number of Third Party lawsuits by restricting them to accidents where the injured suffers “death, permanent disfigurement, or serious impairment of body function.” MCLS § 500.5135(1). Before an injured person can successfully file a Third Party lawsuit under the Michigan No-Fault Act, he or she must prove a “death, permanent disfigurement, or serious impairment of body function” was caused by a motor vehicle accident. If the injured party can establish a death, permanent disfigurement, or serious impairment of body function was the result of a motor vehicle accident, then he or she must still prove the common law elements of negligence: (1) duty; (2) breach; (3) causation; and, (4) damages.
Certainly, we all can understand the definition of “death”. But, the other terms “permanent disfigurement” and “serious impairment of body function” contained in MCLS § 500.5135(1) have various definitions. "Serious impairment of body function" was defined as an “objectively manifested impairment of an important body function that affects the person's general ability to lead his or her normal life.” MCLS § 500.3135(7). There is a mountain of decisions from the Michigan Appellate Courts defining what is, and what is not, a serious impairment of body function.
You may be wondering why all this matters. You may be thinking that the notion of a Third Party No-Fault action is unnecessary. The importance of a Third Party No-Fault action is that it is the only way to sue for non-economic damages. Third Party No-Fault actions provide the exclusive way for victims injured in motor vehicle accidents to receive compensation for intangible damages—most importantly pain and suffering. In the absence of a Third Party action, a person injured in a motor vehicle accident would never be able to receive compensation for pain and suffering.
At Arnold E. Reed & Associates, P.C., we specialize in both First Party and Third Party No-Fault cases. We can help you get the money you deserve.