No-Fault Benefit Claims: Everything You Need to Know
The Michigan no-fault law provides certain benefits to an injured person without regard to who was at fault in the accident. These benefits are called no-fault benefits. They can be thought of as a type of health and disability policy that insures the person and his or her family. Whether you were in your vehicle, someone else's car, or just walking as a pedestrian, you may be entitled to certain benefits.
If an injury is the result of a motor vehicle accident (usually a car, truck or bus and not a parked vehicle), there will generally be no-fault coverage. To qualify as a motor vehicle, the law requires that the vehicle have more than two wheels, operate by power other than muscular power, and be operated or designed for operation on a public highway.
Certain people are excluded from benefits if their uninsured car is involved in the accident and they are the owner of that vehicle.
What about motorcycle accidents?
Motorcyclists are excluded from no-fault coverage because the vehicle is a two-wheeled vehicle. However, when a motorcycle collides with an automobile, a motor vehicle is involved and no-fault coverage will generally be provided, usually from the insurer of the striking vehicle.
Which Company Pays the Benefits?
No-fault benefits are similar to health and disability policies. They generally follow the person who bought the insurance rather than the motor vehicle that is insured. No-fault coverage is, to some extent, personal in origin and extends to the insured, the insured’s spouse, and relatives residing in the same insured’s household.
Thus, usually the injured person will get no-fault benefits based on the policy that the person has on their own vehicle. If that policy does not apply, no-fault benefits may be obtained from the policy on the spouse’s vehicle or that of any relative residing in the same household. If there is no coverage in the name of the injured person or a household relative, the injured will generally get coverage from the vehicle that they were in. If the person was injured as a pedestrian or motorcyclist, they'd receive benefits from the striking vehicle coverage.
What if everyone in the accident is uninsured?
If no insurer can be identified, there is an assigned pool set up to pay no-fault benefits to those who are entitled to them and cannot find a no-fault insurer. Motorcyclists first get coverage from the insurer of the striking vehicle.
Application for No-Fault Benefits
The law requires that certain information be supplied to the no-fault carrier within one year of the accident. Generally, the law requires an identification of where, when, and who was injured; a description of the nature of the injury; and a claim for no-fault benefits.
How do I apply?
There is a standard application form that can be obtained through the Insurance Commissioner’s office or through any insurance company. The form requests all of the factual information required by statute to be provided to the no-fault insurer. If the application is not submitted (with all appropriate information) to the insurer within one year accident date, the individual’s claim for no-fault benefits is forever barred.
If a question arises regarding who should receive the no-fault application for benefits, a claimant is well advised to give the written application for benefits to each insurance company that may be responsible to pay no-fault benefits.
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The No-Fault Act requires that the no-fault insurer pay all reasonable charges for the necessary products, services, and accommodations for an injured person’s care, recovery, or rehabilitation arising out of a motor vehicle accident. The medical expenses are payable for life and are unlimited in amount. Medical benefits include such things as:
- hospital bills
- doctor’s visits
- medical tests
- physical therapy
- transportation to and from medical care
- vans, wheelchairs
- home modifications
- home or residential care, including attendant care provided by family members
Nursing care is an entirely separate expense from replacement services. Nursing care benefits provide care for the injured person. Replacement services are those household tasks that the injured person would have performed for himself or herself or his or her dependents. Replacement service benefits have a maximum of $20.00 per day. There is no statutory maximum amount for nursing services.
Coordination/Excess Medical Benefits
The no-fault law allows the no-fault insurance company to sell two types of no-fault coverage: full medical coverage and coordinated (sometimes called excess) coverage. Usually, there is a small premium reduction for the coordinated excess coverage compared to a full policy. An insurance agent must offer the choice of full coverage or the premium discounted coordinated coverage to the named insured. The election of a coordinated policy applies to the named insured, that person’s spouse, and any relative residing in the insured’s household.
Coordinated or Excess Coverage Policy
If you have a coordinated or excess coverage policy, you must use the health care insurance or HMO first if the service is available. The no-fault insurer will pay for the care that is not covered by the health insurance or HMO or in excess of the HMO or health insurance coverage. For example, if the HMO limits the number of physical therapy visits to 16 and your doctor recommends 20, the no-fault carrier would be responsible for the remaining 4 physical therapy visits.
With a coordinated policy, the no-fault insurer will require proof that the bills have been submitted to the other health plan first and that the other health plan has either rejected them or made the appropriate partial payment under its contract before the no-fault insurance company will honor the submission.
Full Health Coverage
With full health policy and no-fault coverage, under some circumstances (usually Blue Cross Blue Shield policies) the medical bills will be paid twice, once by the health insurer to the provider and a second time by the no-fault carrier directly to the injured person. Many health insurance policies include policy language to avoid paying for medical expenses resulting from motor vehicle accidents if there is no-fault coverage. Others have a coordination provision that states that the health insurer is not responsible for no-fault benefits if there is a full no-fault policy. That type of coordination has been allowed when there is a full no-fault policy. If you have a health insurance policy, you should examine it to determine whether or not it excludes motor vehicle accidents.
Medical expense benefits include mileage to and from medical care. As a claimant, you should keep a record of the mileage expenses by date and miles for submission to the no-fault carrier. The state rate of mileage is approximately $.55 per mile at the present time. The amount paid by insurers varies from about $.30 per mile to $.55 per mile.
The No-fault Act also provides funeral expense benefits of a minimum of $1,750.00 with the right to purchase up to $5,000.00 in funeral and burial expense coverage. Depending on the amount that was purchased on the no-fault insurance policy that applies to the case, there will be at least $1,750.00 towards funeral and burial expenses in the event of a death resulting from a motor vehicle accident.
The No-fault Act provides benefits for wage loss that are payable for three years from the date of the accident. The wage loss benefits may be up to 85 percent of a person’s wage and salary or the current monthly maximum amount, which is approximately $5,000.00 per month, whichever is less. The monthly maximum in effect at the time of the accident is the maximum for that injured person for the next three-year period. However, the no-fault wage loss maximum is adjusted annually for inflation. The income that is recoverable is what you would have earned, not what you could have earned. It is also not based necessarily on the last year or even the last month’s earnings. A new job, a promotion, and a new wage rate (if provable) are recoverable under no-fault insurance.
No-fault wage loss benefits are paid at the 85 percent rate since the statute assumes a 15 percent tax reduction. The no-fault insurer is allowed a tax reduction from the gross wage since the no-fault wage loss received is tax free under the Internal Revenue Code.
No-fault wage loss does not include most fringe benefits unless they are actual monetary payments such as cash bonuses or contributions to a specific savings or retirement fund. Other noncash fringe benefits such as health insurance, life insurance, etc., are not recoverable as a no-fault wage loss. However, no-fault wage loss does include overtime pay, wage increases, and bonus payments that are lost.
A dependent survivor of an individual who is killed in a motor vehicle accident has the right to survivor’s loss payments similar to the wage loss benefits of a surviving disabled claimant. Generally, the three-year income payment is paid to a narrow group of dependents, usually the spouse and minor dependent children. The maximum for survivor’s loss benefits is currently about $5,000.00 per month (adjusted annually), which also includes the replacement service maximum of $20.00 per day. However, survivor’s income loss is broader than wage loss and includes fringe benefits, including health insurance and other premiums and coverages that the decedent’s employment would have provided, plus lost wages, salary, and other income.
Coordination or Setoff of Other Benefits
The no-fault wage loss and survivor’s loss benefits are reduced by Social Security disability or survivor’s benefits or worker’s compensation benefits. If the no-fault policy that applies was a coordinated policy, the no-fault insurer is entitled to a credit for any private disability payments or insured medical payments made. Depending upon the nature of the benefits, the no-fault insurer does not get a credit or reduction from the wage loss or survivor’s loss benefits for sick pay, vacation pay, or similar employment-provided wage continuation (except for wage continuation benefits available through the employer that are paid by an insurance company or typically would be paid by an insurance company).
Under the No-fault Act, an insured person or the survivor of a deceased may recover replacement services. The no-fault law provides for the payment of up to $20.00 per day for the loss of services that the injured or deceased person would have provided for himself or herself (if the person is surviving) and for dependents. The replacement services are only payable for the first three years after the accident. Typical replacement services include such things as housecleaning, washing dishes, yard work, home maintenance, babysitting, child transportation, etc. The service can be hired and paid to nonfamily members or provided by family members with a payment or promise to pay by the injured person. Benefits for replacement services are not adjusted for inflation and have been increased since the act was enacted in 1973.
Lawsuit for No-Fault Benefits
If any of your no-fault automobile insurance benefits are outstanding for any reason, it is important for you to know that you must file a lawsuit within one year of the date the benefits were incurred. For example, any time you have medical treatment, you have one year from the date of the services rendered in which to file a lawsuit if the medical bill for those services rendered has not been paid. If you wait one day beyond one year from the date services were rendered (not the date you are billed for those services), you will lose your right to have your day in court asking that the insurance company be ordered to pay for those services. This is called the “one year back rule.” It also applies to other benefits such as wage loss, replacement services, attendant care, and medical mileage. In most cases some interest will be awarded on benefits recovered. In some cases the court may award an attorney fee.
Tax Consequences of First-Party or Third-Party Recovery
In most cases the amount a claimant receives in a personal injury action, either for no-fault benefits or for auto negligence pain and suffering or long-term wages loss or survivor’s loss, is not taxable. However, any interest that a court awards is subject to income taxation.
This explanation of Michigan’s no-fault law is a general description without all of the details or exceptions. Please feel free to raise any question with a lawyer from Gray Sowle and Iacco P.C. regarding the law or procedure that applies to your particular claim.