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Michigan Auto Reform

The new Michigan No-Fault law known as Senate Bill 1 went into effect on June 11, 2019. This historic change affects every driver throughout Michigan. The professionals at Brighton Insurance & Financial Services are here to help you understand how your individual coverage could be impacted and help you transition under the new guidelines.

Some important dates to remember:

  • July 2020 — Statutorily required Personal Injury Protection (PIP) medical coverage options, PIP average rate reductions, increased Bodily Injury (BI) minimum limit and rating/underwriting limitations take effect.


  • July 2021 — Statutory medical fee schedule and attendant care hourly limits take effect.


  • July 2028 — Statutorily mandated average PIP rate reduction requirement ends. Personal injury protection (PIP) medical coverage options - All carriers are statutorily required to offer all options.

  • Qualified Health Coverage (QHC)
    As defined in 3107d(7 (B) QHC includes either: 1. Health or accident coverage that (1) does not exclude or limit coverage for auto accident injuries and (2) has an annual deductible of $6,000 or less per individual, OR 2. Coverage under Medicare Parts A and B of the Federal Medicare Program. Notes: This definition is important when deciding whether policyholders qualify to “opt out” of PIP Allowable Expenses coverage. Medicaid is not QHC under the statutory definition. The notes in the “Coordination” section include additional information related to QHC.
  • Qualified Person
    As defined in 3107d(7)(C), a “qualified person” is a person who has coverage under Parts A and B of the Federal Medicare program.
  • Allowable Expenses
    As defined in Section 3107(1)(a), Allowable Expenses includes reasonable charges incurred for: Medical Expenses Attendant Care Funeral Benefits (capped at a specified dollar limit in the policy) Notes: This term is sometimes used interchangeably with “PIP Medical,” even though it includes some expenses that are not “medical” in nature (e.g. funeral benefits and some aspects of attendant care. Allowable Expenses do NOT include work losses, replacement services, or survivor’s benefits. Thus, these coverages are not impacted by the policyholder’s choice of Allowable Expenses coverage limit.
  • Insured
    In our contract, the definition of insured for PIP coverage is clarified to include only: The named insured(s) The named insured(s) spouse Resident Relatives
  • PIP Allowable Expenses Limit
    We use this term to refer to the new Allowable Expenses coverage limit options defined in Section 3107c. The coverage limit options include: Unlimited (no limit) $500,000 $250,000 (does not apply to exclusions for QHC – see below) $50,000* Policyholders must elect 1 of the above limits per policy. The limits above apply per individual, per claim. The limits apply only to Allowable Expenses coverage. Coverage for work loss, replacement services and survivor’s benefits are not impacted by the limit. *To qualify for the $50K limit: At least one named insured must be enrolled in Medicaid All other insureds must be either enrolled in Medicaid, have Qualified Health Coverage or PIP Allowable Expenses coverage from another Auto policy.
  • Medicare Opt-Out
    We use this term to refer to the provision in Section 3107d that allows policyholders meeting the statutory requirements to elect not to maintain PIP Allowable Expenses coverage. Section 3107d states that if the named insured is a “Qualified Person” AND all other “insured(s)” have Qualified Health Coverage, the applicant or named insured may elect not to maintain PIP Allowable Expenses coverage. Notes: When a policyholder selects this option, we will continue to provide coverage for work loss, replacement services and survivors benefits, and an appropriate premium will be charged for this coverage. This is a policy-level option. No one under the policy will have Allowable Expenses coverage when this option is selected.
  • Qualified Health Coverage (QHC) Exclusion
    We use this term to refer to the provision in Section 3109a(2) that allows policyholders meeting the statutory criteria for Qualified Health Coverage to elect not to maintain PIP Allowable Expenses coverage. In order to select this option: An applicant or named insured who wishes to exclude PIP Allowable Expenses must have qualified health coverage (QHC) that is not Medicare. Any spouse or family member who wishes to exclude PIP Allowable Expenses must have qualified health coverage (QHC). Notes: Medicare enrollees that wish to not maintain PIP Allowable Expenses coverage do not qualify for the QHC Exclusion option but may qualify for the “Medicare Opt-Out” option. The named insured is responsible for disclosing the names of family members excluded from PIP Allowable Expenses coverage. Family members that are not excluded will receive limited PIP Allowable Expenses coverage of $250,000 per individual, per loss occurrence. This is the only option available to non-excluded family members under the QHC Exclusion. When a policyholder selects this option, we will continue to provide coverage for work loss, replacement services and survivors benefits, at an appropriate premium.T The QHC Exclusion should only be considered when it can be verified that the policyholder’s QHC covers auto-accident related injuries on a “primary” basis. See the “Coordination” section below for more details.
  • Loss of Qualified Health Coverage (QHC)
    This concept applies to both the Medicare Opt-Out and QHC Exclusions if QHC coverage is lost. In that scenario, you should be aware that: The named insured has 30 days after the effective date of the termination of AHC to obtain PIP Allowable Expenses coverage. During this 30-day period, the named insured can apply to Michigan Assigned Claims Plan (MACP) if injured in an auto accident. Any such claim to the MACP will be subject to a statutory $2 million coverage limit. After the 30-day period expires, there will be no coverage for Allowable Expenses under the policy or through the MACP.
  • Coordinated or Excess Medical
    These terms are used interchangeably and refer to the coverage options that are available if the insured has other insurance (e.g. health or disability insurance, whether QHC or not), that will cover auto accident-related injuries on a “primary” basis. A discount is available for both PIP Allowable Expenses and Work Loss, if health or disability insurance pays primary. Notes: The Excess Medical discount will only be available for the Unlimited, $500K and $250K options. The Excess Medical discount will NOT be available for the $50K, Medicare Opt-Out and the Qualified Health Care Exclusion options. “Qualified Health Coverage” does not necessarily mean the plan qualifies for the Excess Medical discount. For example, Medicare is qualified, but will not pay primary. Please refer to our Health Insurance Verification guide for information about some health plans that have historically NOT covered auto accident injuries on a primary basis.
  • Other PIP
    We sometimes use this term to refer to an insured, other than the named insured, who has an auto policy covering PIP Allowable Expenses. The determination of whether “Other PIP” coverage is available may impact a policyholder’s eligibility for the $50K and Medicare Opt-Out options.
  • Family Member
    As defined in our contract “family member" means a person related to you by blood, marriage or adoption, who physically resides primarily in your household. This includes the following: A ward who resides with the “named insured”; A foster child who resides with the “named insured”; and Unmarried dependent children of the named insured, while temporarily away from home if they intend to continue to reside in the household of the “named insured”.
  • MCCA Assessment
    The MCCA Assessment consists of two components: (1) the pure premium amount needed to cover current and future claim costs; and (2) the deficit/surplus adjustment for deficiencies in prior year assessments. Notes: Only those policyholders selecting Unlimited coverage will pay both components of the MCCA Assessment. They will see this as “Michigan Catastrophic Claims Association - Full Assessment” on the Dec Page. All other policyholders will pay only deficit/surplus adjustment. They will see this as “Michigan Catastrophic Claims Association – Deficit/Surplus Assessment” on the Dec Page.
  • Other Assessments
    Other state-mandated assessments include the Michigan Assigned Claims Plan (MACP), the Auto Theft Prevention Authority (ATPA) and taxes associated with assessments. Policyholders will see all of these charges combined on the Dec Page under “Other Assessments Required by State Laws.”
  • Attendant Care
    We use this term generally to describe services rendered to care for an injured party. This category of PIP benefits is not specifically defined in the statute but is a component of PIP Allowable Expenses coverage. It includes services and accommodations for an injured person’s care, recovery or rehabilitation. This includes family, agency and institutional long-term care.
  • Attendant Care Rider
    We use this term to refer to the mandatory new coverage option defined in Section 3107c(8): Though attendant care coverage is a component of the mandatory Allowable Expenses coverage required in Section 3107(1)(a), this additional Attendant Care Rider provides optional additional attendant care coverage. The Attendant Care Rider is only available to policyholders who choose the $500K, $250K or $50K PIP Allowable Expense coverage options. This coverage will provide benefits in addition to the applicable Allowable Expenses limit.
  • Replacement Services
    This term is defined in Section 3107(1)(c). Replacement Services are sometimes referred to as “household Expenses.” They are limited to $20 per day, and only covered for the first 3 years after the accident. They are intended to cover ordinary services and not meant to be a source of income. This is NOT part of Allowable Expenses coverage.
  • Survivor’s Benefits
    This term is defined in Section 3108. These “loss of income” benefits are payable to a survivor are limited to a monthly dollar maximum and only payable for the first 3 years after the date of accident. This is NOT part of Allowable Expenses coverage.
  • Order of Priority
    This term refers to the rules that determine which insurance policy(s) applies. It is covered in Sections 3114 and 3115 in the statute. Notes: The rules for passengers in motor vehicles for hire are complex and can lead to situations where the named insured’s policy isn’t first in the OOP. Therefore, it is important to know the type and ownership of the vehicle involved in the accident. We have created a separate training document providing more detail into the rule of order of priority, included detailed slides for each type of vehicle.
  • Economic Damages
    Economic Damages are generally described as the monetary damages associated with a person’s injury from an auto accident. These damages include Allowable Expenses (medical, attendant care, funeral benefits), work loss and survivor’s benefits. Notes: With the no-fault changes, section 3135(3)(C) was amended to allow for tort liability for economic damages in excess of any applicable PIP limit, even for policyholders who elect the Medicare Opt-Out or the QHC Exclusion. Importantly, under Section 3135(3)(C), an insured can be sued even if they are less than 50% at fault. Under the new laws, Michigan insureds remain liable for economic damages to non-Michigan residents. However, out-of-state residents are not entitled to economic losses unless the accident results in death, permanent serious disfigurement or serious impairment of body function. These changes, combined with the increased minimum liability limits, will likely cause overall liability costs to increase, which means that liability premiums would also increase. Individual policyholders may experience a higher liability premium, depending on which coverages they select. In addition, policyholders may be subject to additional litigation seeking economic damages after 7/2/2020.
  • Non-Economic Damages
    This category of damages generally includes monetary compensation for losses such as “pain and suffering.” Non-economic damages may be sought and awarded when the auto accident results in death, disfigurement, or serious impairment of a bodily function (sometimes referred to as “threshold injuries”). Notes: Michigan law continues to allow tort liability for non-economic damages for threshold injuries – 3135 (1), (2). Non-economic damages cannot be awarded to an injured person who is more than 50% at fault.

Consider the following common family scenarios, for example. Each of these scenarios requires a review of coverage.

Son or Daughter Is Temporarily Away At School

Greg McLaughlin attends college in Virginia, nine months out of the year, but he is at home with his parents in Michigan for the remainder of the year. He has a vehicle with him and is insured on his parents’ policy. What should the McLaughlins do now?


A student temporarily away at school is "generally" considered to be a family member who resides in your household. Greg could remain on his parents’ policy as a rated driver,  the garaging location where the car is kept should be added.  The better option would be to title the car in Greg’s name and get him his own policy.

Son or Daughter Owns A Vehicle, Is A Resident Of The Household, And Has Insurance With A Different Carrier

Monica Appleton just bought her first car. Her parents both have an insurance policy for their vehicles, but Monica elected to use a different carrier for her insurance policy, even though she lives in her parents’ house.


What should the Appletons do now?


The Appletons need to list Monica on their policy as a driver insured elsewhere.

Son or Daughter Owns A Vehicle And Is Not A Resident Of The Household

Allison Smith recently moved out of her parents’ house. Her car is still insured on her parent’s policy, even though she is no longer a resident of the household.


What should the Smiths do now?


It is recommended that Allison have her own policy, in which she is the named insured.

Son or Daughter Owns A Vehicle And Is A Resident Of The Household

​Joe Clarkson recently bought a car so he can commute to his local community college. He currently lives with his parents and is insured on their policy.


What should the Clarksons do now?


The Clarksons should have a separate policy for Joe, in which he is the named insured, and a separate policy for Joe’s parents, in which they are the named insureds.

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