A. Vince Colella
Moss & Colella P.C.
On June 11, 2019, the initial changes to the Michigan No Fault Act became law. The thrust of the amendments centered on the elimination of mandatory unlimited essential services (expenses for care, recovery and rehabilitation). Additionally, the amendments changed the order of priority for pedestrians, bicyclists and certain occupants of privately owned vehicles. More specifically, changes to the priority provisions direct certain claimants to the Michigan Assigned Insurance Placement Fund (“MAIPF”) rather than the insurer of the vehicle(s) involved in the accident for their PIP benefits. According to the amended statute, the changes were to be “effective immediately.” However, on September 20, 2019, claimants (and their attorneys) were thrown a curve ball when the Director of the Department of Insurance and Financial Services (DIFS) issued an “Order” putting the brakes on insurance companies taking advantage of the cost savings provision in the amended statute. At first, the MAIPF abided by the Order; however, later mounted challenges both in the Court of Claims and on their own accord. Meanwhile, automobile accident attorneys were left in the lurch.
Apparently, auto insurance companies were so eager to adopt the changes to the No Fault Act that they neglected to seek and obtain the requisite approval. Consequently, on September 20, 2019, the Director of Insurance issued an Order stating in pertinent, “[r]egardless of their effective date, amended provisions that affect the scope of coverage required to be provided under automobile policies may not be implemented until automobile insurers have submitted revised forms and rates for the Director’s review and approval.” Because attorneys were not privy to the filings of the carriers, determining the order of priority became a perplexing and quite frankly, impossible task. On top of creating massive confusion, the effective date of the amendments set the financial stakes extremely high. For example, previous to the amendments a pedestrian or occupant that did not have their own coverage, or coverage through a spouse or resident relative, would have a right to unlimited lifetime benefits from the insurer of the vehicle(s) involved in the accident. However, under the new law the pedestrian would be required to present his claim to the MAIPF where the maximum limits on allowable expenses could be capped at $250,000.00. In the case of a serious to catastrophic injury the margin of savings to the auto insurers under the amended order of priority cannot be overstated.
Presumably recognizing the financial implications of the Director’s Order on auto insurers, the MAIPF filed suit against DIFS and its Director, alleging that it would be breaking the law if it did not give immediate effect to the $250,000 cap on benefits. Moreover, the suit also claims that DIFS does not have the authority to amend or alter Michigan law and any attempt to do so would be in violation of the separation of powers under the Michigan Constitution. While the decision of the Court of Claims has not been released to the public and is currently pending appeal, the MAIPF provided insight into the ruling in its prescient “Bulletin” issued in mid-December 2020. It states in part, “…based on court rulings indicating that the No Fault statute did not support the [DIFS] Order …the MAIPF is notifying the Director that it will no longer be denying claims incurred post June 11, 2019 for which the [new priority provisions apply]”
Saddled with an unannounced ruling from the Court of Claims and conflicting directives from DIFS and the MAIPF, the filing of a PIP claim with the appropriate insurance company has become a moving target and potential pitfall for auto accident attorneys. So, how can lawyers protect their clients against an untimely filing of their claims? It is uncertain. However, the answer may be found in the interplay between the amended statute and MAIPF Bulletin. Under Section 3145 of the No Fault Act (as amended), the one-year period of limitations is tolled (in limited circumstances only) from the date a specific claim for benefits is made and the date the insurer formally denies the claim. According to the Bulletin, if an insurer determines that it will deny qualifying claims based on the statutory priority change, the MAIPF requires the insurer to report the claim to the MAIPF for its consideration. Moreover, the MAIPF has made it clear that it will accept an application for benefits filed with the insurer in place of the MACP’s standard application. Accordingly, until the opinion of the Court of Claims is announced and/or an appellate decision is reached, it remains unclear as to when the revised statutory order of priorities take effect. Best practices may be to submit the original applications for benefits to the insurer in the highest priority under the new statute and the MACP simultaneously to be certain that all notice requirements have been met.
This article was first published in the Detroit Legal News on Febuary 4, 2021