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No-Fault Explained: Penalty Interest

After a serious auto accident, medical bills and household expenses can pile up quickly. You shouldn’t have to wait for your no-fault benefits. That’s why legislators included a statute assigning penalty interest any time an auto insurer doesn’t pay on time.

MCL 500.3142 is the section of the Michigan No-Fault Act that makes sure your benefits are paid on time. If they’re not, you are entitled to 12% penalty interest for any late benefits.

When Benefits are Payable

Section 3142(1) says:

Personal protection insurance benefits are payable as loss accrues.

That short provision is very important. It means that you don’t have to wait until your treatments are finished to file for benefits. As each surgery, doctor’s visit, or physical therapy session happens, you have a right to be paid right away.

Because your medical providers have the right to collect benefits from the auto insurance company directly, Section 3142(1) means you won’t have to field calls from bill collectors while you put together the rest of your no-fault case.

When Payments are Due

Your claim has to include reasonable proof of the fact of reimbursable expenses and the amount of the loss. Once you provide that claim to your no-fault provider, the insurance company has 30 days to respond. If your claim needs further investigation to count as reasonable proof, the 30 days start counting as soon as that information is provided.

When Payments are Overdue

Insurance companies know about the deadline for no-fault benefits. But all too often, they will deny payments based on any number of false defenses. Once 30 days have passed and your claim has been denied, or simply left unpaid, penalty interest kicks in.  When a judge or jury later awards you no-fault benefits that you were falsely denied, that award will be increased by 12% per annum, to help make up for your wait.

Penalty interest was intended to put pressure on auto insurance companies to resolve no-fault claims quickly. Sadly, all too often, insurance adjusters treat it as just another cost of doing business. At least, when all is said and done, the auto accident attorneys at Christensen Law can use Michigan no-fault law to compensate you for the delay.