No-Fault Explained: Recouping Uninsured Motorist Benefits

Uninsured Motorist Benefits


Michigan law prohibits any driver from operating a motor vehicle on a highway without proper no-fault insurance. But the relatively minor criminal penalties for driving without insurance are only the start of an uninsured motorist’s problems if they are involved in an accident.

An uninsured motorist cannot receive any no-fault benefits after an auto accident involving the uninsured’s car. This is true no matter who was at fault for the accident. But sometimes, other people are involved in the accident. Often the Michigan Assigned Claims Plan will become involved, assigning an insurance company to pay for the uninsured passenger or pedestrian’s injuries.

That’s when the real consequence of driving as an uninsured motorist kicks in. Under MCL 500.3177, if an insurance company is required to pay no-fault benefits in a case involving an uninsured motorist, the insurer may then sue the owner of the uninsured vehicle to recoup its losses. This is called subrogation. The uninsured motorist can be billed for the actual benefits paid, as well as the costs incurred by the insurance provider in connection with the claim. That could include covering all the auto insurance company’s attorney fees and expert witness costs.

Medical no-fault benefits in a serious auto accident can quickly add up to hundreds of thousands of dollars, and industry attorney fees can add thousands of dollars to the bill. An uninsured motorist could be facing a lifetime of debt and a possible bankruptcy.

The auto insurance companies’ right to reimbursement in uninsured motorist context can create some cycles of payments. For example, imagine Jane doesn’t have insurance, but chooses to drive her daughter Anna to a friend’s house across town. On the way there, Jane gets into an accident. She can’t receive any no-fault benefits for her own injuries, but Anna can as an innocent passenger. Because Anna is a minor, Jane, as her mother, receives the benefits on her behalf. Then, the auto insurance provider that paid Anna’s benefits can sue Jane through subrogation to get the money back.

Michigan courts have said that the insurance companies are not allowed to deny payment of benefits just because they may be entitled to subrogation claims against the same person later on. This puts the risk on the insurance providers to make sure they get their reimbursement before the no-fault benefits are spent on medical care or other household needs.

If an uninsured motorist is not able to pay the auto insurer back within 30 days, his or her driver’s license and vehicle registration can be suspended or revoked. To get their licenses reinstated, uninsured motorists need to enter into a payment plan through the Secretary of State. If they fall behind, their licenses can be suspended again.

A ticket is the least of an uninsured motorist’s worries after an accident. In these difficult situations, you need attorneys whose focus is on nothing but auto accidents. If you think there may be an uninsured motorist involved in your crash, contact Christensen Law today to schedule a consultation.