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Understanding Michigan No-Fault: Who Pays the Bills?

For victims of auto accidents, Michigan’s No-Fault Insurance laws can be confusing. This series of posts will break the law down so you can understand who, what, and how to recover after your car accident. This first post will focus on who pays the bills if you are injured in an automobile accident.

The Michigan No-Fault statutes break up injury and damage lawsuits into two categories. A First Party claim is filed by the injured person against his or her own insurance company. Third-Party claims go against the person who caused the accident. Let’s look at these one at a time:

First-Party Claims

No-Fault insurance pays for a person’s accident-related medical bills, lost wages and even for help around the house, when you are injured and laid up. These are your “no-fault PIP benefits.”

But, sometimes the question becomes “which auto insurance company will pay my benefits? When a person is injured in a car crash, his or her own No-Fault Auto Insurance company usually pays the benefits. That is fine if you have own a car and have auto insurance, but what happens if a passenger doesn’t have a car and doesn’t have insurance?

For example: Joe and Mark are riding in Joe’s car on the freeway. They get hit by Sally. Mark doesn’t own a car and has no insurance.

Joe can receive is benefits from his own insurance company. But what about Mark? If Mark doesn’t have insurance, the law says that his benefits will be paid by his spouse’s auto insurance, or any auto insurance policy held by immediate family in Mark’s household. That’s right, he will be covered by his resident relative’s auto insurance, even though they were not involved in the crash! This is the law.

If Mark’s spouse or resident relatives do not have car insurance, then Joe’s insurance, as the owner of the car in the crash, will pay for Mark’s bills and other PIP benefits.

Now let’s say Mark was riding his bicycle when Sally hit him. Since he wasn’t in a vehicle, has no insurance and has no “resident relatives” with insurance, the law will turn to Sally and her insurance provider. If Sally doesn’t have No-Fault insurance, the claim is randomly assigned to a No-Fault Insurer to pay the bills and other benefits.

Third-Party Claims

Even when a person has excellent No-Fault Insurance coverage, there will still be some things that are not covered by the policy. (See Part 2: What’s covered?) Sometimes those injuries or damages can be collected directly from the person who caused the accident or his or her insurance. But before a person can sue the other driver for most of these claims, he or she must have suffered a “serious impairment of a bodily function,” permanent disfigurement, or death. (If the person dies his or her estate can sue for damages including funeral expenses.) In less serious accidents the injured person is limited to his or her first-party claims.

Suing for damages under Michigan’s No-Fault law is no easy task. With savvy insurance lawyers on the other side, it is important for accident victims to have a knowledgeable and experienced litigator at their backs. If you know someone who suffered from a serious auto accident, have them call Christensen Law to speak to an expert no-fault attorney.