Matters Column

Michigan's no-fault insurance law and the out-of-state traveler

July 17, 2015
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It is a Friday in mid-July, the type of summer day we dream about in February: sunshine, a cloudless sky, high-70 degree temperatures and no humidity. I am heading north on U.S. 131 at 5:30 p.m., ready to start my weekend. 

Because it is summer in Michigan, traffic is slowly merging to one lane through the busiest part of Grand Rapids due to another round of construction — they don’t refer to Michigan's seasons as "winter" and "construction" for nothing. 

In addition to the rush-hour traffic and construction delaying my weekend plans, the highway is packed with families, couples and individuals traveling "up north" to enjoy a summer weekend on Lake Michigan or one of the countless inland lakes.

As I blankly stare out my window, I notice how many out-of-staters are making the same northerly trip I am making. 

With all of the recurring talk about Michigan's "no-fault" auto insurance law, I can't help but wonder how that law applies to the out-of-staters who traverse our state each year, taking advantage of Michigan’s outdoor playground. 

Most states do not have no-fault insurance, so knowing how this law applies to these out-of-state travelers is important, especially if you are a Michigan resident on the other side of an accident with a non-resident.

No-fault law, in general

Michigan adopted its no-fault insurance law as a way to increase the level of benefits paid to people injured in auto accidents, ensure prompt payments of insurance claims and reduce insurance premiums resulting from legal costs associated with auto accidents. 

All Michigan motorists are required to carry a no-fault insurance policy, which provides unlimited medical and rehabilitation benefits, wage loss benefits for up to three years and replacement services for those injured in an auto accident. 

In return for these benefits, Michigan drivers give up the right to sue when they are involved in an auto accident except in very limited circumstances. This prevents any delay in insurance payments in case conflict arises over who was at fault.

But all of the foregoing is not necessarily helpful when you are side-swiped by an out-of-state driver.

For example, one difference in the law's applicability to residents and non-residents is the person's ability to sue for damages arising from an accident. 

A Michigan resident involved in an auto accident cannot sue another party involved in the accident for damages unless the Michigan resident, or his representative, can prove he suffered death, permanent and serious disfigurement, or a serious impairment of body function resulting from the accident. This rule applies regardless of whether the other party involved in the accident is a Michigan resident.

Conversely, if a non-resident has an auto accident with a Michigan resident, and the out-of-state driver is not insured by a company that has filed a certificate of compliance with the state of Michigan, the non-resident is exempt from the Michigan no-fault insurance law. 

This means the non-resident can sue a Michigan resident for damages resulting from an auto accident, regardless of whether the Michigan resident has basic or comprehensive no-fault insurance coverage. 

But this also means the non-resident is ineligible to receive any of the benefits that Michigan's no-fault insurance grants to accident victims.

If the non-resident's insurance provider has filed a certificate of compliance with the state of Michigan, the out-of-state resident is entitled to the same no-fault insurance benefits as a Michigan resident. 

Of course, this also means the non-resident must forgo the ability to sue other drivers involved in an accident unless the non-resident driver, or the driver's representative, can show he has suffered death, permanent and serious disfigurement, or a serious impairment of body function resulting from the accident. 

The out-of-state driver would also have to make his first-party personal injury claim to his own insurance provider in order to recover under the Michigan no-fault insurance law.

Residual liability

Michigan's no-fault insurance does provide for "residual liability," which refers to costs that may arise if a Michigan resident has an accident with a non-Michigan driver or any driver, from Michigan or elsewhere, who sues for damages resulting from an accident. 

However, a basic no-fault policy only covers up to $20,000 for each person and $40,000 for each accident in which people are hurt or killed and up to $10,000 for property damage in other states. 

When you’re traveling out-of-state

In the case that you are a Michigan resident traveling outside of the state in the near future, there are some important things to know about how Michigan's no-fault insurance works if you get in an accident outside of Michigan. 

A Michigan resident who has an accident outside of Michigan cannot sue a non-Michigan resident with whom they are involved unless the Michigan resident can prove the accident resulted in death, permanent and serious disfigurement, or a serious impairment of body function. However, an out-of-state resident can sue a Michigan resident for damages resulting from an auto accident that occurred outside Michigan. 

What to do?

In order for you as a Michigan driver to be best protected in the unfortunate event you are involved in an accident either outside of Michigan or with a non-resident who does not have coverage compliant with Michigan's no-fault insurance, it may be a good idea to buy more extensive insurance than the mandated minimum.

A few options that would cover more of your liability than the basic coverage include increased residual liability insurance, collision coverage or comprehensive coverage.

Always keep in mind that, while Michigan's basic no-fault insurance has its benefits, it won't cover you in all situations. Be prepared by considering all of your insurance options.

Safe travels!

Erin Buerger is a summer associate with Varnum, Riddering, Schmidt & Howlett LLP and will begin her third year of law school at Indiana University Maurer School of Law in August. She can be reached at enbuerger@varnumlaw.com. 

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