Michigan Bill Improves Consumer Protections in No-Fault Law

The Michigan No-Fault Act, which controls auto insurance, has been up for review and possible reform for years. Past bills have unsuccessfully tried to impose caps and restrictions on injured motorists seeking coverage. Now a new proposal takes no-fault reform in a new direction: consumer protection.

Covering Catastrophically Injured Motorists

The Michigan No-Fault Act is designed to make sure no one faces a financial emergency because of a severe auto accident. It provides unlimited medical benefits and up to three years of lost wages and replacement services. Every Michigan driver is required to buy no-fault insurance to cover his or her vehicle, in case of an accident. After the most severe car crashes, lifetime medical expenses can easily rack up to millions of dollars. To keep any one insurance company from being put out of business by the bad luck of its consumers, the law includes a fail-safe: the Michigan Catastrophic Claims Association (MCCA).

The MCCA is a private organization of Michigan auto insurers. It reimburses insurance companies for medical claims of injured motorists above $555,000. The organization is funded by assessments that are passed on to policyholders. In 2017, it costs $170 per vehicle insured. The MCCA currently controls about $20 billion in funds and claims it is not enough to pay the expected benefits.

The Michigan Catastrophic Claims Association in the Courts

How that assessment is calculated has been under the microscope in recent years. The Coalition Protecting Auto No-Fault, a watchdog organization, tried to get to the bottom of recent assessment increases using a Freedom of Information Act (FOIA) request. But MCCA said no.

The dispute resulted in a lawsuit, Coalition Protecting Auto No-Fault v Michigan Catastrophic Claims Association. The Michigan Court of Appeals said that even though the MCCA was a public body (created by statute), it was exempt from the state’s FOIA laws under the Michigan No-Fault Act. The Michigan Supreme Court refused to review the case.

New Bill Promotes Transparency and Consumer Protection within MCCA

Responding to the Court’s decision, Michigan Representative Henry Yanez (D – Sterling Heights) has proposed a new no-fault reform bill, HB 4354, that would improve transparency and allow the public to understand how MCCA assessments are calculated. If passed, the bill would:

• Remove the FOIA exemption for the MCCA
• Require the MCCA to publicly post details about how the assessment is calculated
• Require annual audits by an independent CPA
• Appoint a public member to the MCCA board of directors to act as a consumer protection advocate

Another bill, HB 4049, would require similar levels of transparency, but doesn’t have the same consumer protections. Yanez told one Michigan news source:

“This is one piece of the puzzle and is something that we really need to be forthright and aggressive on because as a consumer who is required to buy a product, we should know what we’re buying.”

The bills represent a push by consumer advocates to address the many factors driving up costs, rather than simply capping premiums. Recommendations also include creating an insurance fraud authority with the power to investigate claimants, medical providers, and insurance providers themselves to fight back against fraudulent claims or denials.

Either bill will likely face challenges in the Republican-controlled House of Representatives. Neither has yet been voted out of committee, and it remains to be seen whether any substantial no-fault reform bill will have the votes it needs to become law. But by including these bills in the mix, state representatives are looking out for the consumer’s protection needs of their constituents.