I wrote a few weeks ago about a troubling and very disturbing trend that has emerged involving unsuspecting people purchasing Michigan auto insurance without the mandatory liability and no-fault coverage.
Under Michigan law, PIP no-fault and bodily injury coverage is mandatory. However, some Michigan car insurance agencies are selling car insurance policies to customers without these mandatory coverages.
The two coverages are very important. PIP coverage, also known as no-fault coverage, is the backbone of Michigan car insurance benefits. If you are injured in a Michigan car accident, you are entitled to various benefits, including the payment of lost wages, payment of hospital and doctor bills, case management services, payment of out-of-pockets costs as well as the payment for services rendered by family members for taking care of you.
Liability insurance covers you if you cause a car accident. Without liability insurance, you can be sued personally if you hurt somebody in a car accident.
Earlier this year, one of our clients purchased insurance through an LA Insurance agency in Royal Oak, Michigan. She was subsequently injured in a car accident. When she turned to her insurance carrier, USA Underwriters, for the payment of no-fault benefits she was told her policy did not contain Michigan no-fault benefits.
A review of her policy showed she only purchased collision and comprehensive insurance, coverage that protects the car itself, not the owner and is occupants.
Since I last wrote about this, I spoke to a representative from USA Underwriters about the fact our client was not provided with mandatory no-fault coverage when she purchased her car insurance earlier this year. The representative understood my complaints, but did not seem very receptive. Instead he seemed to indicate the action of LA Insurance and USA Underwriters was perfectly legal and that our client knew she was not purchasing no-fault or bodily injury coverage. After I explained to him the realities of Michigan law, he said he would look into this matter and get back with me. We haven’t heard from him yet.
We decided to look into the matter ourselves. Another attorney in our office, Debra Garlinghouse, contacted a fraud representative with the Michigan Department of Insurance and Financial Services (DIFS). Debra was informed that LA Insurance/USA Underwriters are currently being investigated for selling physical damage policies only in Michigan because a lot of complaints have been filed by consumers.
The representative went to say this practice is becoming more common due to high insurance rates in red-lined areas, but does not appear to violate any laws on its face if the customer is made aware that the policy is for physical damage only and that no-fault and liability coverage must be obtained elsewhere. What’s important is what documentation of insurance was provided to the customer to take to the secretary of state to get plates. The law prohibits the issuance of a certificate that purports to affirmatively extend coverage that is not actually provided for in the insurance policy or is misleading as to coverage.
In addition, the certificate of insurance provided to the customer must contain language warning that “when a named excluded person operates a vehicle all liability coverage is void – no one is insured.” It is unclear if our client ever received this warning.
Our law office will continue to monitor this situation. But again it is really important for all people to be aware of this predatory insurance practice, especially for drivers in high risk areas.
If you have any questions about your car insurance policy, please contact us at 1-800-LEE-FREE (1-800-533-3733).