Based on conversations over the years I’ve realized it’s not uncommon for most people to be a little confused by no-fault auto insurance.
When there is an accident, under Michigan no-fault insurance, your own auto insurance company responds for your damages – regardless of who was at fault.
Understandably that can seem, on first glance, counterintuitive. After all, it only seems fair that if a person was at fault in an accident then that individual – or their insurance company – should be responsible for any resulting damages.
There are a couple of guiding principles behind no-fault auto insurance:
One being your own insurance company should have more of a vested interest in settling a claim for you, as their client, promptly and fairly. Regardless of fault, an insurance company that has no direct financial relationship with you has no financial stake in resolving a claim expediently and to your satisfaction.
This is also intended to cut down on lawsuits as consumers don’t have to sue to establish legal responsibility and compel an insurance company to pay for damages.
A second notion behind no-fault auto insurance is each consumer can individually determine (to a certain extent) what coverages they want to carry on their own auto insurance policy.
While there are auto insurance requirements mandated by the State of Michigan those are for relatively minimal liability coverage and medical and work loss benefits. There is, however, no state requirement that an individual insure their vehicle for physical damage.
Adding to the confusion about Michigan no-fault auto insurance there are also a few exceptions wherein the at-fault party can be responsible for damages. The exceptions include:
- Serious injury, death, or dismemberment: In these situations while your own insurance company would still respond for medical bills and lost wages there can be recourse against an at-fault party for pain and suffering. This provision allows an injured party to obtain financial compensation for a diminished quality of life resulting from injuries caused by another driver.
- Parked vehicle: When your car is legally parked it considered property when damaged by another driver. If another driver hits your parked car they would be responsible for the damages – basically the same as if they hit your mailbox.
- Mini-tort claim: Under this provision the at-fault party in an accident can be responsible for up to $1,000 of the damages to another person’s car if those damages are not covered by that person’s own insurance. This exception is intended to provide a modest amount of relief for a not-at-fault party that properly insured their own vehicle, but doesn’t carry collision coverage or has a deductible that applies to any coverage afforded by their own policy.
As auto insurance differs from state-to state there are also exceptions if you happen to be involved in an accident in another state or if you are involved in an accident in Michigan with a non-resident who is driving a vehicle registered and insured in another state.