Cuts to Michigan auto insurance law can't be applied to past car crash victims, appeals court rules

Michigan's bipartisan 2019 auto insurance reform law that reduced rates but also zapped funding for long term care for patients critically injured in car crashes doesn't apply to those who were receiving benefits before the bill passed, a court said Thursday.

The Michigan Court of Appeals ruled the no-fault auto insurance reforms do not apply retroactively, which means the law cannot limit benefits to those severely injured. 

In a 2-1 ruling delivered Thursday morning, the appeals court said the legislature had not clearly demonstrated the reforms could apply retroactively to people already injured. But even if lawmakers had done so, the court said the new limits "would substantially impair" coverage for those already in the system.

Recent studies found thousands of patients immobilized by car crashes had being discharged from care providers around the state due to a lack of funding. 

The appeals court rejected arguments from the defendants in the case, two insurance companies that said the legislature had intended for the new law to apply to those injured before the effective date. 

"(The) defendants fail to identify any language" within the law that says it should be applied retroactively, either explicitly or implicitly, the court said. The judges also said car crash victims who were injured before the reforms were enacted had a "legitimate expectation" that "they would receive unlimited lifetime benefits, so long as the charges were reasonable and the care reasonably necessary."

Furthermore, the court also said the insurance companies would receive a lot of money "with no corresponding benefit" to those who are insured if the law was retroactively applied.

"Put simply, the insurers have already collected premiums in an amount sufficient to provide unlimited benefits, and to release them from that responsibility would substantially diminish their well-settled obligations" under the previous law. 

The Insurance Alliance says the ruling today removed a provision that has helped reduce auto insurance rates in Michigan.

Erin McDonough, the executive director of the Insurance Alliance of Michigan, responded in a statement, saying in part, "Today’s ruling is truly a disappointment for Michigan families and small businesses because it threatens to roll back the progress we’ve made and to eradicate the savings drivers are experiencing since the 2019 bipartisan reforms took effect with the purpose of reducing the high cost of auto insurance… The medical fee schedule established by these bipartisan auto no-fault reforms is absolutely critical because it reins in overcharging by medical providers and brings fairness, common sense and transparency to the costs of medical care."

MORE: Nearly 7,000 patients critically injured in car crashes have been discharged from providers, study finds

The suit was brought by two people who suffered traumatic brain injuries before the bill was signed by Gretchen Whitmer in June 2019. One requires 24-hour care and the other lives at an inpatient living center with rehabilitative services.