How Does the Right of Reimbursement Work in Michigan?
When it comes to auto insurance, Michigan is a no-fault state.
Each driver’s insurance company pays for medical bills for injuries sustained in a car accident. This happens no matter who causes the collision.
Michigan requires all drivers to carry Personal Injury Protection (PIP) as part of their auto insurance. PIP pays specifically for these injuries sustained in car accidents.
Until last year, Michigan drivers were required to carry unlimited PIP coverages. That resulted in drivers in the state paying some of the highest auto insurance premiums in the country.
The state government changed that law, though. Michigan drivers can now choose their PIP coverage, which can lower their premium payments.
The new auto insurance law doesn’t change the fact that it’s still more difficult for drivers in Michigan to sue other drivers for damages than it is in what are known as tort states.
That being said, Michigan does have laws related to the right of reimbursement. Sometimes, this is referred to as subrogation. Here’s how it works in Michigan.
What is Subrogation?
Subrogation is a process that essentially allows an insurance company to college payments from another insurance company. One insurance company can collect money from the at-fault driver’s insurance company for expenses they paid after the accident.
This right of reimbursement applies in Michigan, even though the state is considered no-fault. Ultimately, this process forces the at-fault driver’s insurance company to cover the cost of damages. In the meantime, the people who suffered injuries can receive payouts quicker.
Subrogation allows auto insurance companies to pay on their claims faster. The right of reimbursement also helps keep premiums lower for Michigan drivers who aren’t at fault in an accident.
Since the process is done between insurance companies, drivers don’t have to play a huge role in it. The process won’t even happen until after a settlement for the case is issued.
How Does Subrogation in Michigan Work?
In Michigan, insurance companies pay benefits to their own customers, regardless of who is at fault for the accident. But, insurance companies will still conduct investigations into which driver was at fault.
Why? Because this fault could determine the outcome of subrogation. While this process is mainly conducted between insurance companies, it could also have an effect on drivers. The right of reimbursement will allow drivers to potentially recover their entire deductible.
The first step is determining the fault of the drivers involved in the collision. There are two ways that this can happen. Either one driver is at complete fault for the collision, or drivers can share fault.
The outcome of subrogation will depend on this determination of fault. If one driver is responsible for all fault in a collision, the process is much easier. For example, your insurance company could seek reimbursement for all expenses it incurs if the other driver is completely at fault for a collision.
In this case, you would also be able to recover any money you paid toward your insurance policy’s deductible. If you paid a $1,000 deductible, for instance, you have the ability to recover that entire $1,000.
Michigan law also allows partial fault to be applied. For example, one driver can be determined to be 30% at fault, with the other driver 70% at fault. In these cases, subrogation is a little more complicated.
If you are considered to be 30% at fault for a collision, you and your insurance company would be able to seek a reimbursement for 70% of the costs incurred.
Let’s see how this works in an example. We’ll assume that your insurance company incurred $10,000 in costs as a result of a collision you were in. Also assume that you were determined to be 30% at fault for the accident, and you paid a $1,000 deductible. In other words, you paid 10% of the total costs, with your insurance company paying the other 90%.
In this example, your insurance company would recover $7,000 from the other driver’s insurance company. That would equate to 70% of the total damages. Then, you’d be able to recover 10% of that total, or $700.
You would be required to still pay $300 in your deductible as the result of your percentage of fault.
What About Partial Recovery?
The above examples assume that your insurance company was able to recover the full amount you were entitled to. Sometimes, this isn’t possible, though.
One reason for this would be if the other driver doesn’t have enough PIP coverage to pay for all the damages. With Michigan’s new auto insurance law, this may become more common.
In these cases, your insurance company may only be able to recover a percentage of the damages incurred. When this occurs, you will be reimbursed based on what they were able to recover, with the fault percentage applied.
Let’s take a look again at the example above, but with this new twist. In this example, we’ll assume your insurance company was only able to recover 50% of the total damages. This would mean they’d recover $5,000 instead of the full $10,000.
Now, you will be able to recover 10% of what was recovered. In this example, you’d be able to recover $500, instead of the $700 as before.
Work with an Insurance Company That Will Fight for You
Drivers in Michigan often shop around for auto insurance plans based on their premium cost. With the new state laws that change PIP requirements, drivers must be happy that they can lower their costs.
The new laws won’t change what happens when you’re in an accident, though. Your insurance company will still pay for your damages.
After settlement has been completed, the right of reimbursement process will commence. This allows your insurance company to recover costs if you aren’t determined to be at least 50% at fault for the accident. As the driver, subrogation can also help you recover all or part of the deductible you paid.
That’s why it’s so important to work with an insurance company that will fight for you. It’s one thing to offer you a policy with a low premium. It’s another thing altogether to have a company that will fight to recover money you paid after a collision.
Signature Insurance is among the most trusted auto insurance companies in Michigan. We fight for all of our customers every day. We seek to provide great policies and great customer service in times of need.
Call us today for more information and for a free quote.