How Auto Insurance Caps Can Hurt Injured Motorists

After a serious car accident, you and your loved ones may find yourselves scrambling to find money to pay for anything from ongoing therapeutic treatments to your mortgage or child care costs. You may expect your insurance provider to cover everything, but auto insurance caps can hurt injured motorists when their damages come up against the limits of their coverage.

No-Fault Auto Insurance Medical Coverage Is Unlimited, Unless You Limit It

The Michigan legislature has made certain that injured motorists don't have to worry about the cost of medical care after an accident. All reasonably necessary medical expenses are covered by your no-fault auto insurance, for as long as it takes for you to recover. These auto insurance benefits can cover physical injuries treatments and rehabilitation, mental health sessions, prescription medicines, therapy, and equipment, as long as they result from the collision. In the most serious injury cases, the Michigan Catastrophic Claims Association can cover reasonably necessary medical expenses for life.

However, if you enter into an auto insurance settlement, you may inadvertently block later insurance benefits. Most settlement agreements include a waiver, saying that the payment received satisfies any claim related to the auto accident, even if the medical treatments had not yet been incurred. When an injured motorist is in a hurry to receive no-fault benefits, he or she may sign a settlement too soon, before the extent of their injuries are uncovered. When that happens, the waiver serves as an auto insurance cap, cutting the injured motorist off from necessary medical benefits later on.

First Party Auto Insurance Caps on Living Expenses

Medical bills aren't your only worry after a serious auto accident. When your injuries keep you for working your living expenses can start to pile up. The Michigan No-Fault Act covers up to 85% of lost wages and $20 per day for reasonably incurred replacement services (like child care and lawn maintenance). But those benefits are capped at three years from the date of the accident. Because some injuries, such as spinal cord damage or traumatic brain injury, get worse over time, those living expense benefits can often fall short of the need.

Third Party Negligence Lawsuits Often Fail to Fill the Gap

When a person's own no-fault insurance fails to cover his or her losses, an experienced personal injury attorney can often file a third party negligence lawsuit against the at-fault driver to help make up the difference. Third party lawsuits are only available in cases where there is death, disability, or serious impairment of a bodily function. That includes most cases where a person is medically unable to work for more than three years.

When a third party lawsuit settles, the amount is often based on the caps on the at-fault driver's liability insurance. Michigan's mandatory auto insurance sets the minimum policy limits at $20,000 per person or $40,000 per incident. Drivers can choose to pay for higher policy limits, but many don't. High speed collisions and serious injuries with long-term disability often cause pain and suffering, loss of enjoyment, and other non-economic damages far beyond those auto insurance caps. Unless the third party case goes to trial, injured motorists can find their recoveries coming up short.

Underinsured Motorist Coverage Comes With Auto Insurance Caps

When an injured motorist's long-term disability needs and other non-economic damages go beyond the at-fault driver's ability to pay, he or she can sometimes turn to an uninsured or underinsured motorist policy (UIM). This voluntary auto insurance coverage is designed to pay for those losses when the other recovery available falls short.

However, UIM insurance is a contract between you and your insurance provider. The UIM policy will include a cap on the benefits available. No matter how serious the injury, you won't be able to recover more than the insurance company agreed to pay. A recently published Michigan Court of Appeals case, Andreson v Progressive Marathon Ins Co, provides an example.

On October 11, 2013, David and Debra Andreson were stopped at a traffic light when they were rear-ended in a high-speed collision. Both of them were injured, but Debra's injuries were far more serious than David's. Her pre-existing back injuries were severely aggravated by the auto accident, and as a result she needed back surgery. Debra's auto accident attorneys filed a Third Party lawsuit, but it was eventually settled for $50,000 per person — far less than her damages. She then sought payment from her underinsured motorist coverage. The jury in the case awarded Debra over $1.3 million. But the Michigan Court of Appeals said that verdict was too high.

The Andresons' injuries had run up against their UIM auto insurance caps of $250,000 per person. That was further reduced by the $50,000 received from the at-fault driver. Even though she had suffered over $1 million in damages, at the end of the day she only received the limit of the insurance contract.

At Sachs Waldman, we know how to help the victims of serious injury car accidents put together auto insurance benefits from UIM insurance and third-party negligence lawsuits to cover living expenses and other damages not paid for by no-fault benefits. We will review your case, and your needs, and help you form a plan to get as much recovery as is available. Contact our Detroit personal injury law office at 1-800-638-6722.

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