MCL § 500.3107 – Allowable economic PIP benefits
Table of Contents
Code Details
Chapter 500
Act 218 of 1956
218-1956-31
Exact Statute Text
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Sec. 3107.(1) Subject to the exceptions and limitations in this chapter, and subject to chapter 31A, personal protection insurance benefits are payable for the following:
(a) Allowable expenses consisting of reasonable charges incurred for reasonably necessary products, services and accommodations for an injured person’s care, recovery, or rehabilitation. Allowable expenses do not include either of the following:
(i) Charges for a hospital room in excess of a reasonable and customary charge for semiprivate accommodations, unless the injured person requires special or intensive care.
(ii) Funeral and burial expenses in excess of the amount set forth in the policy, which must not be less than $1,750.00 or more than $5,000.00.
(b) Work loss consisting of loss of income from work an injured person would have performed during the first 3 years after the date of the accident if he or she had not been injured. Work loss does not include any loss after the date on which the injured person dies. Because the benefits received from personal protection insurance for loss of income are not taxable income, the benefits payable for the loss of income must be reduced 15% unless the claimant presents to the insurer in support of his or her claim reasonable proof of a lower value of the income tax advantage in his or her case, in which case the lower value must be applied. For the period beginning October 1, 2012 through September 30, 2013, the benefits payable for work loss sustained in a single 30-day period and the income earned by an injured person for work during the same period together must not exceed $5,189.00, which maximum must be applied pro rata to any lesser period of work loss. Beginning October 1, 2013, the maximum must be adjusted annually to reflect changes in the cost of living under rules prescribed by the director, but any change in the maximum must be applied only to benefits arising out of accidents occurring after the date of change in the maximum.
(c) Expenses not exceeding $20.00 per day, reasonably incurred in obtaining ordinary and necessary services in lieu of those that, if he or she had not been injured, an injured person would have performed during the first 3 years after the date of the accident, not for income but for the benefit of himself or herself or of his or her dependent.
(2) Both of the following apply to personal protection insurance benefits payable under subsection (1):
(a) A person who is 60 years of age or older and in the event of an accidental bodily injury would not be eligible to receive work loss benefits under subsection (1)(b) may waive coverage for work loss benefits by signing a waiver on a form provided by the insurer. An insurer shall offer a reduced premium rate to a person who waives coverage under this subdivision for work loss benefits. Waiver of coverage for work loss benefits applies only to work loss benefits payable to the person or persons who have signed the waiver form.
(b) An insurer is not required to provide coverage for the medical use of marihuana or for expenses related to the medical use of marihuana.
MCL § 500.3107 Summary
This Michigan statute outlines the specific types of economic benefits payable under Personal Protection Insurance (PIP), often referred to as “no-fault” benefits, following a motor vehicle accident. The core of this section details three main categories of benefits: allowable expenses, work loss, and replacement services.
“Allowable expenses” cover reasonable charges for necessary products, services, and accommodations for an injured person’s care, recovery, or rehabilitation. However, there are limitations: hospital room charges are capped at a semiprivate rate unless special care is needed, and funeral and burial expenses have a policy-defined limit between $1,750 and $5,000.
“Work loss” benefits compensate for lost income an injured person would have earned during the first three years post-accident. These benefits cease upon the injured person’s death and are reduced by 15% because they are not considered taxable income, though a claimant can prove a lower tax advantage. This section also specifies a maximum monthly cap for work loss benefits, which is adjusted annually for cost of living.
“Replacement services” cover expenses, up to $20 per day, for obtaining ordinary and necessary services (like household chores) that the injured person would have performed for themselves or their dependents, but can no longer due to injury, for the first three years after the accident.
The statute also includes specific provisions: individuals aged 60 or older who wouldn’t be eligible for work loss benefits can waive this coverage for a reduced premium. Additionally, insurers are explicitly not required to cover costs related to the medical use of marihuana.
Purpose of MCL § 500.3107
The legislative purpose behind this Michigan statute is foundational to the state’s no-fault automobile insurance system. The primary aim is to ensure that individuals injured in motor vehicle accidents receive prompt and adequate financial support for their economic losses, irrespective of who was at fault for the accident. By clearly defining “allowable expenses,” “work loss,” and “replacement services,” the statute seeks to provide a clear framework for what an injured person can expect their no-fault insurance to cover.
This provision addresses the critical need for accident victims to access necessary medical care, rehabilitation services, and financial compensation for lost wages and essential household services without the delays often associated with traditional fault-based litigation. It helps to alleviate the immediate financial burdens on injured individuals and their families. Furthermore, the limitations, such as caps on certain expenses and the 15% reduction for work loss (due to non-taxability), aim to balance victim compensation with cost containment within the insurance system. The waiver option for seniors and the exclusion of medical marihuana costs reflect specific policy decisions regarding coverage scope and affordability.
Real-World Example of MCL § 500.3107
Imagine Sarah, a 35-year-old marketing professional, is involved in a severe car accident in Michigan. She suffers a broken leg, a concussion, and several other injuries that require extensive medical treatment and prevent her from working for several months.
Under MCL § 500.3107:
1. Allowable Expenses: Sarah’s medical bills, including emergency room visits, surgery for her leg, physical therapy sessions, and prescription medications, would be covered as “allowable expenses.” Her PIP insurer would pay for the “reasonable charges incurred for reasonably necessary products, services and accommodations for her care, recovery, or rehabilitation.” If she required a private hospital room, her insurer would only pay up to the “reasonable and customary charge for semiprivate accommodations,” unless her specific injuries demanded intensive or special care that necessitated a private room.
2. Work Loss: Because Sarah cannot return to her marketing job for four months, she experiences a loss of income. Her PIP benefits would cover this “work loss” for the duration she’s out of work, up to three years from the accident date. If her monthly salary was $6,000, her benefits would be calculated by reducing this amount by 15% (or a lower proven tax advantage), reflecting that these benefits are not taxable income. Her monthly work loss benefit would be subject to the annually adjusted maximum set by the director, ensuring she receives compensation up to that cap.
3. Replacement Services: While recovering, Sarah is unable to perform her usual household duties like cooking, cleaning, and grocery shopping. Her husband hires a service to help with these tasks. The cost for these “ordinary and necessary services” would be reimbursed by her PIP insurer, up to $20 per day, for the first three years after the accident. These are services she would have performed for herself and her family if she hadn’t been injured, but not for income.
In this scenario, MCL § 500.3107 directly provides the framework for Sarah to recover her medical costs, lost wages, and the expenses for household help through her no-fault insurance policy, helping her manage the financial impact of her accident.
Related Statutes
Several Michigan statutes are closely related to MCL § 500.3107, as they collectively govern the Michigan no-fault insurance system and how personal injury claims are processed:
- MCL § 500.3105 – Personal protection insurance benefits; accidental bodily injury: This statute establishes the fundamental entitlement to personal protection insurance (PIP) benefits for accidental bodily injury arising out of the ownership, operation, maintenance, or use of a motor vehicle. It sets the stage for *who* can receive benefits, while MCL § 500.3107 details *what* benefits are payable.
- MCL § 500.3109 – Deductibles, exclusions, primary coverage, catastrophic claims: This section allows insurers to offer deductibles and exclusions, outlines rules for coordinating benefits with other health and disability insurance, and historically involved the Michigan Catastrophic Claims Association (MCCA) for high-cost claims (though significant reforms have altered aspects of this). It affects the net amount an injured person might receive under MCL § 500.3107 by determining which insurer pays first or if any deductible applies.
- MCL § 500.3145 – Notice of injury; time for bringing action: This statute sets the one-year statute of limitations for bringing an action for PIP benefits. An injured person must notify the insurer of the injury within one year and file suit within one year from the date the expense was incurred (or after the last payment was made by the insurer for a recurring expense) to preserve their claim for benefits outlined in MCL § 500.3107.
- MCL § 500.3157 – Furnishing information to insurer; independent medical examination: This provision grants the insurer the right to request reasonable medical information and require the injured person to undergo independent medical examinations (IMEs). This is crucial for insurers to assess the “reasonableness” and “necessity” of expenses and treatment claimed under MCL § 500.3107(1)(a).
Case Law Interpreting MCL § 500.3107
Michigan courts have frequently interpreted various aspects of MCL § 500.3107, particularly concerning the definitions of “reasonable charges,” “reasonably necessary,” and the scope of “work loss” and “replacement services.”
- Allowable Expenses (Reasonable and Necessary):
* *Proudfoot v. State Farm Mut. Ins. Co.*, 280 Mich. App. 391 (2008): This case, among others, has addressed the “reasonable and necessary” standard for allowable expenses. It clarifies that an insurer’s obligation extends to services that are both medically necessary and charged at a reasonable rate for the locale. The court examined whether a specific charge was reasonable and customary. Link to Google Scholar search for Proudfoot v. State Farm Mut. Ins. Co. 280 Mich. App. 391
* *Douglas v. Auto-Owners Ins. Co.*, 304 Mich. App. 111 (2014): This case involved the interpretation of “reasonably necessary” products, services, and accommodations for an injured person’s care, recovery, or rehabilitation. The court confirmed that medical opinions, not just patient preference, are crucial in determining necessity. Link to Google Scholar search for Douglas v. Auto-Owners Ins. Co. 304 Mich. App. 111
- Work Loss:
* *Kirkpatrick v. Auto Club Ins. Ass’n*, 211 Mich. App. 210 (1995): This case provides guidance on the calculation of work loss benefits, particularly addressing how lost earning capacity versus actual lost wages should be considered, and the appropriate methodology for determining the claimant’s income. Link to Google Scholar search for Kirkpatrick v. Auto Club Ins. Ass’n 211 Mich. App. 210
These cases highlight the fact-intensive nature of PIP claims and the judicial scrutiny applied to ensure benefits are paid in accordance with the statutory language and intent.
Why MCL § 500.3107 Matters in Personal Injury Litigation
MCL § 500.3107 is the bedrock for asserting and defending claims for economic damages in Michigan personal injury cases arising from motor vehicle accidents. For plaintiffs, it provides the fundamental legal basis for recovering medical expenses, lost wages, and household replacement services from their own no-fault insurer. Understanding its nuances is crucial for clients to know what benefits they are entitled to and for attorneys to correctly advise on the scope and limitations of their no-fault claims.
Plaintiff attorneys rely on this statute to identify all potential avenues of recovery for their injured clients. They must meticulously document medical charges, prove the necessity and reasonableness of treatments, accurately calculate work loss (including the 15% tax reduction), and substantiate claims for replacement services. Disputes often arise over what constitutes “reasonable charges” or “reasonably necessary” care, making medical evidence and expert testimony critical.
For defense attorneys and insurance adjusters, MCL § 500.3107 defines the boundaries of their clients’ obligations. They scrutinize claims against the statute’s criteria, challenging charges deemed excessive, services not medically necessary, or work loss calculations that don’t adhere to the three-year limit or the statutory caps. The provision regarding the waiver for seniors and the exclusion of medical marihuana are also key for insurers in managing their liabilities and policy offerings.
Ultimately, this statute is central to Michigan’s no-fault system, dictating the economic lifeline for accident victims and shaping the strategies for both plaintiffs and defendants in personal injury litigation. Its precise language and ongoing judicial interpretations significantly impact the financial recovery of injured individuals and the responsibilities of auto insurers in the state.