The administrator of a plan that covers the medical expenses of uninsured non-drivers who are injured in car crashes is suing the state of Michigan, alleging that a regulator’s recent orders conflict with the state’s new auto insurance overhaul.
The lawsuit was filed in the Court of Claims by the Michigan Automobile Insurance Placement Facility. The organization is run by insurers and administers the Michigan Assigned Claims Plan, which must provide medical benefits for passengers and pedestrians who are injured in accidents and have no auto insurance.
The suit accuses the state Department of Insurance and Financial Services and its director, Anita Fox, of forcing the plan to break the law by not implementing a new $250,000 cap on benefits until July 2020. The limit took immediate effect in June, according to the complaint.
“DIFS does not have the authority to amend or alter Michigan law, and any attempt to do so is a violation of separation of power principles under Michigan’s Constitution,” the suit says.
The assigned claims plan largely covered pedestrians and bicyclists initially, but it has increasingly aided passengers who are hurt while riding in uninsured vehicles. Rising costs led the Republican-controlled Legislature and Democratic Gov. Gretchen Whitmer to cap the benefit at $250,000 as part of a law enacted in May and June and that was meant to help lower Michigan’s high premiums.
Insurers and the Whitmer administration are at odds over sections of the law that governs claims made by uninsured passengers and pedestrians.
Fox issued two orders last month. One prohibits insurers from incorporating changes to the law that affect the scope of their policies without first submitting revised forms and rates to the state for review and approval. The second bars the implementation of the $250,000 cap until next July.
A spokeswoman said the state insurance department was reviewing the suit. Fox wrote last month that applying the limit before July would expose at-fault drivers with existing policies to “significant financial harm” if they were sued for expenses exceeding $250,000.
The orders are supported by opponents of the insurance overhaul, which also will let drivers forego mandatory medical benefits and limit reimbursements to health providers in the coming years.
John Cornack, president of the Coalition Protection Auto No-Fault, called the suit a “stunt” and “another example of big auto insurance companies shirking off their responsibilities” to children, seniors and bicyclists. “Instead of paying for their care, the auto insurance companies filed a baseless lawsuit to try to save a few bucks. How shameful.”
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