Michigan Personal Auto Policy in Practice

A Michigan personal auto policy is the standard personal auto coverage parts with Michigan’s no-fault coverages built in and Michigan’s optional choices laid on top. Most client questions come down to one document, the declarations page, and to three claims that test it: a collision loss, a serious injury caused by a driver who carries too little insurance, and a rental car. The sections below read a declarations page line by line, then work each of those claims to the dollar. Every person, company and figure in the examples is invented for illustration. A premium, a limit or a deductible shown here is not a statutory figure unless a statute is cited beside it.

Reading a Michigan Declarations Page

Dana Okafor lives in Ann Arbor and insures one 2022 compact SUV with Fernwood Casualty Insurance Company. Her declarations page shows these coverages.

Coverage	What the declarations shows	What the line tells you
Personal protection insurance (PIP) allowable expenses	$250,000 per person per accident	The level Dana selected on the Director’s form (MCL 500.3107c(1)(b)). It limits allowable expenses only.
PIP work loss, replacement services, survivors’ loss	Statutory	Not affected by the level chosen.
Property protection insurance (PPI)	$1,000,000 per accident	The most one policy pays for damage to all tangible property from one accident (MCL 500.3121(5)).
Residual liability, bodily injury	$250,000 each person, $500,000 each accident	The statutory default (MCL 500.3009(1)). A lower choice, never below $50,000 and $100,000, needs the Director’s form (MCL 500.3009(5)).
Residual liability, property damage	$50,000 each accident	Above the $10,000 statutory floor (MCL 500.3009(1)(c)).
Medical payments	$5,000 each person	An optional add-on to PIP, covered below.
Collision	Broad form, $500 deductible	One of the collision options an insurer must offer (MCL 500.3037(1)(b)).
Other than collision	$250 deductible	Fire, theft, glass, animals and the other causes that are not collision.
Uninsured and underinsured motorists	$100,000 each person, $300,000 each accident	Contract coverage. The statute that once required it was repealed.
Rental reimbursement	$40 per day, $1,200 maximum	An endorsement that raises the base policy’s transportation expense limits.

Three habits make the page useful instead of decorative.

1. Match each choice to its paper. A PIP level needs a signed Director-approved form, and a verbal selection counts only if it was recorded (MCL 500.3107c(2), 500.3107e). Lower liability limits need their own form. A rejection of limited collision without a deductible, or of both collision coverages, must be in writing (MCL 500.3037(4)). If the page shows a choice and the file has no form, the choice is exposed.
2. Read the coverages that are absent. A page with no collision line means the client bears the whole loss to the car. A page with no UM/UIM line means no contract protection against a driver who carries too little.
3. Check the vehicle schedule against the household. Every vehicle a household member owns needs security, and “owner” includes a person who has had the use of a vehicle for more than 30 days (MCL 500.3101(3)(l)).

The form behind a Michigan declarations page is the insurer’s own filed policy. The standard personal auto policy teaches the structure, and its Part B, C and D wording is used below as the pattern. Where a standard form is said to pay something, that means standard forms generally, and the client’s policy controls.

Uninsured and Underinsured Motorist Coverage

Why it is contract coverage

The Insurance Code once had a section requiring uninsured motorist coverage. It was repealed effective October 1, 1973 (compiler’s note to MCL 500.3010), and the chapter on policies now mentions the coverage only where it lets an insurer exclude it, as in sections 3017 and 3018. With the repealed section gone, the limits, definitions and any rejection form are left to the policy. The policy and the insurer’s filed rules decide them. A producer protects the client and the agency by putting the offer, the limits quoted and the client’s choice in writing, signed, in the file. That is practice, not a statutory requirement.

What the standard wording pays

Under the standard personal auto form, uninsured motorist coverage pays compensatory damages an insured is legally entitled to recover from the owner or operator of an uninsured motor vehicle because of bodily injury. Three words carry most disputes.

• Legally entitled to recover. The insured must be able to prove what the at-fault driver would owe. Because Michigan limits tort recovery, proving what the at-fault driver would owe means clearing the tort threshold: noneconomic loss is recoverable only for death, serious impairment of body function or permanent serious disfigurement (MCL 500.3135(1)), damages are assessed by comparative fault, and a person more than 50% at fault recovers nothing (MCL 500.3135(2)(b)).
• Uninsured. The standard definition includes a vehicle with no liability policy, a vehicle whose liability limit is below the financial responsibility minimum, and a hit-and-run vehicle that actually hits the insured, the insured’s auto or a vehicle the insured is occupying. Physical contact is the usual requirement, so a miss-and-run claim depends on the policy’s wording.
• No duplicate payment. The same element of loss is not paid twice under the policy. PIP already pays allowable expenses, work loss and replacement services without regard to fault, and tort liability for those elements is abolished within PIP’s limits (MCL 500.3135(3)), so they are not what UM or UIM adds. UM and UIM answer mainly for what PIP does not pay, such as noneconomic loss.

The standard form’s uninsured motorist part does not reach a driver whose liability limit meets the financial responsibility minimum but falls short of the injured person’s damages. Underinsured motorist coverage is added by endorsement, and the endorsement’s wording decides how it measures the shortfall. That wording is the most important thing to read.

Worked claim: underinsured

A driver with a $50,000 per person liability policy crosses the center line and hits Dana. Dana is 0% at fault. Her injuries are serious impairment of body function, so her noneconomic claim survives the threshold. PIP pays her medical and wage losses up to its limits. After that, a court would assess her remaining damages, the ones PIP does not pay, at $210,000. The at-fault driver’s insurer pays its $50,000 limit. Dana’s UIM limit is $100,000 per person.

There are two common ways an endorsement measures what the insurer owes.

Measure	Steps	UIM pays	Dana’s total recovery	Unpaid
Damages above the at-fault limit, up to the UIM limit	$210,000 damages - $50,000 paid = $160,000; capped at the $100,000 UIM limit	$100,000	$50,000 + $100,000 = $150,000	$60,000
UIM limit reduced by what the at-fault driver paid	$100,000 UIM limit - $50,000 paid	$50,000	$50,000 + $50,000 = $100,000	$110,000

The same facts produce a $50,000 difference. Dana cannot know which measure she bought from the limits on the declarations page, only from the endorsement. A client who asks for “$100,000 of underinsured coverage” may mean the first measure and receive the second. Show the client the endorsement language at the point of sale.

Comparative fault changes the first line. If Dana were 20% at fault, her recoverable damages would be $210,000 x 80% = $168,000, and under the first measure UIM would owe $168,000 - $50,000 = $118,000, capped at $100,000. At more than 50% at fault she would recover nothing.

Worked claim: a hit-and-run

Two cases show how the uninsured definition works. On a night drive, an unidentified pickup clips the rear quarter of Dana’s SUV and drives off. The pickup hit her vehicle, so it meets the standard hit-and-run definition, and a claim under her uninsured motorist coverage goes forward if she can show what the unidentified driver would owe. Now change the facts. The pickup forces her off the road, and she hits a tree without any contact between the vehicles. Under the standard wording, which asks for a hit, the claim fails unless the policy or the insurer’s filed endorsement adds miss-and-run coverage. The injury is identical and the contract answer is not, which is why a producer reads the definition of an uninsured motor vehicle before telling a client what the coverage does.

In neither case does uninsured motorist coverage pay for the SUV. Damage to the vehicle comes under collision, subject to the options above.

Collision Coverage, Deductibles and the Mini-Tort

The options

Collision pays for the upset of the covered auto or its impact with another vehicle or object. The Code makes the insurer offer two versions at a new applicant’s first written application, and allows more (MCL 500.3037(1), (2)).

Coverage	When it pays	Deductible
Limited collision	Required to pay if the operator was not substantially at fault. Payment when the operator was substantially at fault is for the policy’s wording.	None when the operator is not substantially at fault
Standard collision, which an insurer may also offer (MCL 500.3037(2))	The policy’s wording; as commonly sold, regardless of fault	A Director-approved amount. The statute provides no waiver
Broad form collision	Regardless of fault	A Director-approved amount, waived if the operator was not substantially at fault

“Substantially at fault” means the operator’s action or inaction was more than 50% of the cause (MCL 500.3037(8)(b)). Comprehensive, which the standard form calls other than collision, is a separate coverage with its own deductible, and glass, theft, fire and animal strikes belong to it.

Why the car is the client’s own problem

Michigan removed most tort liability for vehicle damage. A person may still recover up to $3,000 to a motor vehicle for accidents after July 1, 2020, but only to the extent the damage is not covered by insurance (MCL 500.3135(3)(e)). Property protection insurance does not pay for a vehicle driven on the road, because it excludes vehicles unless they are parked so as not to cause an unreasonable risk (MCL 500.3123(1)(a)). The at-fault driver’s insurer therefore does not pay for the client’s repair bill. The client’s own collision coverage does or, apart from the small claim described below, nobody does.

Worked claim: collision with a deductible

Dana’s SUV is hit and the repair estimate is $15,600. Its actual cash value before the loss is $13,200. The standard form pays the lesser of the actual cash value or the amount necessary to repair or replace, less the deductible. The repair cost exceeds the value, so the vehicle is a total loss and the lesser figure is $13,200.

The result depends on the coverage Dana bought and how the fault is divided.

Coverage	Dana 20% at fault	Dana 70% at fault
Limited, no deductible	$13,200	Statute does not require payment; the policy’s wording decides
Standard, $500 deductible	$13,200 - $500 = $12,700	$12,700
Broad form, $500 deductible (her policy)	$13,200 (deductible waived)	$12,700
Broad form, $1,000 deductible	$13,200 (deductible waived)	$12,200

Dana has broad form coverage, so at 20% at fault the insurer pays $13,200. At 70% at fault it pays $12,700, and Dana bears the $500.

Now suppose Dana had standard collision instead. At 20% at fault the insurer pays $12,700, and her $500 deductible is damage not covered by insurance. She may sue the other driver for it under the $3,000 vehicle damage provision, assessed by comparative fault: $500 x 80% = $400. At 70% at fault she recovers nothing, because a party more than 50% at fault gets no award (MCL 500.3135(4)(a)). The action is brought in small claims court where legally possible (MCL 500.3135(4)(c)).

While the car is being replaced, transportation expense coverage applies. In the standard form it pays up to $30 a day for temporary transportation, to a maximum of $900, with no deductible, and only if the declarations show the coverage that caused the loss. Payment begins when the auto has been withdrawn from use for more than 24 hours, and ends after the time reasonably required to repair or replace it. If Dana rents a car at $38 a day for 35 days of covered expense, she incurs $1,330, but the form pays 35 x $30 = $1,050, limited to $900. Her $40 a day, $1,200 rental reimbursement endorsement replaces those figures: 35 x $38 = $1,330, limited to $1,200, so she bears $130. Reading the endorsement’s cap before promising a client “full rental” avoids that surprise.

Medical Payments Alongside PIP

Michigan’s PIP is mandatory, pays allowable expenses regardless of fault and pays to the selected level. Medical payments coverage is not required, so it exists to fill what PIP leaves. The standard form pays reasonable expenses for necessary medical and funeral services incurred within three years after the accident, to you or a family member occupying a motor vehicle or struck by one designed mainly for public roads, or by a trailer, and to anyone else occupying your covered auto. It does not pay twice for the same element of loss, and it excludes injury covered by workers’ compensation.

Where it helps depends on the policy’s wording, which a producer must read for three points: whether it pays on top of PIP or only what PIP does not pay, whether it follows the person or the vehicle, and whether it pays after the PIP level is exhausted. Here is a case where the first and third answers matter. Dana’s accident leaves her with $262,000 in allowable expenses. Her PIP pays to the $250,000 level, which leaves $12,000. If her medical payments wording pays expenses beyond PIP, it pays up to its $5,000 limit and she is left with $7,000. She may also claim the excess against the at-fault driver, because tort liability survives for allowable expenses above the selected level (MCL 500.3135(3)(c)). A client who chose the $50,000 level because of Medicaid enrollment, or who carries a PIP deductible (MCL 500.3109(3)), has the same gap on a smaller scale.

Rental Vehicle Coverage

A rental draws on three rules.

• Owner or renter. A person renting or having the use of a motor vehicle for more than 30 days is an owner who needs security for PIP, PPI and residual liability (MCL 500.3101(3)(l)). A renter for 30 days or fewer is not an owner, so a vacation rental does not need its own no-fault policy.
• PIP follows the person. A renter hurt in a motor vehicle accident claims under the PIP policy on the person named in the policy, the spouse and a relative of either domiciled in the same household (MCL 500.3114(1)). A person without such a policy goes to the assigned claims plan in the circumstances the statute sets (MCL 500.3114(4)).
• Liability and physical damage follow the contract. In the standard form a rental is a non-owned auto. Part A liability applies, and Part D covers it with the broadest coverage the declarations show for any covered auto, as excess over any coverage the owner provides.

Worked claim: a rented car

Dana rents a sedan for five days. She hits a guardrail and damages it. The rental company’s repair bill is $4,200. It also charges $55 a day for the six days the car is in the shop, a loss of use charge of $330. Dana bought no waiver, and the rental company’s own coverage does not pay first.

1. Physical damage. Her collision coverage applies to the rental with her $500 deductible. $4,200 - $500 = $3,700.
2. Loss of use. The standard form pays the expenses for which she becomes legally responsible for loss of a non-owned auto, up to $30 a day, with no deductible. 6 x $30 = $180. The $150 difference is hers.

The insurer pays $3,700 + $180 = $3,880. Dana pays $500 + $150 = $650. A rental that goes past 30 days changes the analysis entirely, because by then Dana is an owner who should have her own security on the vehicle.

Extended Non-Owned Coverage and Miscellaneous Type Vehicles

Extended non-owned coverage

A named non-owner endorsement gives liability coverage to a person who owns no vehicle but has someone else’s available. An extended non-owned endorsement gives liability coverage to a driver of non-owned vehicles used for business purposes. Under a 1996 bulletin of the Insurance Bureau, either endorsement, when issued to a person who is not an owner, gives residual liability only, and only to the named person and spouse. It does not provide PIP, PPI or physical damage coverage, and it excludes resident relatives other than the spouse (DIFS Bulletin 96-02). The producer’s job is to find the person who needs the coverage and to say what the endorsement does not do. Take Marcus, who owns no car, has no vehicle available to him for more than 30 days, and drives other people’s vehicles for his delivery work. The endorsement covers his liability as a driver. If he is hurt, it does not give him PIP.

Miscellaneous type vehicles

An endorsement for miscellaneous type vehicles extends a personal auto policy’s liability and physical damage coverages to vehicles the base policy does not treat as covered autos, such as motorcycles, off-road vehicles, golf carts and snowmobiles. Standard forms generally work this way, and the insurer’s own filed endorsement controls what it covers and how it rates each type. What Michigan adds is that most of these vehicles are not “motor vehicles” under the no-fault chapter (MCL 500.3101(3)(i)).

Vehicle	Status under chapter 31	What follows
Motorcycle	Not a motor vehicle	Liability security is required, and insurers that cover it must offer first-party medical benefits in $5,000 increments (MCL 500.3103). No PIP is required.
Off-road vehicle, which includes an all-terrain vehicle	Not a motor vehicle	No PIP or PPI requirement from the policy that insures it.
Golf cart	Not a motor vehicle	The same.
Moped or electric bicycle	Not a motor vehicle	The same.

A motorcycle accident that does not involve a motor vehicle is a “motorcycle accident” under the statute, so the car’s PIP does not apply to the motorcyclist. When a motor vehicle is involved, the injured motorcyclist follows a priority order that starts with the insurer of the motor vehicle’s owner or registrant (MCL 500.3114(5)). A producer insuring a household with both a car and a motorcycle should say that the two are not interchangeable and that the motorcycle’s medical benefit is chosen separately.

Lesson summary

• A Michigan declarations page shows PIP allowable expense level, PPI, residual liability limits, collision type and deductible, comprehensive deductible and any UM/UIM and rental limits. Each statutory choice needs its signed form in the file.
• Uninsured and underinsured motorist coverage is contract coverage in Michigan because the former statute was repealed in 1973. The policy’s wording sets who is insured, what counts as uninsured and how an underinsured shortfall is measured.
• The same facts can produce different underinsured payments under a “damages above the at-fault limit” measure and a “limit reduced by the at-fault payment” measure, so the endorsement language must be read.
• Limited, standard and broad form collision differ in whether fault matters and whether the deductible is waived. “Substantially at fault” means more than 50% of the cause.
• Michigan abolished most tort liability for vehicle damage, so the client’s own collision coverage pays for the car. A mini-tort claim of up to $3,000 reaches only what insurance does not cover and is reduced by comparative fault.
• Medical payments coverage works around mandatory PIP and fills gaps. The tort claim for allowable expenses above the PIP level survives.
• A person with the use of a vehicle for more than 30 days is an owner who needs no-fault security. A short rental is a non-owned auto under the renter’s policy.
• Named non-owner and extended non-owned endorsements give residual liability only to the named person and spouse. Motorcycles, off-road vehicles and golf carts are not motor vehicles under the no-fault chapter.