Commercial no-fault personal protection insurance deductibles

Issued and entered September 30, 1981 by Nancy A. Baerwaldt, Commissioner of Insurance

The Insurance Bureau issued Bulletin AD 74-2 on April 15, 1974 containing guidelines concerning no-fault personal protection insurance deductibles. Bulletin AD 74-2 provided that deductibles in excess of $300 per accident would not be approved for new or renewal policies after June 3, 1974. Any personal protection insurance deductible options in excess of $300 per accident were to be revised or withdrawn.

It appears that there may be insurers which are issuing commercial no-fault insurance policies with personal protection insurance deductibles in excess of $300 per accident. These no-fault deductible provisions have not received prior approval by the Commissioner, and the Insurance Bureau is not aware that rates have been filed for these deductible options. This bulletin reviews the provisions of the no-fault law with respect to deductibles, amends the personal protection insurance guidelines of Bulletin Ad 74-2, and contains guidelines for the review of commercial no-fault personal protection insurance deductibles.

PROVISIONS OF LAW

Section 3109(3) of the Michigan Insurance Code (Code), MCLA 500.3109(3); MSA 24.13109(3), allows a no-fault automobile insurer to offer, at appropriately reduced premium rates, personal protection insurance deductibles of specified dollar amounts which do not exceed $300 per accident. A deductible may be applied to any or all specified types of personal protection insurance benefits, but the total deductible per accident may not exceed $300. The section provides that a deductible shall apply only to benefits payable to the person named in the policy, his or her spouse and any relative of either domiciled in the same household.

Any other deductible provisions require the prior approval of the Commissioner.

GUIDELINES

A commercial personal protection insurance deductible allows a commercial insured to save premium dollars by self-insuring for a portion of each no-fault bodily injury claim. The Commissioner will approve reasonable personal protection insurance deductibles in excess of $300 per accident for no-fault commercial automobile insurance policies. The insurer may apply an approved commercial deductible provision on a per accident basis, regardless of whether the injured person is the named insured, his or her spouse or a relative of either domiciled in the same household. The commercial insured is responsible to pay any no-fault personal protection insurance benefits due an injured person which fall under the deductible provision of the no-fault automobile insurance policy. The Commissioner will not approve a commercial personal protection insurance deductible unless the following statement appears on the declarations page of the policy:

The named insured is responsible to pay any no-fault personal protection insurance benefits due an injured person which fall under the deductible provisions of this policy.

Pursuant to Section 3109(3), an insurer may not issue no-fault personal protection insurance with deductibles in excess of $300 per accident without the prior approval of the Commissioner. In addition, Section 2412 of the Code, MCLA 500.2412; MSA 24.12412, provides that an insurer shall not make or issue a contract or policy except in accordance with rate filings which are filed with the Insurance Bureau and in effect for the insurer.

If an insurer does not have specific prior approval for personal protection insurance deductibles in excess of $300 per accident, these deductible provisions may not be used. General deductible provisions on file for an insurer may not be applied to no-fault personal protection insurance coverages. Filings for personal protection insurance deductibles should be made pursuant to Section 2406 of the Code, MCLA 500.2406; MSA 24.12406. The file and use provisions of Section 2430 of the Code, MCLA 500.2430; MSA 24.12430, do not apply.

RIGHTS AND PROCEDURES

This bulletin is effective October 30, 1981. In conformity with Section 3(6) of the Administrative Procedures Act of 1969, MCLA 24.203(6); MSA 3.560(103)(6), these guidelines are a statement of policy which the agency intends to follow, which does not have the force or effect of law, and which binds the agency, but does not bind any other person.

The Bureau shall use these guidelines in reviewing all filings of no-fault commercial personal protection insurance deductibles for approval by the Commissioner and in determining whether an insurer is in compliance with Section 3109(3) and Section 2412 of the Code. The operation of this bulletin amends the personal protection insurance deductibles section of Bulletin AD 74-2 but does not suspend or modify operation of any other guidelines currently in force.