August 29, 2019
With the passing of the massive revisions to the No-Fault Act this summer, many of the previous rules we knew to exist have been replaced or revised. MCL 500.3142, pertaining to calculation of penalty interest on past due benefits, did not escape this overhaul.
Previously, we all understood that once reasonable proof of the fact and the amount of loss was provided, the insurer had thirty (30) days to pay the benefit or it became “past due” and subject to interest of 12% per year.
Starting June 11, 2019, the revised statute reads:
(1) Personal protection insurance benefits are payable as loss accrues.
(2) Subject to subsection (3), personal protection insurance benefits are overdue if not paid within 30 days after an insurer receives reasonable proof of the fact and of the amount of loss sustained. Subject to subsection (3), if reasonable proof is not supplied as to the entire claim, the amount supported by reasonable proof is overdue if not paid within 30 days after the proof is received by the insurer. Subject to subsection (3), any part of the remainder of the claim that is later supported by reasonable proof is overdue if not paid within 30 days after the proof is received by the insurer. For the purpose of calculating the extent to which benefits are overdue, payment must be treated as made on the date a draft or other valid instrument was placed in the United States mail in a properly addressed, postpaid envelope, or, if not so posted, on the date of delivery.
(3) For personal protection insurance benefits under section 3107(1)(a), if a bill for the product, service, accommodations, or training is not provided to the insurer within 90 days after the product, service, accommodations, or training is provided, the insurer has 60 days in addition to 30 days provided under subsection (2) to pay before the benefits are overdue.
(4) An overdue payment bears simple interest at the rate of 12% per annum.
New to the statute is subsection (3) which pertains to products, services, accommodations and training only. In the event the bills for such benefits are not submitted to the carrier within 90 days of the date of provision then the time frame the insurer has to pay the benefit is extended from 30 days to 90 days after the reasonable proof of the amount of loss (bill) is received.
Subsection (2) contains more wording than the prior statute, but the handling will be similar to the prior statute. 3142 indicates that if reasonable proof is not received for the whole claim but only for part of the claim, that portion of the benefit for which the carrier does have reasonable proof must be paid within 30 days as before. However, for those parts for which reasonable proof is not received, the time for making the payment of such benefit is 30 days from whenever such reasonable proofs are provided.
Therefore, claims representatives should be aware of these nuances which change the long established calculation of time for providing benefits. 1) If both the reasonable proof of the fact of the loss and the reasonable proof of the amount of the loss (the bill) are received within 90 days of the date of service, the carrier must pay benefits within 30 days of receipt of those proofs or face penalty interest. 2) If reasonable proof is provided as to a portion of the claim, but not the whole claim, then the amount that is supported by reasonable proof must be paid within 30 days of receipt of those proofs or the carrier will face penalty interest. 3) If a bill for the provision of products, services, accommodations or training is not provided to the insurer within 90 days of the provision, then the time frame for payment of benefits is extended to 90 days after the bill is provided to the insurer.
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Please direct any questions to Christian Huffman, Editor Pro Tempore of the Law Fax Publication and a Shareholder in our Detroit Office. He can be reached at 313.446.5549 or firstname.lastname@example.org