Besides the cost of medical treatment and recovery, the biggest financial concern of most auto accident victims is how they will make up the income that was lost while waiting for injuries to heal. In a Michigan car accident, the wage loss element of no-fault auto insurance covers this loss for most people injured in the accident.
According to the state's no-fault insurance laws, the no-fault insurance company covering injury victims' medical care for an accident must also cover victims' lost wages. However, unlike medical care, wage loss coverage under no-fault is NOT unlimited. No-fault compensates victims for up to 85% of lost wages or $5,189 per month (whichever is lower) for a maximum of three years.
As noted above, no-fault wage loss compensation is calculated at 85% of an injury victim's wages for the period of time for which his or her injuries prevented them from working. Why isn't the victim granted 100% of his or her lost wages? Because no-fault wage loss compensation is non-taxable. By reducing the full value by 15%, the state approximates what the victim would have received in earnings after taxes.
Although most people receive the 85% of lost wages, there is a limit to how much no-fault insurance is required to pay. This cap is $5,189 per month. If an injury victim earns take-home pay greater than $5,189 per month, there are only two ways to recover the additional lost wages:
through the victim’s additional insurance policy that covered the excess amount, if he or she had one
through an excess economic damages lawsuit against the driver at fault (see below)
When calculating wage loss compensation, it's important to understand that only actual wages can be used. The claimant (injury victim) cannot claim potential earning value such as raises or promotions they might have received during the time they were unable to work or wages they might have earned if they had acquired a new job. No-fault wage loss compensation is calculated from the actual pay rate at the time of the accident. If the claimant was unemployed at the time of the accident but actively looking for employment, wage loss is calculated on the rate of pay for the most recent day worked.
Finally, no-fault wage loss compensates injury victims only for the actual length of time that the injuries prevent the victim from working or a maximum of three years. If a victim returns to work after a week, a month, several months or any period less than three years, they will only receive compensation for wages lost during that time. If injuries keep an accident victim from working more than three years, the additional wages must be recovered by one of the same means listed above for wages above $5,189 per month.
When a victim's lost wages aren't fully compensated for by no-fault insurance (i.e. lost wages exceed the caps mentioned above), the excess amount must be recovered through a lawsuit for excess economic damages against the driver at fault (or multiple drivers if more than one contributed to the accident and subsequent injuries). Excess economic damages could also be recovered in an insurance claim if the injured person has a policy covering such damages. Most people do not have such insurance and must file a lawsuit.
You may have heard that auto accident injury victims in Michigan can only file a lawsuit if their injuries meet certain severity requirements (i.e. threshold injuries). That is true for lawsuits aiming to recover damages for pain and suffering or other non-economic damages. This threshold requirement does not apply to lawsuits seeking to recover excess economic damages. Nor are such lawsuits limited by Michigan's comparative negligence law. Auto accident injury victims can recover lost wages from other at-fault drivers even if they were more than 50% responsible for the accident or their own injuries.
Auto accident victims who are being denied claims for lost wages or who need to pursue the at-fault driver for excess economic damages can get assistance for their claims from the personal injury and auto accident lawyers at Sachs Waldman. Our attorneys have extensive experience helping injury victims successfully recover lost wages, excess economic damages and other losses from insurance companies and at-fault drivers. Call our Detroit personal injury law office at 1-800-638-6722 to schedule a free consultation.
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