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Step-Down Clauses Update

Posted at 4:49 PM, Feb 12, 2019

All of us want nothing but the best for our families. Part of taking care of our families means obtaining adequate amounts of Michigan auto insurance to protect them from disaster. And there is perhaps no greater disaster than one of us doing something that hurts a loved one.

But what if you learned that you may have a Michigan auto insurance policy that effectively eliminates coverage for your loved ones if they are hurt by you or another family member?

These “step-down” provisions apply when one family member pursues an auto negligence claim against another family member. The purpose of the provision is to reduce liability insurance coverage to the state-mandated minimum of $20,000, regardless of how severe the injury, how negligent the driver or the amount of insurance purchased in the first place.

Unfortunately, many insurance companies have no problem hiding step-down provisions in their policies. These provisions in “standard” policies issued by Progressive, Farm Bureau and Grange, just to name a few. And now AAA has added them to existing policies.

It has become apparent that relief from the step-down problem will not come from the courts. For example, in the case of Ruzak v USAA Insurance Agency, where the plaintiff suffered serious personal injuries in an auto accident when her husband lost control of his vehicle and collided with a tree. The wife made a claim under her husband’s insurance policy that provided $300,000 in liability coverage. The insurance company denied nearly all the wife’s claim, citing an exclusion in the policy that allowed for no more than $20,000 in coverage for claims by “family residing in the covered person’s household.”

The trial court in Ruzak refused to uphold the step-down provision, calling it “repugnant, reprehensible, and unconscionable.” However, the Michigan Court of Appeals disagreed, noting the auto insurance policy still provided $20,000 in coverage and the husband and wife could have bought insurance from a different carrier.

Think about this: why should a child who is catastrophically injured in a Michigan car accident caused by a parent-driver’s negligence be treated differently than a child who is catastrophically injured in a car accident caused by a stranger-driver’s negligence?

For more, visit the Sinas Dramis website.