What Does Liability Insurance Cover If You’re Not At Fault?

You’re driving north on M-63 in St. Joseph when traffic slows at a red light. Unfortunately, the driver behind you is too engrossed in his phone and doesn’t stop in time. The impact throws you forward, sending your forehead against the steering wheel and leaving you with a concussion and painful spinal cord injury. The police arrive, your motor vehicle is loaded on a tow truck, and you head to the hospital for medical evaluation and treatment.

Naturally, you expect your own car insurance to handle the initial claim. That’s how Michigan’s no-fault system works: you turn first to your own coverage for property damage repairs to your vehicle and for medical care and lost income. Still, once doctors confirm that you’ve suffered a spinal cord injury, you start getting calls from the at-fault driver’s insurance company, leaving you wondering, “What does liability insurance cover when you didn’t cause the crash?” In this guide, we answer that question and explain how a Michigan car accident lawyer can help.

Liability Insurance in Michigan: an Overview

Liability insurance is meant to protect the at-fault driver from the financial impact of a car accident by covering injuries and property damage they cause. When you’re not at fault, this is the coverage you’ll rely on when you pursue compensation beyond what your own insurance provides. Although the term sounds simple, it includes several components that determine what’s available and how much can be paid.

Here’s what you need to know:

• Each Michigan auto policy includes bodily injury liability and property damage liability coverage. Bodily injury liability pays for another person’s physical injuries, lost income, and non-economic damages such as pain and suffering, up to the limits chosen by the at-fault driver.
• Michigan’s minimum required limits are $250,000 per person and $500,000 per vehicle collision for bodily injury coverage, though drivers can select higher limits. Drivers can also sign documents to opt-down for limits as low as $50,000 per person and $100,000 per vehicle collision. The limits chosen by the at-fault driver set the maximum amount the automobile insurance company will pay on behalf of the driver who caused the crash.

Understanding where your no-fault coverage ends and the at-fault driver’s liability coverage begins can help you see which expenses may still be recoverable.

Whose Auto Insurance Applies and When?

Michigan’s no-fault system divides financial responsibility between several types of coverage, and each serves a different purpose. Your automobile insurance company pays certain benefits automatically, while the at-fault driver’s insurer becomes involved only when liability comes into play. Knowing which company to contact (and for what reason) can prevent delays and unnecessary disputes.

Your Own Car Insurance: No-Fault Benefits

Your insurance company handles the immediate fallout of a collision through your Personal Injury Protection (PIP) coverage. That portion of your insurance policy pays for your medical costs, rehabilitation, lost wages, and some household services, regardless of fault. You must notify your insurer as soon as possible after the crash so your PIP claim can begin. This part of the system is intended to keep medical bills and income loss from waiting on a fault investigation.

If your injuries are extensive, your medical expenses may exceed the limits of your chosen PIP coverage. 

You also look to your own automobile insurance for vehicle repair costs – this is your collision coverage. 

However, you might face a vehicle repair deductible, or medical expenses, or wage loss, or pain and suffering damages that your auto insurance doesn’t cover. That’s when another part of the automobile insurance framework starts to matter.

The Other Driver’s Auto Insurance: Liability Coverage

The at-fault driver’s insurance company gets involved when its policyholder may be legally responsible for your additional losses. This includes vehicle damage capped at $3,000, and economic losses over what is covered by your own PIP coverages, as well as pain and suffering and other non-economic harm once your injuries meet Michigan’s serious-impairment threshold. 

Because these insurers represent different interests, their goals rarely match. Your car insurance company must pay PIP benefits by law; the other driver’s insurer aims to limit its liability exposure. If you speak with the at-fault driver’s insurer, it’s best to keep communication factual and brief until you’ve reviewed your options with legal counsel.

How Both Car Insurance Coverages Interact

In most cases, you’ll work with both insurers at different stages. Your no-fault benefits handle immediate costs, while the at-fault driver’s liability coverage becomes relevant later, once fault and injury severity are established. The two systems overlap but don’t replace one another. Knowing when to involve each auto insurance company (and what they’re responsible for) helps you maintain control of your claim and ensures you receive the full compensation Michigan law allows.

What Liability Insurance Covers When You’re Not at Fault

When another driver causes an auto accident, their liability insurance is intended to pay for the harm you’ve suffered. In Michigan, this car insurance coverage works alongside your no-fault benefits rather than replacing them. As we outlined previously, it applies once your medical or financial losses exceed what your own auto insurance policy provides or when your injuries meet the legal standard for a serious impairment, permanent serious disfigurement or death. The scope of this coverage determines how much compensation you can claim from the at-fault driver’s insurance company.

Medical Expenses Beyond Your No-Fault Coverage

Your Personal Injury Protection covers most medical treatment related to the crash, but limits vary depending on your chosen policy. Once those limits are reached, you may recover additional medical bills through the at-fault driver’s liability coverage. This includes hospital stays, follow-up visits, physical therapy, prescriptions, and other medically necessary treatment linked to your injuries. To support your claim, you’ll need records showing that the injuries were caused by the collision and that the care you received was reasonable and necessary.

Lost Income That Exceeds PIP Limits

Michigan’s no-fault insurance pays a portion of your lost wages (generally up to 85 percent of your regular income) for up to a maximum of 3 years and with a monthly cap. If your income loss continues beyond that period or exceeds the monthly cap, you may seek the remaining amount from the other driver’s liability insurance. This often requires proof of your employment, earnings, and medical documentation showing how the injuries restricted your ability to work.

Pain and Suffering

Liability insurance also provides compensation for non-economic damages like pain, discomfort, emotional distress, and reduced quality of life when your injuries meet Michigan’s threshold injury requirement. These claims depend on the nature of your injuries, their effect on your daily activities, and your recovery outlook. While no dollar amount perfectly reflects this kind of loss, Michigan law allows you to pursue it through the at-fault driver’s liability coverage once eligibility is established.

Property Damage Coverage

If your motor vehicle is damaged or declared a total loss, your auto insurance is responsible for the vehicle repair or replacement costs. You can recover your deductible from the other driver’s limits, but this claim is capped at $3,000.

Wrongful Death Claims

When a crash results in death, the deceased person’s family may file a claim under the at-fault driver’s liability insurance. This can include compensation for loss of companionship, financial support, and funeral expenses. These cases are brought through Michigan’s Wrongful Death Act and typically involve detailed financial and emotional loss assessments.

Policy Limits and Practical Challenges

Each of these categories of compensation depends on the at-fault driver’s policy limits. If those limits are low, they may not cover all your losses. In that situation, you may turn to your own underinsured motorist coverage if you purchased it. The claims process can then become more complicated because two insurers (yours and the other driver’s) may each have financial exposure. Keeping thorough documentation and communicating through your personal injury lawyer can help preserve the value of your claim.

What Liability Insurance Doesn’t Cover in Michigan

Liability insurance has defined limits, and understanding what they are can prevent false expectations. Knowing what isn’t payable under liability coverage helps you better understand which benefits or policies can fill the gap.

• Your Own Vehicle Repairs Without Collision Coverage: If the other driver caused the crash and you carry collision coverage, your insurance company will pay for damage to your vehicle, subject to your deductible, as well as rental car expenses. Without collision coverage, you can only recover up to $3,000 from the other driver’s insurance and must prove they were at fault.
• Your Medical Expenses Within PIP Limits: Because Michigan is a no-fault state, your medical care is paid by your own Personal Injury Protection coverage up to the limits you selected. The at-fault driver’s liability policy doesn’t handle these bills unless your expenses exceed those limits. This distinction explains why both insurers become involved but cover different aspects of your recovery.
• Expenses Beyond the At-Fault Driver’s Policy Limits: Every liability policy has a ceiling on what it may owe. When your medical costs, wage loss, or non-economic damages exceed those limits, the insurer’s obligation ends. You may then rely on your own underinsured motorist coverage if you have it, or you may pursue the at-fault driver personally for the balance. However, personal recovery is rarely practical unless the driver has assets beyond their insurance.
• Uninsured Motorists: If the person who caused your vehicle collision has no insurance, there’s no liability coverage to collect from. In that situation, your own uninsured motorist coverage (if included in your policy) can take the place of the missing insurance company. It functions as if the uninsured driver carried liability insurance and pays for the same types of damages, within your chosen limits.
• Punitive or Exemplary Damages: Michigan law generally prohibits punitive damages in standard auto cases. Liability insurance doesn’t pay to punish a driver; it only compensates for measurable loss. Even when the other driver acted recklessly, recovery is limited to the types of damages permitted under Michigan’s no-fault and negligence statutes.

Have You Been Injured? Get a Free Consultation From a Michigan Car Accident Lawyer!

A car accident can leave you dealing with multiple insurance companies, several adjusters, and overlapping policies. Michigan’s no-fault system helps you receive medical care and wage replacement quickly, but that’s only part of the picture. When another driver causes serious harm, their liability insurance may be the source of additional recovery. Knowing how each type of coverage works allows you to protect your claim and avoid losing compensation that should be available to you.

If you’ve been injured in a crash in Southwest Michigan, Conybeare Injury and Accident Lawyers can review your situation, handle insurer communication, and pursue the compensation available to you. Our experienced personal injury attorneys can protect your rights and help you move forward after an accident. To schedule your free initial consultation, call our law firm at 269-983-0561 or fill out this contact form. Remember: if it’s not fair, call the Bear!