Judge calls no-fault auto law 'shameful,' urges Michigan leaders to address it

Christine Ferretti
The Detroit News
A lawsuit, filed in August, seeks to force action on insurance rates by the Legislature or revert Michigan to a tort system in which an at-fault driver would be responsible for damages, medical expenses and other costs resulting from a crash.

Detroit — A federal judge on Thursday invited state leaders to address Michigan's "shameful" no-fault auto insurance law during a hearing in a lawsuit that challenges the law's constitutionality.

U.S.District Judge George C. Steeh said he was hopeful state lawmakers would give auto insurance reform more consideration after hearing arguments on a motion to have the case tossed out.

Steeh noted new leadership in the state Legislature that he believes "have an appreciation of the problems" and "may be in a position now to address what really is a shameful situation as it relates to the cost of our insurance coverage."

"I don't know another word for it, but it is all of that, at least," said Steeh, before noting he'd take the motion under advisement. "In the meantime, I understand officials represented here are going to be talking about possible solutions to the problem. I think this is the time to strike."

Detroit Mayor Mike Duggan and several motorists sued the state last year, arguing no-fault law has led to “excessive” rates that violate the constitutional rights of Michigan citizens.

The lawsuit, filed in August, seeks to force action on insurance rates by the Legislature or revert Michigan to a tort system in which an at-fault driver would be responsible for damages, medical expenses and other costs resulting from a crash.

The state Attorney General's Office is seeking to have the suit dismissed, claiming that there is no constitutional right to car insurance premiums that align with rates in other states. Assistant Attorney General D.J. Pascoe contends that if there is a claim in the case worth considering, it should be handled in the state courts.

On Thursday, Pascoe argued the plaintiffs' federal claim is insufficient. 

"There is no federal right to car insurance at a particular level. It doesn’t exist," he told the judge. "There is no right to travel in a particular mode of transportation."

David Fink, Bloomfield Hills-based counsel for the plaintiffs, countered that the no-fault law is "on the wrong side of the constitutional line."

"We have a circumstance that the legislation is so bad and causes so much harm that it's actually unconstitutional," he said. 

The state House in 2017 rejected a bipartisan plan backed by Duggan and then-House Speaker Tom Leonard that would have given motorists the choice to buy reduced-coverage auto insurance policies. Michigan is the only state that requires lifetime medical benefits for injured motorists.

Fink, after the hearing, said the judge signaled efforts to resolve the problems among state lawmakers and other parties involved in the case, shouldn't have to wait for the court's ruling.

"There's no mystery that the state has a serious problem," he said. "The only mystery is why the Legislature has waited so long to address it."

In a statement, the attorney general's office stood by its position that federal law does not support the plaintiff's case.

"If there is a question about what Michigan law requires, Michigan courts should answer that question," said Kelly Rossman-McKinney, a spokeswoman for Attorney General Dana Nessel. "Further comment on the merits of the allegations made in the complaint will be considered at the appropriate time.”

Thursday's hearing comes a day after testimony before the Senate Insurance and Banking Committee in Lansing. The committee expects to debate potential reforms. 

Leaders in both chambers of the Michigan Legislature have identified auto insurance reform as a top priority this session. Previous reform efforts have stalled amid intense lobbying from trial lawyers, hospitals and insurers. 

The No-Fault Act took effect in October 1973, with Michigan being among 19 states to adopt the policy by 1976. It set out to provide victims of auto accidents with faster and more adequate compensation than what was offered under the prior, common law tort system. 

No-Fault abandoned the common law fault determination, eliminating the right to sue the responsible party in most vehicle accidents. But it allowed accident victims to seek compensation through their own insurance companies. 

The state Supreme Court rendered the law unconstitutional by its failure to ensure that rates would be fair and equitable.

Despite that, the court did not strike down the law. Instead, the state Legislature and governor were given 18 months to correct the constitutional deficiencies. In response, legislators passed the Essential Insurance Act of 1979.


Staff writer Jonathan Oosting contributed