Column: ‘No fault’ a misnomer
Michigan uses a “no fault” auto insurance system. All accident victims get generous insurance benefits no matter who is at fault. The intent is to limit the need for the courts to figure out who is to blame and who is owed what, which is a costly and slow process. Unfortunately, good intentions aren’t enough, and the system has evolved into something different altogether.
A no-fault system can only work well if it limits the number of lawsuits that arise from car accidents. You may have noticed over the last several years the proliferation of attorneys advertising their services to accident victims. There’s a reason for that: It has become increasingly feasible and profitable for accident victims to sue even under Michigan’s no-fault insurance scheme.
In some ways, Michigan’s no-fault system was doomed from the start. In creating the No Fault Act of 1973, the Legislature created three thresholds which must be surpassed for someone to be allowed to sue. The accident has to result in death, permanent serious disfigurement or serious impairment of a body function. This last threshold was problematic from the start as it left it up to the courts to determine what was meant by it. And it is this threshold, rather than the other two, that is most often used to justify an accident-related lawsuit.
Michigan courts have proved unpredictable when determining what will meet this lawsuit threshold. Four major interpretations by the Michigan Supreme Court have flopped back and forth over the years from strict to loose definitions of “a serious impairment of a body function.” In 1982, a strict ruling was made, but then followed by a reversal and looser interpretation in 1986. In 1995, another case tightened up the definition and made it harder for accident victims to meet the threshold. But a 2010 ruling undid that and created what is arguably the lowest threshold for suing ever established in Michigan and remains the last word on the issue.
A key part of the 2010 ruling was its reinterpretation of what an accident victim needed to demonstrate to meet the legal threshold. Previously, someone who sued had to offer objective evidence — usually medical tests and reports from doctors — that an accident had led to bodily harm and a serious “overall” impact on the person’s life. But the court in 2010 held that an accident victim need only demonstrate an impairment, not an injury, and the effect of the impairment need only have “some” effect on a person’s life. So accident victims can now argue that they meet the threshold if they are unable to do certain things that they used to be able to do before the accident: lift heavy objects, sleep well, play softball, and so forth. You don’t need a law degree to figure out the problem here: It opens up almost unlimited opportunities for people involved in accidents to claim damages through negligence lawsuits.
Court statistics corroborate this point. In 2010, before the new Michigan Supreme Court threshold ruling went into effect, there were 5,509 negligence lawsuits filed as a result of car accidents, according the State Court Administrator’s Office reports. Based on this same data, though, there were almost 8,700 lawsuits – 58 percent more – on file with Michigan courts in 2016, under the new threshold standard. This translates into one automobile negligence lawsuit for every 1,100 Michigan residents.
Much has been written about the need to limit the unique and remarkably generous benefits the no-fault system provides. That is a real problem and a contributing factor to costly premiums. But lawmakers should also recognize the growing problem of weak standards for what meets the threshold for lawsuits. Until the Legislature acts decisively and puts an end to the courts’ multiple attempts to alter the no-fault law as they see fit, Michigan drivers will continue to have all the costs of a no-fault system but few of its promised benefits.
Michael Van Beek is director of research at the Mackinac Center for Public Policy. Matt Coffey is an attorney and lecturer at Central Michigan University.