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More about the 7 things to know about so-called Michigan No-Fault 'reform'

Michigan No-Fault attorney adds his insight to list of ‘need to know’ No-Fault topics created by Michigan Watch’s Lester Graham

There’s a lot more to know about the Michigan insurance industry’s misguided campaign to dismantle Michigan’s nearly 40-year-old No-Fault auto insurance system.

In January 2012, investigative reporter Lester Graham of Michigan Radio’s Michigan Watch did an excellent job of identifying some of the most important aspects of the debate concerning so-called No-Fault “reform.”

He outlined his findings in his story, “Seven things to know about changes to Michigan’s mandatory auto insurance,” which I encourage everyone to check out.

Having written extensively about so-called No Fault “reform,” and after being interviewed by Lester Graham previously on this topic, here are a couple additional points that I would add.

As such, Mr. Graham’s seven points are listed below, followed by my own.

1. What We Have Now

For nearly 40 years, Michigan’s No-Fault Law has guaranteed that seriously injured Michigan auto accident victims will receive unlimited, lifetime medical benefits to pay for the expenses associated with the products, services and accommodations “reasonably necessary” for the victim’s accident-related care, recovery and rehabilitation.

Ironically, the strongest case for keeping Michigan No-Fault’s unlimited guarantee of necessary medical benefits in the event of serious personal injury has been made by the insurance industry itself.

Insurance industry leaders such as the Insurance Institute of Michigan, its executive director, Pete Kuhnmuench, the American Insurance Association and the Insurance Journal have for years praised Michigan’s nearly 40-year-old No Fault system and especially its guarantee of unlimited, necessary lifetime medical no fault insurance benefits:

o “‘Michigan [No Fault] policyholders have the Cadillac of auto insurance policies.'” (Insurance Institute of Michigan, “National Study Shows Average Auto Insurance Premiums in Michigan Falling,” December 21, 2010, Press Release, quoting IIM Executive Director Pete Kuhnmuench)

o Michigan’s No Fault Law guarantees Michigan drivers “the best auto insurance coverage in the country.” (Insurance Institute of Michigan, “Michigan Average Auto Insurance Premiums Drop,” December 2, 2009, Press Release, quoting IIM Executive Director Pete Kuhnmuench)

o Michigan No Fault policyholders “‘are getting a bang for their buck when it comes to protecting themselves in the case of a traffic crash.'” (Insurance Institute of Michigan, “Michigan Average Auto Insurance Premiums Drop,” December 2, 2009, Press Release, quoting IIM Executive Director Pete Kuhnmuench)

o “Michigan is generally recognized as having the most efficient and effective auto insurance law in the United States. … Auto insurance prices in Michigan are reasonable — especially considering the high level of benefits provided to consumers. …” (Insurance Institute of Michigan, 2010 IIM Fact Book, Page 19-20)

o Michigan’s No Fault Law guarantees Michigan drivers “the best no-fault medical benefits of any state.” (Insurance Institute of Michigan, “Auto … Insurance Rates Decrease in 2007,” February 7, 2008, press release)

o “Michigan’s no-fault law [which] requires insurance companies to provide unlimited, lifetime medical benefits to those injured in auto accidents … is generally recognized as … the most efficient and effective auto insurance law in the United States.” (Insurance Institute of Michigan, “No Fault: An overview of Michigan’s unique auto insurance law,” brochure)

o “The no-fault concept has worked well.” (Insurance Institute of Michigan, “No Fault: An overview of Michigan’s unique auto insurance law,” brochure)

o “The cost of Michigan’s [No Fault] auto insurance system is reasonable — considering that Michigan has the highest level of auto insurance medical benefits in the country.” (Insurance Institute of Michigan, IIM web site,, Consumers — Auto Insurance)

o Michigan’s No Fault system “is cost effectively providing the nation’s most extensive auto insurance benefits at affordable rates …” (American Insurance Association, News Release, February 4, 2009)

o “Given that Michigan’s no-fault injury benefits package is unlimited, the average price paid by driver in the state is extremely reasonable. Michigan is the only state in which no-fault medical benefits have no dollar limit.” (Insurance Journal, “Michigan Debate Over Proposed Auto Insurance Changes Heats Up,” quoting statement from Property Casualty Insurers Association of America (PCI), December 2, 2009)

2. Changes under the legislation

Michigan’s auto insurance industry wants to “scrap” the nearly 40-year-old guarantee of unlimited, necessary lifetime medical benefits — which the industry itself describes as “the best auto insurance coverage in the country” — in favor of putting limits on the amount of medical benefits a seriously injured auto accident victim can receive.

Here’s how former Michigan insurance commissioner, Thomas C. Jones, voiced his opposition to putting a “ceiling” on No-Fault medical benefits when the auto insurance industry previously complained:

“[L]imiting first party benefits … would simply result in a renewed increase in tort cases as people were required to sue for benefits denied by a limitation on medical and rehabilitation expenses.”

* * *

“[A] ceiling on benefits introduces no overall savings in the economy. In fact, it probably would cost the public money in the long run. … The savings to the insurance industry from [capping] unlimited medical benefits will simply be shifted forward to the injured individual through inadequate medical care, through inadequate rehabilitation, through increased health insurance costs, or through total financial ruin of some individuals, and finally onto public assistance programs.”

* * *

“Placing a ceiling on PIP payments will serve to introduce uncertainty for the injured individual on whether or not he or she can afford rehabilitation treatments. This uncertainty inevitably causes delay and markedly reduces the possibility of successful rehabilitation.”

* * *

“These points all argue that not only is a ceiling on PIP payments destructive to the no-fault concept and clearly contrary to the public interest, but it actually increases the overall cost of the catastrophic loss.” (“No-Fault Insurance In Michigan: Consumer Attitudes And Performance,” Thomas C. Jones, Michigan Insurance Commissioner, April 10, 1978, Pages 76-77)

Moreover, by “scrapping” the No-Fault Law’s unlimited, lifetime medical benefits, so-called No-Fault “reform” threatens to force more people onto Medicaid, thereby requiring taxpayers to pick up the tab for what Michigan’s auto insurance companies should be paying.

Finally, as seriously injured Michigan auto accident victims’ medical expenses exceed the “reformed” limits on No-Fault medical benefits, they will be forced to do precisely what Michigan’s No-Fault Law sought to prevent: File lawsuits.

Michigan’s No-Fault was passed and took effect on October 1, 1973 because the “tort liability” or “at fault” system of filing lawsuits was doing such a horrible job of compensating seriously injured auto accident victims for their accident-related medical costs:

Michigan’s tort liability system was criticized as “incomplete, inequitable, inefficient and slow” and doing “a poor job of providing for seriously injured auto accident victims.”

* * *

In particular, it was found that the tort liability system had an “inequitable payment structure” because a “high percentage of persons injured in automobile accidents received no reparations under the tort system” and the system “systematically undercompensated the most seriously injured” victims.

* * *

Moreover, “lengthy delays existed under the tort system in compensating those injured in automobile accidents — often in cases where the need for prompt compensation was strongest.”

* * *

As such, given the “long payment delays,” “[s]everely injured people [were forced] to bear devastating financial burdens while waiting for lawsuits to be settled.” (“No-Fault Insurance After Three Years,” Thomas C. Jones, Michigan Insurance Commissioner, October 6,1976, Opening Letter, Introduction, Page 12; “No-Fault Insurance In Michigan: Consumer Attitudes And Performance,” Thomas C. Jones, Michigan Insurance Commissioner, April 10, 1978, Pages iv, 3; Shavers v. Attorney General, Michigan Supreme Court, 1978)

* * *

3. Supporters of change say system is unsustainable

4. Opponents say there’s no proof the current system is unsustainable

We will see who is right.

And, the Coalition Protecting Auto No-Fault (CPAN) is going to make sure.

In a lawsuit filed on January 23, 2012, CPAN has asked a judge in the Ingham County Circuit Court to order the Michigan Catastrophic Claims Association (MCCA) to open its books for inspection to test the legitimacy of the claims that so-called No-Fault “reform” is necessary to preserve Michigan’s allegedly “unsustainable” No-Fault system.

The MCCA, which is responsible for charging and collecting assessments from all Michigan drivers and using the monies to pay for catastrophic claims that exceed $500,000, has thus far refused to reveal its finances to the public, invoking a legal loophole in Michigan’s Freedom of Information Act (FOIA).

For more details about CPAN’s lawsuit against the MCCA, check out “CPAN Files FOIA Lawsuit To Access Auto No-Fault Data,” on the CPAN website.

5. The medical community says changes would shift costs

It is a gross understatement to say that the Michigan State Medical Society (MSMS), which is the largest and most powerful organization of Michigan doctors, is vehemently opposed to dismantling No Fault‘s nearly 40-year-old guarantee of unlimited, lifetime medical benefits.

In fact, MSMS has said so-called No Fault “reform” is “dangerous” for, among other things, its shifting of enormous costs from the profit-making auto insurance “companies onto the state’s cash-strapped Medicaid system”:

“Eliminating Michigan’s no-fault insurance laws … will drive up costs on taxpayers with a massive shift from no-fault insurance to Medicaid.

Accident victims’ injuries resulting in medical expenses higher than the limits they have selected would be forced to turn to their health care insurance, Medicaid, causing the financial burden on Michigan taxpayers to skyrocket.

Health insurance premiums paid by job makers and Michigan families would increase while Michigan’s balanced budget will be threatened by staggering hikes in Medicaid reimbursements.

In fact, Colorado recently made the switch from no fault insurance to a lawsuit driven system and the shift to taxpayers was enormous. The state saw a staggering 205% increase in Medicaid costs associated solely with care related to motor vehicle accidents.

Michigan’s “Catastrophic Claims Fund” could not cover the need if the state moves away from no-fault.”

Here’s more information from the Michigan State Medical Society: Repercussions of Senate Bills 293-295 and MSMS putting brakes on dangerous No-Fault bills

Notably, it has been estimated that limits on No-Fault medical benefits — as proposed by the proponents of so-called No Fault “reform” — could increase taxpayers’ Medicaid burden by approximately $30 million per year, according to “The Impact of Reducing PIP Coverage in Michigan,” a study prepared for the Michigan Brain Injury Provider Council, August 2011.

6. The drivers of higher insurance rates in Michigan

Mr. Graham notes in his story:

“Supporters of the legislation [to dismantle the No Fault system’s guarantee of unlimited, lifetime medical benefits] say something must be done to lower auto insurance costs …” and that the way to do so is “to scrap the current coverage …”

Not so fast!

We’ve been promised savings before from the insurance industry in exchange for enacting generally anti-consumer laws, such as the nation’s harshest auto accident injury threshold in 1995. These promised savings never materialized.

I propose that before anything more is done to dismantle Michigan’s No-Fault system, Michigan’s auto insurance industry should provide answers to the following important questions about alleged “savings” for Michigan’s auto insurance consumers:

1. To keep Michigan auto insurance affordable for everyone and to protect Michigan drivers from ever-increasing insurance rates, are Michigan auto insurance companies willing to have their prices regulated by the Insurance Commissioner – as they are in a majority of other states in the U.S. – or capped (just as they are urging the Legislature to cap the fees that doctors can charge when treating Michigan auto accident victims)?

2. Are you willing to guarantee in writing (perhaps as amendments to bills currently pending in the Michigan Senate) exactly how much Michigan drivers will save should your proposed PIP Choice policy limits become law? (Let’s not forget recent history, such as the insurance industry’s empty promises of “savings” in 1995, when it convinced the Republican Legislature to make it much more difficult for Michigan auto accident victims to sue for pain and suffering.)

Perhaps I’m a bit jaded as a No-Fault insurance lawyer, but I’ve seen the insurance industry PR machine do this before. Let’s ask for some accountability before we take away critical protections for ordinary Michigan citizens in exchange for boosting profits to an industry that already makes more money in Michigan than in nearly any other state.

Once Michigan’s auto insurance industry provides answers to those questions, everyone will have the information we all need to have a meaningful discussion about the cause of Michigan’s high auto insurance prices and whether gutting “the best auto insurance coverage in the country” is really the best way to bring those prices down.

7. Voters could not overturn it

Of all the contemptuous elements of so-called No Fault “reform,” this one warrants its own special place in the “Hall of Shame.” This is politics at its ugliest.

The Michigan auto insurance industry has inserted through its operatives in the legislature into the so-called No Fault “reform” bill (House Bill 4936) a legal gimmick, i.e., an appropriation, that would prevent voters from attacking and overturning the “reformed” No-Fault system.

Under Article 2, Section 9 of Michigan’s Constitution, voters have the right to challenge any law passed by the Legislature, except those laws “making appropriations.” Elsewhere in the Michigan Constitution, it is emphasized that only the Michigan Legislature can challenge, amend or otherwise change an appropriations bill. (Article 4, Sections 30 and 34)

This maneuver is literally dripping with hypocrisy and cynicism: Claiming to speak for and act on the behalf of the people while simultaneously stripping the people of their constitutional right to challenge the laws foisted upon them.

Steven M. Gursten is one of the nation’s top No-Fault attorneys handling auto accident lawsuits. He is head of Michigan Auto Law and president of the Motor Vehicle Trial Lawyers Association. Steve frequently writes about Michigan No-Fault and insurance company abuse, and is available for comment.

Related Information:

A simple way to save Michigan No-Fault: Write your representatives

Your Michigan No-Fault insurance benefits

Charade over “savings” from Michigan No-Fault “reform” has stopped

Michigan Auto Law is the largest law firm exclusively handling car accident, truck accident and motorcycle accident cases throughout the entire state. We have offices in Farmington Hills, Detroit, Ann Arbor, Grand Rapids and Sterling Heights. Call (800) 777-0028 to speak with one of our Michigan No-Fault attorneys.

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