By John Lindstrom
Publisher
Posted: February 22, 2019 2:07 PM

Everyone hates Michigan's no-fault auto insurance system. Well, they hate it until they get in a horrid accident. But aside from that nagging terror at the back at everyone's mind they hate the no-fault system. Why? Well, because it's so damn expensive.

That is what has driven the push to find a way to lower rates for decades, almost since the day nearly 46 years ago no-fault took effect. Make it cheaper, the public wants, just make sure it cares for me forever should I have a chance head-on encounter with a Mack truck.

The latest effort to find a resolution is sort of a shotgun approach: try as many attempts as possible presuming something will get hit. No-fault reform is a priority of Governor Gretchen Whitmer, in fact mentioning a bid to lower insurance rates drew the only bipartisan standing ovation of her State of the State address. Both legislative houses have made it a primary focus, with hearings already underway.

Detroit Mayor Mike Duggan has a proposal and has taken the issue to federal court.

And Detroit's own latest gazillionaire leader Dan Gilbert is ready to move ahead with a ballot issue if needed to force changes.

Surely, surely, something will work this time, folks hope.

With all the efforts underway, let us for a few moments focus on the court case of Mr. Duggan, however. Several analysts have suggested that a ruling by a federal judge that the rates charged by insurance companies allowed by the act, as well the mandatory scope of no-fault will be enough to terrify lawmakers into acting.

Except, a court has already held that the concept of no-fault was constitutional but there had to be a constitutional way to ensure affordable rates.

That would be Shavers v. Attorney General, a 4-3 ruling by the Michigan Supreme Court in June 1978. It had been the most anticipated Supreme Court case for a couple years. While waiting for the case, the Detroit Free Press ran an editorial saying something on the line of perhaps in our lifetime we will see a decision in the no-fault case.

Shavers was filed about the time no-fault went into effect in 1973 and challenged the whole notion of the law. It was not the only case to do so (this reporter regrets to confess that he got into a minor auto accident and was sued in small claims court to cover the other motorist's equally minor damages. I had insurance, he did not. My insurance company thought mine would be a good test case dealing with an uninsured motorist versus an insured motorist, so moved the case to circuit court. The plaintiff never showed up, the court threw out the case and as my reward my insurance company dumped me). But Shavers was the case before the Supreme Court.

Context always being important one of the major issues at the time was that of redlining and legislation to ban redlining was going nowhere.

In terms of no-fault, yes people were upset they had to buy auto insurance, but it was the rates, oy, the rates. Yeah, trust me, you'd love to pay 1978 rates now, but for 1978 they were hefty.

And it was on the rates the Supreme Court focused much of its attention. Justice, and former Governor, G. Mennen "Soapy" Williams wrote in his majority decision the act constitutionally provided benefits to the injured and did not exceed the Legislature's police power.

But, "the entire rate structure is suspect. The statutory stricture against 'excessive, inadequate or unfairly discriminatory' rates is without the … support of clarifying rules established by the (insurance commissioner), without legislatively sufficient definition, and without any history of prior court interpretation. The legislative due process mandate is thus reduced to mere exhortation. When we add that the statute authorizes insurers to utilize any classification scheme which 'may measure any differences among risks that may have a probable effect on losses or expenses,' it becomes clear that rates can be established on insubstantial bases which do not satisfy due process," Mr. Williams wrote.

That alone might have been enough for the Supreme Court to scrap the law. But they chose a different route. They gave the Legislature 18 months to fix the problem. And in that they achieved that rare phenomenon of legislative unity, because every single legislator said almost in unison, "Who the hell is the Supreme Court to tell us anything?"

Ah, but lawmakers did act and tried to handle the redlining issue as well in their solution by setting rules on how much rates could vary by rating territory. That seemed to solve the larger issue, at least for a little while.

So, courts are on record saying no-fault cannot allow a rate structure that provides little relief for the compelled purchasers. How Michigan lawmakers end up solving the problem this time around, well, we'll see.

However, having watched this issue since its nativity, let me venture to forecast that whatever solution is reached, in a few years people will complain about their auto insurance rates again. It's tradition, if nothing else.