No-Fault Repeal Legislation: Bad Policy, Poorly Written

A blog post by CPAN Legal Counsel George Sinas

The sponsors of the 7-bill package identified as HB 5517 – 5523 claim that these bills will repeal the Michigan No-Fault Act and return Michigan to a system of pure tort law. Apart from the social irresponsibility of such legislation, is the harsh reality that these bills, as currently written, are a drafting nightmare that are virtually impossible to fully understand.

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Clearly these bills outlaw the sale of all no-fault PIP policies after January 1, 2020. Therefore, people injured in auto accidents after that date must pursue other legal rights. Yet those rights are unclear under the language of these bills. The point is well demonstrated by a review of the language of HB 5517 which appears at page 42, line 19 through page 45, line 22. Anyone supporting these bills should be challenged to explain exactly what that language really means. On one hand, this language could be read to mean that victims of accidents occurring after January 1, 2020 have full legal rights to pursue, in tort, economic and non-economic loss claims against the at-fault driver. However, this language could also be read to mean that, for policies issued after January 1, 2020, the tort law provisions of the statute do not apply in any respect. As a result of this confusion, no clear rules emerge for auto accidents occurring after January 1, 2020. In fact, the ambiguity is of such a nature that one could argue there are no specific rules governing the rights of people injured in auto accidents occurring after January 1, 2020.

At a minimum, the language deficits that exist in this legislation, if passed, will probably result in years of litigation seeking clarification from the Michigan appellate courts regarding the true intent of the legislature. Michigan citizens deserve far better than this mess. If the legislature is going to seriously consider repealing the Michigan Auto No-Fault Law and replacing it with a pure tort law system (a policy decision that would be an egregious mistake), those offering such legislation have a duty to write it in a manner that is precise and unambiguous. These bills are a colossal failure in that regard.

What is even worse, is that the proponents of these bills do not seem to care much about the current ability of the Michigan tort system to fully replace the No-Fault System. Apparently, it is the intent of this legislation to provide that auto accident victims will have only one place to turn for reimbursement of medical expenses, lost wages, and diminished quality of life – the at-fault drivers’ liability insurance policy. Nevertheless, these bills have left in place the antiquated state minimum liability insurance requirements mandating that drivers carry only $20,000 of liability insurance. That minimal level of coverage will not be enough to pay for even a few days of hospitalization, let alone compensate the other substantial expenses incurred by accident victims.

In addition to the fundamental failures discussed above is the disturbing fact that this package of bills sets the stage for insurance companies to help themselves to the $21 billion-dollar MCCA bank account after the MCCA closes out its last PIP claims. Under the MCCA “Plan of Operation,” insurance companies can theoretically act to refund to themselves any “surplus” that may exist in the MCCA coffers. The only protection against such a taking is the prohibition contained in the current no-fault statute that allows the Michigan Department of Insurance and Financial Services Director to invalidate any provision in the MCCA Plan of Operation that would be inconsistent with the objectives of the MCCA. Recognizing that this provision could interfere with a money grab by insurance companies, the bill [HB 5517] at page 39, line 17 to page 40, line 1, eliminates the power of the Department Director to block such efforts to commandeer money belonging to Michigan policy holders. Perhaps that is the real motivation for the repeal of the Michigan No-Fault System – to allow insurance companies to seize the $21 billion-dollar fund amassed from the MCCA assessment fees Michigan drivers were required to pay over the past four decades.

No one who is sincerely interested in creating an auto insurance reparation system that adequately meets the needs of seriously injured citizens could ever support such a reprehensible piece of legislation as that which is embodied by HB 5517 – 5523. CPAN believes it is time to stop playing politics and look for reasonable and realistic solutions to reform the Michigan Auto No-Fault Law – a law which has consistently achieved national recognition as a model insurance system.

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