TortsProf Blog

Editor: Christopher J. Robinette
Southwestern Law School

Monday, December 13, 2021

No-Fault, Traditional Auto Insurance, and Reform

NPR's Bill Chappell has a story on Michigan providing a $400 refund to Michigan drivers for each vehicle that they own.  Refunds were possible because the legislature instituted reforms last year that saved Michiganders a lot of money on auto insurance.  Michigan is one of approximately a dozen states that retains some form of no-fault auto insurance law.  For years, Michigan has also had the highest auto insurance rates in the nation.  The major reform allowed drivers to choose how much personal injury protection medical coverage they want when they purchase or renew a policy.  

In this post, I don't intend to advocate for no-fault auto insurance.  Jeffrey O'Connell, my torts professor, mentor, and friend, was the co-author of the work that led to no-fault laws.  Despite my respect and affection for him, I don't support passing traditional no-fault laws.  The choice no-fault plans he embraced later in life are appealing, but I am not advocating for those in this post either.  Nor do I necessarily oppose the reform passed in Michigan.  Auto insurance cannot be prohibitively expensive, something Jeffrey himself believed wholeheartedly.  

My point is a more modest one.  Saying Michigan has the highest auto insurance rates in the nation is not an apples-to-apples comparision.  First, everyone injured in a no-fault system receives compensation, regardless of whether they were at fault.  So all Michiganders are protected from injuries in auto accidents.  Second, Michigan is the only state that, until the 2020 reform, required drivers to purchase lifetime medical benefits.  Anyone injured in an auto accident in Michigan would have all of their health care needs provided for the rest of their lives.  The situation is very different in other states.  In both Pennsylvania, where I lived for 18 years, and California, where I live now, someone injured in an auto accident could receive as little as $15,000 from an at-fault driver.  The $15,000 amount is the mandatory minimum amount of liability insurance required for bodily injuries to a single person.  That is not half the cost of a helicopter ride to the hospital.  Technically, the driver is personally liable for all costs above insurance coverage, but it is rare they have the assets for that.  One of the bigger problems with tort law for auto accidents is that smaller claims tend to be overcompensated and larger claims tend to be undercompensated, sometimes dramatically so.  So, although Michiganders paid more for auto insurance, they received a lot more protection. 

Again, I am not arguing the reform was a mistake.  If the costs are too high, it may not be reasonable to require such levels of protection.  (Though, undoubtedly, there will be those who rue the change.)  But if lifetime medical coverage is too high, surely $15,000 is too low.  Those states requiring only $15,000, or even $25,000, of liability insurance per person for physical injuries need to review those laws and consider changing them.  (For an article specific to Pennsylvania, but applicable more broadly, see here.)  You can, and should, protect yourself using UM/UIM and medical insurance, but so many people do not or cannot understand the need to do so.   With auto accident deaths rising again, now is an excellent time to reconsider the minimum auto insurance requirements.

Thanks to Sheila Scheuerman for the tip.

Legislation, Reforms, & Political News | Permalink


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