(CN) – Detroit Mayor Mike Duggan and eight Detroit-area residents alleged in federal court Thursday that the unreasonably high premiums of Michigan’s mandatory no-fault insurance coverage violates due process and is therefore unconstitutional.
The lawsuit filed in Michigan’s Eastern District Court claims that the requirement for Michigan motorists to have no-fault auto coverage goes against Shavers v Kelley, a Michigan Supreme Court finding from 1978 that states “a driver’s license, once issued, is a significant interest subject to constitutional due process protections.”
The complaint claims that costs of no-fault insurance are inhibiting due process for those carrying a Michigan driver’s license because of how expensive it has become. Because the insurance is required, this in turn prevents many drivers from pursuing employment and educational opportunities, shopping for groceries or taking their children to school.
Michigan’s No-Fault Insurance Act was enacted in October 1973. It was intended to provide victims of automobile accidents with faster and more adequate compensation than was offered under the previous system.
The act eliminated the right to sue the responsible party in car accidents, but allowed victims to seek compensation through their own insurance outlets. This was expected to drive down premiums and lessen litigations statewide.
The complaint states that this is not at all what has happened. Michigan’s average annual automobile insurance premium is $3,509; the national average is $1,512. Detroit in particular has the highest auto insurance rates of any city in the nation.
This has led many drivers in the Wolverine State to forego auto insurance altogether. The state has one of the highest rates of uninsured motorists in the country, with more than 20 percent of drivers lacking coverage. This many uninsured drivers only raises the cost of premiums even more, making the problem that much worse.
David Fink, the attorney representing the plaintiffs, is keenly aware of all of this.
“Forty years ago, the Michigan Supreme Court decided that the No-Fault Act is constitutional if rates are not excessive or unfairly discriminatory,” he said in an interview with Courthouse News Service. “The court invited challenges if rates became unaffordable. This is that challenge.”
The complaint disputes the constitutionality of the No-Fault Act on multiple fronts.
Some include the fact that there is no fee schedule for auto accident-related medical services, medical providers can charge huge fees that would be normally priced at a fraction of No-Fault rates and there are few protections against health care, attendant care and transportation providers who provide unnecessary and over-priced services.
The prohibitive prices and exigent circumstances that ensue combine to create a perfect storm that the complaint calls a “no-win situation” for drivers. Motorists who rely on their car for transportation are left with difficult cuts to make to other expenses like housing food, or healthcare in order to afford their compulsory auto insurance, according to the lawsuit.
In his statement, Fink puts forth that he and the plaintiffs “feel very confident that any objective observer will agree that our insurance rates are not affordable.”
A statistic brought up in the complaint notes that financial experts recommend allocating 15 percent of a household budget to transportation costs. The average household income in Detroit is $26,249; for a driver with this income, auto insurance expenses would account for over 45 percent of total household income, not factoring in other transportation costs and other car-related expenses.
Aside from a declaration that the law is unconstitutional, the plaintiffs are calling for the state to be given six months to repair the automobile insurance scheme. If that deadline is not met, the complaint affirms, the No-Fault Act should be deemed null and void and the tort system should be reinstated.
Mayor Mike Duggan’s office and representatives of Michigan’s Department of Insurance and Financial Services could not be reached after business hours Thursday for comment.