April 26, 2019

No-Fault Update—Mayor of Detroit Pursues Action to Declare the Michigan No-Fault Act Unconstitutional

Duggan v. McPharlin

Introduction

Detroit Mayor Mike Duggan filed an action to have the Michigan No-Fault Act declared unconstitutional under the Michigan and Federal Constitutions. Although it might seem far-fetched, it is not unprecedented—the Michigan Supreme Court declared an early version of the No-Fault Act unconstitutional in 1978. See Shavers v Kelley, 402 Mich 554, 600-01 (1978). Shavers is further instructive on the current suit filed by Mayor Duggan.

Brief Synopsis of Shavers Rule/Holding

The Shavers Court held that the No-Fault statutory scheme was constitutional under the Michigan Legislature's police powers, but it functioned in an unconstitutional manner as it could violate due process. Id. at 598, 600. "[A]t a minimum, [due process] requires that insurance rates are not, in fact, excessive, inadequate, or unfairly discriminatory." The Court found that the 1978 No-Fault scheme did not have adequate mechanisms to ensure No-Fault coverage was available on a fair and equitable basis. Id. at 580.

The Court ultimately gave the legislature eighteen (18) months to fix the problems of the No-Fault Act. Id. at 609. In 1982, the Court found that the amended No-Fault Act was constitutional simply because there was no action seeking to declare the No-Fault Act unconstitutional. The Court also confirmed that its declaration "should not be construed as foreclosing future attacks on the constitutionality of the act-based concerns expressed in our opinion" Shavers v. Attorney Gen, 412 Mich 1105 (1982).

Analysis

In the present Cause of Action, Mayor Duggan argues that pursuant to Shavers, the current Michigan No-Fault Act violates due process because insurance rates are "unconstitutionally excessive." Mayor Duggan argues that Michigan's auto insurance rates are the highest in the country and that every zip code in Detroit has car insurance premiums that are unaffordable according to the Federal Insurance Office.

Mayor Duggan argues that Michigan's first-party personal injury protection ("PIP") coverage is the main culprit behind the excessive rates because No-Fault Act does not cap medical and attendant care benefits like similar statutes in other states. As a result, the price controls are lacking in the No-Fault Act resulting exceptionally high insurance rates.