Asked and Answered Steven M. Gursten

Michigan lawmakers and Gov. Rick Snyder are once again talking about reviewing and possibly reforming the state's "no-fault" auto insurance laws. Michigan's law provides uncapped lifetime medical benefits for those injured in auto accidents. Steven M. Gursten is a recognized expert on no-fault insurance litigation and is head of Michigan Auto Law, the state's largest law firm handling car accident, truck accident and motorcycle accident cases.

Thorpe: The fee insured vehicle owners must pay to Michigan Catastrophic Claims Association will increase on July 1 by 21 percent. How big a dent will that put in the fund's multibillion dollar deficit?

Gursten: Great question. Unfortunately, the MCCA does not give us the information we would need to provide an answer. The MCCA sets rates behind closed doors, and these rates are set by representatives from the insurance industry. Rep. Philip Cavanaugh compares the MCCA to "a bunch of foxes watching us chickens." I think he's right. As taxpayers, we pay money into the MCCA and fund the MCCA, but we aren't given any of the necessary information to be able to answer your question. It's hard to understand how we allowed this to happen.

Thorpe: The MCCA was created by state law in 1978. Could the same system have been created in today's political and economic environment?

Gursten: I don't think so. Not in today's Citizen's United world. Not with the stranglehold that the insurance industry has on the Michigan Legislature and our courts, a stranglehold made worse by the added influence of our state insurance commissioner who previous to this ran one of the state's largest and most profitable medical malpractice insurance companies. Of course, back in 1978, none of this would have been necessary because the Legislature and the Insurance Commissioner's Office would have bowed to the insurance industry's vehement objections to the No Fault Law's guarantee of unlimited, lifetime medical benefits for catastrophically injured auto accident victims. So, the guarantee would have been eliminated. It would probably have been replaced with unrealistically low caps, much like those that are being proposed with HB 4936. And, thus, the entire raison d'etre for the MCCA would not exist.

Thorpe: Could you briefly explain the relationship between spiraling medical costs and insurance premiums under the no-fault system? Is there a way to break that link?

Gursten: The question assumes a direct correlation between medical costs and higher premiums. But the answer may have more to do with some of the nation's highest profitability margins for auto insurance companies that do business in this state than it does with rising medical costs.

The insurance industry spin is that rising medical costs increase the cost of the average PIP claim, and auto insurance premiums must increase to keep pace. But the point that I've been making for some time now is that we can keep these vital no fault protections and dramatically lower the costs of auto insurance by empowering our state insurance commissioner to regulate outrageous and excessive profit margins.

Why should insurance companies be allowed to price gouge on a product -- the price of no-fault auto insurance -- that we are required by law to purchase? And why should our state insurance commissioner, alone of almost every other state in the nation, not have the same powers to regulate excessive profit margins made in insurance companies that sell us insurance that we are forced by law to buy?

To believe the insurance industry line requires a huge leap of faith. We have to ignore all of the information that the insurance industry is not sharing with the public. To have a meaningful discussion, the public needs to know how many PIP claims are being reported annually, how many of those claims are being paid by the auto insurance companies and what the actual payouts are on those claims. We also need to know exactly what are the profit margins that these insurance companies make every year in this state. Otherwise, we really are back to the foxes guarding the henhouse again.

Thorpe: Critics say that H.B. 4936 is heavily weighted in favor of insurers and against consumers. Others say it's needed as a first step to control skyrocketing costs. Who's right?

Gursten: The critics. HB 4936 strips Michigan drivers of vital No Fault protections. But the bill gives Michigan drivers nothing in return. Most disturbing is that this bill makes no promise, guarantee, or even mention of any proposed savings that Michigan drivers would see as "compensation" for having their rights taken away from them.

Moreover, there's no chance that any savings, assuming there ever would be any savings from a proposal such as HB 4936, could even begin to match value of Michigan's current no-fault insurance laws, such as necessary lifetime care for catastrophic medical injuries. This protection is the cornerstone of our Michigan No-Fault Law. It was the cornerstone for the gigantic compromise that took place on October 1, 1973, when we made the trade for vital no-fault protections in return for introducing an injury threshold law that limits many claims for injuries and pain and suffering.

What the insurance industry wants today is to have its cake and eat it, too. They want to return Michigan back to Kreiner v. Fischer, and the nation's harshest injury threshold law on the third-party side. And they want to take away all of the critical no-fault protections and replace that system with caps on the first-party side. Add to this the pernicious effect of money on politics and upon our judiciary, and they may even get away with it. Make no mistake, the only winner in this would be the insurance industry. Our state and our citizens would suffer terribly if the insurance industry has its way.

Taking a stroll through history, the unlimited medical benefits for necessary medical care was considered so important that rather than do away with it, our Legislature created the Michigan Catastrophic Claims Association in 1978 which reimburses No-Fault auto insurance companies for claims that exceed a certain dollar amount. Currently, the amount is $500,000.

Here's what former Michigan insurance commissioner, Thomas C. Jones, said in his April 10, 1978, report, "No Fault Insurance In Michigan: Consumer Attitudes And Performance," about why eliminating No-Fault's unlimited medical benefits guarantee is such a bad idea:

"[L]imiting first party benefits ... would simply result in a renewed increase in tort cases as people were required to sue for benefits denied by a limitation on medical and rehabilitation expenses."

"[A] ceiling on benefits introduces no overall savings in the economy. In fact, it probably would cost the public money in the long run. ... The savings to the insurance industry from [capping] unlimited medical benefits will simply be shifted forward to the injured individual through inadequate medical care, through inadequate rehabilitation, through increased health insurance costs, or through total financial ruin of some individuals, and finally onto public assistance programs."

"Placing a ceiling on PIP payments will serve to introduce uncertainty for the injured individual on whether or not he or she can afford rehabilitation treatments. This uncertainty inevitably causes delay and markedly reduces the possibility of successful rehabilitation."

"These points all argue that not only is a ceiling on PIP payments destructive to the no-fault concept and clearly contrary to the public interest, but it actually increases the overall cost of the catastrophic loss."

Published: Thu, Apr 26, 2012