Whatever happened to no-fault? - no-fault automobile insurance

Washington Monthly, April, 1986 by Peter Spiro, Jeffrey O'Connell

A better way to set thresholds is through categories of harm--for example, those who have suffered permanent disability, serious disfigurement, or the loss of a limb. These "verbal' thresholds tend to be more restrictive than monetary thresholds, with the result that the verbal threshold no-lawsuit states--Michigan, New York, and Florida--end up having, well, fewer lawsuits.

The second method of watering down no-fault is to place no restrictions at all on the right to sue and merely to require insurers to sell, and in some cases drivers to buy, no-fault insurance. Eight of the 24 no-fault states have adopted this form of no-fault, including Texas, Maryland, and Oregon. In these "add-on' states, no-fault is watered down even more than in the no-lawsuit states, since the courts remain open to all accident victims.

In both the no-lawsuit and the add-on states, there is an additional problem: insurance companies are required to offer only a limited amount of no-fault coverage--in some states only a few thousand dollars. This leaves anyone with a serious injury no choice but to resort to the courtroom. An exception is Michigan, which enacted no-fault in 1975. Michigan is a no lawsuit state with a tough verbal threshold: only accident victims who can show that they have suffered "serious impairment of the bodily function' or "permanent serious disfigurement' have access to the courtroom. (Families of those whose injuries result in death may also sue.) By saving on court costs, Michigan is able to offer unlimited no-fault medical benefits; there is no cap on what victims like Faith Ann Glynn can collect from their insurer. At the same time, Michigan enjoys low auto insurance premiums: in 1983 the U. S. Department of Transportation found them to be 17 percent lower than they would have been had no-fault not been enacted.

Auto didacts

Why the compromises that have proven so damaging everywhere but Michigan? Blame a small group of self-interested professionals who see a serious threat in the passage of tougher nofault laws. Most of the nation's trial lawyers earn their bread and butter through tort law; fees for auto accident cases alone top $1 billion annually. Obviously these fees are threatened by no-fault. While upwards of 80 percent of all tort cases-- and certainly all high-stakes tort cases--require the services of a lawyer, only 15 percent of all no-fault claims do (usually for dealing with the insurance company). True no-fault would bring that 15 down closer to zero. Small wonder, then, that the lawyers have done everything they can to strangle no-fault in the crib.

The Association of Trial Lawyers of America annually doles out hundreds of thousands of dollars in political contributions, aimed primarily at issues related to tort law, including no-fault. ATLA can take much of the credit for the defeat of a bill before Congress in the late 1970s that would have required states to adopt no-fault laws with minimum coverage of $100,000 for medical expenses and $24,000 for rehabilitation. Equally important have been local groups operating at the grass-roots level, like ADOPT (Attorneys Devoted to Ohio People Totally), which targeted state legislators who favored no-fault.