The relatively tranquil existence of the Accident Fund came to an abrupt end in December 1976. Not only was the Accident Fund a state agency, ruled Kelley, but its employees were subject to the civil service code and its assets—including its office building, reserves for unreported claims, and policy holders' surplus—belonged to the state government.[18] Insurance Commissioner Thomas Jones immediately ordered the Fund to discontinue its supplemental pension plan and turn all assets and claim files over to the state.

The Accident Fund officers refused to comply with these directives and the issue moved into the courts, where it has remained since. There is little to be gained by a detailed account of the struggle—a series of suits, countersuits, injunctions, and restraining orders. Two particular rulings should be highlighted, however.

In August 1982, Federal Judge Richard Enslen issued a preliminary declaration that Accident Fund assets were not available for general state purposes, but held in trust for Fund policy holders. Judge Enslen later declined to hear the case, ruling in January 1984 that the dispute should be settled in state court.

In August 1986, Ingham County Circuit Court Judge Carolyn Stell ruled that the state had no interests in the assets or surplus of the Accident Fund. That ruling is currently being appealed by state officials.

The lengthy court struggle has had little impact on the day-to-day operation of the Accident Fund. Its employees remain outside the Michigan civil service system. The rates charged and dividends paid by the Fund are still determined by the Fund's management and Advisory Board. The Michigan State Senate has passed bills in each of the last four legislative sessions to clarify the Accident Fund's status, but the bills have died in the State House each time.

Over ten years of fierce legal and political warfare have failed to resolve the fate of the Accident Fund. The battle has tended to focus on legal concepts and political ideologies. Notably absent from the discussions has been a dispassionate analysis of the likely long-term consequences of the options available to dissolve the dispute.