Overview of Michigan’s No-Fault Law

On Oct. 1, 1973, Michigan joined a growing number of states in adopting a “no-fault” automobile insurance law, which has remained intact ever since. Impetus for the law came from supposed dissatisfaction with the previous system, commonly referred to as a “tort system.” Under a tort system, people injured in automobile accidents could sue the at-fault driver without limitations. There were several specific complaints about the tort system that led to Michigan enacting the No Fault Act of 1973.

It was believed that tort failed to provide appropriate levels of compensation for injury victims — inadequate compensation for serious injuries and overcompensation for minor ones. Even if appropriate compensation was awarded, the tort system was also thought to be slow, which could delay victims’ access to medical treatment. Since it relies heavily on the court system to provide compensation, it was also argued that the tort system had become a costly burden on the courts through excessive litigation. Finally, it was believed that the tort system discriminated against low-income injury victims, who may have been forced to accept inadequate compensation because lengthy litigation was expensive.

No-fault insurance was viewed as a solution to many of these issues. It uses a different approach to providing compensation for injury victims: Insurance companies of both parties involved in an automobile accident, no matter who is at fault, pay the costs of treating the injuries incurred by insured drivers. It’s a small, but distinct difference: The no-fault system insures drivers against the cost of treating their own injuries if they are hurt in an auto accident. Under tort, drivers are insured for the costs of treating injuries they may have inflicted upon others (if they are found to be at fault). The no-fault system is designed to reduce the need for litigation — which the tort system relies on heavily. In fact, Michigan’s no-fault law limits the ability of injury victims to sue the at-fault driver.[1]

[1] This restriction only applies to noneconomic losses. MCL § 500.3135(3)c-d.