As mentioned, one of the driving causes for instituting a no-fault auto insurance system back in the early 1970s was the perceived ineffectiveness and expense of relying on the judicial system to determine who was owed what as a result of an accident. By using a no-fault system and restricting the ability of accident victims to file tort lawsuits, it was believed that the role of the courts in this area would be greatly reduced, lowering costs and speeding up the determination and delivery of benefits.
Unfortunately, there’s little evidence that this has worked. In fact, Michigan in 2010 ranked as one of the top 10 most litigious states for tort claims in the nation. Additionally, data from Michigan’s State Court Administrative Office shows a significant and steady increase in automobile negligence lawsuits.
This should seem a bit puzzling. How could it be that Michiganders still regularly file auto-related tort lawsuits despite having their ability to do so restricted in the no-fault law? Part of the explanation is the changes the courts have made to essentially undermine these tort restrictions.
Under no-fault, accident victims can only sue the at-fault driver or vehicle owner if the injury they sustained is serious. This is referred to as a “threshold injury,” because the injury must meet a certain level of severity before it can be used as a basis for a suit against a driver. Michigan, unlike some states, has a “verbal” statutory threshold and not a “monetary” threshold. The verbal threshold is defined specifically in the no-fault law and provides at-fault drivers with some limited or conditional immunity from tort suits. The threshold is defined as “death, serious impairment of body function, or permanent serious disfigurement.” What meets this threshold to sue has been interpreted very inconsistently by the Michigan Supreme Court since no-fault was enacted, meaning that the limitation on lawsuits has fluctuated greatly from very weak, to stringent and then back to very weak again.
In 1995, the Michigan Legislature recognized the legal wiggle room left in using such a verbal threshold and attempted to define more specifically what is meant by “serious impairment of body function.” An amendment to Michigan’s no-fault law was adopted, refining this definition to “an objectively manifested impairment of an important body function that affects the person’s general ability to lead his or her normal life.”
This 1995 amendment of the no-fault law was interpreted first by the Michigan Supreme Court in a case known as Kreiner v. Fischer in 2004. Kreiner established a multistep process for determining whether or not a serious impairment existed. The standard was relatively difficult to meet, requiring injured plaintiffs to prove that they had an objective impairment of an important body function which affected their overall ability to lead their normal life. The Kreiner court determined that minor or insignificant effects did not meet the threshold, rather, only serious injuries affecting the course or trajectory of a person’s life would fit the bill. This ruling seemed to confirm the original intent of no-fault, which was to restrict accident victims’ ability to sue based on the fact that certain benefits would be guaranteed to them by their insurer.
Kreiner, however, was overruled by the Michigan Supreme Court in 2010 in a case called McCormick v. Carrier. In McCormick, the Michigan Supreme Court held that Kreiner was wrongly decided because it interpreted the no-fault law when it was clear as written and was not in need of interpretation. Despite criticizing the Kreiner court for its willingness to interpret what did not need interpretation, the McCormick court went forward with yet another interpretation of the statute.
McCormick held that when considering a serious impairment of body function the overall course or trajectory of a person’s life need not be affected. Rather, an effect upon any one aspect of the person’s life at any point in time was sufficient. In other words, a person’s life need not be drastically altered and the threshold could be met if some part of their life had been changed as a result of the accident.
McCormick also held that it’s not a person’s injury that must be manifested objectively, but only the impairment arising from the injury. In other words, it is the effect of the injury that needs to objectively demonstrated, not necessarily the injury itself. For instance, someone’s impairment of pain could be objectively verified by claiming that they can no longer do activities that cause them pain, such as run, lift heavy objects, etc., as those impairments would be readily observable to others. Under the previous Kreiner ruling, a person in that type of situation would have to demonstrate that their pain was a direct result of an objectively manifested injury incurred in the accident.
The McCormick ruling significantly watered down the verbal threshold standard used to determine if an accident victim has a legal right to pursue additional damages from the at-fault driver. Under this interpretation, if accident victims can demonstrate that any one particular aspect of their lives has been changed significantly as a result of the accident and they have some objective impairment — e.g., they can’t run or throw a ball or need a cane to walk, etc. — they have a reasonable chance of maintaining the legal right to sue.
Another court interpretation that has expanded the ability of accident victims to use the courts to win additional damages is related to the concept known as “proximate cause.” Historically, in tort cases, in order for an injured victim to sue, there must be a connection between the defendant’s conduct and the plaintiff’s injury, the proximate cause. Proximate cause consists of factual or “but for” causation and legal or “proximate” causation. Factual causation simply connects the accident to the injury by applying a “but for” test — “but for” the accident, the injury would not have occurred. Proximate causation, on the other hand, is more of a policy consideration by the court, based essentially on foreseeability or predictability of harm. If the ultimate injury was too far afield or too attenuated as determined by the court, there would be a lack of proximate causation and the defendant is not liable.
But under Michigan’s current no-fault law, the causation standard is much different as interpreted by Michigan courts. In this respect, Michigan courts have held that the technical requirement of “proximate cause” in terms of an insurer’s obligation to provide PIP benefits is not necessary and that “almost any casual connection or relationship will do” between accident and injury.
While later decisions have criticized this “any connection” standard, it is unclear whether this has been expressly overruled. For example, the Michigan Supreme Court has stated that the “any connection” standard is discredited, but it did not indicate that technical proximate cause was required in auto-related PIP cases. Rather the standard is that that the connection between accident and injury must only be “more than incidental, fortuitous, or but for.”
As a result, the standard to establish causation in a third-party tort lawsuits is higher than the standard to establish causation in a PIP case. This means that an insurer may be responsible for providing PIP benefits in a case where there may not be causation between accident and injury under traditional tort law and thus no viable suit for damages. This lower standard makes it easier for accident victims to use the courts to sue insurance companies even if they could not have maintained a tort claim under traditional proximate cause standards.
This low standard in PIP has created significant opportunities for attorneys to seek unreasonable and unnecessary medical treatment solely for purposes of building third-party tort claims. Any attorney practicing auto law is probably well aware of medical providers who routinely and systematically prescribe medical treatment that is unnecessary for the patient’s care and recovery, but could nevertheless still be claimed as a paid benefit under PIP given the low causation standard. It is also certainly true that a small number of attorneys send their clients to these providers for purposes of building tort cases.
Most reputable attorneys and physicians do not engage in this practice, but there is little doubt that it does occur. In fact, there are attorneys who routinely build third-party tort cases on the back of the generous PIP system. This is not the intent of the PIP system in providing prompt payment of reasonable benefits to auto accident victims and is precisely what no-fault meant to restrict. Of course, the cost of building expensive lawsuits on the back of the PIP system also plays a role in driving up the cost of auto insurance premiums, because insurers need to price their exposure to such suits.
An additional factor contributing to the cost of auto insurance in Michigan and directly affecting both auto negligence and PIP lawsuits is the relatively short time table that an insurance company has to pay medical bills. Insurers must pay benefits within 30 days after receiving proof of the service being performed. If an insurance company does not pay during this short window and a lawsuit is filed against them, the attorney representing the claimant can be awarded attorney fees. If the court determines that the insurer “unreasonably” refused to pay or delayed the payment, the insurer must pay this attorney fee on top of the benefits that are owed.
There is not a corresponding provision awarding attorney fees against the claimant, except in a circumstance where the claim is “fraudulent or so excessive as to have no reasonable foundation.” These factors provide an incentive for attorneys to file these cases against insurance companies as often as possible. It also provides a good platform to build third-party auto negligence cases. The cost of these lawsuits is something insurers need to factor into their premiums, which, of course, increases costs for drivers.
 “Annual Guide to State Litigation Climates Shows Most Litigious” (LexisNexis, June 22, 2010), http://perma.cc/Y9V7-ZRA8.
 JC Reindl, “How Aggressive Lawyers, Costly Lawsuits and Runaway Medical Bills Make Detroit Car Insurance Unaffordable,” Detroit Free Press, May 6, 2017, https://perma.cc/JD4S-MVCE.
 MCL § 500.3135.
 MCL § 500.3135(1).
 MCL § 500.3135(5).
 471 Mich 109; 683 N.W.2d 611 (2004).
 487 Mich 180; 795 N.W.2d 517 (2010).
 Scott v. State Farm Mutual Insurance Company, 278 Mich 578; 751 N.W.2d 51 (2008) vacated in part, appealed in item part, 482 Mich 1074; 758 N.W.2d 249 (2008), vacated appeal denied, 483 Mich 1032; 766 N.W.2d 273 (2009).
 Oostdyk v. Auto Owners Insurance Company, 498 Mich 913; 870 N.W.2d 926 (2015).
 MCL § 500.3142.
 MCL § 500.3148.
 MCL § 500.3148(2).