The Tort Threshold [71]

Michigan's verbal threshold for tort liability for noneconomic loss states that: "A person remains subject to tort liability for noneconomic loss . . . only if the injured person has suffered death, serious impairment of body function or permanent serious disfigurement". Numerous court decisions have dealt with the meaning of "serious impairment of body function", and whether satisfaction of the threshold is a matter of law for the court to decide or a question of fact for the jury.

In Cassidy v McGovern (416 Mich 104), decided in December 1982, the Supreme Court of Michigan held in a five-to-one decision that whether a serious impairment of body function had occurred was a question of statutory construction for the trial court as long as there was no material., factual dispute about the extent of injury. The Court reasoned that the expression "serious impairment of body function" was not one in which the jury would have a clear sense of the intended meaning, that to allow the jury to make the determination would increase litigation contrary to the objective of no-fault, and that having the court decide the issue would increase uniformity. The Court also specified several criteria to be employed in determining whether a serious impairment of body function had occurred. It argued that the meaning should be considered in conjunction with the other criteria in the statute (death and permanent serious disfigurement), that it cannot mean any body function (e.g., "harm to a person's little finger"), that the injury should be "objectively manifested", and that it should interfere with a person's "general ability to lead a normal life". The Court ruled, however, that the impairment need not be permanent.

In the next several years numerous appellate court decisions dealt with whether injuries satisfied the criteria set forth in Cassidy. By 1986, the members of the Supreme Court had changed substantially. In DiFranco v Pickard (427 Mich 32), the Court overturned Cassidy in a four-to-three decision. It ruled that whether an injury constituted a serious impairment of body function was a question for the jury unless reasonable minds could not disagree about the issue. It rejected the "objectively manifested" and "general ability to lead a normal life" criteria and essentially stated that all relevant factors could be considered to determine whether an injury satisfied the threshold. The clear implication was that soft tissue injuries for which there existed no evidence of physical damage might nonetheless satisfy the tort threshold. The court based this decision largely on the argument that the legislature had not intended to impose a substantial barrier to recovery for noneconomic loss when it enacted no-fault. The insurance industry has argued that the DiFranco decision has increased bodily injury liability claim costs. It has been proposed that the no-fault law be amended to codify the key elements of the Cassidy decision. [72]

Figure 4 illustrates changes in paid claim frequency (per 100 vehicles) for bodily injury liability and personal injury protection coverage in Michigan. The figure also shows countrywide paid claim frequency for bodily injury liability. The values shown are the average frequency for the previous four-quarters divided by the average frequency for the four-quarters ending in December 1984. [73] Analogous results are shown for the frequency of new claims in Figure 5. Both figures suggest an increase in bodily injury claim frequency in 1987 that cannot be explained by changes in the number of injuries in Michigan (i.e., personal injury protection claim frequency does not show the same pattern) or by countrywide trends in frequency. Since the DiFranco decision was decided in December 1986, the results are consistent with a positive impact of the decision on the frequency of liability claims. The results also indicate a general decline in bodily injury claim frequency until 1987. This decline could reflect greater difficulty in satisfying the threshold after the Cassidy decision.

The Michigan legislature should make the statutory threshold as precise as is possible. Given the objectives and economic advantages of no-fault, it makes little sense to have large numbers of injuries potentially subject to litigation to determine whether the threshold has been satisfied. Under such conditions, insurance companies would be likely to pay many questionable claims for noneconomic loss rather than incur the expense and risk of letting the case go before a jury. The legislature should ensure that a strict threshold is maintained that limits tort liability for noneconomic loss to serious injuries. Erosion of the threshold in conjunction with large personal injury protection benefits could greatly aggravate the affordability problem and threaten the entire no-fault system.