No-Fault Reform: A Glimpse Into the Future

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Noted scholar, Norman D. Tucker recently published an article, “Michigan’s Medical Malpractice Tort Reform ‘The Juice Isn’t Worth the Squeeze’” on the Michigan Association for Justice’s blog. The article, which focused on the effects of Michigan tort reform first passed in 1994, gives a bleak forecast for what could happen if the current No-Fault Insurance Reform bills become law.

The 1994 Medical Malpractice Tort Reform laws put caps on “noneconomic” injuries like pain and suffering and disability. For 95% of cases, the most a person can collect from the negligent health care provider is $440,200 (plus medical expenses and lost wages). This is a drastic reduction in the amount awarded in these kinds of serious personal injury cases.

At the same time, the law required additional legal hurdles including “Affidavits of Merit” and mandatory expert testimony for each health care provider involved. As a result, these kinds of cases can cost $20,000 before they are even filed.

And then there’s the “cost of doing business.” With low caps on the damages insurance companies have to pay, there is less risk to the companies from going to trial. In the field of medical malpractice that meant that the number of cases that went to trial jumped from 5% in 2000 to 18% in 2007. Each one of those cases cost on average $70,000 to $100,000 in litigation costs.

For this kind of reform to be a good deal, it would make sense for it to be paired with a big cut in physicians’ malpractice insurance. But by the end of 2009 premiums had dropped a mere 19.8%, less than a third of what the insurance companies saved over the same period of time.

The parallels to the No-Fault Insurance reform bills being considered by the Michigan House of Representatives and Senate are striking. No-Fault reform would put similar caps on benefits paid. But where Tort Reform only covered “noneconomic” damages, the No-Fault bills cap everything – even necessary medical care.

No-Fault reform also restricts accident victims’ access to the courts by taking away their right to a jury and limiting the evidence they can present. Just like with Tort Reform, this will make it far harder for plaintiffs’ attorneys to justify the expense, and fewer victims will be able to find someone to take their case.

On top of all that, No-Fault reform only requires automobile insurance companies to lower their premiums by 10%, and only for 2 years. Given what’s happened in malpractice insurance it is safe to say the discount in premiums will not match the reduction in paid benefits.

Michigan’s No-Fault reform is the sequel to the 1994 Medical Malpractice Tort Reform laws. By using the past to predict the future it becomes crystal clear: the juice is simply not worth the squeeze. If you want to protect your top-quality automobile insurance, call your representative today and tell him or her that No-Fault reform is no good for Michigan drivers.