Mayor Duggan, 8 Michigan motorists, file federal lawsuit challenging constitutionality of No-Fault system

2018
  • Mayor says oppressive rates have become a civil rights issue for many in State
  • Suit asks court to require Governor and Legislature to fix broken system within six months or to go back to “tort” insurance system
  • 1978 Michigan Supreme Court ruled Michigan must ensure rates are fair and equitable

DETROIT, Michigan - Detroit Mayor Mike Duggan today filed a lawsuit in US District Court, seeking to have Michigan’s 45-year-old No-Fault auto insurance law declared unconstitutional.  He is joined in the suit by eight other plaintiffs of various ages and cities of residence in Michigan, each of whom struggle with oppressively high insurance rates. 

In the suit, the Mayor contends that the State’s broken No-Fault insurance system discriminates against people of lower income.  Under Michigan law, drivers are required to have auto insurance, although countless Michigan residents simply cannot afford to pay rates that are often more than twice the rates charged in other states. 

“This law is causing thousands of people across Michigan to break the law by driving without insurance because they simply can no longer afford it,” said Mayor Mike Duggan.  “Because the Legislature has not shown the leadership to address the issue, we are asking the court to provide residents the relief they need from these unjustifiably high insurance rates.”

Duggan said that because of the abuses we have seen of our insurance system by certain hospitals and trial lawyers, No-Fault is no longer affordable to hundreds of thousands of Michigan residents and therefore must be fixed or declared unconstitutional. 

The suit names Patrick McPharlin, in his capacity as Director of the Department of Insurance and Financial Services, as the defendant.  It asks the court to require the Governor and Legislature to fix Michigan’s broken auto insurance system within six months.  If No-Fault is not fixed in a way that guarantees affordability, the suit requests that the court order Michigan to go back to the “tort” system that was in place before No Fault was established in 1973.

Duggan is joined in the suit by several plaintiffs, ranging in age, race and city of residence, all of whom say they must pay excessive rates for auto insurance.  They are:

  1. Carrol Lockett, 69, a resident of the City of Oak Park in Oakland County
  2. Joseph Vaughn, 53 a resident of the City of Detroit in Wayne County
  3. Gladys “Peggy” Noble, 76, a resident of the City of Detroit in Wayne County
  4. Stephanie Huby, 49, a resident of the City of Eastpointe in Macomb County
  5. Ian Davis, 27, a resident of the City of Oak Park in Oakland County
  6. Haley Roell, 20, a resident of the City of Ann Arbor in Washtenaw County
  7. Jacintha Pittman, 39, a resident of the Village of New Haven in Macomb County
  8. Clayton Wortmann, 25, a resident of the City of Detroit in Wayne County

 

After Michigan adopted the No-Fault Act of 1973, the Michigan Supreme Court ruled that because the State chose to make No-Fault insurance mandatory for all motorists, the State must ensure that coverage is available at fair and equitable rates: 
“Michigan motorists are constitutionally entitled to have no-fault insurance made available on a fair and equitable basis … due process, at a minimum, requires that rates are not, in fact, ‘excessive, inadequate or unfairly discriminatory….’”  Shavers v. Kelley, 402 Mich. 554, 600-601 (1978).

According to the suit, Michigan’s mandatory No-Fault automobile insurance system violates the constitutional rights of Michigan’s citizens. Once the State issues a driver’s license, it cannot deprive a citizen of the primary benefit of the license – the ability to drive a motor vehicle – without first providing constitutional due process. Unfortunately, thousands of Michigan residents are denied the ability to drive because they are not given the opportunity to purchase No-Fault insurance at fair and equitable rates.

Highest insurance rates in America
Michigan’s average auto insurance premium of $3,059 is more than double the average premium in Michigan’s neighboring states--Ohio ($1,236), Illinois ($1,158) and Indiana ($1,365); the national average cost for auto insurance is $1,512.

The high cost of auto insurance in Michigan puts significant economic pressure on an already financially-strapped population.  A 2016 United Way report found that, while 15% of Michigan households live below the Federal Poverty Level, an additional 25% of the State’s residents live above the poverty level but still struggle to afford basic household needs such as housing, childcare, food and transportation.

With so many of the State’s residents struggling financially, and the cost of insurance premiums so high, it is no wonder that Michigan has one of the highest rates of uninsured motorists in the country, with more than 20% of drivers lacking coverage.

The extremely high cost of No-Fault insurance coverage in Michigan is a statewide issue that is felt most acutely in the Detroit Metropolitan area.  More than 50% of Detroit workers commute to jobs that are outside the city limits and almost 75% of the jobs within the city are held by workers who commute from the suburbs.

Detroit drivers pay an average of $6,197 for auto insurance coverage, four times the national average.  In fact, Detroit has the highest auto insurance rates of any city in the nation.  Residents of many other Metro Detroit communities also pay exorbitant auto insurance premiums:

  • Dearborn - $5,135
  • Southfield - $4,443
  • Warren - $3,446
  • Roseville - $3,378

Meanwhile, motorists in similarly sized cities outside of Michigan, pay, on average, less than half of what motorists in Metro Detroit pay.

  • Cleveland - $1,674
  • Chicago - $1,765
  • Indianapolis - $1,538

Excessive insurance premiums have a catastrophic impact for many Detroit residents. The average household income in Detroit is just over $26,000, less than half the national average of $55,322, and almost 40% of the City’s residents are living in poverty.   Financial experts recommend allocating no more than 15% of a household budget to transportation expenses, including purchasing a vehicle, gas and motor oil costs, and other transportation costs.  In Detroit, adding these basic costs to the average Detroit auto insurance premium would result in nearly $12,000 in transportation costs.  For a driver with average income in Detroit, transportation costs would consume more than 45% of their total household income.

The Plaintiffs:

  • Plaintiff Carrol Lockett is a resident of the City of Oak Park in Oakland County. Ms. Lockett, age 69, volunteers at her local church and at a large community activities center, where she operates the neighborhood hotline. Ms. Lockett pays an insurance premium of $329 per month. She has not been involved in an auto accident in over 20 years, has a clean driving record and only drives 10-15 miles daily, yet her auto insurance payment is almost as much as her car payment, and it costs nearly 15% of her monthly income. Ms. Lockett has periodically had to give up driving because she could not afford insurance.
  • Plaintiff Joseph Vaughn is a resident of the City of Detroit in Wayne County. Mr. Vaughn, age 53, owns several businesses and is very involved in community service, including serving as a Detroit Police Department reservist, volunteering as a mentor in the Man to Man mentorship program, and coordinating a mentorship program through Detroit Mumford High School. Mr. Vaughn is currently uninsured because he cannot afford the cost of No-Fault insurance. He was recently quoted a price of $4,000 for six months of insurance coverage, a total that equates to 15% of his income, even though he has never had a ticket or been in an auto accident. 
  • Plaintiff Gladys “Peggy” Noble is a resident of the City of Detroit in Wayne County. Ms. Noble, age 76, is a retired social worker who obtained her Master’s Degree in Social Work at the age of 65. An active member of her community, Ms. Noble serves as president of her neighborhood community association and as a mentor to young mothers. Ms. Noble has had a spotless driving record over the past 60 years, and she drives a 16-year old vehicle. Her car insurance payment, however, is over $210 each month for basic coverage. This is almost 20% of her monthly income. From time to time in recent years, Ms. Noble has had to forego driving because she could not afford to pay for both auto insurance and basic necessities such as food and medication.
  • Plaintiff Stephanie Huby is a resident of the City of Eastpointe in Macomb County. Ms. Huby, age 49, has been employed by the same employer for more than 18 years. Ms. Huby has a perfect driving record, yet she pays $250 per month for automobile insurance. Ms. Huby’s monthly insurance payment, which is more than twice the national average, is also more expensive than the monthly lease payment on her vehicle. In the past Ms. Huby has been forced to let her insurance coverage lapse because she could not afford the monthly payments.
  • Plaintiff Ian Davis is a resident of Oak Park, Michigan.  Mr. Davis, age 27, is a graduate of Michigan State University, is employed by CSI Support and Development, a non-profit organization focusing on low income senior housing. He drives a 2012 Honda Civic, with monthly payments of $250. His insurance coverage costs approximately $200 per month. Mr. Davis has had a perfect driving record for the past 4-5 years, and he has never been involved in an automobile accident.
  • Plaintiff Haley Roell is a resident of Ann Arbor. Hayley, age 20, is a senior-to-be at the University of Michigan, majoring in Psychology and Political Science. Hayley drives a 2007 Chevy Cobalt that she purchased earlier this year. She currently pays $1,400 annually for coverage through MEEMIC insurance. However, her insurance coverage is directly tied to her employment as a research assistant with the University, a position which is set to end in December.  Last year, prior to her employment with the University, she was quoted prices exceeding $400 monthly for insurance coverage. As a result, she was only able to afford insurance periodically. Haley has never been in an accident and has never received a traffic ticket.
  • Plaintiff Jacintha Pittman is a resident of New Haven, Michigan. Mrs. Pittman, age 39, works as an esthetician and she volunteers in the local school district which her three children attend. She currently drives a 2008 Saturn Vue. Her monthly insurance premium of $325 is more than twice the national average for car insurance. She has never been involved in an automobile accident and she has does not have a single moving violation on her record.
  • Plaintiff Clayton Wortmann is a resident of Detroit, Michigan.  Mr. Wortmann, age 25, works as a tutor for high school students and as a respite care provider for people with special needs. He also volunteers with Auntie Na’s House, a community outreach center that provides support to low-income families in Detroit. Mr. Wortmann drives a 2015 Chevy Cruze and has never received a traffic ticket. His monthly insurance premium is $280, more than twice the national average.