Shavers v. Kelley

• Decision Date: 08 June 1978
• Docket Number: Nos. 57916,57935,57931,57934,s. 57916
• Parties: Catherine SHAVERS et al., Plaintiffs, Appellants, Appellees and Cross- Appellees, v. Frank J. KELLEY, Attorney General of the State of Michigan, Richard H. Austin, Secretary of State of Michigan, Daniel J. Demlow, Commissioner of Insurance of the State of Michigan, Aetna Casualty & Surety Company, the Travelers Indemnity Company, Hartford Accident & Indemnity Company, Continental Casualty Company, the Home Indemnity Company and League General Insurance Company, Defendant, Appellants, Appellees and Cross-Appellees, and Allstate Insurance Company, Defendant, Cross-Plaintiff, Cross-Appellant and Appellee, and State Farm Mutual Automobile Insurance Company, Defendant-Cross-Plaintiff and Appellee, and Detroit Automobile Inter-Insurance Exchange, and Riverside Insurance Company of America, Defendants and Appellees.
• Court: Michigan Supreme Court

Page 72

267 N.W.2d 72

402 Mich. 554

Catherine SHAVERS et al., Plaintiffs, Appellants, Appellees and Cross- Appellees, v. Frank J. KELLEY, Attorney General of the State of Michigan Richard H. Austin, Secretary of State of Michigan, Daniel J Demlow, Commissioner of Insurance of the State of Michigan Aetna Casualty & Surety Company, the Travelers Indemnity Company, Hartford Accident & Indemnity Company, Continental Casualty Company, the Home Indemnity Company and League General Insurance Company, Defendant, Appellants, Appellees and Cross-Appellees and Allstate Insurance Company, Defendant, Cross-Plaintiff, Cross-Appellant and Appellee, and State Farm Mutual Automobile Insurance Company, Defendant-Cross-Plaintiff and Appellee, and Detroit Automobile Inter-Insurance Exchange, and Riverside Insurance Company of America, Defendants and Appellees.

Nos. 57916, 57935, 57934, 57931.

Supreme Court of Michigan.

June 8, 1978.

Philo, Cockrel, Spearman, Cooper, Rine, King & Atkinson and Lopatin, Miller, Bindes, Freedman & Bluestone, Detroit, for Catherine Shavers et al., plaintiffs, appellants, appellees and cross-appellees.

Frank J. Kelley, Atty. Gen., Lansing, for Attorney General, Secretary of State and Commissioner of Insurance of the State of Mich., defendants, appellants, appellees and cross-appellees.

Bodman, Longley, Bogle, Armstrong & Dahling, Detroit, for State Farm Mut. Auto. Ins. Co., defendant, cross-plaintiff and appellee.

Dickinson, Wright, McKean, Cudlip & Moon, Detroit, for Allstate Ins. Co., defendant, cross-plaintiff, cross-appellant and appellee.

Downs & Edwards, P. C., Lansing, for League General Ins. Co., defendant, appellant, appellee and cross-appellee.

Dykema, Gossett, Spencer, Goodnow & Trigg, Detroit, for Detroit Auto. Inter-Insurance Exchange and Riverside Ins. Co. of America, defendants and appellees.

Honigman, Miller, Schwartz & Cohn, Detroit, for Aetna Casualty & Surety Co., The Travelers Indemnity Co., Hartford Accident & Indemnity Co., Continental Casualty Co. and The Home Indemnity Co., defendants, appellants, appellees and cross-appellees.

WILLIAMS, Justice.

The Michigan No-Fault Insurance Act, which became law on October 1, 1973, was offered as an innovative social and legal response to the long payment delays, inequitable payment structure, and high legal costs inherent in the tort (or "fault") liability system. The goal of the no-[402 Mich. 579] fault insurance system was to provide victims of motor vehicle accidents assured, adequate, and prompt reparation for certain economic losses. The Legislature believed this goal could be most effectively achieved through a system of compulsory insurance, whereby every Michigan motorist would be required to purchase no-fault insurance or be unable to operate a motor vehicle legally in this state. Under this system, victims of motor vehicle accidents would receive insurance benefits for their injuries as a substitute for their common-law remedy in tort.

The No-Fault Act, insofar as it provides benefits to victims of motor vehicle accidents without regard to "fault" (as a substitution for tort remedies which are, in part, abolished), constitutionally accomplishes its goal. After intense scrutiny of this litigation's extensive record, this Court holds that the No-Fault Act does not exceed the traditional scope of the Legislature's police power. The partial abolition of tort remedies under the act is consistent with constitutional principles articulated by this Court. The act's personal injury protection insurance scheme, with its comprehensive and expeditious benefit system, reasonably relates to the evidence advanced at trial that under the tort liability system the doctrine of contributory negligence denied benefits to a high percentage of motor vehicle accident victims, minor injuries were overcompensated, serious injuries were under-compensated, long payment delays were commonplace, the court system was overburdened, and those with low income and little education suffered discrimination. See Part V, infra. Likewise, the act's property damage protection scheme reasonably relates to the valid public purposes of creating an incentive to build safer motor vehicles, encouraging group rates, and reducing costs by eliminating the necessity of accident "fault" investigation. See Part VI, infra.

However, while the No-Fault Act is, in theory, a valid, rational response to problems affecting the general welfare, the actual mechanisms for protecting the welfare of individual Michigan motorists, required by law to purchase no-fault insurance, are constitutionally deficient in failing to provide due process. The Legislature, in the No-Fault Act and other sections of the Insurance Code, recognized the significance of a motorist's interest in the registration and operation of a motor vehicle on Michigan streets and highways. Measures were taken to assure that compulsory no-fault insurance in Michigan would be available to motorists at fair and equitable rates. These measures are, unfortunately, inadequate to protect individual motorists, who must purchase no-fault insurance from private insurers, from potentially unfair insurance rates 1. the statutory protection against "excessive, inadequate or unfairly discriminatory" rates is without the support of clarifying rules established by the Commissioner of Insurance, without legislatively sufficient definition, and without any history of prior court interpretation; the legislative mandate is thus reduced to mere exhortation (see Part III-B(1) infra );

insurance refusal or cancellation. In particular, under the No-Fault Act and the Insurance Code:

2. there are inadequate statutory provisions for a motorist attacking the validity of an individual rating decision (see Part III-B(1) infra );

3. there is no adequate statutory provision permitting an individual to challenge insurance refusal, discriminatory cancellation, or assignment to the "Automobile Placement Facility" with its presumptively higher rates (see Part III-B(2) infra ).

The constitutional status of the No-Fault Act places this Court in an extraordinary jurisprudential position: the No-Fault Act, which has substantially affected every Michigan motorist, every insurance company underwriting motor vehicle insurance in Michigan, and our entire system of civil justice for nearly five years, is constitutional in its general thrust but unconstitutionally deficient in its mechanisms for assuring that compulsory no-fault insurance is available to Michigan motorists at fair and equitable rates.

We therefore believe it necessary, for purposes of the general jurisprudence, the general welfare of the public and the administration of justice, to hold that the No-Fault Act will remain in effect for eighteen months from the issuance of this opinion.

During this period, the Legislature and the Commissioner of Insurance can remedy the Act's deficiencies by taking necessary constitutional corrective action assuring that compulsory no-fault insurance is available at fair and equitable rates. The types of corrective actions necessary to remedy the act's due process deficiencies are set out in Part III-C of our opinion.

Toward the end of this period, this Court will re-examine the status of the No-Fault Act to determine whether the present constitutional deficiencies have been remedied. At that time, an appropriate order reflecting the act's constitutional status will be entered by this Court.

I.

Prior to October 1, 1973, the effective date of the No-Fault Act, eleven named plaintiffs in their own behalf and as representatives of several classes of other persons initiated this action against the Secretary of State, the Commissioner of Insurance, and 25 named automobile insurers as representatives of the entire automobile insurance industry in Michigan. The complaint sought a declaratory judgment as to the constitutionality of the No-Fault Act and an injunction against the act's enforcement. ¹ Plaintiffs initially had sought a temporary injunction against enforcement of the act. This relief had been denied.

An amended complaint was then filed, pursuant to an order of the trial court, on December 6, 1973, adding Michigan's Attorney General as a defendant. Additionally, the following amendments were made: one named plaintiff was dropped and eight (8) others were added as named plaintiffs; and the assertion of rights to declaratory and injunctive relief were added on behalf of five (5) of the named plaintiffs as property taxpayers, pursuant to GCR 1963, 201.2(3). Two of the defendant insurers, Allstate Insurance Company and State Farm Mutual Automobile Insurance Company, filed cross-complaints, challenging the constitutionality of the act's property damage protection insurance scheme, §§ 3121, 3123, 3125 and 3127.

Pursuant to GCR 1963, 301.6, Judge Horace W. Gilmore was assigned to conduct all matters preliminary to trial and to try the case. Preliminary and final pre-trial conferences were conducted on four days during November and December 1973. At these conferences the parties identified legal and factual issues to be tried and stipulated to facts which were undisputed. The pre-trial statement issued at the conclusion of the conferences was subsequently amended on several occasions before trial to include additional issues.

Judge Gilmore ably and commendably conducted the trial, which occupied 35 trial days, from January 14 to March 21, 1974. The parties were given every opportunity for argument; the trial record includes over 5,000 pages of transcript and over 200 exhibits.

On May 20, 1974 Judge Gilmore filed a learned and thoughtful opinion of over 100 pages. The court held that plaintiffs had standing to raise every constitutional objection they asserted pursuant to the "taxpayers' suit" rule, and statute (GCR 1963, 201.2(3); M.C.L. § 600.2041; M.S.A. § 27A.2041), and the Declaratory Judgment rule (GCR 1963, 521.1) (Joint Appendix...