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Insurance limits, inflation and "reform"

Most Michigan citizens would think that with all of the "reform" championed by the Republicans in the last twenty years, our no fault law would be "up-to-date".  Boy, would they be mistaken.

     Michael Butler recently dredged up several statistics in a Lawyers Weekly article that demonstrated the real meaning of "reform" to Michigan Republican extremists on the payroll of the Chamber of Commerce and the insurance industry.  Butler noted that in 1973 when the Michigan no fault system was created, residents were required to purchase $20,000.00 of liability coverage in order to operate a vehicle on Michigan roads.  At that time, the average cost of a new home was $32,000.00; a new American Motors Javelin was $2,900.00, and the Dow Jones closed the year at 850.  Average monthly rent was $175.00 and average yearly wage was $12,900 per year.  The $20,000.00 of coverage was considered to be a fair minimum to pay the victim of a motor vehicle accident caused by a negligent driver--if the injured victim suffered death, permanent serious disfigurement or a "serious impairment of bodily function".

     In other words, to enjoy the privilege of driving on Michigan roads, you had to buy enough insurance to pay someone about one and 2/3 years of "average" wages if you made a "negligent" mistake and crippled the person or killed them.  Since then, the price of cars, homes, and groceries have increased ten-fold and the cost of medical care has increased by even more.  But the amount of money your insurer would have to pay your victim?  Still the same $20,000.00:  enough to protect someone from poverty for less than one year.

     What would it cost to increase that coverage to an inflation-adjusted amount comparable to 1973? Almost nothing:  you can buy Underinsured Motorist Coverage to make up for the lack of insurance of someone who might injure your family and get a quarter million dollars of coverage for about $20 per year.  Pull out the declaration page on your own no fault policy.  You'll see that most of the cost of your insurance contract goes to pay collision coverage for putting an expensive car on the road.  Most of the remainder is dedicated to lifetime medical coverage.  The balance (less than one-quarter, usually) is "liability" coverage and incidentals like "comprehensive" (theft, weather damage, etc.).

     The "reforms" of the past twenty years have made it harder to sue a drunk who hurts you or your kids, harder to sue your insurer to force payment of medical bills and harder to win if you have the audacity to sue:  meanwhile, the cost of insurance has continued to rise, and insurance profits have skyrocketed [see the statistics elsewhere on the weblog].  The number of "personal injury" cases in Michigan has been reduced by fifty percent, yet insurers and the Chamber of Commerce continue to flog victims and "trial lawyers", alleging frivolous lawsuits.

     In Michigan, "reform" has just been a fancy word for scratching the back of rich donors.  Most of us think of "reform" as improvement:  in Michigan it means peer protection for the wealthy corporation.

Thompson O’Neil, P.C.
309 East Front Street
Traverse City, Michigan 49684
Toll Free: 1-800-678-1307
Fax: 231-929-7262