Appendix — Allstate Insurance v. Kelley
Supreme Court brief1979
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Supreme Court, U
FILED
APR 16 1979
APPENDIX MICHA Ra0e
~ CL
IN THE
Supreme Court of the Anited States
OCTOBER TERM, 1978.
No. 8-15 8g
ALLSTATE INSURANCE COMPANY,
AN ILLINOIS CORPORATION,
Petitioner,
vs.
FRANK J. KELLEY, ATTORNEY GENERAL OF THE
STATE OF MICHIGAN, et al.,
Respondents.
Petition for a Writ of Certiorari to the Supreme Court of
the State of Michigan.
Gunthorp-Warren Printing Company, Chicago e Financial 6-6565
APPENDIX
IN THE
Supreme Court of the Anited States
OCTOBER TERM, 1978
ALLSTATE INSURANCE COMPANY,
AN ILLINOIS CORPORATION,
Petitioner,
vs.
FRANK J. KELLEY, ATTORNEY GENERAL OF THE
STATE OF MICHIGAN, et al.,
Respondents.
Petition for a Writ of Certiorari to the Supreme Court of
the State of Michigan.
INDEX
PAGE
App. A Opinion of the Supreme Court of the State of
POPE rrrr rT ert ere Terr ree Al
App. B_ Order of the Supreme Court of the State of
PR eee ee ee A96
App. C_ Application for Rehearing on Part III of the
Coe Rs on ee AS ei ewe ntedan A98
App. D Order of the Supreme Court of the State of
Michigan Denying Rehearing.............. A152
App. E Opinion of the Court of Appeals of Michigan... A154
i
App. F Opinion of the Circuit Court for the County of
Wayne, State of Michigan................. A169
App. G Order of the Circuit Court for the County of
Wayne, State of Michigan of February 13,
ra Pera rarer ery ee emir re ry A256
App. H_ Mich. Comp. Laws §§ 500.2400-2484....... A258
Mich. Comp. Laws §§ 500.3101-3380....... A287
App. I Chart Summarizing Relevant Insurance Provi-
sions of the Various States. ..........+.+-.. A337
Al
APPENDIX A
402 Mich. 554
CATHERINE SHAVERS et al.,
Plaintiffs, Appellants, Appellees and
Cross-Appellees,
VS.
FRANK J. KELLEY, Attorney General of the State of Michigan,
RICHARD H. AusTIN, Secretary of State of Michigan, DAN-
IEL J. DEMLOW, Commissioner of Insurance of the State of
Michigan, AETNA CASUALTY & SURETY COMPANY, the TRAV-
ELERS INDEMNITY COMPANY, HARTFORD ACCIDENT & IN-
DEMNITY 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-A ppellant
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.
A2
Lopatin, Miller, Bindes, Freedman & Bluestone (by Sheldon
L. Miller and Victoria C. Heldman) and Philo, Cockrel, Spear-
man, Cooper, Rine, King & Atkinson for plaintiffs.
Frank J. Kelley, Attorney General, Robert A. Derengoski,
Solicitor General, and Harry G. Iwasko, Jr., Assistant Attorney
General, for defendants Secretary of State, and Commissioner
of Insurance.
Bodman, Longley, Bogle & Dahling (by Theodore Souris and
James R. Buschmann) for defendant State Farm Mutual Auto-
mobile Insurance Company.
Dickinson, Wright, McKean, Cudlip & Moon (by W. Gerald
Warren, Dawn L. Phillips, Richard J. Meyers, and Robert L.
Schwartz) for defendant Allstate Insurance Company.
Downs & Edwards for defendant League General Insurance
Company,
Dykema, Gossett, Spencer, Goodnow & Trigg (by James
D. Tracy, Michael J. McGuigan, and Nancy C. Kurtz) for
defendants Detroit Automobile Inter-Insurance Exchange and
Riverside Insurance Company of America.
Honigman, Miller, Schwartz & Cohn (Avern Cohn and John
M. Kamins, of counsel) for defendants Aetna Casualty and
Surety Company, The Travelers Indemnity Company, Hartford
Accident and Indemnity Company, Continental Casualty Com-
pany, and the Home Indemnity Company.
Amici Curiae:
Robert E. Keeton.
American Mutual Insurance Alliance, by Foster, Swift &
Collins, P.C. (by Webb A. Smith, David W. McKeague, and
Michael J. Schmedlen).
Michigan Mutual Insurance Company, by Elijah Poxson and
James L. Schueler.
Progressive Casualty Company, Universal Underwriters, Mid-
west Mutual Insurance Company, Balboa Insurance Company,
Northland Insurance Company, Reserve Insurance Company,
A3
and National Indemnity Insurance Company, by Plunkett,
Cooney, Rutt, Watters, Stanczyk & Pedersen (by D. J. Watters
and Charles A. Huckabay).
WILLIAMS, J. 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-fault insurance
system was to provide victims of motor vehicle accidents as-
sured, adequate, and prompt reparation for certain economic
losses. The Legislature believed this goal could be most effec-
tively 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 sub-
stitution for tort remedies which are, in part, abolished), con-
stitutionally 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, reason-
ably relates to the evidence advanced at trial that under the
tort liability system the doctrine of contributory negligence de-
nied benefits to a high percentage of motor vehicle accident
victims, minor injuries were overcompensated, serious injuries
were under compensated, long payment delays were common-
place, 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
A4
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, ra-
tional response to problems affecting the general welfare, the
actual mechanisms for protecting the welfare of individual Mich-
igan 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 in-
terest 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 avail-
able 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, insurance refusal or
cancellation. In particular, under the No-Fault Act and the
Insurance Code:
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 exhorta-
tion (see Part ITI—B[1] infra);
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, discrimina-
tory cancellation, or assignment to the “Automobile
Placement Facility” with its presumptively higher rates
(see Part III—B[2] infra).
AS
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 unconstitu-
tionally 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 ad-
ministration of justice, to hold that the No-Fault Act will remain
in effect for 18 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 corr ive 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, 11 named plaintiffs in their own behalf and as repre-
sentatives 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 com-
plaint sought a declaratory judgment as to the constitutionality
of the No-Fault Act and an injunction against the act’s enforce-
A6
ment.' 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 others were added as named plaintiffs; and the asser- —
tion of rights to declaratory and injunctive relief were added on
behalf of five of the named plaintiffs as property taxpayers,
pursuant to GCR 1963, 201.2(3). Two the the defendant in-
surers, Allstate Insurance Company and State Farm Mutual
Automobile Insurance Company, filed cross-complaints, chal-
lenging the constitutionality of the act’s property damage pro-
tection 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 pretrial 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 pretrial statement issued at the conclusion of the con-
ferences 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 thought-
ful 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]; MCL 600.2041; MSA 27A.2041), and the declara-
tory judgment rule (GCR 1963, 521.1) The court also held
“1. ‘This action was brought subsequent to the issuance of this
Court’s Advisory Opinion re Constitutionality of 1972 PA 294, 389
Mich 441; 208 NW2d 469 (1973).
A7
that the No-Fault Act did not significantly infringe or penalize
plaintiffs’ constitutional “right to travel.” The court held
constitutional:
§ 3101(1), which requires the purchase of no-fault in-
surance as a condition precedent to registration and opera-
tion of a motor vehicle;
The penalties imposed for non-compliance with the act’s
compulsory insurance requirement (§ 3102[2])
the act’s personal injury protection insurance scheme;
the limitation of $1,000 for no-fault funeral and burial
expenses (§ 3107) ;
the classification between workers in the home and workers
outside the home in terms of maximum benefits payable in
case of injury (§ 3107);
the delegation of authority to the Commissioner of In-
surance to approve deductibles as provided in § 3109a of
the act;
§ 3102(1), which requires that nonresident motorists main-
tain no-fault insurance when in Michigan for an aggregate
of more than 30 days in any calendar year;
§ 3116 which, read in light of § 3135, can be interpreted
to mean that an insurer paying personal injury insurance
benefits is entitled to reimbursement from the tort recovery
of an injured person to the extent that the tort recovery in-
cludes damages for losses for which personal injury in-
surance benefits were paid;
§ 3114, which requires that a person who suffers accidental
bodily injury while an operator or passenger of a motor
vehicle engaged in the business of transporting passengers
seek personal injury insurance benefits from the insurer
. ef the vehicle.
The court held unconstitutional:
the act’s property damage protection insurance scheme;
§ 3101(2), which excludes two-wheel vehicles from cov-
erage under the act;
A8
§ 3107(b), which requires that the cost of replacement for
ordinary and necessary services be “reasonably incurred”
before reimbursement;
§ 3109(1), which requires that benefits provided or re-
quired to be provided under the laws of any state or the
federal government be subtracted from personal injury
insurance benefits ;
the delegation of authority to the Commissioner of Insur-
ance to approve deductibles as provided in § 3109(3) of
the act;
§ 3113, which denies injured “transient” nonresident mo-
torists who have not purchased no-fault insurance or whose
insurer has not filed a certificate in compliance with § 3163
personal injury insurance benefits and tort recovery below
the threshold of § 3135(2).
The court also held that the sections of the act declared un-
constitutional were severable.
On June 25, 1974, the trial court issued its declaratory
judgment. Upon entry of this judgment, plaintiffs moved for a
new trial. After a hearing, this motion was denied by the court.
Plaintiffs and various defendants appealed to the Court of
Appeals.
Application for leave to appeal to this Court prior to de-
cision by the Court of Appeals was filed on August 21, 1974,
by all defendants and was denied by this Court December 23,
1974.
Thereafter, upon review of the record and the hearing of
arguments, the Court of Appeals issued its opinion November
5, 1975.?
The Court of Appeals disagreed with the trial court that the
“taxpayers’ suit” rule and statute, supra, were applicable to the
instant case. 65 Mich App 355, 362; 237 NW2d 325 (1975).
The Court then found plaintiffs had standing under the declara-
2. Shavers v Attorney General, 65 Mich App 355; 237 NW
2d 325 (1975).
A9
tory judgment rule, supra, to challenge a limited number of
issues.®
The Court of Appeals held constitutional the act’s personal
injury protection scheme (affirming the trial court), 65 Mich
App 355, 365-367, and the act’s exclusion of two-wheel vehicles
from compulsory no-fault coverage (overruling the trial court),
65 Mich App 355, 367-368. The Court held unconstitutional
3. The Court of Appeals in its opinion structured its “standing”
analysis in terms of the trial court’s declaratory judgment. The Court
stated that plaintifis, under the declaratory judgment rule, had not
shown a required “case of actual controversy” with respect to
“Paragraphs C, D, E, F, and H of the court’s judgment”. 65 Mich
App 355, 363. In terms of the trial court’s declaratory judgment, this
meant that plaintiffs did not have standing to challenge:
—the constitutionality of § 3107(b)’s requirement that the cost
of replacement for ordinary and necessary services be “reason-
ably incurred” before reimbursement (Paragraph C of the
declaratory judgment);
—the constitutionality of the delegation of authority to the
Commissioner of Insurance to approve deductibles as pro-
vided in § 3109(3) of the act (Paragraph D of the declara-
tory judgment);
—the constitutionality of § 3109(1)’s requirement that benefits
provided or required to be provided under the laws of any
state or the federal government be subtracted from personal
insurance injury benefits (Paragraph E of the declaratory
judgment) ;
—the constitutionality of § 3113(c) and § 3135(2) of the act
as they pertain to “transient” non-resident motorists (Para-
graph F of the declaratory judgment);
—the interpretation of § 3116 of the act, which pertains to the
subtraction of tort recovery from personal injury insurance
benefits (Paragraph H of the declaratory judgment) ;
The Court of Appeals held that plaintiffs’ action for declaratory
judgment on the issues found in Paragraphs A, B, and G of the trial
court’s judgment was appropriate. 65 Mich App 355, 363-364.
Paragraph A of the trial court’s declaratory judgment stated, in
pertinent part, “the act, including § 3109a. thereof, does not violate
any provision of the United States and Michigan Constitutions except
as hereinafter specifically declared”. Paragraph B declared the exclu-
sion of two-wheel vehicles from tne act’s coverage unconstitutional.
Paragraph G declared the act’s property protection insurance scheme
unconstitutional. Although the Court of Appeals held that plaintiffs
had standing to challenge all issues “found” in Paragraph A of the
(Footnote continued on next page.)
Al0
the act’s property damage protection scheme (affirming the
trial court), 65 Mich. App. 355, 368-370. The Court also held
that the unconstitutional property damage protection scheme
was severable. 65 Mich. App. 355, 372.
On November 25, 1975, plaintiffs filed a motion for rehear-
ing with the Court of Appeals challenging the findings of the
Court of Appeals in its opinion but, more specifically, request-
ing the Court of Appeals remand the case for further testimony
consistent with GCR 1963, 820.1(5). Plaintiffs’ motion for re-
hearing in the Court of Appeals was denied on December 17,
1975. On January 9, 1976, plaintiffs filed a motion for leave to
appeal to this Court. Leave was granted on May 27, 1976.
Il.
A crucial threshold question concerns plaintiffs’ standing
to raise certain issues.
Plaintiffs first seek to establish standing to challenge the
constitutionality of the No-Fault Act underethe court rule and
statute which creates a “taxpayers’ suit”. GCR 1963, 201.2(3)
and MCL 600.2041; MSA 27A.2041, which are identical, deal
with real parties in interest. The rule and statute provide in
pertinent part:
“Every action shall be prosecuted in the name of the
real party in interest * * * and further
* * *
“3) An action to prevent the illegal expenditure of
state funds or to test the constitutionality of a statute re-
lating thereto may be brought * * * in the names of at
least 5 residents of this state who own property assessed
for direct taxation by the county wherein they reside.”
(Footnote continued from preceding page.)
declaratory judgment, i.e., all issues declared constitutional by the
trial court, the Court only addressed one of these issues, namely, the
constitutionality of the act’s personal injury protection insurance
scheme. The Court did not address the other issues found constitu-
tional by the trial court although it stated plaintiffs had standing to
raise them.
All
The trial court held that plaintiffs had standing under the
rule and statute to raise every constitutional objection they as-
serted. The Court of Appeals reversed, declaring:
“We disagree with the trial court’s ruling that the court
rule provides a basis for plaintiffs’ suit. Plaintiffs are not
concerned with the illegal expenditure of state funds. The
court rule allows taxpayers aggrieved by the outlay of state
funds to hurdle the traditional standing obstacle in tax-
payers suits. We do not read it as permitting a group to
challenge any legislation merely because of an incidental
expenditure of state funds; almost all legislation involves
some public spending. GCR 1963, 201.2(3) is inapplicable
to this litigation.” 65 Mich App 355, 362.
We agree. The No-Fault Act does not, on its face, contem-
plate the “expenditure of state funds”. We do not believe that
the “taxpayers’ suit” rule and statute is intended to give plain-
tiffs standing to “test the constitutionality” of an entire act when
the expenditure of funds alleged is incidental to its implementa-
tion. Compare Hertel v. Racing Commissioner, 68 Mich App
191; 242 NW2d 526 (1976); Jones v. Racing Commissioner,
56 Mich App 65; 223 NW2d 367 (1974).*
Alternatively, both plaintiffs and cross-plaintiffs seek to estab-
lish standing under the GCR 1963, 521.1 declaratory judg-
ment rule. GCR 1963, 521.1 provides:
“In a case of actual controversy within its jurisdiction,
any circuit court of this state may declare the rights and
other legal relations of any interested party seeking a decla-
4. We do not believe that the cases relied on by the trial court
in reaching its holding are persuasive. In Bode v Barrett, 412 Il
204, 206; 106 NE2d 521, 523 (1952), plaintiffs challenged
statutes which expressly controlled the raising and expenditure of
state funds. Blair v Pitchess, 5 Cal 3d 258; 96 Cal Rptr 42; 486
P2d 1242 (1971), involved an attack on a statute which, though
not contemplating the expenditure of state funds, did directly and
immediately involve county officials. However, we reject this approach
to taxpayers’ suits because it would, if adopted, virtually abolish the
law of standing, a result not clearly contemplated by GCR 1963,
201.2(3) and MCL 600.2041; MSA 27A.2041.
We also note that the Illinois and California “taxpayers’ suit”
statutes do not include language similar to the Michigan statute’s “to
test the constitutionality of a statute relating thereto”.
Al2
ratory judgment, whether or not relief is or could be
sought or granted.”
The declaratory judgment rule was intended and has been
liberally construed to provide a broad, flexible remedy with a
view to making the courts more accessible to the people. 2
Honigman & Hawkins, Michigan Court Rules Annotated (2d
ed), Committee Comment, p 683; Comm’r of Revenue v.
Grand Trunk W R Co, 326 Mich 371, 375; 40 NW2d 188
(1949),
The existence of an “actual controversy” is a condition
precedent to invocation of declaratory relief. In general, “ac-|
tual controversy” exists where a declaratory judgment or decree
is necessary to guide a plaintiff's future conduct in order to
preserve his legal rights. Updegraff v. Attorney General, 298
Mich 48, 52; 298 NW 400 (1941); Flint v. Consumers Power
Co, 290 Mich 305, 309-310; 287 NW 475 (1939); see, also,
Welfare Employees Union vy, Civil Service Comm, 28 Mich
App 343, 350-351; 184 NW2d 247 (1970).
This requirement of an “actual controversy” prevents a
court from deciding hypothetical issues. However, a court is
not precluded from reaching issues before actual injuries or
losses have occurred. Merkel v. Long, 368 Mich 1, 11-14; 117
NW2d 130 (1962). Also, before affirmative declaratory re-
lief can be granted, it is essential that a plaintiff, at a minimum,
pleads facts entitling him to the judgment he seeks and proves
each fact alleged, i.e., a plaintiff must allege and prove an
actual justiciable controversy. See Kuhn v. East Detroit, 50
Mich App 502; 213 NW2d 599 (1973).
Therefore, what is essential to an “actual controversy” under
the declaratory judgment rule is that plaintiffs plead and prove
facts which indicate an adverse interest necessitating the sharpen-
ing of the issues raised.
The five plaintiffs who testified at trial all owned an auto-
mobile. Two had purchased no-fault insurance and three had
not. One of the plaintiffs who had purchased no-fault insurance,
Melvin Janasevich, testified that he was a retiree with no work
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income who cares for his paralyzed, wheelchair-confined wife.
Plaintiffs’ amended complaint names three persons who are
“motorcycle owners and operators”; defendants’ answer ad-
mits the status of these plaintiffs.° Also, it was undisputed on
the record that the cross-plaintiff insurance companies who
challenge the validity of the property damage provisions of the
No-Fault Act were required to issue insurance policies in com-
pliance with the act if they wished to continue to underwrite
in Michigan.
This Court deeply appreciates that the No-Fault Act, in
radically redefining the nature of Michigan’s motor vehicle in-
surance, profoundly and importantly affects a crucial dimension
of our lives. We are also aware that the constitutionality of
this act has been in question sinc: this action was commenced
in August, 1973. In light of the record and our belief that
plaintiffs, cross-plaintiffs, and the people of the State of Michi-
gan deserve as definitive a decision on the challenges to the
No-Fault Act as judiciously can be afforded within the parame-
ters of the above stated rules for declaratory relief, we hold that
plaintiffs and cross-plaintiffs have established standing under
GCR 1963, 521.1 to raise the following issues:
1) whether § 3101, which requires registrants and opera-
tors of motor vehicles to maintain compulsory per-
sonal injury protection insurance, property protection
5. The five plaintiffs who testified at trial were Eric Gentile, who
owned an automobile but who had not purchased no-fault insurance;
Melvin Janasevich, who owned an automobile and who had pur-
chased no-fault insurance; John Shano, who owned an automobile
but who had not purchased no-fault insurance; Raymond Hullum,
who owned an automobile and who had purchased no-fault insur-
ance; Frederick Boyd, who owned an automobile and who had not
purchased no-fault insurance.
Plaintiff Janasevich testified that he was retired and that he has
to take care of his paralyzed, wheelchair-confined wife.
The three plaintiffs named as “motorcycle owners and operators”
in plaintiffs’ amended complaint were Steven Makella, Linda Cham-
berlain and John Savard. For defendants’ admission of this status in
their answers, see Joint Appendix, pp. 65a, 77a, 88a.
Al4
damage insurance, and residual liability insurance, is
constitutional,;®
2) whether the act’s personal injury protection insurance
scheme violates the due process and equal protection
clauses of the Michigan and United States Constitu-
tions’ (Const 1963, art 1, §§ 2, 17; US Const, Am
XIV);
3) whether the act’s property damage protection insurance
scheme violates the due process and equal protection
clauses of the Michigan and United States Constitu-
tions;®
4) whether § 3101(2), in excluding two-wheel motor
vehicles from coverage under the act, violates the equal
protection clauses of the Michigan and United States
Constitutions;*
5) whether the act’s statutory scheme with respect to work-
loss reimbursement and reimbursement for replace-
ment services, § 3107, violates the equal protection
6. Plaintiffs who have not purchased no-fault insurance would be
exposed to criminal (see § 3102[2]) and civil (see § 3135[2])
penalties if the compulsory insurance requirement under the act is
constitutional. If the compulsory insurance requirement under the act
is unconstitutional, plaintiffs who have purchased no-fault insurance
are entitled to a determination of this issue in order to guide their
future conduct.
7. Plaintiffs who have purchased no-fault insurance would be
exposed to tort liability without insurance reimbursement if the tort
immunity vis-a-vis the personal injury protection insurance under the
act is held unconstitutional.
8. Cross-plaintiffs State Farm and Allstate, if they wish to under-
write property damage protection insurance in Michigan, must do so
pursuant to §§ 3121, 3123, 3125, and 3127 of the act. Plaintiffs
who have purchased no-fault insurance would be exposed to tort
liability without insurance reimbursement if the tort immunity vis-a-
vis the property damage protection insurance under the act is held
unconstitutional.
9. Plaintiff motorcycle owners and operators might be required
to purchase no-fault insurance or be exposed to criminal (see
§ 3102[2]) and civil (see § 3135[2]) penalties if the two-wheel
motor vehicle exclusion is held unconstitutional.
Al5
clauses of the Michigan and United States Constitu-
tions;?°
6) whether the act’s statutory schemata with respect to
nonresident, out-of-state motorists, § 3102(1), which
requires nonresident motorists to maintain no-fault
insurance when they are in Michigan “an aggregate
of more than 30 days in any calendar year”, and
§ 3113 read inter alia with § 3135(2), which pertains
‘to transient nonresident motorists, violate the due pro-
cess and equal protection clauses of the Michigan and
United States Constitutions."
We do not reach two issues because they are not neces-
sary to decision and appear to have been abandoned.'? Also, we
do not believe these plaintiffs have established standing under
the declaratory judgment rule as to three issues.'* Two of these
10. Plaintiff Janasevich, who has purchased no-fault insurance
and who is a retiree caring for a paralyzed, wheelchair-confined
wife, might be exposed to discrimination under this statutory scheme
if he were injured in a motor vehicle accident.
11. Plaintiffs who have purchased no-fault insurance would be
exposed to tort liability without insurance reimbursement if these
schemata are held unconstitutional.
12. These issues are (1) whether, under § 3114, it is constitu-
tionally permissible to require a person suffering accidental bodily
injury while an operator or passenger of a motor vehicle operated in
ihe business of transporting passengers to seek personal protection
insurance benefits from the insurer of the vehicle and (2) whether
the $1,000 maximum limit for funeral and burial expenses under
§ 3107 is constitutional.
We note that we do not remand the issues not addressed by the
Court of Appeals for which we have found standing (issues 1, 5,
and 6, supra) because of the importance of the issues involved and
the public’s need for a prompt decision. GCR 1963, 852.1 and
865.1.
13. Plaintiffs have not established standing to raise three issues,
for the reasons stated: (1) whether, under § 3116 of the act, tort
claim recoveries must be subtracted from personal injury protection
benefits. There is no proof on the record that any plaintiff had
realized a tort claim which an insurer subtracted from the personal
injury protection benefits which he received or to which he was
entitled. (2) Whether, under § 3109(1) of the act, government
(Footnote continued on next page.)
Al6
issues are properly before this Court in Workman v Detroit
Automobile Inter-Insurance Exchange, Docket No. 58106; and
O'Donnell v State Farm Mutual, Docket No. 58833.
MI.
The first and most important issue before us, stated in its
general terms, is whether § 3101(1) of the act, which requires
registrants and operators of motor vehicles to maintain compul-
sory personal injury protection insurance, property damage
insurance, and residual liability insurance, is constitutional.’
(Footnote continued from preceding page.)
benefits must be subtracted from personal injury protection benefits.
There is no proof on the record that any plaintiff had a claim for an
injury which had been denied or reduced on account of the fact he
received government benefits. (3) Whether the Legislature, in con-
ferring authority upon the Commissioner of Insurance to approve
deductibles under § 3109(3) and § 3109a of the act (added by 1974
PA 72), constitutionally delegated its legislative power. There is
no proof on the record that the Commissioner had approved any
deductibles pursuant to these provisions. We note that the issue of
whether § 3109(3) constitutes a valid delegation of legislative power
has been properly before the Court of Appeals. See, Davidson v
Johnson, 76 Mich App 497; 257 NW2d 139 (1977): Davidson
Vv. Johnson (On Rehearing), 79 Mich App 660; 262 NW2d 887
(1977); Porter v. Michigan Mutual Liability Co., 80 Mich App 145;
263 NW2d 318 (1977).
14. _ The trial court held that Ҥ 3101(1), requiring the purchase
of no-fault insurance, is constitutional”.
Plaintiffs did not expressly appeal this issue to the Court of
Appeals or to this Court. However, certain defendants admitted this
issue was contested and addressed it in their briefs before this Court.
See, Briefs of Defendants-Appellees Allstate Insurance Company, pp.
45-47; League General Insurance Company, pp. 17, 35-36; Detroit
Automobile Inter-Insurance Exchange and Riverside Insurance Com-
pany of America, pp. 13-14; see, also, Brief of Amicus Curiae
Progressive Casualty Company, et al., p. 1.
A general concern with the impact of the No-Fault Act’s com-
pulsory insurance requirement has been a constant underlying issue
throughout the litigation of this case. Plaintiffs have repeatedly
voiced objection to the imposition of compulsory no-fault insurance
without regard to its financial impact. See, Plaintiffs’ Complaint
and Plaintiffs’ Second Amended Complaint. At trial, the trial court
barred testimony concerning the application of the compulsory
insurance requirement and its financial impact, perceiving the issue
(Footnote continued on next page.)
Al7
We perceive the issue of the constitutionality of the “com-
pulsory insurance requirement” of § 3101(1) to be, in essence,
two-fold:
(Footnote continued from preceding page.)
as solely one of law. However, at pretrial, the court recognized, and
the partics agreed, “* * * that the issue of whether there are adequate
guidelines to guide the Insurance Commissioner is clearly before the
court and must be determined, especially in view of the fact that the
statute now requires all motorists to carry Insurance or to provide
other security”. The trial court did not address this “sub-issue” in
its opinion. In their brief before the Court of Appeals, plaintiffs
argued:
“When the Legislature refuses to establish adequate guide-
lines for rates, it actually encourages illegal rate discrimination.
Discriminatory rates are the end result when no sufficient guide-
lines are established. Because the act does not furnish adequate
guidelines to the Insurance Commissioner in setting rates, and
the act does not establish adequate guidelines for the Secretary
of State in approving security, the ‘no fault’ act must be uncon-
stitutional. There cannot be a constitutional compulsory system
without sufficient guidelines to establish, implement, and operate
the legislative intent.”
The Court of Appeals did not address this “sub-issue.” Plaintiffs,
in their brief before this Court, once again made reference to it. See,
Plaintiffs-Appellants Brief on Appeal, pp. 2, 22 and Supplementary
Brief on Appeal, pp. 34-36. .
Although plaintiffs did not expressly raise on appeal the issue
decided by the trial court. “Can the Legislature constitutionally. as a
condition precedent to [registration and] operation of a motor vehicle,
require the purchaser of no-fault personal protection insurance and
no-fault property protection insurance * * *” we feel compelled to
address it because of its basic, threshold importance to any decision
we might render as to the No-Fault Act’s constitutionality.
Plaintiffs forcefully challenged the due process sufficiency of the
act’s regulatory scheme before the trial court, in its brief before the
Court of Appeals, and, by reference, before this Court (during oral
argument plaintiffs requested that this Court * make reference to and
use [their] Court of Appeals bricf on any issues that were otherwise
inadequate or deficient in this reviewing court”). As indicated supra,
the trial court viewed this challenge as a “delegation issue. The
Court of Appeals did not even address plaintiffs’ crucial challenge.
After five years of uncertainty as to the constitutionality of the
No-Fault Act, we believe the people of the State of Michigan deserve
an opinion which addresses this crucial constitutional challenge to the
No-Fault Act’s regulatory scheme head-on.
(Footnote continued on next page.)
Als
(A) Can the Legislature constitutionally, as a condition
precedent to registration and operator of a motor
vehicle, require the purchase of no-fault personal
protection insurance and no-fault property protection
insurance, or in the alternative require security
approved by the Secretary of State?
(B) Does the present regulatory scheme for compulsory
no-fault insurance sufficiently protect the interest of
registrants and operators of motor vehicles in accord
with the due process clause of the Michigan and
United States Constitutions as to
(1) the fairness of insurance rates, and
(2) the proper availability of insurance.
(A) Compulsory No-Fault Insurance
Before the advent of no-fault insurance, the power of the
Legislature to require all motorists to obtain mandatory liability
insurance as a prerequisite to receipt of a driving license was
well-established."* The United States Supreme Court recently
observed in Bell v Burson, 402 US 535, 539; 91 SCt 1586; 29
L Ed 2d 90 (1971):
(Footnote continued from preceding page.)
This challenge could be considered on the basis of whether the
act's regulatory scheme contains suflicient protections to pass muster
aS a constitutional delegation by the Legislature. However, this
opinion analyzes plaintitfs’ due process challenge in two steps: first,
does the requirement that Michigan motorists must purchase no-fault
insurance in order to register and operate a motor vehicle create an
entitlement to fairness and availability of such insurance; second, if
there is such an entitlement, does the No-Fault Act on its face, or on
its face complemented by proper agency rules and regulations,
indicate that due process has been complied with in terms of plaintiff
motorists’ “entitled” interest. See discussion, Part III(B), infra.
15. Michigan’s No-Fault Act is generally recognized to be “com-
pulsory,” not “mandatory”. The distinction is a semantic one made
by those acquainted with insurance terms of art. Insurance is
“mandatory” in nature when the buyer can choose whether or not
* to purchase insurance, but if he chooses to purchase insurance, he
must purchase a, specific type of insurance. Insurance is “compul-
sory” if the buyer must purchase a specific type of insurance, i.e.,
the buyer has no choice in whether or not he purchases insurance.
Al9
“If the statute barred the issuance of licenses to all
motorists who did not carry liability insurance or who did
not post security, the statute would not, under our cases,
violate the Fourteenth Amendment. Ex parte Poresky, 290
US 30; 54 SCt 3; 78 LEd 152 (1933); Continental
Baking Co v Woodring, 286 US 352; 52 SCt 595; 76
L Ed 1155; 81 ALR 1402 (1932); Hess v Pawloski,
274 US 352; 47 SCt 632; 71 LEd 1091 (1927).”
The highest courts of eight states have reviewed their states’
no-fault automobile insurance laws.'® Every court which has
considered the issue of whether a legis.ature, within its police
power, can require no-fault insurance as a condition precedent
to the operation of a motor vehicle, has answered in the affirma-
tive.'’ This Court also holds that the Michigan Legislature has
authority under its police power to compel the purchase of
no-fault insurance.
The No-Fault Act’s self-insurance concept is embraced
within the traditional scope of the police power as stated in the
maxim “sic utere tuo ut alienum non laedas” (“so use your own
that you do not injure that of another”). 16 Am Jur 2d,
Constitutional Law, § 267, p 523. The insurance required under
16. Gentile v. Altermatt, 169 Conn 267; 363 A2d | (1975),
appeal dismissed 423 US 1041 (1976); Montgomery vy. Daniels, 38
NY2d 41; 340 NE2d 444 (1975); Singer v Shepperd, 464 Pa 387;
346 A2d 897 (1975); Lasky v. State Farm Ins. Co, 296 So 2d 9
(Fla, 1974); Manzanares v Bell, 214 Kan 589; 522 P2d 1291
(1974); Opinion of the Justices May 14, 1973, 113 NH 205; 304
A2d 881 (1973); Grace v. Howlett, 51 Il! 2d 478; 283 NE2d 474
(1972); and Pinnick v Cleary, 360 Mass 1; 271 NE2d 592 (1971).
See, also, Rybeck v Rybeck, 141 NJ Super 481; 358 A2d 828
(1976), appeal dismissed per curiam as moot, 150 NJ Super 151,
375 A2d 269 (1976), and Andrew v State, 238 Ga 433; 233 SE2d
209 (1977).
17. Only the Courts in Pinnick, 360 Mass 1, 25 and Gentile, 169
Conn 267, 302-303, expressly approved the involvement of private
companies in the insurance rate scheme. However, in Pinnick,
although the court expressed an opinion on the subject, the Massa-
chusetts No-Fault Act was not compulsory. In Gentile the court
relied, without examination, on the existence of statutory protection
against underwriting and ratemaking abuses by insurers and the
state’s assigned risk plan.
A20
the No-Fault Act protects not only the driver of a motor vehicle,
but also passengers, pedestrians, owners of fixed property, and
owners of properly parked vehicles. Furthermore, the operation
of a motor vehicle, even when it affects no one but the driver,'®
results in serious and immediate danger to a large section of
society. West Coast Hotel Co v Parrish, 300 US 379, 394;
57 S Ct 578; 81 L Ed 703 (1937). This principle, that those
who use the public highways may properly be required to
provide security for loss that may predictably be suffered by
others on account of such use, can properly be extended to
require security for the loss that the state itself might otherwise
incur on account of such use.
(B) Due Process
The protections of the due process clause can only be
invoked when there has been state action. Jackson v. Metro-
politan Edison Co, 419 US 345, 349-350; 95 SCt 449; 42
L Ed 2d 477 (1974).
The No-Fault Act compels insurance for all motor vehicles;
failure to comply with this requirement may result in criminal
and civil sanctions.’® In addition, the No-Fault Act specifies the
extent of coverage to be provided and the conditions of payment
for insurance benefits.*° Finally, the No-Fault Act and the
Insurance Code provide for the assignment of claims and risks.”*
In effect, insurance companies are the instruments through
18. We recognize that the aforementioned pre-no-fault case law
dealt exclusively with mandatory liability or third-party insurance
and is therefore distinguishable from the instant no-fau't insurance
scheme which additionally compels first-party or self-insurance. See,
Woodroof, Fonseca & Squillante, Automobile Insurance & No-Fault
Law (New York: The Lawyers Co-operative Publishing Co, 1974),
p. 355.
19. See MCL 500.3102(2); MSA 24.13102(2) and MCL
500.3135(2); MSA 24.13135(2).
20. See MCL 500.3105 et seg.; MSA 24.13105 et seq.
21. See MCL 500.3171 et seq.; MSA 24.13171 et seq. and
MCL 500.3301 et seq MSA 24.13301 et seq.
A21
which the Legislature carries out a scheme of general welfare.
This legislation goes beyond a grant of a monopoly or an
attempt to regulate a utility; there exists “a sufficiently close
nexus between the State and the challenged action of the regu-
lated entity so that the action of the [regulated entity] may
fairly be treated as that of the State itself”. Jackson v. Metro-
politan Edison Co, supra, 419 US 345, 351.
The interest of plaintiffs that is affected by compulsory
no-fault insurance is not a previously recognized common-law
or constitutional right.
This Court, however, has recognized that the concepts of
“liberty” and “property” protected by due process “are not to be
defined in a narrow or technical sense but are to be given broad
application”. Bundo v. Walled Lake, 395 Mich 679, 690; 238
NW2d 154 (1976). See, also, Board of Regents v. Roth,
408 US 564; 92 S Ct 2701; 33 L Ed 2d 548 (1972), and
Perry v. Sindermann, 408 US 593, 601, 92 S Ct 2694, 33 L Ed
2d 570 (1972).
The existence of interests or benefits entitled to due process
protection depends on the extent to which government activity
has fostered citizen dependency and reliance on the activity.
We are reminded: “It is a purpose of the ancient institution of
property to protect those claims upon which people rely in their
daily lives, reliance that must not be arbitrarily undermined”.
Board of Regents v. Roth, 408 US 564, 577 The Supreme Court,
1975 Term, 90 Harv L Rev 86-104 (1976); Tribe, American
Constitutional Law, pp 514, 522; Pennsylvania Coal Mining
Ass'n V. Insurance Dep't, 471 Pa 437; 370 A2d 685 (1977).
In Michigan the independent mobility provided by an auto-
mobile is a crucial, practical necessity; it is undeniable that
whether or not a person can obtain a driver’s license or register
and operate his motor vehicle profoundly affects important
aspects of his day-to-day life.
The cases, statutes and rules affecting the issuance of drivers’
licenses reflect an appreciation of the importance of the access
A22
to motor vehicles.** Crampton v. Dep’t. of State, 395 Mich 347,
235 NW2d 352 (1975), and Gargagliano v. Secretary of State,
62 Mich App 1, 11-12; 233 NW2d 159 (1975), opinion by
N. J. KAUFMAN, J.
A driver’s license, once issued, is a significant interest
subject to constitutional due process protections. Bell v Burson,
402 US 535, 539; 91 S Ct 1586; 29 L Ed 2d 90 (1971).
Although the compulsory insurance requirement of the No-
Fault Act does not directly affect the issuance of a driver’s
license, it directly affects the use of such a license: a licensee
may not register or operate a motor vehicle in Michigan without
no-fault insurance. A driver’s license is, clearly, of little use
unless a licensee can register and operate a motor vehicle.
We believe that the interest in registering and operating a
motor vehicle is as significant as the interest in the use of a
driver’s license.
In choosing to make no-fault insurance compulsory for
all motorists, the Legislature has made the registration and
operation of a motor vehicle inexorably dependent on whether
no-fault insurance is available at fair and equitable rates. Conse-
quently due process protections under the Michigan and
United States Constitutions (Const 1963, art 1, § 17; US Const
Am XIV) are operative.
The Legislature has, additionally, fostered the expectation
that no-fault insurance will be available at fair and equitable
rates. Section 2403(1)(d) of the Insurance Code states that
“Rates shall not be excessive, inadequate or unfairly discrim-
inatory”, MCL 500.2403(1)(d); MSA 24.12403(1)(d);
§ 3301(1)(a) of the Insurance Code provides the “guarantee”
that no-fault insurance coverage “will be available to any person
22. Various statutes and regulations carefully monitor the licens-
ing of drivers in this state. MCL 257.320(a); MSA 9.2020(a);
MCL 257.322; MSA 9.2022; 1974 AACS R 257.1-257.5.
A23
who is unable to procure such insurance through ordinary
methods”. MCL 500.3301(1) (a); MSA 24.13301(1) (a).
We therefore conclude that Michigan motorists are constitu-
tionally entitled to have no-fault insurance made available on a
fair and equitable basis. The availability of no-fault insurance
and the no-fault insurance rate regulatory scheme are, accord-
ingly, subject to due process scrutiny.”
(1) In scrutinizing the statutory scheme for regulating in-
surance companies’ underwriting and rate-making practices, we
must look beyond the No-Fault Act itself to other provisions of
the Insurance Code, including the Uniform Trade Practices Act,
MCL 500.2400 et seq.; MSA 24.12400 et seq., and MCL
500.2001 et seqg.; MSA 24.12001 et seq.
Under the present regulatory scheme, rates and rate-making
factors are proposed and supporting material is filed by private
insurance companies. MCL 500.2406; MSA 24.12406. The
Commissioner of Insurance may approve or reject the proposed
rates and rate-making factors. If he takes no action within
23. This is a separate and independent basis for invoking duc
process protection for Michigan motorists required to purchase no-
tault insurance. See Viculin v Dep’t of Civil Service, 386 Mich 375,
387; 192 NW2d 449 (1971); see, also, Paul v Davis, 424 US
693, 710-711; 96 S Ct 1155; 47 L Ed 2d 405 (1976); Bishop v
Wood, 426 US 341; 96 S Ct 2074; 48 L Ed 2d 684 (1976);
Meachum v Fano, 427 US 215, 226; 96 S Ct 2532; 49 L Ed 2d
451 (1976); The Supreme Court, 1975 Term, 90 Harv L Rev
86-104 (1976).
24. We note that at least two courts have held that consumers
have an insufficient interest to invoke due process with respect to
utility rates. Holt v Yonce, 370 F Supp 374 (D SC 1973);
Sellers v. lowa Power & Light Co, 372 F Supp 1169 (SD Iowa,
1974). We believe these cases are distinguishable from the instant
challenge to the no-fault insurance rate-making scheme. First, insur-
ance underwriting and rate-making, unlike utility rate-making, in-
herently involves discrimination among individuals. Insurance poli-
cies are written in accord with an insurance company’s perception of
an individual’s risk. Serious equal protection issues are, thereby, im-
plicated. Second, no history of careful rate-regulation exists with
respect to the insurance industry. Lewis, Comment: Jnsurance Rate
Regulation in Pennsylvania: Does the Consumer Have a Voice?, 81
Dickinson L Rev 297, 304-305 (1977).
A24
30 days, however, “the filing shall be deemed to meet the require-
ments of this chapter”. MCL 500.2408; MSA 24.12408.
An alternative method for filing provides that an insurance
company can specify the date upon which the rate becomes
effective. The Commissioner of Insurance then has 15 days
within which to act on that filing. If the filing is not disapproved
within 15 days of the filing, “the filing shall be deemed to be
approved”. MCL 500.2430; MSA 24.12430.
The Insurance Code also provides that rating plans may
measure any differences among risks that may have a probable
effect upon losses or expenses. However, such rates shall not
be “excessive, inadequate or unfairly discriminatory”. MCL
500.2403; MSA 24.12403. See, also, MCL 500.2027; MSA
24.12027.
Manuals pertaining to classifications, rules and rates, rate
plans and every modification of any of the foregoing must be
filed with the Commissioner of Insurance. MCL 500.2406;
MSA 24.12406.
The no-fault insurance rate classifications adopted by the in-
surance industry are allegedly the result of competition, not the
governmental process. Private insurance companies are, and
should be, primarily concerned with making a profit, while pro-
viding a public service.
We also recognize that it is within the Legislature’s authority
to prescribe that rates shall be primarily set by competition
in the marketplace. However, due process, at a minimum,
requires that rates are not, in fact, “excessive, inadequate or un-
fairly discriminatory” and, further, that persons affected have
notice as to how their rates are determined and an adequate
remedy regarding that determination.
Although the Legislature has provided some due proc-
ess protection, significant deficiencies remain. First, the en-
tire rate structure is suspect. The statutory stricture against
“excessive, inadequate or unfairly discriminatory” rates is with-
A25.
out the support of clarifying rules established by the Commis-
sioner, without legislatively sufficient definition, and without
any history of prior court interpretation. The legislative due
process mandate is thus reduced to mere exhortation. When we
add that the statute authorizes insurers to utilize any classifica-
tion scheme which “may measure any differences among risks
that may have a probable effect on losses or expenses” (em-
phasis added), it becomes clear that rates can be established on
insubstantial bases which do not satisfy due process.** Absent
administrative rules or legislative definition giving substance to
the statutory language, there are inadequate safeguards against
arbitrary action or invidious discrimination. Davis, Administra-
tive Law of the Seventies, § 6.13 (collecting cases).
Second, the present system of rate regulation denies due
process to the motorist attacking the validity of a rate. Filings
and supporting information submitted by insurers are open to
public inspection only after the filing becomes effective. MCL
500.2406; MSA 24.12406. This certainly is questionable due
process. Also, under the Insurance Code, if a complainant,
upon administrative review, can convince the Commissioner of
Insurance that a filed rate does not meet the statutory require-
ments, the Commissioner will determine that “within a reason-
able period thereafter, such filing shall be deemed no longer
effective”. MCL 500.2420; MSA 24.12420. This leaves the
complainant with the unacceptable choice of paying the invalid
25. See, Insurance Bureau, Michigan Department of Commerce,
A Report to the Governor on Essential Insurance in Michigan
(1977), where the Commissioner of Insurance writes, p. 35:
“Most importantly, the present law provides completely in-
sufficient tools for insuring that rates are not unfairly discrimina-
tory. It authorizes companies to uitilize any classification scheme
which ‘* * * may measure any differences among risks that
may have a probable effect on losses or expenses.’ ”
A26
rate from the date of the effective filing until the subsequent date
when the filing is no longer effective or taking the risk of not
having insurance. This is certainly not due process.”
(2) In scrutinizing the statutory scheme affecting the avail-
ability of no-fault insurance, we again look beyond the No-
Fault Act itself to the Insurance Code, Chapter 20, the Uniform
Trade Practice Act, MCL 500.2001 et seqg.; MSA 24.12001
et seq., and Chapter 33, the “Automobile Placement Facility”
(or “assigned risk plan”), MCL 500.3301 et seq.; MSA
24.13301 et seq.
Under § 2027 of the Uniform Trade Practices Act, the
Legislature statutorily defines “[uJnfair methods of competition
and unfair or deceptive acts or practices in the business of in-
surance” as including “[rjefusing to insure, or refusing to con-
tinue to insure * * * an individual” for a number of patently
discriminatory reasons. MCL 500.2027; MSA 24.12027.
In establishing the “Automobile Placement Facility”, the
Legislature expressly provided “the guarantee that automobile
insurance coverage will be available to any person who is un-
able to procure such insurance through ordinary methods”.
MCL 500.3301(1)(a); MSA 24.13301(1) (a).
However, although § 2027 of the Uniform Trade Practices
Act attempts, through the good offices of the Commissioner
of Insurance, to protect from discrimination a motorist
who is refused no-fault insurance or whose no-fault insurance
is cancelled, the act does not provide such motorists with an
individual legal remedy for challenging an alleged discrimina-
tory basis for the refusal or cancellation.” See Wolff v. Mc-
Donnel, 418 US 539, 557-558; 94 S Ct 2963; 41 L Ed
2d 935 (1974).
26. See Pennsylvania Coal Mining Ass'n v. Insurance Dep't.,
supra.
27. Section 2029 of the Uniform Trade Practices Act provides
the Commissioner of Insurance with a means for legal redress to
remedy “an unfair method of competition, or an unfair or deceptive
(Footnote continued on next page.)@
A27
Furthermore, a motorist placed in the “Automobile Placement
Facility” and classified as an “assigned risk” is subject to a
Statutory presumption that the rates charged will be higher than
the rates for motorists in the open marketplace. MCL 500.3365;
MSA 24.13365. In addition, a motorist insured by the
“Automobile Placement Facility” is exposed to the proce-
dural and substantive inadequacies of the facility’s rate
regulatory scheme (which are, essentially, the same as the in-
adequacies of the rate regulatory scheme for motorists able to
obtain insurance from an insurance company in the market-
place). Also, this facility does not provide the same varieties
of coverage options offered in the standard market. Finally,
there is no statutory provision allowing such a motorist to chal-
lenge his assignment to the “Automobile Placement Facility”
with its presumptively higher rates.
Therefore, although no-fault insurance may be available,
motorists can be refused no-fault insurance or have their in-
surance cancelled without effective legal redress for challeng-
ing refusal or discriminatory cancellation. Furthermore, motor-
ists can be placed into the “Automobile Placement Facility”
without an assurance of fair and equitable rates, without an op-
portunity to obtain the same variety of coverage options, or
without a right to challenge such placement.
(Footnote continued from preceding page.)
act or practice” of a person “engaged in the business of insurance”.
MCL 500.2029; MSA 24.12029. However, under § 2026 of the
Uniform Trade Practices Act, “[uJnfair methods of competition
and unfair or deceptive acts or practices in the business of in-
surance”’ do not include “isolated incidents”, i. e., instances of unfair
deceptive acts or practices, etc., affecting a single individual.
We also note that Chapter 32 of the Insurance Code, MCL
500.3204 et seq.; MSA 24.13204 et seq., although it provides
statutory measures pertaining to automobile liability insurance can-
cellation, does not protect insureds against potential discriminatory
bases for insurance cancellation and allows cancellation under con-
ditions not acceptable under a compulsory system.
A28
These deficiencies, in our opinion, most certainly deny due
process.”®
(3) These statutory defects as to the availability of no-fault
insurance and the scheme for regulating no-fault insurance rates
illustrate the inadequacies of the present statutory system of
compulsory insurance but do not define what process is “due”.
We therefore feel it necessary to identify the concerns which
must be addressed in any new system for rate-regulation and
“availability”, although “[t]he very nature of due process negates
any concept of inflexible procedures universally applicable to
every imaginable situation”. Cafeteria & Restaurant Workers
Union, Local 473 v McElroy, 367 US 886, 895; 81 S Ct 1743;
6 L Ed 2d 1230 (1961).
In determining what process is “due” we consider:
“* * * First, the private interest that will be affected by
the official action; second, the risk of an erroneous depri-
vation of such interest through the procedures used, and
the probable value, if any, of additional or substitute proce-
dural safeguards; and finally, the Government’s interest,
including the function involved and the fiscal and admin-
istrative burdens that the additional or substitute proce-
dural requirement would entail.” Mathews v. Eldridge,
424 US 319, 335; 96 S Ct 893; 47 L Ed 2d 18 (1976).
28. Ina Report to the Governor on Essential Insurance in Michi-
gan, supra, the Commissioner of Insurance states, p. 35:
‘“* * * the rate regulation statutes completely ignore under-
writing standards and effectively ignore cancellation decisions.
Yet we know that those decisions are equally as critical to
competitive and fair rates as are pricing decisions. People under-
written against or cancelled may be forced to pay much higher
rates in a ‘market of last resort.’ ”
The Commissioner opines, p. 11:
“Many have been shunted into the residual market because
of the application of arbitrary and capricious underwriting and
cancellation decisions.”
Our conclusion that the No-Fault Act’s present rate-making scheme
and mechanisms for availability are constitutionally deficient echoes
the belief of the Commissioner in his letter to the Governor p. i:
“(T]he present system of regulation and the mechanisms for
guaranteeing availability are seriously deficient.”
A29
We are concerned that a person’s interest in the registration
and operation of a motor vehicle may be effectively suspended
by the legislative requirement that registrants and operators of
motor vehicles purchase no-fault insurance as a condition to the
operation of a motor vehicle if no-fault insurance is not made
available on a fair and equitable basis.
The current procedures of the Commissioner of Insurance for
the promulgation of rates by insurance companies do not pro-
vide sufficient assurance that rates and rate-making factors will
be substantially justified. Absent adequate procedures, there is
a danger that persons similarly situated will ultimately be treated
differently with respect to their recognized interest in registering
and operating a motor vehicle. See Davis, Administrative Law
of the Seventies, § 6.13.
At the same time, we recognize the insurance companies’
need for prompt adjustment of rates which provide adequate
capitalization and the state’s desire to minimize its administrative
burden. We are also concerned with the availability of insurance.
Individuals must have the knowledge necessary to protect them-
selves against erroneous or discriminatory underwriting and
rate-making decisions. See Fuentes v. Shevin, 407 US 67; 92
S Ct 1983; 32 L Ed 2d 556 (1972). There must be available
adequate means of redress for such errors and discrimination.
See Dixon v Love, 431 US 105; 97 S Ct 1723; 52 L Ed 2d
172 (1977). There must also be available adequate means of
redress for insurance refusal, discriminatory insurance cancella-
tion, or assignment to the “Automobile Placement Facility” with
its presumptively higher rates.
These objectives can be achieved and the procedures har-
monized consistent with the due process clause in different ways.
At a minimum, this Court holds that no-fault insurance
does not satisfy constitutional due process unless:*°
29. We emphasize that the following are minimally required to
satisfy due process. The Legislature can, in its wisdom, choose
other enforcement mechanisms assuring adherence to the above
principles.
A30
1. The Legisiature and/or the Commissioner of Insurance
(pursuant to his present rule-making authority, MCL
500.2484; MSA 24.12484), give substantial meaning
to the statutory standards “Rates shall not be excessive,
inadequate or unfairly discriminatory”. See MCL
500.2403; MSA 24.12403; MCL 500.3340; MSA
24.13340.*°
2. A filed rate, or a rate determined on administrative or
judicial review, provides and sets forth:
a) premiums reasonable to insured and insurer for the
specific insurance coverage without regard to
factors assertedly warranting differences in pre-
miums among those insured ;
b) the factors which properly may be considered by
the insurer in differentiating premiums among those
insured; and
c) the amount of differential appropriate for each
such factor.
3. Such information for each insurer*' is publicized in
such a manner that every person affected can readily
ascertain the factors and amounts of differentials appli-
cable to him and calculate the premium the insurer
may charge.
4. Every motorist has the opportunity to obtain a prompt
‘and effective administrative review of an insurer’s calcu-
lation of the factors, differentials and premium
applicable to him and a prompt and effective adminis-
30. See Davis, Administrative Law of the Seventies, § 6.13.
31. The Legislature, or Commissioner of Insurance (if so
authorized), might, as in other states, establish factors, differentials
or premiums uniformly applicable to all insurers. This “minimal” re-
quirement proceeds on the assumption that this will not be required
or authorized by the Legislature and that, as now, factors, differen-
tials and premiums may be established based upon the insurer’s
separate experience.
A31
trative review of the basis for the refusal or cancellation
of insurance.*”
(4) Our holding the No-Fault Act’s “compulsory insur-
ance requirement” unconstitutional because of the inade-
quacies that exist in the present statutory system for making
no-fault insurance available at fair and reasonable rates raises
crucial jurisprudential and social considerations.
We are deeply aware that our holding not only directly affects
the problems of motorists and the insurance business in this
state, but that it also substantially affects our entire system of
civil justice.
We also assume that, because of our otherwise constitutional
approval of the general statutory schemata under the No-Fault
Act (e. g., the personal injury protection insurance and property
damage protection insurance schemata), the Legislature and the
Commissioner of Insurance will seek to remedy the constitu-
tional deficiencies articulated supra.
We therefore believe it best, for purposes of the general
jurisprudence, the general welfare of the public, and the admin-
istration of justice in our state to hold the “compulsory insur-
ance requirement” of the No-Fault Act unconstitutional (for the
reasons araiculated supra) effective as of 18 months from the
issuance of this opinion.**
32. The Legislature can, of course, choose to prohibit an indi-
vidual insurer’s refusal or cancellation of no-fault insurance by re-
quiring that an insurer establish a system of equitable categories for
all ‘high risk’ persons (for which the insurer can receive some form
of legislative protection).
33. See Robinson v Cahill, 62 NJ 473; 303 A2d 273 (1973),
cert den 414 US 976 (1973). In Robinson, the New Jersey Supreme
Court held that state’s education financing scheme unconstitutionally
violated equal protection. The Court, in its order, declared:
“The present system being unconstitutional, we come to the
subject of remedies. We agree with the trial court that relief
must be prospective. The judiciary cannot unravel the fiscal
skein. Obligations incurred must not be impaired. And since
government must go on, and some period of time will be needed
(Footnote continued on next page.)
A32
At an appropriate time before 18 months from the issuance
of this opinion, we will re-examine the constitutional status
of the No-Fault Act in terms of remedying the present due
process deficiencies. Any party or person wishing to file briefs or
be heard shall make timely inquiry of the Clerk as to the proper
procedure.** This Court will take whatever action appears
appropriate at that time.
(Footnote continued from preceding page.)
to establish another statutory system, obligations hereafter in-
curred pursuant to existing statutes will be valid in accordance
with the terms of the statutes. In other respects we desire the
further views of the parties as to the content of the judgment,
including argument as to whether the judiciary may, as the trial
court did with respect to the ‘minimum support aid’ and the
save-harmless provision of the 1970 Act, 118 NJ Super
[223] at 280-281 [287 A2d 187 (1972)], order that moneys
appropriated by the Legislature to implement the 1970 Act shall
be distributed upon terms other than the legislated ones. A
short date for argument will be fixed.” 62 NJ 473, 520-521.
Subsequent to this, the Court issued a per curiam opinion
referring to the statement in its opinion that it “desired the
further views of the parties as to the content of the judgment.”
This opinion, essentially identical in substance to our holding,
stated, 63 NJ 196, 198; 306 A2d 65 (1973):
“We have had the benefit of further argument. It is our view
that the Court should not disturb the statutory scheme unless
the Legislature fails to enact, by December 31, 1974, legislation
compatible with our decision in this case and effective no later
than July 1, 1975. We withhold ruling upon the question whe-
ther, if such legislation is not so adopted, the Court may order
the distribution of appropriated moneys toward a constitutional
objective notwithstanding the legislative directions.
“We retain jurisdiction. Any party may move for appropriate
relief, before or after December 31, 1974, if new circumstances
so warrant.”
See Governor v State Treasurer (On Rehearing), 390 Mich 389,
394-395; 212 NW2d 711 (1973).
34. The Legislature, in whatever manner it deems appropriate,
is invited to be represented at this Court’s re-examination of the
constitutional status of the No-Fault Act.
A33
During the interim period:
1) the Legislature and the Commissioner of Insurance may
take whatever action they deem necessary to remedy
the due process deficiencies articulated supra*®
2) §§3101(1) and 3101(4) of the No-Fault Act will
remain in effect, i.e., motorists will still be required to
obtain no-fault insurance as a condition precedent to
the registration and operation of a motor vehicle;
3) the No-Fault Act’s constitutionally valid provisions, as
decided in this opinion and subsequent opinions, will
remain in effect.
Until there is legislative or agency response to the due process
deficiencies articulated supra, the Commissioner of Insurance
shall actively enforce the present regulatory scheme in the spirit
of our opinion in order to assure the availability of no-fault
insurance at fair and equitable rates during this period.
We also add that all rights accrued by individuals against
their insurers or against the “Automobile Placement Facility”
until the order in this case is entered remain valid.
c 35. See Robinson v. Cahill and fn 33, supra.
See also, Sax, The Public Trust Doctrine in Natural Resource
Law: Effective Judicial Intervention, 68 Mich L Rev 471, 559, fn
268 (1970). Professor Sax writes that “In the ideal world legis-
latures are the most representative and responsive public agencies;
and to the extent that judicial intervention moves legislatures toward
that ideal, the citizenry is well served.” He then perceptively notes,
and we agree: rls
“It should be emphasized that the judicial function is properly
invoked principally to deal with issues which, while very im-
portant, tend to be made at low-visibility levels, even though
they may be endorsed by very highly placed officials. Converse-
ly, when there is high public visibility on an issue, when it is
dealt with as a central matter of state or national policy, and
when account has been taken of open and widespread public
opinion from all quarters, the judiciary does not ordinarily have
a role to play as a perfector of the political process. In such
cases, the charge that judicial intervention would amount to
displacement of the considered judgment of co-equal branches
of the government has merit.” (Emphasis added. )
A34
IV.
Although we have held the No-Fault Act’s “compulsory
insurance requirement” unconstitutional because of insufficient
due process protections, effective as of 18 months from the
issuance of this opinion, we again emphasize our concurrent
holding that “[djuring the interim period * * * the No-Fault
Act’s constitutionally valid provisions, as decided in this opinion
and subsequent opinions, will remain in effect.” Accordingly, we
now address the remaining issues in this case properly before us.
All the remaining issues involve due process and equal pro-
tection challenges to various statutory schemata of the No-Fault
Act. At bottom, these issues are directed at the question of
whether the Legislature constitutionally exercised its police
power in enacting a particular statutory scheme. Because the
constitutional framework employed and discussed with respect to
the “compulsory insurance requirement” (i.e., the facial due
process sufficiency of the protections provided in the act and
other sections of the Insurance Code for available no-fault
insurance at fair and equitable rates) was, conceptually, of a
different constitutional nature, it is necessary that we discuss the
applicable due process and equal protection tests for these re-
maining issues.
The test to determine whether legislation enacted pursuant
to the police power comports with due process is whether the
legislation bears a reasonable relation to a permissible legis-
lative objective.** See Michigan Canners v. Agricultural Board,
397 Mich 337, 343-344, 245 NW2d 1 (1976).
36. Plaintiffs and cross-plaintiffs State Farm Mutual and Allstate
contend that this Court should apply a more rigorous cue process
test in deciding those issues involving the abolition of a common-law
cause of action in tort. They cite, as authority, speculative dicta in
New York C R Co Vv White, 243 US 188, 201; 37 S Ct 247;
61 L Ed 667 (1917) and Pinnick v Cleary, 360 Mass 1, 15;
271 NE2d 592, 602 (1971). They ask that we require the Legisla-
ture to afford an “adequate substitute remedy” before- abolishing a
common-law cause of action in tort.
(Footnote continued on next page.)
A35 .
The test to determine whether a statute enacted pursuant
to the police power comports. with equal protection is, essen-
tially, the same. As the United States Supreme Court declared in
United States Dep't. of Agriculture v. Moreno, 413 US 528,
533; 93 S Ct 2821; 37 L Ed 2d 782 (1973):
“Under traditional equal protection analysis, a legislative
classification must be sustained, if the classification itself is
rationally related to a legitimate governmental interest.”
(Citations omitted. )*"
(Footnote continued from preceding page.)
We disagree. The “adequate substitute” test is not required by
either the United States or Michigan Constitutions. The United
States Supreme Court, in Silver v. Silver, 280 US 117, 122; 50
S Ct 57; 74 L Ed 221 (1929), a case decided after New York
C R Co v White, flatly declared: “[t}he constitution docs not
forbid the creation of new rights, or the abolition of old ones recog-
nized by the common law, to attain a permissible legislative object.”
In Pinnick, the Massachusetts Supreme Court, in choosing to apply
a “reasonable and adequate substitute test”, correctly recognized that
the test was “not constitutionally required”. 360 Mass 1, 15-16.
Other state courts have also forthrightly rejected the test as consti-
tutionally required. See especially, Montgomery v. Daniels, 38 NY2d
41, 56; 340 NE2d 444, 453 (1975); and Jones v. State Board of
Medicine, 97 Idaho 859, 869; 555 P2d 399, 409 (1976).
Our Constitution does not recognize a vested right in the con-
tinuance of existing remedies for injuries not yet suffered. Article
3, section 7 of our Constitution states that “the common law and
the statute laws now in force, not repugnant to this constitution, shall
remain in force until they expire by their own limitations, or are
changed, amended or repealed.” Const 1963, art 3, § 7. As this
Court stated in Mackin v. Detroit-Timkin Axle Co, 187 Mich 8,
13; 153 NW 49 (1915): “Except as to vested rights, the legis-
lative power exists to change or abolish existing statutory and
common-law remedies. Common and statute laws only remain in
force until altered or repealed.” See, also, Myers v Genesee County
Auditor, 375 Mich 1, 7-8, 133 NW2d 190 (1965) (opinion by
O'Hara, J.).
This is not to suggest that the Legislature may arbitrarily abolish
a common-law remedy. Leaving seriously injured persons without
any remedy may violate concepts of fundamental fairness and
justice which are part of the fabric of constitutional government.
37. Plaintiffs contend that this Court should apply the “sub-
stantial-relation-to-the-object” test advanced in Manistee Bank &
Trust Co. v. McGowan, 394 Mich 655; 232 NW2d 636 (1975).
(Footnote continued on next page.)
A36
In the application of these tests, it is. axiomatic that the
challenged legislative judgment is accorded a presumption of
constitutionality. See Michigan Canners v. Agricultural Board,
supra, 343-344. What this “presumption of contitutionality”
means, in terms of challenged police power legislation, is that in
the face of a due process or equal protection challenge, “where
the legislative judgment is drawn in question”, a court’s inquiry
“must be restricted to the issue whether any state of facts either
known or which could reasonably be assumed affords support
for it”. United States v Carolene Products Co, 304 US 144, 154;
58 S Ct 778; 82 L Ed 1234 (1938). A corollary to this rule is
that where the legislative judgment is supported by “any state of
facts either known or which could reasonably be assumed”,
although such facts may be “debatable”, the legislative judgment
must be accepted. Carolene Products Co v Thomson, 276 Mich
172, 178; 267 NW 608 (1936) .*
(Footnote continued from preceding page.)
In Manistee, we stated this test is applicable in those cases in which
“the challenged statute carves out a discrete exception to a general
rule and the statutory exception is no longer experimental” (em-
phasis added). 394 Mich 655, 671. The No-Fault Act, not even in
effect for five years at the time of this writing, cannot be sensibly
characterized as legislation “no longer experimental” in the same
wavy in which the 45-year-old guest statute at issue in Manistee Bank
& Trust Co. unquestionably was.
Plaintiffs also contend that this Court should review this legisla-
tion with “strict scrutiny” under the equal protection clauses of the
Michigan and United States Constitutions because a “fundamental
interest”, the right to travel, is involved. We agree with the trial
court and the Court of Appeals that under the equal protection
clause a person’s interest in operating an automobile is not funda-
mental. Shavers vy Attorney General, 65 Mich App 355, 364;
237 NW2d 325 (1975). The right to travel protects movement in
the sense of migration, not the individual’s cuoice of a particular
means of transportation. See Memorial Hospital v Maricopa County,
415 US 250, 255-259; 94 § Ct 1076; 39 L Ed 2d 306 (1974).
38. See Ferguson v Skrupa, 372 US 726, 730-731, 83 S Ct
1028; 10 L Ed 2d 93 (1963), where the United States Supreme
Court stated:
“(Cjourts do not substitute their social and economic beliefs
for the judgment of legislative bodies, who are elected to pass
(Footnote continued on next page.)
A37
In accord with this axiomatic rule and its corollary a
court may uphold the constitutionality of police power legis-
lative judgments in the face of due process or equal protection
challenge by taking judicial notice of indisputable, generally
known or easily ascertainable facts.*® And, because the “pre-
sumption of constitutionality” is a rebuttable presumption, a
party challenging the legislative judgment may attack its consti-
tutionality in terms of purely legal arguments (if the legislative
judgment is so arbitrary and irrational as to render the legislation
unconstitutional on its face)*® or may show, by bringing to the
court’s attention facts which the court can judicially notice, that
the legislative judgment is without rational basis.*'
There are, however, instances in which police power legislative
judgments cannot be affirmed or rejected on the basis of purely
legal arguments or indisputable, generally known or easily
ascertainable facts which can be judicially noticed. In such
instances, the facts upon which the existence of a rational basis
for the legislative judgment are predicated “may properly be
made the subject of judicial inquiry” (United States v Carolene
Products, supra, 153). Thus, a court may require a trial so that
it may establish adequate findings of facts to determine whether,
(Footnote continued from preceding page.)
laws. As this Court stated in a unanimous opinion in 1941,
‘We are not concerned * * * with the wisdom, need, or ap-
propriateness of the legislation.’ Legislative bodies have broad
scope to experiment with economic problems, and this Court
does not sit to ‘subject the State to an intolerable supervision
hostile to the basic principles of our Government and wholly
beyond the protection which the general clause of the Four-
teenth Amendment was intended to secure.’ * * * We refuse
to sit as a ‘superlegislature to weigh the wisdom of legislation’.”
(Citations omitted. )
39. See Borden’s Farm Products Co, Inc. v. Baldwin, 293 US
194; 55 S Ct 187, 79 L. Ed. 281 (1934). For a recent example
of this Court’s exercise of this principle, see People v Poucher, 398
Mich 316; 247 NW2d 798 (1976).
40. See Borden’s Co v Baldwin, fn 39, supra; Pinnick v Cleary,
supra, 360 Mass 36; 271 NE2d 614 (Tauro, C. J., concurring).
41. See fn. 39, supra.
A38 |
on the one hand, plaintiffs have shown facts which reveal that
the legislative judgment is without rational basis, or, on the other
hand, whether there is any reasonable state of facts on the
record which can be produced in support of the legislative
judgment.”
Such an approach is particularly necessary when the chal-
lenged police power legislation is important, complicated, novel
or experimental legislation. Borden’s Farm Products Co, Inc v
Baldwin, 293 US 194, 204, 210, 212; 55 S Ct 187; 79 L Ed
281 (1934). See also Pinnick v. Cleary, supra, 34-37 (Tauro,
C. J., concurring). As Chief Justice Hughes declared, writing for
a unanimous United States Supreme Court in Borden’s Co
Vv Baldwin, supra:
“(Where the legislative action is suitably challenged, and
a rational basis for it is predicated upon the particular
economic facts of a given trade or industry, which are
outside the sphere of judicial notice, these facts are prop-
erly the subject of evidence and of findings. With the notable
expansion of the scope of governmental regulation, and the
consequent assertion of violation of constitutional rights, it
is increasingly important that when it becomes necessary
for the Court to deal with the facts relating to particular
commercial or industrial conditions, they should be pre-
sented concretely with appropriate determinations upon
evidence, so that conclusions shall not be reached without
edequate factual support.” (Emphasis added.) 293 US
194, 210.
We believe that the No-Fault Act is substantively analogous
in this respect to the legislation challenged in Borden’s Co v
Baldwin. The challenged rational bases for the legislative
judgments under the act are “predicated” upon complicated
statistics and actuarial facts of the motor vehicle insurance
42. See Note, The Presentation of Facts Underlying the Con-
stitutionality of Statutes, 49 Harv L Rev 631 (1936); Alfange,
The Relevance of Legislative Facts in Constitutional Law, 114 Pa
L Rev 637 (1966). ,
43. At issue in Borden’s Co v Baldwin was the constitutionality
of the New York Milk Control Law.
A39.
“trade” or business (which have substantial economic conse-
quences). We believe, as did the Supreme Court in Borden’s Co
v Baldwin, that the “complexity of problems” inherent in a
judicial determination of whether the legislative judgments of the
No-Fault Act are constitutional, “makes it the more imperative
that the Court in discharging its duty, in sustaining govern-
mental authority within its sphere and in enforcing individual
rights, shall not proceed upon false assumptions”. 293 US 194,
210-211. Thus, as Justices Stone and Cardozo stated in their
concurring memorandum in Borden’s Co v Baldwin:
“We are in accord with the view that it is inexpedient to
determine grave constitutional questions upon a demurrer
to a complaint, or upon an equivalent motion, if there is a
reasonable likelihood that the production of evidence will
make the answer to the questions clearer.” 293 US 194,
213.
This Court implicitly recognized this approach in Michigan
Canners V Agricultural Board, supra. At issue in Michigan
Canners were “important questions of first impression regard-
ing the constitutionality and construction of the Agricultural
Marketing and Bargaining Act, MCL 290.701 et seq.; MSA
12.94(101) et seq.”. 397 Mich 337, 340. The circuit court,
however, dismissed the challenge on (erroneous) jurisdictional
grounds. 397 Mich 337, 342, 344-345. This Court declared:
“As mentioned above, plaintiff has raised important
questions regarding the constitutionality and construction
of the Agricultural Marketing and Bargaining Act without
developing a factual record at trial which would help pro-
vide a context in which to consider these questions.
“To resolve these significant issues in such a factual
vacuum would be imprudent where it appears that further
factual development would substantially contribute to the
‘ proper disposition of the case.
“Such is the case here, especially in that Michigan
Canners has claimed that the Bargaining Act is unconsti-
tutional because it exceeds the police power of the state.
This claim in particular requires full development of facts
AAO
which might support or undermine the claim that the
statute is an invalid exercise of the police power.” 397
Mich 337, 342-343.*
Therefore, in the face of due process challenges to the legis-
lative judgments of the No-Fault Act which resulted in various
statutory schemata, our task is double-edged. First, we must
determine from the record before us whether plaintiffs have over-
come the presumption of constitutionality by showing facts
which reveal that the legislative judgment is without rational
basis, or, to the same effect, we must determine from the record
whether the challenged legislative judgment is supported by any
reasonable state of facts justifying its enactment. Second, we
must then determine whether the legislative response bears a
reasonable relation to this identified objective.
Similarly, our task is double-edged in considering equal pro-
tection challenges to the No-Fault Act. First, we must determine
from the record before us whether plaintiffs have overcome the
presumption of constitutionality by showing facts which reveal
that the legislative judgment is without rational basis or, to the
same effect, we must determine from the record whether the
challenged legislative judgment is supported by any reasonable
44. Justice COLEMAN, concurring in this approach, declared:
“Although it is accepted that the concept of police power
is somewhat ‘elastic in nature’, there is a danger here that it
be stretched so far as to have no real meaning. Proposed stan-
dards such as that which fosters the ‘convenience and com-
fort of: the people’ or preserves ane improves ‘social and
economic conditions affecting the community at large’ could
justify almost any imaginable action.
“Remand is proposed because the claim that the statute
exceeds the police power ‘in particular requires full develop-
ment of the facts’. I agree with the remand providing that
the trial judge develop those facts deemed pertinent, but I
would leave discussion of the constitutional question until we
have the facts.” 397 Mich 337, 351-352.
Therefore, we remanded to the circuit court asking “both parties
to contribute to the development of a factual context which will
allow.us to properly resolve the issue of the constitutionality of
the act”. 397 Mich 337, 344.
AAI
set of facts indicating that the legislative judgment is in the
exercise of a legitimate governmental interest. Second, we must
then determine whether the challenged statutory classifications
which result from the legislative judgment are reasonably re-
lated to this legitimate governmental interest.*®
V.
The second issue before us is whether the No-Fauit Act’s
personal injury protection insurance scheme violates the due
process and equal protection clauses of the Michigan and United
States Constitutions.
The features of the act’s personal injury insurance scheme
relevant to the resolution of the due process and equal protection
challenges before us are:
1, The owner or registrant of a motor vehicle required to
be registered in Michigan must maintain security for
payment of benefits under personal injury protection
insurance (§ 3101);
2. Tort liability arising from the ownership, inaintenance
or use within the State of Michigan of a motor vehicle
is abolished with respect to accidental bodily injury
except for non-economic loss “if the injured person has
suffered death, serious impairment of body function or
permanent serious disfigurement” (§ 3135[1]), inten-
tionally caused harm to persons (§ 3135[2][a]), or
damage in excess of the personal injury insurance
benefits provided under the act (§ 3135[2][c]). How-
ever, tort liability arising from the ownership, main-
tenance or use within this state of a motor vehicle with
respect to bodily injury is not abolished if the operator
of tne motor vehicle has not complied with the act’s
45. This Court does not believe a factual context is necessary
to decide the facial due process sufficiency of the act’s present rate
regulatory scheme because of this issue’s purely procedural nature.
A42.
mandatory insurance requirements (i.e., if the person
is uninsured) (§ 3135[2]);
3. The owner, registrant and operator of an insured vehicle
who suffers accidental motor vehicle bodily injury in
Michigan or in another state, whether he suffers this
injury in his own vehicle or as an occupant of another
vehicle or when he is not an occupant of a motor
vehicle, is entitled to personal injury protection insur-
ance benefits. The same is true for the “spouse and any
relative” of the insured who is “domiciled in the same
household” as the insured (§ 3114[1], see § 3110).
However, an owner or registrant of a vehicle with
respect to which the compulsory requirements of the
act are not in effect (i.e., the uninsured Michigan
motorist) is not entitled to personal injury protection
insurance benefits.
In general, personal injury protection insurance under the
act provides:
(a) all medical costs and expenses occasioned by injuries
sustained in a motor vehicle accident, including ex-
penses for rehabilitation (see § 3107[a]);
(b) reimbursement up to a maximum of $1,000 a month
for loss of income resulting from a motor vehicle
accident for a period not exceeding three years. This
amount is applied pro rata for shorter periods of work
loss. (This limit may be adjusted annually to keep
pace with changes in the cost of living.) (§ 3107[b]).
Personal injury protection insurance also provides up
to $1,000 for funeral and burial expenses (§ 3107[a]);
(c) reimbursement for the cost of replacement of ordinary
and necessary services “reasonably incurred”, i.e.,
reimbursement of services the injured person would
have performed not for income but for his own
personal benefit or the benefit of his household if these
A43
services are shown to be “reasonably incurred”. Under
the act, an injured person may be reimbursed for such
services up to a limit of $20 a day for a maximum
period of three years. (This limit may be adjusted
annually to keep pace with changes in the cost of
living.) (§ 3107[b].) The family of the injured person
may receive the same reimbursement should the
injured person die. (§ 3108.)
(A) Due Process
Plaintiffs contend that the No-Fault Act violates due process
by partially abolishing the common law remedy in tort for
persons injured by negligent motor vehicle tortfeasors.
We disagree.
As noted supra, the Legislature need not provide an “adequate
substitute” remedy before abolishing a common-law cause of
action in tort; Macklin v Detroit-Timkin Axle Co, 187 Mich
8, 13; 153 NW 49 (i915); Naudzius v Lahr, 253 Mich 216;
234 NW 581 (1931; Silver v Silver, 280 US 117; 50 S Ct 57,
74 L Ed 221 (1929). The abolition of a common-law tort
remedy is measured by the traditional due process test, namely,
whether the legislation bears a reasonable relationship to a
permissible legislative objective. See discussion, Part IV, supra.
We believe that the abolition of the tort remedy for personal
injury resulting from motor vehicle accidents was clearly justi-
fied by deficiencies in the tort system.
Testimony and documentary evidence presented at trial sup-
port the apparent legislative judgment that the tort system of
reparations for automobile accident victims had _ several
operational deficiencies:
1. A high percentage of persons injured in automobile
accidents received no reparations under the tort system
(to collect damages under this system the injured
person must be free of any contributory negligence
A44
and the accident must be caused by a person who is
adjuged to be at fault) ;*°
2. Minor injuries were over-compensated and serious in-
juries were under-compensated;*"
3. Lengthy delays existed under the tort system in com-
pensating those injured in automobile accidents—often
in cases where the need for prompt compensation was
strongest;**
4. The tort system imposed a heavy burden on the state’s
court system,*®
46. See Exhibit 17, Russell E. Van Hooser, Commissioner of
Insurance, Statement on Automobile Insurance (1974), and Conard,
Morgan, Pratt, Voltz, & Bombaugh, Automobile Accident Costs &
Payments (Ann Arbor: The University of Michigan Press, 1964)
to the effect that “only 37% of persons injured in automobile acci-
dents in Michigan received tort recovery”.
47. The trial court summarized the exhibit provided by Pro-
fessor W. James MacGinnitie of the University of Michigan School
of Business Administration as follows:
“His testimony showed that for cases of serious injuries
under the tort system, 56.7% of the persons received no com-
pensation; 11.1% received less than 50% of the economic loss,
and 10.9% received 50% to 100% of economic loss. The
balance of 20.3% received anywhere from 100% to 400% of
economic loss.”
See, also, Department of Transportation, Motor Vehicle Crash
Loss¢s and their Compensation, which reports that “for fatally
and seriously injured persons with economic losses of $10,000
or more the median aggregate compensation received from all
sources was only 35% of their total economic losses”. Joint
Appendix, p. 2674a, and Van Hooser, Statement on Automobile
Insurance, supra.
48. See testimony of Chief Deputy Insurance Commissioner
Robert Rowe and Department of Transportation study, Motor
Vehicle Crash Losses, to the effect that there is “an average delay
of 16 months for fatalities and serious injuries”. Joint Appendix,
p. 267Sa.
49. See Department of Transportation study, Automobile Acci-
dent Litigation, Joint Appendix, p. 2680a.
A45
5. The tort liability system discriminated, in terms of
recovery, against the uneducated and those persons on
a low income scale.*°
The legislative response, the enactment of the no-fault personal
injury protection scheme, reasonably relates to the purpose of
correcting these evils. These provisions provide, inter alia, for
payment without regard to fault within 30 days of claim for all
reasonable medical and rehabilitation expenses, for wage loss
and replacement services for a period of three years, for sur-
vivor’s loss of support and services for three years. Such pay-
ments may substantially compensate all personal injury victims
of motor vehicle accidents for economic loss, including the
victims of motor vehicle accidents, who were, under the tort
system, uncompensated or undercompensated for their economic
losses, Prompt payment provided for under the act may remedy
the delays under the tort system. By partially abolishing tort
liability to those who suffer personal injuries as a result of motor
vehicle accidents, the act may lessen the number of motor vehicle
personal injury tort suits in the courts. The prompt availability
of compensation for economic losses may relieve the under-
educated or those with lower income from the pressure—“legal”
or economic—to settle serious claims prematurely and for less
than an equitable amount.
50. The trial court found:
“(t]he percentage of recovery by level of family income
increased as the family income increased, and also increased
as the level of education increased. For example, those with
a family income under $5,000 recovered 38% of their eco-
nomic loss. Those with family incomes of $5,000 to $9,999
recovered 52% of their economic loss, and those with income
over $10,000 recovered 61% of their economic loss. By the
same token, those who had only a grade school education re-
covered 24% of their economic loss. Those with a high school
‘education recovered 53% of their economic loss, and those
who had some college training recovered 70% of their economic
loss.”
See, also testimony of Dean Lindsay Cowen of Case Western Reserve
Law School, Chairman of the Commission of the National Con-
ference of Uniform State Laws.
A46
For these reasons, we hold that the personal injury protection
insurance scheme under the No-Fault Act, in partially abolishing
the common-law remedy in tort for persons injured by negligent
motor vehicle tortfeasors, does not violate the due process clauses
of the Michigan and United States Constitutions.
(B) Equal Protection
Plaintiffs contend that the No-Fault Act, by partially abolish-
ing the common-law remedy in tort for persons injured by
negligent motor vehicle tortfeasors, violates equal protection
by creating two impermissible statutory classifications: (1)
motor vehicle tortfeasors and their victims and all other tort-
feasors and their victims; (2) victims of insured motor vehicle
tortfeasors and victims of uninsured motor vehicle tortfeasors.
We disagree.
The treatment of motor vehicle tortfeasors differently from all
other tortfeasors does not violate the traditional test for equal
protection. Exhibits were introduced at trial to show that motor
vehicle accidents have consistently and by a wide margin been
the principal cause of accidental injury and death in Michigan.
The State Police reported that in 1973 approximately 360,000
motor vehicle accidents occurred, resulting in 2,215 fatalities.
The legislative judgment to limit its experiment in personal
injury reparation to victims of accidents involving motor vehicles
is justified by the predictably frequent and serious injury to
persons ahd property resulting from the use of motor vehicles.
See Williamson v Lee Optical Co, 348 US 483, 489; 75 S Ct
461; 99 L Ed 2d 563 (1955).
Second, the creation of two classes of motor vehicle accident
victims—victims of an insured motor vehicle tortfeasor who
may not sue below the threshold and victims of uninsured motor
vehicle tortfeasors who may sue—does not violate equal protec-
tion. This classification, along with penalties imposed by § 3102(2)
may serve as an incentive for compliance with the compul-
sory insurance provision because an uninsured motorist may
A47
be liable in tort for all injury suffered by the victim. McKendrick
v. Petrucci, 71 Mich App 200, 207; 247 NW2d 349 (1976).™
It is significant in this regard that the Assigned Claims
Facility is required to pay benefits to persons who may be
injured by uninsured motorists. MCL 500.3171 et seq.; MSA
24.13171 et seq.
For these reasons, we hold that the No-Fault Act’s incidental
statutory classification between victims of insured motor vehicle
tortfeasors and victims of uninsured motor vehicle tortfeasors
does not violate the equal protection clauses of the Michigan
and United States Constitutions.
VI.
The third issue before us is whether the No-Fault Act’s prop-
erty damage protection scheme violates the due process and
equal protection clauses of the Michigan and United States
Constitutions.
51. The right granted victims of uninsured motorists to main-
tain an action for damages below the statutory threshold is of mar-
ginal value. The argument that it unfairly discriminates against
victims of insured motorists to deny them the same below-the-
threshold recovery assumes erroneously that the right granted victims
of uninsured motorists is of comparable value to the right with-
held from the victims of insured motorists who as a group are more
likely to be responsible than those who are not insured. It also
ignores that victims of insured motorists have, perhaps in part be-
cause of the in terrorem effect of the various sanctions, including
this sanction, to which uninsured motorists are subject, a better
source of recovery above the threshold—within and above the re-
quired policy limits—than victims of uninsured motorists. The
classification reflects a legislative policy which, although it discrimi-
nates between victims, does not in our judgment constitute an in-
vidious discrimination offending the equal protection clause.
It is a separate question whether the classification invidiously
discriminates among uninsured tortfeasors or between uninsured
and insured tortfeasors, a question not raised by the plaintiffs and
which we need not now consider. Nor need we consider whether,
if the classification so invidiously discriminates, the remedy would
be to eliminate the limitation on recovery below the threshold or
to make it applicable to all tortfeasors without regard to whether
they are or are not insured.
A48
The features of the act’s property damage insurance scheme
relevant to the resolution of the due process and equal protection
challenges before us are:
1. The owner or registrant of a motor vehicle required
to be registered in Michigan must maintain security for
payment of benefits under property damage protection
insurance (§ 3101) ;
2. Tort liability arising from the ownership, maintenance
or use within the State of Michigan of a motor vehicle
is abolished with respect to property damage except for
intentionally caused damage to property (§ 3135[2]);
3. Tangible (“non-moving”) property owned by a third
party injured as a result of a motor vehicle accident
and motor vehicles parked in such a way as not to
cause unreasonable risk of damage are entitled to
property damage protection insurance benefits up to
$1,000,000 against the insurer of the motor vehicle
which inflicted the damage (§§ 3121, 3123{1][a]);
The following damaged property is not entitled to property
damage protection benefits: the property of the insured, includ-
ing the motor vehicle, and tractor attached thereto, or any
property of the insured in his motor vehicle (§ 3123[1] subds.
[a], [b]). Also, property damage protection benefits are not
payable for damage to (1) third-party motor vehicles which are
parked in such a way as to cause an unreasonable risk of
damage, or (2) non-vehicle property arising from out-of-state
motor vehicle accidents (§ 3123).
Because property damage to an insured’s own motor vehicle
is not covered by property protection insurance benefits, the act
requires insurers to offer optional first-party collision insurance
to provide an insured reimbursement for such damage if he so
chooses (§ 3037).
A49
(A) Due Process
Plaintiffs and cross-plaintiffs contend that the No-Fault Act
violates due process by abolishing the common-law remedy in
tort for persons whose property is damaged by negligent motor
vehicle tortfeasors.
We disagree.
Again, in resolving this due process challenge, we apply the
traditional due process test, namely whether the legislation bears
a reasonable relation to a perntissible legislative objective.
The trial court found, and the record tends to support its
conclusion, that the weaknesses of the tort system of compensa-
tion for personal injuries suffered as a result of motor vehicle
accidents™ did not affect that system’s compensation of property
damage. Although the switch from property damage liability
coverage to collision coverage may yield some increase in the
efficiency of payments, it is apparent from a review of the record
that the tort system provided relatively prompt, equitable com-
pensation for damage to property resulting from motor vehicle
accidents.
The analysis by the trial court and the Court of Appeals
suggests that there must be an identifiable evil which the Legis-
lature intends to correct. We do not believe this is constitu-
tionally necessary. The Legislature is as free to experiment with
other ways of dealing with a subject in the hope of making a
good system better as it is to correct a perceived evil system.
The property damage section seeks to achieve several goals
in addition to prompt, equitable and complete compensation.
Testimony at trial established that the Legislature anticipated
that the abolition of a tort action for property damage would
52. The trial court stated: “[T]he former system operated at
high efficiency in resolving property damage disputes arising from
automobile crashes.” See Mehr & Eldred, Should the Automobile
Property Damage Liability Insurance System Be Preserved?, 48
Notre Dame Lawyer 811 (1973), and Exhibits 162, 163, 164,
and the testimony of Richard Kinkade, Joint Appendix, p. 1235a.
ASO
have at least four major effects ultimately resulting in lower and
more equitable premiums.
First, with the shift from liability to collision insurance re-
sulting from the abolition of tort liability, there would be a new
emphasis on the value and repairability of the insured’s own
motor vehicle; rates would be calculated on the basis of repair
costs for that vehicle, rather than, as in liability insurance, on
the potential damage to a vehicle of unknown value.”
Second, an additional anticipated effect of relating premium
costs to the insured’s car was that this system would create in-
centives for safer cars.™
Third, the abolition of tort liability eliminates the necessity
for accident investigations, because a determination of fault is
irrelevant to the payment of compensation. The elimination of
such investigations, it was hoped, would result in decreased ad-
ministrative costs and resultant savings on insurance premiums.”
53. See testimony of Professor W. James MacGinnitie:
““* * * [G]reater equity will be achieved in the sense that
each individual will be paying a premium related to the size and
damageability and characteristics of his own vehicle.
“In the past, he’s paid a premium which, in large part, re-
flected the average of all the other vehicles with which he might
be involved in an accident * * *.
“The equity that is achieved thereby is [that] a small car
which has a relatively low value, would carry a lower premium
for collision as opposed to a large car, high value [which]
would carry the relatively larger premium.”
See, also, 13 ULA, Civil Procedural and Remedial Laws, Uniform
Vehicle Accident Reparations Act, § 5(a)(4), Comment, p. 374,
and the testimony of Chief Deputy Insurance Commissioner Robert
Rowe, Joint Appendix, p. 486a.
54. See Exhibit 202, New York Insurance Department, Auto-
mobile Insurance—For Whose Benefit?, pp. 119-121; Exhibit 34,
Uniied States Department of Transportation, Motor Vehicle Crash
Losses and Their Compensation in the United States (March, 1971),
pp. 97, 128-129; and the testimony of Professor W. James Mac-
Ginnitie, Joint Appendix, p 2557a.
55. See testimony of Professor W. James MacGinnitie and
Dean Lindsey Cowen, Joint Appendix, pp 1578a 2072a and Uni-
form Motor Vehicle Accident Reparations Act, § 5(a)(4), Com-
ment, p 374.
- ASI
Finally, by shifting from a liability to a no-fault system which
emphasizes the risk to be insured, not the exposure to some
unknown third party, the Legislature anticipated that group
insurance would become feasible. Group insurance has been
shown to be far less expensive to administer and more likely to
result in lower costs. Furthermore, this potential for group in-
surance may draw large life and group insurance underwriters
into the automobile insurance field, resulting in beneficial com-
petition.”
The fact that these effects are not yet evident does not
diminish the legitimacy of the goals sought to be achieved or
the reasonableness of the means adopted. At this early stage in
the functioning of the No-Fault Act these long-term develop-
ments cannot yet fully be assessed. Indced, this litigation itself,
with its resulting uncertainty as to the viability of the No-Fault
Act, may slow the achievement of the act’s goals. Our decision
in Manistee Bank, supra, is particularly relevant to this aspect
of the case: it is precisely because regulation in the economic
field often deals with long-term developments that the Court
treats such legislation with great deference.
Plaintiffs and cross-plaintiffs emphasize that fault investiga-
tions have continued under the No-Fault Act. But that fact is
not at this point a relevant consideration.’’ Those investigations
may be merely vestigial.
56. See testimony of Professor W. James MacGinnitie, Joint
Appendix, pp 2043a-2044a.
57. The trial court and appellee State Farm point to the testi.
mony of Richard Kinkade, witness for and employee of State Farm,
who testified that the cost of investigating fault for property dam-
age was 3/10 of 1% of State Farm’s earned premiums, $63,215, in
1972. A review of the State Farm report (Exhibit 53) relied on
by Kinkade reveals that in 1972 the paid allocated loss adjustment
expenses, which includes fault investigations, had substantially greater
expenditures for the category of property damage connected with
bodily injury ($1,640,284) and bodily injury alone ($1,577,069).
It is not clear from the testimony whether the $63,000 figure for
property damage reflects those instances where a minimal fault in-
vestigation was necessary, nor is it clear what percentage of the
(Footnote continued on next page.)
AS2
Similarly, plaintiffs and cross-plaintiffs emphasize the increase
in collision premiums resulting from the enactment of No-Fault.
Whether or not there has been such an increase and whatever
the cause, the important consideration for this Court at this
point is to determine whether there existed a permissible legisla-
tive objective reasonably related to the statute. We find that the
No-Fault Act’s property damage protection scheme meets this
test and, accordingly, hold the property damage protection
scheme does not violate due process.
(B) Equal Protection
Plaintiffs and cross-plaintiffs contend that the No-Fault Act
violates equal protection by creating the following statutory
classifications: (1) damage to vehicular property is not covered
by any mandatory insurance under the act, i.e., property dam-
age claims with respect to this kind of property are covered
solely under optional first-party collision insurance, while (2)
damage to tangible property and properly parked motor vehicles
is covered by mandatory third-party (no-fault) property damage
insurance up to $1,000,000 required to be carried by the motor-
ist who inflicted the damage.
We disagree.
Again, as in the equal protection challenge to the personal
injury section of the No-Fault Act, we apply the traditional
equal protection test.
(Footnote continued from preceding page.)
figures for property damage were connected with bodily injury and
bodily injury investigations. Nevertheless a review of all the figures
indicates that the $63,000 sum was an inaccurate estimate of the
total fault investigations connected with property damage accidents.
The view that fault investigations are a substantial element in the
administrative costs of insurance companies is in accord with the
testimony of Dean Cowen, contributor to the Uniform Motor
Vehicle Accident Reparations Act, and W. James MacGinnitie,
Professor of Actuarial Science and Director of the Master of Actu-
arial Science program at the University of Michigan. Finally, it
should be noted that Mr. Kinkade admitted in his testimony that
(Footnote continued on next page.)
AS3
Plaintiffs’ and cross-plaintiffs’ equal protection complaint is,
in essence, that the Legislature has violated equal protection in
providing that persons whose vehicular property is damaged as
a result of a motor vehicle accident are to be compensated only
if they have chosen to purchase collision insurance. While, on
the other hand, the Legislature provided that persons whose
tangible property or properly parked motor vehicle is damaged
as a result of a motor vehicle accident are to be compensated
up to $1,000,000 through mandatory third-party (no-fault)
property damage insurance required to be carried by the motor
vehiclist who inflicted the damage.
In discussing this equal protection challenge to the property
damage protection scheme, it is necessary to first logically
analyze a basic misconception: no-fault and first-party insurance
are misnomers in the context of property damage protection. It
is not essential that every aspect of the no-fault scheme provide
first-party protection, i.e., recovery by the victim from his own
insurer. First-party protection is only one method of assuring
prompt, equitable recovery.
Under the property protection scheme, owners of tangible
property and properly parked motor vehicles collect from the
insurer of the motor vehicle which inflicted the damage. Owners
of moving or improperly parked motor vehicles may collect
compensation from their own insurers, if they have chosen to
self-insure.
The different treatment of moving vehicles and tangible prop-
erty and properly parked vehicles is related to the second con-
ceptual difficulty relating to the use of fault in a no-fault act.
Common sense would indicate, and actuarial studies have shown,
that in accidents involving motor vehicles and tangible property,
the motor vehicle is usually at fault. Consequently, the act makes
(Footnote continued from preceding page.)
the cost of investigation would be less under no-fault than it was
under the tort system. Thus, even if some fault investigation con-
tinues under no-fault for certain types of coverage, it will apparently
be less intensive or not as common as before.
AS4
the motorist strictly liable for the damage he does to tangible
property and requires him to purchase insurance for such dam-
age.*®
The system, however, functions without regard to fault. That
is, there is no determination in each accident of who was at
fault. Thus, the appellation “no-fault” is a misnomer only if one
concentrates on the initial legislative allocation of responsibility.
However, if one looks at the operational effect of the act, it re-
mains a system of insurance without fault.
Section 3121 of the No-Fault Act provides that prop-
erty protection insurance benefits paid under one policy for all
damage to tangible property resulting from an accident shall
not exceed $1,000,000. This limit does not violate equal pro-
tection (nor due process). It appears from the record that the
Legislature sought to limit the absolute liability of insurance
companies.*” The choice of a $1,000,000 limit was justified
from an actuarial standpoint.
For these reasons we hold that the No-Fault Act’s clas-
sification of persons whose vehicular property is damaged
as a result of a motor vehicle accident (who are compensated
if they have chosen to purchase first-party collision insurance),
and those persons whose tangible property or properly parked
motor vehicles are damaged (who are compensated up to
$1,000,000 through mandatory third-party, no-fault property
damage insurance required to be carried’ by the motorist who
inflicted the damage), does not violate the equal protection
clauses of the Michigan and United States Constitutions.
58. It is possible that a motorist’s insurer will be liable to the
owners of stray animals, trains or other non-stationary tangible
property which may occasion the damage. The equal protection
clause does not, in this context, require that statutory classifications
be drawn with great precision. New Orleans v. Dukes, 427 US
297, 303-304; 96 S Ct 2513; 49 L Ed 2d 511 (1976).
59. See testimony of former Commissioner of Insurance Van
Hooser, Joint Appendix, p 2393a.
60. See testimony of Jerry Hillhouse, which revealed that the
difference in providing coverage with a $10,000 limit or a $1,000,000
limit was insignificant.
';A55
VII.
The fourth issue before us is whether § 3101(2) of the
No-Fault Act, in excluding two-wheel motor vehicles from
coverage under the act, violates the equal protection clauses
of the Michigan and United States Constitutions.
Section 3101(2) of the No-Fault Act provides:
“(2) ‘Motor vehicle’ as used in this chapter, except
for section 3103, means a vehicle, including a trailer,
operated or designed for operation upon a public highway
by power other than muscular power which has more than
2 wheels.” (Emphasis added.) MCLA 500.3101(2); MSA
24.13101(2), as amended by 1975 PA 329.
The thrust of plaintiffs’ complaint is that the No-Fault Act,
by limiting coverage to those vehicles with “more than 2 wheels”
violates equal protection because it impermissibly treats owners
of two-wheel vehicles (i.e., motorcycle owners) differently from
owners of vehicles with more than two wheels.
We disagree.
The actuarial data in the record tends to show that motor-
cycles are rarely at fault in motor vehicle accidents.*' Also, there
was extensive testimony to the effect that in accidents involving
motorcycles the drivers and passengers of motorcycles are killed
or severely injured at a rate twice exceeding that of those in-
volved in automobile accidents. Thus the inclusion of motor-
cycles in a no-fault system would result in insurance premiums
so high as to preclude most motorcyclists from purchasing in-
surance.** We believe these are, for purposes of satisfying equal
61. See testimony of Robert Rowe, Chief Deputy Insurance
Commissioner, Joint Appendix, p 364a.
62. See, especially, testimony of Professor James L. Chastain,
Professor of Insurance and Director of the Insurance Studics Center
at Drake University, Joint Appendix, pp 170a, 1697a-1698a. To the
same effect, see Chief Deputy Insurance Commissioner Robert
Rowe’s testimony, Joint Appendix, pp 365a-366a, 1857a. See, also,
(Footnote continued on next page.)
AS6
protection, legitimate governmental interests. The exclusion of
motorcycles from coverage under the No-Fault Act is, quite
evidently, reasonably related to these legitimate interests.
We therefore hold that § 3101(2) of the No-Fault Act, in
excluding two-wheel vehicles from coverage under the act, does
not violate equal protection.”
VITl.
The fifth issue before us is whether the No-Fault Act’s
statutory scheme with respect to work-loss reimbursement and
reimbursement for replacement services, § 3107, violates the
equal protection clauses of the Michigan and United States
Constitutions.
The thrust of plaintiffs’ constitutional complaint is § 3107
violates equal protection: (A) because it invidiously discrimi-
nates between workers in the home and workers outside the
home in terms of maximum benefits payable in case of injury;
and (B) because it creates an arbitrary statutory classification
by restricting recovery for injuries to those employed in the
home to expenses “reasonably incurred” for replacement
services.
The trial court held that (A) “the classification * * * between
those who work for compensation and those who do not work
for compensation inside the house is [not] so invidious as to
(Footnote continued from preceding page.)
Exhibit 182, Tab 1, The Extent of Bodily Injury to Motorcycle Riders
(1973), Summary, pp 4-5, a study performed by the Insurance
Studies Center of Drake University.
63. In so holding, we agree with the Court of Appeals that:
“In our delicate task of constitutional review we should not
deprive the Legislature of its ability to consider the economic
aspects when deciding how far to extend its reform. Dandridge
v Williams 397 US 471; 90 S Ct 1153; 25 L Ed 2d 491
(1970).” (Emphasis added.) 65 Mich App 355, 368.
See also, Gauthier v. Campbell, Wyant & Cannon Foundry Co,
360 Mich 510; 104 NW2d 182 (1960).
AS7
strike it down under the Equal Protection Clause”; (B) “that
portion of § 3107(b) requiring that the cost of replacement
services must be incurred and subsequently reimbursed is un-
constitutional as violative of the Equal Protection Clauses of
both the Fourteenth Amendment and the Michigan Constitu-
tion”. The Court of Appeals did not consider this issue on
the merits.
At the threshold we observe that the trial court, in deciding
this twofold issue, did not hear testimony. Rather, the court
based its decision on “stipulations of fact * * * entered into at
the preirial conference’.”
In Part IV, supra, we ruled that as a matter of constitutional
policy, in constitutional challenges to the legislative judgments
under the No-Fault Act, this Court requires, at a minimum, that
evidence be produced at trial to provide an adequate factual
context which might either support or undermine the claim that
the legislative judgment in question is an invalid exercise of the
police power.
Although the trial court did make its decision on the basis of
the noted “Stipulations of Facts,” we do not feel these stipula-
tions provide an adequate factual context in which we can
decide the difficult equal protection issues raised regarding
§ 3107. For example, the stipulation that “there are times when
a person working within a home performs services that are
equal to the services of those working outside the home, and
who are not compensated to the same extent as those working
outside the home” does not indicate whether this happens 90%
64. “It was * * * stipulated that there are times when a person
working within the home performs services equal to the services of
those working outside the home, and are not compensated to the
same extent as those working outside the home. It was further agreed
that there are economic and/or pecuniary losses in the death or
injury of a person exceeding the amount allowed under the statute
for recovery on a no-fault basis. And it was also stipulated that there
is at least one ayers in the State of Michigan who would be unable
to get household help to assist that person, without paying daily for
such help and who does not have the money to make such daily cash
payments.”
AS8
or 10% of the time. This is a factual determination which could,
obviously, present.an important consideration. And, the stipula-
tion that “there is at least one person in the State of Michigan
who would be unable to [obtain such services on credit] and
who does not have the [cash to pay for them]” gives rise to the
response, “De minimis non curat lex” (“The law is not based
ou minimal considerations” ).
Therefore, we deem it necessary to remand to the trial court
so that evidence relevant to the constitutionality of this two-fold
issue may be received by that court and constitutionally adjudged
in accord with the “traditional” equal protection test articulated
in Part IV, supra.
We retain jurisdiction as to this issue.
IX.
The sixth issue before us is whether the No-Fault Act's
statutory schemata with respect to nonresident, out-of-state
motorists, § 3102(1), which require nonresident motorists to
maintain no-fault insurance when they are in Michigan “an
aggregate of more than 30 days in any calendar year”; and
§ 3113, read inter alia with § 3135(2), which pertains to tran-
sient nonresident motorists, violate the due process and equal
protection clauses of the Michigan and United States Consti-
tutions.
The trial court held:
“The Court finds § 3102(1) not violative of either
the Due Process or Equal Protection Clauses of the Four-
teenth Amendment, or those of the Michigan Constitution.
The difference in the treatment of out-of-state motorists in
Michigan an aggregate of 30 days in any one year is
reasonably related to the essential purposes of the act and
is not arbitrary and discriminatory. No invidiously dis-
criminatory classification is established.”
The trial court also held “the provisions of § 3113(c) denying
a nonresident transient recovery of personal protection insurance,
_ AS9
and also depriving such transient of tort recovery below the
threshold, is invalid”. The court reasoned that “[the] disparate
treatment of resident and nonresident motorists, and their
passengers, violates the due process and equal protection stand-
ards discussed earlier in this opinion”. The court then stated,
correctly, that “[f]here was no evidence offered that such dis-
parate treatment was reasonably related to any proper legislative
purpose, nor was any evidence offered to justify the classification”
(empahsis added).
In the lengthy and extraordinary trial in this case, neither
plaintiffs nor defendants developed an adequate factual record
with respect to the statutory schemata pertaining to nonresident
motorists. We cannot, as a matter of policy, allow the disposition
of these constitutional challenges to succeed or fail on that basis. .
Therefore, we remand to the trial court so that evidence
relevant to the constitutionality of the above schemata may be
received by that court and constitutionally adjudged in accord
with the “traditional” due process and equal protection tests
articulated in Part IV, supra.”
We retain jurisdiction as to this issue.
Conclusion
The Court of Appeals and the trial court are affirmed in part
and reversed in part as indicated by our holdings in this opinion’s
individual parts.
65. We wish to bring to the attention of the trial court the fact
that an inconsistency exists between the requirement that a non-
resident obtain no-fault insurance when present in Michigan for “an
aggregate of more than 30 days in any calendar year” (§ 3102[2]),
and the requirement that persons operating a “pleasure” vehicle in
Michigan “for a period exceeding 90 days” register their vehicles in
this state (MCLA 257.243[c]; MSA 9.1943[c]).
66. With respect to the issues remanded (sce discussion, Part
VIII and this part), the trial court shall proceed on the premise
that the specific statutory schemata involved are severable and will
not be revised by the Legislature. :
If the Legislature sees fit to revise either or both schemata, the
trial court can then dismiss the suit as to these issues as moot.
A60
An appropriate order refiecting the constitutional status of
the No-Fault Act will enter 18 months from the issuance of this
opinion. GCR 1963, 866.3(b).%
No costs, a public question being involved.
KAVANAGH, C. J. and LEvIN and BLAIR Moopy, Jr., JJ.,
concurred with WILLIAMS, J.
RYAN, J. (concurring in part, dissenting in part). I dissent
from the judgment of my colleagues in holding unconstitutional
the compulsory insurance section, 3101(1), of 1972 PA 294,
known hereafter as the Act or the No-Fault Act. At this
juncture I would uphold the constitutionality of the above provi-
sion as well as the other challenged provisions of the Act.
For succinctness and ease of analysis, my opinion is divided
into sections to correspond with the respective sections of the
majority opinion.
ParRT I. INTRODUCTION
I concur with the majority opinion.
PART II. STANDING
On month prior to the date 1972 PA 294 became effective,’
the initial plaintiffs brought an action challenging the constitu-
tionality of the Act, while asking for declaratory and injunctive
relief. Subsequently, the pleadings were amended and parties
were added in an effort to better arrange a more exhaustive
constitutional challenge. Plaintiffs claimed standing pursuant to
GCR 1963, 201.2(3) or, alternatively, GCR 1963, 521.1.
GCR 1963, 201.2(3) is designed to permit five or more
residents of this state who own property assessed for direct
taxation by the county where they reside to bring an action to
67. Amended effective January 23, 1978, 402 Mich cxlviii.
1. Plaintiffs filed a complaint for declaratory and injunctive
relief on August 28, 1973. The No-Fault Act became effective
Cctober 1, 1973.
Aél
prevent the illegal expenditure of state funds or to test the
constitutionality of a statute relating thereto. I agree with the
majority conclusion that GCR 1963, 201.2(3) does not con-
template the expenditure of state funds incidental to the opera-
tion of a regulatory scheme. Because the state funds required to
be expended under the No-Fault Act are merely those costs
incidental to the implementation and enforcement of the Act,
the plaintiffs do not have standing to challenge the Act’s con-
stitutionality under that rule.
In the alternative, plaintiffs seek declaratory judgment pur-
suant to GCR 1963, 521.1 which provides:
“In a case of actual controversy within its jurisdiction, any
circuit court of this state may declare the rights and other
legal relations of any interested party seeking a declaratory
judgment, whether or not other relief is or could be sought
or granted.” (Emphasis added.)
Before relief can be granted under this rule, plaintiffs must allege
and prove an “actual justiciable controversy”. “Actual contro-
versy” encompasses something more than simply the plaintiffs’
“need to know” in order to guide their future conduct.
In addition, “actual controversy” connotes the pursuance of
an honest and actual antagonistic assertion of right by one party
against another. A noncollusive adversary proceeding, as dis-
tinguished from a contrived friendly lawsuit, is critical, both
pragmatically and constitutionally, to the proper performance
of the judicial function. Outside of the constitutional provision
for advisory opinions, Const 1963, art 3, § 8, this Court limits
its resolution of controversies to instances where the stakes of
the disputants are committed and the issues developed in
adversary proceedings upon trial. Request for Advisory Opinion
on the Constitutionality of 1977 PA 108, 402 Mich 83; 260
NW2d 436 (1977).
Despite the manifestly contrived nature of the instant action,
I would allow plaintiffs standing under GCR 1963, 521.1
A62
because of the compulsory nature of the no-fault scheme. Resi-
dent plaintiffs who own and operate automobiles are compelled
under threat of civil and criminal sanctions to purchase the
no-fault insurance. The pleadings allege that various parties are
financially unable to buy no-fault insurance coverage and are
therefore subject to those sanctions. We need not hypcthecate
future events in determining that some of the plaintiffs in this
very limited respect are factually in a position antagonistic or
adverse to the named state officials whose duty it is to implement
the compulsory coverage provisions.
Although “actual controversy” arises solely out of the com-
pulsory coverage provisions, plaintiffs also have standing to
challenge other provisions in the Act because of their specific
interest in those provisions and because of the allegedly inte-
grated nature of the scheme. Accordingly, in an effort to prove
1972 PA 294 constitutionally infirm, the plaintiffs have the
requisite standing to raise the issues addressed in the majority
opinion.
PART III. COMPULSORY INSURANCE
The first substantive issue addressed in the majority opinion
is whether § 3101 of the No-Fault Act, which requires owners
or registrants of motor vehicles to maintain compulsory personal
injury protection insurance, property damage insurance and
residual liability insurance, is constitutional.”
Presumably there are a number of theories upon which a
challenger might fashion an attack upon the constitutionality of
2. “The owner or registrant of a motor vehicle required to be
registered in this state shall maintain security for payment of benefits
under personal protection insurance, preperty protection insurance
and residual liability insurance. Security shall be in effect continuous-
ly during the period of registration of the motor vehicle.” MCLA
500.3101(1); MSA 24.13101(1).
The majority has erroneously framed the issue in terms of regis-
trants and operators. In actuality, the Act mandates only owners or
registrants to insure their motor vehicles. Individuals are not required
to — no-fault security by virtue of being the operators of motor
vehicles. .
A63
§ 3101. It might be claimed that the statute as applied violates
equal protection guarantees of the state and Federal Constitu-
tions, denies due process as applied, or simply is an arbitrary or
unreasonable statuiory mandate. There may be other bases for
challenge as well. Whatever the theory of attack, however, and
no matter what specific claims a party might make in a judicial
challenge to the constitutionality of the provision, one funda-
mental principle of orderly appeilate review should govern:
A party wishing to make a claim of unconstitutionality must
raise it on appeal before the court of appellate review. There are
a number of reasons for such a rule including, of course, the
fundamental proposition that an appellate court of final and dis-
cretionary review does not, in the proper performance of its
function, conjure up issues of interest or even of great im-
portance which the litigants have not raised or asked the court
to decide.
The majority ignores this elemental precept of the appellate
function and, acknowledging that the plaintiffs did not expressly
raise the issue on appeal, “feel compelled to address it because
of its basic, threshold importance to any decision we might ren-
der as to the No-Fault Act’s constitutionality”.* I cannot ac-
quiesce in legitimatizing such an approach to the appellate
function. It is just that sort of “this ticket for this train for this
day only” ad hoc rule for appellate review which has invited the
criticism that this Court is often long on policy and short on
judicial restraint.
It is manifest that the No-Fault Act, currently in its experi-
mental stages, is novel, and some say revolutionary, legislation
3. Footnote 14, p. 594 of the majority opinion states:
“Although plaintiffs did not expressly raise on appeal the
issue decided by the trial court, ‘Can the Legislature constitu-
tionally, as a condition precedent to [registration and] operation
of a motor vehicle, require the purchase of no-fault personal
protection insurance and no-fault property protection insurance
* * * we feel compelled to address it because of its basic,
threshold importance to any decision we might render as to
the No-Fault Act’s constitutionality.”
A64
affecting literally millions of people and a billion dollar industry
in ways utterly beyond our ability to foresee. It is imperative
therefore that this Court proceed in a carefully informed manner
before declaring upon the constitutionality of the compulsory
no-fault insurance scheme. By disregarding the proper scope
and conditions of appellate review, the majority has deliberately
precluded the possibility of a better informed decision. Because
the trial court heard no evidence whatever supporting any claim
of inadequate casualty insurance regulation, and since none of
the parties nor any of the amici either briefed or argued the
“compulsory insurance” issue, the majority was able to raise
and resolve the issue unburdened by any factual record and upon
freewheeling speculation. In the absence of a factual basis to
illuminate and give meaning to § 3101 and the manner in which
it is applied, the majority has fashioned a strictly facial attack
upon its constitutionality. In so doing the majority has assumed
the role of the advocate rather than that of the impartially re-
viewing court. In assuming that posture, the majority has
jeopardized, indeed abandoned, the objective and neutral stance
so necessary to the proper performance of the judicial function.
The inevitable result, of course, is that the Court has forsaken
its ability to reach a sound decision as evidenced by its dogged
determination to raise and resolve an issue which was neither
contentious nor preserved, and its adoption of a most anomalous
resolution of that issue.
My brothers discuss the issue of the constitutionality of the
“compulsory insurance requirement” of § 3101 in the framework
of two questions:
(a) Can the Legislature constitutionally, as a condition
precedent to registration and operation of a motor vehicle,
require the purchase of no-fault personal protection insur-
ance and no-fault property protection insurance or, in the
alternative, require security approved by the Secretary
of State?
A65
(b) Does the present regulatory scheme for compulsory
no-fault insurance sufficiently protect the interests of regis-
trants and operators of motor vehicles in accord with the
due process clause of the Michigan and United States
Constitutions as to (1) the fairness of insurance rates, and
(2) the proper availability of insurance?
For the reader’s benefit, I shall address the issue within the
same framework.
(a) Can the Legislature constitutionally, as a condition
precedent to registration and operation of a motor vehicle,
require the purchase of no-fault personal protection insur-
ance and no-fault property protection insurance or, in the
alternative, require security approved by the Secretary
of State?
Authoiities are abundant and unanimous that under‘the police
power the state may regulate travel upon its public highways.
Stapleton v. Independent Brewing Co, 198 Mich 170; 164 NW
520 (1917); Bowerman vy. Sheehan, 242 Mich 95; 219 NW 69
(1928); People v. Thompson, 259 Mich 109; 242 NW 857
(1932); DeVries v. Secretary of State, 329 Mich 68; 44
NW2d 872 (1950). The power of the Legislature to control
the operation of motor vehicles upon the highways of this
state includes the power to enact legislation affecting the
reciprocal rights and duties of all owners, operators, or occupants
arising out of such operation. This sphere of control is the
outgrowth of the state’s interest in mitigating the detrimental
consequences of highway motor vehicle accidents and is
expressed through the enactment of legislation designed to
insure a party’s financial responsibility to others* as well as to
himself.’ The legislative decision to accomplish those legitimate
4. See, DeVries v. Secretary of State, supra; Larr v. Secretary of
State, 317 Mich 121; 26 NW2d 872 (1947).
5. See, Helvering v. Davis, 301 US 619; 57 S Ct 904; 81 L
Ed 1307 (1937); Carmichael v. Southern Coal & Coke Co, 301
US 495: 57 S Ct 868; 81 L Ed 1245 (1937).
A66
goals by mandating the purchase of no-fault insurance by
Michigan motor vehicle owners and registrants is clearly within
- the state’s police power. The constitutional validity of the no-
fault scheme is properly assessed not only as a police power
regulation, but also as an integral part of the authority and
interest of the state in licensing motor vehicle operators and the
vehicles they own and operate.
Obviously the imposition of this “compulsory insurance” re-
quirement upon all owners or registrants of motor vehicles
required to be registered in this state may well work something
of a burden upon certain persons under certain conditions. How-
ever, the imposition of such a burden is not, per se, unconsti-
tutional. The Legislature is vested with wide discretion not only
to determine what is inimical to the public welfare, but also to
determine what is fairly designed to protect the public against
the evils which might otherwise occur. The expediency, the
wisdom, the desirability, or even the fairness, in the abstract
sense, of the specific means selected by the Legislature to
advance legitimate public interests is strictly within the discretion
of the lawmaking body and not subject to judicial veto, pro-
viding the means chosen do not offend constitutional safeguards.
In pursuance of its determination to accomplish the goals stated
heretofore, the Legislature may validly condition the operation
of a motor vehicle upon the procurement of no-fault personal
injury protection and property damage protection insurance.
(b). Does the present regulatory scheme for compulsory
no-fault insurance sufficiently protect the interests of own-
ers or registrants of motor vehicles in accord with the due
process clause of the Michigan and United States Consti-
tutions as to (1) the fairness of insurance rates, and (2) the
proper availability of insurance?
It is with regard to this question that I believe my brothers’
reasoning is most seriously erroneous and in consequence of
which today’s action is taken. I shall attempt, first, to identify
and explain the reasoning which must have fathered the
A67
majority opinion and then to demonstrate how the well-known
constitutional principle upon which the majority depends has
been misapplied.
The majority holds that the “compulsory insurance” require-
ment of § 3101 denies due process unless the government takes
certain necessary steps to assure that all persons required to
purchase no-fault insurance have an opportunity to do so on
“fair” terms.
Although positing the view that some Michigan motorists are,
in effect, denied the operation of their motor vehicles because
of an inability to obtain insurance at justified, reasonable rates,
the majority does not support such a conclusion with a factual
record because none exists. There being no evidentiary basis
upon which to predicate the assumption of the claim of unavail-
ability of insurance, nor even appellate argument claiming it, the
majority is forced to resort to an involved analysis by which an
attempt is made to identify fair and equitable insurance rates
as an “interest” warranting procedural protection under the due
process provisions of the state and Federal Constitutions.
Accordingly, the “interest” identified by the majority is an al-
leged “statutory entitlement” to no-fault insurance on a fair and
equitable basis.
Although arguing that persons have a “statutory entitlement”
to fair and equitable insurance rates, the majority meticulously
avoids defining or delineating the scope of the term “statutory
entitlement”. Concededly, the United States Supreme Court has
never explicitly defined a “statutory entitlement”, nor does this
form of property interest lend itself to easy definition. However,
certain attributes of a “statutory entitlement” are sufficiently
established in United States Supreme Court decisions to enable
one to extrapolate a tentative definition of the concept.
A statute creates an entitlement claim to a governmental
benefit if it defines the conditions under which the benefit must
be granted or if it sets out the specific and sole conditions under
A68
which the benefit may be denied.* Once the cognizable benefit
is conferred or received, the individual beneficiary has a sufficient
property interest in the benefit to warrant due process protection
in the event the government attempts to withhold or deny the
benefit." Underlying this concept of a property interest to which
there is an entitlement is the rationale that the recipients of
governmental benefits place a reliance upon the continued receipt
of those benefits which must not be arbitrarily undermined.*
In attempting to identify the enjoyment of fair and equitable
insurance rates as such an entitlement interest, the majority
ignores certain absolutely essential attributes of entitlement
interests, which will be discussed hereafter, while focusing
extensively upon other attributes. In declaring that there exists
an entitlement interest in fair and equitable insurance rates, the
Court focuses upon two factors which it claims raise insurance
rates from an important if abstract economic concern to a
constitutionally protected property interest, to wit: (1) a citizen’s
dependency and reliance upon fair and equitable no-fault insur-
ance rates; and (2) the action of the Legislature in fostering an
expectation that no-fault insurance will be available at fair and
equitable rates.
In finding the necessary citizen dependence or reliance, my
brothers reason that simply because “independent mobility pro-
vided by an automobile is a crucial practical necessity * * *”
and “whether or not a person can obtain a driver’s license or
register and operate his motor vehicle profoundly affects impor-
tant aspects of his day-to-day life”, there exists therefore a
constitutionally protected property interest in such registration
and operation.
6. See, Goldberg v. Kelly, 397 US 254; 90 S Ct 1011; 25
IL Ed 2d 287 (1970); Arnett v. Kennedy, 416 US 134, 94 § Ct
1633, 40 L Ed 2d 15 (1974).
7. See, Board of Regents v. Roth, 408 US 564; 92 S Ct 2701;
33 L Ed 2d 548 (i972); Bell v. Burson, 402 US 535; 91 S Ct
1586; 29 L Ed 2d 90 (1971).
8. See, Goldberg v. Kelly, supra.
A69
The next step my brothers take is to conclude that because the
new found property interest one has in registering and operating
a motor vehicle upon the highways is conditioned upon the
procurement of no-fault insurance, constitutionally based pro-
cedural guarantees are also applicable to enable one to fulfill the
condition. The result of such reasoning, of course, is that the
provision established by the Legislature (compulsory purchases
of no-fault insurance) as a condition to the exercise of the
constitutionally protected entitlement interest (registering and
operating one’s motor vehicle upon the highways) is, through
bootstrapping argument, itself elevated to a constitutionally pro-
tected entitlement interest.
Apparently recognizing that the element of citizen reliance
standing alone is not sufficient to create the entitlement interest
to which due process protections attach, the majority finds “a
separate and independent basis for invoking due process protec-
tion for Michigan motorists required to purchase no-fault insur-
ance”, viz., legislative enactments, independent of the compul-
sory no-fault insurance scheme which “fostered the expectation
that no-fault insurance will be available at fair and equitable
rates”.°
That somewhat convoluted route leads the Court to the
conclusion that because of what it perceives to be inadequate
procedural protections guaranteeing the availability of no-fault
9. “(1) All rates shall be made in accordance with the follow-
ing provisions:
% * *
“(d) Rates shall not be excessive, inadequate or unfairly
discriminatory.” MCLA 500.2403(1); MSA 24.12403(1).
“(1) Every insurer authorized to write and writing auto-
mobile bodily injury liability and property damage liability in-
surance in this state shall participate in an organization for the
‘purpose of:
“(a) Providing the guarantee that automobile insurance
coverage will be available to any person who is unable to
procure such insurance through ordinary methods.”
MCLA 500.3301(1); MSA 24.13301(1).
A70
insurance at fair and equitable rates; the “compulsory ifisurance”
requirement of § 3101 is unconstitutional.
The fundamental error in the reasoning of the majority is in
the assumption that there is a property interest or entitlement, in
the constitutional sense, in the availability of no-fault insurance
at the fair and equitable rates.
Essentially, “[t]he Fourteenth Amendment's procedural pro-
tection of property is a safeguard of the security of interests that
a person has already acquired in specific benefits”. (Emphasis
added.) Board of Regents vy. Roth, 408 US 564, 576; 92 S Ct
2701; 33 L Ed 2d 548 (1972). When such benefits are termi-
nated, the constitutional right to a hearing provides an oppor-
tunity for a person to vindicate his claim to such benefits. Board
of Regent v. Roth, supra, 577. Obviously, procedural due process
is not required until a benefit is abridged or otherwise threatened.
At the very outset my brothers err in concluding that the
mandatory no-fault insurance scheme is an abridgment of the
property interest one has in registering and operating his motor
vehicle. The error is the result of an improper analysis of the
essence of an entitlement interest. The analysis is deficient in
two respects.
First, there is a failure to recognize that the property interest
to which a citizen has an entitlement, and which is involved in
this case, derives from the action of the state in registering or
licensing a motor vehicle, a benefit which, once conferred,
permits the use of a motor vehicle upgn the public highways.
The concept of the present enjoyment of the benefit appears
to be an essential attribute of the protected interests in property
under the entitlement doctrine. The attribute of present enjoy-
ment is consistent with the rationale of the recipient’s depend-
ency and reliance upon the government activity.
“Once licenses are issued, as in petitioner’s case, their
continued possession may become essential in the pursuit
A71
of a livelihood.” (Emphasis added.) Bell v. Burson, 402
US 535, 539; 91 S Ct 1596; 29 L Ed 2d 90 (1971).
“The Fourteenth Amendment’s procedural protection of
property is a safeguard of the security of interests that a
person has already acquired in specific benefits.” (Emphasis
supplied.) Board of Regents v. Roth, supra, at 576.
“The emerging and underlying principle is clear; once a
cognizable benefit is conferred or received, governmental
action must not be employed to deprive or infringe upon
that right without some form of prior hearing. We are
unaware, however, of any authority for the proposition that
the full panoply of due process protections attaches every
time the government takes some action which confers a
new status on the individual or denies a request for a
different status.” Scarpa vy. United States Board of Parole,
477 F2d 278, 282 (CA 5, 1973).
Second, there is a failure to appreciate that the legislative
command that no-fault insurance be obtained as a condition
precedent to the registering of a vehicle does not terminate or
even abridge one’s entitlement to that benefit, but merely defines,
in part, the perimeters or dimensions of the benefit.
An individual does not possess, in the abstract, a property
interest in the operation of his vehicle upon Michigan’s high-
ways. Rather, the property interest lies in his status as a regis-
trant or licensee recipient of the entitled benefit. Until an indi-
vidual acquires such licensure or proves his eligibility for it, he
does not have a legitimate claim of ent:ilement to it. Essentially,
the requirement of no-fault insurance simply conditions or
defines one aspect of the eligibility for the benefit. Until an
individual fulfills the eligibility requirement of obtaining no-fault
insurance, he does not have a valid claim of entitlement to
operate his vehicle in Michigan.
The property interest at issue was created by the Legislature
and, within constitutional limitations, the Legislature is free to
define its dimensions. Board of Regents v. Roth, supra 577.
The condition of obtaining no-fault insurance, which is appli-
A72
cable to all motor vehicle registrants, is no more than a partial
determinant of such dimensions. So long as the condition is not
palpably arbitrary or unreasonable, it does not offend due
process.'° Michigan Canners v. Agricultural Board, 397 Mich
337; 245 NW2d 1 (1976); Grocers Dairy Co v. Department
of Agriculture Director, 377 Mich 71; 138 NW2d 767 (1966);
Carolene Products Co v. Thomson, 276 Mich 172; 267 NW
608 (1936).
To so condition the issuance of such a license does not run
afoul of Fourteenth Amendment procedural guarantees.
“If the statute barred the issuance of licenses to all motorists
who did not carry liability insurance or did not post security,
the statute would not, under our cases, violate the Four-
teenth Amendment.” Bell v. Burson, supra, 539.
The majority implies that the Legislature recognized a consti-
tutionally protected property interest in fair and equitable rates
when it enacted legislation toward that end. Moreover, because
of this claimed interest in fair and equitable rates, the majority
opines that procedural guarantees must be effectuated in con-
nection with the rate making process.
The validity of the statement by the majority, implying that
the Legislature has recognized an interest in fair and equitable
insurance rates by “foster[ing] the expectation that no-fault
insurance will be available at fair and equitable rates”, is neces-
sarily dependent upon a showing that the alleged interest in fact
10. As expressed in question (a), the condition of no-fault
insurance is reasonably related to the state’s interest in mitigating
the detrimental consequences of highway motor vehicle accidents.
Moreover, the various underwriting guidelines currently employed by
state regulated casualty insurers are not alleged to be arbitrary or
discriminatory either by the majority or the plaintiffs on appeal.
Although that challenge is not made in the instant case, it is made in
Connecticut’s counterpart to Shavers, Gentile v. Altermatt, 169
Conn 267; 363 A2d 1 (1975). The Connecticut court, relying on
a regulatory scheme virtually identical to that enacted in Michigan,
rejected the challenge to the underwriting guidelines under the
traditional due process and equal protection tests. See, Conn Gen
Stat Ann 38-201c, amended since the Gentile decision. See Conn
Gen Stat Ann (Supp 1978) 38-20Ic.
A73
exists. Since, as explained above, there does not exist, in the
abstract, an interest in fair and equitable insurance rates, the
interest in such rates, allegedly recognized by the Legislature,
must exist, if at all, within the framework of this statutory
scheme alone. Accordingly, we must determine whether the
statutory provisions cited by the majority create an entitlement
interest in such rates.
The relevant provisions of the legislative enactment upon
which my brothers rely are the following:
“(1) All rates shall be made in accordance with the
following provisions:
* ok *
“(d) Rates shall not be excessive, inadequate or
unfairly discriminatory.” MCLA 500.2403 (1);
MSA 24.12403(1).
“(1) Every insurer authorized to write and writing auto-
mobile bodily injury liability and property damage liability
insurance in this state shall participate in an organization
for the purpose of:
“(a) Providing the guarantee that automobile insur-
ance coverage will be available to any person who is
unable to procure such insurance through ordinary
methods.
“(b) Preserving to the public the benefits of price
competition by encouraging maximum use of the
normal private insurance system.
“(2) The organization created under this chapter shall
be called the ‘Michigan automobile insurance placement
facility.” "> MCLA 500.3301(1); MSA 24.13301(1).
The suggestion that, by enacting a regulatory scheme, the
Legislature established a property interest in the subject matter
of the regulation is constitutionally unsound. As explained
earlier, a statute creates an entitlement to a government benefit
when it declares the conditions under which the benefit must be
granted or the conditions under which the benefit may be denied.
Aql4
Rather than creating or recognizing the existence of a property
interest, the first cited provision, § 2403(1), sets the standards
for the casualty insurers and the Commissioner of Insurance to
follow when making casualty insurance rates.
The cases cited by the majority (footnote 23, pp 599-600,
majority opinion) in support of the claim that there exists an in-
terest in “fair and equitable insurance rates”, do not, in my view,
stand for the stated proposition that there exists “a separate and in-
dependent basis for invoking due process protection for Michigan
motorists required to purchase no-fault insurance”. Rather, the
cases clearly narrow and limit instances in which procedural
guarantees attach to situations in which there is not only a
dependency or reliance upon the alleged interest, but also a
legislative recognition of the interest at issue. Paul v. Davis,
424 US 693; 96 S Ct 1155; 47 L Ed 2d 405 (1976); Bishop
v. Wood, 426 US 341; 96 S Ct 2074; 48 L Ed 2d 684 (1976) ;
Meachum vy. Fano, 427 US 215; 96 S Ct 2532; 49 L Ed 2d 451
(1976); The Supreme Court, 1975 Term, 90 Harv L Rev
86-104 (1976).
MCL 500.3301; MSA 24.13301, cited by the majority
(p. 599, majority opinion) as independently supporting the
claim of legislative recognition of an interest in fair and
equitable rates, merely provides for the creation of the “Michi-
gan automobile insurance placement facility”. The provision
compels insurers to participate in the assignment of high risks in
order to make coverage available to all, while preserving to the
public the benefit of price competition through the maximum use
of the normal private insurance system. Outside of citing this
provision in the context of its independent basis argument, the
majority does not explain how it recognizes an interest in “fair
and equitable insurance rates”.
Even if the majority was correct in concluding that there is a
constitutionally protected entitlement interest in “fair and equi-
table insurance rates”, there has been no showing that the com-
pulsory insurance provision of the Act either terminates or
abridges the continued enjoyment of such interest. As indicated
A75
~
heretofore, Fourteenth Amendment procedural protection of
property is a safeguard of interests a person has already acquired
and procedural due process is not applicable until a state threat-
ens to terminate or otherwise abridge the benefit. Although the
majority alleges that a property interest in “fair and equitable
rates” does in fact exist, their discussion is without any illustra-
tion demonstrating how no-fault’s compulsory insurance scheme
abridges or terminates this interest. The majority does not dis-
cuss the essential factor of termination or abridgment of a
property interest which triggers the procedural guarantees,
because it is obvious that the compulsory insurance scheme in
no sense abridges any interest in fair and equitable insurance
rates. The action of the Court in declaring the compulsory in-
surance scheme unconstitutional is, to say the least, an anoma-
lous approach to assuring procedural safeguards
This text is long and has been trimmed here. Open the source document for the complete record.
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