2011-2012 Legislators Guide to Michigan’s Insurance Issues

The Verbal Threshold

DISCUSSION

In exchange for the most generous economic benefits – unlimited lifetime medical and rehabilitation benefits – in the country, Michigan residents are subject to a strong limitation on the ability to sue for noneconomic (or pain-and-suffering) damages as a result of an auto accident. The ability to sue is reserved only to those who have suffered death, permanent serious disfigurement, and serious impairment of body function. Some no-fault systems have a dollar threshold, but Michigan chose a definition-style tort threshold called the ‘verbal threshold.’

Establishing a strong threshold – the verbal threshold – to pain-and-suffering suits provides important balance. This balance is critical to establishing equilibrium between the unlimited medical care and the pain-and-suffering recoveries afforded under Michigan’s auto no-fault system. If the verbal threshold permitted virtually anyone to sue for personal injury in an automobile accident, the system would impose costs on consumers for both unlimited lifetime medical benefits and unlimited pain-and-suffering tort claims – a system that would quickly go broke.

The verbal threshold has been subject to interpretation since the inception of no-fault. In 2004, in Kreiner v Fischer, the Michigan Supreme Court set forth criteria for determining whether someone has met the threshold, including a nonexhaustive list of objective factors that must be considered by the court. Following the Kreiner decision, plaintiffs’ attorneys argued that this decision made it much more difficult to prove serious impairment of body function. Several pieces that would loosen the threshold significantly, letting many more cases into the court system, but none passsed.

It wasn’t until the composition of the Supreme Court changed that Kreiner was overturned by the McCormick v Carrier decision in July of 2010. The McCormick decision effectively weakened the threshold again and thereby continued the legal uncertainty over Michigan’s verbal threshold.

MIC’s POSITION

MIC supports a strong verbal threshold in order to maintain the appropriate balance in our no-fault system. MIC believes that the McCormick case will undoubtedly result in more pain-and-suffering lawsuits and higher auto insurance premiums. By interpreting the same statutory language differently, the Court has made the statute even more difficult to administer. However, the current statute – properly construed – strikes the appropriate balance. Changing the language of the statute should only be undertaken with the proper balance in mind, and with a healthy concern for encouraging pain-and-suffering lawsuits that add unnecessary expense to the system.

RELATED REFERENCES/RESOURCES

  • Kreiner v. Fischer 471 Mich 109; 683 NW2d 611 (2004)
  • McCormick v. Carrier case number 135738 (2010)
  • No-fault chapter of the Insurance Code, MCL 500.3135