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Automated Vehicles and Michigan’s No-Fault Auto Insurance Act

According to the National Highway Traffic Safety Administration (“NHTSA”), human error causes 94% of serious vehicle accidents. ((NHTSA, Automated Vehicles for Safety, https://www.nhtsa.gov/technology-innovation/automated-vehicles-safety (last visited May 5, 2018).)) In response, the latest vehicles have implemented driver assistance technologies that use sensors, cameras, and computers to identify safety risks and reduce error-caused accidents. ((Id.)) While still in development, automated vehicles that “can see more and act faster than human drivers” are purported to be ready for conventional use by 2025. ((Id.)) Research shows that automated vehicles “have the potential to significantly improve roadway safety.” ((NHTSA, Automated Driving Systems 2.0: A Vision for Safety, https://www.nhtsa.gov/sites/nhtsa.dot.gov/files/documents/13069a-ads2.0_090617_v9a_tag.pdf (last visited May 5, 2018).)) For example, in California between 2014 and 2017, automated vehicles were less likely to be involved in accidents than conventional cars. ((See Francesca M. Favarò et al., Examining accident reports involving autonomous vehicles in California, Plos One, https://doi.org/10.1371/journal.pone.0184952 (last visited May 5, 2018).)) Also, “in 22 out of the 26 reported [automated vehicle] accidents the [automated vehicle] was not-at-fault,” and, as for the other four accidents, “two happened during manual mode (and blame is placed on the human driver in the reports).” ((Id.))

States are responsible for governing matters involving roadways and car insurance, and the NHTSA guidelines state that this area of responsibility “should remain largely unchanged” when automated vehicles hit the streets. ((NHTSA, supra note 4.)) Michigan law requires cars to be covered under a no-fault insurance policy, whereby the insurance company pays the costs of injuries suffered by the insured regardless of which party is at fault. ((Mich. Comp. Laws §§ 500.3101–500.3179.)) It is no secret that Michigan drivers pay the highest car insurance premiums in the country. ((See Paul Egan, Michigan’s no-fault auto insurance fee is going up—again, Det. Free Press (Mar. 29, 2018), https://www.freep.com/story/news/local/michigan/2018/03/29/auto-insurance-michigan-car/470883002/.)) High premiums exist in part because Michigan’s no-fault system effectively provides unlimited personal injury protection (“PIP”) for an insured’s catastrophic claims. ((Id.)) In addition, every motorist in Michigan must pay an annual fee to the Michigan Catastrophic Claims Association, which covers the gap between catastrophic claims that cost insurance companies more than $550,000. ((Id.)) As a result of rising expenses, many Michigan legislators have called for reconsidering the No-Fault Auto Insurance Act, arguing that rates could be reduced by 50% under a tort system. ((See Emily Lawler, Michigan’s no-fault auto insurance would be scrapped under legislative proposal, MLive (Feb. 8, 2018), http://www.mlive.com/news/index.ssf/2018/02/michigans_no-fault_auto_insura.html.))

Accepting that automated vehicles will, in the future, significantly decrease car accidents, will Michigan’s no-fault insurance rates also drop? When traditional cars share the road with automated vehicles, car insurance rates should fall in tandem with any reduction in accidents. However, until Michigan’s current legislation changes, no-fault insurance in Michigan presumably will remain expensive because benefits such as unlimited PIP will still exist. Although several recent proposals seeking to reform Michigan’s car insurance system have failed, the future might be different. In a few years, Michigan legislators may be more willing to take a closer look at the no-fault insurance legislation as the widespread use of automated vehicles inevitably becomes a reality.