## Facts

- Michigan enacted the No-Fault Insurance Act, requiring motorists to purchase automobile insurance as a condition of lawful vehicle operation and providing first-party benefits for specified economic losses.
- The statute substantially limited tort recovery for auto-accident personal injuries, generally allowing noneconomic damages only for death, serious bodily impairment, or permanent disfigurement.
- Motorists and accident victims sued state officials responsible for administering the system and multiple insurers, seeking declaratory and injunctive relief.
- Plaintiffs alleged the Act violated due process and equal protection by mandating insurance purchases, restricting traditional tort remedies, and employing allegedly irrational classifications.
- Plaintiffs also challenged the statute’s rate-setting and oversight framework as lacking adequate standards and procedural protections, producing arbitrary, excessive, discriminatory, or confiscatory premiums.
- The consolidated constitutional challenges reached the Michigan Supreme Court on direct review.

## Issues

1. Whether compulsory no-fault insurance and the Act’s restriction of most tort remedies for automobile-accident injuries violate due process.
2. Whether the Act’s classifications and injury-threshold limits on tort recovery violate equal protection.
3. Whether the statutory and administrative scheme for regulating no-fault insurance rates provides constitutionally adequate standards, procedures, and review to protect affected interests.

## Decision

- The Michigan Supreme Court upheld the constitutionality of the Act’s core features, including compulsory coverage and the limitation of tort actions for most automobile-accident injuries.
- The Court rejected due process and equal protection attacks on the statute’s basic structure under rational-basis review.
- The Court held that portions of the rate-regulation and oversight framework were constitutionally deficient for inadequate standards and safeguards to ensure fair, nonarbitrary, and nonconfiscatory rates.
- The Court required correction of the regulatory defects while leaving the general no-fault scheme in place.

## Legal Principles

- The legislature may modify or replace common-law tort remedies if the change is rationally related to legitimate governmental objectives and provides a reasonable substitute remedy.
- Under rational-basis review, limiting noneconomic tort recovery to serious-injury categories may be sustained where it is reasonably tied to goals such as prompt compensation for economic loss and reduced litigation costs.
- When the state compels participation in an economic arrangement (such as mandatory insurance), due process requires meaningful standards and procedures in administration, including safeguards against arbitrary or confiscatory rate-setting.
- A constitutionally adequate rate-regulation system must include sufficient criteria, opportunity for participation or challenge, and oversight or review to prevent irrational or unfair premium outcomes.

## Conclusion

Michigan’s compulsory no-fault insurance system and its principal restrictions on tort liability were sustained as rational legislative responses to defects in the prior fault-based regime, but the state was required to cure constitutional deficiencies in the mechanisms governing insurance rate regulation and oversight to ensure fair, nonarbitrary administration of mandatory premiums.


Shavers v. Kelley, 267 N.W.2d 72 (Mich. 1978)