Gursten tells Fox 2 Detroit why Duggan lawsuit is flawed

by Michigan Auto Law

Duggan ignores redlining and credit scoring, two issues that hammer Detroiters and drive up car insurance rates in Motown; time to enact HB 5111 

Attorney Steve Gursten talks to Fox 2 Detroit about Mayor Duggan's No-Fault lawsuit

Detroit Mayor Mike Duggan has recently filed a lawsuit in federal court seeking to declare Michigan’s auto No Fault law unconstitutional. Of course, this lawsuit was filed at the same time that Michigan Radio reported that credit-scoring influences rates in Michigan are more than in any other state.

And that, as I told Fox 2 Detroit, is the fatal flaw in the Mayor’s lawsuit.

Mayor Duggan ignores the two most egregious cost drivers for high car insurance rates in Detroit: redlining and credit scoring. Both hammer residents of Detroit harder than any other suburb – or indeed – any other city in the nation.

But both redlining and credit scoring continue to be ignored by the Detroit mayor.

For someone like Mayor Duggan, who “claims” to be so committed to making car insurance rates affordable for Detroit drivers, it’s not just a glaring oversight.

It’s shameful hypocrisy. It says to consumer advocates and No-Fault lawyers like me that he is still more interested in working with the insurance industry than he is in tackling the issues that drive up rates for people who live in the neighborhoods of Detroit.

And that’s exactly what I told Fox 2 Detroit’s Roop Raj and Taryn Asher when they asked me to appear on the news recently to talk about Duggan’s No-Fault lawsuit:

“My problem is I just don’t think this lawsuit accomplishes the main goal of really making auto insurance affordable because it … doesn’t tackle the two most important cost drivers that make auto insurance unaffordable for people in Detroit.”

That’s redlining and credit scoring which studies and research have shown – over and over – cause vast discrepancies in car insurance prices, especially for drivers in the Motor City.

I’ve been saying this for years.

As I stated in my blog post, “Detroiters pay steep price for redlining”:

“Does it matter if a Detroit resident has a spotless driving record and a long history as a safe driver? Not in the eyes of Michigan’s auto insurance companies, who for years have been charging up to $5,000 more annually for Detroiters’ car insurance policies based on ZIP codes. This practice is known as redlining. It’s something I’ve spoken out against on the pages of this auto lawyers blog, to the media, and on behalf of Detroit drivers. Make no mistake, redlining is arbitrary and discriminatory. It’s been banned in many states. Where a person lives — along with sex, race, credit score history, type of job you have, and marital status — should have no bearing on car insurance rates if you are a safe driver, have not caused any prior car accidents, and pay your car insurance bill on time. I’ve labeled the practice of redlining in Detroit, Flint, Battle Creek and other cities as ‘legalized discrimination.’”

Similarly, in my blog post, “How do credit scores punish Detroit residents when paying for auto insurance?,” I explained:

“If your credit score is poor, it will cost you more. Last week I was interviewed by Bloomberg News on the cost of auto No Fault insurance in cities like Detroit. In the story, I explained how the ugly use of credit scoring is a double whammy for people who live in cities like Detroit, a community that can afford it least, and I compared the use of credit scoring to legalized discrimination.”

Duggan’s decision to keep repeating an easily proven lie – that redlining and credit scoring are not “significant drivers of car insurance costs in Detroit” is just further proof that he has made the political calculation to care more about not upsetting the powerful insurance industry than he cares about lowering car insurance for his constituents. He’d rather unfairly attack all car accident lawyers and innocent car accident injury victims and the medical providers who care for them, rather than confront the insurance companies that are actually charging the excessive prices he claims to be so troubled by.

Of course, at the end of the day, if Michigan’s No-Fault law is found unconstitutional, or if there is a ballot referendum on this in 2020 and the state repeals auto No Fault, none of this matters. We will be a pure tort state, and prices for car insurance will drop in Detroit and everywhere else.

But the problem I have with this is that it shows Mayor Duggan is not making a good faith effort to actually fix auto No Fault in Michigan because he continues to repeat the same mantra that this doesn’t affect rates – when the evidence is overwhelming that it does and does so significantly – and he’d rather scrap the system than fix it, preserve it, and make it better and more affordable for residents of Detroit who, because of poverty rates and poorer access to good health insurance, depend on our No-Fault system more than anyone else if they are seriously injured in a car crash.

Time to Work on Fixing Auto No-Fault, enacting HB 5111 to eliminate redlining and credit scoring

Of course, I’m talking about Rep. Sherry Gay-Dagnogo (D-Detroit) and her well-supported House Bill 5111, which proposes to eliminate redlining and credit scoring as factors that auto insurers can consider in setting prices:

  • “An insurer shall not establish or maintain rates or rating classifications for automobile insurance based on the territory in which the insured resides or works.”
  • “An insurer shall not use … consumer credit information or credit score … in underwriting or establishing rates for automobile insurance.”

What I told Fox 2 Detroit about insurance rates in Detroit

To watch my full interview with Fox 2 Detroit’s Roop Raj and Taryn Asher, click here.

There’s a lot to think about when it comes to the high car insurance prices that Detroiters have to pay.

Here are some of the highlights of what I discussed with Roop and Taryn during my appearance on Fox 2:

  • “What’s interesting is if you take [out] Detroit – which is hammered by redlining and credit scoring that really, really hurts the poor and the minorities in Detroit – Michigan auto insurance actually drops to number 12 or number 14 [for the highest rates] in the nation and … that’s comparing it also with states like Ohio and other states that offer nothing … that are just pure tort states.”
  • “So the other argument is we actually have a really tremendous deal and we get a great … really great benefits – the best benefits in the nation compared to these other states.”
  • “I’m not going to say that the system is not too expensive. It is. When half of Detroit is probably driving uninsured, we need to do a lot better.”

Eliminating redlining should be the priority in Duggan’s No-Fault lawsuit

Indeed, Duggan’s lawsuit makes as a strong a case as any for the devastating effects that redlining (which is where insurers intentionally charge more to certain people just because of where they live) is having on his constituents.

In paragraphs #2 and #6, he points out that even though Michigan’s “average annual auto insurance premium” is $3,059 (even though it’s lower than that in other parts of the state), it’s more than double that for Detroiters who are paying $6,197.

Getting rid of redlining is not a new idea, nor is it a particularly radical one.

As I noted in my blog post, “Fixing No-Fault: Start with the excessive rate loophole,” the Insurance Commissioner in its 2005 study of auto insurance premium “excessiveness” explained that, in light of the “tremendous rate disparities across the state,” focusing on “driving history” rather than where a driver lives “would serve to reduce rates in areas that currently have the highest rates.”

Michigan drivers with poor credit scores pay way more for car insurance

Credit scoring is also a harmful (albeit inexplicably legal) rate-setting practice in Michigan, as a recent Michigan Radio article, “Credit score influences auto insurance rates in Michigan more than any other state,” made clear:

“A hypothetical [Michigan] driver – with the same background and demographic data other than credit score – with fair credit pays 89.6% more than one with excellent credit …The disparity balloons even more when that driver moves from fair to poor credit – to 229.4 percent.”

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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