An important theme from the No-Fault Law Institute Seminar this past week was to encourage Michigan trial lawyers to take on smaller cases against auto insurance companies when they deliberately refuse to pay out on small first-party auto claims that they are clearly obligated to pay. If there are enough Michigan lawyers willing to take on these bad faith insurance companies over smaller cases, perhaps as a profession lawyers can start to make these insurance companies behave better and honor claims that should be paid. And if you heed the following lesson from a fellow Michigan trial lawyer, you can make a decent living while protecting the public.
No Risk for Michigan Insurance Companies when they Refuse to Pay
Many automobile insurance companies in Michigan intentionally refuse to pay people with small outstanding claims. The claims adjusters know that people will either not pursue a lawsuit or that people will have difficulty finding a lawyer to represent them with such small amounts owing. Michigan does not have bad faith insurance laws or punitive damages to punish these insurance companies for bad behavior, so there is little downside or risk for them to refuse paying out on small claims like there is in other states.
Only (mild) Penalty for Insurance Company is when Case Goes to Trial
The only way that these insurance companies face any penalty, and the word penalty is extremely relative considering the vast sums that are being saved by doing this, is for a lawyer to take a case all the way to trial. Unfortunately, this means the lawyer and client are now also incurring all the litigation costs and the uncertain risks of a trial, in the hope that a jury will not only pay the full amount that was owing to begin with, but also find that the bill or claim is “overdue” so that the lawyer can claim statutory penalty interest of 12% and attorney fees. Otherwise, the lawyer will be collecting, if at all, only the customary 1/3 contingent fee of the underlying bill or claim – which is why so many insurance company adjusters believe these people will never be able to find a lawyer to begin with to help them.
Many Deserving Claims are Never Found Overdue by Juries
Most insurance companies will eventually pay the claim they should have paid at some point before trial, and very few people are willing to chance a 100% guarantee of getting a bill paid in the hope that a jury will find the claim also overdue so that they can punish the insurance company and claim penalty interest and attorney fees. Unfortunately, juries get bogged down or are reluctant to calculate interest. Many deserving claims are never found “overdue” by juries due to many people’s aversion to math in general, and wanting to get home and finish jury duty instead of spending the time necessary to perform complicated interest rate tabulations in particular. The result is yet another example of Michigan auto insurance companies getting away with one.
Best Tip of No Fault Institute Seminar Goes to . . .
Therefore, “best tip” of the seminar goes to my friend Stan Feldman, a very smart trial lawyer in Southfield, Michigan who spoke on litigating PIP no fault trials. Stan suggested that lawyers should submit the interest rate chart and tabulations on overdue bills or claims a few weeks before the trial is to begin to the claims adjuster and then subpoena the insurance claims file to trial. As the claims adjuster has a duty under Michigan law to continue to adjust the claim even when it is in litigation, it is proper for a lawyer to send a submittal directly to the adjuster and to copy it to the defense attorney for the insurance company. This solves the problem so many Michigan no-fault lawyers have had, including myself, of having the adjuster admit to the overdue bills and the interest in the deposition that was taken a year or more before the trial, only to have the claims adjuster take the witness stand and say it was all a mistake (usually at the urging of the insurance company’s lawyer).
Public Policy for Trial Lawyers to Protect People – More Important than Ever
As I’ve previously mentioned, there are very few, if any, “big sticks” that no-fault insurance lawyers in Michigan can use to deter bad behavior. Auto insurance companies in Michigan are making record breaking profits, even as the economy continues to stumble. That a few lawyers here and there might actually take a case all the way to verdict, and force the insurance companies to pay some interest and attorney fees really is not much of a deterrent. Therefore, the public policy for trial lawyers to protect people becomes more important than ever. My friend Wayne Miller, another excellent lawyer who handles no fault collection work for doctors and hospitals, took an overdue PIP case over a $5,200 medical bill to trial and jury verdict last year and received over $100,000 in attorney fees and penalty interest for doing so. Wayne’s case is admittedly very unusual, but the message for the lawyers attending the seminar was clear: lawyers can help protect and serve the public, and it can be profitable to do so.
Michigan Lawyers can Collectively Make Insurance Companies Honor Claims
Hopefully, the message from this seminar and the advice from Stan Feldman and Wayne Miller will resonate. If there are enough Michigan lawyers willing to take on these insurance companies over these smaller cases, perhaps as a profession lawyers can start to make these insurance companies behave better and honor claims that should be paid. And if lawyers can make a decent living while protecting the public, it only helps the effort.