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A Michigan No-Fault insurance ‘shell game’ by Daimler Chrysler Insurance Company

February 10, 2011 by Steven M. Gursten

No-Fault lawyer’s open letter to Michigan Insurance Commissioner Ken Ross, part 2: Stop this fraudulent scheme

Yesterday, I started my letter to Ken Ross, bringing his attention to the fraudulent language buried in the fine print of Daimer Chrysler Insurance Company’s (DCIC) No-Fault policy – that essentially leaves its insured employees and retirees with no protection whatsoever following a serious car accident. Here’s the last part of the letter from our No-Fault insurance lawyers, urging Mr. Ross to stop this abhorrent practice by DCIC:

Daimler Chrysler Insurance Company’s objectionable auto insurance policy came to light in a case that was recently before the Michigan Supreme Court, Abay v. Daimler Chrysler Insurance Company (Case no. 139725).

The policy is one that DCIC issues to participants in Daimler Chrysler’s employee/retiree lease program (all program participants are required to purchase any and all auto insurance from DCIC).

Again, the way that Daimler Chrysler Insurance Company rigs the policy to contain a built-in excuse to deny claims for No-Fault and liability coverage, is by naming “Daimler Chrysler Corporation” as the “named insured” on the policies, rather than the person who is actually paying the premiums on the policy.

Consequently, when the “insured” files a claim under the liability coverage provisions, the insurer can generally deny coverage on the ground that coverage only extends to the “named insured” and the person who is making the claim (who also happens to be the person who is actually paying the premiums) is not the “named insured.”

Similarly, with respect to coverage of No-Fault benefits, Daimler Chrysler Insurance Company’s “name game” allows the insurer to insulate itself from having to pay out on No-Fault claims for the “insured” or for anyone through the “insured,” because the No-Fault priority rules depend on the identity of the “named insured” in the policy.

For instance, with Daimler Chrysler Corporation named as the “named insured” in DCIC’s policies, neither the premium-paying “insured,” nor his or her spouse, nor a resident relative can claim No-Fault benefits through the policy – because the premium-paying “insured” is not the “named insured” on the policy. (See MCL 500.3114(1))

Harsh words for Daimler Chrysler Insurance Company auto insurance ‘scheme’

When Daimler Chrysler Insurance Company’s policy was initially challenged by the plaintiff in Abay, the trial judge refused to let DCIC use it to shirk its responsibility to provide coverage.

Although a two-judge majority on the Michigan Court of Appeals reversed, the dissenting judge, Douglas B. Shapiro, did not hold back in his condemnation of DCIC’s policy: “This is at best an aberration that should be corrected rather than approved and may, in fact, be a calculated deception.”

Once the Abay case reached the Michigan Supreme Court, the criticism of DCIC’s policy became even more bare-knuckled. In a joint “friend of the court” brief, Allstate Insurance Company and Auto Club Insurance Association had the following to say:

o “DCIC has unlawfully constructed its policy in such a way that it is never required to pay PIP benefits if there is another no-fault policy in the claimant’s household.”

o The DCIC’s policy’s purported No Fault “coverage is wholly illusory …”

o “[E]very person who leased a vehicle through [Daimler Chrysler’s employee/retiree lease program] was the victim of fraud by being forced to pay for no-fault insurance from which the person, his or her family, and all occupants of the leased vehicle could reap no benefits due to the no-fault insurance shell game perpetrated by DCIC premiums are paid but mandatory coverage is not provided.”

o “The time has come … to put an end to DCIC’s PIP shifting scheme.”

However, despite such forceful and compelling arguments by two of the state’s largest auto insurance companies, a four-justice majority of the Michigan Supreme Court ultimately decided to not hear the case.

Michigan’s insurance commissioner needs to act

Using your regulatory powers, Mr. Ross, to condemn and prohibit unscrupulous actions by a Michigan auto insurance company, such as those taken by DCIC in issuing the auto policy described above, is not unprecedented.

In 2005, your office invoked your powers to prohibit “misleading” and “deceptive” policies to issue a Notice and Order of Prohibition declaring that a shortened limitation period (less than the statutorily permitted three years) for filing an uninsured motorist claim was “unreasonable.”

The Notice and Order of Prohibition (05-060-M) stated that such shortened limitation periods were “misleading” and “deceptive” because purchasers of affected uninsured motorist policies “will often be paying for coverage that is illusory as a practical matter.”

Notably, the Notice and Order of Prohibition was a direct response to the Michigan Supreme Court’s decision in Rory v. Continental Insurance Company, wherein the court failed to protect Michigan drivers by refusing to declare the shortened limitation periods on uninsured motorist policies unreasonable.

When the No-Fault lawyers at Michigan Auto Law inquired about what actions, if any, you will take to stop Daimler Chrysler Insurance Company from continuing with its auto insurance “scheme” and, thus, prevent other Michigan auto insurance companies from jumping on the “shell game” bandwagon, the following response was communicated to Michigan Auto Law through your Public Information Officer:

“The Commissioner has directed his counsel further review the policy form involved in this case to determine whether he has authority to take action such as an Order of Prohibition on the terms of the “fronted policy” involved in this case, particularly the “named insured” clause, and if such administrative action is warranted.”

It is my sincere hope that, once you have finished your review of the auto insurance policy at issue in Abay, you will conclude that not only do you have the authority to prohibit such misleading and deceptive auto insurance “schemes,” but you have the obligation as Michigan’s Insurance Commissioner to do so.

Steve Gursten is recognized as one of the nation’s top No-Fault insurance lawyers handling serious car accident and truck accident lawsuits. He routinely writes about insurance company abuse and the No-Fault laws in Michigan, and is available for comment.

Related information:

Michigan’s 10 worst auto insurance companies

Auto accident lawyers beware: Daimler Chrysler Insurance Company’s ‘fraudulent’ No-Fault policy

How to read your Michigan auto insurance policy

Michigan Auto Law is the largest law firm exclusively handling car accident, truck accident and motorcycle accident cases throughout the entire state. We have offices in Farmington Hills, Detroit, Ann Arbor, Grand Rapids and Sterling Heights to better serve you. Call (248) 353-7575 for a free consultation with one of our No-Fault lawyers.

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