With no protections from a state bad faith law, no help from the Michigan Consumer Protection Act, and no right to seek punitive damages, the insurance industry’s proposed No Fault changes will allow insurers to run amok
Let me share an open secret with you. It’s one that every lawyer, judge, and every insurance company in Michigan already knows. But it gets almost no media attention, and the only people who sadly are taken by surprise are members of the unsuspecting public unfortunate enough to be hurt in a car accident.
Michigan’s auto insurance companies are out of control. There are countless bad faith insurance denials and illegitimate cut-offs of No Fault medical benefits to injured auto accident victims.
At some point, nearly every serious auto accident case requires a No Fault lawsuit just to make the insurance company responsible for paying No Fault benefits actually do what it is contractually obligated by law to do. The promise of prompt payment of No Fault benefits in this state – in exchange for citizens giving up the right to sue in tort for injuries and pain and suffering, unless the injuries were sufficiently “serious” – that our entire No Fault Act was predicated upon since 1973 to the present is already broken. Just ask State Farm, or any other insurer how seriously it takes its obligation to promptly pay No Fault benefits.
With no “big stick” to deter illegal behavior that hurts innocent people, and no threat of “bad faith” or punitive damages or consumer protection lawsuits to slow them down, Michigan’s auto insurers have increased their denials and cut-offs by approximately 177% over the last 10 years.
That number is staggering. It shows how the system is spiraling out of control.
But, as horrific as that sounds, it’s going to get unimaginably worse — if the absurd and reckless plans for so-called No Fault “reform” being pushed by the insurance industry, with the support of Governor Snyder and as contained in House Bill 4612, are passed into law this fall or winter.
This is true because so-called No Fault “reform” will have the following effects:
- It will make it easier for auto insurers to deny and/or cut-off No Fault medical benefits to auto accident victims.
- It will make it harder, if not nearly impossible, for victims to successfully challenge the denial and/or cut-off of their No Fault medical benefits.
How Michigan lets auto insurers run amok with denials and cut-offs
Michigan auto insurers have been emboldened by years of pro-insurance rulings from the already Republican-controlled Michigan Supreme Court and the Michigan Court of Appeals. Sadly – and here I believe I find agreement with every judge, law professor and lawyer in Michigan – the pernicious effects of insurance companies and lawyers giving record amounts of money to judges in elections after Citizens United v. FEC have had a corrupting effect, even if it is only in the appearance of impartial justice. As Justice Stevens said in his dissent in Citizens United: “A democracy cannot function effectively when its constituent members believe laws are being bought and sold.” Citizens United v. FEC, 130 S. Ct. 876, 954 (2010) (Stevens, J., dissenting).
Whether it is as obvious as many insurance lawyers and and consumer protection advocates believe or not, there is certainly the widespread belief that the insurance companies that are pouring record amounts into judicial elections in this state are expecting a return on their investment.
Michigan law does not allow insurers to be sued for “bad faith denials.” Nor does it allow insurers to be required to pay punitive damages when they throw people “under investigation” without any explanation, and simply stop paying necessary insurance benefits like medical and wage loss so people can get needed medical care and not lose their homes.
Moreover, Michigan law does not provide any meaningful consumer protection against auto insurers who engage in “unfair, unconscionable, or deceptive” business practices.
We can thank our Republican Michigan Supreme Court for that one. The Republican majority decided in an activist interpretation of the Michigan Consumer Protection Act that the Act should not protect consumers injured or wronged by insurance companies. A nice exception whittled out for insurance companies, and suddenly an important weapon used to level the playing field by No Fault insurance lawyers like myself disappeared.
No Fault cut-offs and insurance denials skyrocket 177%
Not surprisingly, with these obstacles removed, the insurance industry is revving up their denials and bad faith cut-offs of No Fault medical benefits to injured auto accident victims in recent years.
For instance, denials and cut-offs of No Fault benefits have increased approximately 177% from 2,701 in 2002 to 7,485 in 2012, according to data reported in the Statistical Supplements contained in the Annual Report of the Michigan State Courts.
Note: The above calculation is based on the “New Filings” data for “No-Fault Automobile Insurance” lawsuits, which are generally only filed by auto accident victims/insureds to recoup unpaid and overdue No Fault benefits after a denial or cut-off of benefits by an auto insurer.
Making it easier for auto insurers to deny/cut-off No Fault medical benefits
Under so-called No Fault “reform,” it will be easier for auto insurers to deny or cut-off No Fault medical benefits because they will have many new – albeit vague, confusing, inconsistent and contradictory – grounds on which to base their denials and/or cut-offs.
Now, if an insurer wants to deny or cut-off No Fault medical benefits, the insurer has essentially only two justifications:
- Claiming that No Fault medical benefits are NOT “reasonably necessary”; or
- Claiming that No Fault medical benefits are NOT reasonably priced. (See MCL 500.3107(1)(a))
However, under No Fault “reform,” the list of justifications becomes larger and more tricky for auto accident victims to navigate.
For instance, under the provisions of HB 4612, auto insurers will be able to rationalize their denials and cut-offs by claiming the No Fault medical benefits in question were NOT:
- “Medically appropriate” and/or “medically necessary”.
- “[R]easonably likely to result in meaningful and measurable lasting improvement in the injured person’s functional status.”
- “[P]rovided for medical or rehabilitative reasons,” but “rather … primarily for the convenience of the individual, the individual’s caregiver, or the health care provider.”
- “[P]rovided in the most appropriate location where the service may, for practical purposes, be safely and effectively provided.” (See Pages 32, 35-37 of HB 4612)
Making it harder for auto accident victims to challenge denials and cut offs
It’s ridiculous how so-called No Fault “reform” stacks the deck against auto accident victims, making it harder, if not nearly impossible, for victims to successfully challenge the denial and/or cut-off of their No Fault medical benefits.
For instance, HB 4612 erects the following permanent and unprecedented legal “roadblocks” to impede auto accident victims’ efforts:
- Insurers’ decisions to deny No Fault medical benefits can be “reexamined” only by a doctor of the No Fault auto insurer’s choosing. (Pg. 35-36 of HB 4612)
- Auto accident victims are barred from presenting “claims processing evidence” in a trial to recover unpaid and overdue No Fault benefits. (“Claims processing evidence” shows how a No Fault auto insurer “processed” an auto accident victim’s claim for No Fault medical benefits and, ultimately, decided to stop paying on it) (Pg. 45 of HB 4612)
- Auto accident victims have no right to a jury trial. (Pg. 47 of HB 4612)