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Why is there so much fraud and abuse from car insurance companies in Michigan?

October 26, 2015 by Steven M. Gursten


Michigan insurance fraud

If you’ve read my list of the “Worst” auto insurance companies for 2015, you can surely see that insurance company abuse is rampant in this state. It makes sense, sadly. Michigan does not have some of the most basic protections against insurance company abuses and bad faith that exists in most other states.

Michigan has no bad faith laws. We have no punitive damages to punish insurance companies when serious harm is caused by insurance company bad faith. And we even had protections that once existed – such as under the Michigan Consumer Protection Act, dismantled by a Supreme Court friendly to the insurance industry.

We need some serious action now to regulate how the auto insurance companies treat people who have been seriously injured in automobile accidents in Michigan.

One day, one of these people could be you.

As a No Fault insurance lawyer, I see first-hand how insurance companies treat people.  If you’ve been injured in an auto accident, chances are you will experience the three D’s from an auto insurance company when handling your claim.  The insurance company will usually:

  1. Delay your insurance benefits,
  2. Deny you were injured in an auto accident, and then
  3. Defend aggressively, to frustrate people in the hopes they will forgo benefits that are contractually owed to them, or hope they accept a compromised settlement offer that’s far lower than what they’re owed.

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Below, I will outline more about the reasons there’s so much more fraud and abuse from car insurance companies in Michigan than in other states across the country.

No bad faith laws in Michigan

Bad faith laws are laws that prohibit insurance companies from treating you unfairly and illegally. Bad faith is defined as an intentional dishonest act by not fulfilling legal or contractual obligations, misleading another, entering into an agreement without the intention or means to fulfill it, or violating basic standards of honesty in dealing with others.

No punitive damages in Michigan

Punitive damages are additional damages that a judge or jury can award when an insurance company acts with recklessness, malice or deceit. Michigan law does not allow judges or juries to award punitive damages in car accident cases, or any personal injury lawsuits for that matter.

So insurance company defendants have no problem forcing legitimate cases to trial. Even if they lose, all they have to pay is the insurance policy limits.

This also means we have more “grasshoppers” – truckers who have caused so many truck accidents that they can’t get jobs in states with punitive damages. So they come here.

Michigan’s Pathetic Consumer Protection Act

Consumer protection laws are supposed prevent businesses from engaging in fraud or certain unfair practices and to protect consumers in the marketplace.

Unfortunately, this means nothing in Michigan, where our Republican Supreme Court ruled that the Michigan Consumer Protection Act cannot be used to protect people against auto insurance companies.

The result is that once again, Michigan insurance company claims adjusters can treat people terribly and largely can get away with it.

Michigan insurance companies already lead the nation in profitability, and Michigan is one of the few states without an insurance commissioner who can regulate how much profit these insurance companies can make; even though as residents, we are all required by law to purchase No Fault insurance.

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