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MCA puts kibosh on State Farm denying No Fault benefits to auto accident victims

January 8, 2016 by Steven M. Gursten

State Farm denies No Fault PIP benefits in violation of 13-year old Michigan Supreme Court ruling

State Farm not a good neighbor


What do you call an auto insurance company that refuses to obey the law?

Yep. You guessed it.

State Farm.

I write quite a bit about State Farm. They keep doing things that give me no choice but to write about them.  Ask most auto No Fault insurance attorneys in Michigan which insurance company today gives their clients the hardest times, or gives doctors and hospitals the hardest time getting paid on outstanding medical bills for auto accident victims, and I’d wager the vast majority will say State Farm.

The following Michigan Auto Law blog posts describe just a few of the practices that State Farm uses against auto accident victims –  and its own loyal, premium-paying State Farm insureds and customers:

In the recently published Michigan Court of Appeals opinion, Chiropractors Rehabilitation Group, P.C., v. State Farm Mutual Automobile Insurance Company, State Farm got smacked down – AGAIN – for trying to condition its payment of No Fault auto insurance benefits to a Michigan auto accident victim on the victim’s willingness to submit to an EUO (also known as an “Examination Under Oath”).

What makes this so outrageous is that State Farm was violating a No Fault law that has been “on the books” for 13 years.

In 2002, the Michigan Supreme Court ruled:

“We hold that EUO provisions may be included in no-fault policies, but are only enforceable to the extent that they do not conflict with the statutory requirements of the no-fault act. Because the insurer in this matter … impermissibly sought to enforce the EUO as a condition precedent to its duty to pay no-fault benefits, this brought the EUO provision into conflict with the requirements of the no-fault statute. The EUO provision must yield to the statute.” (Pages 1-2)

*    *    *

“[W]e conclude that an EUO that contravenes the requirements of the no-fault act by imposing some greater obligation upon one or another of the parties is, to that extent, invalid. Thus, a no-fault policy that would allow the insurer to avoid its obligation to make prompt payment upon the mere failure to comply with an EUO would run afoul of the statute and accordingly be invalid.” (Page 11)

*    *    *

An auto insurance company’s “attempt to require plaintiff to submit to an EUO as a condition precedent to payment of no-fault PIP benefits [is] impermissible …” (Page 14)

This is not news.  I speak at the majority of No Fault insurance seminars. What makes State Farm’s actions so frustrating is the auto insurer’s familiarity with the law. It has been bold-faced violating. Indeed, State Farm was the auto insurance company whose denial of No Fault benefits as a penalty for an auto accident victim’s failure to submit to an EUO resulted in the Michigan Supreme Court’s 2002 ruling. The case is Cruz v. State Farm Mutual Automobile Insurance Company (Michigan Supreme Court, July 17, 2002, #117505).

State Farm’s ‘smackdown’ in the Michigan Court of Appeals

In Chiropractors Rehabilitation Group, P.C., State Farm denied No Fault auto insurance benefits to Michigan auto accident victims based on the victims’ failure to submit EUOs. State Farm tried to justify its actions by insisting “that the injured parties are ineligible for [No Fault] PIP [“personal injury protection”] benefits because they failed to submit to EUOs,” which were required in State Farm’s auto insurance policies.

But the Court of Appeals refused to accept State Farm’s argument that “compliance with EUO provisions” in an auto insurance policy “effectively operate[s] as a condition precedent to State Farm’s duty to pay no-fault benefits.”

Instead, the Court of Appeals ruled:

“[U]tilizing the compliance with EUO provisions as a condition precedent to the recovery of no fault benefits is precluded by Cruz, which held that an insurance company and its insured are not permitted to contract in a manner that vitiates the insurance company’s ‘duty to pay benefits in a timely fashion as required by the statute. Once “reasonable proof of the fact and of the amount of loss sustained” [is] received by [the insurer], it [must] pay benefits or be subject to the penalties.’ … Accordingly, we find that the failure to submit to an EUO does not establish, as a matter of law, that an injured party is not entitled to no-fault benefits.”

In light of the above, it’s no wonder that State Farm topped our attorneys’ list of what we believe are the “Worst” auto insurance companies for 2015.

To learn more, please check out Michigan Auto Law’s blog post, “Why did our attorneys rate State Farm as our worst insurance company for 2015?”

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