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How about a No-Fault fraud ‘watchdog’ that goes after auto insurers, too?

June 1, 2017 by Steven M. Gursten

Rep. Graves (R-Argentine Township)’s May 30, 2017, HB 4672 proposes car insurance fraud authority targeting insurers’ bad-faith practices that harm people and deny without justification No-Fault PIP benefits to car crash victims

Car insurance fraud watchdog

Insurance companies have been getting away with too much for too long. They treat car crash victims unfairly and dishonestly. They treat people in Michigan far worse than they do in other states because Michigan is one of the few states without bad faith laws, punitive damages, or a Consumer Protection Act that can actually protect against insurance fraud committed by the big auto insurance companies.

For the entirely of my career as an auto accident attorney, I’ve watched insurance companies cause incredible harms to innocent people by withholding desperately needed medical care and treatment, attendant care, and wage loss — without any reason whatsoever. I’ve seen people cut-off from No-Fault PIP benefits and put under “investigation” by claims adjusters who later admit it was so they could then ignore an open and valid accident claim.

I’ve had enough.

I’ve repeatedly called on the pages of this Auto Lawyer Blog for the creation of a No-Fault car insurance fraud authority that would investigate fraud committed by both insurers and insurers. The insurance companies, and far too many politicians in Lansing who are the beneficiaries of generous campaign contributions by the insurance industry, would prefer it to be a one-way street and have, up until now, only backed the idea of the creation of a fraud authority that would look at car crash victims. Insurance companies would not be subject to scrutiny.

But I’m far from alone in advocating for a No-Fault fraud authority that looks at both the insurance companies and the insureds.

On May 30, 2017, Rep. Joseph Graves (R-Argentine Township) sponsored House Bill 4672, which proposes to create a “Michigan Automobile Insurance Fraud Authority” that would fund law enforcement, prosecutors and an “independent entity” to simultaneously investigate and root out:

  • No-Fault car insurance fraud (by insurers and individuals); and,
  • Unfair claims and settlement practices of Michigan No-Fault auto insurance companies.

Significantly, on the issue of “unfair settlement practices and claims practices,” the car insurance fraud authority would be required to:

  • “Evaluate the impact unfair claims practices by insurers have on the citizens of this state and shall determine the costs incurred by the citizens through unnecessary litigation and bad-faith practices that delay, withhold, or deny policyholder benefits that are based on legitimate claims, including special investigation units that report suspected fraud and abuse cases that are not based on independent, appropriate, and good-faith investigation.”
  • Identify and evaluate “unfair settlement practices and claims practices, including the claims practices of the [Michigan Catastrophic Claims Association], reimbursement rate practices, timeliness of claims practices, and the use of independent medical examiners and special investigation units.”
  • “Recommend any changes to existing laws to reduce [the] costs” incurred through “unnecessary litigation” and “unfair,” “bad-faith” “claims practices.”

Notably, the Insurance Fraud Authority would be controlled by a 25-member Board of Directors — of which 11 seats would be filled by members representing the following groups:

  • General public (2).
  • Consumer rights and patient advocacy groups (3).
  • Medical community who cares primarily for patients with acute medical needs (1).
  • Medical community who care primarily for patients with subacute medical needs (3).
  • Attorneys knowledgeable about Michigan’s No-Fault auto insurance law (2).

The Board of Directors members above would be appointed by the Governor, except for the attorneys who would be elected by the State Bar of Michigan.

Talk about an idea whose time has come.

Let’s just hope lawmakers don’t miss the moment.

What is car insurance fraud?

HB 4672 defines “automobile insurance fraud” as a “fraudulent insurance act as described in [MCL 500.4503] that is committed in connection with automobile insurance, including an application for automobile insurance.”

Interestingly, the statute says that a “fraudulent insurance act” includes, but isn’t limited to:

A person, individual or insurer making a false statement “concerning any fact or thing material to” an “application for the issuance of an insurance policy” and/or “any claim for payment or other benefit pursuant to an insurance policy.” (MCL 500.4503 (a) through (d))

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