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How to stop auto insurers from acting in bad faith

November 10, 2017 by Steven M. Gursten

To prevent insurers from acting in bad faith, House Bill 5104 imposes a duty to deal fairly & in good faith; exemplary damages, attorney fees for breach

Auto insurers acting in bad faith

Car accident injury victims in Michigan are pretty much powerless under existing Michigan auto law to stop insurance companies from acting in bad faith to deny No Fault benefit claims.

That’s because Michigan doesn’t have:

  • A bad faith law that imposes financial penalties on auto insurers who refuse to deal fairly and in good faith with their insureds, who are entitled to No Fault benefits after they’ve been injured in a car crash.
  • A meaningful and effective Michigan Consumer Protection Act that provides legal recourse to auto accident victims against auto insurers that that engage in “[u]nfair, unconscionable, or deceptive” business practices.
  • Punitive damages.

But a recently introduced bill could go a long way toward finally putting power into the hands of Michigan car crash injury victims and the lawyers who help to protect them against overreaching, exploitative and abusive practices by the auto insurance companies.

Specifically, House Bill 5104, which was introduced by Rep. Ed Canfield (R-Sebewaing), proposes the following:

  • No Fault auto insurers will have “a duty to deal fairly and in good faith with a person claiming benefits [i.e., a car accident victim] and the person’s service providers.” (HB 5104, page 3)
  • Insurers who breach the “duty to deal fairly and in good faith” will be “liable for compensatory, consequential, economic, noneconomic, and exemplary damages proximately caused by the breach and actual attorney fees and the related costs of litigation.”
  • There are, at a minimum, seven types of insurer “conduct” that “constitute[]” a breach of the “duty” to “deal fairly and in good faith …”

To protect car crash victims, we need a “big stick” to deter bad faith claims handling

I should know we need help. I’ve helped people as an auto accident attorney since 1995. I’ve had to file hundreds of lawsuits just to get insurance companies to pay what they should have paid from the beginning. I’ve watched as auto lawyers have to resort to litigation and filing costly lawsuits far too often as a result of No Fault insurer clear bad faith. I’ve long been a proponent of changing Michigan’s law to require insurance companies to deal fairly and in good faith with car accident victims.

As I wrote in my prior 2014 blog post, “Insurance companies treating people in good faith in Michigan?”:

“Back in 2009, it looked like the Michigan House of Representatives was going to make some serious headway in terms of requiring auto insurance companies to finally start acting in ‘good faith’ and providing penalties and punishments for insurers who insisted on acting in ‘bad faith’ in their dealings with insured customers. For thousands of injured automobile accident victims, such legislation would have been welcome relief. After all, insurance companies in Michigan regularly treat accident victims far worse than insurance companies do in other states. The difference is that in almost all other states, there are bad faith laws to protect consumers from abuse and neglect. In Michigan, such laws do not exist.”

Hopefully, HB 5104 can change all of that.

How can you tell when a No Fault auto insurer is acting in bad faith?

HB 5104 provided the following non-exhaustive list of “examples” of when an insurer is breaching its deal fairly/good faith and, thus, acting in bad faith:

  • The insurer makes “a statement or representation regarding the legal rights of the claimant or a service provider or the legal duties and obligations of the insurer that is materially false or deceptive …”
  • The insurer makes “a threat or an act of intimidation or retaliation against the claimant or a service provider regarding the submission, adjustment, or payment of a claim for benefits …”
  • The insurer “fail[s] to pay the claim or a portion of the claim if it reasonably appears that the insurer owes the claim or portion of the claim.”
  • The insurer “demands” that an auto accident victim submit to a so-called “independent” medical examination by an insurance company-hired IME doctor who: (1) “has demonstrated himself or herself to be biased in favor of insurers …”; (2) “does not practice in the same specialty as the health care professional who is treating” the auto accident victim; and (3) “devotes less than a majority of his or her professional time to active clinical practice …”
  • The insurer “fail[s] to make reasonable efforts to reconcile conflicting medical opinions and documentation … between the medical opinions of the claimant’s treating medical providers and the opinions” of the insurance company’s IME doctors.
  • The insurer “demand[s] that the” car accident victim “or a service provider submit unnecessary and excessive documentation in support of the claim” for No Fault benefits.
  • The insurer engages in “any other conduct that demonstrates the insurer has not dealt fairly and in good faith” with the auto accident victim “or a service provider in connection with the claim” for No Fault benefits. (HB 5104, Pages 3-5)

Which House lawmakers want to stop auto insurers from acting in bad faith?

Significantly, HB 5104’s primary and co-sponsors include 4 Republicans and 6 Democrats.

In addition to its primary sponsor, Rep. Canfield (R-Sebewaing), HB 5104’s co-sponsors include: Rep. Ben Frederick (R-Owosso); Rep. John Bizon (R-Battle Creek); Rep. Terry Sabo (D-Muskegon); Rep. Frank Liberati (D-Warren); Rep. Pam Faris (D-Clio); Rep. Tim Sneller (D-Burton); Rep. Wendell Byrd (D-Detroit); Rep. Jeff Yaroch (R-Clinton Township); and Rep. Bettie Cook Scott (D-Detroit).

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