The Michigan No-Fault Insurance reform bills announced by the House Democratic Caucus on May 1, 2014 have hit the Internet. This continuing blog series reviews the bills as they are released. This time, the post will consider several bills creating consumer protections against unfair practices by the insurance company.
The Democratic bills seek to arm families and consumers with legal rights to combat abuse by insurance companies when they unfairly refuse to provide legitimate coverage and benefits.
HB 5519 and HB 5520 would make it illegal for insurance companies to engage in unfair dealings with their customers – whether for personal injuries or property and casualty claims. Unfair dealings include:
- Misrepresenting Facts Or Policy Provisions;
- Failing To Respond To Claims;
- Failing To Promptly Investigate Claims;
- Refusing Payment Without Reasonable Investigation;
- Failing To Affirm Or Deny Coverage In A Reasonable Amount Of Time;
- Failing To Make Reasonable Settlement Efforts With Claimants;
- Forcing Claimants To File Lawsuits To Receive Reasonable Awards;
- Relying On Advertising To Settle Claims For Less;
- Altering The Claims Application Without Notice;
- Omitting Coverage Upon Paying A Claim;
- Threatening Further Litigation To Force Claimants To Take Settlements Lower Than An Arbitration Award;
- Requiring Duplicative Claims Reports;
- Using Settlement Of One Claim To Influence Settlements Of Other Claims;
- Failing To Give Reasonable Explanations For Denials Of Claims Or Settlement Offers;
Where there has been a finding of bad faith, the bills would entitled the customer or care provider to sue the insurance company and receive:
- Compensation For Harm Done By The Company’s Behavior
- Court Costs And Attorney Fees
- Interest On Unpaid Benefit Premiums (HB 5523)
- Exemplary Damages To Prevent Future Bad Faith Behavior
- Correction Of Credit History As Related To The Company’s Nonpayment Of Debts (HB 5525)
If the insurance companies make a habit of unfair practices, HB 5518 imposes a $1 million penalty for second and subsequent consumer protections violations. The money is paid into a Whistleblowers’ Protection Fund to help catch future bad faith dealings. HB 5522 also allows attorneys who represent insured motorists in First-Party insurance claims to get attorney fees for collecting overdue payments. If the delay is a result of bad faith (described above), then the insurance company will also have to pay the insured $10,000.00 or 3 times the amount of benefits withheld.
The statutes make clear that the insurance company’s behavior is a question of fact to be decided by a jury. But where there is proof of unfair practices, HB 5523 will create a legal presumption that the insurance company was acting in bad faith. That means the insurer, not the customer, will be on the defensive to prove what happened was right.
This set of bills, taken together, could give insured claimants much more power in negotiating settlements based on automobile accidents, while at the same time guaranteeing them access to the courts. If you believe the insurance company should be more closely regulated, contact your state representative and tell him or her to support these bills.