(Source: MIRS.news, Published 05/05/23) A Senate bill creating stricter accountability practices for insurance providers hasn’t been formally introduced yet, but Michigan’s trial lawyers are already on board.
The soon-to-be-introduced SB 329 will be sponsored by Sen. Jeff IRWIN (D-Ann Arbor), after development with the Michigan Association for Justice (MAJ), formerly known as the Michigan Trial Lawyers Association (MTLA).
MAJ President Stuard Sklar said the Association pushed for the introduction of legislation creating standards for insurance company conduct, which he said will hopefully encourage insurers to act in good faith.
“The insurance industry has created a culture where company profits are placed ahead of the interests of policyholders,” Sklar said. “The corporate tactics they use to delay and deny payment of claims violate the Good Faith and Fair Dealing required of insurance companies.”
For almost the entire history of Michigan law, he said, there has never been anything in statute that allows policy holders to hold insurance companies accountable by giving them the option to sue and collect damages for wrongful conduct.
The Consumer Protection Act doesn’t apply to insurance companies, he said, and the Unfair Trade Practices Act, which is overseen by the Department of Insurance and Financial Services (DIFS), doesn’t allow individuals to pursue legal action.
“It is critical that we establish industry standards for investigating and paying claims, and to protect consumers, businesses and insurance companies,” Sklar said.
The bill creates standards for insurance companies dealing with claims, including providing documents and updates on claim status, Sklar said. This will ensure valid insurance claims are paid promptly.
He added that the bill will also allow claimants who feel an insurance company is not acting in good faith to file a lawsuit and seek not only the amount of the claim, but also potential damages.
Sklar said 47 other states have some sort of law similar to what they are now proposing.
“Insurance companies will be against this, but nobody else will be against this,” he said.
Erin McDonough, executive director of the Insurance Alliance of Michigan, said she is concerned about the potential for costs to be driven up "for everyone that purchases insurance in our state.
“Other states that have gone down this road have seen a dramatic increase in fraudulent claims and frivolous lawsuits that create escalating costs for all consumers and businesses,” she said, adding that Washington state passed a more pared down version of this and saw costs grow by 20%, and some Florida insurers saw so many lawsuits abusing the law that insurers were put in positions where they could no longer provide coverage for homes and businesses there.
“At a time when people in our state are struggling with the costs of everything from gas to groceries, we urge caution, thoughtful conversation and research when thinking about dramatic changes like this to our system,” McDonough said. "We are ready to engage in conversations with the Legislature around this proposed legislation so we don’t become the most expensive state in the nation for consumers to purchase insurance.”
McDonough added that Michigan already has strong safeguards in place for consumers through DIFS investigations.
Of the approximately 2 million claims each year, she said DIFS statistics show that there were only 2,086 inquiries about home and auto insurance claims being handled properly, meaning 99% of claims are paid promptly and without issues.
The bill was supported by the Coalition to Protect Auto No Fault, and President Tim HOSTE said the bill would address the challenge of untimely and unpredictable insurance payments faced by medical providers.
“If enacted, this law will ensure that medical providers can rely on the fact that payments for medical services will be made timely,” he said, “which will result in lower costs to patients and drivers.”
The bill is awaiting a formal introduction in the Senate.
