TOV Injury and Safety Blog

Court reaffirms: no remedy for Michigan insureds when Farm Bureau acts in bad faith

Shirley Nixon sued Farm Bureau General after it refused to pay benefits under her homeowner's policy and accused her of intentionally setting fire to her home.  The trial court refused to dismiss her "bad faith" claim or her cause of action for "intentional infliction of emotional distress."  Farm Bureau appealed to the Court of Appeals, arguing that even if it acted in "bad faith" and wrongfully denied Nixon's purchased benefits, she had no claim for damages.

Citing an earlier case where Blue Cross wrongfully refused to pay for treatment of Stage IV metastatic breast cancer treatment, the Court of Appeals reversed the lower court ruling in Nixon's case and dismissed her claim for "bad faith."  The Court held that "the mere failure to pay insurance benefits" does not create a cause of action against the insurer in Michigan.  Unlike most states, Michigan does not recognize a cause of action for bad-faith refusal to pay an insurance claim, no matter how egregious the insurer's conduct, as "[f]ailure to pay a contractual obligation does not amount to outrageous conduct, eve if it is willful or in bad faith."  

Do you still have doubt about the power of insurance companies to control the law in Michigan?

Home owner cannot hold insurer responsible for allowing fraudulent "agent" to cancel policy

Robert Gaines purchased a home which he immediately sold to a realtor-friend.  The realtor-friend was authorized to manage the transaction, and she allowed her boyfriend to purchase homeowner's coverage.  Before Gaines could sell the home to his friend, however, the house burned.  When Gaines sought coverage from Michigan Basic, he was informed that "his son" [actually the friend's boyfriend]had cancelled the coverage prior to the sale.  Gaines sued the insurer for negligence in allowing a third-party to cancel coverage, however, his claim was dismissed.  The Court pointed to the fact that Notice of Cancellation had been mailed to the proper address, precluding Gaines from arguing that the insurer should be estopped from cancelling.  The Court also rejected his claim that he should be treated as an "equitable subrogee," noting that the protection provided under that doctrine applies only to a third-party who pays the legal debt of another.

Bank can't grab fire insurance proceeds to pay off loan

Since the economy has turned home equity upside-down on so many people, a new problem has surfaced.  When a structure suffers damage that is insured, the mortgagee bank is tempted to grab the money for repayment of its loan, rather than allowing the home to be re-built.  That's exactly what happened to Allen and Julie Hilliker in Ogemaw County after their home suffered a fire loss.  They were insured by Wolverine Mutual and elected to have the home re-built.  Rebuilding would cost $185,859.51, but the actual cash value of the home was only $119,127.13---less than the $140,000.00 mortgage. 

Commercial tenant held responsible for damage caused by fire

In American States Insurance and Ratcliff v. Hampton, dba VIP Truck & Trailer, a building owner and his insurer sued the tenant who caused a fire in the leased premises for the damage caused to his building.  Under the parties' written lease, Hampton had assumed responsibility for any damage resulting from "his negligence or the negligence of invitees or guests."  Hampton argued, however, thast Ratliff's purchase of fire insurance and his admission that his building was under-insured constituted proof that the landlord had assumed the risk associated with a fire caused by Hampton.

The Courts rejected this analysis, and distinguished this case from a prior case where the tenant's only relevant leasehold duty was to pay the insurance premiums incurred by the landlord.

Farm Bureau's efforts to avoid paying fire loss are discredited by court

Brittany Smith's home burned.  She had bought coverage with Farm Bureau.  Farm  Bureau demanded that Smith complete the copious Proof of Loss which can be required by law (and it has short time limits, by the way) and she filled it out including between $900 and $1,000 dollars of personal property in the residence destroyed by fire but not owned by her.  She explained that apparent discrepancy to Farm Bureau when it forced her to sit for an examination under oath.  Nevertheless, Farm Bureau attempted to void her policy and refused to pay her the insured value of her loss--which was in excess of $200,000.00 in real and personal property.

Farm Bureau evades another obligation

Dynamic Land, L.L.C., bought commercial insurance from Farm Bureau on a two-unit commercial building.  It was renovating the insured property when a sprinkler system pipe broke.  It attempted to recover for lost rent and actual expenses of nearly $300,000.00, incurred over the twelve months the property was under repair.  Farm Bureau denied payment, arguing that the company had not shown an "actual loss of business income" during the repair period. 

Court of Appeals refuses to overturn jury verdict regarding building fire

The owners of the vacant Bagley Building in Detroit sued the company that was demolishing an adjacent building, the Statler-Hiltorn Hotel, after the Bagley Building was damaged by fire.  The owners claimed that the fire in the Bagley Building was caused by the Defendant's demolition activities.  The jury disagreed, and the owners argued on appeal that the jury's decision was "against the great weight of the evidence."  

The latest in insurance "loophole" arguments

A superficial search of this weblog will provide numerous examples of insurers attempting to avoid obligations they have collected premiums to cover--through nonsensical or perverse construction of the insurance policy contract.  The industry hit a new low in Texas this fall, however, when Great American Insurance Company filed an argument claiming that it was not responsible to provide "excess" coverage for several deaths that resulted from an office building fire.  The insurer is claiming that although its policy including fire liability coverage, it owes no coverage for the seven deaths that occurred in a 2007 fire because the victims all died of smoke inhalation.  The insurer is arguing that it owes no coverage for smoke inhalation deaths because it included an exclusion in the policy for damages caused by "pollution".   

Claimants' rights are extinguished by execution of allegedly-unintended Release

In Jack v. Hastings, the Court of Appeals upheld the Grand Traverse County Ciruit judge's dismissal of a follow-up contract claim brought by the owners of a condominium against their insurer.  The condo owners had suffered a substantial water damage claim and received a $34,000.00 payout by its own insurer.  The owners then pursued a negligence claim to recover more fully for their damages and achieved a settlement of an additional $180,000.00 from the at-fault party.  The owner then attempted to pursue a contract action against its own insurer, to recover the remainder of his damages. 

Farm Bureau denies another claim on a technicality

Farm Bureau has been one of the more aggressive insurers in relying on the pro-insurance Michigan Supreme Court to avoid paying claims.  It was successful again in Sherman-Nadiv v. Farm Bureau, where the insured wasn't allowed to challenge a jury verdict because it had not filed the proper motion in the lower court.  The case involved a rental property that the plaintiffs had insured with Farm Bureau.  The policy contained language in the fine print that excluded coverage if the home was "unoccupied" for 30 days, unless it was "being constructed".

Is my insurance agent my agent or the insurance company's agent?

The Court of Appeals issued an interesting opinion addressing this topic last week.  In Genesee Food Services, Inc. v. Meadowbrook, Inc., two judges of the Court of Appeals held that the Plaintiffs could sue their insurance agent for [allegedly] arranging inadequate insurance, despite the fact that the Plaintiffs had executed a release that held harmless Citizens Insurance and its "agents".   Genesee Foods had experienced a disastrous fire after its agent, Meadowbrook, placed them with Citizens Insurance Company.   Meadowbrook had earlier executed an agency agreement with Citizens, and its attorneys argued that by the plain language of the Release and Settlement Agreement with Citizens, Meadowbrook was immune from suit.

Fire Insurance claim filed in accordance with original policy limitations is "late" and dismissed

James Carpenter sued Michigan Basic Property Insurance Association for losses suffered in a fire.  Michigan Basic's original policy allowed Carpenter two years in which to sue.  The Company had issued an amendatory endorsement reducing this limitation period to one year (usually computed from the time the insurer formally denies liability--but don't count on it--Randolph v. State Farm). 

Farm Bureau strikes again: "You expected us to pay a claim?"

  Beware of the small print in your insurance contract:  you can't negotiate the language or change it; but the insurer and some judges will strangle you with it.

Over-reaching Farm Bureau takes two hits in one week

  Farm Bureau insurance has been very aggressive in attempting to enlist the activist Michigan judiciary in its campaign to deny insureds' purchased benefits.  For example, it has been a leader in the effort to avoid paying any liability benefits under its policies, if the "negligence" of the wrong-doing insured is also "in the nature of a criminal act" (this vague  policy phrase includes negligent discharge of a BB gun, negligently endangering a child, failing to take the door off an abandoned refrigerator, and dozens of other "crimes").  Michigan is about the only jurisdiction that allows such a broad interpretation of "criminal" acts in insurance policies, leaving many paying insureds without the coverage that they thought they had purchased.  Recently, Farm Bureau took a slap-down from the Court of Appeals on two efforts to further restrict insured's rights.