TOV Injury and Safety Blog

A divided court recognizes wage loss where the sub-S Corporation is losing money

Under the Michigan No Fault Act, injured persons are not compensated for the loss of "earning capacity"; they can only recover actual lost wages.  AAA argued that an injured worker shouldn't be able to recover lost wages from his own sub-chapter S corporation if the corporation appeared to be losing money.  In a 5-2 decision, with Justices disagreeing over the pertinent logic, the Michigan Supreme Court handed a rare defeat to an insurer.  It held, in essence, that the statutory language and the recognition of a corporation's separate legal identity required it to honor the victim's lost wage claim.

Farm Bureau strikes again: no coverage for a substitute vehicle

Farm Bureau is making a concerted effort to compete with Allstate's reputation for callous, obstructive bullying in claims management.  This week, it managed to avoid paying an injured woman's PIP claims by asserting that she could not transfer coverage to a rental vehicle while her vehicle was "in the shop".

Broe v. Allstate: Allstate forced to pay overdue PIP benefits

   In this action to recover personal injury protection benefits from Allstate Insurance Company, the summary disposition in favor of the provider was upheld where Allstate opposed the provider's motion with only conclusory affidavits disputing the allegations of the provider's complaint.  The Court held that in response to a motion for summary disposition, Allstate was required to provide specific evidence in defense of the claims and not merely conclusory objections to payment.

Justice Taylor writes another opinion for the insurance industry: this time, he lets Engler's Insurance Commissioner overrule the expert physicians

In Ross v. Blue Care Network, Justice Taylor wrote for the majority, upholding the Insurance Commissioner's decision denying payment of health care costs incurred by a patient dying from multiple myeloma.  Under his health insurance contract, Ross was required to seek care "in-network" first.  When U of M couldn't treat him, he went to one of two facilities in the world that treat multiple melanoma (in Little Rock, Arkansas, surprisingly), where the doctors concluded that his life expectancy, without treatment, was on the order of 7 days.  Blue Care denied payment.  When the family appealed, the statutory Independent Review Organization--made up of health care professionals--recommended payment, but Governor Engler's Insurance Commissioner rejected the recommendation.  Justice Taylor endorsed the politically-appointed bureaucrat's decision.

The Gang of Four on Michigan's Supreme Court does another favor for insurance companies

In the recent case entitled Mary Ellen McDonald v. Farm Bureau, the Engler appointees to Michigan's Supreme Court overruled 30 years of case law to allow Farm Bureau to enforce a contract provision that was previously considered illegal and unenforceable.

Cancellation and rescission of insurance contracts

  The Courts and the Legislature have been very generous to insurers, allowing them to cancel, rescind or void insurance contracts where there is any evidence of fraud , misrepresentation, or incomplete disclosure in insurance applications.  In some cases, the misrepresentation must be of a "material" fact.

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.

The object must hit your car: your car can't hit the object

  In an effort to eliminate "phantom" uninsured motorist claims, most insurers require that there be some corroborating evidence of "physical contact" with the insured vehicle.  The "strict constructionists" in Seger v. Hartford read this requirement with such minute detail that striking a tree did not meet the contract terms and benefits were denied.

Insurance limits, inflation and "reform"

Most Michigan citizens would think that with all of the "reform" championed by the Republicans in the last twenty years, our no fault law would be "up-to-date".  Boy, would they be mistaken.

This week it was State Farm's turn to be slapped down for over-reaching

  In Suminski v. State Farm, the Michigan Court of Appeals, rejected State Farm's claim that it could enforce a "written consent" requirement in its uninsured motorist coverage, after State Farm waived the clause earlier in litigation.

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.

More over-reaching by Bristol West Insurance Company

    Bristol West has been a recent entry in the Michigan competition to see who can most aggressively abuse Michigan consumers.  While no one can really compete with Allstate in this competition, Bristol West appears to be doing its best.  This week it over-reached.

Ingenix: a system to rip-off insureds and doctors on "reaonable and customary"?

New York's Attorney General and the AMA have filed separate lawsuits charging that a system used by insurers to calculate "reasonable and customary" charges is cheating customers and health care providers.

The real Allstate Insurance Company: "outrageously greedy"...

  With a wealth of profits over the past few years, you may have noticed that Allstate Insurance is spending heavily to purchase goodwill by advertising in all manner of expensive venues.  In particular, you may have noted that the nets that catch extra points and field goals on many televised football games carry Allstate's name, and the insurer also spends heavily on a particular black actor as their spokesman:  he projects the face and voice of credibility on their behalf.

  Unfortunately, with Allstate, credibility and sincerity are only skin deep--literally, only the depth of the actors they hire to front for the company.  We have discussed this issue at some length previously (see the blog entry "Good hands or boxing gloves", in particular), and were reminded of the issue again recently when we saw reports of the insurance rate dispute currently under discussion in Florida.

The magic haybale

   In another marvelous result-oriented, pro-insurance, typically Henry Saad opinion, this week the Court of Appeals ruled that magical hay bales are capable of appearing anywhere, at any time.   In Kerr v. State Farm, the plaintiff was badly injured after she was startled by the presence of a haybale in the middle of the freeway and attempted to avoid it. She struck the bale, left the road and hit a highway obstacle, suffering vehicular damage and  severe injuries.  Since she couldn't identify the owner of the bale of hay, she brought a claim against her own carrier, State Farm, under the pertinent section of her policy.

Delays in the Emergency Room

  If you have health insurance and were inclined to consider yourself protected from the problems facing the increasing proportion of uninsured Americans, consider this.  A recent study undertaken through Harvard Medical School documented that the delay in obtaining treatment through an Emergency Room has increased substantially from 1997 to 2004.  Regardless of insurance status, the average wait for all patients increased from 22 minutes in 1997 to 30 minutes in 2004.  The interim for the sickest heart patients increased from 8 minutes in '97 to 20 minutes, on average.  One-quarter of those patients waited 50 minutes or more, at a time when their triage diagnosis indicated that every minute of delay could be fatal or cause permanent harm.

Insurance agents and their authority

        In a recent Wayne County case, the Michigan Court of Appeals addressed the limits of authority of an insurance agent.  In  Briko's Market v. Emerson-Prew, Inc., a market suffered a loss of refrigeration and a significant loss of inventory.  They thought they were insured for such an eventuality, however, it turned out that their agent had never obtained a written binder for coverage on their market.

        When the owners went to the Oakland Insurance Agency to purchase insurance, Oakland's employee told them they had bound coverage, but did not comply with the insurer's requirements (i.e.,   submission of a twenty percent deposit, photos of the property and certain financial information).  The court concluded that even if Oakland was an agent of the insurance company, it had exceeded its authority by binding coverage without meeting these requirements.  Therefore the insurer owed nothing on the inventory loss.

          The insurer had also argued that Oakland Agency was not its agent and that Oakland was solely the agent of the insured.  In prior cases, the Michigan Supreme Court has held that an insurance agent is not normally the agent of the insured, and the agent's sole agency obligation is to sell as much insurance as it can for the insurer:  apparently a Michigan insured is damned either way, which seems to be a succinct statement of the state of the law in Michigan.

Drunk driving "accidents" under ERISA

  In applying ERISA law governing insurance policies, the Sixth Circuit held that Nancy Lennon's son was not involved in an "accident" when he caused a motor vehicle collision while driving drunk.  26 year-old David Lennon was a GMAC accountant, and at the time of his death, his blood alcohol was three times the legal limit.  The Trial Judge had held that while he was "grossly negligent", his death was still an "accident" under the Met Life policy.

        The Sixth Circuit judges reversed, holding that it was not "arbitrary and capricious" to treat Lennon's "gross negligence" as tantamount to intentional conduct, because his behavior rendered the risk of serious injury or death "foreseeable."  The court relied heavily upon the common sense recognition that the risk associated with driving under the influence increases as the level of intoxication increases, and stressed that it was not upholding the suggestion that death caused by any ingestion of alcohol could be excluded from ERISA coverage.

        Of the three judges on the panel, one would apply a generous interpretation to the concept of "reasonable forseeability", one would hold the plan administrator to a high standard of proof (i.e., proving "gross intoxication" to establish "intent") , and the third dissented:  the latter judge would interpret the language of the policy as written and require proof of an intentionally-caused injury. 

         It seems that the policy language is only interpreted "as written" when it disadvantages a consumer:  when the language, as here, is inconvenient to the insurer, the Court applies its own interpretation of common sense to avoid the impact of black and white rules.  This young man did not "intend" to injure himself or anyone.  He was, however, stupidly negligent.  The ERISA policy, however, did not exclude injuries caused by "gross stupidity":  it excluded injuries caused intentionally.  No ordinary person we know would suggest that in normal parlance, as a culture we equate drunk driving with intentional suicide.

Insurance complaints arising out of Hurricane Katrina

  The State of Louisiana has compiled some interesting statistics with respect to the insurance response to Katrina.  The hurricane created hundreds of anecdotal claims of under-payment, reneging on promises, delayed or deliberately underestimated repairs and mistreatment.  The hard numbers are less open to interpretation and over-simplification.  Some 6600 insurance disputes have landed in the local Federal  Court with 3700 still pending.  State courts are handling several thousand more.  4700 formal complaints were filed with the Louisiana Department of Insurance in 2006, alone, and for the six months after the hurricane, the department fielded 20,000 complaint calls per month.  The state estimates that, on average, homeowners have been underpaid by $5700.00 each, in comparison to what the state believes they should have received.  A group of former adjusters has filed a federal whistle-blower lawsuit, contending that insurers, including State Farm and Allstate, deliberately and improperly shifted damages from their own coverage to federal flood insurance programs.  A federal investigation into similar claims arising out of Mississippi is pending.  It bears notice that the property and casualty insurance industry reported profits of $48 billion in 2005 and $68 billion in 2006.

Leveling the playing field

        In an attempt to "level the playing field" between insurers and policy holders, the Democratically-appointed Michigan Insurance Commissioner has responded to the Michigan Supreme Court's refusal to examine insurance policies.  In a 2005 decision, the four most conservative members of the Michigan Supreme Court held that "a court must construe and apply any unambiguous contract provisions as written, and that "the judiciary is without authority to modify [insurance] contracts".  This holding allowed Michigan insurers to insert discretionary clauses into insurance policies which had the effect of denying coverage to paying insureds.  For example, a clause requiring the insured to file suit to collect uninsured motorist coverage within one year---even before the at-fault was declared "uninsured" by his own company---was upheld by these Justices.

        Since insurance coverage may be mandatory and the insured is not provided a copy of his policy when he purchases it--and thus cannot even read the terms of his policy at the time it is issued and paid for [or on receipt, for that matter], in most states, the courts reserve the right to pass judgment on the ultimate fairness of policy provisions.  This is called the "rule of reasonable expectations", and it was also a recognition of the unequal bargaining power of insureds and large, corporate insurers.  The concept was that the insurer could not use coverage exceptions or fine print to deny coverage that a reasonable person would believe he or she had purchased.  Michigan had followed this rule, at least in substance, for more than two decades. 

        The four Supreme Court representatives who had been hand-selected to protect the insurance industry and appointed to the appellate courts by Governor Engler, asserted in 2005 in the Rory v. Continental case that the Michigan judiciary did not have this power because they argued that the power to regulate policies had been reposed in the Insurance Commissioner.  Acting in belated response, the Insurance Commissioner has finally put into place rules that outlaw such discretionary clauses, and denying the companies the right to unilaterally insert favorable provisions into policies that they write.  This is not a complete solution to the problem created by the pro-insurance Justices, however, it is a small step in the right direction of protecting consumers from large corporations with overwhelming bargaining (and lobbying) power.

"Good hands or boxing gloves"

        The American Association of Justice recently published a thoroughly researched article explaining the massive change that Allstate Insurance Company has initiated in the United States' insurance industry. In 1987, the Insurance Information Institute conclued in its annual report that the industry, while profitable, needed to cut costs and enhance profits in order to compete with Fortune 500 companies for investment dollars.  Twenty years later, it continues to report that the industry has reported "superb", "robust" and "excellent" investment and income results, but it also continues to call for caps on recovery that it originally advocated in the 1980s--despite the fact that the industry was highly profitable (profits increased in the first nine months of 2006, alone, by 15.1 billion dollars) and that the suggested caps had lost 75 percent of their value due to inflation.  By 2006, Allstate had captured returns for its investors that were double that of the Standard & Poor 500, yet it continued to seek higher profits by limiting payouts to consumer insureds.  It had not cut premiums.

        In 1995, Allstate initiated a program it called Claims Core Process Redesign (CCPR) at the suggestion of a corporate consulting company called McKinsey & Co.   McKinsey is better known for having provided consulting services to the Enron Company.   Most people will recall that Enron reported spectacular profits as a result of a novel and illegal accounting strategy, before it crashed and destroyed the lives of its workers and investors.  Under the guidance of a CEO who in 1999 retired with a personal fortune of more than 150 million dollars in stocks, options and incentive buyouts,  and a successor who profited by more than 50 million dollars between 1995 and 1999, Allstate secretly adopted a business paradigm that intentionally manipulated its loss payouts to insureds in order to maximize profits. 

     Historically, courts had required that insurers balance profits with a fiduciary duty to the persons they insured.  In short, the insurer "represented" the policy holder and the relationship was not entirely "at arm's length": in many cases, citizens are even compelled to buy the insurance product in order to operate a vehicle on state roads, for example, or to bid on public contracts.  In return, the insurer recieved various legislative and financial perquisites thought to be necessary to accomplish the purpose of sharing risks broadly.  Thirty years ago, the California Supreme Court characterized this "quasi-public" responsibility of insurers as an obligation of "good faith and fair dealing, encompass[ing] qualitites of decency and humanity inherent in the responsibilities of a fiduciary".

         Taking the Enron philosophy to its core, McKinsey and Allstate increased Allstate's pre-tax operating income [not including investment income] from a decade-long average of82 million dollars a year, to an average of 27.4 billion dollars per year from 1996-2006.  McKinsey and Allstate did not accomplish this by making smarter investments or through wiser risk management.  Rather, Allstate adopted a "zero-sum" approach which internal memos claimed "redefine[d] the game" and "radically alter[ed] our whole approach to the business of claims".    Allstate aimed to reduce claims payments by 15 to 20 percent, and in fact it reduced payouts on auto claims from 69 cents per premium dollar collected, in 1994, to 51.7 cents per dollar in 1998 and 43.5 cents per dollar by 2006.  Parenthetically, this should have resulted in some reduction in premiums but in fact it did not.

        In order to achieve these spectacular results, McKinsey and Allstate devised a "Good Hands or Boxing Gloves" approach, pursuant to which Allstate would pay claims fairly, or promptly, but not both.  Insureds would be offered a choice:  prompt payment of an arbitrarily computed amount (actually eighty percent of similar past claims, apparently)--or incur the expense, risk and delay of bare-knuckled litigation.    This strategy deliberately took advantage of the economic pressures which accompany a significant personal or property loss:  many policy holders would simply be unable to withstand the delay and expense of litigation and be forced to capitulate and accept unjust settlement offers that had been calculated at about eighty percent of past payouts.

        McKinsey estimated that faced with legal expenses and substantial court delays in resolution of a claim, 90 percent of policy holders would throw in the towel.  The remaining ten percent of insureds willing to contest this arbitrary reduction in a claim would be forced in to what McKinsey and Allstate called the "kill box":  no-holds-barred litigation designed not to determine the actual value of a claim, but rather to punish policyholders unwilling to accept less than the actual value of their loss.

        As further assurance of higher profits, the industry also redoubled its assault on victims' rights under state laws.  A full-scale national campaign was engaged (and then fueled with extraordinary profits) to limit payouts by all casualty and liability insurers through changes in the law and marketing to potential jurors.  "Frivolous claims" became a political by-word, despite the fact that no actual proof was offered to document that such claims were a legitimate issue. 

        In an earlier blog we documented the enormous change in the number and size of payouts in Michigan since 1987: insurers have enjoyed particular success in reducing claims and claims payouts in Michigan and have reaped profits that are even more spectacular than nationwide averages as a result.  Refer to "Record Profits..." in our weblog index.      

        Enormous insurers like Allstate, Safeco and Progressive have achieved such startling profits that they have embarked upon a massive stock buyback with excess premium dollars.  Just two y ears ago, Allstate bought back more than 15 billion dollars in stock during the same period it was complaining about large potential weather-related losses and lobbying legislatures for insurance "reform".  While insurance industry spokespeople like Mark Racicot--formerly a top Enron lobbyist and Republican National Committee Chairman, and current head of the American Insurance Association--describe the industry as "high-risk" when responding to critics, the facts show otherwise:  even in 2005 when three of the ten most destructive storms in history ravaged the United States, U.S. insurers declared RECORD profits.

        These record profits have not ocurred by coincidence.  Even while the industry was reporting 44+ billion in profits in 2005, insurance executives were manipulating to enhance profits further.  For example, Jeff Radke, CEO of a Bermuda-based reinsurer, claimed that Hurrican Katrina is a "significant event" for our company...our loss will leave us with enough capital to really thrive in the markety opportunity that's going to follow...this is one of those happy cases where if a rating agency were to insist that we raise capital...it wouldn't trouble us much at all."  AIG Executive Vice President JW Greenberg expressed similar sentiments in an intra-company memo he wrote the day Hurricane Andrew hit south Florida:  "We have opportunities from this and everyone must probe with brokers and clients.  Begin by calling your underwriters together and explaining the significance of the hurricane.  This is an opporunity to get price increases now. We must be the first and it begins by establishing the psychology with our own people.  Please get it moving today.   Lloyd's of London described the September 11 attacks similarly, as a "historic opportunity...where very large profits are possible".

        In short, the American public has been manipulated into a cultural change of significant  proportions through a campaign of deceit and greed.  Led by Allstate and McKinsey, a quasi-public industry that historically balanced state-defined risks and rights in order to broadly share accident risks accross the population, has achieved an Enron-like goal of redefining and diminishing consumer rights in order to record record profits.  Even more disgusting, it has cynically and deliberately profited from catastrophes such as September 11 and Hurricane Katrina, while diverting attention from its record profits to excoriate innocent victims and policyholders.  One can't help but wonder just how long the middle class will allow itself to be manipulated against its own interest by wealthy Enron-like profit-mongers.

       

       

The gap between citizens and Michigan's judiciary

        The gap betweenthe sensibilities of Michigan citizens and the Michigan judiciary was exposed in the recent Barnett v. AutoOwners case.  In Barnett, the jury awarded the Plaintiff exemplary (or "punitive") damages in response to allegations of abuse she suffered at the hands of the case manager appointed by her auto insurer.  The plaintiff was very severely injured in a motor vehicle collision and claimed that she fought a constant battle with the case manager appointed by AutoOwners to manage her medical care.  Mrs. Barnett alleged that the case manager was inappropriately intruding on her privacy and medical care and interfering with her doctors' judgment in an effort to contain AutoOwners medical expenses.  After the Plaintiff died mid-litigation, the case was continued by her son to a verdict against the insurer.

        Applying the harsh standard imposed by the Michigan Supreme Court previously, the Court of Appeals overturned Barnett's verdict.  While each of the three judges offered a different explanation for their vote, the common denominator was an acknowledgement that the improper conduct by the Case Manager was not so repulsive as to meet the high standard imposed by the Michigan Supreme Court.  "The conduct complained [must be] so outrageous in character, and so extreme in degree, as to go beyond all possible bounds of decency, and to be regarded as atrocious and utterly intolerable in a civilized community".  Sadly, we have arrived at a state where our judiciary either relieves the insurance insdustry of any duty, whatsoever, or holds it responsible only for behavior which is "outrageous...extreme...beyond all possible bounds of decency...atrocious and utterly intolerable".  Obviously, a typical Michigan jury would expect more from an insurer.  Justices elected with the financial support of insurers do not.

Record Profits for Michigan Insurers

         A recent analysis of the financial reports from AAA, Allstate and State Farm (these three insurers account for about 45 percent of Michigan auto insurance premiums) documented that they have made record profits since 2002.  Even accounting  for losses caused by Hurricane Katrina, these companies have earned record profits and created record levels of reserves.  This performance is consistent with record after-tax profits in the industry generally:  the industry reported profits in 2006 of 63 billion dollars--which was fifty percent above 2005's record profit of 43 billion dollars. 

          The Auto Insurance Report, a respected industry commentator, explained that the Michigan insurers are "significantly" more profitable than their reported loss ratios would indicate; and other industry investment organs have described Michigan insurers' profits as "eye-popping" or "the second-highest of a generation".  As the Auto Insurance Report described the situation:  "Everyone, and we mean everyone, made money..."  For the decade ending in 2002, [this would be measuring performance prior to the full impact of "reform"], AIR estimated that Michigan auto insurers earned a profit on net-worth that was approximately 25 percent higher than auto insurers nationwide.  These profits will rise in 2007 and in the future as Michigan apparently has the lowest loss-to-premium ratio in the industry and that ratio is declining on an annual basis as "reforms" reduce the number of viable claims. 

            AAA, the best indicator of Michigan's auto insurance performance, had a loss ratio (earned premiums to defense costs) of eight percent:  "lower than virtually all insurers doing business on a national level".  In fact, in Michigan these premium dollars are so lucrative that the only area of increased expense is marketing.  Michigan insurers are willing to spend one-third of their premium dollar on agents' commissions and underwriting expenses in order to compete to attract these low-payout premiums.

          AAA, which writes 80+ percent of its business in Michigan, doubled its annual profits in the past five years (from 50.9 million in 2002 to 104.2 million in 2006) and increased its surplus from 915 million dollars to $1.534 billion by the end of 2006.  Allstate and State Farm, which conduct substantial business in other states, reported similar profits and surpluses. 

          These record profits originate substantially from automobile liability coverage.   Auto insurance accounts for about forty percent of all property and casualty insurance. While liability coverage constitutes only between 15 and 16 percent of the total cost of Michigan No Fault coverage, it is highly lucrative.  About fifty percent of the cost of coverage is for physical damage to property.  The remaining one-third of the Michigan auto premium dollar goes to no fault coverage (which primarily covers medical expense). 

          Analysis of the claims incurred or paid, when compared with premiums collected, shows that premiums collected for liability coverage are "excessive" and are a primary source of the documented profits.  Premiums collected for this coverage exceed the dollars paid out and disproportionately support profits and other coverages.  While it is clear that Michigan insurers make a significant profit on liability coverage and property coverage, it is impossible to evaluate the propriety of the final component of no fault premiums--no fault medical profits, because all Michigan insurers must contribute to the catastrophic claims fund which is operated by a board of insurance representatives:  this board has refused to release its actuarial or reserve calculations to the public and denies that it is subject to the Freedom of Information Act.  The catastrophic claims fund that sets and collects these premiums is the same entity that was embarrassed into returning excessive premiums ($180 per car) to Michigan rate-payers in 1998.

          Since liability coverage constitutes only fifteen percent of total Michigan auto premiums, if half of all existing liability claims were eliminated it would reduce the cost of auto insurance by only about seven percent.  Nevertheless, when insurers talk about the cost of coverage and "reform", liability and trial lawyers are the only topics they discuss:  where "liability" was once associated with "safety" and "accountability", it has now been purposely equated in the public's mind with frivolous greed.

         Investigation of these profit figures and claims information make clear that Michigan citizens have been duped into giving away their rights when victimized, not to save on insurance premiums, but rather to enhance the profit potential of large insurance corporations.  If insurance or tort "reforms" and profits were monitored by the State and actually translated into a reduced cost of using the roads, we could say that a legitimate public policy choice ( cheap transportation over reparations for injury) had been made.  As matters stand, however, we merely have one more example of ordinary people being taxed through auto insurance to support big business profits.

The Supreme Court and "independent medical examinations"

    This week the conservative four-member majority of Michigan's Supreme Court issued a new ruling on independent medical examinations (IME's).  It was presented with a controversy regarding an examination scheduled by State Farm.  State Farm had set the examination with a doctor whom it consulted regularly, and who had previously violated the attorney-client privilege during examinations by inquiring into the insured's conversations with her attorney.

          The IME came up in the context of litigation over personal injury protection (PIP) benefits sought by the insured after a motor vehicle collision.  State Farm had denied payment and the insured had initiated suit.  After suit was started State Farm compelled the insured to attend the IME at its' doctor's office.  Faced with the history of inappropriate questioning by this doctor, the trial judge relied upon the Court Rule governing IMEs in personal injury litigation to impose certain conditions upon the examination.  State Farm did not claim that the conditions were unreasonable:  it claimed and "unconditional right" to an examination...without regard to "good cause".  It maintained that the Court Rule regarding IMEs in litigation should not apply to a no fault insurance claimant and that the only requirements should be those contained in the parties' insurance contract.  The trial judge and the Court of Appeals rejected this claim and ruled that all IMEs are subject to the court rule.

          The four members of the Supreme Court who have been regularly criticized for pandering to the insurance industry overturned the lower courts' rulings and held that State Farm was not required to meet the conditions imposed by the trial court.  The four members suggested that the rights of the no fault insured were limited to the insurance policy and two limited provisions in the no fault act.  It held that no fault insureds don't enjoy the normal court rule protections incorporated into personal injury actions.

          The insurance-oriented majority held that "physicians are presumed to be bound by the methodologies of ther profession and by principles of professional integrity" and that until an insured submits to the court demonstrable evidence to rebut this presumption, a court may not impose conditions on the conduct of a no fault IME.

          As a result of the Court's decision, fewer insureds will have the protections which were assumed to apply to IMEs and insurance-retained physicians will be entitled to stretch the envelope in their dealings with injured victims.  We believe, along with the majority of judges who considered this issue (3 in the Supreme Court, two in the Court of Appeals and one in the trial court) that there was no rational or statutory basis to deny the carefully considered court rule protection framework to all injury claimants.  The protections in the Court Rule impose basic obligations such as requiring the IME insurer to provide a copy of the resulting report to the victim.

The Michigan Courts punish patience

  In an update to the "one year back" rule debate, on May 24 the Court of Appeals reluctantly denied the Henry Ford Health System's right to collect for $130,000.00 in care it provided to a badly injured young girl after a car accident.  Henry Ford provided the care in 2004 and Traverlers Insurance did not deny the claim until May of 2005.  When the conservative majority of the Michigan Supreme Court decided Devilliers v. Auto Club, holding patients and providers to one year in which to sue, (and overturning 19 years of previous practice), the Henry Ford system had only one day in which to sue Travelers.  The Appellate Court judges determined that the Supreme Court left them no alternative but to deny Henry Ford's legitimate claim as a result of this "loophole" or technicality, despite its unfairness.

This is just one of many recent Michigan decisions which punish a party with a legitimate claim for its exercise of patience in negotiating with insurers prior to filing suit.  Unfortunately, a majority of the Michigan Supreme Court is willing to punish potential litigants who have patiently attempted to negotiate rather than jumping to litigation, despite paying lip-service to a desire to make the courts less crowded, more efficient, less expensive and more "fair".

Deadlines to Sue

      One of the many "reform" decisions issued recently by the Michigan Supreme Court addressed the issue of how long an injured person, or people providing services to the person, can delay before filing suit against an auto insurer for PIP benefits [PIP benefits are medical expenses and three years of lost wages or domestic services, payable normally by the injured person's own insurance].  From the 1970s when Michigan's No Fault Act was adopted, the Supreme Court had consistently held that the injured person, or a service provider, could delay suit until the auto insurer actually denied the benefit claim in writing.  This approach made sense, since it encouraged the parties to negotiate claims without litigation and it allowed unsophisticated consumers the opportunity to manage claims themselves, without fear of inadvertently losing the right to enforce their rights.

         The arch conservative Michigan Supreme Court majority decided to overturn this rule, however, and reversed 19 years of law that had appeared to be expressly resolved and stable.  It held that the injured person, or persons providing services to the injured person, must sue within one year of incurring the original expense, or lose their claim.  It also held that insurers who negotiate through this deadline are not estopped to raise the deadline to deny the claimant the right to sue.  It also applied this deadline to infants and incompetent persons, and denied them the protections of extended deadlines that the Legislature had previously established in the Revised Judicature Act.  In other words, it took away all the established exceptions and protections and instituted a hard-line one year statute of limitations protecting auto insurers from PIP lawsuits.  Unfortunately, most citizens are unaware of this one-year deadline, or of the fact that if a provider's bill is not paid by the first anniversary, and no suit is filed, the billing may become an obligation of the family.

          Since this change in interpretation came as a surprise to most claimants and medical providers, it caught many flat-footed, holding claims that were legitimate but had not been placed in suit while the parties were negotiating compromises.  Under the existing rules, the claimants and their service providers would have enjoyed the right to exhaust negotiations and then sue within a year if no satisfactory compromise could be reached.  The Supreme Court overturned that right and also made its decision retroactive, so that people who had patiently attempted to negotiate without rushing to Court were punished by the complete denial of their [now stale] claims.  We can't imagine how many millions of dollars this dropped in to the laps of auto insurers in Michigan, in one fell swoop.

          While conservative "reformers" have paid lip service to reducing the amount of litigation and the need for families to aggressively protect their rights by hiring lawyers and involving the courts, this decision helps to demonstrate the real goal of "insurance reform":  preserving and enhancing the profit margin of Michigan's insurers.  No wonder they were willing to contribute heavily to the Justices' re-election campaigns.

          The message for families with a severely injured loved one is also clear:  consult with a knowledgeable person to confirm your rights and don't trust or rely upon an insurance representative.  While some insurance adjusters and case managers are honest, dedicated and decent, many are not; and families have too much at risk to rely upon their [conflicted] advice exclusively.  Most experienced attorneys will consult with a family for free, and capable attorneys can be hired on an hourly or contingent fee basis, depending on what is best for the family, to provide knowledge and guidance.

Insurance coverage for acts that are "criminal in nature"

      The last five years have seen a continuing assault on the breadth of homeowner’s insurance coverage in Michigan.  Unlike No Fault automobile insurance, where the insurer's obligation is coextensive with the driver/owner's liability, homeowner's insurance companies are free to define the circumstances under which they will provide coverage.  The conservative majority of the Michigan Supreme Court has, in the last few years, granted insurers even greater latitude by holding that insurance policy terms are not limited by any "reasonableness" standard and by denying the Court's long-assumed jurisdiction to refuse to enforce terms which a reasonable insured would not expect--but which are placed in the carrier's fine print.

     Several Michigan insurers have taken advantage of this handful of decisions to eviscerate the normal homeowner liability coverage that most citizens take for granted.  Acting on a handful of unusual and not well-considered appellate decisions, insurers such as Farm Bureau have begun to aggressively interpret and enforce insurance exclusions from coverage for acts that are "intentional" or "in the nature of a criminal act".

 

     As a result of this aggressive approach to denying coverage, the insurers are not only denying coverage for assaults, bar-fights and shootings, as one might expect.  Those exclusions had been recognized and enforced for decades.  Rather, the fight for coverage is now over indemnification for "negligent" criminal acts.    In research we conducted for a 2004 case, we could find no other state that consistently allows homeowner's insurers to deny coverage for negligent criminal acts.  According to Farm Bureau and others, Michigan does.  This means that when someone "negligently endangers a child", "fails to disable the door of a discarded refrigerator", "negligently discharges a firearm [INCLUDING A BB-GUN, AS IN OUR CASE], or commits any one of thousands of other misdemeanors that don't require intent, the homeowner's liability coverage is at risk.

     For example, we currently represent two clients who have cases on appeal to determine insurance coverage.  One case involves an off-duty fireman who was accidentally shot by an off-duty policeman while they were deer hunting. The other case involves a ten-year old who lost an eye in a BB-gun accident.  Ten years ago, coverage for both of these incidents would have been assured.  Today, neither the victim nor the purchaser of the coverage will derive the benefit of the coverage purchased, if the insurer is successful on appeal.  There are literally dozens of similar cases pending in Michigan, involving all types of "negligent' acts that have resulted in injury.

     Sadly, purchasers of homeowner's coverage in Michigan have no idea how "bare" they may be in the event of a family member's mistake.  Virtually any act that can cause injury--particularly to a child--has been criminalized in some form.  If the carrier can argue that the insured's mistake was "in the nature of a criminal act", regardless of intent, liability coverage provides only illusory protection for the homeowners' assets (and victim).  In a 2005 case, Justice Taylor, no "raving liberal", recognized that ordinary people purchase coverage to protect the victim (and the purchaser's family's assets) in the event that someone does something "stupid":  in a continuing assault on consumer rights, however, insurers in our state have been allowed to reject that fundamental truth underlying insurance coverage.

Interpreting Insurance Contracts

     In two cases released this summer, a 4 member majority of the Michigan Supreme Court turned its back on consumers by rejecting any duty to assess the reasonableness of insurance contract language.  The particular cases upheld a short, one-year, limitation on suing to collect uninsured motorist coverage and rejected a 19 year old decision holding that an insured had one year from the date insurance benefits were denied in which to sue.  The Court decided that in all cases involving no fault personal injury protection benefits, the consumer was required to sue within one year on incurring the expense--even if the benefits were still under review by Blue Cross or the auto insurer.

     The case involving uninsured motorist benefits means that people lose their right to benefits in some cases, even before they know that they were hurt by an uninsured motorist.  With regard to the "one year back" rule, people get stuck with medical expenses that should have been the obligation of the insurer and which the insurer has not even denied, simply because the involved insurers take too long to process claims or the provider is slow in filing the proper forms.

     In each case, the court has essentially penalized decent people who are not eager to file suit. Because they are willing to try to avoid suit and don't jump into litigation within the first year, they end up being denied the rights they have paid for.

     These cases fit within a general trend of this extremely conservative, pro-insurance majority who have taken Michigan jurisprudence back toward the 19th century.  Their holdings claim that they have no power to decide whether an insurance contract is fair or reasonable, and they vow to enforce, as written, all of the small print--regardless of whether it comports with an insured's reasonable expectations.  Virtually no other state in the country takes such an absurd position.

     Perhaps the saddest and most ironic aspect of these decisions is that they tend to reward the litigious--whether insured or insurer--at the expense of those who are reluctant to "see you in court" and who were willing to try to achieve a non-litigated outcome.  A sad outcome for a group of jurists who complain about our overly litigious society.