Michigan Bill Limiting Lawsuits Against Insurers Awaits Governor’s Signature

A bill approved by Michigan Legislature that further limits certain consumer lawsuits against insurance companies under the state’s Consumer Protection Act has been sent to Gov. Rick Snyder for his signature.

The issue addressed by HB 5558 “is whether a consumer may sue an insurance company under the Michigan Consumers Protection Act (MCPA) for damages resulting from unfair, unconscionable, or deceptive methods, acts, or practices in violation of Chapter 20 of the Insurance Code that occurred on or before March 28, 2001,” according to an analysis of the bill published by the state Legislature.

The measure specifies that the prohibition against consumer lawsuits “applies to methods, acts and practices occurring before, on, or after March 28, 2001,” the legislative analysis states.

The Michigan Insurance Coalition supported the bill, saying it closes “a loophole in the Consumer Protection Act that lawyers have been using to file lawsuits against auto insurance companies for cases that are 20 to 30 years old.”

In an announcement regarding the passage of the bill, the MIC stated that the issue stems to 1976 when the Michigan legislature passed the CPA. The act covers complaints against industries that are not regulated by the states.

Insurance companies are regulated under the state’s Insurance Code, but “in 1999, the Supreme Court ruled that private right of action could be brought against insurance companies [under the CPA]. In 2000, the legislature quickly corrected the act to restore the original intent of the law. However, they did not make the changes retroactive and following a Supreme Court ruling in 2012, trial lawyers have been filing cases involving incidents dating from 2001 back to 1976,” the MIC explained.

“It was time to close this loophole for good,” Tom Shields, spokesperson for the Michigan Insurance Coalition, said in the association’s announcement. “Consumers are already protected under the Insurance Code. This loophole was just encouraging frivolous lawsuits that drive up the cost of No-Fault auto insurance for consumers across the state.”

In addition to the MIC, the legislation was supported by the Michigan Department of Insurance and Financial Services, and groups such as the Michigan Association of Independent Agents, the Michigan Chamber of Commerce, the Professional Insurance Agents of Michigan and the American Insurance Association.

Organizations testifying against the bill included the Brain Injury Provider Council, the Brain Injury Association and the Coalition Protecting Auto No-Fault/CPAN.

The Associated Press reported that according to the bill’s sponsor, Rep. Tom Leonard of Lansing, it clarifies the intention of the 2001 law. In opposition, however, Democratic Rep. Sam Singh said HB 5558 “serves only to further undermine our weakened consumer protection laws,” AP reported.