Proposed Michigan Bill: Protecting Insureds or Complicating Claims Adjusting?

Ten Democratic state senators introduced on May 9 Michigan Senate Bill 329, which if adopted, would dramatically reshape the adjusting process in first- and third- party auto claims.

This legislation, which proposes to add Chapter 30B to the state’s insurance code, is being marketed by its proponents as a ‘Good Faith bill.’ It outlines additional responsibilities and duties that these senators seek to impose on insurers who are still reeling from the Michigan Court of Appeals decision in Andary.

While the bill is in its infancy, it provides the backdrop for a discussion about an insurer’s current duties and how a law like this would affect the claims adjusting process.

As written, the proposed legislation would apply to first- and third-party claims. The bill would bar insurers from delaying, denying or failing to pay a claim unless there is a reasonable basis found in the policy. Therefore, it would require the insurer to specifically articulate the reason for delay or denial, and once litigation commences, the bill would prevent an insurer from changing the legal or factual basis of that denial unless new information was obtained during litigation.