What Is The Time for Responding to a Defense Tender?
An insurer must within 30 days of receiving a claim specify in writing to the insured what documents it requires to constitute a proof of loss. Mich. Corp. Laws § 500.2006(3).
An insurer must pay covered claims within 60 days of receipt of proof of loss. Mich. Corp Laws § 500.2006(3).
Does Reserving Rights Create a Conflict of Interest?
If an insurer reserves its rights on substantive issues, a conflict is created. it must retain independent counsel to represent the insured. American Home Assur. Co. v. Evans, 589 F.Supp. 1276, 1286 (E.D. Mich. 1984), vacated on other grounds, 791 F.2d 61 (6th Cir. 1986).
Does a Reservation of Rights Create Additional Duties?
An insurer who defends under a reservation of rights has a duty to give reasonable notice of this to the insured. Kirschner v. Process Design Associates, Inc., 592 N.W.2d 707, 710 (1999).
What Must Be Done If A Conflict of Interest Exists?
If a conflict is created by a reservation of rights on substantive issues, the insurer must retain independent counsel to represent the insured. American Home Assur. Co. v. Evans, 589 F.Supp. 1276, 1286 (E.D. Mich. 1984), vacated on other grounds, 791 F.2d 61 (6th Cir. 1986).
Who Is Responsible for Fees of Independent Counsel?
An insurer not obligated to pay for independent counsel unless the conflict of interest is such that it is impossible for defense counsel to act independently. Federal Ins. Co. v. X-Rite, Inc., 748 F.Supp. 1223, 1228 (W.D. Mich. 1990)(expressly rejecting Cumis standard).
What Are Independent Counsel’s Obligations?
No cases found.
What Settlement Duties Exist?
What Actions May Result in a Claim for Bad Faith?
Unfair or deceptive consumer practices are proscribed by Mich. Comp. Laws § 445.901, et seq.
An insurer exhibits bad faith when, without a bona fide reason, it fails to settle a claim that results in a judgment that exceeds the policy limits. See City of Wakefield v. Globe Indem. Co., 225 N.W. 643, 652-653 (Mich. 1929).
“Claims of bad faith cannot be based upon negligence or bad judgment, so long as the actions were made honestly and without concealment. However, because bad faith is a state of mind, there can be bad faith without actual dishonesty or fraud. If the insurer is motivated by selfish purpose or by a desire to protect its own interest, bad faith exists, even though the insurer’s actions were not actually dishonest or fraudulent.” Commercial Union Ins. Co. v. Liberty Mut. Ins. Co., 393 N.W.2d 161, 164 (1986).
Michigan courts do not recognize a tort for bad faith breach of an insurance contract. Kewin v. Mass. Mut. Life Ins. Co., 295 N.W.2d 50, 56-57 (Mich. 1980).
Michigan courts do not recognize a right of action for a breach of any implied covenant of good faith and fair dealing. Dahlman v. Oakland University, 432 N.W.2d 304, 306 (Mich. App. 1988).
Penalty interest of 12 percent may be added to any judgment but requires proof that the insurer’s position was unreasonable. Mich. Comp. Laws §?500.2006(4); ?Yaldo v. North Pointe Ins. Co., 578 N.W.2d 274, 279 (Mich. 1998).
Are Attorney’s Fees Recoverable in Insurer-Insured Dispute?
Attorney’s fees are not recoverable unless expressly authorized by a statute, court rule, or a recognized exception. See Burnside v. State Farm Fire and Cas. Co., 528 N.W.2d 749, 751 (Mich. App. 1995).
Are Punitive Damages Recoverable in Insurer-Insured Dispute?
No; Michigan prohibits punitive damages. Kewin v. Mass. Mut. Life Ins. Co., 295 N.W.2d 50, 56-57 (Mich. 1980).
Alternative Coverage Options
Where coverage questions exist, an insurer should provide a defense to the insured under a reservation of rights and bring a declaratory judgment action. Detroit Edison Co. v. Michigan Mutual Ins. Co., 301 N.W.2d 832, 838 (Mich. 1982).
An insurer may pursue a declaratory action to determine disputed issues of coverage. Allstate Ins. Co. v. Hayes, 499 N.W.2d 743, 751-752 (Mich.1993).
Relevant Statutes
Declaratory Judgment – Mich. Code Regs 2.605(A)
“In the case or actual controversy within its jurisdiction, a Michigan court of record may declare the rights and other legal relations of an interested party seeking a declaratory jdugmet, whether or not other relief is could be sought or granted.”
Consumer Protection Act. – Mich. Comp. Laws § 445.901.
Uniform Trade Practices Act, M.C.L. § 500.2001 et seq. This statute does not create a private right of action, but an insured may recover the interest penalty. Young v. Michigan Mut. Ins. Co., 362 N.W.2d 844, 846-47 (1984).