In March, the Michigan Court of Appeals made an important ruling on penalty interest and attorney fees under the Michigan no-fault law. In Bronson Health Care Group v. Titan Insurance Co., (docket no. 324847, published 3/15/2016), the Court held a no-fault insurer is not permitted to investigate and wait in paying a no-fault claim if it has in its possession reasonable proof of the claim and the amount owed. If the car insurance company does wait, it is liable for penalty interest and attorney fees.
In Bronson Health, Amber French was severely injured while a passenger in a car in Kalamazoo. Following the car accident, she spent about a week at Bronson Methodist Hospital. She did not have auto insurance of her own and did not live with a resident relative who carried auto insurance. In addition, the vehicle she was in was uninsured. As a result, she applied for insurance through the Michigan Assigned Claims Plan (MACP), who assigned Titan Insurance to pay her claim.
On three separate occasions, Bronson Hospital submitted applications to the MACP for personal injury protection (PIP) benefits so the hospital would get reimbursed for its services from Titan Insurance. Although Titan Insurance received the applications, which outlined Ms. French’s injuries and the fact no other car insurance company was higher in priority to pay her claim, Titan still refused to pay the medical bill within 30 days.
Under Michigan law, specifically MCL 500.3142, PIP benefits are overdue if not paid within 30 days after an insurer receives reasonable proof of the fact and the amount of loss sustained. Further, the insurer must pay a 12% penalty interest for overdue payments.
Because Titan Insurance refused to pay the hospital bill, Bronson sued Titan. Almost a year later, Titan Insurance finally relented and paid Bronson Hospital its outstanding bill.
However, due to the delay in payment, Bronson wanted Titan Insurance to pay penalty interest and attorney fees, as allowed under the Michigan no-fault law. Bronson argued that Titan had everything it needed to pay the bill within the 30 day review period, failed to do so, and therefore is obligated to pay a 12% penalty interest and attorney fees.
The Michigan Court of Appeals agreed, holding that under MCL 500.3142, a claimant is not required to prove that the insurer acted arbitrarily or unreasonably delayed in paying benefits. Instead, the insurer is liable for penalty interest if it does not pay the claim within 30 days after receiving reasonable proof of loss. Titan Insurance does not get the benefit of confirming on its own timeline whether it was the correct no-fault insurer to pay the claim. If it has reasonable proof of loss, it must pay the claim within 30 days.
The Court also held that Titan Insurance was responsible for paying attorney fees and costs under MCL 600.2591. Under this statute, if a court finds a civil action or defense as frivolous, the court shall award to the prevailing party the costs and fees incurred by that party. Because Titan’s defense to penalty interest pursuant to MCL 500.3142 was frivolous under MCL 600.2591, it was responsible for paying Bronson Hospital’s attorney fees.
The Bronson Health Care case is a major win for injured people. Because bad faith is not an actionable claim against Michigan insurance companies, the only ammunition claimants have against insurance car companies for delaying or outright refusing to pay good claims is the 12% penalty interest fee and attorney fees awards.
On a daily basis, insurance carriers like State Farm and Allstate Insurance refuse to pay no-fault benefits, instead conducting unnecessary “investigations” to delay payment. These insurance carriers do this knowing full well that many judges and juries are unwilling to “pull the trigger” and award penalty interest and attorney fees. This decision provides these decision makers with the ammo they need to hopefully make the right decision in the future so our state’s auto insurance carriers remain in check.