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Farm Bureau can continue to duck liability with "unreasonable" one-year limit, despite repudiation by Insurance Commissioner

Several years ago, a majority of the Michigan Supreme Court--under the ultra-conservative leadership of Justice Taylor--announced a new holding:  judges could not invalidate an insurance contract provision on the basis that it was "unreasonable."  The so-called "Engler Majority" of activists with an insurance bias maintained that an insurer could insert any provision it desired into a contract, regardless of "fairness:"  they suggested that only the Insurance Commissioner was vested with the power to rule on the reasonableness of a contract provision (meaning that unreasonable provisions could only be invalidated prospectively and in an academic analysis--denying aggrieved insureds who were actually injured by an unreasonable provision any recourse). 

In response, in December of 2005, the Insurance Commissioner acted to correct the injustice the Supreme Court refused to correct:  the Commissioner held that a one-year limit on filing Uninsured(UM) or Underinsured Motorist (UIM) Claims was unreasonable because insureds frequently would not have time to confirm that a wrongdoer was, in fact, uninsured in time to take legal action under the coverage the insured had purchased.  In the case that served as a catalyst for the Supreme Court's ruling, the at-fault's insurer defended an injury claim  for 18 months before declaring the policy void and rendering the at-fault "uninsured."

Farm Bureau has not replaced its "unreasonable" one-year limitation and renewed its contract with Linda Ulrich in 2006 without revising the limit.  She was hurt in a car wreck later that year.  She sued the at-faults, both of whom turned out to be uninsured.  Unfortunately, by the time Ulrich learned the perpetrators were uninsured and amended her complaint to include Farm Bureau, the one year contract limitation period had expired.  In a Henry Saad-special [Saad has never met an insurance defense he didn't buy], Saad and Judges Hoekstra and Christopher Murray ruled that Ulrich was too late in suing Farm Bureau.  The judges pointed to language in the Insurance Commissioners ruling that appeared to allow Farm Bureau to "grand-father" its use of the "unreasonable" provision for eternity.  This allowance, they concluded, was unaffected by the renewal of the insurance contract after the Insurance Commissioner's ruling.   These insurance-friendly judges also concluded that an insurer's contract limitation is due greater deference than a legislatively adopted statute of limitations, rendering the equitable "estoppel" argument inapplicable.  Hopefully, Ulrich's attorneys will pursue an appeal to the Michigan Supreme Court:  with Taylor gone, there is a good chance that a more moderate middle-of-the-road Supreme Court will reject this absurd ruling.

Thompson O’Neil, P.C.
309 East Front Street
Traverse City, Michigan 49684
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