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Farm Bureau wins fight to reduce payment to its own insureds under auto policy

Farm Bureau now writes into many of its auto insurance policies a provision that allows it to reduce liability payments to any family member of an at-fault insured.  In other words, if you are driving six girls scouts to an event, including your daughter, and the daughter and another girl are both injured by your mistake, your daughter's right to recover insurance benefits is arbitrarily limited to the statutory minimum liability coverage ($20,000.00), regardless of the liability coverage limits you purchased.  Thus if both girls suffered the same devastating injury and you had purchased $500,000.00 of liability coverage, the other girl would recover the full half-million dollars of coverage and your daughter would get only $20,000.00 for the same injury. The Court of Appeals recently considered the validity of these provisions with Judge Kirsten Kelly, apologist for the insurance industry, on the panel.  The judges ruled in Hollenbeck v. Farm Bureau Mutual Insurance Company of Michigan that the policy limitation can be enforced by the insurer.  In this case, Edwin Hollenbeck became a permanent quadriplegiac after Devon Hollenbeck rolled the vehicle they were riding in.  The injured family member's recovery was limited to the statutory minimum of $20,000.00 in liability coverage, even though the Hollenbecks had bought $100,000.00 of liability coverage.

If Farm Bureau customers knew that their company was inserting this kind of limitation in its fine print--a limitation that screws over the insureds' family and no one else, to the insurer's sole benefit---they probably would shop somewhere else for coverage.  We wish that this kind of sneaky, manipulative nonsense was more widely understood among consumers:  if it were, a practice like this would not last in the market place. 

And, by the way, it doesn't matter that most insureds don't know this fine print is in their policy until a month after buying insurance when the policy arrives (if they even read the fine print and understand it then).  In most states this type of arbitrary limitation is considered void as against public policy, but in Michigan, insurers can do as they please and enforce any arbitrary policy provision that they choose to write into the policy, provided it does not violate an existing law.

Thompson O’Neil, P.C.
309 East Front Street
Traverse City, Michigan 49684
Toll Free: 1-800-678-1307
Fax: 231-929-7262