Leveling the playing field

        In an attempt to "level the playing field" between insurers and policy holders, the Democratically-appointed Michigan Insurance Commissioner has responded to the Michigan Supreme Court's refusal to examine insurance policies.  In a 2005 decision, the four most conservative members of the Michigan Supreme Court held that "a court must construe and apply any unambiguous contract provisions as written, and that "the judiciary is without authority to modify [insurance] contracts".  This holding allowed Michigan insurers to insert discretionary clauses into insurance policies which had the effect of denying coverage to paying insureds.  For example, a clause requiring the insured to file suit to collect uninsured motorist coverage within one year---even before the at-fault was declared "uninsured" by his own company---was upheld by these Justices.

        Since insurance coverage may be mandatory and the insured is not provided a copy of his policy when he purchases it--and thus cannot even read the terms of his policy at the time it is issued and paid for [or on receipt, for that matter], in most states, the courts reserve the right to pass judgment on the ultimate fairness of policy provisions.  This is called the "rule of reasonable expectations", and it was also a recognition of the unequal bargaining power of insureds and large, corporate insurers.  The concept was that the insurer could not use coverage exceptions or fine print to deny coverage that a reasonable person would believe he or she had purchased.  Michigan had followed this rule, at least in substance, for more than two decades. 

        The four Supreme Court representatives who had been hand-selected to protect the insurance industry and appointed to the appellate courts by Governor Engler, asserted in 2005 in the Rory v. Continental case that the Michigan judiciary did not have this power because they argued that the power to regulate policies had been reposed in the Insurance Commissioner.  Acting in belated response, the Insurance Commissioner has finally put into place rules that outlaw such discretionary clauses, and denying the companies the right to unilaterally insert favorable provisions into policies that they write.  This is not a complete solution to the problem created by the pro-insurance Justices, however, it is a small step in the right direction of protecting consumers from large corporations with overwhelming bargaining (and lobbying) power.