Republican Supreme Court majority reverses long-standing law; allows insurer to enforce 30-day time limit
Historically, Michigan has repeatedly recognized that insurance contracts are different than other contracts, in that the parties don't negotiate their terms: an insured pays a premium and selects general coverages and 30-60 days later the policy "contract terms" arrive in the mail, as dictated by the insurer. In part for this reason, arbitrary deadlines in the policy language have historically been enforced only if they are "reasonable" and only if violation of short deadlines has "actually prejudiced" the insurer. The insurance-friendly, Republican-nominated, Chamber of Commerce- funded majority on Michigan's Supreme Court has gone to significant lengths to change that "reasonable insured" approach. On May 30, it took one more step. It allowed State Farm to enforce a provision that required an insured to give notice of a "hit and run" accident within 30 days--regardless of prejudice or any other complicating factor.
In DeFrain v. State Farm Mutual, Nancy DeFrain sought to collect Uninsured Motorist Coverage (UM) benefits from her insurer. The DeFrains had purchased UM coverage in case one of them was injured by someone who did not have no fault liability insurance. In May of 2008, DeFrain's husband was struck by a hit and run motorist.
While the DeFrains were coping with William's head injury, the 30 day "notice" period to inform State Farm of its potential UM liability expired without DeFrains sending a formal notice. Under the policy language, the DeFrains were told to provide "all the details about the death, injury, treatment, and other information that [State Farm] may need as soon as possible..." The policy also required that in the event of a hit and run, the police must be notified within 24 hours and State Farm must be notified within 30 days. William never recovered from his injuries and died within six months, without providing the formal notice that State Farm demanded. State Farm did not claim that it suffered any prejudice as a result of William's failure to give notice, but nevertheless denied his wife's claim for UM benefits on the basis of the 30-day notice provision.
The trial court rejected State Farm's motion to dismiss the DeFrain claim and the Court of Appeals agreed. The lower courts cited long-standing Michigan law holding that an insurer who seeks to enforce this kind of short notice or limitation period must demonstrate that it suffered actual prejudice as a result of the failure of notice. The lower courts were probably also sympathetic to the real-world difficulties faced by the DeFrains as they struggled to cope with William's head injury.
The Supreme Court granted State Farm's appeal of the lower courts' decisions and this week the Republican majority overturned precedent and cited its own recent rulings to grant the insurer immunity from the DeFrain's [purchased] insurance rights. The four Republican nominees to the Court held that an insurer can insert any limiting language it chooses in non-statutory insurance coverages and need not demonstrate prejudice in order to enforce the policy language.
The three Democratic Party nominees to the Court dissented, pointing to Michigan's decades-old rule taking a more middle ground with respect to insurance policy language. The dissenting Justices considered the Court's holding an unreasonable "windfall" to an insurer resulting solely from an unreasonably short notice period. Justice Brian Zahra wrote the majority opinion.
We have never felt comfortable with advertising or soliciting cases by sending literature to injury victims and wrongful death survivors. Given this decision, however, perhaps the advertising attorneys have it right: injury victims need to get counsel, and they need counsel immediately. They can't wait until they have regained their equilibrium.