The Gang of Four on Michigan's Supreme Court does another favor for insurance companies
In the recent case entitled Mary Ellen McDonald v. Farm Bureau, the Engler appointees to Michigan's Supreme Court overruled 30 years of case law to allow Farm Bureau to enforce a contract provision that was previously considered illegal and unenforceable.
Ms. McDonald was hurt in a car wreck. She had purchased no fault insurance from Farm Bureau and paid extra for "uninsured and underinsured motorist coverage" that would compensate her or a family member if they were hurt by a motorist who was uninsured or "under" insured. That policy provision required her to prove the level of coverage of the wrongdoer (through litigation statements under oath) and then secure Farm Bureau's written consent to any settlement with the wrongdoer. It also included a provision requiring her to file suit against Farm Bureau for uninsured or underinsured benefits within one year of being hurt. [That provision has since been outlawed by the Insurance Commissioner as unreasonably short and not allowing sufficient time for the injured person to sort out his or her legal rights.]
Ms. McDonald and her attorney followed all of Farm Bureau's rules, sued the at-fault, forced the at-fault to confirm his insurance limits under oath, and then sought Farm Bureau's written consent to settle with the at-fault. By now there was only one month left in the one-year limit--a fact that the Farm Bureau adjuster noted gleefully in his file. Farm Bureau then neglected to respond for the 30 days remaining in its one-year limit: after the year had passed it wrote to McDonald's attorney and denied the claim because it was "stale".
The Trial Court and the Court of Appeals rejected Farm Bureau's defense based on the one-year limit. They found that the one-year statute was "tolled" by the woman's claim until Farm Bureau either accepted or denied her claim, relying on thirty years' worth of Michigan opinions rejecting this kind of behavior by insurers. The Trial Court also found that Farm Bureau was "estopped" to enforce the one-year limitation because of its own behavior in pushing McDonald beyond the one-year limit.
The four Justices hand-chosen by former Governor Engler to protect insurance companies (including the Chief Counsel of AAA, for example) rejected this 30 years of Michigan law and overturned the existing rules to allow Farm Bureau to enforce its one-year limitation. In addition, the Engler "Gang of Four" activists applied their new rationalization retroactively, so that litigants who had followed the old rule (and delayed filing suit in hope of achieving a negotiated settlement) would be punished without notice.
The three dissenting Justices soundly criticized the ruling. They noted that this kind of activism in overturning settled law was precisely what the majority had criticized in "liberal" judges. The dissenters pointed out that this kind of one-year statute--which forces insureds to file suit prematurely and eliminates the potential for negotiated settlements--is now void as bad public policy and should not be enforced in any event. They also pointed out that insurance contracts are an unusual form of a contract, in that the parties don't sit down and negotiate the insurance terms: consumers agree to purchase insurance and about a month later they are mailed a complicated document that establishes the insurance terms [stated in a manner that the California Supreme Court once acknowledged even it could not understand without specialized training].
So, once again, the Gang of Four has acted to:
1. protect insurance companies from claims;
2. allowed insurers to reject claims without even addressing the issue of fairness;
3. endorsed a short policy limitation period that State Government has repudiated;
4. established a policy that adds to the expense and delay of resolving claims by forcing insureds into Court--perhaps before their claim is even ripe;
5. allowed an insurer and its adjuster to reap enormous benefit from tactics of stalling and questionable ethics;
6. without notice, abruptly adopted a change in law that patient, non-litigious insureds relied upon to seek out-of-court settlements--and which now punishes them by denying them their day in court or fair compensation they had purchased.
Congratulations, Governor Engler: thanks to you, in Michigan, insurance companies own the highest court and "justice" is a secondary consideration--if it is considered at all.