Insurance Bad Faith

An insurance company acts in bad faith when it does not fulfill its responsibilities as required by an insurance contract, which can include wrongfully denying someone’s claim, not investigating a claim properly, delaying payments from a valid claim, or otherwise acting unfairly or deceptively. Insurance companies have a duty to avoid these predatory practices and treat their clients fairly. Currently, there is little in Michigan law requiring them to act in good faith. When companies act in bad faith, policyholders may be able to receive compensation for financial losses and emotional distress. However, the costs of hiring an experienced attorney and the lack of proper safeguards stopping insurance companies from continuing to mistreat clients leave working people unable to find justice. The goal of an insurance bad faith law is to protect people and families from insurance companies treating policyholders unfairly and to make sure that insurance companies are held accountable when they harm their policyholders.

In Michigan, insurance companies have a nearly free pass to act in bad faith without any punishment. Insurance companies have far more resources than their clients in court, and can extend legal battles far beyond the time and money available to people seeking legal action. So, finding justice in the legal system is not feasible for many consumers, leading insurance companies to act in bad faith, knowing their clients cannot fight back. Insurance companies seeking to generate greater profits off the backs of their policyholders delay or deny benefits that are rightfully owed to consumers. Even if a consumer sues an insurance company in court and wins, the company faces little penalty, as the fees they owe as a result are minimal, and the net profit gain from the other consumers they exploit cushions them from any real consequence. To protect consumers, we want to hold insurance companies accountable and deter them from exploiting consumers by establishing practical consequences for bad-faith actors. Legislation must be passed to hold insurance companies liable for acting in bad faith.

Michigan is currently one of only 7 states that do not provide policyholders a specific legal path to sue insurers for acting in bad faith. Senate Bill 245 was introduced in the Michigan Senate to rectify this issue by providing real accountability for insurance companies acting in bad faith.