Several Michigan State Representatives have taken steps to enact legislation to hold insurance companies “accountable” for perceived misdeeds. State Representatives Vicki Barnett, Mike Simpson, Lisa Brown and Jon Switalski have proposed a bill providing for $1 million fines for insurance companies that “repeatedly deny and delay legitimate claims” and to charge “corporate leaders” who foster or encourage wrongful denial of claims with felony convictions. For further information regarding their position, please see their website at www.stopinsurancedenial.com.
These legislators have taken the position that insurance companies benefit by “postponing and rejecting legitimate claims.” They assert that insurance companies have a “set of tactics” that they use to delay or deny legitimate claims and make “gigantic profits.”
An extreme example involving an obviously sympathetic injured child has been used to justify the legislation. Kecia Milliner, the mother of the injured 5-year old, appeared with representatives Barnett, Simpson and Switalski at a press conference on July 13, 2009, to illustrate and support the charges against insurance companies. In fairness, however, it is worth making the following observations:
- The child will have medical coverage for the rest of her life for all expenses incurred for reasonably necessary medical treatment and accommodations for the child’s care, recovery and rehabilitation. Although it was suggested that Michigan is out of step with 46 states that have “protective” legislation, Michigan is the only state that requires insurance companies to pay lifetime benefits with no limit on the amounts paid.
- Michigan already has a statute that requires that insurance companies must pay a benefit or the child’s doctor’s bills within 30 days after it receives reasonable proof of the charge and relation to the accident. An overdue payment requires the insurance carrier to pay a 12% per annum penalty.
- If Ms. Milliner retains to an attorney to pursue her claims, existing legislation requires that the attorney’s fee shall be charged against the insurance company in addition to any benefits recovered, including penalty interest, if the court finds that the insurer unreasonably refused to pay the claim or unreasonably delayed in making proper payment. Despite this provision, the proponents of this legislation state “there is nothing to protect consumers from a wrongful denial.”
It is one thing to promote proposed legislation, encourage dialogue, and debate the need for specific legislation. It is quite another to suggest that insurance companies are all out to cheat their policyholders. Although it is fashionable to criticize the insurance industry, our firm’s experience has consistently been that claims are handled fairly, efficiently and expeditiously. To suggest there is some type of corporate culture to defraud is wrong.