New Michigan Proposal Would Permit Treble Damage Awards
Although insurers have fared relatively well in recent years in contesting law suits alleging bad faith, they have recently lost ground in state legislatures. In addition to the new administrative regime for adjusting bad faith claims in Maryland and the Oregon referendum reported on earlier this week by Diane Polscer, legislation has now been proposed in Michigan that would permit policyholders to recover treble damages if an insurer unreasonably denied a claim to sue for damages (including costs). Senate Bill 866, which was introduced on November 1 and referred to the Committee on Economic Development and Regulatory Reform, would require insureds to give 20 days notice before such claims could be made.
While the fate of SB 866 is unclear, a proposal of this sort would have a dramatic impact on Michigan law. Michigan is among the few states that do not recognize claims for breach of an impllied covenant of good faith and fair dealing against insurers. As a result, bad faith damages are, for the most part, limited to penalty interest.
SB 866 also highlights the growing trend of plaintiffs and policyholder to obtain remedies and rights through the legislative process that they've heretofore been unable to secure in court.
