FOR IMMEDIATE RELEASE
May 11, 2009
Contact: Jason Moon 517-335-1700
 

LANSING - On Friday the Michigan Supreme Court announced it will hear the Office of Financial and Insurance Regulation’s (OFIR) appeal regarding the agency’s rules to ban the use of insurance credit scoring. In 2005, OFIR promulgated rules banning the use of insurance credit scoring. The insurance industry challenged the rules and the issue has been working its way through the legal system for the last four years.

“This is good news for Michigan consumers,” OFIR Commissioner Ken Ross said. “After four years of waiting, we are hopeful that the court resolves this issue in favor of Michigan drivers.”

History of OFIR’s Rules Banning Insurance Credit Scoring:

In 2004, Governor Granholm and then-OFIR Commissioner Linda Watters proposed a new state rule to reduce base rates for all insurance customers by prohibiting the use of credit scoring in determining rates for homeowners and auto insurance sold in Michigan.
 
In March, 2005, after extensive public hearings across the state, the commissioner promulgated these rules.  The Insurance Institute of Michigan, the Michigan Insurance Coalition, and several insurers challenged the rules in Barry County Circuit Court.
 
In April, 2005, Judge James Fisher issued an opinion and order declaring the rules invalid and permanently enjoined the commissioner from enforcing them against any plaintiff in the action.  Commissioner Watters immediately appealed Judge Fisher's decision to the Michigan Court of Appeals. 

In August, 2008, the Michigan Court of Appeals issued a split decision and three separate opinions on the challenge to the rules.  The common points among the three opinions resulted in the Court of Appeals vacating Judge Fisher’s order and injunction and lifting the stay he had imposed on the enforcement of the rules.

On October 1, 2008, current Commissioner Ken Ross filed an application for leave to appeal and specifically asked the Michigan Supreme Court to rule that the insurance credit scoring rules are valid. On October 2, 2008, the insurance industry filed an application for leave to appeal and asked the Michigan Supreme Court to reverse the Court of Appeals and reinstate Judge Fisher’s order. Both sides filed briefs in support of the applications, and each responded to the brief filed by the opposing party. The stay continues in force as the Michigan Supreme Court considers these appeals.

In February, 2009, OFIR began enforcing the statute that governs insurance rate filings and disapproved filings made by auto and home insurance companies that use insurance credit scoring. The agency determined that insurance credit scoring relies on information that is unreliable, unfairly discriminatory and does not meet the requirements of Michigan’s Insurance Code. On April 10, 2009, Judge Fisher expanded his 2005 injunction and prevented OFIR from enforcing the statute. OFIR has appealed the expansion of the 2005 injunction to the Michigan Court of Appeals.

On May 8, 2009, the Michigan Supreme Court granted the applications for leave to appeal the 2005 injunction. The court will begin hearing arguments in October, 2009.

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