FOR IMMEDIATE RELEASE
December 21, 2005
Contact OFIS Directly (toll-free): 877-999-6442
Media/Press calls: Andy Schor: 517-335-1700
Claimants Will Be Given
At Least Three Years to File Claims or Bring Lawsuits
On December 16th, the Office
of Financial and Insurance Services (OFIS) took action to protect consumers
by requiring that insurance policyholders have at least three years to file
uninsured motorist benefit claims or lawsuits under new policy forms put into
use in Michigan.
OFIS issued a prohibition
order that specifically prohibits Michigan insurance companies, in new policy
forms, from putting one-year limitations on claims or legal actions respecting
uninsured motorist coverage. This prohibition order determined that a limitation
period of less than three years is misleading and unreasonably affects the risk
purported to be assumed in the general coverage of the policy and, therefore,
may not be used in new or revised forms. This came in response to a Michigan
Supreme Court ruling (Rory v Continental Ins Co (2005)) allowing insurance companies
to impose a one-year limitation period for uninsured motorist benefits. The
limitation barred claims and the bringing of lawsuits if more than one year
elapsed after an accident, and overturned decades of judicial decisions holding
that courts may refuse to enforce contractually- shortened limitation periods
that are unreasonable.
In the ruling, the Supreme
Court overturned the Michigan Court of Appeals, which ruled that Continental’s
one-year limitation period for challenging the denial of an uninsured motorist
claim was unreasonable. The Supreme Court instead said that it is the OFIS Commissioner,
not the court system, that has been given the authority to police unreasonable
insurance contract provisions.
“The Granholm administration
and my staff are always interested, first and foremost, in protecting consumers,”
said OFIS Commissioner Linda A. Watters. “OFIS is taking decisive action
here to ensure there is enough time for policyholders to file a claim or bring
a lawsuit after an accident with an uninsured motorist.”
OFIS will also issue a survey
in January to property and casualty companies to determine how many forms or
contracts currently being used contain this one-year reporting requirement.
Once this information is collected, OFIS will initiate the process to disapprove
those forms. Companies will have the statutory appeal process to contest this
action.
Uninsured motorist coverage
pays damages that a covered person is legally entitled to recover from an uninsured
driver. Under no-fault, drivers may be sued for certain accidents including
where a covered person suffers death, serious impairment of a body function,
or permanent serious disfigurement. Serious impairment of a body function is
defined in law as “an objectively manifested impairment of an important
body function that affects the person’s general ability to lead his or
her normal life.”
The claimants in Rory were
severely injured. The no-fault law allowed them three years to sue the other
driver. They filed on time and then found out that the other driver was uninsured.
The claimants then made an uninsured motorist claim with their own insurer,
only to have it denied. Continental, their insurance company, had a one-year
limitation on filing a claim in their policy form that began running from the
date of the accident. The claimants sued Continental to obtain their benefits.
The Court of Appeals found
that the one-year limitation is not reasonable because the insured:
- may not have sufficient
opportunity to investigate and file an action because of insufficient information
about his own physical condition to warrant filing a claim.
- will likely not know
if the other driver is insured until legal process is commenced.
- is subject to a time
period so short as to lose the right of action.
- may have his or her action
barred before the loss can be ascertained.
The Michigan Supreme Court
determined that this is a matter in the OFIS Commissioner’s jurisdiction,
not the courts. As a result, this Prohibition Order has been issued to protect
the public from limitation periods that unreasonably affect the risk purported
to be assumed in the general coverage of the policy.
The prohibition order has
been sent to all Michigan property/casualty companies.
Memo to Property/Casualty
Companies and Prohibition Order: http://www.michigan.gov/documents/Prohibition_Order_121605_145496_7.pdf
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