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STATE OF MICHIGAN
DEPARTMENT OF LABOR AND ECONOMIC GROWTH
OFFICE OF FINANCIAL AND INSURANCE SERVICES
Bulletin 2006-02-INS
In the matter of PROMPT PAYMENT
OF OFIS SURETY BOND CLAIMS REQUIRED
_______________________________________________/
Issued and entered
this 30th day of January 2006
By Linda A. Watters
Commissioner
Mortgage companies regulated by the Office of Financial and Insurance Services (OFIS), pursuant to the Mortgage Brokers, Lenders, and Servicers Licensing Act, The Secondary Mortgage Loan Act, or Consumer Financial Services Act, are generally required to maintain a surety bond. MCL 445.1654, MCL 493.56, and MCL 487.2056.
A surety bond issued by an insurance company pursuant to all of the aforementioned statutes is payable to the commissioner. See MCL 487.1654(1)(b)(i); MCL 493.56(1)(b)(i); and MCL 487.2056(2). Thus, the Commissioner has the exclusive insurable interest, on behalf of the citizens of the State of Michigan. It is impermissible and improper for an issuing insurance company to accept a claim directly from a consumer.
Accordingly, any and all consumer claims against surety bonds may only be filed with the Commissioner. The Commissioner's staff thoroughly investigates all filed surety bond claims. Following a thorough investigation by the Commissioner's staff to determine the merit and validity of the claim, the Commissioner may file a claim on behalf of the citizen with the issuing insurance company, for prompt/immediate payment.
If the Commissioner determines that a claim is valid and warrants reimbursement, it is expected that insurance companies will immediately pay each surety bond claim filed by the Commissioner.
Failure to pay a claim filed by the Commissioner may result in the Commissioner's refusal to accept surety bonds issued by an insurance company under the statutes. Further, the Commissioner may commence administrative action proceedings against the certificate of authority of an insurance company that fails to immediately pay such claims.
Any questions regarding this bulletin should be directed to:
Office of Financial and Insurance Services
Market Conduct Division
Mortgage and Consumer Finance Section
611 West Ottawa Street
P.O. Box 30220
Lansing, Michigan 48909-7720
Phone: (517) 373-7240
Toll Free: (877) 999-6442
_________________________________________
Linda A. Watters
Commissioner of Financial and Insurance Services
