CAPAC – In a move to protect Michigan consumers from some of the most outrageous practices in the home, auto and health care insurance industries, State Representatives Terry Brown (D-Pigeon) and Jennifer Haase (D-Richmond) today announced a package of bills that will toughen penalties and rein in corporate leaders who promote a culture that denies consumers' legitimate claims. The legislation is modeled after laws in 46 other states that have taken aim at wrongful denial or "bad faith" insurance practices.
"Michigan is one of only four states that doesn't protect its consumers against insurance companies that break their promises – our residents deserve better," Brown said. "This legislation will make sure that insurance companies are not let off the hook when they refuse to hold up their end of the bargain. It's time to make our laws stronger so that people are more important than profits."
Bad faith insurance practices consist of a set of tactics to delay or deny legitimate property, automotive or health care claims in order to maximize a company's bottom line. Such practices can have devastating consequences for consumers while reaping profits for companies.
Heather Sarazin of Capac, has seen firsthand how delay and denial tactics can be devastating to consumers when her husband, Jerry, suffered a serious brain injury after an auto accident. Almost immediately, the Sarazin's insurance company refused to honor the terms of their policy. The Sarazin's have been forced to deplete their retirement savings, almost lost their home and their credit rating has been destroyed.
"When you're fighting to save a loved one's life, the last thing you should have to worry about is whether your insurance company will honor it's commitment to you," Heather Sarazin said. "When insurance companies put profits ahead of people, like my husband, Jerry, it has a devastating affect. Because of the insurance company, we've lost our retirement and almost our home, just to get my husband the treatment he needs."
Brown and Haase joined the Sarazin's at their home today to announce their plan that will:
- Strengthen consumer protections by punishing insurance companies that illegitimately deny consumer claims with penalties including a $1 million fine.
- Punish corporate leaders who knowingly foster or encourage wrongful denial of claims by making the misconduct a felony that could result in four years in prison plus a $50,000 fine.
- Create a whistle-blower protection plan to shield employees who report that an insurance company is engaging in wrongful denial of claims.
- Require insurance companies to repair a consumer's credit rating when harmed by wrongful denial of coverage.
Michigan's current law offers little or no protection against bad faith insurance practices, and the state's lack of penalties acts as an incentive to encourage companies to break their promises and exploit residents. According to the 2007 Bloomberg News report, insurance companies even make money by low-balling claims and collecting interest when they delay a consumer's claim.
"Insurance companies are supposed to help us times of crisis, not turn their back on us," said Haase, a sponsor of the plan. "Those that delay and deny legitimate claims are ruining the lives of people every day. Our plan will protect Michigan consumers from big corporations that back out on their end of the deal simply to increase their profits."
Video testimonials by wrongful denial victims and whistle-blower Jo Anne Katzman are available here.