One facet of a no-fault system like Michigan’s is that it aims to exchange prompt payment of economic damages for the ability to sue for noneconomic damages (except for more serious injuries). Michigan’s no-fault act contains a “stick” (not a carrot) to motivate prompt payment. The act provides that a claimant can recover attorney fees “if the insurer unreasonably refused to pay the claim or unreasonably delayed in making proper payment.” Because fraud is also a concern, the no-fault act provides a stick for insurers, allowing insurers to recover their attorney fees incurred in defending a claim that was “fraudulent or so excessive as to have no reasonable foundation.”
These two implements clashed in Proudfoot v State Farm Mutual Automobile Insurance Company(Sept. 12, 2013), with the claimant’s stick emerging victorious. (read more…)