Not So Fast: Insurance Transactions Are Generally Exempt Under the Michigan Consumer Protection Act

Not So Fast: Insurance Transactions Are Generally Exempt Under the Michigan Consumer Protection Act


The Legislature created the Michigan Consumer Protection Act to identify and prevent unfair trade practices in consumer transactions. The Act identifies over 37 types of conduct that are defined as “unfair” and “deceptive” when committed in the course of transactions for personal, family, or household services, among others. MCPA violations have been assessed against a wide variety of service providers—from a residential builder for failing to construct a home in a workman-like manner, to a pharmacy for filling incompatible prescriptions, to a real estate agency for making misrepresentations to a property buyer about where a home could be constructed.

With the array of MCPA claims stretching from a landlord’s mistreatment of a tenant to an automobile manufacturer’s sale of a defective vehicle, could the conduct of an insurer and its agent in procuring personal insurance coverage for an insured violate the MCPA? Generally, the answer is no. Although the MCPA appears to cover just about every imaginable consumer transaction, it also carves out certain exemptions.

One exemption applies to a “transaction or conduct specifically authorized under laws administered by a regulatory board or officer acting under statutory authority of this state or the United States.” To determine whether a MCPA claim is barred by this exemption, the question is whether the transaction is specifically authorized by law, regardless of whether the alleged misconduct is prohibited.

Insurance transactions, for the most part, fall within this exemption. Insurance transactions, such as issuing insurance policies, are authorized under Michigan’s Insurance Code. The Insurance Code is administered by an Insurance Commissioner, who creates the rules. The Insurance Commissioner certifies insurers and their agents, who are the only entities allowed to sell insurance. Given the role of the Insurance Commissioner in regulating insurers and their agents, insurance transactions can be regarded as “transactions . . . specifically authorized under laws administered by an officer acting under statutory authority of the state . . . .”

What this means for insurance carriers and agents

MCPA violations are attractive claims for plaintiffs to include in lawsuits because of the possible recovery of attorney fees as sanctions in the event they prevail. Plaintiffs have attempted to hold insurers and agents liable for MCPA violations, but Michigan courts have repeatedly held that such claims are barred. As long as the transaction or conduct at issue was authorized under the Insurance Code and administered by the Insurance Commissioner, an argument can be made that the claim is exempt under the MCPA.

Have questions or looking for further information? Contact one of our attorneys.