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Court of Appeals Allows Bad Faith Claim Under the MCPA for Actions Occurring Before March 28, 2001, if the Complaint was Filed on or Before June 5, 2014

By: Jennifer Anstett

This case also stands for a reminder that the statute of limitations should be pled as an affirmative defense, separate from the one-year-back rule.  In Dell v. Citizens Ins. Co. of Am, unpublished opinion per curiam of the Court of Appeals, issued October 20, 2015 (Docket No. 322645), the plaintiff suffered a closed head injury and injuries to her leg in a 1984 motor vehicle accident. In 1987, a representative from Citizens informed the plaintiff that attendant care benefits did not exist. It was not until April of 2011 that the plaintiff submitted a claim for attendant care benefits through her attorney. Citizens began paying attendant care benefits.  In July of 2011, the plaintiff filed suit for No Fault benefits. After the trial court ordered that the plaintiff’s claim for benefits was limited by the one-year-back rule, the plaintiff amended her complaint to add a count under the MCPA. Citizens moved for summary disposition on the grounds that it was time-barred by MCL 445.911(7). The trial court denied Citizens’ motion and the case proceeded to trial.

The jury found that Dell had not incurred any allowable expenses in the one year prior to the filing of the complaint but concluded that Citizens violated the MCPA. The jury awarded Dell $1.7 million in unpaid benefits and $300,000.00 in mental anguish damages as a result of the violation of the MCPA.  Citizens moved for JNOV on the argument that the jury’s verdict with respect to the first count established that the plaintiff’s MCPA claim was time-barred under MCL 445.911(7), and the trial court agreed. The plaintiff appealed and Citizens’ cross appealed arguing that the trial court erred when it concluded that the MCPA applied to misconduct that occurs during the claims handling and adjustment process.

The Court of Appeals first addressed the case law history regarding the MCPA’s application to insurance cases and the Legislature’s amendments of the MCPA. Ultimately, it found that based on the amendments of the Act, a plaintiff generally may not bring a claim under the MCPA alleging harm from an “unfair, unconscionable, or deceptive method, act, or practice” that is “made unlawful by chapter 20 of the insurance code . . . MCL 500.2001 to 500.2093 . . . .” However, if the “method, act, or practice” at issue occurred prior to March 28, 2001, and a complaint was filed on or before June 5, 2014, the claim remains viable.”

In the Dell case, the actions occurred before March 28, 2001 and suit was filed before June 5, 2014. As such, the plaintiff could bring the cause of action. Thus, the next inquiry was whether or not the conduct she alleged was unlawful under the MCPA. To determine whether Dell stated a viable claim under the MCPA, the first question to be answered was whether the conduct she alleged was unlawful under MCL 445.903; the second question was whether that conduct was exempted from the MCPA’s purview by MCL 445.904. Citizens argued that the conduct alleged in the complaint did not state a claim under the MCPA because the MCPA does not reach misconduct in the claims handling or adjustment process. However, the Court of Appeals found that it was actionable under MCL 445.903(1)(n), which states it is unlawful to “caus[e] a probability of confusion or of misunderstanding as to the legal rights, obligations, or remedies of a party to a transaction.” The Court of Appeals reasoned that Citizens was a party to the sale of the insurance policy. And, the transaction created a legal obligation on the part of Citizens to pay certain benefits in the event of a covered accident. The fact that the misrepresentations occurred after the sale was completed was irrelevant to the Court. Overall, the Dell decision is limited to actions that occurred prior to March 28, 2001 and suits filed before June 5, 2014. However, it may indicate a shift in the Court to find avenues for claims of bad faith.

Moreover, the Dell decision highlights the importance of asserting the statute of limitations as an affirmative defense. The failure to raise an affirmative defense constitutes a waiver of that defense and the statute of limitations defense must be raised in the defendant’s responsive pleading. In Dell, Citizens alleged the defense of the one-year-back rule of MCL 500.3145(1) but did not assert the statute of limitations defense under MCL 445.911(7). The Court of Appeals found that raising the one-year-back provision was not sufficient to raise a statute of limitations defense.

Practice tips: If a case is currently pending that was filed on or before June 5, 2014, with the plaintiff arguing that s/he was entitled to benefits prior to March 28, 2001, be aware that the plaintiff may move to amend the complaint to add a cause of action under the MCPA on the basis that the insurer acted in bad faith during the claims handling process. Moreover, Dell highlights the importance of always raising the statute of limitations as a separate and distinct defense from the one-year-back rule.