Uniform Trade Practices Act and Insurers

A bill working its way through the Michigan Legislature creates a bad faith cause of action against insurers for not paying insurance claims in a timely fashion. It references the “duties” of insurers, for example, the property claims duties imposed by the federal Uniform Trade Practices Act. One of the Act’s stated purposes is identifying unfair or deceptive acts, and penalizing insurers for dilatory practices in settling meritorious claims. The penalty interest provision imposes 12 percent interest on first-party claims and on third-party claims absent a reasonable dispute. If the insurer is found liable by judgment and pays the claim in a timely fashion, it is not an unfair trade practice. The Act also requires insurers to specify in writing what constitutes a “satisfactory proof of loss” within 30 days of receipt of the claim. Payment is “timely” if made for amounts supported by a “satisfactory proof of loss” within 60 days after receipt. The above-referenced article is the first of three examining the Uniform Trade Practices Act.