Antitrust Law Daily Wrap Up, CONSUMER PROTECTION—E.D. Mich.: Summary judgment granted limiting insured’s deceptive practices claims against auto insurance carrier to damages for specified time frame, (Feb 14, 2014)

By Linda O’Brien, J.D., LL.M.

The federal district court in Bay City, Michigan granted summary judgment to an automobile insurance carrier limiting an insured’s claims for violations of the Michigan Consumer Protection Act (MCPA) to damages that resulted from conduct for a specified time frame (Mead v. State Farm Mutual Automobile Insurance Company, February 12, 2014, Ludington, T.).

David Schwein suffered severe injuries when he was involved in an automobile accident in 1980. At the time of the accident, Schwein maintained a no-fault auto insurance policy issued by State Farm Mutual Automobile Insurance Company. In 1997, Schwein filed an action against State Farm, alleging that the company refused to pay him all personal protection insurance (PIP) benefits in accordance with the policy provisions. The action was settled and Schwein executed a release for all claims incurring before July 1998 in connection with the accident. In 2013, Schwein filed a second suit against State Farm for breach of contract and a violation of the MCPA. He contended that State Farm failed to pay all the PIP benefits under the policy and failed to honestly explain the no-fault policy benefits. State Farm filed a partial motion for summary judgment regarding the MCPA claim.

The court determined that there were no genuine issues of material fact that Schwein’s claim under the MCPA should be limited to damages that resulted from conduct occurring after July 1998 (when he executed the settlement release) and before March 2001 (when the MCPA was amended to exempt transactions between an insurance company and it’s insured). When Schwein filed the first suit against State Farm in 1997, there were no causes of action under the MCPA for failure to honestly explain an insured’s no-fault policy rights. Beginning in 1997, case law held that private actions were permitted against an insurer until 2001 when the state legislature amended the MCPA to exempt transactions between an insurance company and an insured for unfair and deceptive practices.

The doctrine of res judicata bars claims arising out of the same transaction that could have been litigated in a prior proceeding but were not, the court noted. It was undisputed that Schwein’s release entered into his 1997 lawsuit was a final decision on the merits and involved the same parties. He had the opportunity to amend his complaint to assert the MCPA claim which arose from the same essential facts as his claim for no-fault benefits. However, since Schwein chose not to amend his complaint to assert the MCPA claim in 1997, res judicata precluded the assertion of that claim in his 2013 action, according to the court.

The case is No. 13-12389.

Attorneys: Paul A. Zebrowski (Paul Zebrowski Associates) for Sandy Mead. David D. O’Brien (Miller, Canfield, Paddock and Stone) for State Farm Mutual Automobile Insurance Company

Companies: State Farm Mutual Automobile Insurance Company

Cases: ConsumerProtection StateUnfairTradePractices MichiganNews