Federal court keeps insurance case alive

By Thomas Franz
BridgeTower Media Newswires

DETROIT-A ruling out of the U.S. District Court for the Eastern District of Michigan determined that a claim of tortious interference against an insurance company can move forward with factual development.

In Luxury Limousine v. National Indemnity Company, the plaintiff argued that National's lack of response to a claim stemming from a vandalism incident led to the limousine business's inability to operate.

"There's been virtually no case law in right of action against an insurance company for not processing a claim in a timely fashion," said plaintiff's counsel Mark Koroi, a solo practitioner in Plymouth.

Judge George Caram Steeh ruled on the case.

Background

On June 4, 2018, the plaintiff acquired an insurance policy from National to cover several vehicles in its fleet.

On Sept. 4, 2018, four of the plaintiff's buses and a Rolls Royce were vandalized. The plaintiff filed a claim to National the next day.

National had an appraisal performed on the five vehicles, and plaintiff's counsel sent a letter regarding the claim to National on Sept. 28 but didn't receive a response, the opinion stated.

The plaintiff received a records request from National, after which the plaintiff tried to set up a meeting with National that December.

The plaintiff claimed that its attempts were not responded to and a meeting wasn't held until January 2019.

The plaintiff argued that National unreasonably delayed processing the claim and that caused them to lose revenue while the vehicles waited to be repaired.

That lost revenue also caused the plaintiff to be unable to pay its insurance premiums, and National canceled plaintiff's coverage on Feb. 3, 2019.

The plaintiff asserted that without insurance, it cannot operate its business.

Legal action

The plaintiff filed six counts: breach of contract, specific performance, breach of policy and statutory duties to give notice of cancellation, statutory interest, tortious interference with business relations, and bad faith - actions in disregard of the duties owed to policy holder.

National responded by filing a motion for partial dismissal on the counts of specific performance, tortious interference and bad faith claims.

Analysis

The court granted the defendant's motion to dismiss on the counts of specific performance and bad faith, but it denied the same motion on the count of tortious interference.

On specific performance, the court ruled the claim to be an equitable remedy and not a cause of action.

National argued that the plaintiff has an adequate remedy, which is damages for breach of the insurance contract, while the plaintiff countered by asserting that specific performance can force an insurer to process a claim in an expeditious manner.

The court ultimately sided with National by concluding that the plaintiff has not alleged that its remedy is inadequate.

With regard to the bad faith count, the court sided with National's argument that the tort of bad-faith breach of an insurance contract does not exist in Michigan.

Where the court agreed with the plaintiff is the count of tortious interference. The court wrote that the plaintiff alleged that National interfered with the limousine company's relationships with its clients by failing to process the claim in a timely manner and improperly canceling the policy.

National countered by arguing its actions were not wrongful and were motivated by legitimate business reasons.

The court cited Watson Carpet and Floor Covering v. Mohawk Industries (2011) to rule that the tortious interference portion of the case can move forward for further factual development.

Attorney's comments

Koroi said this case is unique because the tort claim gives rise to the availability of recovering damages.

"The judge took the common law tort of tortious interference and said if this was done by an insurance carrier with the intent to damage a business, it's a possible tort claim and can be left open for factual development," Koroi said.

Going forward, Koroi said this case can impact other similar cases that involve an insurer failing to process a claim.

"The judge put in an opinion that you can get a tortious interference claim for failing to process a claim," Koroi said. "It's done all the time where it takes three or four years to actually go into the process of making the claim and going through the court system, and no small business can sustain that type of delay in having their benefits processed without having a court ruling."

Defense attorney Kurt Meyer did not respond to requests for comment on this case.

Published: Fri, Nov 08, 2019

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