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No-Fault Insurance Defense September Kitch Report

September, 2018

Timothy P. BradyTimothy S. GroustraMark M. SesiMarcy Tayler



Governor Rick Snyder Takes a Bite at Combatting No-Fault  Insurance Fraud by Creating an Anti-Fraud Unit. But Will that Bite Have Any Teeth? 
 
On September 11, 2018, Governor Rick Snyder signed an executive order that establishes an Anti-Fraud Unit within the Michigan Department of Insurance and Financial Services.  The purpose of the Anti-Fraud Unit is to provide the Department with tools to perform is statutory obligations related to the prevention, investigation, and prosecution of insurance fraud. And this includes fraud under The Insurance Code of 1956, as amended, 1956 PA218, MCL 500.100 et seq. The Insurance Code, of course, includes the No-Fault Act, MCL 500.3101 et seq.   

Governor Snyder, in a press release that accompanied Order No. 2018-9, conveyed his position that fraud in the insurance system drives up the costs for everyone.  He didn't specifically state that this Order is aimed at curtailing no-fault insurance costs. But given the public awareness of high insurance costs in this State, it is not a far leap to discern his intent. Identifying and combatting no-fault insurance fraud is a big step toward lowering insurance costs. To accomplish this, the Order directs the Anti-Fraud Unit to collect, maintain, and investigate claims of fraudulent conduct that, if true, would violate the Insurance Code or any other law. The Order further creates avenues between the Anti-Fraud Unit and criminal-justice agencies to facilitate investigations, enforce matters under the Department's authority, and coordinate with law-enforcement and regulatory agencies to prosecute criminal and fraudulent activities.

Theoretically, the Anti-Fraud Unit could benefit Michigan insurers by rooting out and prosecuting fraudulent insurance claims or simply acting as a claim deterrent. But will the Anti-Fraud Unit actually achieve its purpose? It's way too early to tell. The Order places the burden of structuring, staffing, and funding the Anti-Fraud Unit on the Department's Director. We don't know what the Unit will look like, how it will operate, or when it will come into fruition. We also have no idea if the Anti-Fraud Unit will be sufficiently staffed or equipped to deal with the level of fraud in no-fault insurance. Further, we don't know if an investigation would be worth our time. While we try to resolve these no-fault actions as efficiently as possible, investigations by the Anti-Fraud Unit may take too long to validate a decision to make a claim.

For now, it seems that we need to wait and see what comes of this Order. Governor Snyder has taken a step in the right direction: combatting no-fault insurance fraud. And this Order may actually reduce fraudulent no-fault claims and lower insurance costs.