Legal Memorandum: Insurance Company's Actionable Negligence

Issue: Under Michigan law, what constitutes actionable negligence by an insurance company?

           Additional damages which naturally flow from the wrongful acts of an insurer toward its insured are recoverable in a negligence claim brought by the insured:

In the instant case, plaintiff, in his negligence claim, sought damages for:  (1) loss of use of the vehicle; (2) lost profits; (3) loss of the use of the settlement amount and, (4) costs incurred by the default on the note secured by the vehicle.  The damages arising from the defendant’s negligence in handling plaintiff’s insurance claim, for loss of the use of the vehicle, for the decline in profits from a business use of his vehicle, and for costs incurred by the default on the note secured by the vehicle, are conceivably damages which might reasonably have been anticipated by defendant.  Moreover, questions of what damages might be reasonably anticipated is a question better left to the fact finder.

Wendt v Auto Owners Ins Co, 156 Mich App 19; 401 NW2d 375, 378 (1986).  “[S]erious and recurrent negligence by the insurer” has long been recognized as an element of bad faith by Michigan courts.  See Commercial Union Ins Co v Liberty Mut Ins Co, 426 Mich 127, 138-39; 393 NW2d […]