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Traverse City, Michigan

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Kevin A. Elsenheimer
Kevin A. Elsenheimer
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Update on Insurance Bad Faith Reform Package in Michigan

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I’ve been asked to talk briefly about the manner in which the insurance reform package left the Michigan House of Representatives, and to give an update as to its status in the Michigan Senate.

House Bills 4244, 4844, 5020, and 5144-5151 were passed out of the House on what was essentially a partisan vote (most Democrats voting for, Republicans mostly opposed) in the early Fall. The bills were referred to the Committee on Economic Development and Regulatory Reform in the Michigan Senate. My staff has communicated with the staff of the committee’s chairman, Sen. Alan Sanborn, and we have been advised that the bills will not be taken up by the Senate committee, which means that the issue is likely dead for this legislature.

To my mind, it is a shame these bills moved in such a poor state. I think there was a middle ground that could have been reached on the issue which might have led to an improved policy. Unfortunately, policy took a backseat to politics and there was no opportunity given for compromise.

When the bills were voted on by the House, I issued a strongly-worded press release as Republican Leader in the House chastising both the actions of the Insurance Commissioner, Butch Hollowell, and the House Democrats in moving bills that were so one-sided they virtually gauranteed no action in the Republican-led Senate. Let me address each one of these comments.

On the day of the vote on the bills, my office began receiving contacts from Republican members of the House complaining that their offices had been contacted by the Office of the Insurance Advocate regarding clearly political matters, such as who the member’s key supporters and donors were, when the members conducted office hours and the names of their political opponents. My members viewed this contact as a poorly-vieled threat on the part of the Insurance Advocate’s Office, and by proxy, the Granholm Administration, to seek out political retribution on those who would oppose the Bad Faith Reform package. That this was being done on the taxpayer’s dime made the matter even more infuriating.

It should be noted that Butch Hollowell has said he knew nothing about the calls made to my members’ offices. I take him at his word, but the actions of his department had a lot to do with the attitude that House Republicans brought to this particular set of bills. But it wasn’t the only cause of that attitude.

There are several members of my caucus who would support some kind of bad faith fix. No member of my caucus, however, was willing to support the one-sided language that suddenly came from the House Committee on Insurance. I am told that we had at least one member that was working with the chair to come up with compromise language that would actually have the potential of moving in the Senate. When the bills were suddenly moved to the floor of the House, my Insurance Committee members felt like the rug had been pulled out from under them.

In my experience, this kind of rushed work only happens when a powerful special interest group demands some kind of action. The Justice League (or whatever the trial lawyers call themselves now) was the prime mover of this package, and I called out the House Democrats as pushing the legislation as a pay-off to trial lawyers.

Not surprisingly, I received some contacts from some fellow attorneys about my comments. Tim Smith, who blogs regularly on this site, was particularly unhappy and was kind enough to ask me to explain in this forum what happened on the ground.

In hindsight, my press release was a bit strong, but there is more than an air of truth in my comments. This package moved before its time. It did so without meaningful compromise and as a result is dead in the Senate. The fact that House Democrats moved it in this way, which is unusual, and that the Insurance Advocate’s Office was involved led me to believe at the time that the real goal of moving this package was to have political ammunition for future campaigns. I still believe that is the case today. The fact that the MAJ gave 99.73% of the $591 thousand-plus that it spent from July of ’08 to July of ’09 to Democrats isn’t lost on me either.

Someone needs to ask, is the goal here to enact real policy reform or to advance a political objective? This and other policy objectives can be achieved – again, let me stress that I have members who are willing to enact bad faith reform – if the MAJ and the insurance lobby are willing to compromise. That means both sides will need to move. In this instance, I saw those on one side of the argument pick up their toys and go home.

Thanks again to Tim Smith for the opportunity to blog, and I’m sorry for the delay in doing so.

Kevin Elsenheimer

House Republican Leader