Arizona law, not Michigan law, applied in bad faith auto insurance claim

In Barten v. State Farm Mutual Automobile Insurance Company, a federal district court in Arizona determined that Arizona law, rather than Michigan law applied in a suit by the insured alleging that an insurance company acted in bad faith in denying his claim for personal protection insurance benefits under a Michigan no-fault automobile insurance policy.

Background and procedural history

The plaintiff became quadriplegic as a result of injuries he sustained in a car accident in Lansing, Michigan, in 1995. At the time of the accident, the plaintiff was covered under his father's personal injury protection (PIP) policy issued under Michigan's no-fault auto insurance laws.

After the accident the plaintiff moved to Arizona to get away from the harsh Michigan winters. The plaintiff's girlfriend assisted him with personal needs, such as shopping and moving him in and out of his wheelchair, and the insurance company compensated her for her services.

After the plaintiff's girlfriend moved away in 1997, the plaintiff had difficulty coping with day-to-day needs. The insurance company authorized payment for three hours of attendant care per day for services related to feeding, bathing, toileting, dressing, undressing, and transferring. The plaintiff subsequently requested an increase to 16 hours per day after his doctor issued a prescription for that amount. The insurance company refused the request on the basis that the plaintiff's medical condition had not changed since the time the plaintiff had agreed to accept three hours of care.

In 2012, the plaintiff filed a lawsuit against the insurance company in state court in Arizona, alleging claims for breach of contract and insurance bad faith. A third claim, alleging a violation of the Medicare Second Payer Act, was subsequently dismissed by stipulation of the parties.

The plaintiff's case was later removed to federal court.

Applicability of Michigan law to breach of contract claim

The parties both agreed that the breach-of-contract claim should be decided under Michigan law.

Applicability of Arizona law to bad-faith claim

The insurance company argued that Michigan law applied to the bad-faith claim and that it should be dismissed because Michigan does not recognize bad-faith claims against insurers. The district court disagreed.

The court noted that the plaintiff's alleged mental and physical injuries and financial harm arising under the bad-faith claim all occurred in Arizona. The plaintiff was living in Arizona when the insurance company allegedly mischaracterized and paid for services provided by the plaintiff's girlfriend under the policy's "replacement services" benefit, which extended only for a limited period of time after the accident. The plaintiff's bad-faith claim argued that the services should have been paid under the "attendant care" benefit, which is not limited in duration. The bad-faith claim also asserts that the insurance company failed to provide benefits that were due under the policy, for example, by limiting payments for attendant care to just three hours per day instead of the 16 hours recommended by the plaintiff's attending physician.

The court also determined that a trial was necessary to decide several disputed questions of fact regarding bad faith, punitive damages, the applicable statute of limitations and the plaintiff's claim for reimbursement for 16 hours per day in attendant care services.

Contact an attorney

Individuals and business entities in Arizona who believe their insurance carrier is not acting in good faith in the coverage of a claim should contact a competent attorney experienced in insurance matters to assist them in seeking legal remedies that may be available under the law, such as a possible lawsuit for bad faith in handling the claim.