McLiechey v. Bristol West Ins. Co.

• Decision Date: 13 January 2006
• Docket Number: No. 5:05-CV-103.,5:05-CV-103.
• Parties: Burl and Cathy McLIECHEY, husband and wife, on behalf of a class of persons similarly situated, Plaintiffs, v. BRISTOL WEST INSURANCE COMPANY, f/k/a Reliant Insurance Co., f/k/a LHIW Insurance Company, Defendant.
• Court: U.S. District Court — Western District of Michigan

408 F.Supp.2d 516

Burl and Cathy McLIECHEY, husband and wife, on behalf of a class of persons similarly situated, Plaintiffs, v. BRISTOL WEST INSURANCE COMPANY, f/k/a Reliant Insurance Co., f/k/a LHIW Insurance Company, Defendant.

No. 5:05-CV-103.

United States District Court, W.D. Michigan, Southern Division.

January 13, 2006.

Christopher G. Hastings, Drew, Cooper & Anding, Grand Rapids, MI, for Burl McLiechey husband, on behalf of a class of persons similarly situated, Cathy McLiechey wife, on behalf of a class of persons similarly situated, plaintiffs.

Lori McAllister, Dykema Gossett PLLC (Lansing), Lansing, MI, for Bristol West Insurance Company formerly known as Reliant Insurance Co. formerly known as LHIW Insurance Company, defendant.

OPINION

ROBERT HOLMES BELL, Chief Judge.

This matter comes before the Court on Defendant Bristol West Insurance Company's motion to dismiss Plaintiffs' complaint pursuant to FED. R. CIV. P. 12(b)(1) and 12(b)(6). For the reasons that follow Defendant's motion will be granted.

I.

Plaintiffs Burl and Cathy McLiechey, husband and wife, filed this class action complaint in the Kent County Circuit Court against Defendant Bristol West Insurance Company alleging that by using its insureds' economic circumstances as one of the criteria in setting automobile insurance rates Defendant has 1) breached an implied covenant of good faith and fair dealing; 2) violated the Consumer Protection Act, M.C.L. § 445.901 et seq., and 3) violated Chapter 21 of the Insurance Code, M.C.L. § 500.2101 et seq.

Defendant removed the case to federal court pursuant to 28 U.S.C. §§ 1332(d), 1446 and 1453, because the parties are diverse in citizenship and because the value of the claims of the individual class members when aggregated exceeds the sum of $5,000,000. Defendant now moves to dismiss Counts I and III of the complaint pursuant to FED. R. CIV. P. 12(b)(1) for lack of subject matter jurisdiction and to dismiss Counts I, II and III pursuant to FED. R. CIV. P. 12(b)(6) for failure to state a claim on which relief may be granted.

II.

Plaintiffs' class action complaint seeks damages as a result of Defendant's alleged failure to comply with the requirements of Chapter 21 of the Insurance Code, commonly known as the "Essential Insurance Act," in the pricing of automobile insurance. (Compl. p. 1). The essence of the complaint is found in Count III, where Plaintiffs allege a violation of Chapter 21 of the Insurance Code.

Defendant contends that Count III of Plaintiffs' complaint is subject to dismissal for failure to state a claim pursuant to Rule 12(b)(6) because the remedies provided in Chapter 21 of the Michigan Insurance Code are exclusive, and Plaintiffs cannot circumvent these exclusive remedies by proceeding on a private cause of action in tort.

"To survive a motion to dismiss under Rule 12(b)(6), a `complaint must contain either direct or inferential allegations respecting all the material elements to sustain a recovery under some viable legal theory.'" Advocacy Org. for Patients and Providers v. Auto Club Ins. Ass'n, 176 F.3d 315, 319 (6th Cir.1999) (quoting Scheid v. Fanny Farmer Candy Shops, Inc., 859 F.2d 434, 436 (6th Cir.1988)).

Chapter 21 of the Insurance Code addresses automobile and home insurance. Rates for automobile and home insurance are subject to comprehensive rate-making standards. See M.C.L. §§ 500.2109-2111. An insurer is required to file its rates with the Commissioner and to certify that the rates conform to the requirements of Chapter 21. M.C.L. § 500.2108. The insurer may use the rates as soon as they are filed, but the rates are subject to the Commissioner's review and approval. M.C.L. §§ 500.2106-2107. Any person or organization who is aggrieved with respect to any insurance rate filing may apply to the Commissioner for a hearing on the filing. M.C.L. § 500.2114(1). If the Commissioner finds that the filing does not meet the requirements of sections 2109 and 2111, the Commissioner shall state the reasons for that finding and state when the filing "shall be considered no longer effective." M.C.L. § 500.2114(2). In addition, any person who believes he has been charged an incorrect premium is entitled to a private informal managerial-level conference with the insurer, and, if that fails, to a review before the Commissioner. M.C.L. § 500.2113(1). Any party who disagrees with the Commissioner's determination can request that the matter be heard by the Commissioner as a contested case. M.C.L. § 500.2113(5). Final decisions from contested case hearings are subject to judicial review under the contested case provisions of the Michigan Administrative Procedure Act. M.C.L. §§ 24.271-87 and M.C.L. §§ 24.301-06.

It is well established under Michigan law that "[w]here a statute gives new rights and prescribes new remedies, such remedies must be strictly pursued; and a party seeking a remedy under the act is confined to the remedy conferred thereby and to that only." Monroe Beverage Co., Inc. v. Stroh Brewery Co., 454 Mich. 41, 45, 559 N.W.2d 297, 298-99 (1997) (quoting Lafayette Transfer & Storage Co. v. Public Utilities Comm., 287 Mich. 488, 491, 283 N.W. 659 (1939)). This principle, that a new right created by statute must be pursued in strict accordance with the remedies provided by the Legislature, was recently reaffirmed by the Michigan Supreme Court:

Where a statute gives new rights and prescribes new remedies, such remedies must be strictly pursued; and a party seeking a remedy under the act is confined to the remedy conferred thereby and to that only.

McClements v. Ford Motor Co., 473 Mich. 373, 382, 702 N.W.2d 166, 171 (2005), amended, 474 Mich. 1201, 704 N.W.2d 68 (2005) (quoting Monroe Beverage Co., Inc. v. Stroh Brewery Co., 454 Mich. 41, 45, 559 N.W.2d 297 (1997)). Thus, in McClements, the Court noted that the common law did not provide a remedy for workplace discrimination; that such a remedy was created only by the Civil Rights Act; and that the Civil Rights Act was the exclusive remedy for Plaintiff's claim of negligent retention based upon workplace discrimination. McClements v. Ford Motor Co., 473 Mich. at 383, 702 N.W.2d 166.

Plaintiffs do not deny that the rights, obligations and remedies prescribed in Chapter 21 of the Insurance Code are new rights that have never been governed by the common law. Neither do they deny that Chapter 21 prescribes statutory remedies. Instead, Plaintiffs contend that Michigan courts have consistently acknowledged that a private right of action may be implied where the remedy provided by statute is "plainly inadequate." See, e.g., Genesis Center, PLC v. Blue Cross and Blue Shield of Michigan, 243 Mich. App. 692, 695-96, 625 N.W.2d 37 (2000); Pro-Staffers, Inc. v. Premier Mfg. Support Servs., Inc., 252 Mich.App. 318, 326, 651 N.W.2d 811 (2002); and General Aviation, Inc. v. Capital Region Airport Auth., 224 Mich.App. 710, 715, 569 N.W.2d 883 (1997).

A number of courts have held that there is no private right of action to pursue violations of Chapter 20 of the Insurance Code. See, e.g., National Union Fire Ins. Co. of Pittsburgh, Pa. v. Arioli, 941 F.Supp. 646, 655 (E.D.Mich.1996); Isagholian v. Transamerica Ins. Corp., 208 Mich. App. 9, 17, 527 N.W.2d 13 (1994); Young v. Michigan Mut. Ins. Co., 139 Mich.App. 600, 605, 362 N.W.2d 844 (1984). However, it appears that no court has yet examined the issue of whether there is a private right of action to pursue violations of Chapter 21 of the Insurance Code. Plaintiffs contend that because the remedies available under Chapter 21 differ from those available under Chapter 20, the Court should not assume that there is no private right of action under Chapter 21. Chapter 20 authorizes the Commissioner to issue refunds to consumers injured by Unfair Trade Practices Act violations. M.C.L. § 500.2038(1)(c). Accordingly, Plaintiffs contend that a private right of action to enforce Chapter 20 would be superfluous. By contrast, Plaintiffs contend that the remedy provided by Chapter 21 is plainly inadequate because the Commissioner has no authority to order a premium refund.

There is a dispute between the parties as to whether or not the Commissioner has the authority to order a premium refund for violations of Chapter 21. Plaintiffs contend this issue was decided in the negative in Allstate Ins. Co. v. Mich. Dep't of Ins., 195 Mich.App. 538, 491 N.W.2d 616 (1992). In Allstate the Commissioner ordered Allstate to refund overcharges to its policyholders based on Allstate's failure to provide an adequate basis for its rates in violation of § 2111. The Court of Appeals struck down that portion of the Commissioner's order requiring a refund because it was beyond the power vested in the Commissioner to order such a refund. The court noted that although the Insurance Code provides for a refund as a remedy for violations of Chapter 20, M.C.L. § 500.2038, the remedial provisions for violations of Chapter 21 are "quite different." Allstate, 195 Mich.App. at 544, 491 N.W.2d 616. Violations of Chapter 21 can only be remedied by the prospective relief of terminating the effectiveness of the rate filing. Id at 546, 491 N.W.2d 616. "[I]t is absolutely clear that the Legislature deliberately refused to vest the commissioner with power to order a refund for noncompliance with chapter 21." 195 Mich.App. at 547, 491 N.W.2d 616.

Defendant contends that Allstate addressed only the Commissioner's authority to remedy filing violations under § 2114, and that it does not control the Commissioner's authority to remedy incorrect premiums under § 2113. Defendant also contends that Allstate has been effectively overruled by the amendment of § 150 of the Insurance Code.

Allstate did not differentiate between actions under 2113 and actions under 2114. Instead, it used broad language limiting the Commissioner's remedial authority under Chapter 21. Moreover, Plaintiffs' action could be characterized as a § 2114 a...