McLiechy v. Bristol West Ins. Co.

• Citation: 474 F.3d 897
• Decision Date: 30 January 2007
• Docket Number: No. 06-1228.,06-1228.
• Parties: Burl and Cathy McLIECHEY, husband and wife on behalf of a class of persons similarly situated, Plaintiffs-Appellants, v. BRISTOL WEST INSURANCE COMPANY, f/k/a Reliant Insurance Company, f/k/a LHIW Insurance Company, Defendant-Appellee.
• Court: U.S. Court of Appeals — Sixth Circuit

474 F.3d 897

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

No. 06-1228.

United States Court of Appeals, Sixth Circuit.

Argued: December 7, 2006.

Decided and Filed: January 30, 2007.

ARGUED: Jay Angoff, Roger G. Brown & Assoc., Jefferson City, Missiouri, for Appellant. Lori McAllister, Dykema Gossett, Lansing, Michigan, for Appellee. ON BRIEF: Jay Angoff, Roger G. Brown & Assoc., Jefferson City, Missiouri, Thomas V. Hubbard, Drew, Cooper & Anding, Grand Rapids, Michigan, for Appellant. Lori McAllister, Dykema Gossett, Lansing, Michigan, for Appellee.

Before CLAY, ROGERS, and SUTTON, Circuit Judges.

ROGERS, Circuit Judge.

Bristol West Insurance Company changed Burl and Cathy McLiechey's insurance policy after the McLiecheys moved into a higher risk area, received a worse credit rating, and had a two week lapse in insurance coverage due to a temporary inability to pay premiums. The McLiecheys allege, on behalf of similarly situated class members, that Bristol West's three justifications for changing their insurance policy violated Chapter 21 of the Michigan Insurance Code, a statute that regulates the setting of insurance rates. See Mich. Comp. Laws § 500.2101 et seq. The district court dismissed the McLiecheys' complaint because the statutes upon which the McLiecheys relied do not create a private cause of action.

We affirm because the two Michigan statutes upon which the McLiecheys rely do not establish a cause of action. First, under Michigan law, Chapter 21 of the Michigan Insurance Code would only create a private cause of action if the remedies that Chapter 21 provided were "plainly inadequate." In this case, Chapter 21 provides an adequate remedy, although not necessarily the remedy that class members most desire. Second, the Consumer Protection Act, Mich. Comp. Laws. § 445.901 et seq., which creates a private cause of action, does not extend to claims under Chapter 21 of the Michigan Insurance Code. The Consumer Protection Act does not apply to claims regarding "transactions or conduct specifically authorized" by statute, and Chapter 21 specifically authorizes and regulates the setting of insurance rates.

This case involves the interpretation of Chapter 21 of the Michigan Insurance Code, also known as the Essential Insurance Act, which regulates the setting of insurance rates. Mich. Comp. Laws § 500.2101. Chapter 21 provides that "[r]ates shall not be excessive, inadequate, or unfairly discriminatory," defined as "not reasonably justified by differences in losses, expenses, or both, or by differences in the uncertainty of loss, for the individuals or risks to which the rates apply." Id. § 500.2109(1). The statute lists factors that insurance companies may consider in setting automobile insurance (e.g., age of the driver, vehicle characteristics, commuting mileage), personal protection insurance (e.g., earned income, use of safety belts), and home insurance (e.g., use of locks and smoke detectors), and factors that they may not consider (e.g., sex, marital status). Id. § 500.2111. The statute also permits insurance companies to maintain "statistical reporting territories" and, if the Commissioner of Insurance agrees, "utilize factors in addition to those specified" in the statute. Id. Finally, "[i]f uniformly applied to all its insured" and if "the plan is consistent with the purposes of [Chapter 21] and reflects reasonably anticipated reductions in losses or expenses," an "insurer may establish and maintain a premium discount plan utilizing [additional] factors." Id. § 500.2110a.

Chapter 21 also establishes a remedial scheme. If a "person [ ] has reason to believe that an insurer has improperly denied him or her" insurance or "has charged an incorrect premium for that insurance," that person is entitled "to a private informal managerial-level conference with the insurer and to a review before the [C]ommissioner, if the conference fails to resolve the dispute." Id. § 500.2113(1); see also id. § 500.2114. If the insurer refuses to meet or the insurer's proposed resolution of the claim is unsatisfactory, the person "shall be entitled to a determination of the matter by the [C]ommissioner," who "shall by rule establish a procedure for determination . . . which shall be reasonably calculated to resolve these matters informally and as rapidly as possible, while protecting the interests of both the person and the insurer." Id. § 500.2113. The person may then request that the Commissioner "proceed to hear the matter as a contested case," id., and may then seek judicial review. Flumignan v. Detroit Auto. Inter-Ins. Exch., 131 Mich. App. 121, 345 N.W.2d 910, 914 (1983). As discussed in more detail below, the McLiecheys argue that the statute's remedial scheme is plainly inadequate, thus triggering the inference under Michigan law that the legislature intended to create a private cause of action.

Plaintiffs filed a class action in the Kent County Circuit Court, alleging that Bristol West breached an implied covenant of good faith and fair dealing, violated the Michigan Consumer Protection Act, Mich. Comp. Laws § 445.901 et seq., and violated the Michigan Essential Insurance Act, Mich. Comp. Laws § 500.2101 et seq. (Chapter 21 of the Michigan Insurance Code). Relying on 28 U.S.C. §§ 1332 (diversity jurisdiction), 1446 and 1453 (removal), Bristol West filed a notice of removal on July 8, 2005, to remove the case to federal court, and, on July 13, 2005, filed a motion to dismiss.

The federal district court dismissed all three claims in the McLiecheys' complaint. First, the district court dismissed the count alleging a violation of Chapter 21 because the remedial scheme in Chapter 21 was not "plainly inadequate," and Chapter 21, therefore, did not create a private cause of action. Second, the district court dismissed the McLiecheys' Consumer Protection Act claim because that Act does not apply to Bristol West's decisions, which fell under the Michigan Insurance Code. Third, the district court dismissed the class's good faith and fair dealing claim, a decision that the McLiecheys do not challenge on appeal. Finally, the district court noted that dismissal was warranted on the alternative grounds of exhaustion of administrative remedies and primary jurisdiction, grounds that we do not reach here.

On appeal, the McLiecheys challenge the district court's decision to dismiss the Chapter 21 claim, arguing that the remedy that Chapter 21 provides is plainly inadequate, and, therefore, the courts should infer that the Michigan legislature intended to create a private cause of action. They also challenge the district court's decision to dismiss the Consumer Protection Act claim, arguing that the Michigan Insurance Code did not specifically authorize Bristol West's behavior and that the Consumer Protection Act, therefore, provides them with a cause of action. Both arguments are without merit and the McLiecheys cannot pursue a private cause of action against Bristol West under either Chapter 21 or the Consumer Protection Act.

First, Chapter 21 does not create a private cause of action because its remedial scheme is not "plainly inadequate." Under Michigan law, "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, 702 N.W.2d 166, 171 (2005), amended 474 Mich. 1201, 704 N.W.2d 68 (2005) (quoting Monroe Beverage Co. v. Stroh Brewery Co., 454 Mich. 41, 559 N.W.2d 297, 298-99 (1997)). Because Chapter 21 does not explicitly provide for a private cause of action, courts will interpret the statute as creating one only if the statutory remedial scheme is "plainly inadequate," see Gen. Aviation, Inc. v. Capital Region Airport Auth., 224 Mich.App. 710, 569 N.W.2d 883, 885 (1997), or "provide[s] no means of enforcement," see Pro-Staffers, Inc. v. Premier Mfg. Support Servs., Inc., 252 Mich. App. 318, 651 N.W.2d 811, 816 (2002). The parties fundamentally disagree over whether Michigan case law supports the proposition that Chapter 21's remedial scheme is "plainly inadequate," but agree that there is no case directly on point.

Michigan cases do suggest, however, that the remedies in Chapter 21 are not "plainly inadequate." In McClements, for example, the Michigan Supreme Court ruled that an employee could not bring a common law claim for negligent retention in the context of a workplace sexual harassment claim. 702 N.W.2d at 171. The statute at issue provided a remedial scheme that included only "a civil action for appropriate injunctive relief or damages, or both," and not a common law claim of negligent retention. Id. (quoting Mich. Comp. Laws § 37.2801(1)). The Michigan Supreme Court, finding the remedial scheme adequate, construed the statute narrowly and did not allow the plaintiff to recover under a cause of action that the statute did not provide. In Pro-Staffers, the Michigan Court of Appeals decided that an employer whose employee was injured by a third-party tortfeasor could not sue the third party for damages in the form of increased worker's compensation premiums and lost profits. 651 N.W.2d at 815. The Michigan statute in Pro-Staffers only permitted the employer to recover from the third-party tortfeasor for benefits that the employer paid to the injured employee, and not for the increased premiums. Id. at 816-17. Because the statute permitted the employer to obtain some relief but not all the relief that the employer sought, the court reasoned that the statute's remedies were not "plainly inadequate." Id. at 817.

Like the statutes in McClements and Pro-Staffers, Chapter 21 provides a remedial scheme for the McLiecheys, and...