Bad faith in insurance means an insurer unreasonably denies, delays, underpays a valid claim, or refuses to defend a policyholder it is contractually required to protect. Michigan approaches these cases differently from many other states, and the remedies available to you depend heavily on the type of policy and the specific conduct involved.
Our insurance coverage attorneys at August Law handle disputes for businesses and policyholders throughout Michigan. We help you determine whether your situation qualifies.
Common Insurer Behaviors That Cross the Line
Insurance companies owe every policyholder a duty of good faith and fair dealing. That means handling claims honestly, promptly, and reasonably. When an insurer breaks that duty, the conduct usually falls into a handful of recognizable patterns:
- Denying a claim without a reasonable investigation of the facts
- Delaying payment for weeks or months without a valid reason
- Undervaluing a legitimate loss with a lowball offer
- Misrepresenting policy language or coverage limits
- Refusing to defend an insured business against a covered lawsuit
Not every claim denial rises to the level of bad faith. Insurers can lawfully deny claims that are not covered, and honest disputes about coverage happen every day. The question is whether the insurer’s conduct was unreasonable given what it knew, or should have known, when it made the decision.
Michigan Handles Bad Faith Differently From Other States
First-party insureds in Michigan cannot sue for bad faith as a stand-alone tort because the Michigan Supreme Court held in Kewin v. Massachusetts Mutual that damages are generally limited to what the contract allows, plus statutory penalty interest.
Key features of the Michigan approach include:
- Punitive and mental distress damages are unavailable in first-party bad faith cases.
- Individual policyholders cannot sue under the Michigan Consumer Protection Act for regulated claim-handling. However, this past ruling may be subject to challenge under the July 31, 2026, Michigan Supreme Court case of Attorney General v. Eli Lilly and Company.
- Under MCL 500.2006, insurers that fail to pay a valid claim within 60 days of proof of loss owe 12 percent penalty interest.
- The No-Fault Act allows attorney fees when an auto insurer unreasonably refuses or delays personal injury protection benefits.
For policyholders in Wayne, Oakland, Macomb, or Kent County facing a delayed insurance claim, Michigan provides several potential remedies. Which options apply depends largely on whether the dispute involves first-party coverage under your own policy or third-party liability coverage, as well as any deadlines governing the claim.
Act on Your Michigan Bad Faith Insurance Claim
When an insurer fails to honor the coverage promised in a policy, unpaid claims can quickly create financial pressure while legal deadlines continue to run. August Law, PLLC, represents Michigan businesses and policyholders, drawing on more than 30 years of commercial litigation experience and millions recovered for clients. We may also handle qualifying business matters on a contingency fee basis.
Call our office or contact us online to speak with our commercial litigation lawyers, who will walk you through the policy, the timeline, and the potential remedies available under Michigan law.