Insurance Terms
Bad faith, declarations, IME, subrogation, UM/UIM, and the contract language behind every claim.
Insurance Terms Definitions
Bad faith, declarations, IME, subrogation, UM/UIM, and the contract language behind every claim.
- B Bad Faith (First-Party) Link
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In Michigan, a first-party bad faith claim arises when an insurer unreasonably delays or denies payment of benefits owed under the insured's own policy. Michigan does not recognize an independent tort cause of action for first-party bad faith, but unreasonable delays can trigger penalty interest under MCL 500.3142 (12% per year for overdue No-Fault benefits) and attorney fees under MCL 500.3148.
See also - B Bad Faith (Third-Party) Link
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A claim against a liability insurer for unreasonably failing to settle a claim within its policy limits when there was a reasonable opportunity to do so, exposing the insured to excess judgment liability. Michigan does recognize tort claims for third-party bad faith by insureds whose insurers failed to settle within limits.
- B Bodily Injury Liability (BI) Link
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Auto insurance coverage that pays for injuries to other people caused by the policyholder in an accident. Michigan requires minimum BI limits of $250,000 per person/$500,000 per accident. Inadequate BI limits on the at-fault driver's policy are a key reason injured victims need their own Underinsured Motorist (UIM) coverage.
- C Claims Adjuster Link
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An insurance company employee (or independent contractor) who evaluates insurance claims and makes decisions about coverage and payment. Adjusters work for the insurer, not the claimant. Their goal is to resolve claims at the lowest possible cost. Learn the tactics adjusters use to minimize your claim. An experienced attorney can counter an adjuster's tactics and advocate for full, fair compensation.
- C Coverage Dispute Link
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A disagreement between an insured and their insurance company over whether a particular claim is covered under the policy. Coverage disputes require careful analysis of the policy language and Michigan insurance law.
- D Declaratory Judgment Action Link
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A lawsuit seeking a court ruling on the rights and obligations of parties under a contract or statute, without necessarily seeking monetary damages. In insurance law, declaratory judgment actions are used to resolve coverage disputes - for example, whether a particular accident is covered under a policy.
- D Deductible Link
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The amount the insured must pay out of pocket before insurance coverage kicks in. For example, a $1,000 deductible on collision coverage means the insurer only pays for vehicle damage exceeding $1,000. Deductibles do not typically apply to liability claims made by injured third parties.
- E Excess Judgment Link
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A court judgment against an insured defendant that exceeds the limits of their liability insurance policy. When an insurer fails to settle a claim within policy limits when it had the opportunity to do so, it may be liable for the entire excess judgment under Michigan's third-party bad faith doctrine.
- I Insurance Policy Link
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A contract between an insured and an insurer specifying the coverage provided, the premium charged, the limits of coverage, and the exclusions that apply. Policy language governs the rights and obligations of both parties. Courts interpret ambiguous policy language in favor of the insured.
- L Letter of Protection (LOP) Link
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A document signed by an attorney and sent to a medical provider, promising to pay the provider's bills from the proceeds of any settlement or judgment in the client's personal injury case. LOPs allow injured persons without insurance to receive necessary medical treatment. They create a lien against the client's recovery.
See also - L Liability Coverage Link
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Insurance that pays for injuries or property damage the policyholder causes to others. All Michigan drivers are required to carry residual bodily injury liability coverage and property damage liability coverage.
- P Policy Limits Link
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The maximum amount an insurance company is required to pay under a given policy for a covered claim. Policy limits are a critical factor in evaluating any injury claim. When the at-fault party's limits are low, the injured person's own UM/UIM coverage may be the primary source of full compensation.
- R Reservation of Rights Link
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A notice from an insurance company to its insured that it is investigating a claim but reserving the right to deny coverage later based on a specific policy provision or exclusion. A reservation of rights letter signals a potential coverage dispute and is often a precursor to a denial.
- S Structured Settlement Link
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A settlement in which the plaintiff receives compensation in a series of periodic payments over time rather than in a single lump sum. Structured settlements may offer tax advantages and can provide long-term financial security, but they can also limit flexibility. Structured settlement terms must be carefully negotiated with advice of counsel.
- U Underinsured Motorist Coverage (UIM) Link
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Optional (but strongly recommended) Michigan auto insurance coverage that pays for injuries the policyholder sustains when the at-fault driver's liability insurance is insufficient. Read our full guide on Michigan UM/UIM claims to understand how this coverage can close the gap. For example, if the at-fault driver has $50,000 in liability coverage but the injured person suffers $200,000 in damages, UIM coverage pays the gap (subject to the UIM policy limits).
See also - U Uninsured Motorist Coverage (UM) Link
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Optional Michigan auto insurance coverage that pays for injuries sustained by the policyholder when struck by a driver who has no insurance at all. Michigan has a high rate of uninsured drivers, making UM coverage essential protection. Learn how Michigan UM claims work.
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This glossary is provided for general informational purposes only and does not constitute legal advice. Reading this glossary does not create an attorney-client relationship. Laws change and Michigan statutes may be amended after the date this glossary was last updated. Always consult a licensed Michigan attorney for legal advice specific to your situation.