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Los Angeles Insurance Company Vows to Fight State Regulators In Court; Claims ‘One Sided War’ Being Waged

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L.A. Insurance Company

USA Underwriters, an affiliate of the L.A. Insurance retail chain company out of Los Angeles, specializes in personal injury protection auto insurance policies. Based in Royal Oak, Michigan, USA Underwriters has asked a state judge to allow the company to continue selling policies [via L.A. Insurance] that strictly cover vehicle damage. The move comes after Michigan state regulators sought to outlaw the practice via new legislation. 

The company sued Michigan’s Department of Insurance and Financial Services (DIFS) recently, seeking an injunction that would allow policies that only cover the comprehensive and collision portion of no-fault plans to continue to be written and issued. The suit is a reaction to a September 11th decision, where the State Insurance Department ordered USA Underwriters to stop selling collision-only insurance plans by December 9, 2019.  The State claims the specific policies violate a section of a new no-fault auto insurance reform law that took effect June 11. The new law stipulates that individuals are no longer required by law to purchase unlimited no-fault benefits. Additionally, drivers with Medicare may “elect to not maintain coverage” for no-fault PIP (personal injury protection) medical benefits. 

USA Underwriters maintains that the company will likely be forced out of business if the new reform law is allowed to stand. David Fink, an attorney representing USA Underwriters, stated via court documents:

“The new law will have a devastating impact…the company’s ability to stay in business will be in jeopardy,” adding, “The economic impact will be incalculable and is likely to lead to the loss of 50-70 jobs.” 

Since the law was passed in June, a battle over regulation has unfolded among the state insurance department, L.A. Insurance, and the company’s affiliates including USA Underwriters. Attorneys for USA Underwriters argue in the lawsuit that the DIFS has engaged in a “one sided war” against the company and L.A. Insurance. As of 2012, DIFS has allowed USA Underwriters to issue comprehensive and collision policies that L.A. Insurance pairs with a separate insurance policy for personal injury protection coverage.

The company claims such policies are necessary because they provide a specific customer base — specifically low income or economically disadvantaged individuals — with the opportunity to obtain insurance that would otherwise be unavailable. “Separating the collision and comprehensive coverage from the mandatory coverages [sic]… allows [USA Underwriters] to charge an amount that is affordable to an economically disadvantaged customer base, which would otherwise be priced out of the insurance market,” Fink wrote in a November 6th court filing. 

The lawsuit formally requests that Michigan Court of Claims Judge, Cynthia Diane Stephens, overturn the insurance department’s denial of USA Underwriters’ appeal to continue selling comprehensive and collision-only policies “until, at the earliest, July 2020.” State insurance regulators are accused of engaging in “a long-standing practice and pattern of unfairly singling out [USA Underwriters] for adverse treatment” via the lawsuit. Additionally, the suit alleges that the DIFS has called USA Underwriters’ customers and informed them, falsely, that they have been overcharged for policies. 

A DIFS spokeswoman, Andrea Miller, stated the Department does not comment on pending litigation. Crain’s reported, however, that Miller previously stated that split-policy plans “being sold simultaneously can raise concerns,” and “can be confusing to consumers who may not fully understand the details of the products being purchased.” 

As the December 9th deadline approaches, the question of how Judge Stephens will decide lingers heavily for USA Underwriters. PINews will provide updates as they are available.