In Michigan, "Bad Faith" conduct is only relevant to a third-party tort claimant's claim to recover penalty interest under Michigan Compiled Laws § 500.2006(4). This is part of the holding in the case of Tyler v. Pacific Indemnity Co., 2013 WL 183931 *4 (E.D. Mich. January 17, 2013).
In a first-party case like Tyler, on the other hand, the statutory claim for penalty interest is made by the Insured, who or which only needs to prove that the Insurance Company "failed to pay benefits within sixty days of submitting satisfactory proof of loss to be awarded penalty interest. [Citation omitted.] Bad faith is thus irrelevant to Plaintiff's MUTPA [Michigan Uniform Trade Practices Act] claim." Tyler v. Pacific Indemnity Co., 2013 WL 183931 *4 (E.D. Mich. January 17, 2013).
As noted, the claim at issue is one for statutory penalty interest. In particular in what would be so-called "Third-Party Bad Faith" cases at common law in Michigan, the cause of action for breach of an insurance contract is simply breach of contract in the ordinary case, and presumably the same is true in First-Party Bad Faith cases under Michigan common law as well. See Tyler v. Pacific Indemnity Co., 2013 WL 183931 *4 (E.D. Mich. January 17, 2013)("Moreover, to the extent Michigan courts recognize an implied contractual duty to conduct a good faith investigation on an insurance contract, breaching that duty only enables the recovery of penalty interest, which is precisely what Plaintiff is already capable of recovering under the MUPTA." Tyler v. Pacific Indemnity Co., 2013 WL 183931 *4 (E.D. Mich. January 17, 2013). [Emphasis added.] See also Dennis J. Wall, Litigation and Prevention of Insurer Bad Faith § 3:23, "Legal Bases of Liability in Settlement--Contract" (3d Edition West 2012, 2013 Supplement in process).
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