State RegulationsMI specificDifficulty 2/5
A Michigan insurer is found to have violated the timely claims-payment provisions applicable to its life and health claims. What civil fine may be imposed for this violation?
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Answer & full 3-part explanation (select an option above, or peek)
Why B is correct
M.C.L. 500.2006(13) attaches a civil fine of $1,000 per violation of the claims-payment section, capped at $10,000 in the aggregate. This penalty scheme is specific to the claims provisions, so it is distinct from the fines that apply to producers under Chapter 12 or to cease-and-desist violations under the trade-practices article. Michigan couples the 12% interest rule with these fines to make slow claim payment costly on both fronts.
Why the other options are wrong
- A) The $500-per-violation and $25,000 aggregate figures are the producer-level civil fines under M.C.L. 500.1244(1)(a), not the claims-section fine.
- C) $20,000 per violation is the penalty for violating a trade-practices cease-and-desist order under M.C.L. 500.2040(1)(a), and it is not the claims fine.
- D) $10,000 per violation with a $50,000 cap applies to knowingly violating a Chapter 12 cease-and-desist order under M.C.L. 500.1244(3), not to the claims provisions.
Memory hook
Claims late? One grand a pop, ten grand the cap.