Case Title: Estate of Nickola v MIC General Ins. Co. (Opinion on Application)

Citation: 

Docket Number: 152535

State: michigan

Court: Michigan Supreme Court

Date: 2017-05-12T00:00:00Z

Document:
NICKOLA v MIC GENERAL INSURANCE COMPANY 
 
Docket No. 152535.  Argued on application for leave to appeal January 10, 2017.  
Decided May 12, 2017. 
 
 
George and Thelma Nickola brought a declaratory action in the Genesee Circuit Court 
against their no-fault insurer, MIC General Insurance Company (MIC), in April 2005, asking the 
court to compel arbitration in connection with the Nickolas’ efforts to obtain underinsured-
motorist (UIM) benefits from MIC.  The Nickolas had been injured in a car accident caused by 
Roy Smith, whose no-fault insurance policy provided the minimum liability coverage allowed by 
law: $20,000 per person, up to $40,000 per accident.  Smith’s insurer settled with the Nickolas 
and paid them the limits of Smith’s policy.  The court, Richard B. Yuille, J., ordered the case to 
arbitration while retaining jurisdiction.  The Nickolas’ insurance policy provided that each side 
would select an arbitrator, and those two arbitrators would then select a third.  If a third arbitrator 
could not be selected by agreement, then either side could ask the court to select the third 
arbitrator.  The two arbitrators selected by the parties could not agree on a third arbitrator, and 
neither side asked the court to appoint a third arbitrator until 2012.  In 2013 the case proceeded 
to arbitration, and the arbitration panel awarded $80,000 for George’s injuries and $33,000 for 
Thelma’s injuries.  The award specified that the amounts included any interest arising as an 
element of damage from the date of injury to the date of suit but did not include any other 
interest, fees, or costs that the court could award.  The Nickolas’ son, Joseph G. Nickola, who 
was made personal representative of the Nickolas’ estates and substituted as plaintiff after the 
Nickolas died, moved for entry of judgment on the arbitration award.  Plaintiff also asked the 
court to assess 12% penalty interest under the Uniform Trade Practices Act (UTPA), MCL 
500.2001 et seq.  The court affirmed the arbitration awards but declined to award penalty interest 
under the UTPA, ruling that penalty interest did not apply because the UIM claim was 
reasonably in dispute for purposes of MCL 500.2006(4).  Plaintiff appealed.  The Court of 
Appeals, GADOLA, P.J., and JANSEN and BECKERING, JJ., affirmed the trial court, holding that the 
“reasonably in dispute” language applied to plaintiff’s UIM claim because a UIM claim 
essentially places the insured in the shoes of a third-party claimant.  312 Mich App 374 (2015).  
Plaintiff applied for leave to appeal in the Supreme Court, which ordered and heard oral 
argument on whether to grant the application or take other peremptory action.  499 Mich 935 
(2016).   
 
 
In a unanimous opinion by Justice ZAHRA, in lieu of granting leave to appeal, the 
Supreme Court held: 
 
Michigan Supreme Court 
Lansing, Michigan 
Syllabus 
 
Chief Justice: 
Stephen J. Markman 
 
Justices: 
Brian K. Zahra 
Bridget M. McCormack 
David F. Viviano 
Richard H. Bernstein 
Joan L. Larsen 
Kurtis T. Wilder 
This syllabus constitutes no part of the opinion of the Court but has been  
prepared by the Reporter of Decisions for the convenience of the reader. 
Reporter of Decisions: 
Kathryn L. Loomis 
 
The second sentence of MCL 500.2006(4), which provides that third-party tort claimants 
are not entitled to penalty interest under the UTPA if their claim was reasonably in dispute, does 
not apply to claims made by an insured.  Auto-Owners Ins Co v Ferwerda Enterprises, Inc (On 
Remand), 287 Mich App 248 (2010), was overruled to the extent it was inconsistent with this 
opinion. 
 
 
1.  MCL 500.2006(1) requires insurance claims to be paid on a timely basis and provides 
that, if they are not, penalty interest will be imposed under the UTPA.  As it relates to the 
imposition of penalty interest, MCL 500.2006(1) refers to MCL 500.2006(4), which, at the time 
of the trial court’s decision, provided that if benefits are not paid on a timely basis the benefits 
paid shall bear simple interest from a date 60 days after satisfactory proof of loss was received 
by the insurer at the rate of 12% per annum if the claimant is the insured or an individual or 
entity directly entitled to benefits under the insured’s contract of insurance.  MCL 500.2006(4) 
further provided that if the claimant is a third-party tort claimant, then the benefits paid shall bear 
interest from a date 60 days after satisfactory proof of loss was received by the insurer at the rate 
of 12% per annum if the liability of the insurer for the claim is not reasonably in dispute, the 
insurer has refused payment in bad faith, and the bad faith was determined by a court of law.  
Subsection (4) consists of two sentences, which divide insurance claimants into two distinct 
classes.  The first sentence creates a class of claimants who are insureds or an individual or entity 
directly entitled to benefits under an insured’s insurance contract.  The second sentence creates a 
class of third-party tort claimants.  The first sentence contains no “reasonably in dispute” 
exemption from the imposition of penalty interest for the untimely payment of benefits due under 
an insurance contract.  The second sentence, which addresses situations in which the claimant is 
a third-party tort claimant, expressly states that third-party tort claimants are not entitled to 
penalty interest under the UTPA if their claim is reasonably in dispute.  Because the “reasonably 
in dispute” limitation is contained only in the second sentence of MCL 500.2006(4), this 
limitation applies only to third-party tort claimants, not to insureds. 
 
 
2.  The Nickolas were directly entitled to benefits and are therefore within the class of 
claimants identified in the first sentence of MCL 500.2006(4).  Defendant’s argument to the 
contrary presumes that the phrase “directly entitled to benefits” modifies “insured,” whereas a 
more natural reading suggests that the phrase modifies “individual or entity.”  Furthermore, even 
if the phrase modifies “insured,” the Nickolas would still be directly entitled to benefits.  While 
defendant relies on definitions of “directly” that indicate that something must “happen quickly or 
without delay,” “directly” is alternatively defined as “in a direct line, way, or manner; straight,” 
and “direct” is similarly defined as “proceeding in a straight line or by the shortest course; 
straight.”  In the present context, the latter meaning is the most appropriate one and, therefore, 
the Nickolas were directly entitled to benefits in the sense that they were entitled to benefits in a 
straight line from the insurance company.  The Nickolas were not third-party tort claimants; 
rather, they were parties to the insurance contract, and they chose to pay higher insurance 
premiums in order to obtain protection from underinsured motorists.  Therefore, the first 
sentence of MCL 500.2006(4) is applicable, and the “reasonably in dispute” language contained 
in the second sentence does not apply to plaintiff’s claim for UIM benefits.  This conclusion is 
consistent with Yaldo v North Pointe Ins Co, 457 Mich 341 (1998), and Griswold Props, LLC v 
Lexington Ins Co, 276 Mich App 551 (2007). 
 
3.  The Court of Appeals in this case erroneously focused on the nature of a UIM claim.  
The panel rationalized that while plaintiff is seeking UIM benefits provided under the Nickolas’ 
insurance policy, he is doing more than making a “simple first-party claim.”  Yet the plain 
language of MCL 500.2006(4) distinguishes only the identity of the claimant, not the nature of 
the claim.  The proofs required for a UIM claim do not transform the insured into a third-party 
tort claimant when seeking to enforce the insured’s own insurance contract.  The insured by 
definition is a party to the insurance contract, not a third party.  The fact that the Nickolas’ UIM 
coverage requires a particular set of proofs in order to recover UIM benefits does not transform 
plaintiff’s claim for benefits under the insurance policy into a tort claim.  Nothing in MCL 
500.2006(4) permits an insurer to avoid payment of penalty interest when the insured has not 
been paid benefits within 60 days of submitting to the insurer satisfactory proof of loss. 
 
 
Court of Appeals’ decision denying plaintiff penalty interest under the UTPA reversed; 
case remanded for further proceedings. 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
©2017 State of Michigan 
FILED  May 12, 2017 
 
 
 
S T A T E  O F  M I C H I G A N 
 
SUPREME COURT 
 
 
JOSEPH G. NICKOLA, Personal 
Representative of the Estates of GEORGE 
and THELMA NICKOLA, 
 
 
Plaintiff-Appellant, 
 
 
v 
No. 152535 
 
MIC GENERAL INSURANCE 
COMPANY, d/b/a GMAC INSURANCE, 
 
 
 
Defendant-Appellee. 
 
 
 
BEFORE THE ENTIRE BENCH  
 
ZAHRA, J.  
The issue presented in this case is whether an insurer’s untimely payment of 
underinsured motorist (UIM) benefits is subject to penalty interest under the Uniform 
Trade Practices Act (UTPA).1  We hold that an insured making a claim under his or her 
 
                                              
1 MCL 500.2001 et seq.  
 
Michigan Supreme Court 
Lansing, Michigan 
OPINION 
 
Chief Justice: 
Stephen J. Markman 
 
 
Justices: 
Brian K. Zahra 
Bridget M. McCormack 
David F. Viviano 
Richard H. Bernstein 
Joan L. Larsen 
Kurtis T. Wilder 
 
 
 
 
 
2 
own insurance policy for UIM benefits cannot be considered a “third party tort claimant” 
under MCL 500.2006(4), a provision of the UTPA.  This holding is required by the plain 
language of MCL 500.2006(4) and is entirely consistent with this Court’s opinion in 
Yaldo v North Pointe Ins Co2 and the Court of Appeals’ opinion in Griswold Props, LLC 
v Lexington Ins Co.3  We overrule the Court of Appeals’ opinion in Auto-Owners Ins Co 
v Ferwerda Enterprises, Inc (On Remand)4 to the extent it is inconsistent with this 
opinion.  We reverse the opinion of the Court of Appeals denying plaintiff penalty 
interest under the UTPA and remand to the trial court for further proceedings consistent 
with this opinion.5 
I.  FACTS AND PROCEEDINGS 
On April 13, 2004, George Nickola and his wife, Thelma, were injured in a car 
accident.  The driver of the other car who caused the accident, Roy Smith, was insured by 
Progressive Insurance Company.  Smith’s automobile no-fault insurance policy provided 
the minimum liability coverage allowed by law:  $20,000 per person, up to $40,000 per 
accident.6   
 
                                              
2 Yaldo v North Pointe Ins Co, 457 Mich 341; 578 NW2d 274 (1998). 
3 Griswold Props, LLC v Lexington Ins Co, 276 Mich App 551; 741 NW2d 549 (2007).   
4 Auto-Owners Ins Co v Ferwerda Enterprises, Inc (On Remand), 287 Mich App 248; 
797 NW2d 168 (2010), vacated in part 488 Mich 917 (2010). 
5 We deny plaintiff’s application for leave to appeal the trial court’s decision not to 
impose sanctions on defendant. 
6 See MCL 257.520(b)(2).  
 
 
 
3 
On May 7, 2004, the Nickolas’ son, Joseph G. Nickola, then acting as their 
attorney,7 penned a letter to the Nickolas’ insurer, defendant MIC General Insurance 
Company, doing business as GMAC Insurance.  The letter explained that Smith’s 
“liability insurance policy is insufficient to cover the . . . injuries sustained by both [the 
Nickolas].”  The letter also advised that the Nickolas “are claiming [UIM] benefits under 
the provisions of their automobile policy . . . .”  The Nickolas’ policy provided for UIM 
limits of $100,000 per person, up to $300,000 per accident, and they sought payment of 
UIM benefits in the amount of $160,000; $80,000 for each insured.8   
On February 8, 2005, the Nickolas again demanded payment of $160,000, the full 
UIM limits available to George and Thelma.  On February 17, 2005, an adjuster for 
defendant denied the claim, asserting that the Nickolas could not establish a threshold 
injury for noneconomic tort recovery.  Defendant’s adjuster explained: 
We believe your client’s [sic] were adequately compensated for their 
pre-existing injuries, which were aggravated in the accident.  Your client’s 
[sic] appear to be able to lead their normal life as described in the Kreiner 
[v Fischer][9] decision.  If however, you have some additional information 
 
                                              
7 George and Thelma Nickola were the original plaintiffs in this case.  During the 
pendency of this case, the couple passed away, requiring that Joseph Nickola, who was 
named personal representative of both estates, be substituted as plaintiff.  For ease of 
reference, George and Thelma are collectively referred to as “the Nickolas.” 
8 Progressive extended an offer to the Nickolas to settle for Smith’s policy limits 
($40,000 total—$20,000 each).  Defendant provided the Nickolas written permission to 
accept the offer.  The demand of $160,000 ($80,000 each for George and Thelma) was 
arrived at by taking the UIM policy limits of $200,000 ($100,000 for each insured) and 
deducting $40,000, the amount paid to the Nickolas by Progressive under the tortfeasor’s 
no-fault insurance policy. 
9 Kreiner v Fischer, 471 Mich 109; 683 NW2d 611 (2004), overruled by McCormick v 
 
 
 
 
4 
that you want me to review, please forward the medical records and I will 
be happy to review the matter again.   
On February 22, 2005, the Nickolas demanded arbitration of the UIM claim.  
Their policy provided that if defendant and the insured did not agree about whether the 
insured was entitled to recover damages under the UIM endorsement, or did not agree 
about the amount of damages, then “[e]ither party may make a written demand for 
arbitration.”10  Despite the standardized arbitration language, defendant advised the 
Nickolas that the policy required both parties to agree to arbitration, and defendant 
refused to arbitrate the claim.   
Accordingly, on April 8, 2005, the Nickolas filed suit, asking the trial court to 
refer the matter to arbitration.  The court ordered the case to arbitration while retaining 
jurisdiction.  The UIM endorsement provided that each side would select an arbitrator, 
and those two arbitrators would then select a third.  If a third arbitrator could not be 
selected by agreement, then either side could ask the court to select the third arbitrator.  
The two arbitrators selected by the parties could not agree on a third arbitrator.  
Remarkably, for the next six years this case remained stagnant with neither side asking 
the court to appoint a third arbitrator.11   
                                              
Carrier, 487 Mich 180, 214; 795 NW2d 517 (2010). 
10 Emphasis added.  
11 It was during this period of inactivity that George and Thelma died.  Neither death was 
caused by the injuries suffered in the car accident. 
 
 
 
 
5 
Finally, in 2012, plaintiff asked the trial court to appoint a neutral arbitrator.  The 
court agreed and the case proceeded to arbitration, where the arbitration panel awarded 
$80,000 for George’s injuries and $33,000 for Thelma’s injuries.  The award specified 
that the amounts were “inclusive of interest, if any, as an element of damage from the 
date of injury to the date of suit, but not inclusive of other interest, fees or costs that may 
otherwise be allowable by the Court.” 
Plaintiff then filed a motion in the trial court for entry of judgment on the 
arbitration award.  Plaintiff also asked the court to assess 12% penalty interest under the 
UTPA.  The court affirmed the arbitration awards but declined to award penalty interest 
under the UTPA, finding that penalty interest did not apply because the UIM claim was 
“reasonably in dispute” for purposes of MCL 500.2006(4).  Plaintiff appealed. 
The Court of Appeals affirmed the trial court, holding that the “reasonably in 
dispute” language applied to plaintiff’s UIM claim because a UIM claim “essentially” 
places the insured in the shoes of a third-party claimant.12  Plaintiff sought leave to 
appeal in this Court.  We directed the Clerk of this Court to schedule oral argument on 
whether to grant the application or take other action.13  
 
                                              
12 Nickola v MIC Gen Ins Co, 312 Mich App 374, 387; 878 NW2d 480 (2015).  The 
panel further determined that plaintiff’s UIM claim was reasonably in dispute.  Id. at 388-
389.   
13 Nickola v MIC Gen Ins Co, 499 Mich 935 (2016).  
 
 
 
6 
II.  STANDARD OF REVIEW 
Matters of statutory and contractual interpretation present questions of law, which 
this Court reviews de novo.14  
III.  ANALYSIS 
A.  PENALTY INTEREST UNDER MCL 500.2006(4) 
UIM policies are not mandated by statute.  Individuals seeking UIM coverage 
contract for it freely, voluntarily, and at arm’s length.15  When the UIM insured is injured 
by a tortfeasor motorist whose policy is insufficient to cover all of the insured’s damages, 
the insured makes a claim for the shortfall against his or her UIM insurer.16  
Notwithstanding the fact that the Nickolas’ UIM coverage was governed by contract, this 
case presents a statutory claim for penalty interest under the UTPA, which applies to all 
insurers doing business in Michigan.  The UTPA provides for 12% penalty interest on 
certain claims not timely paid by an insurer.17   
We begin all matters of statutory interpretation with an examination of the 
language of the statute.18  “The primary rule of statutory construction is that, where the 
 
                                              
14 Cruz v State Farm Mut Auto Ins Co, 466 Mich 588, 594; 648 NW2d 591 (2002); 
Miller-Davis Co v Ahrens Constr, Inc, 495 Mich 161, 172; 848 NW2d 95 (2014). 
15 McDonald v Farm Bureau Ins Co, 480 Mich 191, 194; 747 NW2d 811 (2008).  
16 Id.  The insured generally must first determine how much of the damages will be 
covered by the tortfeasor and only then seek further recovery under his or her UIM 
coverage from the insurer. 
17 See MCL 500.2006(4); Yaldo, 457 Mich at 348. 
18 Lash v Traverse City, 479 Mich 180, 187; 735 NW2d 628 (2007). 
 
 
 
7 
statutory language is clear and unambiguous, the statute must be applied as written.”19  
“A necessary corollary of these principles is that a court may read nothing into an 
unambiguous statute that is not within the manifest intent of the Legislature as derived 
from the words of the statute itself.”20 
In this matter, the relevant statutory provisions of the UTPA are Subsections (1) 
and (4) of MCL 500.2006.  Subsection (1) requires insurance claims to be paid on a 
timely basis, or penalty interest will be imposed under the UTPA.21  As it relates to the 
imposition of penalty interest, Subsection (1) directs us to Subsection (4), which, at the 
time of the trial court’s decision, provided: 
If benefits are not paid on a timely basis the benefits paid shall bear 
simple interest from a date 60 days after satisfactory proof of loss was 
received by the insurer at the rate of 12% per annum, if the claimant is the 
insured or an individual or entity directly entitled to benefits under the 
insured’s contract of insurance.  If the claimant is a third party tort 
claimant, then the benefits paid shall bear interest from a date 60 days after 
 
                                              
19 Cruz, 466 Mich at 594. 
20 Roberts v Mecosta Co Gen Hosp, 466 Mich 57, 63; 642 NW2d 663 (2002), citing 
Omne Fin, Inc v Shacks, Inc, 460 Mich 305, 311; 596 NW2d 591 (1999).  
21 MCL 500.2006(1) specifically provides: 
A person must pay on a timely basis to its insured, an individual or 
entity directly entitled to benefits under its insured’s contract of insurance, 
or a third party tort claimant the benefits provided under the terms of its 
policy, or, in the alternative, the person must pay to its insured, an 
individual or entity directly entitled to benefits under its insured’s contract 
of insurance, or a third party tort claimant 12% interest, as provided in 
subsection (4), on claims not paid on a timely basis.  Failure to pay claims 
on a timely basis or to pay interest on claims as provided in subsection (4) 
is an unfair trade practice unless the claim is reasonably in dispute. 
 
 
 
8 
satisfactory proof of loss was received by the insurer at the rate of 12% per 
annum if the liability of the insurer for the claim is not reasonably in 
dispute, the insurer has refused payment in bad faith and the bad faith was 
determined by a court of law.  [Emphasis added.][22] 
Subsection (4) consists of two sentences, which together create a straightforward 
scheme.  These sentences divide insurance claimants into two distinct classes.  The first 
sentence creates a class of claimants who are insureds or an individual or entity directly 
entitled to benefits under an insured’s insurance contract.  The second sentence creates a 
class of third-party tort claimants.   
The first sentence contains no “reasonably in dispute” exemption from the 
imposition of penalty interest for the untimely payment of benefits due under an 
insurance contract.  The Legislature cast a broad net when defining circumstances under 
which insurers would be subject to penalty interest.  All claims made by an insured or an 
individual or entity directly entitled to benefits under a policy of insurance must be timely 
paid under the policy or the insurer risks the imposition of penalty interest.  The UTPA 
encourages prompt payment of contractual insurance benefits.  
The second sentence addresses situations in which “the claimant is a third party 
tort claimant.”23  In stark contrast to the first sentence, the second sentence of Subsection 
(4) expressly states that third-party tort claimants are not entitled to penalty interest under 
the UTPA if their claim is “reasonably in dispute.”24  The omission of a provision in one 
 
                                              
22 This provision has since been amended by 2016 PA 276; however, as we will explain 
further, the changes do not affect our analysis. 
23 MCL 500.2006(4).   
24 Id. 
 
 
 
9 
part of a statute that is included in another part of the same statute should be construed as 
intentional.25  “We do not read requirements into a statute where none appear in the plain 
language and the statute is unambiguous.  ‘It is not within the province of this Court to 
read therein a mandate that the [L]egislature has not seen fit to incorporate.’ ”26  
Therefore, because the “reasonably in dispute” limitation is contained only in the second 
sentence of MCL 500.2006(4), this limitation applies only to third-party tort claimants, 
not claims made by an insured.27 
We reject defendant’s argument that the Nickolas were not “directly entitled to 
benefits” and therefore are not within the class of claimants identified in the first sentence 
of MCL 500.2006(4).  This argument presumes that the phrase “directly entitled to 
benefits” modifies “insured,” whereas a more natural reading suggests that the phrase 
 
                                              
25 See Farrington v Total Petroleum, Inc, 442 Mich 201, 210; 501 NW2d 76 (1993); see 
also Scalia & Garner, Reading Law: The Interpretation of Legal Texts (St Paul: 
Thomson/West, 2012), pp 57-58 (“[T]he limitations of a text—what a text chooses not to 
do—are as much a part of its ‘purpose’ as its affirmative dispositions.  These exceptions 
or limitations must be respected, and the only way to accord them their due is to reject the 
replacement or supplementation of text with purpose.”).  
26 People v Feeley, 499 Mich 429, 439; 885 NW2d 223 (2016), quoting Jones v Grand 
Ledge Pub Sch, 349 Mich 1, 11; 84 NW2d 327 (1957) (citation omitted).  
27 As a result of 2016 PA 276, the first sentence of MCL 500.2006(4) now refers to “the 
insured or a person directly entitled to benefits under the insured’s insurance contract.”  
(Emphasis added.)  The Legislature’s replacement of “individual or entity” with “person” 
does not alter this Court’s analysis.  Most importantly, the first sentence of amended 
Subsection (4) continues to omit the “reasonably in dispute” language that applies only to 
the insured or a person directly entitled to benefits, whereas the second sentence of 
amended Subsection (4) retains the “reasonably in dispute” language that applies only to 
a third-party tort claimant.  
 
 
 
10 
modifies “individual or entity.”  Furthermore, even assuming the phrase modifies 
“insured,” we believe the Nickolas were “directly entitled to benefits.”  While defendant 
relies on definitions of “directly” that indicate that something must “happen quickly or 
without delay,” “directly” is alternatively defined as “in a direct line, way, or manner; 
straight,” Random House Webster’s College Dictionary (2001), def 1, and “direct” is 
similarly defined as “proceeding in a straight line or by the shortest course; straight,” id., 
def 14.  In the present context, we believe the latter meaning is the most appropriate one 
and thus that the Nickolas were “directly” entitled to benefits in the sense that they were 
entitled to benefits in a “straight line” from the insurance company.   
In this case, the claimants, George and Thelma Nickola, were parties to the 
insurance contract.  The Nickolas chose to pay higher insurance premiums in order to 
obtain protection from underinsured motorists.  The Nickolas were insureds, not third-
party tort claimants.  Therefore, the first sentence of MCL 500.2006(4) is applicable, and 
the “reasonably in dispute” language contained in the second sentence does not apply to 
plaintiff’s claim for UIM benefits.28 
 
                                              
28 Although neither defendant nor the Court of Appeals raised the issue, we observe that 
the closing sentence of MCL 500.2006(1) refers to whether a claim is “reasonably in 
dispute.”  But this reference in MCL 500.2006(1) does not affect this Court’s analysis.  
No reasonable interpretation of Subsection (1) would require application of the 
“reasonably in dispute” language to all categories of claimants identified under 
Subsection (4)—insureds as well as third-party tort claimants.  Had the Legislature 
intended this result, there would have been no need to separate the two types of claims in 
Subsection (4), thus rendering a portion of Subsection (4) superfluous.  Further, we are 
guided by the fact that Subsection (1) specifically refers to claims paid “as provided in 
subsection (4),” which marks a clear distinction between claims made by an insured and 
claims made by third-party tort claimants.   
 
 
 
11 
The Court of Appeals in this case erroneously focused on the nature of a UIM 
claim.  The panel rationalized that while plaintiff is seeking UIM benefits provided under 
the Nickolas’ insurance policy, he is doing more than making a “simple first-party 
claim.”29  The panel explained that “[i]n order for plaintiff to succeed on his UIM claim, 
he essentially has to allege a third-party tort claim” because UIM insurance permits an 
injured motorist to obtain coverage from his or her own insurer to the extent that a third-
party claim would be permitted against the at-fault driver.30  Yet the plain language of 
MCL 500.2006(4) distinguishes only the identity of the claimant, not the nature of the 
claim.  The proofs required for a UIM claim do not transform “the insured” into a “third-
party tort claimant” when seeking to enforce the insured’s own insurance contract.  The 
insured by definition is a party to the insurance contract, not a third party.31  Simply 
because the Nickolas’ UIM coverage requires a particular set of proofs in order to recover 
UIM benefits does not transform plaintiff’s claim for benefits under the insurance policy 
into a tort claim.32  In sum, the Nickolas were insureds who made a claim for benefits 
under their policy of insurance.  Nothing in MCL 500.2006(4) permits an insurer to avoid 
 
                                              
29 Nickola, 312 Mich App at 387. 
30 Id. 
31 See Black’s Law Dictionary (10th ed) (defining “insured” as “[s]omeone who is 
covered or protected by an insurance policy”). 
32 A fundamental principle of insurance law is that insurance policies are contracts.  See, 
e.g., Auto-Owners Ins Co v Churchman, 440 Mich 560, 566; 489 NW2d 431 (1992); 
Nash v New York Life Ins Co, 272 Mich 680, 682; 262 NW 441 (1935).   
 
 
 
12 
payment of penalty interest when the insured has not been paid benefits within 60 days of 
submitting to the insurer satisfactory proof of loss.33  
B.  CASELAW APPLYING MCL 500.2006(4) 
The Court of Appeals erroneously distinguished the present case from binding 
caselaw interpreting the UTPA’s penalty-interest provision under MCL 500.2006(4).  
This Court, in Yaldo, addressed whether the “reasonably in dispute” language in MCL 
500.2006(4) applied to the plaintiff’s first-party claim.34  Yaldo ruled, in part, that the 
trial court could have awarded the plaintiff insured 12% penalty interest for the defendant 
insurer’s untimely payment under MCL 500.2006(4),35 noting: 
Defendant’s claim that our holding would negate the “reasonably in 
dispute” language of MCL 500.2006(4); MSA 24.12006(4) is based on a 
misreading of the statute.  Its express terms indicate that the language 
applies only to third-party tort claimants.  Where the action is based solely 
on contract, the insurance company can be penalized with twelve percent 
interest, even if the claim is reasonably in dispute.[36]   
 
                                              
33 Defendant argues that even if the Nickolas were entitled to penalty interest under MCL 
500.2006(4), they never submitted a satisfactory proof of loss as required by the statute.  
Having determined that the Nickolas were not precluded from receiving penalty interest 
on the basis of the “reasonably in dispute” language, we leave it to the trial court on 
remand to decide any remaining questions pertaining to plaintiff’s entitlement to penalty 
interest under MCL 500.2006(4).  
34 Yaldo, 457 Mich at 348.  
35 Id. at 348-349.   
36 Id. at 348 n 4.  Defendant argues that the language “based solely on contract” in Yaldo 
supports its position that the Nickolas’ claim for UIM coverage is likened to a third-party 
tort claim because the UIM coverage requires plaintiff to effectively prove a tort claim 
against defendant.  The “based solely on contract” language in Yaldo, however, does not 
alter our interpretation of MCL 500.2006(4).  This language merely differentiated 
 
 
 
 
13 
The Court concluded: 
We find that defendant misreads the Uniform Trade Practices Act.  
Clearly, plaintiff could have filed a claim under MCL 500.2006(4); MSA 
24.12006(4).  With respect to collection of twelve percent interest, 
reasonable dispute is applicable only when the claimant is a third-party tort 
claimant.  Here, plaintiff is not such a claimant.  Rather, he is seeking 
reimbursement for the loss of his business due to a fire.  Therefore, plaintiff 
could have recovered interest at the rate of twelve percent per annum under 
the Uniform Trade Practices Act.[37]   
Yaldo is clear that the “reasonably in dispute” language under MCL 500.2006(4) applies 
only to a third-party tort claimant, not insureds claiming benefits under their insurance 
contract. 
Further, the Court of Appeals clarified any doubt Yaldo may have left on this issue 
via a conflict-panel resolution38 in Griswold, which addressed the types of insurance 
claims subject to the “reasonably in dispute” language of MCL 500.2006(4).39  The sole 
issue before the conflict panel was whether the Court was compelled to adhere to Arco 
Indus Corp v American Motorists Ins Co (On Second Remand, On Rehearing),40 which 
                                              
between “the insured or an individual or entity directly entitled to benefits under the 
insured’s contract of insurance” and third-party tort claimants.  As stated, the Nickolas—
the insureds—contracted with defendant for UIM coverage.  The particular proofs 
required under the parties’ insurance contract do not transform the contract into a third-
party tort claim.  Therefore, defendant’s reliance on the “based solely on contract” 
language is misguided. 
37 Id. at 349. 
38 See MCR 7.215(J). 
39 Griswold, 276 Mich App at 553-554.  
40 Arco Indus Corp v American Motorists Ins Co (On Second Remand, On Rehearing), 
233 Mich App 143; 594 NW2d 74 (1998), aff’d by equal division 462 Mich 896 (2000).   
 
 
 
14 
concluded that Yaldo was not binding on this point and held that an insurer was not 
obligated to pay a claimant-insured penalty interest under the UTPA if the claim was 
reasonably in dispute.41  The conflict panel in Griswold held:  
[T]he “reasonably in dispute” language of MCL 500.2006(4) applies 
only to third-party tort claimants; if the claimant is the insured or an 
individual or entity directly entitled to benefits under the insured’s contract 
of insurance, and benefits are not paid on a timely basis, the claimant is 
entitled to 12 percent interest, irrespective of whether the claim is 
reasonably in dispute.[42]   
The Court of Appeals distinguished the instant case from Griswold.43  The panel 
recognized that Griswold supported plaintiff’s argument that he was entitled to penalty 
interest regardless of whether the UIM claim was “reasonably in dispute.”44  But, the 
panel reasoned, plaintiff here was “doing more than merely making a simple first-party 
claim, as was involved in Griswold.”45  Relying on Ferwerda,46 the panel concluded that 
 
                                              
41 Griswold, 276 Mich App at 558-559.  In Arco, the Court of Appeals concluded that the 
Yaldo discussion of penalty interest was obiter dictum.  Arco, 233 Mich App at 147.  The 
Arco panel held that, even if the claimant was the insured, an insurer was not obligated to 
pay the penalty interest if the claim was reasonably in dispute.  Id. at 148-149, relying on 
Siller v Employers Ins of Wausau, 123 Mich App 140, 143-144; 333 NW2d 197 (1983). 
42 Griswold, 276 Mich App at 566 (quotation marks and citation omitted). 
43 Nickola, 312 Mich App at 386.  
44 Id.  
45 Id. at 387. 
46 Ferwerda, 287 Mich App 248.  In Ferwerda, the Court of Appeals held that penalty 
interest did not apply to a claim that the insurer breached the contractual duty to defend 
its insured against a third-party tort claim because the underlying tort claim was 
“reasonably in dispute.”  Id. at 260. 
 
 
 
15 
plaintiff’s claim for UIM benefits was specifically tied to the underlying third-party tort 
claim, making the “reasonably in dispute” language applicable.47  The panel observed 
that a UIM claim requires the insured to make what is essentially a third-party tort claim 
against his or her own insurer.48  In such cases, the panel explained, the insurer stands in 
the shoes of the alleged tortfeasor, and the insured seeks benefits from the insurer that 
arose from the tortfeasor’s liability.49  The panel thus concluded that a claim for UIM 
benefits is “fundamentally” different from a typical first-party claim.50   
We reverse.  As previously stated, the plain language of MCL 500.2006(4) 
distinguishes the identity of the claimant, not the nature of the claim.  Thus, the Court of 
Appeals erred by holding that the “reasonably in dispute” language applied to the claim 
made by the insured.  The panel should have instead applied this Court’s decision in 
Yaldo and the Court of Appeals’ decision in Griswold, both of which make clear that, 
under the plain language of MCL 500.2006(4), if the claimant is the insured and benefits 
are not paid on a timely basis, the claimant is entitled to 12% penalty interest per annum 
irrespective of whether the claim is reasonably in dispute.51   
 
                                              
47 Nickola, 312 Mich App at 388-389. 
48 Id. at 387. 
49 Id. at 389. 
50 Id. at 387, citing Adam v Bell, 311 Mich App 528, 535; 879 NW2d 879 (2015).  
51 Yaldo, 457 Mich at 348 n 4; see also Griswold, 276 Mich App at 566.  We overrule 
Ferwerda to the extent it is inconsistent with this opinion.  
 
 
 
16 
IV.  CONCLUSION 
We hold that the “reasonably in dispute” language of MCL 500.2006(4) applies 
only to third-party tort claimants and not to an insured making a claim for UIM benefits.  
We reverse the Court of Appeals’ decision regarding the penalty-interest provision under 
the UTPA.  We overrule the Court of Appeals’ decision in Ferwerda to the extent it is 
inconsistent with this opinion, and we remand this case to the trial court for further 
proceedings consistent with this opinion. 
 
 
Brian K. Zahra 
 
Stephen J. Markman 
 
Bridget M. McCormack 
 
David F. Viviano 
 
Richard H. Bernstein 
 
Joan L. Larsen 
 
Kurtis T. Wilder