Opinion ID: 1693300
Heading Depth: 3
Heading Rank: 2

Heading: Michigan Consumer Protection Act

Text: Turning to the issue whether defendant is exempted from plaintiff's claim of MCPA violations, we first examine whether defendant is exempted by  4(1)(a). The language of  4(1)(a) provides that the MCPA is inapplicable to a transaction or conduct specifically authorized under laws administered by a regulatory board or officer acting under statutory authority of this state.... MCL 445.904(1); MSA 19.418(4)(1). Defendant asserts that its application and certificate of insurance forms were submitted to [8] and implicitly approved by [9] the State Commissioner of Insurance. Hence, it contends, the immediate transaction, the sale of credit life insurance, was specifically authorized and, therefore, was exempted under  4(a)(1). [10] Plaintiff, however, essentially responds that the statute does not specifically authorize the fraudulent insurance practices that she claims were committed in this case. As the Court of Appeals recognized, our decision in Diamond Mortgage [11] controls the resolution of this issue. In Diamond Mortgage, the defendant, a real estate broker, also advertised and offered loans to homeowners at an eleven-percent interest rate. The financing arrangement resulted in the defendant receiving a brokerage or prepaid finance fee that the Attorney General alleged was actually an interest charge and, moreover, usurious. Id. at 607, 327 N.W.2d 805. The Attorney General also claimed that the defendant used confusing and inconsistent forms and that its method of doing business violated the MCPA. Id. The defendant in Diamond Mortgage argued that it was exempt from the MCPA under  4(1)(a) because it had a real estate broker's license and that one of the activities contemplated was that a licensee would negotiate the mortgage of real estate. Id. at 616, 327 N.W.2d 805. Like plaintiff here, the defendants in Diamond Mortgage responded that no statute [or regulatory agency] specifically authorize[d] misrepresentations or false promises made in conducting that activity. Id. at 617, 327 N.W.2d 805. In concluding that the defendants were not exempt from the MCPA, this Court reasoned: While the license generally authorizes Diamond to engage in the activities of a real estate broker, it does not specifically authorize the conduct that plaintiff alleges is violative of the Michigan Consumer Protection Act, nor transactions that result from that conduct. In so concluding, we disagree that the exemption of  4(1) becomes meaningless. While defendants are correct in stating that no statute or regulatory agency specifically authorizes misrepresentations or false promises, the exemption will nevertheless apply where a party seeks to attach such labels to [a] transaction or conduct specifically authorized under laws administered by a regulatory board or officer acting under statutory authority of this state or the United States. For this case, we need only decide that a real estate broker's license is not specific authority for all the conduct and transactions of the licensee's business. [ Id. at 617, 327 N.W.2d 805.] In short, Diamond Mortgage instructs that the focus is on whether the transaction at issue, not the alleged misconduct, is specifically authorized. Thus, the defendant in Diamond Mortgage was not exempt from the MCPA because the transaction at issue, mortgage writing, was not specifically authorized under the defendant's real estate broker's license. Applying this analysis in Kekel, the Court of Appeals concluded that the defendant insurer in that case was exempted from the plaintiff's alleged violations of the MCPA pursuant to M.C.L.  445.903; MSA 19.418(3). It explained: Diamond is distinguishable from the case at bar. The activities of the defendant in Diamond which the plaintiffs there were complaining of were not subject to any regulation under the real estate broker's license of the defendant and thus such conduct was not reviewable by the applicable licensing or regulatory authority.... The insurance industry is under the authority of the State Commissioner of Insurance and subject to the extensive statutory and regulatory scheme, all administered by a regulatory board or officer acting under statutory authority of this state. [ Id. at 384, 375 N.W.2d 455, citing M.C.L.  445.904(1)(a); MSA 19.418(4)(1)(a).] Consistent with these rulings, we conclude here that, when the Legislature said that transactions or conduct specifically authorized by law are exempt from the MCPA, it intended to include conduct the legality of which is in dispute. Contrary to the common-sense reading of this provision by the Court of Appeals, we conclude that the relevant inquiry is not whether the specific misconduct alleged by the plaintiffs is specifically authorized. Rather, it is whether the general transaction is specifically authorized by law, regardless of whether the specific misconduct alleged is prohibited. Therefore, we conclude that  4(1)(a) generally exempts the sale of credit life insurance from the provisions of the MCPA, because such transaction or conduct is specifically authorized under laws administered by a regulatory board or officer acting under statutory authority of this state or the United States. [12] As a consequence, we reverse the judgment of the Court of Appeals, in part, on this issue. However, we agree with the Court of Appeals that the Kekel Court misconstrued  4(2) of the MCPA. In addition to the broad exemption provided in  4(1)(a),  4(2) provides in relevant part: Except for the purposes of an action filed by a person under [MCL 445.911; MSA 19.418(11) ], this act does not apply to an unfair, unconscionable, or deceptive method, act, or practice that is made unlawful by: (a) Chapter 20 of the insurance code of 1956, Act No. 218 of the Public Acts of 1956, as amended, being sections 500.2001 to 500.2093 of the Michigan Compiled Laws. [MCL 445.904; MSA 19.418(4).] Thus,  4(2)(a) specifically exempts from the MCPA unfair, unconscionable, or deceptive methods, acts, or practices made unlawful by chapter 20 of the Insurance Code. [13] Yet, the first phrase of  4(2) explicitly provides that the exemption is inapplicable to actions filed under  11 of the MCPA, which provides in relevant part: (1) Whether or not he seeks damages or has an adequate remedy at law, a person may bring an action to do either or both of the following: (a) Obtain a declaratory judgment that a method, act, or practice is unlawful under section 3. (b) Enjoin in accordance with the principles of equity a person who is engaging or is about to engage in a method, act, or practice which is unlawful under section 3. (2) Except in a class action, a person who suffers loss as a result of a violation of this act may bring an action to recover actual damages or $250.00, whichever is greater, together with reasonable attorneys' fees. [MCL 445.911; MSA 19.418(11).] Giving effect to both  4(1) and  4(2), we conclude that private actions are permitted against an insurer pursuant to  11 of the MCPA regardless of whether the insurer's activities are specifically authorized. Although  4(1)(a) generally provides that transactions or conduct specifically authorized are exempt from the provisions of the MCPA,  4(2) provides an exception to that exemption by permitting private actions pursuant to  11 arising out of misconduct made unlawful by chapter 20 of the Insurance Code. Therefore, the exemptions provided by  4(1)(a) and 4(2)(a) are inapplicable to plaintiff's MCPA claims to the extent that they involve allegations of misconduct made unlawful under chapter 20 of the Insurance Code. For these reasons, we conclude that defendant is not entitled to summary disposition with regard to plaintiff's MCPA claims. To the extent that Kekel and its progeny [14] are inconsistent with this holding, they are overruled.