"Amount Disputes are No Basis for Rejecting a Proof of Loss," says the Court of Appeals

Name: Memberselect Insurance Company v. Sam Yono and Muntaha Yono

Court / Judge: Oakland Circuit Court; Michigan Court of Appeals

Issued: May 8, 2025

INTRODUCTION

On May 8, 2025, in Yono v. MemberSelect, the Michigan Court of Appeals held that “satisfactory proof of loss does not require agreement of the parties as to the amount of damage.” MemberSelect rejected the Yonos’ proof of loss—claiming the amount was excessive and not supported by the proofs—and the parties entered a years-long appraisal process that concluded in May 2022. The Court of Appeals ultimately held that MemberSelect was liable for 12% statutory penalty interest under MCL 500.2006 and emphasized that disagreement over the value of a claim does not invalidate a timely and satisfactory proof of loss or negate statutory penalty interest. MemberSelect illustrates how insurers must respond within the statutory deadlines of MCL 500.2006 and should not reject proofs of loss based, in whole or in part, on a dispute of the claim’s value.

This decision reinforces the importance of clear procedural compliance and timely communication in handling property claims.

ANALYSIS

On March 8, 2017, a broken water pipe caused extensive damage to the Yono’s home, thus prompting the Yonos to file an insurance claim. The Yonos failed to submit the MemberSelect’s “Sworn Statement In Proof Of Loss” within the 60-day policy requirement. However, on July 10, MemberSelect granted the Yonos a two-week extension to file the proof of loss, which the Yonos returned on July 20, with an estimated loss exceeding $1.49 million.

Prior to July 20, MemberSelect sent the Yonos several checks as payment advances towards the loss, but critically, on July 25, MemberSelect rejected the sworn proof of loss because the amount claimed was in “excess of the true amount of the loss.” Despite denying the claim, MemberSelect did not provide the Yonos further instructions to comply with the proof of loss. Upon reaching a disagreement, the Yonos requested an appraisal of the claims. The appraisal process started in March 2018 and finished in May 2022, when MemberSelect paid the appraisal value in full.

1. The Court of Appeals overruled the trial court’s finding that statutory penalty interest was not applicable in the present case.

   The Court of Appeals reversed the trial court’s denial of statutory interest to the Yonos under MCL 500.2006. MCL 500.2006(3) requires an insurer to specify, in writing, the materials that constitute satisfactory proof of loss within 30 days of receiving the claim from their insured. MCL 500.2006(4) provides that when an insurer fails to pay benefits within 60 days after receiving satisfactory proof of loss supplied by the insured, a 12% penalty interest begins accruing on day 61. The court affirmed that there are no exceptions to the penalty interest rule. Satisfactory proof of loss is the necessary information to trigger payment of a claim by an insurer and once received, starts the 60-day timing requirement for an insurer to pay the claim. Whether an insured provided satisfactory proof of loss to trigger penalty interest under MCL 500.2006(4) is a question of fact for a jury.

   The Court of Appeals determined that should an insured’s proof of loss be unsatisfactory, the insurer must submit, within the first 30-day period, what constitutes satisfactory proof of loss to its insured. Should an insurer fail to meet this requirement, they waive any argument to later assert that the claim is not payable. Once the insurer returns the proof of loss with a written request stating what makes the proof satisfactory, the 30- and 60-day requirements restart and begin running again once the insured submits a satisfactory proof of loss.

   Critically, in this case, the Court of Appeals affirmed the holding from Griswold I, that “satisfactory proof of loss does not require agreement of the parties as to the amount of damage[.]”[1] A disagreement between the parties on value of loss still triggers penalty interest because the insured provided a satisfactory proof of loss. Therefore, a disagreement on the value of a claim is not a sufficient basis for rejecting an insured’s claim and will subject an insurer to statutory penalty interest. Instead, to toll the time required for the insured, an insurer must find a deficiency in the proof submitted by the insured.

2. The Court of Appeals affirmed the trial court’s decision to grant MemberSelect’s motion for summary disposition of the Yonos’ claim for withheld depreciation.

Next, the Yonos brought a withheld depreciation claim against MemberSelect. The Yonos argued that pursuant to the terms of the policy: “[y]ou may make a claim within two years after the date of loss for any additional payment on a Replacement Cost basis if you repair or replace the damaged property…” they were entitled to withheld depreciation after they purchased a new home—to replace their old one—five years after their claim was made.

The Court of Appeals affirmed the trial court’s finding that the depreciation claim lacked procedural viability, given that the Yonos failed to plead this issue in their counterclaim. Moreover, the Yonos did not develop the claim with any legal authority or cite to binding precedent supporting their argument that they were entitled to withheld depreciation five years after the initial loss. Additionally, the claim lacked substantive merit because the Yonos failed to comply with their policy requirements to make this claim within two years of the loss.

Practically, MemberSelect stands for the proposition that rejecting a sworn statement in proof of loss because the proofs do not support the amount claimed does not show that there is unsatisfactory proof of loss. Rather, it creates a reason for the insured to demand appraisal. The critical practice point is to avoid rejecting proofs of loss based on value. Instead, reject the proof of loss based on deficiencies within the four corners of the form, such as failure to properly notarize a signature or a wrong date. Appraisal may result in any instance where value is the ultimate basis for the rejection.

Conversely, notifying the insured, in writing, about what specific documents and information are needed, within 30 days of receiving the sworn statement in proof of loss, shows that the insured’s submission is unsatisfactory. This also resets the 30-day and 60-day timeframes until the insured responds to the request.

[1] 275 Mich App 543, 566.