Wow, Tim, that is pretty low. But is it a new low? Seems like these are the types of arguments and exceptions we hear from insurance companies all the time. "It wasn't the hurricane that knocked your house down, it was the flood (not covered)."

At what point do practices like this constitute bad faith?

In Michigan, our hands our tied. Many states have laws that prohibit "bad faith" actions by insurors. If they drag their feet in processing your claim, deny your claim without a proper investigation or make low-ball offers on clear claims, they can be liable for sanctions including attorney fees and costs. Unfortunately, Michigan does not have such a law and it allows insurance companies to act in "bad faith" without fear of any adverse consequences. There are some narrow circumstances where bad faith can be alledged as a common-law concept, but the citizens of Michigan do not have the statutory protections provided by other states.

Interesting. Between Michigan's preemption of product liability suits against the makers of defective or dangerous drugs (the worst in the country) and the favorable treatment of insurance companies that do wrong, it sounds like you certainly don't want to find yourself hurt in this state.

Here in Florida, I have to say I have been happy to see our state insurance commissioner, Kevin McCarty in the news each month, appearing to fight the insurance companies at every turn. It's hard to tell who is winning these fights, but at least he's raising the public interest on controversial and important issues. I think it should be that way in every state, but it seems like too many public officials think their job is to enact the will of the private sector.