Roberts v. Auto-Owners Insurance

Williams, C.J.

(concurring). I concur in the result on these facts, but would have this Court join the growing trend in the courts of our sister states recognizing the tort of intentional infliction of emotional distress as exemplified by § 46 of the Restatement Torts, 2d.

Levin, J.

(separate opinion). I agree with the signers of the opinion of the Court that the plaintiffs failed to meet the threshold requirements of *612proof to make out a prima facie claim of intentional infliction of emotional distress.

Although the Court draws back from "formally adopting]” the tort of intentional infliction of emotional distress into this state’s jurisprudence, recognizing that the question whether it should be adopted need not be decided on these facts, it intimates that the Court is prepared to look favorably on this "modern tort.”1 This focus on the potential development of a tort action to compensate a plaintiff complaining of dilatory and bad-faith tactics of an insurance company impels me to write separately and to reiterate views previously expressed on the underlying issue in this case, namely, unjustified civil litigation.

The civil justice system is beleaguered with unjustified litigation from both the plaintiff and defendant sides of a lawsuit — nuisance actions commenced by some plaintiffs and stonewall tactics by some insurers and other defendants.

As the judicial body that has the ultimate responsibility to address the problems in the judicial system that make delay, harassment, and unnecessary litigation effective tactics for both an insured and an insurer, we should question whether recognition of still another cause of action — that would increase the burden of litigation and randomly provide a fortuitous amount of compensation in a handful of isolated cases, Friedman v Dozorc, 412 Mich 1, 57; 312 NW2d 585 (1981) (opinion of Levin, J.) — is the most efficacious means of addressing the problems which continue to beset us.

I am of the opinion that this Court should *613enlarge MCR 2.114(D), (E) to provide compensation for all pecuniary loss resulting from unjustified litigation. Both the bench and bar should be put on notice that trial judges are expected to enforce this rule and that litigants who can show that it has not been enforced can obtain relief in the appellate courts.

I

The actual holding in this case, that the Roberts failed to meet the threshold requirements of proof to make out a prima facie claim of intentional infliction of emotional distress, is well supported in the cases. There appears to be general agreement, as expressed in the opinion of the Court, that the "mere failure to pay a contractual obligation, without more, will not amount to outrageous conduct . . . .”2 *615a defense not well grounded in fact to harass or to cause unnecessary delay,*4 and compelling an insured to institute litigation to recover or refusing to pay amounts due under an insurance policy by offering inadequate amounts.5

*614The critical question — not presented, to be sure, by the facts of this case — is whether a cause of action may be maintained on evidence that an insurer engaged in unfair claim-settlement practices, such as refusing to pay a claim without conducting a reasonable investigation, *3 interposing

*615All would agree that unfair claim-settlement practices are contrary to public policy, some might say "outrageous.” While this Court does not recognize a cause of action on the facts of the present case, it indicates that in a limited range of circumstances a prima facie showing of outrageous conduct can be made in the insurance context. This suggestion of a cause of action for "intentional and outrageous conduct” is made without boundaries or guidelines for the bench or bar. Nor are the boundaries properly spelled out by references to the Restatement Torts, 2d, § 46, the accompanying commentary, or to "seventy-six pages of annotations that currently accompany § 46 ... .”

The twenty-two illustrations in the commentary accompanying the blackletter of the Restatement Torts, 2d, § 46, are based on the cases that had *616then been decided. A review of the illustrations indicates that, for the most part, they are far afield from the present case. Liability was found where there were threats of physical injury to the plaintiff or a relative, ****6 there were threats of destruction of property or of a relationship with the plaintiff's employer,7 false reports of injury to a relative were knowingly made,8 there were threats of or actual false arrest or imprisonment,9 and *617public humiliation occurred10 — such as where a woman was provided with a bathing suit that would dissolve in water in the presence of a group of men and women. The only illustration based on abusive behavior of an insurance adjuster supposes that an adjuster enters a hospital room for the purpose of settling an insurance claim and, knowing of the plaintiff’s weakened condition, acts in a boisterous and rude manner causing severe emotional distress and a heart attack.11

*618The author of the commentary accompanying the Restatement Torts, 2d, § 46, recognizes that callousness and heartlessness, even if it causes dire consequences and emotional distress, does not alone subject the actor to tort liability for emotional distress. In one of the twenty-two illustrations, a landlord evicts a woman and her children who are destitute and ill. The commentary states that while such conduct is heartless, the landlord has done no more than the law permits him to do.12 Insistence upon legal rights in a permissible way, even though the actor is aware that such insistence is certain to cause emotional distress, does not subject him to liability.

Surely this Court has not, and cannot properly, adopt either the blackletter or the commentary accompanying § 46 or the seventy-six pages of annotations.13 The application of the concepts, expressed in § 46 and discussed in the accompanying *619commentary, in concrete cases is a matter on which courts disagree. Only by deciding specific cases can this Court give meaning to the words "intentional and outrageous conduct” and indicate to what extent it agrees with the commentary accompanying § 46 and the terminology of § 46 itself.

One might rationalize that unfair claim-settlement practices can have consequences that to some people are as serious as those that might result from abusive language and threats of physical injury or the other conduct described in the twenty-two illustrations in the commentary accompanying the Restatement. But the argument can also be made that the recognition of a tort in the cases described in the twenty-two illustrations does not justify an extension of whatever principle may have been developed in those circumstances to refusals to pay money, however wilful and unjustified. The law frequently finds it necessary to draw lines lest a principle developed in one context be run into the ground in another.

Decisions delineating the extent of tort liability are . . . more than exercises in logic. They are pronouncements of social policy which should reflect the often subtle balance of the interests involved. The Supreme Court of New Jersey observed:
"[L]ogic (and even abstract justice) 'must defer to overall policy in the appraisal of the justification for judicial changes in the common law.” [Russell v Salem Transportation Co, 61 NJ 502, 506; 295 A2d 862 (1972).]
[I]t is not enough to invoke analogies. An independent re-examination of the policy considerations implicated by the creation of such a separate cause of action is called for. [Berger v Weber, 411 *620Mich 1, 23-24; 303 NW2d 424 (1981) (Levin, J., dissenting).]

II

This Court declared in Kewin v Massachusetts Mutual Life Ins Co, 409 Mich 401, 423; 295 NW2d 50 (1980) that, "absent allegation and proof of tortious conduct independent of the breach,” exemplary damages are not recoverable for breach of a commercial contract. In so declaring, this Court declined to follow a decision of the California Supreme Court "and to declare the mere bad-faith breach of an insurance indemnity contract an independent and separately actionable tort and to thereby open the door to recovery for mental pain and suffering caused by breach of a commercial contract.”14 Kewin reserved the question whether a tort action can be maintained for the intentional infliction of emotional distress.

It makes little difference to the insured or an insurer whether mental distress damages are allowed as contract or tort damages. Changing the form of action to one labeled in tort does not, in the same factual context, justify a rule of damages different from that stated in Kewin and Valentine v General American Credit, Inc, 420 Mich 256; 362 NW2d 628 (1984). In Valentine, this Court declared that mental distress damages were not recoverable in an action for breach of an employment contract although the denial of such damages would leave the plaintiff with less than full recovery. We said that the law does not seek to compensate for all losses suffered._

*621Recovery is denied for attorney’s fees, for mental anguish not accompanied by physical manifestation, and "make-whole” or full recovery has been denied where the cost of performance exceeds the value to the promisee. The courts have not, despite "make whole” generalizations regarding the damages recoverable, attempted to provide compensation for all losses. [420 Mich 261.]

The key question is under what circumstances— not under what label — mental distress damages are collectible.

Ill

The opinion of the Court cites four decisions standing for the proposition that the tort theory of intentional infliction of emotional distress has been recognized to permit recovery of mental distress damages separate from the recovery of contractual damages for breach of an insurance policy. Both Eckenrode v Life of America Ins Co, 470 F2d 1 (CA 7, 1972), and Strader v Union Hall, Inc, 486 F Supp 159 (ND Ill, 1980), are federal cases purporting to apply Illinois law.15 In light of subsequent Illinois decisions, it is questionable whether they would be so decided today.16

Subsequent to Eckenrode and Strader, the Illi*622nois Supreme Court left open the question whether a plaintiff may claim in tort for emotional distress resulting from "outrageous” activity apart from delay and held that vexatious delay in and of itself will not support an action for the tort of outrage. Robertson v Travelers Ins Co, 95 Ill 2d 441; 448 NE2d 866 (1983). Before Robertson, Illinois intermediate appellate courts similarly held that such an action cannot be maintained, relying, in part, on a legislative provision similar to a provision in Michigan law allowing for the recovery of attorney fees as a remedy for an insurer’s unreasonable delay.17 A United States district court in Illinois has, in light of the legislative provision for taxing costs if an insurer unreasonably delays in settling a claim, read Robertson as precluding a cause of action for the intentional infliction of emotional distress resulting from an insurer’s outrageous delay in settling a claim.18

The third case cited in the majority opinion is Amsden v Grinnell Mutual Reinsurance Co, 203 NW2d 252 (Iowa, 1972), where the Iowa Supreme Court "recognized” the tort of intentional infliction of emotional distress, but went on to hold that the conduct in the case then before the Court did not even begin to approach "outrage.” In the only *623subsequent Iowa case, the court said there was insufficient evidence of emotional distress.19

Fletcher v Western National Life Ins, 10 Cal App 3d 376; 89 Cal Rptr 78 (1970), the fourth case cited, does indeed recognize this theory of recovery.20 Fletcher has been followed in other jurisdictions where the conduct included verbal assaults or threats of criminal prosecution, and it has been followed as well in other cases where the behavior *624was far less egregious.21 In most of the cases where *625there has been an actual recovery, the circumstances are close to the facts of the insurance case described in Illustration No. 12 in the commentary accompanying the Restatement. The behavior, in cases where the behavior was found to have been tortious, is readily distinguishable from unfair claim-settlement practices that are not combined with verbal or physical assaults or threats.22

*626The opinion of the Court states that the Court of Appeals has, at least implicitly, acknowledged the viability of the intentional infliction theory in insurance actions alleging dilatory handling of claims. In none of the cited cases, however, did the Court of Appeals affirm a money judgment awarded on that theory for the plaintiff.23

*628The courts in a number of states that have adopted the substance of a model act proposed by the National Association of Insurance Commissioners24 have generally declined to formulate a com*629mon-law remedy for unfair claim-settlement practices.25 Michigan has enacted that legislation.26

*631IV

The underlying premise of the present controversy is that the defendant insurer unreasonably withheld payment of benefits owing to the plaintiffs. The issue presented by this appeal — unjustified litigation in the insurance context — is a subset of the larger problem of unjustified commencement of actions and unjustified defense.

In Friedman v Dozorc, supra — a countersuit commenced by physicians against lawyers who had previously unsuccessfully brought a malpractice action against them — this Court was asked to modify the common law to provide an expanded tort remedy by eliminating the special injury requirement in actions for malicious prosecution. In declining to do so, this Court said:

Most commentators appear to favor abrogation of the special injury requirement to make the action more available and less difficult to maintain. Their counsel should, however, be evaluated skeptically. The lawyer’s remedy for a grievance is *632a lawsuit, and a law student or tort professor may be particularly predisposed by experience and training to see the preferred remedy for a wrongful tort action as another tort action. In seeking a remedy for the excessive litigiousness of our society, we would do well to cast off the limitations of a perspective which ascribes curative power only to lawsuits. [412 Mich 42.]

I remain of the opinion, expressed at the time Friedman v Dozorc was decided,27 that it is this Court’s obligation to provide a means of addressing the problem of unjustified litigation, a problem that confronts all litigants and potential litigants —plaintiffs and defendants. I question whether an expansion of tort remedies and more litigation is the correct response.

If the basis of the plaintiff’s claim is the interposition of an unwarranted defense, it might be difficult to confine the scope of the action to a claim by an insured against an insurer. Since the commencement of this action, this Court has adopted a court rule, MCR 2.114(D) and (E),28 *633providing that an "appropriate sanction” may be imposed on a party who maintains an action or interposes a defense not based on a belief, "formed after reasonable inquiry,” "well grounded in fact,” or for the purpose of "harass[ment] or to cause unnecessary delay.” If this Court were to hold that a common-law action can be maintained against an insurer for breach of the obligation to refrain from interposing a defense except upon a belief, "formed after reasonable inquiry,” "well grounded in fact,” and not for the purpose of "harass[ment] or to cause delay,” then one would think such an action should also be maintainable against any defendant or plaintiff and his lawyer who breaches that obligation. The obligation of an insurer to an insured is not a higher obligation than that owed by a lawyer to the court.

If that view is sound, then recognition of an action in tort for unjustified litigation may open the door to countersuits in a large number of cases. Physicians turned back in Friedman v Do-zorc, might be encouraged to assert a claim of unwarranted or unjustified litigation against a plaintiff who has filed a medical malpractice action, and a plaintiff in such an action might be enabled to respond with a like claim against the physician who, it might be alleged, should have acknowledged the wrongdoing rather than have attempted to cover it up. The lawyers representing the parties might also find themselves subjected to suit. Once this becomes fashionable, I expect a deluge of litigation and attendant increase in the cost of insurance long before this Court is likely to respond to the questions that it has left open by its pronouncement today.

I would favor enlarging the recently adopted court rule to expressly permit the assessment of *634the amount of all actual pecuniary loss29 against a person — plaintiff or defendant — and his lawyer maintaining unjustified litigation, as suggested in Friedman v Dozorc. The sum recoverable should include all fees and administrative charges incurred because of the litigation, as well as reasonable attorney fees. The judge could also award a prevailing litigant an additional sum for loss of income-producing time or business attributable to the wrongful maintenance of the action if the amount is capable of being calculated with reasonable certainty. The sum recoverable would be determined in a prompt post-trial hearing before the judge who presided during the original action, and the rule should allow for the presentation of evidence, including testimony of witnesses, and appellate review.

Having such a determination made by a judge, in this framework, has a number of advantages over allowing a jury to award damages for emotional distress. First, a strategy for evaluating the propriety of litigation which is administered exclusively by judges is more susceptible of consistent application and careful supervision than a strategy which relies on a group of laymen chosen at random often for one day and one trial. Second, the meritorious question whether a defendant is subject to liability to the plaintiff for breach of contract or otherwise and, if so, the amount of the damages, is tried without the opportunities for confusion and prejudice attendant to allowing the trial at the same time of both the meritorious question and the separate question whether the defendant (or, indeed, the plaintiff) acted outrageously in defending (or commencing) the action. Third, limiting recovery to actual pecuniary loss, *635and thus not allowing recovery for emotional distress, and relying on a judge to assess damages, combined with the greater control that appellate courts exercise over judge’s findings as compared to a jury’s verdict, should tend to avoid excessive awards which might intimidate good-faith litigants.30

Such an enlargement of the court rule, and enforcement of the court rule, would go a long way towards addressing the problem that, in a few states, has been addressed by the recognition and application in the insurance context of the so-called tort of outrage.

The majority states that "we are constrained from reaching the issue as to whether this modern tort should be formally adopted into our jurisprudence” (emphasis added) and later suggests that although limited, there is a range of circumstances in which a prima facie showing of outrageousness can be made in the insurance context.

The courts of Alabama, Arizona, Florida, Illinois, Iowa, Minnesota, New York, and the District of Columbia have declined to recognize a cause of action in tort for emotional distress when the gravamen of the complaint was the insurer’s delay or refusal to pay.

The Alabama Supreme Court, in Vincent v Blue Cross-Blue Shield of Alabama, Inc, 373 So 2d 1054 (Ala, 1979), found the evidence insufficient to support the claim of the insureds for intentional infliction of emotional distress resulting from the insurer’s initial disallowance of claims under a preexisting condition exclusion and rude treatment of the insureds. But see also National Security Fire & Casualty Co v Bowen, 447 So 2d 133 (Ala, 1983), n 21 infra, where the insured recovered damages on more egregious facts.

In Davis v First National Bank of Arizona, 124 Ariz App 458; 605 P2d 37 (1979), the Arizona intermediate appellate court concluded that a bank and insurer were not liable for emotional distress alleged to have resulted from attempts to rescind a loan contract, delays in payment of disability benefits, and attempts to restrict coverage of disability benefits.

The Florida Supreme Court quashed the decision of the district court holding that a deceased had a civil action for intentional infliction of emotional distress sufficient to support an action for wrongful death, where the insurance company demanded proof of eligibility and withheld payments of benefits, even though lack of money forced the removal of deceased to a nursing home, the stress of which probably contributed to her death. Metropolitan Life Ins Co v McCarson, 467 So 2d 277 (Fla, 1985).

*614In Robertson v Travelers Ins Co, 95 111 2d 441; 448 NE2d 866 (1983), the Illinois Supreme Court held that vexatious delay alone will not support an action for the tort of outrage. And in Tobolt v Allstate Ins Co, 75 111 App 3d 57; 393 NE2d 1171 (1979), an insurer’s refusal to pay proceeds under a homeowner’s policy was not outrageous conduct even though the insureds were rendered indigent as a result of the fire loss and were unable to provide the necessities of life for themselves and their son.

An insurer’s failure immediately to pay on a fire insurance policy did not even "begin to approach outrageous conduct” where the delay was due to an arson investigation in the Iowa Supreme Court case of Amsden v Grinnell Mutual Reinsurance Co, 203 NW2d 252, 255 (Iowa, 1972).

The Minnesota Supreme Court, in Haagenson v National Farmers Union Property & Casualty Co, 277 NW2d 648, 652 (Minn, 1979), held, notwithstanding the jury’s finding that an insurer’s conduct in delaying payment of no-fault benefits was "intentional, malicious and in bad faith,” that emotional and punitive damages were not recoverable for bad-faith breach of contract and stated that a malicious motive did not convert a contract action into a tort action.

In the New York case of Riffat v Continental Ins Co, 104 AD2d 301; 478 NYS2d 635 (1984), the intermediate appellate court concluded that an insurer’s refusal to pay accidental dismemberment benefits did not state a cause of action in tort; the remedy was an action for breach of contract. Accord Bruno v Home Mutual Ins Co of Bingham-ton, 91 AD2d 1169; 459 NYS2d 136 (1983); Manolis v International Life Ins Co of Buffalo, 83 AD2d 784; 443 NYS2d 461 (1981).

In Sere v Group Hospitalization, Inc, 443 A2d 33 (DC App, 1982), cert den 459 US 912 (1982), the court concluded that a directed verdict on the issue of "extreme and outrageous conduct” was proper where the insurer failed to pay because the request for additional information from insured was not honored.

See Strader v Union Hall, Inc, 486 F Supp 159 (ND Ill, 1980), where the court declined to dismiss by summary judgment a claim based on an insurance company’s failure to investigate the merits of the claim and alleged misrepresentation of the nature of coverage, stating that this constituted the type of abusive behavior that gives rise to the tort of intentional infliction of emotional harm. Contrast Sigler v Mutual Benefft Life Ins Co, 506 F Supp 542 (SD Iowa, 1981), aff'd 663 F2d 49 (CA 8, 1981), where an insured’s contentions that an insurance company acted maliciously by failing to investigate a claim for accidental death benefits and by forcing the plaintiff to initiate legal action, thereby exposing her to public embarrassment because of *615her husband’s death from an autoerotic experience, were found not to be supported by the evidence and summary judgment was granted.

In Eckenrode v Life of America Ins Co, 470 F2d 1 (CA 7, 1972) (applying Illinois law), a cause of action for severe emotional injury was stated where an insurer "invited” compromise of a claim by falsely implying it had a valid defense to payment — a police investigation — in the face of a clear duty to pay. Cf. Othman v Globe Indemnity Co, 759 F2d 1458 (CA 9, 1985) (applying California law), where the court concluded that the evidence did not support a cause of action for "outrageous conduct,” but the insurer’s unreasonable actions before denying reconsideration of the claim — in handling the claim with intent to entice the insured to lose his rights through the application of the statute of limitations — would raise a question for the jury of bad faith under Gruenberg v Aetna Ins Co, 9 Cal 3d 566; 108 Cal Rptr 480; 510 P2d 1032 (1973).

See Sigler v Mutual Benefit Life Ins Co, n 3 supra. In Debolt v Mutual of Omaha, 56 Ill App 3d 111; 371 NE2d 373 (1978), the insurer delayed and ultimately ceased payment of disability income forcing the plaintiff to employ counsel and file a lawsuit. The appellate court held that the plaintiff failed to state a cause of action for intentional infliction of emotional distress.

See Illustration Number 2:

"A, the president of an association of rubbish collectors, summons B to a meeting of the association, and in the presence of an intimidating group of associates tells B that B has been collecting rubbish in territory which the association regards as exclusively allocated to one of its members. A demands that B pay over the proceeds of his rubbish collection, and tells B that if he does not do so the association will beat him up, destroy his truck, and put him out of business. B is badly frightened, and suffers severe emotional distress. A is subject to liability to B for his emotional distress, and if it results in illness, A is also subject to liability to B for his illness.”

See Illustration Number 7:

"A, a creditor, seeking to collect a debt from B, sends B a series of letters in lurid envelopes bearing a picture of lightning about to strike, in which A repeatedly threatens suit without bringing it, reviles B as a deadbeat, a dishonest man, and a criminal, and threatens to garnish his wages, to bother his employer so much that B will be discharged, and to "tie B up tight as a drum” if he does not pay. B suffers severe emotional distress. A is subject to liability to B.”

See Illustration Number 1:

"As a practical joke, A falsely tells B that her husband has been badly injured in an accident, and is in the hospital with both legs broken. B suffers severe emotional distress. A is subject to liability to B for her emotional distress. If it causes nervous shock and resulting illness, A is subject to liability to B for her illness.”

See Illustration Number 5:

"A, a private detective, calls on B and represents himself to be a police officer. He threatens to arrest B on a charge of espionage unless B surrenders letters of a third person which are in her possession. B suffers severe emotional distress and resulting illness. A is subject to liability to B for both.”

and see Illustration Number 6:

"A, the principal of a high school, summons B, a schoolgirl, to his office, and abruptly accuses her of immoral conduct with various men. A bullies B for an hour, and threatens her with prison and with public disgrace for herself and her parents unless she confesses. B suffers severe emotional distress, and resulting illness. A is subject to liability to B for both.”

See Illustration Number 3:

"A is invited to a swimming party at an exclusive resort. B gives her a bathing suit which he knows will dissolve in water. It does dissolve while she is swimming, leaving her naked in the presence of men and women whom she has just met. A suffers extreme embarrassment, shame, and humiliation. B is subject to liability to A for her emotional distress.”

"A, an eccentric and mentally deficient old maid, has the delusion that a pot of gold is buried in her back yard, and is always digging for it. Knowing this, B buries a pot with other contents in her yard, and when A digs it up causes her to be escorted in triumph to the city hall, where the pot is opened under circumstances of public humiliation to A. A suffers severe emotional disturbance and resulting illness. B is subject to liability for both.”

The illustrations in the commentary to the Restatement Torts, 2d, § 46, are for the most part not based on insurance cases. The two exceptions are Illustrations Nos. 7 and 12, which indicate that extreme and outrageous conduct may be found on the basis of an abuse of a position which gives the actor authority or power over the other (comment e) or on the basis of the actor’s knowledge that the other is peculiarly susceptible to emotional distress (comment f).

The reporter’s notes to Illustration No. 7 — the bullying tactics of creditors — cites the analogous behavior of insurance adjusters in two Oklahoma and one Mississippi case. In National Life & Accident Ins Co v Anderson, 187 Okla 180; 102 P2d 141 (1940), an insurance agent’s behavior at an insured’s home — berating her in uncomplimentary language, and charging that she was not sick — caused physical injury as a result of mental shock and was sufficient to defeat a motion for directed verdict. The judgment for the plaintiff, however, was reversed, and the cause was remanded for a new trial because of erroneous jury instructions. Accord PaciSc Mutual Life Ins Co of California v Tetirick, 185 Okla 37; 89 P2d 774 (1938). In Continental Casualty Co v Garnett, 173 Miss 676; 161 So 753 (1935), a jury verdict for wilful and wanton conduct was affirmed where an insurance agent went to the home of an insured and denied a claim for compensation under a health policy and used insulting and abusive language in charging that the insured was presenting a false and fraudulent claim.

*618Illustration No. 12 is drawn largely from the Georgia case of Interstate Life & Accident Co v Brewer, 56 Ga App 599; 193 SE 458 (1937). There the plaintiff recovered damages where an insurance representative, with knowledge of an insured’s physical condition, went to her sick room and persisted in forcing a settlement upon her by throwing a handful of coins in her face and yelling that "[y]ou don’t need a doctor; you ought to die . . . .”

Illustration No. 14.

In Smith v Allendale Mutual Ins Co, 410 Mich 685, 712-713; 303 NW2d 702 (1981), this Court said

"that the application of a common-law rule to a particular set of facts does not turn upon whether those facts can be characterized in the language of the Restatement section corresponding to the common-law rule. Unlike a statute, which expresses a legislative directive for the treatment of future cases, the Restatement seeks primarily to distill the teachings of decided cases and is descriptive. While its drafters may sometimes strive to choose 'the better rule’ or to predict or shape the development of the law, its influence depends upon its persuasiveness. Even where a particular Restatement section has received specific judicial endorsement, cases where that section is invoked must be decided by reference to the policies and precedents underlying the rule restated. Textual analysis of the Restatement is useful only to the extent that it illuminates these fundamental considerations.”

Cf. Gruenberg v Aetna Ins Co, 9 Cal 3d 566; 108 Cal Rptr 480; 510 P2d 1032 (1973), in which the California Supreme Court developed a tort cause of action for bad-faith breach of an insurance contract.

In the absence of a settled question of state law, a federal court will make an educated "guess” of what the highest court of the state would conclude if faced with the same question. But the conclusion of the federal court, even several like holdings, does not constitute state law.

The Illinois appellate courts have consistently rejected claims alleging "outrageous” conduct in the handling of insurance claims. In McCall v Health Care Service Corp, 117 Ill App 3d 107; 452 NE2d 893 (1983), the court said that delays in paying hospitalization benefits and failure to provide the plaintiff with accurate information regarding the status of her claim, which resulted in an action by a hospital against an insured and garnishment of her wages, was not conduct so "outrageous or severe” as to amount to intentional infliction of emotional distress. See also Tobolt v Allstate Ins Co, n 2 supra, and Debolt v Mutual of Omaha, n 5 supra.

See Tobolt v Allstate Ins Co, n 2 supra, and Debolt v Mutual of Omaha, n 5 supra.

The Illinois courts distinguish the California cases such as Fletcher v Western National Life Ins, 10 Cal App 3d 376; 89 Cal Rptr 78 (1970), on which plaintiffs relied for the theory of intentional infliction of emotional distress, on the basis that California did not have a statutory provision analogous to the Illinois provision which permits an insured to recoup additional costs (e.g., attorney fees) where an insurer’s refusal to pay has been vexatious and unreasonable. Tobolt v Allstate Ins Co, 75 Ill App 3d 71.

See Anderson v Mutual of Omaha Ins Co, 594 F Supp 726 (SD Ill, 1984). Robertson, in declining to allow recovery in tort for emotional distress, relied on a similar remedial provision for vexatious or frivolous delay in the payment of workers’ compensation benefits.

The analogous Michigan legislative provision is discussed in n 27.

Amsden v Grinnell Mutual Reinsurance Co, n 2 supra. The plaintiffs, in Higgins v Blue Cross of Western Iowa & South Dakota, 319 NW2d 232 (Iowa, 1982), did not challenge on appeal the trial court’s ruling of insufficient evidence of emotional distress where an insurance company had rescinded a contract for hospital services because of a failure to disclose a preexisting condition.

Fletcher is regarded as the landmark first-party case holding that an insurer’s bad-faith refusal to make payments under a disability policy gives rise to a cause of action for intentional infliction of emotional distress. There the insurer discontinued disability payments by seizing on (and misinterpreting) certain medical statements to conclude that Fletcher was suffering from a condition which he may have contracted from a horse (and therefore could only be paid under the more limited provision for sickness payments), and later by contending that Fletcher’s condition was congenital rather than a result of recent injury. No investigation was undertaken regarding this congenital defect. The company then "embarked upon a concerted course of conduct” to persuade Fletcher to surrender his policy or otherwise enter into a disadvantageous settlement through economic coercion (he was disabled and destitute). The insurance company conceded that its behavior was "outrageous,” but claimed that it was privileged because it was engaged in settlement negotiations and there was no evidence of severe emotional distress.

The California court allowed recovery in tort on two theories: (1) intentional infliction of emotional distress and (2) "tortious interference with a property interest of its insured” — later to become bad-faith breach of contract sounding in tort.

The California Supreme Court, in another leading first-party case, developed an action in tort for bad faith withholding of insurance benefits. In Gruenberg v Aetna Ins Co, 9 Cal 3d 566; 108 Cal Rptr 480; 510 P2d 1032 (1973), the insured was allowed to recover all damages, including for mental distress, caused by the insurer’s scheme to deprive the insured of benefits due on a fire insurance policy. The agent encouraged the bringing of criminal charges against the insured by falsely implying that he had a motive to commit arson, and, knowing that the insured would not appear for an insurance examination during the pendency of criminal charges, the insurer relied on the failure to appear as a pretense for denying liability on the policy. This Court in Kewin expressly declined to follow Gruenberg.

Despite numerous claims asserting that an insurer’s behavior was outrageous and inflicted emotional distress, there are relatively few cases in which the claim survived a motion for summary judgment and even fewer in which damages have been awarded. In addition to California, recovery has been allowed in Alabama, Indiana, Florida, and Washington, and in federal courts in perceived application of Virginia, Oregon, and Illinois law.

The Alabama Supreme Court affirmed a jury verdict on claims of malicious prosecution and intentional infliction of emotional distress in National Security Fire & Casualty Co v Bowen, 447 So 2d 133 (Ala, 1983). The conduct of the private investigators hired by National Security to investigate the fire loss of equipment included flashing their badge, bribing or threatening persons they interrogated to implicate the insured in arson, and physically threatening the insured at gunpoint after forcing him off the road. The court characterized such conduct as "so atrocious and so barbaric . . . that no civilized person could be expected to endure the acts committed without suffering mental distress.”

In Vernon Fire & Casualty Ins Co v Sharp, 264 Ind 599; 349 NE2d 173 (1976), the Indiana Supreme Court found that the insurer’s attempt to exact additional consideration from the plaintiff with regard to a separate lawsuit before performing its obligations under the contract was "intentional and wanton” conduct and affirmed a jury award of punitive damages.

The complaint in Dominguez v Equitable Life Assurance Society, 438 So 2d 58 (Fla App, 1983), aff'd 467 So 2d 281 (Fla, 1985), stated a cause of action for outrageous conduct where the insured alleged that the insurer’s agent falsely represented that she had a letter from a doctor saying that the plaintiff was not disabled and that coverage of the policy was no longer in force and attempted to obtain the plaintiff’s signature surrendering the policy. In World Ins Co v Wright, 308 So 2d 612 (Fla App, 1975), cert den 322 So 2d 913 (Fla, 1975), the court affirmed a jury award for intentional infliction of emotional distress where an insured’s bad-faith conduct included attempts to "buy up” the policy. No additional facts were given. And in Miller v Mutual of Omaha Ins Co, 235 So 2d 33 (Fla App, 1970), cert den 238 So 2d 423 (Fla, 1970), a jury verdict was affirmed, and a judgment notwithstanding the verdict reversed, on a count of intentional infliction of emotional distress where an insurer’s salesman went to the plaintiff’s home after she became ill and charged that she had taken out the policy with knowledge of prior illness. The agent then physically took the policy from the plaintiff and walked out the door.

In Rounds v Union Bankers Ins Co, 22 Wash App 613; 590 P2d 1286 (1979), the Washington intermediate appellate court affirmed a denial of a motion to dismiss a claim for emotional distress for cancellation of a hospital policy.

A United States district court in Virginia held that allegations that an insurer issued an insurance policy without the intent to perform, and in bad faith refused to pay cancer benefits, stated a cause of *625action for intentional infliction of emotional distress. Morgan v American Family Life Assurance Co of Columbus, 559 F Supp 477 (WD Va, 1983).

The United States Court of Appeals for the Ninth Circuit, applying Oregon law, affirmed a jury’s conclusion in Green v State Farm fire & Casualty Co, 667 F2d 22 (CA 9, 1982), that the behavior of a State Farm agent was "outrageous” where, after the State Farm adjuster knew that the state police had abandoned the investigation of Green for arson, the adjuster identified himself as a policeman and questioned Green’s neighbors about the fire, implying that Green had set it and told Green that he would be charged with arson if he pressed his claim against State Farm.

The decision of the United States district court in Illinois in Strader v Union Hall is discussed in n 3 supra, and the Seventh Circuit’s application of Illinois law in Eckenrode v Life of America is discussed in n 4 supra.

In many of the cases where recovery of emotional distress damages against an insurance company was not allowed, the courts, in dicta, indicated that recovery might be allowed in another case. See, for example, Jarvis v Prudential Ins Co of America, 122 NH 648; 448 A2d 407 (1982), n 22 infra, Metropolitan Life Ins Co v McCarson, n 2 supra, and Employers’ fire Ins Co v Love It Ice Cream Co, 64 Or App 784; 670 P2d 160 (1983), stating that an insurer’s egregious conduct amounting to outrageous conduct — independent of bad-faith refusal to pay — could give rise to a tort action.

In some cases where the conduct was more egregious than the simple nonpayment or denial of benefits, the courts have denied recovery in tort.

In Cluff v Farmers Ins Exchange, 10 Ariz App 560; 460 P2d 666 (1969), the Arizona intermediate appellate court concluded that an insured failed to state a claim for intentional infliction of emotional distress based on the actions of an insurance adjuster who attempted to "threaten and cajole” the insured to accept a settlement for the wrongful death of her son without the benefit of counsel. The Illinois intermediate appellate court concluded that an insurer’s denial of liability under a disability policy, referral of the claim between offices and offer to repurchase the policy in settlement of a disputed claim did not state a cause of action for intentional infliction of emotional distress. Debolt v Mutual of Omaha, n 5 supra. In Jarvis v Prudential Ins Co of America, n 21 supra, an insurance company terminated *626reimbursement for nursing services in disregard of a provision in a policy indicating that some services were indeed compensable; the New Hampshire Supreme Court concluded, as a matter of law, that this was not "outrageous conduct.” And in Farris v United States Fidelity & Guaranty Co, 284 Or 453; 587 P2d 1015 (1978), the Oregon Supreme Court concluded that an insurer’s refusal to defend its insured under a liability policy, with knowledge that it has no good reason not to perform, did not justify recovery for emotional distress or punitive damages.

The Court of Appeals has generally concluded that the plaintiff failed to establish a prima facie case of intentional infliction of emotional distress. See Butler v DAHE, 121 Mich App 727; 329 NW2d 781 (1982), where the Court concluded that the plaintiff pled nothing more than a breach of an insurance contract. In Harris v Citizens Ins Co, 141 Mich App 110; 366 NW2d 11 (1983), where plaintiff sought recovery on the ground that the insurance agent had intentionally inflicted emotional distress by unreasonably refusing to pay or unreasonably delaying payment of certain no-fault benefits, the Court of Appeals concluded that the "complained-of conduct. . . does not, as a matter of law, rise to the level of 'extreme and outrageous’ conduct.” See also Butt v DAHE, 129 Mich App’211, 219; 341 NW2d 474 (1983), holding that the trial court erred by denying defendant’s motion for summary judgment on plaintiff’s claim for intentional infliction of emotional distress. The complained-of conduct — requests for verification of replacement service before payment of benefits — "falls far short of the conduct which is considered tortiously outrageous.” The plaintiff, in Hall v Citizens Ins Co, 141 Mich App 676; 368 NW2d 250 (1985), failed to establish a prima facie case of intentional infliction of emotional distress where the insurer erroneously pursued a subrogation claim against the wrong Patricia Hall, resulting in the garnishment of her paycheck. Most recently, in Hajciar v Crawford & Co, 142 Mich App 632; 369 NW2d 860 (1985), it was alleged that workers’ compensation benefits were terminated to coerce the worker into accepting a lump-sum payment which he had previously refused. The Court of Appeals, recognizing that the intentional infliction of emotional distress constitutes a distinct and separate cause of action, concluded that the plaintiff did not allege conduct that might properly be characterized as outrageous and atrocious.

Statements in decisions of the Court of Appeals indicating that it has adopted the definition set forth in Restatement Torts, 2d, § 46, providing that a cause of action is made out by proof of "extreme and outrageous conduct [which] intentionally or recklessly causes severe *627emotional distress to another,” do not indicate that such a cause of action could be established on evidence of an insurer’s dilatory handling of a claim. This appears on a comparison of the facts in often cited Court of Appeals cases. In Warren v June’s Mobile Home Village & Sales, Inc, 66 Mich App 386; 239 NW2d 380 (1976), the Court of Appeals quoted extensively from both the Restatement of Torts and the accompanying commentary defining the type of situations where liability may result. The Court held that a landlord’s actions in verbally harassing the plaintiff in retaliation for her complaints about electric bills, and his attempts to defeat plaintiffs sale of her mobile home, did not constitute the tort of intentional infliction of emotional distress. The Court said, in part, that the defendant may have simply been relying on his legal right to refuse a prospective tenant in the trailer park he owned. The United States Court of Appeals for the Sixth Circuit, applying Michigan law in Ross v Burns, 612 F2d 271 (CA 6, 1980), looked to the standards of § 46 to determine that a newspaper’s publication of photographs of an undercover police officer in a public place, along with his identity, did not amount to "extreme and outrageous conduct.” Similarly, in Fry v Ionia Sentinel-Standard, 101 Mich App 725; 300 NW2d 687 (1980), the Court held that a newspaper report of the accidental death of the plaintiff’s husband and that a female body vías found with his, did not constitute "outrageous” conduct. Cf. Ledsinger v Burmeister, 114 Mich App 12; 318 NW2d 558 (1982), where the Court concluded that the plaintiff stated a cause of action for intentional infliction of emotional distress on allegations of racial epithets uttered by a retail merchant while ejecting Ledsinger from his place of business. And in Rosenberg v Rosenberg Bros Special Account, 134 Mich App 342; 351 NW2d 563 (1984), the Court concluded that a widow’s complaint that her deceased husband’s brother engaged in a course of extreme and outrageous conduct to inflict severe emotional distress on her for the purpose of forcing her to sell her interest in her deceased husband’s business stated a claim upon which relief could be granted.

In often cited Frishett v State Farm Mutual Automobile Ins Co, 3 Mich App 688; 43 NW2d 612 (1966), lv den 378 Mich 733 (1966), the plaintiff alleged that agents of an insurance company made false statements, unjustly withheld payment of benefits, and misused private information, and as a result the plaintiff became distressed and suffered emotional upset. The Court of Appeals reversed a summary judgment for the defendant, granted on the basis that Michigan courts do not allow recovery for mental distress unless accompanied by a physical injury, and stated that "the law of Michigan as set forth in Stewart v Rudner [349 Mich 459; 84 NW2d 816 (1957)] and Carter v General Motors Corp [361 Mich 577; 106 NW2d 105 (I960)] is consistent with the principles enunciated in the Restatement of the Law 1948 Supp, Torts § 46 . ...” In Stewart v Rudner, this Court affirmed a jury verdict against the defendant doctor for mental distress damages arising out of the breach of a contract to perform a Caesarean section. This Court has said that an exception, allowing the recovery of mental distress damages, to the general limitation on the damages recoverable for breach of contract was made in Stewart because of the "personal nature” of the contract. Kewin v Massachu*628setts Mutual Life Ins Co, supra, 409 Mich 415-416. At the same time this Court in Kewin held that insurance contracts are commercial in nature and do not come within the reach of Stewart. In Carter v General Motors, this Court recognized that mental injury may result from emotional stress although there was no physical effect and permitted recovery of workers’ compensation benefits under the circumstances. Neither Stewart nor Carter relied on § 46 or the concept of "outrageous conduct,” nor did either case involve the dilatory handling of an insurance claim.

Finally, the Court of Appeals said in Holmes v Allstate Ins Co, 119 Mich App 710, 714; 326 NW2d 616 (1982):

"Although there has been confusion regarding a cause of action for intentional infliction of emotional distress, as distinguished from damages for mental anguish incident to an independent tort, and the Michigan Supreme Court has not ruled on this issue, the Michigan Court of Appeals has delineated intentional infliction of emotional distress as a separate cause of action which is not necessarily parasitic to another cause of action as an aggravating element of damages.”

On the basis of the standards set forth in the Restatement Torts, 2d, § 46, the Court agreed with the trial judge that the erroneous termination of plaintiff’s workers’ compensation benefits when he failed to attend vocational rehabilitation and failure to give permission for treatment of plaintiff’s back did not present evidence of an intent to cause plaintiff severe emotional distress, nor was there any conduct that could be viewed as "extreme and outrageous.” Defendant’s motion for directed verdict was properly granted.

"Section 4. Unfair Methods of Competition and Unfair or Deceptive Acts or Practices Defined.

The following are hereby defined as unfair methods of competition and unfair or deceptive acts or practices in the business of insurance:

"(9) Unfair Claim Settlement Practices.

Committing or performing with such frequency as to indicate a general business practice any of the following.

(a) misrepresenting pertinent facts or insurance policy provisions relating to coverages at issue;

(b) failing to acknowledge and act reasonably promptly upon communications with respect to claims arising under insurance policies;

(c) failing to adopt and implement reasonable standards for the prompt investigation of claims arising under insurance policies;

(d) refusing to pay claims without conducting a reasonable investigation based upon all available information;

(e) failing to affirm or deny coverage of claims within a reasonable time after proof of loss statements have been completed;

*629(f) not attempting in good faith to effectuate prompt, fair and equitable settlements of claims in which liability has become reasonably clear;

(g) compelling insureds to institute litigation to recover amounts due under an insurance policy by offering substantially less than the amounts ultimately recovered in actions brought by such insureds;

(h) attempting to settle a claim for less than the amount to which a reasonable man would have believed he was entitled by reference to written or printed advertising material accompanying or made part of an application;

(i) attempting to settle claims on the basis of an application which was altered without notice to, or knowledge or consent of the insured;

(j) making claims payments to insureds or beneficiaries not accompanied by statement setting forth the coverage under which the payments are being made;

(k) making known to insureds or claimants a policy of appealing from arbitration awards in favor of insureds or claimants for the purpose of compelling them to accept settlements or compromises less than the amount awarded in arbitration;

(l) delaying the investigation or payment of claims by requiring an insured, claimant, or the physician of either to submit a preliminary claim report and then requiring the subsequent submission of formal proof of loss forms, both of which submissions contain substantially the same information;

(m) failing to promptly settle claims, where liability has become reasonably clear, under one portion of the insurance policy coverage in order to influence settlements under other portions of the insurance policy coverage;

(n) failing to promptly provide a reasonable explanation of the basis in the insurance policy in relation to the facts or applicable law for denial of a claim or for the offer of a compromise settlement.” An Act Relating to Unfair Methods of Competition and Unfair and Deceptive Acts and Practices in the Business of Insurance, § 4(9), in Ashley, Bad-Faith Actions Liability and Damages, Appendix I, pp 2, 6-7.

The Supreme Courts of Pennsylvania, Kansas, Minnesota, New Hampshire, Oregon, and the intermediate appellate courts of Illinois, and federal district courts in perceived application of Illinois law, have relied on statutory provisions in declining to award emotional distress damages or to recognize a common-law cause of action.

The Pennsylvania Supreme Court, in D’Ambrosio v Pennsylvania National Mutual Casualty Ins Co, 494 Pa 501, 507-509; 431 A2d 966 (1981), said that the insured may not supplement remedies in the Pennsylvania Unfair Insurance Practice Act by an action to obtain damages for emotional distress.

In Kansas, the legislative provisions authorizing certain penalties, including imposition of costs and attorney fees, against an insurer for lack of good faith were seen as sufficient remedies and as an indication that the legislature did not intend damages for emotional suffer*630ing to be recoverable by an insured through a tort action for bad faith. See Spencer v Aetna Lite & Casualty Ins Co, 227 Kan 914, 923-924; 611 P2d 149 (1980).

The Minnesota Supreme Court, in Haagenson v National Farmers Union Property & Casually, n 2 supra, denied emotional distress damages, but the insured was entitled to recover the ten percent statutory penalty for delay in payment of no-fault benefits.

In Lawton v Great Southwest Fire Ins Co, 118 NH 607, 613-615; 392 A2d 576 (1978), the availability of legislative remedies militated against the recognition of an independent action in tort for an insurer’s wrongful refusal to settle or delay in settling a first-party insurance claim.

The Oregon Supreme Court rejected a claim for emotional distress damages in the third party context saying "[i]t was certainly not intended by the legislature that additional pressure to perform the contract be exerted by allowing the recovery of damages for emotional distress, since the statute provides for civil damages recoverable by the state for that purpose.” Farris v United States Fidelity & Guaranty Co, 284 Or 453, 458; 587 P2d 1015 (1978).

And the Illinois appellate court said, "[Wjhere the legislature has provided a remedy on the subject matter we are not only loathe but in addition harbor serious doubts as to the desirability and wisdom of implementing or expanding the legislative remedy by judicial decree.” Debolt v Mutual of Omaha, n 5 supra. Accord Smith v Metropolitan Life Ins Co, 550 P Supp 896, 899-900 (ND 111, 1982); Anderson v Mutual of Omaha Ins Co, 594 F Supp 726 (SD 111, 1984).

"Sec. 2026. (1) Unfair methods of competition and unfair or deceptive acts or practices in the business of insurance, other than isolated incidents, are a course of conduct indicating a persistent tendency to engage in that type of conduct and include:

(a) Misrepresenting pertinent facts or insurance policy provisions relating to coverages at issue.

(b) Failing to acknowledge promptly or to act reasonably and promptly upon communications with respect to claims arising under insurance policies.

(c) Failing to adopt and implement reasonable standards for the prompt investigation of claims arising under insurance policies.

(d) Refusing to pay claims without conducting a reasonable investigation based upon the available information.

(e) Failing to affirm or deny coverage of claims within a reasonable time after proof of loss statements have been completed.

(f) Failing to attempt in good faith to effectuate prompt, fair, and equitable settlements of claims in which liability has become reasonably clear.

(g) Compelling insureds to institute litigation to recover amounts due under an insurance policy by offering substantially less than the amounts due the insureds.

(h) Attempting to settle a claim for less than the amount to which a reasonable person would believe the claimant was entitled, by reference to written or printed advertising material accompanying or made part of an application.

*631(i) Attempting to settle claims on the basis of an application which was altered without notice to, or knowledge or consent of, the insured.

(j) Making a claims payment to a policyholder or beneficiary omitting the coverage under which each payment is being made.

(k) Making known to insureds or claimants a policy of appealing from arbitration awards in favor of insureds or claimants for the purpose of compelling them to accept settlements or compromises less than the amount awarded in arbitration.

(l) Delaying the investigation or payment of claims by requiring an insured, claimant, or the physician of either to submit a preliminary claim report and then requiring subsequent submission of formal proof of loss forms, seeking solely the duplication of a verification.

(m) Failing to promptly settle claims where liability has become reasonably clear under 1 portion of the insurance policy coverage in order to influence settlements under other portions of the insurance-policy.

(n) Failing to promptly provide a reasonable explanation of the basis in the insurance policy in relation to the facts or applicable law for denial of a claim or for the offer of a compromise settlement.” MCL 500.2026(l)(a)-(n); MSA 24.12026(l)(a)-(n).

Friedman v Dozorc, supra, p 57 (Levin, J., concurring).

"(D) Effect of Signature. The signature of an attorney or party, whether or not the party is represented by an attorney, constitutes a certification by the signer that

"(1) he or she has read the pleading;

"(2) to the best of his or her knowledge, information, and belief formed after reasonable inquiry, the pleading is well grounded in fact and is warranted by existing law or a good faith argument for the extension, modification, or reversal of existing law; and

"(3) the pleading is not interposed for any improper purpose, such as to harass or to cause unnecessary delay or needless increase in the cost of litigation.

"(E) Sanctions for Violation. If a pleading is signed in violation of this rule, the court, on the motion of a party or on its own initiative, shall impose upon the person who signed it, a represented party, or both, an appropriate sanction, which may include an order to pay to the other party or parties the amount of the reasonable expenses incurred because of the filing of the pleading, including reasonable attorney fees.” MCR 2.114.

The present rule speaks of an "appropriate sanction.” See n 28 for text. Arguably this might comprehend "all actual pecuniary loss.”

Friedman v Dozorc, supra, pp 61-62 (Levin, J., concurring).