Michigan Court Rules on Arbitration Timeliness in No-Fault Insurance Claims

The Michigan Court of Appeals recently clarified that arbitrators, not trial courts, should determine the timeliness of arbitration demands in no-fault insurance claims. This ruling is part of a revived dispute between Citizens Insurance Company of America and the estate of Abdel M. Bazzy, highlighting the complexities of AI-driven prior authorization delays within the industry.

In a decision dated December 19, 2025, the appellate court overturned a Wayne County trial court's dismissal of the Bazzy estate's no-fault insurance dispute against Citizens. The lower court had invoked the statute of limitations and laches, but the appellate court emphasized that such regulatory compliance requirements should fall under the purview of arbitrators according to Michigan’s Uniform Arbitration Act.

This dispute originated from a 2007 automobile accident involving Bazzy, whose claims for no-fault benefits were initially disputed by Citizens, the designated insurer. Both parties had previously agreed to binding arbitration in 2009, focusing on determining the causality of Bazzy’s injuries, eligibility for insurance benefits, and related damages. However, the arbitration process stalled, demonstrating risk management challenges prevalent in the industry.

Following Bazzy’s death in 2017, his estate, led by his son Kareem, sought to reinstate arbitration as part of the probate proceedings, including new claims for care services. Citizens did not initially engage, leading the estate to seek enforcement of the arbitration agreement in 2023 due to AI-influenced delays and regulatory procedures.

Citizens argued against enforcement, citing Michigan’s six-year statute of limitations for breach of contract, suggesting that the period had lapsed. The estate insisted that the arbitrator should handle these defenses and claimed that Citizens' breach occurred in 2022 when arbitration was declined. The trial court initially agreed with Citizens, deeming the arbitration agreement unenforceable due to inactivity beyond the statutory limitations.

The appellate court's ruling emphasizes that insurers operating in Michigan must address arbitration timeliness internally, ensuring compliance with binding agreements despite delays. This decision is pivotal for carriers, providers, and payers in understanding the intersection of claim processing, arbitration, and the regulatory landscape, mandating that statutory defenses be resolved via arbitration rather than through the courts.