At a glance
- As drafted, Section 5511 of the Michigan Insurance Code refers to the dividing insurer, each new insurer, and affected shareholders as "it," "its," and "they," leaving a reader to work out which party each provision means.
- The ambiguity has substantive reach.
- For carriers, compliance teams, and coverage counsel handling Michigan restructurings, that pairing is the operative detail, because a cleanup of statutory grammar is only useful if the section it rewrites is the section that applies.
A 2018 Michigan statute governs what happens when one insurance company splits into two or more separate entities: how assets move, where liabilities land, and which entity holds the policies afterward. As drafted, Section 5511 of the Michigan Insurance Code refers to the dividing insurer, each new insurer, and affected shareholders as "it," "its," and "they," leaving a reader to work out which party each provision means. Representatives Carter and Wozniak introduced House Bill 6375 on September 24 to take that work out, replacing every one of those pronouns with the full noun phrase so there is no question about which entity a given provision applies to. The bill has been referred to the Committee on Finance.
The ambiguity has substantive reach. Section 5511 controls how capital, surplus, and other assets vest in the resulting insurers, who is liable for policy obligations after the split, how shares are converted or canceled, and what appraisal rights shareholders keep — which is why the source describing the bill calls a pronoun that could point to more than one entity a potential coverage dispute waiting to happen. The bill would also update a cross-reference to the Uniform Commercial Code, changing the terminal citation from MCL 440.9994 to MCL 440.12501 to reflect the code's current structure.
The clarifying language would not arrive on its own
HB 6375 carries a contingency clause: it would not take effect unless companion measure House Bill 6347 is also enacted into law, and the two are designed to move together. For carriers, compliance teams, and coverage counsel handling Michigan restructurings, that pairing is the operative detail, because a cleanup of statutory grammar is only useful if the section it rewrites is the section that applies.
If enacted, the change is narrow by construction. The rules are untouched — capital and surplus vesting, post-split liability for policy obligations, share conversion and cancellation, and appraisal rights all stay where the 2018 framework put them — and what shifts instead is the risk of a misreading when a division is litigated. The source frames the bill as continued legislative attention to that division framework, first added through Public Act 421 in 2018, even where the underlying rules remain unchanged.
That leaves the timing in the hands of legislative sequencing rather than one committee's calendar. HB 6375 is currently in the Committee on Finance and has not been enacted; the source reports that no hearings have been scheduled.
Reported by the Insurance regulation desk from Insurance Business America. Published . Corrections