The Complexities of Michigan’s Clean Slate Law and Insurance Compliance

Michigan’s Clean Slate package is now fully in effect. While the laws aim to give dignity to individuals with difficult legal histories, they’ll undoubtedly cause headaches for compliance departments tasked with overseeing onboarding and ongoing compliance for insurance producers, variable lines brokers, or adjusters.

What is the Michigan Clean Slate law?

The Clean Slate law is a package of bills Michigan Gov. Gretchen Whitmer signed into law in 2020. This group of bills created more paths for people who have past convictions to apply to have their convictions set aside. This means the conviction is dismissed, as are any penalties or ongoing legal consequences. 

This law is novel in that, not only does it provide a path forward for those with civil and criminal convictions to apply to set aside their convictions, it actually has provisions for automatically setting aside some convictions after certain time periods. And, perhaps most progressive of all, it includes some felony convictions among those earmarked for automatic setting aside.

While the law went into effect from a technical standpoint in 2021, the state had a two-year buffer to give the state police database time to update its protocols. So, effective April 11, 2023, the state began notifying other government agencies of records that should be set aside.

Now, each day, the state notifies other agencies to withdraw or amend these automatically set aside records.

What does the Clean Slate law do for individuals with criminal records?

If you have a criminal record, the state may set it aside if the conviction meets certain criteria. Having your conviction record set aside means any ongoing punishment associated with the record may be eliminated. That may mean you no longer need to make payments to the state, conduct ongoing probationary check-ins, or report your criminal history to potential employers.

The record of the conviction might not be expunged, but a background check may not return the criminal record, or, if it does, will report it as dismissed.

What activities don’t qualify to be automatically set aside in Michigan?

The state lists the following convictions as being ineligible for automatic dismissal:

• An assaultive crime.
• A serious misdemeanor.
• A crime of dishonesty.
• Any other offense that is punishable by 10 or more years’ imprisonment.
• A violation of the laws of Michigan listed under chapter XVII of the code of criminal procedure, 1927 PA 175, MCL 777.1 to 777.69, the elements of which involve a minor, vulnerable adult, injury or serious impairment, or death.
• Any violation related to human trafficking.
• Any of the following traffic offenses:
  • A conviction for operating while intoxicated committed by any person.
  • Any traffic offense committed by an individual with an endorsement on his or her operator’s or chauffeur’s license to operate a commercial motor vehicle that was committed while the individual was operating the commercial motor vehicle or was in another manner a commercial motor vehicle violation.
  • Any traffic offense that causes injury or death.

If a conviction falls outside of that list, however, it may be automatically set aside if it was a misdemeanor that was sentenced seven or more years ago or a felony conviction where your time was served a decade or more ago.

There are some nuances here regarding how many convictions you have or how long your sentence was for any given offense. 

How many people are affected by the Michigan Clean Slate law?

According to Michigan news outlets, 1 million Michiganders may benefit from the automatic set-aside provisions of the legislation. And that’s not to mention the others who’ll likely apply to have the state consider their case if it can’t be automatically set aside. 

How is the Michigan Department of Insurance handling the Clean Slate law?

The Michigan DOI has expanded the list of possible convictions that the state commissioner’s office considers evidence of “a lack of good moral character.” This would seem to indicate the Michigan DOI is presenting a few new barriers to operating in the industry, yet, the new administrative code also delivers new provisions that give insurance applicants a process to rebut their criminal records.

So, if you have a past arson charge or, say, racketeering, the state may reject your application to be an insurance producer or adjuster, but you can argue in favor of your rehabilitation and provide personal character statements from friends and employers to demonstrate the superior nature of your current character.

Why is Michigan’s Clean Slate law troubling to insurance compliance officers?

Unfortunately, with a change of this scale and involving so many entities that record and report criminal histories, there are bound to be hiccups.

Imagine you had a felony conviction back in the day. Maybe you got busted with, say, a lot of weed in 2012. And you’ve been self-disclosing this very frustrating charge and having to explain everything about it and about yourself for years.

Michigan automatically sets it aside, which is so kind. But, because it’s automatic, you don’t realize this has happened, and now, as you apply for a nonresident insurance license in Georgia, you report your old felony. But then the state runs its mandatory background check and returns no such felony record. 

Now you have an issue where you’ve overdisclosed something problematic, and your disclosure conflicts with your official record. 

Conversely, let’s imagine you decide not to report your epic Mary Jane incident. After all, you’re savvy and you know it’s being expunged from your resident state’s records. But then a carrier background check pulls old data for you, and finds an unreported old conviction.  Either scenario could be problematic for someone trying to get their insurance license, particularly in a state outside of Michigan. 

Compassion in compliance

We’re not advocating against Michigan’s Clean Slate laws; people deserve a break sometimes. Dumb choices you make decades in the past don’t always have to follow you around. But we recognize that the process of updating carrier and agency policies and different state background check requirements to mesh with the Clean Slate records may be slow and cause some yellow flags and compliance headaches in the meantime.

Hopefully, even in a legacy industry that relies on technology and repeatable processes, insurance is still enough of a relationship-driven industry that the process of updating data as records are set aside or expunged is one of human-first compassion. 

If you’re interested in more about the ways producers can lose their licenses, or in how 1033 waivers can help producers restore their ability to work in insurance, we’ve got you covered.

For carriers and agencies looking to validate data or handle fast, accurate background checks for your insurance producers, variable lines brokers, or insurance adjusters, see what AgentSync can do.