Insurance companies can use a person's credit report to determine rates, the Michigan Supreme Court said Thursday in declaring that state regulators exceeded their authority when they banned the practice as discriminatory.

The decision ends a legal battle between insurance companies and Gov. Jennifer Granholm's administration that has reached three courts since 2005.

The industry says people with strong credit reports make fewer claims and deserve lower rates than people with weak credit reports. The Supreme Court, in a 4-3 ruling, said Michigan law allows companies to offer people with good credit lower rates.

"It is difficult to see how offering discounts to some insureds on the basis of good insurance scores is inconsistent with the (law's) general purpose of availability and affordability of insurance for all consumers," Justice Maura Corrigan wrote in the majority opinion.

Travelers Cos. had been named in lawsuits alleging that it tried to hide dangerous health effects of asbestos. The company argued that asbestos claims must be paid out of a trust created by Johns Manville in the 1980s and approved by a federal bankruptcy judge.

Asbestos is a mineral that was commonly used until the mid-1970s in insulation and fireproofing material. Exposure can increase the risk of lung cancer, mesothelioma and other ailments, according to federal health agencies.

Travelers settled with several groups of plaintiffs in 2004 with the caveat that federal courts make clear the company would not have to face any new similar lawsuits. The 2nd U.S Circuit Court of Appeals overturned lower-court approval of the settlement, saying a bankruptcy judge lacked the authority to act so broadly.

The high court on Thursday overturned that decision and sent the case back to the New York-based federal appeals court.

A Barry County judge has ruled that Michigan regulators must stop their practice of denying auto and home insurance rate filings that are based in part on credit scoring.

Friday's ruling by Circuit Judge James Fisher is a victory for the insurance industry in an ongoing dispute with the Michigan Office of Financial and Insurance Regulation. But it may just be temporary because the overall case likely is headed to the Michigan Supreme Court.

Gov. Jennifer Granholm's administration implemented rules to ban the use of credit scores in rate setting in 2005. Insurance companies sued to keep those rules from taking effect.

Insurers and regulators have been fighting in court since.

U.S. District Judge Kurt Engelhardt ruled that a batch of lawsuits on behalf of hundreds of plaintiffs against the federal government and several trailer manufacturers can't be handled as a class action because each person's claim is unique and must be examined individually.

Government tests found elevated levels of formaldehyde in many of the trailers that housed victims of Katrina and Rita after those powerful hurricanes clobbered the Gulf Coast in 2005. Formaldehyde is a preservative that can cause breathing problems and is classified as a carcinogen.

Lawyers for the storm victims accuse trailer makers of using shoddy materials and building methods in a rush to meet the government's demand for emergency housing for the displaced. The attorneys had argued that a class-action lawsuit would efficiently resolve all the cases from Louisiana, Texas, Mississippi and Alabama that Engelhardt is presiding over in New Orleans.

But the judge said the cases involve hundreds of trailer models made by dozens of companies and occupied by people with varying medical histories and symptoms.

"Each plaintiffs' claims and alleged injuries will require an examination of individual evidence," Engelhardt wrote in a 50-page ruling.

Tony Buzbee, one of the lead lawyers for plaintiffs, said he respects the judge's decision but hasn't ruled out an appeal.

Minnetonka, Minn.-based UnitedHealth reported a 28 percent drop in third-quarter profit, driven in part by higher operating costs, lower investment income and settlements for class-action lawsuits. The second-largest U.S. health insurer said its net earnings fell to $920 million, or 75 cents per share, in the quarter ending Sept. 30, down from $1.28 billion, or 95 cents per share, in the same quarter last year.

But UnitedHealth also said revenue rose 8 percent to $20.2 billion from $18.7 billion a year ago.

Its adjusted profit was 73 cents per share, excluding a 2-cent benefit from a change in the estimate of net costs to settle a couple stock option-related lawsuits.

That matched Wall Street expectations. Analysts polled by Thomson Reuters also expected $20.04 billion in revenue.

Company shares rose to $23.75, up from a previous closing price of $21.67.

Goldman Sachs analyst Matthew Borsch said the insurer's results wound up 3 cents per share above his firm's estimate. Overall, the results show a "significant improvement" over the first half, Borsch said in a research note.

He also noted that the company's investment portfolio "remains sound and conservatively positioned."

UnitedHealth saw its total operating costs rise 12 percent to $18.6 billion due mainly to an 11 percent rise in medical costs.

The company also saw a 52 percent drop in investment income to $143 million from $302 million in the quarter.

UnitedHealth normally is the first large managed-care company to release earnings each quarter and is seen by many as a bellwether for the sector.

The company announced in July an $895 million payout to settle a class-action lawsuit over options backdating, a problem it has been wrestling with since 2006. The issue had led to the forced departure of former CEO Bill McGuire, who helped build UnitedHealth into a managed-care powerhouse.

The insurer agreed to settle a class-action lawsuit led by the California Public Employees Retirement System and Alaska Plumbing and Pipefitting Industry Pension Trust. The plaintiffs had argued that options backdating cost shareholders money.

UnitedHealth also agreed to pay $17 million to resolve another suit related to the Employee Retirement Income Security Act.

Sher won a jury verdict in state Civil District Court that put the firm on the hook for the cost of repairs. The state's 4th Circuit Court of Appeal also sided with Sher in November.

Now Sher's case is one of two scheduled to be heard Tuesday by the state's highest court that have high-stakes implications for Louisiana's insurance market.

Both cases going before the Louisiana Supreme Court involve disputes over policy language between insurance companies and property owners after 2005 hurricanes Katrina and Rita.

Lafayette and other insurers say their homeowner policies don't cover damage from any type of flooding, including water from a levee breach. "A flood is a flood, without regard to cause," said Jim Whittle, assistant general counsel for the American Insurance Association.

In a separate but similar case last year, the 5th U.S. Circuit Court of Appeals in New Orleans ruled that insurers aren't obligated to cover water damage from a levee failure.

Last week, the U.S. Supreme Court declined to hear appeals in that case from Xavier University and dozens of other Louisiana policyholders.

James Garner, one of Sher's lawyers, said the federal courts shouldn't have the last word in the dispute over damage from a levee breach. "One thing is certain: the Louisiana Supreme Court makes Louisiana law, not the 5th Circuit," Garner said.

The state Supreme Court also was scheduled to hear arguments Tuesday in a case centered on Louisiana's Valued Policy Law, which applies when a home is destroyed.

Mark and Barbara Landry, whose Vermilion Parish home was demolished during Hurricane Rita, sued Louisiana Citizens Property Insurance Corp. after the company denied their claim. The Landrys argued that the Valued Policy Law requires Citizens to cover all of the damage to their home, even if only part of the damage was caused by wind — a covered peril — while the rest was caused by flood water — a non-covered peril.

Citizens and other insurers say their policies cover damage from wind but not rising water, including wind-driven storm surge, and deny that the Valued Policy Law obligates them to pay for flood damage.

Patsy Bates, 52, a hairdresser from Lakewood, had been left with more than $129,000 in unpaid medical bills when Health Net Inc. canceled her policy in 2004.

On Friday, arbitration judge Sam Cianchetti ordered Health Net to repay that amount while providing $8.4 million in punitive damages and $750,000 for emotional distress.

"It's hard to imagine a situation more trying than the one Bates has had to endure," Cianchetti wrote in the decision. "The rug was pulled out from underneath, and that occurred at a time when she is diagnosed with breast cancer, one of the leading causes of death for women."

Bates, a mother of two, said she screamed when she heard about the damage award.

"I am elated," she said.

Bates' attorney William Shernoff said he wanted other insurers to take notice of the award.

"We are going to put a stop to this practice," he said.

Health Net said it was implementing a freeze on policy cancelations that would last until the company sets up a third-party review panel to scrutinize cases.

"Obviously we regret the way that this has turned out, but we are intent on fixing the processes to maintain the public trust," spokesman David Olson said.

The award came a day after the Los Angeles city attorney sued Health Net, claiming it illegally canceled the coverage of about 1,600 patients. City Attorney Rocky Delgadillo also said the company illegally ran an incentive program in which it paid bonuses to an administrator for meeting targets of policy cancelations.

Health Net acknowledged that such a program existed in 2002 and 2003 but was subsequently scrapped.

"It's hard to imagine a policy more reprehensible than tying bonuses to encourage the recision of health insurance that helps keep the public well and alive," Cianchetti wrote in the Bates decision.

Bates had been insured with another company but was persuaded to switch over to a Health Net policy after an agent suggested she could save money.

She said she had undergone surgery to remove a tumor and had received her first two chemotherapy treatments when doctors stopped treating her because her bills were going unpaid.

"I was devastated. I didn't know what was going to happen," Bates said. "It's boggling that someone can do that to you."

Bates went on to complete her cancer treatment through a state-funded program.

Health Net also said it would review its practices and the way its brokers and agents are trained.