Michigan Court of Appeals; Docket # 342173; Unpublished
Judges Gleicher, Kelly, and Letica; per curiam
Official Michigan Reporter Citation: Not Applicable; Link to Opinion
STATUTORY INDEXING:
Insurer’s Right to Penalty Attorney Fees for Fraudulent / Excessive Claims [§3148(2)]
TOPICAL INDEXING:
Actual Fraud
Fraud/Misrepresentation
SUMMARY:
In this unanimous unpublished per curiam decision, the Court of Appeals affirmed the trial court’s grant of summary judgement in part, and reversed in part, on the issue of fraudulent claims for PIP, UM, and UIM benefits. The Court held that defendant would not be able to cut off payment of PIP benefits, but could deny payment of UM and UIM benefits, because plaintiff, herself, was not a party to the insurance policy—her rights to PIP benefits, therefore, were statutorily mandated, and not subject to the policy’s fraud-exclusion provision—and plaintiff, herself, did not file the fraudulent claims for benefits. UM and UIM benefits, however, are not statutorily mandated, and are subject to the terms of the policy. Defendant could, therefore, deny payment of such benefits.
Plaintiff was injured while operating her friend’s motor vehicle, and being uninsured, herself, submitted a claim for PIP benefits to the insurer of the vehicle. Defendant later discovered that fraudulent claims for attendant care, replacement services, and case management services had been made by plaintiff’s caregivers, and cut off plaintiff’s benefits entirely. Plaintiff then brought suit to recover PIP, UIM, and UM benefits that she alleged were due under the policy. In response, defendant moved for summary disposition on the grounds that plaintiff’s fraudulent claims triggered the policy’s fraud exclusion provision. The trial court ruled that defendant would not have to pay benefits for the fraudulent claims, but could not discontinue payment of PIP benefits altogether. Defendant would still have to pay for plaintiff’s wage-loss and medical expenses, as well as UM and UIM benefits.
The Court of Appeals affirmed the trial court’s ruling as to the fraudulent claims and the defendant’s duty to continue paying plaintiff’s wage-loss and medical expenses. Since the injured plaintiff was not, herself, the policyholder, her benefits were governed by statute, not by the language in the policy. Therefore, the fraud-exclusion provision in the policy did not apply to her. And since the fraud was perpetrated by plaintiff’s caregivers, rather than plaintiff herself, she could not be deprived of her statutory right to PIP benefits. The Court of Appeals reversed the trial court’s ruling as to UM and UIM benefits, however, because benefits under those policies are not statutorily mandated. Fraud exclusion provisions still control in regards to claims for such benefits. The Court summarized its reasoning as follows:
First, PIP benefits are statutorily mandated and cannot be abridged by contract. Bazzi, 502 Mich at 399. Second, UM and UIM coverage is not statutorily mandated, and therefore, such coverage is controlled by the language of the insurance policy. Cohen, 463 Mich at 532; Andreson, 322 Mich App at 84-85. Third, a medical or healthcare provider, although innocent of fraud, may be denied compensation for services based on an insured’s fraudulent representations for purposes of obtaining replacement services benefits. Bahri, 308 Mich App at 424-426. The medical or healthcare provider stands in the shoes of the named insured for purposes of entitlement to benefits, and therefore, cannot recover benefits that the insured is not permitted to recover. Id. at 424. In Bahri, the plaintiff was both the policyholder and the insured party. Id. at 421. Bahri sets forth the elements that must be proved to invoke a fraud exclusion in a policy. Id. at 424- 425. Fourth, an insured who is not a party to the no-fault policy, but who is eligible for benefits pursuant to the no-fault statutory priority provision, MCL 500.3114, is not subject to the policy’s fraud exclusion. Shelton, 318 Mich App at 654-656. In Shelton, the non-party claiming PIP benefits under MCL 500.3114 was also the individual who submitted the fraudulent claim for replacement services. Shelton, 318 Mich App at 651-652. Fifth, a person who is entitled to coverage under MCL 500.3114(1) (member of policyholder’s family and household) does not lose his or her statutory right to PIP benefits on the basis of fraudulent claims submitted by the policyholder. Meemic, 324 Mich App at 467.
The Court of Appeals also vacated the trial court’s rejection of defendant’s valid claim for attorney fees, and remanded that portion of the trial court’s order for further consideration.
