Carvan Jackson v. Meemic Insurance Company, unpublished, September 17, 2020, Michigan Court of Appeals

On September 17, 2020, the Michigan Court of Appeals issued an opinion, finding that the trial court properly granted Meemic’s Motion for Summary Disposition. The opinion discusses two relevant topics: a claimant’s self-representation while having retained counsel, and fraud, respectively. This summation focuses on the fraud aspect of the opinion.

Fraud

Defendant moved for summary disposition of plaintiff’s claims based on a fraud-provision in the insurance policy, arguing that plaintiff signed and submitted fraudulent claims for replacement and attendant care services allegedly provided by his wife. The claims were fraudulent because Plaintiff’s claims alleged the services were rendered by his wife during the time when she was receiving treatment for a stroke she recently had suffered, thus she could not have provided the alleged services to Plaintiff. In response to the trial court’s questions, Plaintiff conceded that he submitted pre-signed forms for these claims, and that his wife never provided those services. The trial court granted summary disposition in favor of Defendant on the grounds that Plaintiff had triggered the fraud-provision in the insurance policy when he signed and submitted claims for replacement and attendant care services provided by his wife.

It was undisputed that the subject insurance policy included a provision according to which the “entire Policy” was rendered void in the event that any insured person “intentionally concealed or misrepresented any material fact or circumstance relating to . . . any claim made under it.”

The Court distinguished this case from the recent Michigan Supreme Court decisions in Meemic v Fortson, _ Mich _ (2020) (Docket No. 158302) and Haydaw v Farm Bureau Ins Co, _ Mich App _ (2020) (Docket No. 345561).

In Jackson, the false statements were made by the insured, not by third-party attendant care providers. Whereas in Fortson, the false statements were made by third-party providers. Thus, the court found that Forston did not control Jackson.

The court in Jackson distinguished Haydaw because the false statements in Jackson “were made in the form of a direct claim for payment of benefits under the insurance contract.” The court did not expand on that statement. However, the court in Jackson found the application of the fraud-exclusion provision to be proper since Plaintiff conceded fraud to the trial court, and failed to challenge the substantive bases underlying the trial court’s decision to grant defendant summary disposition in connection with plaintiff’s claims. Plaintiff did not suggest there was any question that his wife was incapacitated by a stroke for several weeks, overlapping in time when Plaintiff claimed she rendered services to him. Nor did Plaintiff make issue of his admission that he and his wife predated the signed services claim calendars at issue, or of his having later submitted calendars revised to avoid attributing compensable actions to his wife in the immediate aftermath of her stroke. As the trial court stated, and the appellate court affirmed there was “clearly fraud”. The appellate court affirmed the decision to grant Defendant’s motion for summary disposition, allowing Defendant to properly rely on the fraud-provision in the insurance policy.

Butross Dawood Fashho v Liberty Mutual Ins Co _ Mich App _ (for publication) (September 17, 2020) (Docket No 349519)

In Butross, before litigation began, Plaintiff claimed wage-loss benefits of $800/week. Plaintiff claimed that before the accident, he earned $800/week for working on cars, changing tires, picking up tires from other automotive businesses for disposal, loading and unloading trucks, picking up automotive parts from various stores, traveling to and from the junkyard, carrying various tools related to his auto-repair business, and assisting customers. Plaintiff claimed that when he returned to work after the accident, he was unable to do most of those things; he just focused on “dealing with customers” and his “managerial functions.”

Based upon Plaintiff’s claims, Defendant paid wage loss benefits to Plaintiff for some time. During the time Defendant was paying wage loss benefits to Plaintiff, Defendant performed surveillance on the Plaintiff to evaluate whether his wage loss claims had merit. In sum, the surveillance showed that plaintiff was capable of performing many, if not all, of the tasks Plaintiff claimed he could not. Defendant then invoked the fraud provision in the insurance policy, which effectively gave Defendant the right to deny benefits in the event that Plaintiff made misrepresentations in its application or engaged in fraudulent behavior at any time during the policy period. Defendant also ceased the payment of benefits.

Plaintiff filed a PIP complaint against defendant for improper denial of benefits. During his deposition, Plaintiff stated his need for wage loss benefits was truthful, which covered the time the video surveillance was taken by Defendant. Defendant filed a motion for summary disposition, relying on the video surveillance and the deposition testimony. The trial court granted Defendant’s motion for summary disposition, agreeing with the Defendant as to the application of the fraud-provision stated in the insurance policy. Plaintiff appealed. On appeal, the court affirmed the trial court’s decision granting Defendant’s motion for summary disposition.

The Court distinguished Butross from Haydaw, and provided insight into the interpretation of the Supreme Court’s decision in Haydaw. As stated in Butross, Haydaw stands for the proposition that an insurer cannot assert that it denied a claim because of fraud that occurred after litigation began. This does not mean that a defendant cannot rely on evidence of fraud obtained after litigation commences. It simply means that the evidence must relate to fraud that took place before the proceedings began.

Unlike Haydaw, the Plaintiff in Butross made fraudulent representations before litigation commenced, and Defendant rejected Plaintiff’s claim for benefits on the basis of surveillance evidence, which served as proof as to plaintiff’s fraudulent behavior before litigation commenced. Plaintiff’s false deposition testimony made after litigation began only reaffirmed Defendant’s initial determination that plaintiff made a fraudulent misrepresentation about needing wage-loss benefits. The court found that Haydaw does not control this case because Defendant’s basis for denial was obtained and asserted before litigation began. Thus, the Michigan Court of Appeals agreed with Defendant’s argument that the fraud-provision was properly applied, giving merit to a proper grant of Defendant’s motion for summary disposition.

Implications of these cases moving forward

A key takeaway from the Michigan Court of Appeals opinion in Jackson is that if a plaintiff-insured makes fraudulent statements in submitting a claim for benefits to an insurer, the defendant-insurer may successfully rely on the policy’s fraud-provision to deny those fraudulent claims and/or seek dismissal as to those claims. This is distinguishable from the Michigan Court of Appeals opinion in Fortson. In Fortson, the court found that a fraud-provision does not apply to a party seeking PIP benefits when the fraudulent activity was conducted by third-party providers who submitted falsified documents for replacement and attendant care services, rather than by the plaintiff-insured.

A key takeaway from the Michigan Court of Appeals opinion in Butross is that it provides a clear interpretation of the court’s Haydaw decision. As stated in the Butross, Haydaw simply recognizes the reality that a plaintiff-insured only commences suit after the defendant-insurer denies the plaintiff’s claim, and that denial cannot possibly be based on an event that has not yet taken place. However, this does not mean that a defendant cannot rely on evidence of fraud obtained after litigation commenced. Rather, it simply means that the evidence must relate to fraud that took place before the proceedings began. As was the case in Butross, an insurer may rightfully rely on the fraud-provision of an auto-insurance policy to dismiss a case when the insurer gathers surveillance proving plaintiff’s fraudulent activity before litigation began. Further, if a plaintiff subsequently commences a lawsuit because of an insurer’s denial of benefits, a defendant-insurer may rely on subsequent, fraudulent deposition testimony to support its motion for summary disposition, so long as the testimony relates to pre-litigation proof of fraudulent activity.

While some may have believed Haydaw and Fortson negated the use of fraud-provisions under Michigan law, Butross and Jackson certainly provide ample support for insurers to implement fraud-provisions in their policies. Moving forward, the Michigan Court of Appeals affirms the use of a fraud provision to grant a motion for summary disposition if insurers are able to obtain evidence of fraud by the underlying claimant before litigation commences (Butross). Additionally, the Michigan Court of Appeals allows the application of the fraud-provision to support a motion for summary disposition if a claimant partakes in actual fraud, even during litigation, by predating and signing attendant care and replacement services forms (Jackson). The Michigan Court of Appeals upheld such rulings in Butross and Jackson, respectively. It is important to note that the Court of Appeals in Jackson affirmed the trial court’s grant of summary disposition as to all of the plaintiff’s PIP claims based on application of the fraud exclusion and the plaintiff’s fraudulent statements in his claims for household and attendant care services. Therefore, it appears that the Court still is willing to apply fraud exclusions to grant summary disposition as to all PIP claims, even if the fraudulent statement/conduct only relates to certain claims. It should be noted, however, that Jackson is an unpublished case by which the Court will not be bound in future decisions.

With respect to Butross, which is a published case and therefore subject to the rules of stare decisis, it is unclear whether the Court dismissed any claims other than those supported by fraudulent statements—in that case wage loss claims. The Court indicates in the opinion that the plaintiff filed suit to recover payment of “PIP benefits,” that the trial court granted summary disposition based on the conclusion that the defendant could “deny coverage to plaintiff pursuant to the policy’s fraud exclusion,” and that the defendant had the “contractual right to deny coverage on plaintiff’s claim.” This language appears to indicate that the defendant insurer was permitted to deny all of the plaintiff’s PIP claims based on the plaintiff’s fraudulent statements associated with his wage loss claim and application of the fraud exclusion in the policy. Future plaintiffs, however, may try to limit the holding of Butross to only the claim(s) that is supported by fraudulent statements, and more information as to the PIP claims at issue in Butross would be vital to understanding the full scope of the Butross decision.

Q & A:

What if a claim is not denied before litigation commences?

· If a claim is denied after litigation commences, there is still a possibility that a court will dismiss a cause of action for denial of benefits, giving weight to a fraud-provision stated in the insurance policy. Jackson supports this notion as the fraudulently filled out forms in that case were not submitted until after litigation commenced.

What if an insurer obtains evidence of fraud and denies payment of benefits all during litigation?

· The answer is not entirely clear. However, if the evidence of fraud shows it was the Plaintiff who engaged in fraudulent behavior, rather than a third-party service provider, then a court could be inclined to grant an insurer’s motion for summary disposition supported by the application of a fraud provision. The timing of when the fraudulent activity was discovered would be irrelevant in this instance. This is supported by the Jackson opinion.

· Based on the interpretation of both Jackson and Butross, a fraud provision may be relied upon to support a motion for summary disposition in the event that it was the claimant who engaged in the fraudulent activity, and the fraudulent activity relates to actions taken before a denial of benefits imposed by the insurer.

Any information included here or through our web site is presented solely for general informational purposes and is not in any way intended as legal advice, is not a substitute for getting actual legal advice from an attorney, and should not be acted upon as legal advice without first seeking qualified professional counsel specific to your needs and situation. Additionally, by providing this general information and the information on our web site, no attorney client relationship is created.

Breathing Life Into The Fraud Defense

Key Contacts

Related Services