May 4, 2017
Volume XXIX, No. 9

 

COURT OF APPEALS RULES THAT APPLICATION OF FRAUD EXCLUSION IS USUALLY A QUESTION OF FACT

 By Nicholas T. Draugelis

In Hatcher v. Liberty Mutual Insurance Company (Unpub, COA No. 330062, 4/13/17), Kimberly Hatcher sued Liberty Mutual Insurance Company (“Liberty”) for no-fault benefits arising out of a November 25, 2012 motor vehicle accident. She asserted, among other things, that she was entitled to benefits including payment for a cervical discectomy and fusion surgery on December 26, 2013. She claimed she continued to suffer from symptoms related to her injuries through the present.

Liberty asserted that, even if Ms. Hatcher was injured as claimed, she was not entitled to no-fault benefits because she made fraudulent representations which violated the fraud exclusion set forth in Liberty’s policy. During her deposition, Plaintiff testified that she had never complained of neck pain prior to the November 25th motor vehicle accident. In contrast to this testimony, her medical records revealed that she had been treated for “mild neck pain” in September of 2006. In addition, Plaintiff admitted to experiencing back pain when she was “younger.” Her medical records revealed that her complaints of back pain had occurred in 2006 and Liberty argued her use of the word “younger” was meant to imply that the back pain complaints had occurred when she was “young.”

In addition to deposition testimony which was arguably inconsistent with Plaintiff’s past medical records, Liberty asserted that Plaintiff made fraudulent statements with respect to how much money she made as a home health worker before the accident and what date she became so employed. Liberty also claimed that Plaintiff’s replacement services forms were inconsistent with testimony provided by Plaintiff and her service provider. According to Liberty, Plaintiff’s service provider denied “helping Plaintiff out” and that Plaintiff “was doing it on her own” before the above-mentioned discectomy which was contrary to replacement service forms which indicated services had been performed from the date of loss onward. However, the Court of Appeals noted that the testimony cited by Liberty was taken from a portion of deposition wherein the service provider was being questioned predominantly about attendant care services including help with bathing.

The Michigan Court of Appeals cited Goldsmith v. Moskowitz, 74 Mich App 506, 518 (1977) and noted that “[i]n cases involving state of mind, such as the scienter required in fraud, summary judgment will be appropriate in relatively few instances because it will be difficult to foreclose a genuine dispute over this factual question.” The Court also cited to Mina v Gen Star Indemn. Co., 218 Mich App 678 (1996) and Bahri v IDS Prop. Cas. Ins. Co., 308 Mich App 420 (2014) for, among other things, the proposition that fraud requires “…material misrepresentation with the intention that the insurer would act upon it.”(emphasis in original)

Based upon the legal authority discussed above, the Court of Appeals ruled that summary disposition in favor of Liberty was not appropriate. The Court reasoned that the mere existence of inconsistent statements and submissions was not enough to prove fraudulent intent which was required under Mina and Bahri, supra. Because Liberty could not prove sufficient intent to defraud, it could not achieve summary disposition.

In addition, in a footnote, the Court reminded litigants that fraud must be plead as an affirmative defense, with specificity. The issue of whether Liberty raised fraud as an affirmative defense was not raised by Plaintiff on appeal and therefore was not included as part of the Court’s holding.

Nicholas is a Shareholder in our Detroit Office. He can be reached at 313.446.1530 or ndraugelis@garanlucow.com

SEMINARS

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GARAN LUCOW MILLER

INDY CITY SEMINAR

MAY 18, 2017

Marriott Indianapolis North
3645 River Crossing Parkway
Indianapolis, IN 46240

Click HERE to view the Seminar Agenda.

GARAN LUCOW MILLER IS OFFERING

A TRAVELING DEPOSITION BOOT CAMP

This complimentary Deposition Boot Camp would be presented to a group of 10 or more in your office, as a half-day session.

This is an ideal presentation for new claim representatives. Based upon decades of experience, each Boot Camp addresses the Plaintiff’s reasons and motivations for deposing claims professionals, what needs to be done to prepare for the deposition, how to conduct oneself during a deposition, and practical “do’s and don’t’s” for claims professionals before and during the deposition. Practical demonstrations and participation in role-play scenarios complement and complete the presentation.

Please contact Eileen Carty at ecarty@garanlucow.com or (248) 641-7600 to schedule a complimentary in-house presentation.

For inquires, upcoming seminars, or in-house seminar requests please contact Eileen Carty at ecarty@garanlucow.com

Sarah Nadeau, Editor of the Law Fax Publication,

is a Shareholder in our Detroit Office.

Sarah can be reached at 313.446.1530 or snadeau@garanlucow.com

 

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