February 23, 2017
In a recent opinion marked for publication, Shelton et al. v Auto-Owners Insurance Company, (Docket No. 328473 issued February 14, 2017), the Michigan Court of Appeals affirmed the trial court’s denial, in part, of Defendant’s motion for summary disposition based upon the fraud exclusion provision in the policy. The trial court granted summary disposition in favor of Defendant as to Plaintiff’s claims for replacement services and that decision was not appealed.
In Shelton, Plaintiff was a passenger in a single motor vehicle accident in January of 2013. She sought PIP coverage through Defendant – the insurer of the owner and operator of the vehicle in which she was a passenger – because she did not own a vehicle nor did she reside with a relative who had insurance. MCL 500.3114(4)(a). Plaintiff claimed PIP benefits that included medical expenses, and replacement services. Defendant denied payment of the claimed benefits and Plaintiff filed suit.
Defendant sought to dismiss plaintiff’s claims based upon a policy provision that stated, “We will not cover any person seeking coverage under this policy who has made fraudulent statement or engaged in fraudulent conduct with respect to procurement of this policy or to any occurrence for which coverage is sought.” Defendant relied on Bahri v IDS Prop Cas Ins Co, 308 Mich App 420,423-426; 864 NW2d 609 (2014) to argue that Plaintiff’s conduct excluded her from coverage. However in Bahri the plaintiff was the policy holder and the conduct was on its face fraudulent. In this case the Plaintiff was just a passenger who sought coverage as an occupant of a motor vehicle under MCL 500.3114(4)(a).
The Shelton Court reasoned that statutory provisions governed this case, unlike the contractual provisions that governed Bahri, because Plaintiff here was not a party to the insurance contract. It reasoned further that Plaintiff was “neither a third-party beneficiary nor a subrogee” and as a result the Plaintiff sought PIP pursuant to the No-Fault Act only. See Harris v auto Club Ins Ass’n, 494 Mich 462, 471-472; 835 NW2d 356 (2013) and Rohlman v Hawkeye Security, 442 Mich 520, 524-525; 502 NW2d 310 (1993). Therefore, the contractual fraud provision upon which Defendant relied would not bar Plaintiff from recovering PIP benefits provided by the statute.
Defendant unsuccessfully argued that the public policy warranted a departure from the statutory coverage because failure to do so would prevent insurers from the ability to deny fraudulent no-fault claims. The Court did not waiver when it stated that this argument was meritless. It reiterated that an insurer may always deny the claim. See Advocacy Org For Patients & Providers v Auto Club Ins Ass’n, 257 Mich App 365, 378; 670 NW2d 569 (2003). The Court continued by stating the claimant has the burden of proof and that meeting the burden is highly unlikely if the factfinder concludes the claim is fraud.
The Court further reasoned that unlike Bahri it was clear that questions of fact remained as to whether the Plaintiff made material misrepresentations and if those representations were made with the intent to defraud. In Shelton, Defendant relied upon an investigator’s report and some photographs (which the Court of Appeals deemed to be inadmissible) to establish that Plaintiff committed fraud. On the other hand there was testimony, medical reports, and affidavits to support Plaintiff’s claim of injury and need for medical care and assistance. The Court found that Defendant’s evidence was not sufficient to prove fraud. The overwhelming message was that Defendant’s evidence of fraud did not demonstrate beyond question that Plaintiff committed fraud. This was in stark contrast to Bahri where the insurer presented uncontested evidence of fraud.
April 20, 2017
Frederik Meijer Gardens and Sculpture Park
1000 East Beltline Ave. NE
Grand Rapids, MI 49525
An agenda will be posted soon.
May 18, 2017
Marriott Indianapolis North
3645 River Crossing Parkway
Indianapolis, IN 46240
An agenda will be posted soon.