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October 01, 2020
In Fashho v Liberty Mut Ins Co, ___ Mich App ___ (9/17/20), Plaintiff was injured in a motor vehicle accident on July 27, 2017, and sought PIP benefits, including wage loss benefits, from Defendant. Defendant initially paid Plaintiff’s PIP benefits and then reviewed whether Plaintiff’s PIP benefits were warranted in late 2017. Defendant had Plaintiff surveilled, and the surveillance showed Plaintiff working at his automotive repair business without any apparent restrictions. As a result of the surveillance, Defendant terminated Plaintiff’s PIP benefits based upon a fraud exclusion in its policy in January 2018. Plaintiff then filed suit to recover payment of PIP benefits.
Defendant moved for summary deposition arguing that Plaintiff’s PIP claim was barred due to the fraud exclusion in the parties’ contract. Defendant relied on Plaintiff’s testimony and the surveillance. Plaintiff asserted that his policy renewal form and declaration page did not include a fraud exclusion, and even if they did, the evidence only created a question of fact whether he made material misrepresentations intended to defraud Defendant. Plaintiff testified that for several months after the accident, he was not able to perform his job duties and that he was still unable to perform most of those duties. The trial court granted Defendant’s motion finding Plaintiff’s statements were material and false as evidenced by the surveillance, that Plaintiff knew the statements were false, and that he made them intending for Defendant to rely on them.
On appeal, the Court of Appeals held that Plaintiff’s argument regarding his policy’s lack of a fraud provision was meritless, relying on Whittlesey v Herbrand Co, 217 Mich 625; 187 NW 279 (1922). The Court in Whittlesey held that if a written contract references another writing, and the reference is made for the purpose of making such writing a part of the contract, the referenced writing is to be part of the contract. As such, the Court found the Amendment of Policy Provisions – Michigan AS 2281 05 16, which was referenced in Defendant’s declarations page, contained a fraud provision and therefore Defendant’s policy includes a fraud provision.
Regarding Plaintiff’s argument that a question of fact exists as to whether fraud occurred, the Court of Appeals noted that after the trial court granted summary disposition, the Court of Appeals issued Haydaw v Farm Bureau Ins Co, __ Mich App __; __ NW2d __ (2020) (Doc. No. 345516). The Fashho Court concluded that Haydawhas no impact on the outcome of its case, however, as Haydaw only established that when a defendant relies on evidence of fraud, the evidence must relate to fraud that took place before legal proceedings commence.
The Court found that unlike in Haydaw, Plaintiff alleged before litigation commenced that he was entitled to wage-loss benefits. Defendant rejected Plaintiff’s claims based on the surveillance, which was obtained before litigation. The Court noted that, while Plaintiff made false statements after litigation commenced, Defendant did not deny Plaintiff’s wage-loss claims because of those statements. Rather, Plaintiff’s false statements made after litigation only reaffirmed Defendant’s initial determination that Plaintiff made a material misrepresentation about needing wage-loss benefits. Further, Plaintiff made the misrepresentation with the intent that Defendant pay him wage-loss benefits.
The Court held that Defendant had a contractual right to deny coverage on Plaintiff’s claims based on Plaintiff’s pre-litigation material misrepresentations pursuant to the fraud exclusion in Plaintiff’s policy.