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February 12, 2021
In the published Court of Appeals decision, Marilyn Williams et al v Farm Bureau Mutual Ins Co of Mich, the Court of Appeals held that in light of the Supreme Court’s recent decision in Meemic Ins Co v Fortson, 506 Mich 287 (2020), when fraud alleged was made post-procurement and did not influence or induce the policy’s procurement, there is no common-law or statutory basis to void or rescind a policy.
Defendant Farm Bureau’s insured, Plaintiff Marilyn Williams, sustained injuries in a motor vehicle accident and filed a claim for PIP benefits which was denied. Plaintiff filed suit, and defendant moved for summary disposition solely on the allegations of post-procurement fraud, alleging that Plaintiff violated the policy’s anti-fraud provision by making false statements regarding her employment, extent of her injuries, and her need for replacement services. The trial court granted the motion.
On appeal, the Court relied on the Meemic Court’s holding that a no-fault policy may not provide for defenses to coverage other than those provided in the No-Fault Act or that existed in common law and were not abrogated by the Act. The Meemic Court concluded that anti-fraud provisions are invalid to the extent they apply to misrepresentations or fraud that occur after the policy has been issued (post-procurement fraud) but upheld such provisions if they are limited to fraud in the inducement (pre-procurement fraud). The Williams Court reiterated that the no-fault act does not authorize insurers to void or rescind a no-fault policy on the basis of fraud or misrepresentation.
Determining whether post-procurement fraud could void a PIP policy became significant following Bahri v IDS Prop Cas Ins Co, 308 Mich App 420; 864 NW2d 609 (2014). The Williams Court believed Bahri failed to consider whether the upheld anti-fraud provision was consistent with the No-Fault Act as it was applied to fraud other than fraud in the inducement. Instead, the Bahri Court relied upon a fire insurance policy provision supported by another statute. The Williams Court believed Bahri was unrooted in precedent or statutory authority when the Bahri Court concluded a misrepresentation in a PIP claim was grounds to deny all benefits and void the contract on summary disposition. The Meemic Court declined to determine the extent Bahri survived Meemic‘s holding. The Williams Court concluded that Bahri remains good law to the extent that it applies only to cases of fraud in the inducement.
In the present case, because Plaintiff’s allegedly fraudulent statements did not induce the policy’s procurement but instead were made post-procurement, the Williams Court reversed the trial court’s grant of summary disposition in favor of Defendant. The Court noted that Plaintiff’s case involves many claims for various benefits and Defendant remained able to deny certain claims or parts of claims that were fraudulent without voiding the entire policy and attorney fees were available as a penalty for fraudulent claims. The Court also noted that while Plaintiff likely testified falsely at one or both depositions, determining the truth of Plaintiff’s claims was a jury function and the No-Fault Act makes clear these determinations must take place at the end of a trial.
Justice Kirsten Kelly authored a dissent stating that the trial court did not err in granting summary disposition and that Plaintiff’s claims were distinct from those addressed in Meemic. In Meemic, the plaintiff was an “insured person” under the policy’s resident relative provision. The plaintiff’s parents submitted bills for attendant care during a time where the plaintiff was jailed and in a drug program and plaintiff would have been denied benefits because of the purported deception by his parents, which were beyond the plaintiff’s control. Conversely, in Williams, it was Plaintiff herself, the policyholder and claimant, who initiated the suit to recover benefits, and Plaintiff herself who provided conflicting deposition testimony in an unrelated case. Plaintiff testified in the present case that she was in need of replacement services and could not work or drive after the accident, but testified in the unrelated case that she was employed to perform case management services, transportation services and replacement services for another person during the same time period. In light of this testimony, Defendant asserted that the fraud provision was applicable as Plaintiff made material misrepresentations about the extent of her injuries and ability to drive.
The dissent stated that a fraud-exclusion provision in an insurance policy may be enforced when the fraud relates to the required proof of loss for a claim. In the present case, the dissent believed Plaintiff’s conflicting testimony invoked the policy’s fraud exclusion and barred Plaintiff’s claims.