Watch the full video at https://rumble.com/v1haypj-surveillance-establishes-fraud-defense.html and at https://www.youtube.com/watch?v=CTB9sk2BslY
Plaintiff appealed the district court’s order granting summary disposition in favor of defendants Home-Owners Insurance Company (“Home-Owners”), American Country Insurance Company (ACIC), and Hartford Accident and Indemnity Company (“Hartford”), with respect to Plaintiff’s claims on uninsured or underinsured motorist benefits and first party personal protection insurance (PIP) benefits under the No-fault Act, MCL 500.3101 a seq. Although the defendants disputed their priority in paying PIP benefits, the trial court did not decide the issue of priority, but instead dismissed all claims based on the anti-fraud provisions of the defendants’ respective policies.
IN Jonathan Jones v. Home-Owners Insurance Company, American Country Insurance Company, And Hartford Accident & Indemnity Company and Sharneta Hendersonno. 355118, Court of Appeals of Michigan (August 18, 2022), the Court of Appeals issued a Solomon-like decision.
This case arises out of a motor vehicle accident on October 28, 2017, in which the plaintiff’s vehicle was struck by a vehicle driven by the defendant Sharneta Henderson in Detroit. Plaintiff alleges he was driving a 2009 Ford Crown Victoria and was stopped at a red light when Henderson’s vehicle, which was traveling at a high rate of speed, ran through the red light and struck his vehicle.
The plaintiff sued all three insurance companies for recovery of no-fault PIP benefits and also uninsured or underinsured motorist benefits. All three insurance companies filed motions for summary disposition, arguing that the plaintiff’s claims were barred by anti-fraud provisions in the respective policies.
In support of their allegations of fraud, the defendants relied on surveillance evidence from February, June and July 2018, contradicting the plaintiff’s statements about the extent of his injuries and pain, his physical limitations and his inability to work. The district court found that there was no genuine issue of material fact that the plaintiff committed fraud by making material misrepresentations in its deposition and held that all three insurers were entitled to summary disposition based on the anti-fraud provisions of the policies, and accordingly dismissed. all claims against the insurers.
PRIORITY ACCORDING TO MCL 500.3114
Initially, the Court of Appeals concluded that the trial court erred by failing to address which insurer had priority to pay PIP benefits under MCL 500.3114.
The general rule is to turn to a person’s own insurer for no-fault benefits unless one of the statutory exceptions applies. An individual may be entitled to PIP benefits provided by the no-culture law even if the person is not a named insured “pursuant to a no-fault policy, and such person is not subject to the policy’s anti-fraud provisions.” Because plaintiff’s right to no-fault benefits was governed by statute, the exclusionary provision in defendant’s no-fault policy did not apply and could not bar plaintiff’s claim.
Accordingly, the Court of Appeal reversed the district court’s decision to grant summary disposition and remanded the case to determine the priority of the potential insurers, whether the plaintiff is entitled to benefits under an insurance policy, and whether the benefits arise by statute or contract.
POST PROCUREMENT FRAUD
Although the district court concluded that summary disposition was appropriate because of the anti-fraud provisions of the policies at issue, it failed to determine whether the plaintiff was considered insured with respect to the policies and whether any alleged fraud occurred to induce the policies as opposed to post-procurement fraud and whether statutory or common law defenses were available in light of the frauds in question. Looks Meemic Ins Co v. Fortson506 Mich. 287, 305; 954 NW2d 115 (2020); Williams v Farm Bureau Mut Ins Co of Mich, 335 Mich.App. 574, 578, 580; 967 NW2d 869 (2021) (holding that if the alleged fraud did not affect or induce the procuring of the policy, the anti-fraud statutes are invalid when they purport to apply to misrepresentations or fraud occurring after the policy has been issued.
UNINSURED AND UNINSURED MOTORIST BENEFITS
The plaintiff’s complaint also included claims for uninsured and underinsured motorist coverage. The policy itself will govern the interpretation of its uninsured motorist benefit provisions, which are not required by law. In cases where uninsured motorist benefits are involved, the policy definitions govern. Accordingly, because uninsured and underinsured motorist coverage is not mandated by the no-fault statute, there is no bar to applying the anti-fraud provisions of the defendant insurers’ policies as applied to that coverage.
The evidence reflects that the plaintiff made repeated statements at his December 2018 deposition regarding his pain and physical limitations following the accident, which he claimed affected his mobility and ability to lift objects and his ability to work. These statements were directly contradicted and proved to be factually incorrect by the surveillance evidence, which showed the plaintiff moving freely without apparent pain or discomfort, repeatedly lifting heavy objects into a vehicle. Accordingly, the court correctly concluded that the evidence, particularly plaintiff’s deposition testimony and the surveillance evidence, establishes that there is no genuine issue of material fact as to whether plaintiff made false and material misrepresentations, knowing the representations to be false.
False statements made during discovery do not invalidate the policy. To be clear, when an insurer fails to timely pay a claim and a lawsuit has been filed, the parties’ duty to disclose is governed by the rules of civil procedure, not the policy. A plaintiff-insured brings suit only after the defendant-insurer denies the plaintiff’s claim and the denial cannot possibly be based on an event that has not yet occurred. This does not mean that a defendant cannot rely on evidence of fraud obtained after litigation has commenced. It simply means that the evidence must relate to fraud that took place before the proceedings were commenced.
The plaintiff’s statements during his deposit, which took place after litigation commenced, cannot be used to implicate an anti-fraud provision in an insurance policy. But fraudulent statements before litigation has been properly commenced may be considered and may involve an anti-fraud provision in an insurance policy.
In this case, the plaintiff participated in a recorded interview with a representative of Home-Owners on February 16, 2018, prior to the commencement of this lawsuit. Plaintiff made all the same false statements he made in his later deposition.
At the time of his recorded statement, the plaintiff lied about the extent of his injuries and his condition which was shown to be false by the surveillance evidence.
Viewing the evidence in a light most favorable to Plaintiff, there is no genuine issue of material fact that Plaintiff made material misrepresentations about his physical limitations, including his ability to perform his daily activities, as established by the surveillance evidence to be factual incorrect and untrue. The surveillance evidence was clear, uncontroversial, and undermined plaintiff’s claim that his injuries impeded his ability to care for himself.
The evidence was also such that reasonable minds could not agree that the plaintiff made the statements during his taped interview knowing them to be false and intending that a no-fault insurer would act on them to determine his eligibility for coverage. Accordingly, the Court of Appeals concluded that the trial court did not err in dismissing the plaintiff’s claim for uninsured and underinsured motorist benefits based on the plaintiff’s fraudulent misrepresentations.
In summary, the Court of Appeal upheld the district court’s decision granting the defendant summary disposition with respect to the plaintiff’s claim for uninsured or underinsured motorist benefits, but reversed the decision to the extent that it dismissed the plaintiff’s claim for PIP benefits and remand for further trial.
The Michigan no-fault statute needs to be amended to deprive a person of benefits if he or she commits fraud in making the claim. This case allows the claimant to collect no-fault benefits even if his presentation of the claim is patently false and fraudulent. Attempts to determine the extent of these benefits – due to the frauds – will be interesting and limited. Of course, since the fraud is so obvious, Plaintiff Jones should be arrested, convicted and sentenced for insurance fraud under the state’s criminal statutes. Michigan Insurance Code Section 500.4503 and Section 500.4511 make it a crime to knowingly lie about, or conceal a material fact in connection with an insurance claim or payment made under an insurance policy. Applies to the issuance of false insurance policies and rate fixing. Also includes conspiring to do any of the above. The court should have referred Jones to the district attorney.
(c) 2022 Barry Zalma & ClaimSchool, Inc.
Barry Zalma, Esq., CFE, now limits his practice to serving as an insurance consultant specializing in insurance coverage, insurance claims management, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He practiced law in California for more than 44 years as an insurance coverage and claims attorney and more than 54 years in the insurance industry. He can be reached at http://www.zalma.com and firstname.lastname@example.org.
Subscribe and receive videos limited to Excellence in Claims Handling subscribers at locals.com https://zalmaoninsurance.locals.com/subscribe.
Subscribe to Excellence in Claims Handling at https://barryzalma.substack.com/welcome.
Write to Mr. Zalma at email@example.com; http://www.zalma.com; http://zalma.com/blog; daily articles are published on https://zalma.substack.com. Go to the Zalma On Insurance podcast at https://anchor.fm/barry-zalma; Follow Zalma on Twitter at https://twitter.com/bzalma; Go to Barry Zalma videos on Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg; Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/