MARILYN WILLIAMS, Plaintiff-Appellant, and MERCYLAND HEALTH SERVICES and GREATER LAKES AMBULATORY SURGERY CENTER, Intervening Plaintiffs, v. FARM BUREAU MUTUAL INSURANCE COMPANY OF MICHIGAN, Defendant-Appellee.
No. 349903
STATE OF MICHIGAN COURT OF APPEALS
January 28, 2021
FOR PUBLICATION
Wayne Circuit Court LC No. 17-015281-NF
If this opinion indicates that it is “FOR PUBLICATION,” it is subject to revision until final publication in the Michigan Appeals Reports.
Before: GLEICHER, P.J., AND K. F. KELLY AND SHAPIRO, JJ.
Plaintiff Marilyn Williams appeals the trial court‘s order granting summary disposition in favor of defendant Farm Bureau Mutual Insurance Company of Michigan under
I. BACKGROUND
Plaintiff was injured in an automobile collision on September 1, 2016. She filed a claim for personal protection insurance (PIP) benefits with defendant, her no-fault insurer. Defendant denied the claim and plaintiff filed suit on October 20, 2017.
Defendant moved for summary disposition on the ground that plaintiff‘s policy, including her PIP coverage, was void because she had violated an antifraud provision in the policy by making false statements to defendant after her auto accident regarding her employment, the extent of her injuries and her need for assistance. Because the issue presented is purely legal, we need not recapitulate the details of the alleged fraud. The provision relied on by defendant provided that the policy would be void if a claimant made a material misrepresentation either in procuring the policy or in the course of postprocurement claims. The relevant provision in the policy reads:
The entire policy will be void if whether before or after a loss, you, any family member, or any insured under this policy has:
- Intentionally concealed or misrepresented any material fact or circumstances;
- engaged in fraudulent conduct; or
- made false statements;
relating to this insurance or to a loss to which this insurance applies.
Significantly, defendant does not claim that plaintiff committed fraud in the inducement, i.e., plaintiff did not make any material misrepresentations when applying for and purchasing defendant‘s no-fault policy. Nor does defendant claim in its motion that the evidence concerning the accident, injury and treatment, seen in the light most favorable to plaintiff, would be insufficient to qualify for PIP benefits. Defendant sought dismissal solely on the allegations of postprocurement fraud. The trial court granted the motion and this appeal followed.
II. ANALYSIS
A.
In Meemic, 506 Mich 287, the Michigan Supreme Court considered whether a no-fault insurer may rely on a contractual antifraud provision to deny a claim or void or rescind a policy when the benefits in question are those mandated by statute, such as PIP benefits, as opposed to optional coverages such as uninsured motorist coverage. The Court concluded that as to benefits mandated by the no-fault act,
Meemic Insurance Company seeks to void its policy with defendants Louise and Richard Fortson and stop paying no-fault benefits to their son. Although the benefits are mandated by statute, Meemic seeks to avoid its statutory obligations by enforcing the antifraud provision in the policy. The issue before the Court is the extent to which a contractual defense like the one here is valid and enforceable when applied to coverage mandated by the no-fault act,
MCL 500.3101 et seq. We hold that such contractual provisions are valid when based on a defense to mandatory coverage provided in the no-fault act itself or on a common-law defense that has not been abrogated by the act. Because Meemic‘s fraud defense is grounded on neither the no-fault act nor the common law, it is invalid and unenforceable. [Id. at 293 (emphasis added).]
In determining that the antifraud provision did not have a basis in the common law, the Court distinguished postprocurement fraud from fraud in the inducement:
[T]he fraudulent activity at issue here did not relate to the inception of the contract. The fraudulent attendant-care bills . . . neither induced Meemic to enter into the policy nor deceived Meemic as to the contents of the policy. Meemic could not possibly have relied on any fraudulent misrepresentations when it agreed to insure the Fortsons in 2009 because, at the time, they had not yet made any of the alleged misrepresentations. . . . In short, Meemic‘s contract-based
fraud defense fails because it is not the type of common-law fraud that would allow for rescission. [Id. at 304-305 (emphasis added).]
The Court forcefully reiterated its view that a no-fault policy may provide for nonstatutory policy-based exclusions and defenses only as to optional coverages, not mandatory ones such as PIP benefits: “[O]ne thing that is not open to debate is that the [no-fault] act governs the coverages it mandates, and the insurance policy controls coverages that are optional (i.e., not required by the act)[.]” Id. at 298. The Legislature did not include postprocurement misrepresentations among the grounds in
It is clear that the text of the no-fault act does not authorize insurers to void or rescind a no-fault policy on the basis of fraud or misrepresentation. Because fraud is not a statutory defense, the sole remaining question is whether that defense existed at common law and survived the adoption of a no-fault system. Meemic concluded that under common law, fraud constituted grounds to void a contract only as to preprocurement fraud:
[W]e must consider whether Meemic‘s fraud defense is available at common law. As we explained in [Titan Ins Co v Hyten, 491 Mich 547, 555; 817 NW2d 562 (2012)], “Michigan‘s contract law recognizes several interrelated but distinct common-law doctrines—loosely aggregated under the rubric of ‘fraud‘—that may entitle a party to a legal or equitable remedy if a contract is obtained as a result of fraud or misrepresentation.” The key phrase is “if a contract is obtained as a result of fraud or misrepresentation.” Id. at 303.
The Court continued, “At common law, the defrauded party could only seek rescission, or avoidance of the transaction, if the fraud related to the inducement to or inception of the contract.” Id. at 303-304 (emphasis in original). Thus, where the fraud alleged was not in “the inducement to or inception of the contract,” there is no common-law basis to rescind or avoid performance.
Meemic also explained that applying such antifraud provisions to mandatory coverage undermines the entire no-fault system. It stated that “[t]o allow such provisions would reduce the scope of the mandatory coverage required by the no-fault act, as supplemented by the common law. It would in short, vitiate the act.” Id. at 300 (emphasis added). And were there any doubt as to the import of its decision, the Court recapped its holding at the end of the opinion: “[W]e hold that [the] contractual antifraud provision is invalid and unenforceable because it is not based on a statutory or unabrogated common-law defense.” Id. at 317 (emphasis added).
B.
Whether postprocurement fraud could void a PIP policy has only became significant since this Court‘s decision in Bahri v IDS Prop Cas Ins Co, 308 Mich App 420, 424-425; 864 NW2d 609 (2014), which applied an antifraud provision to postprocurement fraud in a PIP case. Prior to Bahri, no case of record had ever held that false statements by a Michigan no-fault insured—other than those relevant to fraud in the inducement—were grounds to void or rescind a policy. Since Bahri, claims of fraud asserted by no-fault insurers against their insureds have become commonplace.
Bahri did not provide extensive analysis in support of its holding. Rather, it relied exclusively on Mina v Gen Star Indemnity Co, 218 Mich App 678, 686; 555 NW2d 1 (1996) rev‘d in part on other grounds 455 Mich 866; 568 NW2d 80 (1997), a fire insurance case governed by a wholly different statute,
Further, Bahri never considered whether the antifraud provision it upheld was consistent with the no-fault act insofar as it was applied to fraud other than fraud in the inducement—it merely assumed that to be the case despite the absence of supporting caselaw. And the no-fault act does provide other grounds for denial of benefits. For example, Meemic points out that ”
Contrary to defendant‘s suggestion, limiting no-fault antifraud provisions to fraud in the inducement—as required by Meemic—will not leave no-fault insurers without recourse in the event of a fraudulent claim. An insurer maintains the power to deny claims or parts of claims it believes fraudulent. The plaintiff then bears the burden of filing suit and ultimately proving that she was injured in an auto accident and that the injury resulted in reasonable and necessary medical care and other covered expenses.
Furthermore, the Legislature provided a specific remedy for postprocurement fraud in the no-fault act itself.
C.
Meemic did not consider the legal underpinnings of Bahri or the many cases that have followed it. The Supreme Court mentioned Bahri only in a footnote and declined to determine whether and to what extent that case survived its holding. The footnote does contain a suggestion that the Court might view Bahri‘s reach differently when the claimant is the named insured:
The Court of Appeals has upheld a fraud-exclusion provision when the fraud related to proof of loss on a claim rather than fraud in the procurement or execution of the policy. See Bahri v IDS Prop Cas Ins Co, 308 Mich App 420, 425; 864 NW2d 609 (2014); but see Shelton [v Auto-Owners Ins Co], 318 Mich App 648, 652-655; 899 NW2d 744 (2017) (limiting Bahri to when the claimant is an insured under the defendant‘s policy). A leading treatise has explained that “to avoid a policy on the ground of fraud or false swearing in the proof of loss, the statement in question must be material.” 13A Couch, Insurance, 3d (2019 rev ed), § 197:18, pp 48-49. In this case, however, because there is no allegation of fraud in relation to Justin‘s claim for benefits, the Court need not address the issue of whether and to what extent fraud related to proof of loss can justify voiding the policy. Moreover, because this case involves fraud by someone other than the claim beneficiary, the Court need not address whether a clause voiding a policy for postprocurement fraud would be valid as applied to fraud by an individual who is both a policyholder and the claim beneficiary. [Meemic, 506 Mich at 307 n 15.]
Despite this hint that Bahri might survive in some form if the claimant was also the policy holder, the Court resoundingly rejected such an approach later in the opinion by explaining that the claimant‘s relation to the policy did not alter its conclusion
[T]he correct framework for deciding this case has nothing to do with the now-abrogated innocent third-party doctrine. . . . The dispositive question in this case turns upon the nature of the common-law fraud defense—specifically, that it must relate to the contract‘s inception—which is irrelevant to [the claimant‘s] status as a third party. [Id. at 310 n 17.]
Thus, Meemic did not turn on the fact that the claimant was not a party to the contract, but on the holding that antifraud provisions may not be applied to PIP claims, other than fraud in the inducement.
By addressing Bahri only tangentially and declining to adopt its holding, the Meemic Court left it to our Court to sort out what now remains of Bahri.4 We conclude that Bahri remains good law only to the extent that it is consistent with the no-fault act and common law as explained in Meemic. In other words, it applies only in cases of fraud in the inducement.5
Our dissenting colleague focuses much of her argument on the evidence of statements made by plaintiff that appear to be false. We agree that given the evidence before us, plaintiff likely testified falsely at one or both depositions. Sorting out the truth is a jury function, however. And here, the task is complicated by the fact that determining whether plaintiff was truthful may hinge on an assessment of the credibility of others, including her friend for whom she testified in a separate case. Moreover, this case does not involve a single claim for benefits, but many such claims. Sorting out whether plaintiff testified falsely about her eligibility for replacement care benefits, for example, does not tell us whether she was entitled to recover medical benefits for reasonable and necessary medical care. Assessing truth and weighing evidence are not within a judge‘s purview under
We agree with the dissent that plaintiff‘s statements are fodder for impeachment and some are likely admissible as substantive evidence. The question in this case is not whether plaintiff committed postprocurement fraud—that is an inherently fact and credibility-driven analysis. The question is whether the fraud provision in defendant‘s policy is enforceable as to postprocurement fraud so as to
III. CONCLUSION
Meemic held that antifraud provisions in no-fault policies apply to fraud in the inducement but not to allegations of
/s/ Douglas B. Shapiro
/s/ Elizabeth L. Gleicher