Case Title: PETER CRUZ JR V STATE FARM MUTUAL AUTOMOBILE INS CO

Citation: 

Docket Number: 117505

State: michigan

Court: Michigan Supreme Court

Date: 2002-07-17T00:00:00Z

Document:
_____________________________________________________________________________________________ 
____________________________________________________________________________________________________________________________ 
___________________________________ 
Michigan Supreme Court 
Lansing, Michigan 48909 
C hief Justice 
Justices 
Maura D. Corrigan  
Michael F. Cavanagh 
Elizabeth A. Weaver 
Marilyn Kelly 
Clifford W. Taylor 
Robert P. Young, Jr. 
Opinion 
Stephen J. Markman 
FILED JULY 17, 2002  
PETER CRUZ, JR.,  
Plaintiff-Appellee,  
v  
No. 117505  
STATE FARM MUTUAL AUTOMOBILE  
INSURANCE COMPANY,  
Defendant-Appellant.  
BEFORE THE ENTIRE BENCH  
TAYLOR, J.  
We granted leave to appeal to consider whether the  
inclusion of an examination under oath (EUO) provision in an  
automobile no-fault insurance policy is permitted under the  
Michigan no-fault insurance act.  MCL 500.3101 et seq.  We  
hold that EUO provisions may be included in no-fault policies,  
but are only enforceable to the extent that they do not  
conflict with the statutory requirements of the no-fault act.  
Because the insurer in this matter, State Farm Mutual  
Automobile Insurance Company, impermissibly sought to enforce  
the EUO as a condition precedent to its duty to pay no-fault  
benefits, this brought the EUO provision into conflict with  
the requirements of the no-fault statute. The EUO provision  
must yield to the statute.  Accordingly, the Court of Appeals  
judgment in favor of plaintiff is affirmed, albeit for  
different reasons.  
I  
Plaintiff was injured in an automobile accident while  
driving a car insured by State Farm.  The State Farm no-fault  
policy provided coverage for no-fault benefits as required by  
the no-fault act, as well as coverage for bodily injury that  
was caused by an uninsured motorist and assorted other  
standard coverages such as comprehensive and collision  
coverages.  After the accident, plaintiff submitted a claim  
under the policy for both no-fault personal injury protection  
(PIP) benefits and for uninsured motorist bodily injury  
benefits.
 He provided State Farm with what has been  
acknowledged by State Farm1 to be reasonable proof of the fact  
and of the amount of the loss sustained (the statutory  
requirement of what an insured must give to the insurer to  
make benefits payable pursuant to MCL 500.3142[2] of the no­
fault act).  Notwithstanding this compliance by the insured  
1State Farm conceded at oral argument that it was 
“provided with the information that the statute requires. 
[State Farm was] given I was injured on such and such a date, 
this is what happened, these are my injuries, here are my 
medical providers, here is the authorization for my wage loss. 
That’s enough to allow a carrier in most cases within thirty 
days to investigate that and start cutting checks.”  
2  
 
with the statutory requirement, because State Farm had in its  
policy a provision that conditioned payment of benefits on the  
submission by the insured to an EUO as often as reasonably  
asked,2 it declined to pay until the EUO was given. It was  
State Farm’s position that the parties could agree in their  
contract 
of 
insurance, 
notwithstanding 
the 
requirements 
of 
the  
statute 
regarding 
prompt payment of benefits, to condition the  
payment of benefits on the submission by plaintiff to an EUO.  
Plaintiff refused repeated requests to submit to the EUO, and,  
because of this, State Farm denied plaintiff’s claims for both  
no-fault PIP benefits and uninsured motorist benefits.  
Plaintiff then requested arbitration of his claim for  
uninsured motorist benefits pursuant to an arbitration  
provision in the uninsured motorist section of the policy.3  
State Farm refused to arbitrate on the basis, again, that  
plaintiff had, by refusing to submit to an EUO, breached a  
2The policy provided:  
2. REPORTING A CLAIM—INSURED'S DUTIES  
a. The following provision is added to item 5:  
The person making the claim also shall answer 
questions under oath when asked by anyone we name, 
as often as we reasonably ask, and sign copies of 
the answers.  
3The policy provided for arbitration of disputes that  
arose between State Farm and its insured with regard to 
uninsured motorist benefits.  Arbitration was permitted, at 
the request of either party, where the parties could not agree 
if the insured was legally entitled to collect damages from 
the owner or driver of an uninsured motor vehicle, and, if so, 
the amount of the damage. No such arbitration provision was 
contained in the no-fault benefits section of the policy.  
3  
material condition of the policy and thus could not enforce  
his right under the policy to arbitration of his claim for  
these benefits.  Moreover, State Farm argued that if plaintiff  
received an award from the arbitration panel, State Farm did  
not have to pay it because the condition precedent to any  
payment—the 
EUO—had 
not been met.  Despite defendant's refusal  
to 
participate, 
the 
arbitration 
proceeded 
with 
the 
arbitrators  
finding that plaintiff had not breached the policy by refusing  
to submit to the EUO, that the other driver was not only at  
fault, but also uninsured, and that defendant accordingly  
should compensate plaintiff for uninsured motorist damages in  
the amount of $150,000.  
Plaintiff filed suit, seeking in the first count of the  
complaint to enforce the arbitration decision regarding the  
uninsured motorist benefits, and seeking in the second count  
of the complaint an award of no-fault PIP benefits under the  
policy.  Defendant moved for summary disposition arguing that  
plaintiff’s failure to submit to the EUO was a breach of a  
condition precedent to his right to obtain either arbitration  
of his uninsured motorist claim or payment of no-fault PIP  
benefits.  The trial court granted defendant’s motion with  
respect to the uninsured motorist claim and vacated the  
arbitration award concerning that claim.  The trial judge also  
ordered plaintiff to comply with the EUO provision regarding  
both the uninsured motorist benefits claim and the no-fault  
PIP benefits claim.  
4  
 
  
Declining to proceed in the fashion the trial court had  
established for perfecting his claims, plaintiff refused to  
submit to the EUO.  Because of this, defendant sought, and  
secured from the trial court, a summary disposition order  
dismissing plaintiff’s case.  
On appeal, the Court of Appeals reversed the trial court  
in part and affirmed in part.4
 It concluded that summary  
disposition was not proper with regard to plaintiff's claim  
for no-fault PIP benefits because the no-fault act “sets forth  
the insured’s duties of cooperation, and because it does not  
provide for an EUO provision, the provision is contrary to the  
no-fault act.”  Id. at 164.  The Court further concluded that  
the trial court did not err in granting summary disposition to  
State Farm on plaintiff’s uninsured motorist benefits claim.  
The reason was that uninsured motorist benefits were not a  
statutorily mandated coverage, and thus an EUO and the rules  
concerning its use were matters the parties could agree to by  
contract.  As a result, the EUO could be enforced by having it  
stand as a condition precedent to the insurer’s duty to pay  
uninsured motorist benefits.5 
Id. at 167-169.  
Leave to appeal was granted by this Court to determine  
4241 Mich App 159; 614 NW2d 698 (2000).  
5Plaintiff has not cross-appealed the decision of the  
Court of Appeals regarding uninsured motorist benefits. 
Therefore, plaintiff’s failure to submit to the EUO precluded 
him from invoking the arbitration provision related to the 
uninsured motorist benefits section of the policy or from 
enforcing the arbitration award.  
5  
 
whether, by enacting the no-fault act, the Legislature’s  
silence regarding what the parties could agree to with regard  
to claim discovery should be held to have precluded all  
methods not mentioned, including EUOs.6  Further, if EUOs were  
not precluded, could the policy provision that conditioned  
payment of benefits on submission to an EUO take priority over  
the no-fault statute’s requirement that the insurer pay  
benefits within thirty days after receipt of proof of the fact  
and of the amount of loss sustained?  
II  
This 
case 
presents 
issues 
regarding 
statutory  
interpretation of the Michigan no-fault insurance act.  
Statutory interpretation is an issue of law that is reviewed  
de novo. 
Cardinal Mooney High Sch v Michigan High Sch  
Athletic Ass’n, 437 Mich 75, 80; 467 NW2d 21 (1991); Farm  
Bureau Mut Ins Co v Nikkel, 460 Mich 558, 563-564; 596 NW2d  
915 (1999).  The primary rule of statutory construction is  
that, where the statutory language is clear and unambiguous,  
the statute must be applied as written. 
Putkamer v  
Transamerica Ins Corp, 454 Mich 626, 631; 563 NW2d 683 (1997).  
Similarly, where contract language is neither ambiguous, nor  
contrary to the no-fault statute, the will of the parties, as  
reflected in their agreement, is to be carried out, and thus  
the contract is enforced as written.  Farm Bureau, supra at  
566-567.  
6464 Mich 873 (2001).  
6  
 
 
III  
As mentioned above, the no-fault act contains no  
reference either allowing or prohibiting examinations under  
oath.
 In order to resolve this appeal, we must first  
determine whether, given this silence, the inclusion of  
examination under oath provisions in no-fault automobile  
insurance policies is allowed. 
Further, if EUOs are  
permissible 
in 
automobile 
no-fault 
policies, 
we 
must 
determine  
if there are any limits regarding when an insurer can refuse  
to pay benefits by invoking the insured’s failure to comply  
with an insurer’s request to submit to an EUO. That is, can  
the parties contract out of the statutory duty imposed on the  
insurer to pay benefits within thirty days of receipt of the  
fact and of the amount of the loss sustained by agreeing that  
no benefits are due until an EUO is given by the insured?  
It is by now well understood that the Michigan no-fault  
insurance act is a comprehensive legislative enactment  
designed to regulate the insurance of motor vehicles in this  
state and the payment of benefits resulting from accidents  
involving those motor vehicles.  As we explained in Shavers v  
Attorney General, 402 Mich 554, 578-579; 267 NW2d 72 (1978):  
The Michigan No-Fault Insurance Act, which 
became law on October 1, 1973, was offered as an 
innovative social and legal response to the long 
delays, inequitable payment structure, and high 
legal costs inherent in the tort (or “fault”) 
liability system. 
The goal of the no-fault  
insurance system was to provide victims of motor 
vehicle accidents with assured, adequate, and  
prompt reparation for certain economic losses. The  
Legislature believed this goal could be most  
7  
 
effectively achieved through a system of compulsory  
insurance, whereby every Michigan motorist would be 
required to purchase no-fault insurance or be 
unable to operate a vehicle legally in this state. 
Under this system, victims of motor vehicle  
accidents would receive insurance benefits for  
their injuries as a substitute for their common-law 
remedy in tort.  
The Legislature realized that, with every motorist  
required to have this insurance, there were many types of  
injuries and property damage that such insurance would have to  
cover.  These included, for example, medical, hospital, and  
death benefits7, work loss8, dependent benefits9, and property  
losses10.
 To establish the methods for payment of these  
benefits, the Legislature, in MCL 500.3141, provided that the  
insurer “may require written notice to be given as soon as  
practicable after an accident involving a motor vehicle  
. . . .” 
Further, § 3142(1) provided that “[p]ersonal  
protection insurance benefits are payable as loss accrues,”  
and, of particular significance to this case, § 3142(2)  
provided that payment is overdue “if not paid within 30 days  
after an insurer receives reasonable proof of the fact and of  
the amount of loss sustained.” 
(Emphasis supplied.)  
Incentives to promptly pay were provided by § 3142(3), which  
said that overdue payments bear simple interest at a rate of  
7MCL 500.3105 and 500.3107(1)(a).  
8MCL 500.3107(1)(b).  
9MCL 500.3108(1) and 500.3112.  
10MCL 500.3121.  
8  
 
twelve percent a year.  
Thus, even though reasonable proof of loss to cause the  
payment 
of 
different 
benefits 
would 
require 
varying  
information depending on the benefit sought, once there was  
“reasonable proof of the fact and of the amount of loss  
sustained,” the statute was clear that the benefit must be  
paid in a prompt manner or the insurer was subject to the  
interest penalty because payment was overdue.  
Insurers, aware of this requirement of prompt payment,  
but also aware of their fiduciary duty to others in the  
insurance pool to not dissipate the pool’s insurance fund  
reserves 
by 
paying 
unwarranted 
benefits, 
developed 
systems 
for  
processing these matters that included, as in this case, a  
contractual right to demand an EUO.  
Examination under oath provisions, which require the  
insured to answer questions about the accident and damages  
claimed, existed in many types of insurance policies long  
before the advent of no-fault automobile insurance.  See  
Gordon v St Paul Fire & Marine Ins Co, 197 Mich 226, 230; 163  
NW 956 (1917).  Their purpose, in part, was to enable insurers  
to gather facts so as to discover and eliminate fraudulent  
insurance claims. Id.  The general difficulty of determining  
when a claim was not valid has been described in scholarly  
writings in the insurance field as being of “staggering  
9  
 
 
proportions.”11  Given this problem, and the potential ability  
of EUOs and other discovery vehicles to address it, EUOs in  
policies have been viewed favorably by courts. Gordon, supra  
at 230; Knop v Nat’l Fire Ins Co, 107 Mich 323, 327-328; 65 NW  
228 (1895); Claflin v Commonwealth Ins Co, 110 US 81, 94-95;  
3 S Ct 507; 28 L Ed 76 (1884).12  Furthermore, as beneficial  
as EUOs and similar discovery vehicles have been when employed  
in policies that may be purchased at the insured’s discretion,  
their potential value is even greater when the coverage is, as  
in this case, mandated by law. Tevo v Havlik, 418 Mich 350,  
366-367; 343 NW2d 181 (1984).13  
The Court of Appeals, however, while recognizing the  
utility of EUOs in general, found that EUOs were precluded in  
the automobile no-fault insurance context because they were  
not mentioned in the act. In our judgment, the Court was in  
error.  EUOs, or other discovery methods that the parties have  
contracted to use, are only precluded when they clash with the  
11Cf. Comment, Property insurance: A call for increased  
use of examinations under oath for the detection and  
deterrence of fraudulent insurance claims, 97 Dickinson L R 
329 (1993).  
12The Court of Appeals itself recognized this when it 
discussed the validity of the EUO in this case in the context 
of nonstatutorily required uninsured motorist insurance. 
Cruz, supra at 168-169.  
13Concern about the affordability of no-fault insurance 
has caused the Legislature over the years to amend the no­
fault act in order to reduce the scope of mandatory coverages. 
See, e.g., MCL 500.2101 et seq.  The goal was to make such 
insurance more affordable.  State Farm Fire & Casualty Co v  
Old Republic Ins Co, 466 Mich 142, 150, n 6; 644 NW2d 715 
(2002).  
10  
 
 
rules the Legislature has established for such mandatory  
insurance policies.  However, when used to facilitate the  
goals of the act and when they are harmonious with the  
Legislature’s no-fault insurance regime, EUOs in the no-fault  
context should be viewed no differently than in other types of  
policies.  In light of this reasoning, we conclude that an EUO  
that contravenes the requirements of the no-fault act by  
imposing some greater obligation upon one or another of the  
parties is, to that extent, invalid.  Thus, a no-fault policy  
that would allow the insurer to avoid its obligation to make  
prompt payment upon the mere failure to comply with an EUO  
would run afoul of the statute and accordingly be invalid.  
However, an EUO provision designed only to ensure that the  
insurer is provided with information relating to proof of the  
fact and of the amount of the loss sustained—i.e., the  
statutorily required information on the part of the  
insured—would not run afoul of the statute.14  
14The dissent asserts that the discovery devices  
specifically 
enumerated 
in 
the 
statute 
constitute 
the 
complete 
panoply of discovery tools that the Legislature intended to 
provide in connection with mandatory no-fault insurance 
coverage.
 How the dissent intuits this, for it must be 
intuition since the statute nowhere imposes such limitations 
on the contracting parties, is unclear.  Militating against 
the dissent’s intuition is the fact that the discovery methods 
provided by the act are quite limited.  Thus, should the 
dissent’s view be adopted, not only with regard to EUOs, but 
with regard generally to discovery, insurance carriers would 
lack important tools with which to root out fraud, as well as 
the means to responsibly investigate claims.  There is no  
evidence that such a goal was within the contemplation of the 
Legislature 
in 
enacting 
mandatory 
no-fault 
insurance 
coverage.  
The discovery tools provided in the statute are not  
11  
  
Our 
approach 
is 
premised on the doctrine that contracting  
parties are assumed to want their contract to be valid and  
enforceable.  Accordingly, we are obligated to construe  
contracts that are potentially in conflict with a statute, and  
thus 
void 
as 
against 
public policy, where reasonably possible,  
to harmonize them with the statute.  It was this approach that  
we utilized in our recent decision in Universal Underwriters  
Ins Co v Kneeland, 464 Mich 491, 498; 628 NW2d 491 (2001), in  
which we emphasized that, in interpreting contracts, we  
presume that the parties “intended to enter a valid,  
enforceable agreement . . . .”  We further observed that we  
give force to this presumption by preferring constructions of  
contracts “that render[] them legal and enforceable.”  Id.  
Thus, in this case, as we did in Universal Underwriters, we  
construe this contract in a manner that renders it compatible  
with the existing public policy as reflected in the no-fault  
act.15  
comprehensive. We simply cannot agree with the dissent that 
the provision of some discovery tools by the act—tools that 
address 
limited 
aspects 
of 
the 
insurer’s 
postclaim 
information 
needs—precludes the parties from contracting for the use of 
other discovery tools including those such as EUOs that enable 
insurers to directly gather information from the insured.  We  
see no basis for drawing such an implication from the language 
of the act, and the dissent offers no such basis.  
15Presumably, it was this approach to harmonizing agreed­
upon 
contract 
terms 
with 
statutory 
requirements 
when  
reasonably 
possible 
that 
caused 
the 
Commissioner 
of 
Insurance, 
pursuant to his duties under MCL 500.2236(1), to approve this 
policy with its EUO provision.  The commissioner has the duty 
to determine that all the statutory requirements of the no­
fault act are complied with in insurance policies under MCL 
500.2236(1), which forbids the issuance of any insurance  
12  
Finally, to apply these rules to this case, State Farm  
and its insured could not contract to vitiate State Farm’s  
policy or indorsement “until a copy of the form is filed with 
the insurance bureau and approved by the commissioner as  
conforming with the requirements of this act and not  
inconsistent with the law.” (Emphasis supplied.)  
Moreover, we are reinforced in our approach to this issue 
by the holdings in other jurisdictions with similar statutes.  
The Hawaii Supreme Court, for example, dealing with a 
similar statutory provision that was silent regarding EUOs, 
but that provided that “[p]ayment of no-fault benefits shall 
be made within thirty days after the insurer has received 
reasonable proof of the fact and amount of benefits accrued, 
and demand for payment thereof [Hawaii Rev Stat 431:10C­
304(3)(A)]” held that an EUO provision in a no-fault  
automobile insurance policy was permissible.  Barabin v AIG  
Hawaii Ins Co, Inc, 82 Hawaii 258, 264; 921 P2d 732 (1996).  
In New Jersey, in interpreting an analogous statute 
(“Personal injury protection coverage benefits shall be 
overdue if not paid within 60 days after the insurer is 
furnished written notice of the fact of a covered loss and of  
the amount of same,” NJ Stat Ann 39:6A-5[g]) that was also 
silent on EUOs, the appellate court reached results similar to 
that of Hawaii, i.e., that the EUOs were allowed.  New Jersey  
Automobile Full Ins Underwriting Ass’n v Jallah, 256 NJ Super 
134; 606 A2d 839 (1992).  
To the same effect, although involving an insurance 
policy provision requiring a no-fault policy holder to submit 
to an independent medical examination rather than an EUO, the 
Georgia Court of Appeals in Morris v Aetna Life Ins Co, 160 Ga  
App 484, 485; 287 SE2d 388 (1981), used reasoning in upholding 
the provision that is equally applicable to this case:  
It hardly can be argued that an insurer cannot 
investigate what reasonably appears to be a  
questionable claim simply because the underlying 
statute authorizing coverage does not mention such 
investigative rights. . . . [The insurer’s] right 
to investigate the claim was reasonable and as such 
did not constitute a limitation by an insured to 
collect a valid claim under PIP protection; neither 
was it a violation of public policy or of the 
Georgia No-Fault Act. [Citation omitted.]  
13  
 
 
duty to pay benefits in a timely fashion as required by the  
statute.  Once “reasonable proof of the fact and of the amount  
of loss sustained” was received by State Farm, it had to pay  
benefits or be subject to the penalties.  Because it is  
acknowledged that such proof was received, State Farm’s duty  
to pay benefits to its insured began thirty days thereafter.  
To the degree that the contract is in conflict with the  
statute, it is contrary to public policy and, therefore,  
invalid.  
Accordingly, on the facts here presented, defendant’s  
attempt to require plaintiff to submit to an EUO as a  
condition precedent to payment of no-fault PIP benefits was  
impermissible and, on remand, defendant must pay the PIP no­
fault benefits—as determined by the trial court—including  
arrearages 
and 
statutorily 
allowed 
penalties. 
MCL  
500.3142(3).  
The dissent characterizes our interpretation of the no­
fault act as one that “tilts the scale” in favor of the  
insurer.  More accurately, however, this decision affords  
insurers access to one potentially valuable tool to prevent  
fraud.16  Further, it does so only under circumstances that are  
16EUOs are well suited to this task because, as the 
dissent concedes:  “The primary use of an EUO is to detect 
fraud.”  Slip op at 3.  Moreover, the dissent’s assertion that 
EUOs are somehow not allowed because MCL 500.3159 allows  
court-ordered discovery concerning earnings and treatment is 
off target. 
Rather, EUOs are merely a prelitigation, 
complementary process to that allowed by § 3159 during 
litigation.  
14  
consistent with the requirements of the no-fault statute. To  
characterize this as any kind of “tilting” is to misunderstand  
the importance of eliminating fraud, not just to insurers, but  
also to those other insureds who pay higher insurance premiums  
when fraud goes undetected.  In light of these considerations,  
we do not share the dissent’s solicitude for those who refuse  
to provide insurers the information necessary to process no­
fault insurance claims knowledgeably and fairly.  
Next, the dissent, hurling the claim that this insurance  
policy 
is 
unconscionable, asserts that this opinion raises the  
quantum of proof necessary to establish a no-fault claim,  
provides a means for insurers to exploit the reasonable proof  
of loss standard, nullifies the effect of the penalty  
provision in § 3142(2), and enables insurers to avoid the  
statutory mandates by claiming an insured who has refused to  
submit to an EUO has not supplied reasonable proof.  This  
policy is not unconscionable, eloquent proof of which comes  
from the failure of plaintiff to even make such a claim.  Nor  
does this opinion provide insurers with the opportunity to  
ride roughshod over their insureds’ rights under the no-fault  
act.  Indeed, the majority, and the concurrence of Justice  
Weaver, have gone to great pains to make that clear.  
The charges leveled by the dissent to the effect that  
this ruling will (1) facilitate insurers avoiding their  
obligations to pay benefits, (2) circumvent the act’s penalty  
provision for slow payment, and (3) undermine the purpose of  
15  
 
 
the act, are irresponsible.  We have unequivocally declared  
that EUOs may not be used to avoid the prompt payment  
requirement or to avoid penalties, and have specifically  
rejected defendant’s attempt to use their EUO in such a  
manner.  The dissent’s cavalier distortion of our opinion,  
when our holding is as clear as it is, is dismaying.  
IV  
We affirm, on different reasoning, the Court of Appeals  
decision reversing summary disposition in favor of defendant  
on plaintiff's count seeking no-fault PIP benefits and remand  
to the trial court for further proceedings consistent with  
this opinion.  
CORRIGAN, C.J., and YOUNG and MARKMAN, JJ., concurred with  
TAYLOR, J.  
16  
 
 
____________________________________ 
S T A T E 
O F 
M I C H I G A N  
SUPREME COURT  
PETER CRUZ, JR.,  
Plaintiff-Appellee,  
v 
No. 117505  
STATE FARM MUTUAL AUTOMOBILE  
INSURANCE COMPANY,  
Defendant-Appellant.  
WEAVER, J. (concurring).  
I agree with the majority’s conclusion that EUO  
provisions may be included in no-fault policies, but are only  
enforceable to the extent that they do not conflict with the  
statutory requirements of the no-fault act, and that in the  
present case, the insurer impermissibly sought to enforce the  
provisions as a condition precedent to the insurer’s duty to  
pay no-fault benefits.  
I 
write 
separately to emphasize that this Court’s holding  
should not be construed as one that would permit insurers to  
avoid their duty to pay no-fault benefits by merely claiming  
in every case that an insured who refused an examination under  
oath has failed to supply reasonable proof.  
___________________________________ 
 
v 
S T A T E O F M I C H I G A N  
SUPREME COURT  
PETER CRUZ, JR.,  
Plaintiff-Appellee,  
No. 117505  
STATE FARM MUTUAL AUTOMOBILE  
INSURANCE COMPANY,  
Defendant-Appellant.  
KELLY, J. (concurring in part and dissenting in part).  
I 
agree 
with 
the majority's holding that defendant cannot  
make payment of personal injury protection (PIP) insurance  
benefits contingent on plaintiff submitting to an examination  
under oath (EUO). However, I respectfully disagree with its  
conclusion that an EUO provision that complied with the  
requirements of the no-fault act1 would be permissible.  
No example has been suggested of an EUO that would not  
conflict with the goals and purposes of the act. Therefore,  
I conclude that an EUO provision could not comply with the  
1MCL 500.3101 et seq.  
 
requirements of the no-fault act.  I would affirm the Court of  
Appeals decision that all EUO provisions are unenforceable  
under the act.  
I. Applicable Standards of Review  
This case involves questions of law and issues of  
statutory interpretation.  They are reviewed de novo, the  
primary 
rule 
of 
statutory construction being to effectuate the  
intent of the Legislature.  Where the statutory language is  
clear and unambiguous, it is generally applied as written.  
Putkamer v Transamerica Ins Corp, 454 Mich 626, 631; 563 NW2d  
683 
(1997).  Also, because the no-fault act is remedial in  
nature, it must be liberally construed in favor of the persons  
intended to benefit from it.  Turner v Auto Club Ins Ass'n,  
448 Mich 22, 28; 528 NW2d 681 (1995).  
II. Current Uses of EUO Provisions  
The parties agree that the no-fault act makes no  
reference to EUO provisions. One of the questions before us  
is whether this absence indicates a legislative intent not to  
allow EUOs in the context of no-fault insurance policies.  In  
deciding this, it is important to consider the nature and  
purpose of EUOs.  
Examination under oath provisions have been held  
generally enforceable in fire insurance and homeowner's  
insurance policies. See, e.g., Yeo v State Farm Ins Co, 219  
2  
 
  
  
Mich App 254; 555 NW2d 893 (1996); Dellar v Frankenmuth Mut  
Ins Co, 173 Mich App 138; 433 NW2d 380 (1988). Their purpose  
is to enable an insurer to gather facts in determining whether  
to deny or to honor a claim. Gordon v St Paul Fire & Marine  
Ins Co, 197 Mich 226, 230; 163 NW 956 (1917).  
The EUO questioning takes place before a lawsuit is  
initiated.  Comment, Property insurance:  A call for increased  
use of examinations under oath for the detection and  
deterrence of fraudulent insurance claims, 97 Dickinson L R  
329, 334 (1993). An insurer may use it to discourage  
litigation or to promote settlement. Id.  It can be used to  
obtain information on any matter concerning the insurance  
policy and the loss.  Questions asked during an EUO are not  
deemed 
improper 
merely because they are controversial or evoke  
answers that might be used for impeachment.  Id. at 338. The  
primary use of an EUO is to detect fraud.  
The insured's compliance with an EUO provision contained  
in a property insurance policy is generally considered a  
condition precedent to recovery.2 
Id. 339. Thus, refusal to  
submit to an EUO constitutes a breach of the insurance  
contract and precludes the payment of benefits, unless the  
refusal is for cause. Gordon, supra.  
2A "condition precedent" is a fact or event that must 
take place before there is a right to performance.  Knox v  
Knox, 337 Mich 109, 118; 59 NW2d 108 (1953).  
3  
  
III. The Inapplicability of EUOs in No-Fault Insurance  
Automobile no-fault insurance is distinguishable from  
property insurance in which EUOs have been found acceptable.  
First,  motor vehicle owners in Michigan are mandated by  
statute to purchase no-fault insurance. The no-fault act is  
an expression of legislative intent to provide automobile  
accident 
victims 
with 
assured, 
adequate, 
and 
prompt  
reparation. Celina Mut Ins Co v Lake States Ins Co, 452 Mich  
84, 89; 549 NW2d 834 (1996).  To that end, the act mandates  
that every owner or registrant of a motor vehicle purchase  
personal injury protection insurance as long as the vehicle is  
driven. MCL 500.3101(1).  
When accidental bodily injury results from the use of a  
vehicle, an insurer is liable to pay benefits under this  
insurance  without regard to fault.  MCL 500.3105(1). The act  
provides that PIP benefits are payable for reasonable charges  
incurred in the care, recovery, or rehabilitation of the  
injured person.  MCL 500.3107(1)(a).  Benefits are also  
payable for loss of income for the first three years following  
the date of an accident. MCL 500.3107(1)(b).  
Of course, the insurer's liability is not without limit.  
The act expressly addresses the duties of the insured.  It  
provides numerous means by which insurers may gather  
information about the fact and the amount of a claimed loss.  
4  
A 
claimant 
has 
the 
burden 
of 
establishing 
the  
reasonableness and necessity of medical expenses and the  
amount that would have been earned had the injury not  
occurred.  See Nasser v Auto Club Ins Ass'n, 435 Mich 33; 457  
NW2d 637 (1990); Anton v State Farm Mut Auto Ins Co, 238 Mich  
App 673, 684; 607 NW2d 123 (1999).  The no-fault act also  
mandates that a claimant submit to a mental or physical  
examination when his mental or physical condition is material  
to a claim. MCL 500.3151. It requires a treating physician  
or medical institution to submit a written report of the  
history, condition, treatment, and dates and costs of  
treatment of the injured person. MCL 500.3158(2).  
With regard to proof of loss of income, MCL 500.3158(1)  
mandates that the employer of a claimant furnish a sworn  
statement of the claimant's earnings.  The insurer can seek a  
discovery order under MCL 500.3159 when there is a dispute  
regarding its right to discover facts concerning earnings or  
the claimant's "history, condition, treatment and dates and  
costs of treatment."  
The act is considered the "rule book" for deciding issues  
regarding the payment of PIP benefits.  Rohlman v Hawkeye- 
Security Ins Co, 442 Mich 520, 524-525; 502 NW2d 310 (1993).  
Despite the fact that it provides  numerous and specific means  
to obtain information about a claim, it is silent regarding  
5  
  
 
the validity of EUO provisions. It is difficult to conclude  
from that silence a legislative intent to allow EUO  
provisions.  
Even more significant is the language used in MCL  
500.3142(2):  
Personal protection insurance benefits are 
overdue if not paid within 30 days after an insurer 
receives reasonable proof of the fact and of the  
amount of loss sustained.  If reasonable proof is 
not supplied as to the entire claim, the amount 
supported by reasonable proof is overdue if not 
paid within 30 days after the proof is received by 
the insurer.  Any part of the remainder of the 
claim that is later supported by reasonable proof 
is overdue if not paid within 30 days after the 
proof is received by the insurer.  [Emphasis 
added.]  
This section is intended to penalize insurers that refuse to  
comply with the act's goal of providing prompt reparation.  
Wood v Detroit Automobile Inter-Ins Exch, 413 Mich 573, 589,  
n 17; 321 NW2d 653 (1982).  
Penalty 
interest begins to accrue when an insurer refuses  
to pay benefits for which it is liable.  MCL 500.3142(3). It  
is assessed regardless of the insurer's good faith in  
withholding benefits.  Davis v Citizens Ins Co of America, 195  
Mich App 323, 328; 489 NW2d 214 (1992).  Thus, an insurer can  
refuse to pay benefits with impunity only if the insured fails  
to file a timely claim and provide reasonable proof of loss.  
Johnston v Detroit Automobile Inter-Ins Exch, 124 Mich App  
212, 216; 333 NW2d 517 (1983). Of course, the insurer could  
6  
 
  
escape the penalty clause if it correctly deemed the proof of  
loss unreasonable, as in cases of fraud.  
It is not apparent, nor does defendant argue, that an EUO  
is needed in no-fault policies for gathering information.  Nor  
is an EUO essential to enable the insurer to detect fraud.  
The statute provides express and ample means of gathering the  
information needed to detect fraud and establish entitlement  
to benefits. 
Hence, I conclude that the absence of a  
statutory provision for EUOs indicates a legislative intent  
not to allow their use.  
IV. The Flaws in the Majority's Analysis  
The majority concludes, notwithstanding the act's  
detailed 
scheme 
for 
gathering 
information, 
that 
the  
Legislature provided inadequate means for insurers to detect  
fraud.  It assumes that EUO provisions are needed but were  
overlooked.
 However, it seems to me likely that the  
Legislature considered the importance of an insurer's need to  
detect fraudulent claims when it wrote and passed the no-fault  
act.3  
3MCL 500.3159 of the no-fault act provides:  
In a dispute regarding an insurer's right to 
discovery of facts about an injured person's 
earnings or about his history, condition, treatment 
and dates and costs of treatment, a court may enter 
an order for discovery. . . .  
(continued...)  
7  
The majority's assumption tilts the scale in favor of the  
insurer.  It allows the insurer to add to the contract a  
provision that raises the quantum of proof necessary to  
establish a no-fault claim.  Not only must the insured provide  
reasonable proof of loss, it must comply with an EUO, if  
requested.  The insured might provide reasonable proof of loss  
but refuse an EUO.  The refusal, alone, would justify an  
insurer in refusing to pay claims, protect it from the act's  
penalty provision, and shield it from suit by the insured for  
breach of contract.  
The majority's opinion sets the stage for this insurance  
abuse.  The insurer has only to assert that the claimant's  
proof of loss is not reasonable, invoke its EUO clause, and  
wait to see if the insured refuses to comply. 
This  
interpretation of the no-fault act is unconscionable.  It  
flies in the face of the act's purpose:  to provide prompt  
reparation to insureds. The act requires payment of premiums  
for mandated coverage.  The majority permits the insurer to  
disallow the insured's claims using a nonstatutory provision  
unnecessary to establish reasonable proof of a claim.  See  
3(...continued) 
If the Legislature intended the use of EUOs in no-fault 
automobile 
insurance 
policy sections, there would have been no 
need to write into the act this specific provision for 
discovery.  This is because discovery includes depositions 
which are examinations under oath supervised by the court.  
8  
Blakeslee v Farm Bureau Mut Ins Co of Mich, 388 Mich 464, 474;  
201 NW2d 786 (1972).  We should not leave open the door for  
EUOs in no-fault policy provisions in reliance on speculation  
that circumstances might arise where they would comply with  
the statutory requirements of the act.  
V. Conclusion  
The no-fault act does not permit an insurer to disallow  
claims by using an EUO, a procedural requirement that has not  
been shown as necessary to uncover fraud or the fact or amount  
of a no-fault loss.  In fact, the Legislature ignored EUO  
provisions when it wrote the no-fault act.  An insurer's  
addition of one to a policy allows it to avoid payment of  
valid 
no-fault 
claims, 
circumvent 
the 
act's 
penalty 
provision,  
and defeat suits for contract breach.  
 Presumably, in this case, if defendant had not admitted  
that plaintiff provided adequate information for it to honor  
the claim without an EUO, the majority would have ruled for  
defendant.  The majority has failed utterly to explain why its  
ruling will not permit insurers to avoid paying no fault  
benefits merely by claiming that an insured who refused an EUO  
failed to supply reasonable proof.  By leaving open this door,  
the majority undermines the act's purpose of providing prompt  
reparation to victims of automobile accidents.  
For all these reasons, I would affirm the Court of  
9  
 
Appeals determination that EUOs in no-fault automobile  
insurance policies are unenforceable.  
CAVANAGH, J., concurred with KELLY, J.  
10