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S T A T E O F M I C H I G A N

C O U R T O F A P P E A L S

KARENN KELLEY,

Plaintiff-Appellee/Cross-Appellant,

UNPUBLISHED

June 28, 2018

v No. 334778

Ingham Circuit Court

HOME-OWNERS INSURANCE COMPANY, LC No. 13-001350-NI

Defendant-Appellant/CrossAppellee.

Before: O’BRIEN, P.J., and CAVANAGH and STEPHENS, JJ.

PER CURIAM.

Defendant Home-Owners Insurance Company hereinafter referred to as “HOIC” appeals 

as of right from a first final judgment and order entered August 25, 2016 awarding plaintiffappellee/cross-appellant Karenn Kelley auto no-fault PIP benefits in the amount of $29,980.20,

no-fault penalty interest pursuant to MCL 500.3142 of the No-Fault Act in the amount of 

$3,451.07, plaintiff attorney fees in the amount of $3,690, and taxable costs in the amount of 

$7,178.63. Because defendant was denied the right to present its legally supported defense of 

fraud to a jury, we reverse and remand for a new trial.

I. BACKGROUND

This case arises out of plaintiff Kelly’s August 22, 2013 motor vehicle accident. 

Following the accident, plaintiff called 911 and was taken by ambulance to Sparrow Hospital

emergency department where she complained of chest, back, and neck pain along with headache 

symptoms and pressure in her head. She was discharged after being examined and administered 

several tests which yielded no positive findings. Three days later, on August 26, 2013 plaintiff 

followed up with her primary care physician and was examined by the nurse practitioner, Shirley 

Courey, who declined to put plaintiff on disability, order household services, order attendant 

care, or refer plaintiff to a specialist. On August 27, 2013 plaintiff filled out an application for 

benefits with HOIC, stating that she was disabled as of the date of her accident although she had 

not been placed on disability by any health care professional at that time. After she filed the

initial claim, plaintiff went to see Dr. Marci Schlinger, D.O., a physical medicine and

rehabilitation specialist on September 5, 2013 with several complaints of pain, discomfort and

disabilities. Dr. Schlinger placed her on disability, referred her to a physical therapist, and

recommended that she undergo speech and occupational therapy evaluations.
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On September 6, 2013, plaintiff submitted paperwork to HOIC seeking to recover auto 

no-fault PIP benefits for medical expenses, wage loss benefits, medical mileage, and replacement 

services. The services claimed included 140 hours of dog walking and 13 instances of grocery 

shopping from August 23, 2013 to October 31, 2013. HOIC’s claims adjuster Leslie Donahue 

with the assistance of special investigation unit investigator Michael Gilmore, ordered 

surveillance on plaintiff. Portions of the three day surveillance video showed plaintiff and her 

significant other, John Kent, walking large dogs and plaintiff grocery shopping on her own. 

Taking the position that plaintiff had made fraudulent misrepresentations in connection with her 

replacement services claim, HOIC denied plaintiff’s entire claim in a letter dated November 21, 

2013. The letter made reference to the HOIC fraud provision which stated in relevant part that:

We will not cover any person seeking coverage under this policy who has made 

fraudulent statements or engaged in fraudulent conduct with respect to 

procurement of this policy or any occurrence for which coverage is sought. 

On December 10, 2013, plaintiff filed a lawsuit against HOIC claiming she was wrongly 

denied benefits. HOIC filed their answer to the complaint on January 13, 2014 raising fraud, 

pre-existing conditions, failure to comply with the terms of insurance contract, 

misrepresentation, and the wrongful conduct rule as affirmative defenses. Both parties filed 

motions for summary disposition that were subsequently denied by the trial court on June 1, 

2015. However, in its ruling the trial court ordered that HOIC was precluded from asserting a 

defense of fraud at trial in an effort to void the policy.

The case proceeded to trial on December 14, 2015. On the first day of trial, outside of 

the presence of the jury, plaintiff withdrew her replacement services claim. The jury 

subsequently returned a verdict in favor of the plaintiff finding that she had suffered accidental 

bodily injuries and that she was entitled to no-fault PIP benefits for medical treatment, wage loss, 

and no-fault penalty interest. Following trial, the trial court also ruled that plaintiff was entitled 

to recover penalty attorney fees in accordance with §3148(1) of the No-Fault Act and taxable 

costs. On appeal, defendant argues that it was entitled to summary disposition and that the trial 

court erred when it denied it the right to raise or argue at trial whether or not fraud was 

committed thereby voiding plaintiff’s coverage in its entirety. Additionally on cross-appeal, 

plaintiff argues that she was entitled to partial summary disposition as well as additional penalty 

attorney fees and taxable costs. While we disagree that either party was entitled to summary 

disposition we agree that defendant should have been able to raise its defense of fraud at trial. 

Because we are remanding for a new trial we will not address the penalty interest issue.

II. SUMMARY DISPOSITION

A trial court’s ruling on a motion for summary disposition is reviewed de novo. Bahri v 

IDS Prop Cas Ins Co, 308 Mich App 420, 423; 864 NW2d 609 (2014). A motion brought 

pursuant to MCR 2.116(C)(10) is properly granted only “if there is no genuine issue of material 

fact and the moving party is entitled to judgment as a matter of law,” Id. To determine whether 

there is a genuine issue of material fact, a court reviews the record in the light most favorable to 

the nonmoving party, including “affidavits, pleadings, depositions admissions, and other 

documentary evidence submitted by the parties.” Id. If, after such review, there remains a 

relevant factual issue on which reasonable people could disagree, the motion must be denied.
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The trial court did not err when it denied both HOIC’s and plaintiff’s motions for 

summary disposition. The court properly determined that the three days of video surveillance 

conducted of plaintiff did not conclusively establish that the plaintiff made misrepresentations of 

a material fact when submitting her claim for no-fault benefits. 

It is well settled that the burden of proving that an insured has engaged in fraud is on the 

insurer. Stein v Home-Owners Ins Co, 303 Mich App 382, 387-389; 843 NW2d 780 (2013). 

This Court has explained the requirements for establishing fraud with regard to an insurance 

policy’s fraud exclusion:

To void a policy because the insured has willfully misrepresented a material fact, 

an insurer must show that 1) the misrepresentation was material, 2) that it was 

false, 3) that the insured knew that it was false at the time it was made or that it 

was made recklessly, without any knowledge of its truth, and 4) that the insured 

made the material misrepresentation with the intention that the insurer would act 

upon it. A statement is material if it is reasonably relevant to the insurer’s 

investigation of a claim. [Bahri, 308 Mich App at 424-425 (citation omitted).]

At the summary disposition stage, it is not enough that a defendant, as movant, demonstrates that 

it has grounds to assert that plaintiff engaged in fraud; rather, it must show that there was no 

question of fact but that fraud occurred. For summary disposition to be granted, defendant must 

show that no rational trier of fact could reach a conclusion other than that plaintiff engaged in 

fraud. West v GMC, 469 Mich 177, 183; 665 NW2d 468 (2003).

HOIC argues that plaintiff made fraudulent misrepresentations in claiming replacement 

services for dog-walking assistance, and in claiming replacement services for grocery shopping 

assistance. In support of its argument, defendant offers surveillance video of plaintiff taken over 

the course of three days in October 2013 where plaintiff is observed at times briefly walking her 

dogs and doing light grocery shopping. Plaintiff disputes the claim that the video conclusively

establishes that her claim for benefits was false and, also argues that even if the claim for certain

benefits was false it does not constitute fraud as defined in the policy which would bar all

recovery and void the policy.

HOIC’s motion for summary disposition was premised on this Court’s decision in Bahri. 

In Bahri, the plaintiff claimed replacement services as PIP benefits from her insurer yet 

surveillance video taken during the time period in which plaintiff claimed replacement services 

showed plaintiff performing many actions that were “inconsistent with her claimed limitations,” 

including driving. This Court held that the surveillance video evidence belied “plaintiff’s 

assertion that she required replacement services” and “directly and specifically” contradicted 

representations made by plaintiff in seeking replacement services. Id at 426. Thus, reasonable 

minds could not differ regarding whether plaintiff had made fraudulent representations of 

material fact for the purpose of recovering PIP benefits. However, Bahri is distinguishable from 

the instant case in that there was a genuine issue of material fact regarding whether plaintiff’s 

conduct constituted fraud. While the three days of video surveillance does show plaintiff briefly 

holding the leash and walking her dogs a few steps and doing light grocery shopping at times it 

was not enough to unequivocally prove that plaintiff’s representations made in connection with 

her claim for replacement services for dog walking and grocery shopping assistance were 
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fraudulent because her specific claims were not continuous. Instead she made claims for 

services only on specific days. Also, while the video showed her briefly holding her dog’s leash 

and carrying small amounts of groceries, she was assisted in dog walking and was never shown 

carrying heavy bags of groceries or other items.

Plaintiff makes an unavailing argument that the definition of fraud under HOIC’s policy 

is wholly inapplicable to the circumstances in this case. She argues under the policy, coverage to 

an insured is barred in one of two ways: 1) in situations where the insured has made fraudulent 

statements or engaged in fraudulent conduct with respect to the “procurement” of the policy or 2) 

where the insured makes fraudulent statements or engaged in fraudulent conduct with respect to 

any “occurrence” covered under the policy. HOIC has made no claim regarding fraud in the 

procurement of the subject policy. Plaintiff argues that HOIC is precluded from voiding 

plaintiff’s entire claim on the basis of fraud because “occurrence” as used in HOIC’s policy 

refers to the subject auto accident itself.

1 HOIC has not alleged that plaintiff made any fraudulent 

statements with respect to the existence or circumstances of the accident itself. However, HOIC

asserts that the claims of injury arising out of the accident are fraudulent. While plaintiff is 

correct that “occurrence” as used in HOIC’s policy refers to the accident, the policy also goes on 

to state that “occurrence means an accident that results in bodily injury.” Thus since occurrence 

means an accident where bodily injury occurs, if no bodily injury has occurred as a result of the 

accident but the policy holder submits claims asserting that injury has occurred, this would 

constitute fraud under the provision and void the policy holder’s entire no-fault claim. 

Accordingly, contrary to plaintiff’s argument the affirmative defense of fraud was applicable to 

the circumstances of this case. 

 As noted above the defendant did present competent, albeit inconclusive, evidence that

the plaintiff made false or exaggerated claims of injury. Because plaintiff, also, presented

competent evidence that the injury claims were valid through both her own testimony and her

physician, the issue of the nature and extent of her injury was one to be determined by the trier of

fact. Neither party was entitled to summary disposition. However the court erred in removing

the question of fraud from jury consideration as discussed in the next section of this opinion.

III. EXCLUSION OF EVIDENCE

The trial court prohibited the defendant from arguing that due to fraud the entire claim

should have been dismissed. It also declined to give a jury instruction in that regard, also. The

defendant argues that this was error and we agree.

This Court reviews the trial court’s decision to admit or exclude evidence for an abuse of 

discretion. Barnett v Hidalgo, 478 Mich 151,158-159; 732 NW2d 472 (2007). However, this 

Court reviews de novo the constitutional question whether defendant was denied his right to 

 1 “Occurrence means an accident that results in bodily injury or property damage and includes, as 

one occurrence, all continuous or repeated exposure to substantially the same generally harmful 

conditions”. [Home-Owners Insurance Company’s No-Fault Policy, Exb 11, Plaintiff/CrossAppellant Joint Brief on Appeal, p. 1]
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present a defense. In re Hawley, 238 Mich App 509, 511; 606 NW2d 50 (1999); People v 

Hayes, 421 Mich 271, 278; 364 NW2d 635 (1984). A defendant has a constitutional right to 

present a defense. People v Yost, 278 Mich App 341, 379; 749 NW2d 753 (2008).

The trial court seriously impaired HOIC’s ability to effectively present a defense when it 

denied it the right to rely on a provision in the parties agreed upon contract to defend against 

plaintiff’s claims. While HOIC was permitted on paper to “contest” plaintiff’s claims, they were 

denied the right to present evidence and argument as to whether fraud was committed at trial 

because the trial court decided it would deal with the fraud issue after trial under MCL 

500.3148(2) which reads: 

An insurer may be allowed by a court an award of a reasonable sum against a

claimant as an attorney's fee for the insurer's attorney in defense against a claim

that was in some respect fraudulent or so excessive as to have no reasonable

foundation. To the extent that personal or property protection insurance benefits

are then due or thereafter come due to the claimant because of loss resulting from

the injury on which the claim is based, such a fee may be treated as an offset

against such benefits; also, judgment may be entered against the claimant for any

amount of a fee awarded against him and not offset in this way or otherwise paid.

However, the issue of fraud was a question of fact for a jury to decide in this case because it 

went to whether there was any coverage afforded to this plaintiff under policy of insurance. 

Kuebler v Equitable Life Assur Soc, 219 Mich App 1, 9; 555 NW2d 496 (1996) (stating that 

“plaintiffs are entitled to an opportunity to prove facts that would support a claim of fraud and 

reformation. Whether those facts are sufficient is up to the trier of fact.”). 

Furthermore, a defendant is entitled to have a jury instructed on defenses that are 

supported by the evidence. People v Mills, 450 Mich 61, 81; 537 NW2d 909 (1995). A review 

of the record establishes that defense counsel’s theory was supported by the evidence. Plaintiff’s 

medical records, as well as her statements contained in those records, the video surveillance, and

the deposition testimony from plaintiff and her significant other John Kent all could reasonably 

support a theory that plaintiff may have committed fraud in connection with her no-fault claim. 

The omission of the jury instruction on fraud was significant because had the jury been 

instructed as to fraud and found fraud, all of plaintiff’s coverage would have been excluded 

under the fraud provision. 

Accordingly, because HOIC was entitled to present its fraud defense to a jury and have a 

jury consider the issue of whether or not plaintiff committed fraud, the trial court did err when it 

ruled that HOIC could not present facts nor argue at trial that plaintiff committed fraud. 

We reverse and remand for a new trial with instructions that the trial court allow 

defendant to raise its fraud defense and the jury be instructed as to the issue of fraud. We do not 
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retain jurisdiction. 

/s/ Colleen A. O'Brien

/s/ Mark J. Cavanagh

/s/ Cynthia Diane Stephens