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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- Appellant, UNPUBLISHED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/Cross

Appellee.

Before: O’B RIEN

, P .J., and C AVANAGH and S TEPHENS , JJ.

P ER C URIAM

.

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 plaintiff

appellee/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, w e reverse and rema nd 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 h er 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. M arci 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 s he undergo speech and occupational therapy evaluations.- 2

- 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 ser vices claimed included 140 hours of dog walking and 13 instances of grocery shopping from August 23, 2013 to October 31, 2013 . HOIC’s claim s adjuster Leslie Donahue with the assistance of special investigation unit investigator Michael Gilmore, ordered

su rveillance 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 misrepresent ations 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 seek ing 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 cl aiming 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 affirm ative 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 e ffort 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 suff ered 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 a ppeal, 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 tri al whether or not fraud was committed thereby voiding plaintiff’s coverage in its en tirety. 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

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

II. SUM MARY 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 2.11 6 (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, includi ng “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.- 3

- The tria l court did not err when it denied both HOIC’s and plaintiff’s motions for summary disposition

. The court properly determin ed that the three days of video surveillance conducted of plaintiff did not conclusively establish that the plaintiff made misrepresentation s 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 misrepr esentation 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 inten tion 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 defend ant, 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, a nd 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 201 3 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 define d 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 y et 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 vid eo 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

co nduct 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 represen tations made in connection with her claim for replacement services for dog walking and grocery shop ping assistance were- 4

- fraudulent because her specific claims were not continuous . Instead she made claims for services only on specific days. Also, while th e 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 item s.

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 subje ct auto accident itself

. 1 HOIC has not alleged that plaintiff made any fraudulent

stateme nt s 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

. W hile 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 pa rty 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.

II I

. EXCLUSION OF EVIDENC E

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 ev idence 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/Cross

Appellant Joint Brief on Appeal, p. 1]- 5

- 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)

.

T he 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 MC L

500.3148 (2) which reads:

An insurer may be allowed by a court an award of a reasonable sum a gainst 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 Mic h 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 suppo rted 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 pl aintiff 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

un der the fraud provision.

Accordingly, b ecause 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 fact s nor argue at trial that plaintiff committed fraud.

W e 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- 6

- retain jurisdiction.

/s/ Colleen A. O'Brien /s/ Mark J. Cavanagh /s/ Cynthia Diane Stephens