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### STATE OF MICHIGAN

COURT OF APPEALS

TYANN SHELTON,

Plaintiff-Appellee,

and

DWAYNE WILLIAMS,

Plaintiff,

and

MICHIGAN CRNAS STAFFING, LLC,

Intervening Plaintiff, FOR PUBLICATION February 14, 2017 9:00 a.m.

v No. 328473 Wayne Circuit Court AUTO-OWNERS INSURANCE COMPANY, LC No. 13-010612-NF

Defendant-Appellant.

Before: K. F. K ELLY , P.J., and G LEICHER and S HAPIRO , JJ.

S HAPIRO , J.

In this No-Fault personal injury protection (PIP) case, defend ant sought summary disposition based upon a fraud ex clusion clause in its policy. Defendant asserted that plaintiff made fraudulent statements con cerning her need for replacement services and so was excluded by the policy from all PIP benefi ts. The trial court granted s ummary disposition as to replacement services, a ruling from which plaintiff has not app ealed. 1 The trial court denied the

1 The record does not make clear the basis for the dismissal of the replacement services claim. Defendant asserts that the trial court’s decision implies that the court made a finding of fraud, and plaintiff argues the decisi on was based on a lack of proofs for the replacement services claim. Defendant refers us to the trial courts remark during th e hearing that she “[doesn’t] like people misrepresenting the truth.” However, the court also sta ted that after a review of the-2- motion as to payment for medical services and from that ruling, defendant appeals by leave granted. 2 We affirm.

Shelton alleges she was injured in a single-car collision on J anuary 22, 2013. The vehicle was owned and operated by Timothy Williams; Shelton was a passe nger. She sought PIP benefits from defendant because she did not own a vehicle nor r eside with a relative who did. Thus, defendant, as Williams’s insurer, was to provide her with those PIP benefits to which she was entitled under the No-Fault Act. MCL 500.3114(4)(a). Plai ntiff claimed PIP benefits that included medical expenses and replacement services for househol d chores, beginning in January 2013. 3 Defendant denied the claim and plaintiff brought suit.

Defendant moved for summary disposition asserting that plainti ff was not entitled to PIP benefits under an exclusionary c lause in the policy reading:

We will not cover any person seeking coverage under this policy who has made fraudulent statements or engaged in fraudulent conduct with res pect to procurement of this policy or to any OCCURRENCE for which coverage is sought.

Defendant argues that this policy exclusion applies to plainti ff despite the fact that she is not a policyholder, and that the evidence demonstrates beyond a question of fact that plaintiff engaged in fraud as defined in the policy. Defendant relies la rgely on Bahri v IDS Prop Cas Ins Co , 308 Mich App 420, 423- 426; 864 NW2d 60 9 (2014), in which we h eld that a fraud provision in an insurance contract could ba r a claim for PIP benefits whe n the policyholder filed a claim for replacement services for a date prior to the subject accide nt. However, both the law and the facts of this case differ substa ntially from those that existed in Bahri

.

plaintiff’s deposition she could not concl ude that plaintiff li ed. And in making its ruling, the trial court did not cite or discuss the elements of fraud, make findi ngs regarding those elements, or even use the word “fra ud.” Neither party a sked the court to cl arify its ruling or to make a finding of fraud. Because the dismissal of the replacemen t services cl aim has not been appealed we need not address it further.

2 Shelton v Auto-Owners Ins Co , unpublished order of the Court of Appeals, entered December 21, 2015 (Docket No. 328473).

3 Before the trial court, defendant also argued that plaintiff fraudulently misrepresented her preaccident history by failing to disclose that she made a PIP cla im following a 2005 accident. The trial court rejected the argumen t regarding the prior auto acci dent noting that plai ntiff’s statement about the 2005 accident could have simply been a mistake or a f ailure of memory and that “it really becomes an issue for the jury to decide whether or not s he’s credible.” Defendant has not argued on appeal that the trial co urt erred in its ruling as to the 2005 claim. Moreover, the materials submitted by defendant with its brief on appeal relev ant to the 2005 claim are not in the lower court record and were str icken, with consent, at oral arg ument.-3- The law governing application of the policy exclusion in Bahri is not applicable in this case. In Bahri , the provision applied to the plaintiff in that case because “ defendant issued [the subject] no-fault automobile policy to [the] plaintiff.” Bahri , 308 Mich App at 421. In this case, however, plaintiff was not a par ty to, nor an insured under, th e policy; she was injured while a passenger and because neither she nor her spouse or resident re lative had a no-fault policy, defendant was required to pay her benefits pursuant to statute, not pursuant to a contractual agreement.

The Michigan Supreme Court stated in Rohlmanv Hawkeye Security , 442 Mich 520, 524- 525; 502 NW2d 310 (1993), that

“PIP benefits are mandated by statute under the no-fault act, M CL 500.3105; MSA 24.13105, and, therefore, the statute is the ‘rule book’ fo r deciding the issues involved in questions reg arding awarding those benefits. On the other hand, the insurance policy itself . . . is the contract betwee n the insurer and the insured . . . .”

The Supreme Court adhered to this principle in Harris v Auto Club Ins Ass’n , 494 Mich 462, 471-472; 835 NW2d 356 (2013), a case involving a motorcycle-aut omobile collision. MCL 500.3114(5)(a), using language para lleling the language used in MCL 500.3114(4)(a), provided that if the injured motorcyclist, his spouse or a resident rela tive did not have a no-fault policy then his no-fault benefits would be paid by the insurer of the owner or registrant of the automobile. In Harris , the Court stated that plaintiff could not take advantage of t he uncoordinated medical benefit prov ision in the policy because h is claim did not flow from the subject policy, but “solely by statute.” Harris , 494 Mich at 472 The Court held that:

[The plaintiff] is not claiming benefits under a no-fault insur ance policy that he or anyone else procured. [He] is ne ither a third-party beneficiar y nor a subrogee of the no-fault policy issued to the person that struck him and th us he [was] not eligible to receive benefits under that policy. Rather, [the p laintiff’s] right to PIP benefits arises solely by statute. [ Id .]

Defendant’s argument is directly contrary to the grounds for th e holdings in both Rohlman and Harris. Here, as in those cases, plaintiff’s no-fault benefits are gove rned “solely by statute.” Thus, the exclusionary provision in defendant’s no-fault policy does not apply to plaintiff and cannot operate to bar pl aintiff’s claim.

This is also consistent with the text of the relevant statutes . “The primary rule of statutory construction is that, w here the statutory language is clear and unambiguous, the statute must be applied as written.” Cruz v State Farm Mut Auto Ins Co , 466 Mich 588, 594; 648 NW2d 591 (2002). Additionally, the “primary task in construing a st atute is to discern and give effect to the intent of the Legislature.” Farmers Ins Exch v Farm Bureau Gen Ins Co , 272 Mich App 106, 111; 724 NW2d 485 (2006) (citation and quotations omitted) . “[A] court must give effect to every word, phrase, and clause and avoid a construction that would render any part of the statute surplusage or nugatory.” Id

.-4- Under Subsection 1 of the no-fault priority statute, “a person al protection insurance policy . . . applies to the person named in the pol icy, the person’s spouse, and a r elative of either domiciled in the same household.” MCL 500.3114(1) (emphasis ad ded). Plaintiff is not an individual named in defendant’s policy, a person named in the p olicy’s spouse, or a relative of either the person named in defendant’s policy or his spouse. T herefore, pursuant to the statute, defendant’s policy does not “appl y” to plaintiff. Rather, plai ntiff received no-fault benefits pursuant to Subsection 4, which reads:

Except as provided in subsections (1) to (3), a person sufferin g accidental bodily injury arising from a motor vehicle accident while an occupant of a motor vehicle shall claim personal protection in surance benefits from insurer s in the following order of priority:

(a) The insurer of the owner or registrant of the vehicle occu pied.

(b) The insurer of the operato r of the vehicle occupied. [MC L 500.3114(4).]

Subsection (4) does not state that the owner or operator’s insu rance policy “applies” to the passenger’s claim for benefits, and its text, unlike that of Su bsection (1), omits any mention of a personal protection insurance policy, instead providing that the injured person is to “claim personal protection insurance bene fits from insurers,” beginnin g with “[t]he insurer of the owner or registrant of the vehicl e occupied.” MCL 500.3114(4)(a).

Defendant argues that as a matter of public policy we should d epart from the statute because if we do not, no-fault insurers will lose the ability t o deny fraudulent no-fault claims. This argument is meritless. As always, if an insurer concludes that a claim is fra udulent, it may deny the claim. 4 Should the claimant then file suit, the burden is on the clai mant to prove that he is entitled to his claimed benef its, a burden that is highly un likely to be met if the factfinder concludes that the claim is fraudulent. 5 And insurers can obtain a ttorney fees for having to litigate any claims that are de termined to be fraudulent. MCL 500.3148.

4 This Court has long held that insurers should be afforded an o pportunity to review claims for lack of coverage, excessiveness, and fraud. Advocacy Org for Patients & Providers v Auto Club Ins Ass’n , 257 Mich App 365, 378; 670 NW2d 569 (2003).

5 MCL 500.3107(1), subsections (a), (b) and (c), respectively re quire plaintiff to prove: that the medical expenses were “reasonable charges incurred for reasonab ly necessary [medical care],” that the costs for replacement services were “reasonably incurr ed in obtaining ordinary and necessary services,” and that plaintiff has lost “income from w ork [he or she] would have performed during the first 3 year s from the date of the acciden t if he or she would not have been injured.”-5- This case also presents very different facts than did Bahri

. 6 In Bahri , the insurer presented unrebutted evidence (a) that plaintiff claimed replac ement services benefits for three weeks before the auto accident even occurred ; and (b) that over a period of seven weeks she repeatedly engaged in a wide range of chores on the days for wh ich she claimed that someone else did them for her. 308 Mich App at 425-426. In this case, it is clear that a questions of fact exist as to whether plaintiff ma de material misrepresentations and, if so, whether they were made with the intent t o defraud defendant.

Reliance on an exclusionary clause in an insurance policy is a n affirmative defense and so defendant has the burden of proof. An “insurance company ha s the burden to prove that one of the policy’s exclusions applies.” Auto Owners Ins Co v Seils , 310 Mich App 132, 146; 871 NW2d 530 (2015). Thus, to obtain summary disposition the insur er must show that there is no question of material fact as to any of the elements of its affi rmative defense. The elements, as set forth in Bahri , are as follows:

6 We note that the policy language in the instant case differs s ignificantly from that in Bahri , 308 Mich App at 424-425. In Bahri , the exclusion read: “We do not provide coverage for any insured who has made fraudulent statements or engaged in fraudu lent conduct in connection with any accident or loss for which coverage is sought under this po licy.” Id . at 423-424. The exclusion in this case states:

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 to any OCCURRENCE for which coverage is sought. [Emphasis added.]

Defendant has not provided us with the policy definition of “oc currence,” but in all cases dealing with the term, it has been defined as the accident or event dur ing which the injury occurs. See,
e.g. Frankenmuth Mut Ins Co v Masters , 460 Mich 105, 112-113; 595 NW2d 832 (1999) (stating that the applicable insurance po licy defined the term “occurren ce” as “an accident, . . . which occurs during the policy period”), Group Ins Co v Czopek , 440 Mich 590, 597-598; 489 NW2d 444 (1992) (stating that the term “occurrence” was defined in t he policy as “an accident, . . . which results, during the policy term, in bodily injury or prop erty damage.”), and Mich Basic Prop Ins Ass’n v Wasarovich , 214 Mich App 319, 327-328; 542 NW2d 367 (1995) (finding that the definition of “occurrence” in the policy included an accide nt that resulted in personal injury during the policy period). Defendant has not alleged any fraud “with respect to the procurement of the policy” nor with respect to the “occurrence.” The claim ed fraud was in the reporting of services later provided, an event not referenced in the provisi on. However, as the issue was not considered below we decline to rule on this basis. Mich Ed Ass'n v Secretary of State
, 280 Mich App 477, 488; 761 NW2d 234 (2008), aff’d 489 Mich 194 (2011); People v Byrne , 199 Mich App 674, 677; 502 NW2d 386 (1993).-6- “To void a policy because the insu red has wilfully misrepresent ed a material fact, an insurer must show that (1) the misrepresentation was materia l, (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 t o the insurer's investigation of a claim. [ 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 N.W.2d 80 (1997) (citation omitted).]” [ Bahri , 308 Mich App at 424–25.]

We review de novo motions for summary disposition under MCR 2. 116(C)(10). Dressel v Ameribank , 468 Mich 557, 561; 664 NW2d 151 (2003). In doing so, we are required to view the affidavits, pleadings, depos itions, admissions, and other d ocumentary evidence in the light most favorable to the nonmovant. Liparoto Constr, Inc v Gen Shale Brick, Inc , 284 Mich App 25, 29; 772 NW2d 801 (2009). Similarly, all reasonable inferen ces must be drawn in favor of the nonmovant. Dextrom v Wexford Co , 287 Mich App 406, 415; 789 NW2d 211, lv den 488 Mich 853 (2010). Summary disposition is only appropriate under MCR 2.116(C)(10) when there is no genuine issue with respect to any material fact and the m oving party is entitled to judgment as a matter of law. Maiden v Rozwood , 461 Mich 109, 120; 597 NW2d 817 (1999). “A genuine issue of material fact exists when the record, giving the benef it of reasonable doubt to the opposing party, leaves open an issue upon which reasonable mind s could differ.” West v GMC
, 469 Mich 177, 183; 665 NW2d 468 (2003).

In support of its motion, defendant relied on an investigator’ s reports and some photographs counsel represents were taken by the investigator o n June 1. 7 Defendant argues that the photographs and investigator’s reports are sufficient to es tablish beyond a question of fact that defendant committed fraud despite the testimony, medical r eports, and affidavits that support plaintiff’s claim of injury and need for medical care and assis tance. We disagree. First, many of the photographs are so blurred an d distant that it is impossibl e to determine who is being photographed and what they are doing. Second, the descriptions in defendant’s brief are at times inconsistent with the investigator ’s reports. For example, def endant’s brief states that on June 1

7 While not raised in the briefi ng, based on the record before u s it appears that many of the documents on which defendant relie s including the three surveil lance reports and the photographs, do not meet the evid entiary requirements of MCR 2. 116(G)(6) and should not have been considered. That rule provides that “affidavits, depositi ons, admissions and documentary evidence offered in support of or in opposition to a motion bas ed on subrule (C)(1)-(7) or (10) shall only be considered to the extent that the content or substance would be admissible as evidence .” (emphasis added). The relied upon reports appear to be hear say. Their ostensible author did not testify and has not provided an affidavit that t he statements in his reports are true and that he will so testify at trial. The same is true of the photographs on which defendant relies.-7- plaintiff “is observed outstret ching both of her arms above her head to lift and pass a child.” However, the investigator’s r eport dated June 1, 2013 states th at the “claimant” being observed is “Timothy Williams,” not plaintiff, and all of the report’s refe rences to “the claimant” use the pronoun “he.” The only person that the report identifies as be ing “observed lifting the toddler” is Williams. 8 The only women referred to in that report are two “female sub ject[s]” neither of whom are identified in the report as plaintiff despite the fact that plaintiff had been watched by this investigator on two prior occasions. Moreover, the only p hotographs submitted by defendant are dated June 1, 2013, the date that the report does not identify plaintiff as being present.

Defendant also argues that pla intiff fraudulently claimed assi stance with doing laundry on June 1, because the investigator’s report states that on tha t date he saw plaintiff wringing out a shirt while on the front lawn of her home. 9 A single instance of a single shirt being wrung out does not demonstrate beyond question that plaintiff can operate a washer or dryer, carry loads of laundry or the like. Nor does it c onclusively demonstrate an i ntent to defraud. S imilarly, the fact that plaintiff was seen wal king without a visible brace 10 and was observed to bend on two occasions does not establish beyond a question of fact that she has defrauded defendant. 11 By contrast, as noted above, the insurer in Bahri presented uncontested evidence (a) that plaintiff claimed replacement services benefits for three weeks before th e auto accident even occurred; and (b) that over a period of seven weeks she repeatedly engage d in a wide range of chores on the days for which she claimed that someone else did them for h er. 308 Mich App at 425-426. While such repeated activities are sufficient to establish the elements of fraud beyond a question of fact, a single episode of wr inging out a shirt does not; nor do isolated examples of an injured person participating in simple physical actions such as bending , modest lifting, or other basic physical movements that they testify are painful or difficult. These types of inconsistencies with a claimant’s statements are not sufficient to establish any of the elements of fraud beyond a question of fact.

8 The report states, “The claim ant is also observed lifting the toddler and shaking him as he is playing with the toddler.”

9 In fact, the report is equivocal as to this fact, stating that plaintiff “ appears to be wringing it out.” (emphasis added). And there is no reference to any photo graphs or videotape to confirm even this self-serving statement.

10 Plaintiff testified that she is able to walk. She also testif ied that she always wore a back brace but stated that sometimes she w ore it under her clothing and so metimes over.

11 Defendant’s brief refers us to a passage in plaintiff’s deposi tion that is not in the record in support of its position. On that page plaintiff states that sh e “normally” wears a back brace and that if wearing a l oose fitting shirt she wears it under her sh irt. Defendant also refers us to one of the June 1, 2013 photos in which a w oman is seen carrying what appears to be a small plastic bag (contents unknown) and argues th is was inconsistent with her de position testimony. However, plaintiff testified that she c ould walk to nearby stores and th at she could lift a bag containing five regular size cans of vegetables.-8- Defendant raises an alternative argument in its reply brief, c laiming that plaintiff’s nofault claim is barred by the w rongful-conduct rule. However, “ [r]eply briefs must be confined to rebuttal, and a party may not raise new or additional arguments in its reply brief.” Kinder Morgan Michigan, LLC v City of Jackson , 277 Mich App 159, 174; 744 NW2d 184 (2007), citing MCR 7.212(G). Accordingly, we need not reach the issue. However, were we to do so, we would reject the argument. The wrongful conduct rule applie s to activities or behavior that occur prior to, and are causative of, the injury. 12 See Cervantes v Farm Bureau Gen Ins Co , 272 Mich App 410, 417; 726 NW2d 73 (2006) (st ating that “the wrongf ul conduct rule only applies if a plaintiff’s wrongful conduct is a proximate cause of his inju ries”) and see Orzel v Scott Drug Co , 449 Mich 550, 558; 537 NW2d 208 (1995) (“[The plaintiff's] in jury must have been suffered while and as a proximate result of committing an illegal act.”) (internal quotations and citations omitted). Defendant makes no such claim here.

Affirmed. We do not ret ain jurisdiction.

/s/ Douglas B. Shapiro /s/ Elizabeth L. Gleicher

12 Defendant’s brief provides no citation to cases applying the w rongful conduct rule as it seeks to do. And when asked at oral argum ent for supporting caselaw, defendant could provide none.