Court Opinion

ID: 4655707
Source: CourtListenerOpinion
Date Created: 2021-01-29 10:06:50.755064+00
Date Added: 2024-06-11T08:00:29.783666
License: Public Domain

If this opinion indicates that it is “FOR PUBLICATION,” it is subject to
                   revision until final publication in the Michigan Appeals Reports.

                           STATE OF MICHIGAN

                             COURT OF APPEALS

MARILYN WILLIAMS,                                                   FOR PUBLICATION
                                                                    January 28, 2021
                Plaintiff-Appellant,                                9:25 a.m.
and

MERCYLAND HEALTH SERVICES and
GREATER LAKES AMBULATORY SURGERY
CENTER,

                Intervening Plaintiffs,

v                                                                   No. 349903
                                                                    Wayne Circuit Court
FARM BUREAU MUTUAL INSURANCE                                        LC No. 17-015281-NF
COMPANY OF MICHIGAN,

                Defendant-Appellee.

Before: GLEICHER, P.J., AND K. F. KELLY AND SHAPIRO, JJ.

SHAPIRO, J.

        Plaintiff Marilyn Williams appeals the trial court’s order granting summary disposition in
favor of defendant Farm Bureau Mutual Insurance Company of Michigan under MCR
2.116(C)(10), on the basis that plaintiff made a false or fraudulent statement related to her claim
for no-fault benefits in violation of an antifraud provision in its policy. In light of the Supreme
Court’s recent decision in Meemic Ins Co v Fortson, ___ Mich ___; ___ NW2d ___ (2020) (Docket
No. 158302), we reverse.

                                          I. BACKGROUND

        Plaintiff was injured in an automobile collision on September 1, 2016. She filed a claim
for personal protection insurance (PIP) benefits with defendant, her no-fault insurer. Defendant
denied the claim and plaintiff filed suit on October 20, 2017.

       Defendant moved for summary disposition on the ground that plaintiff’s policy, including
her PIP coverage, was void because she had violated an antifraud provision in the policy by making

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false statements to defendant after her auto accident regarding her employment, the extent of her
injuries and her need for assistance. Because the issue presented is purely legal, we need not
recapitulate the details of the alleged fraud. The provision relied on by defendant provided that
the policy would be void if a claimant made a material misrepresentation either in procuring the
policy or in the course of postprocurement claims. The relevant provision in the policy reads:

              The entire policy will be void if whether before or after a loss, you, any
       family member, or any insured under this policy has:

               1. Intentionally concealed or misrepresented any material fact or
               circumstances;
               2. engaged in fraudulent conduct; or
               3. made false statements;

       relating to this insurance or to a loss to which this insurance applies.

         Significantly, defendant does not claim that plaintiff committed fraud in the inducement,
i.e., plaintiff did not make any material misrepresentations when applying for and purchasing
defendant’s no-fault policy. Nor does defendant claim in its motion that the evidence concerning
the accident, injury and treatment, seen in the light most favorable to plaintiff, would be
insufficient to qualify for PIP benefits. Defendant sought dismissal solely on the allegations of
postprocurement fraud. The trial court granted the motion and this appeal followed.

                                          II. ANALYSIS

                                                 A.

        In Meemic, ___ Mich ___, the Michigan Supreme Court considered whether a no-fault
insurer may rely on a contractual antifraud provision to deny a claim or void or rescind a policy
when the benefits in question are those mandated by statute, such as PIP benefits, as opposed to
optional coverages such as uninsured motorist coverage. The Court concluded that as to benefits
mandated by the no-fault act, MCL 500.3101 et seq., a no-fault policy may not provide for defenses
to coverage other than those in the no-fault act or that existed in common law and were not
abrogated by the act. The Court unambiguously concluded that antifraud provisions are invalid to
the degree they purport to apply to misrepresentations or fraud that occur after the policy has been
issued (postprocurement fraud) but upheld such provisions as long as they are limited to fraud in
the inducement (preprocurement fraud). In the opinion’s concise opening paragraph, the Court
explained the legal problem and resolved it:

       Meemic Insurance Company seeks to void its policy with defendants Louise and
       Richard Fortson and stop paying no-fault benefits to their son. Although the
       benefits are mandated by statute, Meemic seeks to avoid its statutory obligations
       by enforcing the antifraud provision in the policy. The issue before the Court is the
       extent to which a contractual defense like the one here is valid and enforceable
       when applied to coverage mandated by the no-fault act, MCL 500.3101 et seq. We
       hold that such contractual provisions are valid when based on a defense to
       mandatory coverage provided in the no-fault act itself or on a common-law defense

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       that has not been abrogated by the act. Because Meemic’s fraud defense is
       grounded on neither the no-fault act nor the common law, it is invalid and
       unenforceable. [Id. at ___; slip op at 1-2 (emphasis added).]

In determining that the antifraud provision did not have a basis in the common law, the
Court distinguished postprocurement fraud from fraud in the inducement:

       [T]he fraudulent activity at issue here did not relate to the inception of the contract.
       The fraudulent attendant-care bills . . . neither induced Meemic to enter into the
       policy nor deceived Meemic as to the contents of the policy. Meemic could not
       possibly have relied on any fraudulent misrepresentations when it agreed to insure
       the Fortsons in 2009 because, at the time, they had not yet made any of the alleged
       misrepresentations. . . . In short, Meemic’s contract-based fraud defense fails
       because it is not the type of common-law fraud that would allow for rescission. [Id.
       at ___; slip op at 17-18 (emphasis added).]

        The Court forcefully reiterated its view that a no-fault policy may provide for nonstatutory
policy-based exclusions and defenses only as to optional coverages, not mandatory ones such as
PIP benefits: “[O]ne thing that is not open to debate is that the [no-fault] act governs the coverages
it mandates, and the insurance policy controls coverages that are optional (i.e., not required by the
act)[.]” Id. at ___; slip op at 6. The Legislature did not include postprocurement
misrepresentations among the grounds in MCL 500.3113 on which a court may conclude that the
claimant is not entitled to PIP benefits, though it could readily have been included.1

       It is clear that the text of the no-fault act does not authorize insurers to void or rescind a
no-fault policy on the basis of fraud or misrepresentation. Because fraud is not a statutory defense,
the sole remaining question is whether that defense existed at common law and survived the
adoption of a no-fault system. Meemic concluded that under common law, fraud constituted
grounds to void a contract only as to preprocurement fraud:

       [W]e must consider whether Meemic’s fraud defense is available at common law.
       As we explained in [Titan Ins Co v Hyten, 491 Mich 547, 555; 817 NW2d 562
       (2012)], “Michigan’s contract law recognizes several interrelated but distinct
       common-law doctrines—loosely aggregated under the rubric of ‘fraud’—that may
       entitle a party to a legal or equitable remedy if a contract is obtained as a result of

1
  The grounds set forth in MCL 500.3113 are the knowing use of an unlawfully taken vehicle,
MCL 500.3113(a), a failure to carry the security required by MCL 500.3101 or 500.3103 on the
vehicle involved in the accident, MCL 500.3113(b), or when a claimant is an out-of-state occupant
of a vehicle not registered in Michigan that was not insured by an insurer that has filed a
certification in compliance with MCL 500.3163, see MCL 500.3113(c). And notably, in MCL
500.3173a(4) the Legislature has demonstrated that it knows how to adopt legislation making
postprocurement fraud grounds for denial of a claim. That statute provides that, as to claims filed
with the Michigan automobile insurance placement facility, provision of material false information
renders the claimant ineligible for benefits and classifies such an act as a fraudulent insurance act
under MCL 500.4503.

                                                  3
       fraud or misrepresentation.” The key phrase is “if a contract is obtained as a result
       of fraud or misrepresentation.” Id. [Id. at ___; slip op at 13.]

The Court continued, “At common law, the defrauded party could only seek rescission, or
avoidance of the transaction, if the fraud related to the inducement to or inception of the contract.”
Id. at ___; slip op at 13-14 (emphasis in original). Thus, where the fraud alleged was not in “the
inducement to or inception of the contract,” there is no common-law basis to rescind or avoid
performance.

        Meemic also explained that applying such antifraud provisions to mandatory coverage
undermines the entire no-fault system. It stated that “[t]o allow such provisions would reduce the
scope of the mandatory coverage required by the no-fault act, as supplemented by the common
law. It would in short, vitiate the act.” Id. at ___; slip op at 10 (emphasis added). And were there
any doubt as to the import of its decision, the Court recapped its holding at the end of the opinion:
“[W]e hold that [the] contractual antifraud provision is invalid and unenforceable because it is
not based on a statutory or unabrogated common-law defense.” Id. at ___; slip op at 24 (emphasis
added).

        In the instant case, the allegedly fraudulent statements were made postprocurement and did
not influence or induce the policy’s procurement. The rule of law clearly set forth in Meemic
requires that we reverse the trial court.

                                                 B.

       Whether postprocurement fraud could void a PIP policy has only became significant since
this Court’s decision in Bahri v IDS Prop Cas Ins Co, 308 Mich App 420, 424-425; 864 NW2d
609 (2014), which applied an antifraud provision to postprocurement fraud in a PIP case. Prior to
Bahri, no case of record had ever held that false statements by a Michigan no-fault insured—other
than those relevant to fraud in the inducement—were grounds to void or rescind a policy. Since
Bahri, claims of fraud asserted by no-fault insurers against their insureds have become
commonplace.

        Bahri did not provide extensive analysis in support of its holding. Rather, it relied
exclusively on Mina v Gen Star Indemnity Co, 218 Mich App 678, 686; 555 NW2d 1 (1996) rev’d
in part on other grounds 455 Mich 866; 568 NW2d 80 (1997), a fire insurance case governed by a
wholly different statute, MCL 500.2833. That statute not only permits insurers to incorporate
antifraud provisions in their policies, its plain text requires fire insurance policies to include a
provision “[t]hat the policy may be void on the basis of misrepresentation, fraud, or concealment.”
MCL 500.2833(1)(c). Such a clause in a fire insurance policy is entirely consistent with the
controlling statute. However, Mina provides no support for the notion that such a clause is
consistent with the no-fault act, which does not contain such language. And Bahri neglected to
examine or explain why no-fault insurance policies should be governed by a fire insurance statute
containing critical language missing from the no-fault act. Indeed, the inclusion of a fraud remedy
in MCL 500.2833 reflects the Legislature’s awareness that such provisions are warranted in certain
circumstances, and strongly suggests that the Legislature deliberately adopted a different approach

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when it enacted the no-fault act.2 In sum, by concluding that a single misrepresentation in the
course of a PIP claim was ground to deny all benefits and void the contract on summary
disposition, Bahri announced a rule of law unrooted in precedent or statutory authority.

         Further, Bahri never considered whether the antifraud provision it upheld was consistent
with the no-fault act insofar as it was applied to fraud other than fraud in the inducement—it merely
assumed that to be the case despite the absence of supporting caselaw. And the no-fault act does
provide other grounds for denial of benefits. For example, Meemic points out that “MCL 500.3113
lists several of . . . these circumstances, including, for example, when a person willingly operates
an unlawfully taken vehicle or operates a vehicle as to which he or she was an excluded operator.
The no-fault act, however, does not provide a fraud defense to PIP coverage.”3 Id. at ___; slip op
at 12 (emphasis added).

       Contrary to defendant’s suggestion, limiting no-fault antifraud provisions to fraud in the
inducement—as required by Meemic—will not leave no-fault insurers without recourse in the
event of a fraudulent claim. An insurer maintains the power to deny claims or parts of claims it
believes fraudulent. The plaintiff then bears the burden of filing suit and ultimately proving that
she was injured in an auto accident and that the injury resulted in reasonable and necessary medical
care and other covered expenses.
        Furthermore, the Legislature provided a specific remedy for postprocurement fraud in the
no-fault act itself. MCL 500.3148(2) permits an insurer to recoup attorney fees “in defending
against a claim that was in some respect fraudulent or so excessive as to have no reasonable
foundation.” The fact that the no-fault act provides a specific mechanism for relief in the context
of a fraudulent claim further supports that materially different remedies created by the insurance
policy are not valid. “It is a general rule of law in Michigan that when a statute creates a new right
or imposes a new duty having no counterpart in the common law the remedies provided in the
statute for violation are exclusive and not cumulative.” Ohlsen v DST Indus, Inc, 111 Mich App
580, 583; 314 NW2d 699 (1981), citing Pompey v General Motors Corp, 385 Mich 537; 189
NW2d 243 (1971).
                                                      C.
       Meemic did not consider the legal underpinnings of Bahri or the many cases that have
followed it. The Supreme Court mentioned Bahri only in a footnote and declined to determine

2
  The only other case cited in Bahri was TBCI PC v State Farm Mut Auto Ins Co, 289 Mich App
39; 795 NW2d 229 (2010). But that case did not address whether or not antifraud provisions were
permissible in no-fault policies. The question in TCBI was whether a prior jury’s finding of fraud
by the claimant constituted res judicata as to the claimant’s medical provider when it filed their
own suit for reimbursement. Id. at 40-44. The jury’s finding in the prior case that the claimant
had committed fraud and so was not entitled to coverage was not appealed, and so the validity of
the antifraud provision was never considered by this Court.
3
 As noted in fn 1, this does not apply if the claim is made to the Michigan automobile insurance
placement facility. MCL 500.3173a(2).

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whether and to what extent that case survived its holding. The footnote does contain a suggestion
that the Court might view Bahri’s reach differently when the claimant is the named insured:

       The Court of Appeals has upheld a fraud-exclusion provision when the fraud related
       to proof of loss on a claim rather than fraud in the procurement or execution of the
       policy. See Bahri v IDS Prop Cas Ins Co, 308 Mich App 420, 425; 864 NW2d 609
       (2014); but see Shelton [v Auto-Owners Ins Co], 318 Mich App 648, 652-655; 899
       NW2d 744 (2017) (limiting Bahri to when the claimant is an insured under the
       defendant's policy). A leading treatise has explained that “to avoid a policy on the
       ground of fraud or false swearing in the proof of loss, the statement in question
       must be material.” 13A Couch, Insurance, 3d (2019 rev ed), § 197:18, pp 48-49.
       In this case, however, because there is no allegation of fraud in relation to Justin’s
       claim for benefits, the Court need not address the issue of whether and to what
       extent fraud related to proof of loss can justify voiding the policy. Moreover,
       because this case involves fraud by someone other than the claim beneficiary, the
       Court need not address whether a clause voiding a policy for postprocurement fraud
       would be valid as applied to fraud by an individual who is both a policyholder and
       the claim beneficiary. [Meemic, ___ Mich at ___; slip op at 16 n 15.]

Despite this hint that Bahri might survive in some form if the claimant was also the policy holder,
the Court resoundingly rejected such an approach later in the opinion by explaining that the
claimant’s relation to the policy did not alter its conclusion that the antifraud provision was
inconsistent with the no-fault act:

        [T]he correct framework for deciding this case has nothing to do with the now-
       abrogated innocent third-party doctrine. . . . The dispositive question in this case
       turns upon the nature of the common-law fraud defense—specifically, that it must
       relate to the contract’s inception—which is irrelevant to [the claimant’s] status as a
       third party. [Id. at ___; slip op at 18 n 17.]

Thus, Meemic did not turn on the fact that the claimant was not a party to the contract, but on the
holding that antifraud provisions may not be applied to PIP claims, other than fraud in the
inducement.

          By addressing Bahri only tangentially and declining to adopt its holding, the Meemic Court
left it to our Court to sort out what now remains of Bahri.4 We conclude that Bahri remains good

4
  Our dissenting colleague concludes that Meemic “expressly exempted this scenario from its
holding,” because plaintiff is both the policyholder and the claim beneficiary. We agree. But the
task before us is to answer the legal question expressly left open by the Court, i.e., whether, given
Meemic’s holding and reasoning, “a clause voiding a policy for postprocurement fraud would be
valid as applied to fraud by an individual who is both a policyholder and the claim beneficiary.”
Meemic, ___ Mich at ___; slip op at 16 n 15. The dissent fails to offer any explanation how Bahri
remains viable as applied to postprocurement fraud in light of Meemic.

                                                 6
law only to the extent that it is consistent with the no-fault act and common law as explained in
Meemic. In other words, it applies only in cases of fraud in the inducement.5

         Our dissenting colleague focuses much of her argument on the evidence of statements made
by plaintiff that appear to be false. We agree that given the evidence before us, plaintiff likely
testified falsely at one or both depositions. Sorting out the truth is a jury function, however. And
here, the task is complicated by the fact that determining whether plaintiff was truthful may hinge
on an assessment of the credibility of others, including her friend for whom she testified in a
separate case. Moreover, this case does not involve a single claim for benefits, but many such
claims. Sorting out whether plaintiff testified falsely about her eligibility for replacement care
benefits, for example, does not tell us whether she was entitled to recover medical benefits for
reasonable and necessary medical care. Assessing truth and weighing evidence are not within a
judge’s purview under MCR 2.116(C)(10). Sabbagh v Hamilton Psychological Servs, PLC, 329
Mich App 324, 346; 941 NW2d 685 (2019).

         We agree with the dissent that plaintiff’s statements are fodder for impeachment and some
are likely admissible as substantive evidence. The question in this case is not whether plaintiff
committed postprocurement fraud—that is an inherently fact and credibility-driven analysis. The
question is whether the fraud provision in defendant’s policy is enforceable as to postprocurement
fraud so as to enable a court to sustain a preemptive denial of all coverage, even where some or all
of claim is meritorious. A fact-finder is free, and has always been free, to conclude that some or
all of plaintiff’s claimed benefits were properly denied by defendant. And the trial court is free to
conclude that the claim “was in some respect fraudulent or so excessive as to have no reasonable
foundation,” in which case it may award the insurer its attorney fees. MCL 500.3148(2). But the
no-fault act makes clear that those determinations must take place at the end of a trial, not before
one has begun.

                                       III. CONCLUSION

        Meemic held that antifraud provisions in no-fault policies apply to fraud in the inducement
but not to allegations of postprocurement fraud. Accordingly, the policy provision on which
defendant and the trial court relied is “invalid and unenforceable” to the degree a no-fault insurer
seeks to apply it to allegations of postprocurement fraud in a claim under a mandatory coverage,
as in this case. Meemic, ___ Mich at ___; slip op at 24. The order of summary disposition is

5
  Meemic also allowed that a fraud exclusion may be “valid as applied to a party’s failure to
perform a substantial part of the contract or one of its essential terms.” Meemic, ___ Mich at ___;
slip op at 16. Here, however, as Meemic demonstrates, there is no basis to conclude that a PIP
policy’s fraud provision is an essential term as the contract would be binding and fully consistent
with the no-fault act without the provision. The terms that are essential to a PIP policy are those
defined in the Act. “As a general rule, Michigan’s no-fault insurance system is a comprehensive
scheme of compensation designed to provide sure and speedy recovery of certain economic losses
resulting from motor vehicle accidents.” Bazzi v Sentinel Ins Co, 502 Mich 390, 396; 919 NW2d
20 (2018) (quotation marks and citations omitted).

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reversed and the case is remanded for proceedings consistent with this opinion. We do not retain
jurisdiction.

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

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