Court Opinion

ID: 4661458
Source: CourtListenerOpinion
Date Created: 2021-02-19 10:07:20.55991+00
Date Added: 2024-06-11T08:02:13.566405
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

MICHIGAN SPINE & BRAIN SURGEONS, PLLC,                              UNPUBLISHED
                                                                    February 18, 2021
               Plaintiff-Appellant,

v                                                                   No. 349367
                                                                    Oakland Circuit Court
HOME-OWNERS INSURANCE COMPANY,                                      LC No. 2018-167331-NF

               Defendant-Appellee.

Before: STEPHENS, P.J., and SERVITTO and LETICA, JJ.

PER CURIAM.

       Plaintiff appeals as of right the trial court’s order granting summary disposition under MCR
2.116(C)(10) in favor of defendant on the basis of fraud by defendant’s insured, Amelia Hosey.
We reverse and remand to the trial court for further proceedings consistent with this opinion.

                                       I. BACKGROUND

        On September 11, 2017, Hosey was rear-ended by a bus while coming to a stop at a traffic
light. Immediately after the accident, Hosey complained of headaches, neck, and shoulder pain.
At the time of the accident, Hosey was covered under an automobile insurance policy issued by
defendant. Under the insurance policy, Hosey and defendant agreed that defendant “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.”

        Hosey applied for PIP benefits from defendant, describing her injuries from the accident
as: “Headaches, lightheaded, neck & mid back & lower back pain, shoulder pain, pain radiating
into arms.” Hosey also claimed she did not experience the same or similar symptoms before the
accident and that she had never made a prior insurance claim. Hosey also sought reimbursement
for replacement services she claimed she had incurred.

      On March 7, 2018, Hosey underwent surgery with plaintiff as a result of “[c]ervical
spondylolisthesis,” “[d]egenerative disc disease,” and “[c]ervical radiculopathy.” In connection

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with plaintiff’s treatment, Hosey executed several medical lien and assignment agreements. At
some point shortly after the accident, defendant stopped paying PIP benefits to Hosey.

        On December 28, 2017, Hosey filed a complaint against defendant alleging defendant
failed to pay PIP benefits under the automobile insurance policy between them. Hosey and
defendant settled that lawsuit on May 20, 2019. Plaintiff also sued defendant in connection with
the treatment rendered to Hosey as a result of the September 11, 2017 accident, alleging defendant
failed to pay invoices submitted to defendant totaling $44,335.

       In plaintiff’s lawsuit, defendant filed a motion for summary disposition under MCR
2.116(C)(10), asserting Hosey misrepresented her need for replacement services, her preexisting
medical conditions, and her previous automobile insurance claims. The trial court agreed with
defendant that Hosey made fraudulent statements in connection with her insurance claim and
granted defendant’s motion for summary disposition.

        On appeal, plaintiff argues the trial court erred when it concluded there was no genuine
issue of material fact that Hosey made fraudulent statements on her application for personal injury
protection (PIP) benefits. Plaintiff also asserts the trial court erred when it rejected its argument
that rescission of the insurance agreement was improper because plaintiff was an innocent third
party. Lastly, plaintiff asserts defendant was barred from raising a defense of fraud because of the
doctrines of res judicata and collateral estoppel.

                                  II. STANDARD OF REVIEW

        “Appellate review of the grant or denial of a summary-disposition motion is de novo . . . .”
West v Gen Motors Corp, 469 Mich 177, 183; 665 NW2d 468 (2003). This Court “review[s] a
motion brought under MCR 2.116(C)(10) by considering the pleadings, admissions, and other
evidence submitted by the parties in the light most favorable to the nonmoving party.” Latham v
Barton Malow Co, 480 Mich 105, 111; 746 NW2d 868 (2008). “Summary disposition is
appropriate . . . if there is no genuine issue regarding any material fact and the moving party is
entitled to judgment as a matter of law.” West, 469 Mich at 183. “A genuine issue of material fact
exists when the record, giving the benefit of reasonable doubt to the opposing party, leaves open
an issue upon which reasonable minds might differ.” Id. “If, after careful review of the evidence,
it appears to the trial court that there is no genuine issue of material fact and the opposing party is
entitled to judgment as a matter of law, then summary disposition is properly granted under MCR
2.116(I)(2).” Lockwood v Ellington, 323 Mich App 392, 401; 917 NW2d 413 (2018).

        The interpretation of a contract, such as an insurance policy, is reviewed de novo. Reed v
Reed, 265 Mich App 131, 141; 693 NW2d 825 (2005); see also Meemic Ins Co v Fortson, 324
Mich App 467, 481; 922 NW2d 154 (2018) (insurance policies are reviewed under standard
principles of contractual interpretation). “When interpreting a contract, such as an insurance
policy, the primary goal is to honor the intent of the parties.” Fortson, 324 Mich App at 481
(quotation marks and citation omitted). “[T]he application of legal doctrines, such as res judicata
and collateral estoppel” comprise questions of law that are also typically reviewed de novo. Estes
v Titus, 481 Mich 573, 579; 751 NW2d 493 (2008).

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        To the extent this Court must interpret and apply the provisions of the no-fault act,
questions of statutory interpretation are reviewed de novo. Tree City Props LLC v Perkey, 327
Mich App 244, 247; 933 NW2d 704 (2019). “The overall goal of statutory interpretation is to give
effect to the intent of the Legislature.” Hmeidan v State Farm Mut Auto Ins Co, 326 Mich App
467, 478; 928 NW2d 258 (2018). “If the statutory language is clear and unambiguous, judicial
construction is neither required nor permitted, and courts must apply the statute as written.” Tevis
v Amex Assurance Co, 283 Mich App 76, 81; 770 NW2d 16 (2009).

                                        III. DISCUSSION

                                            A. FRAUD

        Plaintiff first argues the trial court erred by concluding as a matter of law that Hosey made
false statements in connection with her insurance claim, thus triggering the fraud provision in the
insurance policy. We disagree.

       The elements of fraud in connection with an insurance policy are:

       To establish actionable fraud, [defendant] bears the burden of proving that (1) [the
       insured] made a material misrepresentation; (2) it was false; (3) when [the insured]
       made it, [the insured] knew it was false, or else made it recklessly, without any
       knowledge of its truth, and as a positive assertion; (4) [the insured] made it with the
       intention that it should be acted on by [defendant]; (5) [defendant] acted in reliance
       on it; and (6) [defendant] thereby suffered injury. [Titan Ins Co v Hyten, 491 Mich
       547, 571-572; 817 NW2d 562 (2012).]

        The trial court concluded that Hosey fraudulently represented her prior medical history in
her application for PIP benefits. We agree. In her application, Hosey described her symptoms
from the accident as: “Headaches, lightheaded, neck & mid back & lower back pain, shoulder pain,
pain radiating into arms.” Hosey’s historical medical records demonstrate Hosey having
previously experienced the same or similar symptoms. For example, in 2001, Hosey was diagnosed
with “[a]rthritis at the level of L5-S1” of her spine. In 2005, Hosey told doctors at the Michigan
Pain Management Consultants: “[H]er pain is constant in the left neck and shoulder. It is worse
with bending, lifting, exercise, coughing and with lying down. She does not report any alleviating
symptoms. She reports tingling in her bilateral hands. She also reports some swelling in her
bilateral hands. She experiences headache.”

       Plaintiff does not dispute the accuracy of Hosey’s medical records but instead insists that
the symptoms from prior injuries and degenerative changes are not the same or similar. We
disagree. In both the September 11, 2017 accident and in prior injuries, Hosey complained of
headaches, and pain in her back, neck, and shoulder. Hosey also described pain radiating into her
arms and hands. Thus, the trial court did not err in its finding that Hosey’s symptoms were the
same or similar to previous injuries.

        The trial court also determined Hosey made a fraudulent statement on her application for
PIP benefits when she claimed she never had any prior insurance claims. Hosey checked the box
next to “No” in response to the question on the application whether she “ever filed an insurance
claim for injuries [she] sustained prior to this accident.” The trial court found, however, that “the

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records of several insurance companies support that Hosey previously filed an insurance claim for
injuries sustained prior to this accident.”

         This finding was supported by the evidence presented by defendant and was not rebutted
by plaintiff in the trial court or in this Court. Hosey filed multiple insurance claims before the
September 17, 2017 accident. For example, in 1997, Hosey filed an insurance claim for an
automobile accident causing burns and bruising to her arm and leg. In 2000, Hosey filed an
insurance claim for an automobile accident in which Hosey claimed injury to her back. More
recently, in 2011, Hosey filed an insurance claim for an automobile accident causing injury to her
lower back. On the basis of these and other insurance claims filed by Hosey, it was not error for
the trial court to conclude that her statement on the application for PIP benefits—that she had no
previous insurance claims—was false.

       The trial court did not explicitly rely on defendant’s assertion that Hosey fraudulently
represented her request for replacement services. Defendant, however, maintains that Hosey’s
application for PIP benefits contains material misstatements regarding her need for such services.
Defendant relies on a surveillance video purporting to show Hosey running errands on a day that
Ida Norris claimed to have run errands for her.

         Contrary to defendant’s arguments, the surveillance video does not establish as a matter of
law that Hosey committed fraud. Aside from issues of intent, fraud requires defendant to show
there is no genuine issue of material fact that Hosey made a material misstatement. See Titan, 491
Mich at 572. The household services statement merely states errands were run for Hosey, but does
not specify which errands were completed. Thus, it is unclear whether the household services
statement contained any misstatements at all, and it is entirely possible both Hosey and Norris ran
errands on October 10, 2017.

        While there is little doubt plaintiff’s statements regarding her prior medical history and
prior insurance claims were false, plaintiff also argues defendant did not provide evidence
sufficient as a matter of law to conclude Hosey intended to make false statements on her
application.

        “[S]ummary disposition is rarely appropriate in cases involving questions of credibility,
intent, or state of mind.” In re Handelsman, 266 Mich App 433, 438; 702 NW2d 641 (2005)
“Generally, whether an insured has committed fraud is a question of fact for a jury to determine.”
Fortson, 324 Mich App at 473. “However, under some circumstances, a trial court may decide as
a matter of law that an individual committed fraud.” Id.

        For example, in Fortson, the defendants submitted claims for attendant-care services for
their son who was incarcerated at the time. Id. at 474. In addition, the defendants submitted claims
for services that were not compensable as attendant-care services. Id. The defendants claimed the
attendant-care services were provided 24 hours per day. Id. On the basis of these facts, this Court
affirmed the decision of the trial court that the defendants committed fraud as a matter of law. Id.

         Similarly, in Bahri v IDS Prop Cas Ins Co, 308 Mich App 420, 422; 864 NW2d 609 (2014),
the plaintiff submitted invoices for replacement services on days in which she was seen “bending,
lifting, driving, and running errands.” The plaintiff also submitted invoices for replacement

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services that purportedly occurred three weeks before the automobile accident. Bahri, 308 Mich
App at 425. This Court held: “This evidence belies plaintiff’s assertion that she required
replacement services, and it directly and specifically contradicts representations made in the
replacement services statements. Reasonable minds could not differ in light of this clear evidence
that plaintiff made fraudulent representations for purposes of recovering PIP benefits.” Id. at 426.

        Under Bahri and Fortson, it was not error for the trial court to conclude as a matter of law
that Hosey intended to make fraudulent statements in her application for PIP benefits. Hosey did
not forget to include one insurance claim or one prior injury; rather, Hosey completely
mischaracterized her history of filing insurance claims and treatment for head, neck, back,
shoulder, and arm pain. Hosey’s multiple instances of false statements is unlike Shelton v Auto-
Owners Ins Co, 318 Mich App 648, 660; 899 NW2d 744 (2017), a case on which plaintiff relies,
where this Court concluded “isolated examples of an injured person participating in simple
physical actions such as bending, modest lifting, or other basic physical movements that the person
asserts are painful or difficult” are insufficient to establish fraud as a matter of law.

                             B. INNOCENT-THIRD-PARTY RULE

        Next, plaintiff argues the trial court erred by rejecting its argument that rescission of the
insurance policy was inappropriate as against plaintiff under the innocent-third-party rule. The
trial court concluded that the innocent-third-party rule did not apply to plaintiff, as assignee of an
insured. We agree with the trial court.

         “The ‘innocent third party’ rule prohibit[ed] an insurer from rescinding an insurance policy
because of a material misrepresentation made in an application for no-fault insurance where there
is a claim involving an innocent third party.” Sisk-Rathburn v Farm Bureau Gen Ins Co of Mich,
279 Mich App 425, 430; 760 NW2d 878 (2008). The rule has since been abrogated by Titan Ins
Co v Hyten, 491 Mich 547, in the context of the no-fault act. See Bazzi v Sentinel Ins Co, 502
Mich 390, 407; 919 NW2d 20 (2018). Plaintiff, as a medical provider, was not an innocent third
party, but rather an assignee of Hosey. “[H]ealthcare providers do not possess a statutory cause of
action against no-fault insurers for recovery of personal protection insurance benefits under the
no-fault act.” Covenant Med Ctr, Inc v State Farm Mut Auto Ins Co, 500 Mich 191, 196; 895
NW2d 490 (2017). Insureds, however, maintain the “ability to assign his or her right to past or
presently due benefits to a healthcare provider.” Id. at 217 n 40. In such situations, the provider
“stands in the position of the [insured], possessing the same rights and being subject to the same
defenses.” Burkhardt v Bailey, 260 Mich App 636, 653; 680 NW2d 453 (2004); see also Prof
Rehab Assocs v State Farm Mut Auto Ins Co, 228 Mich App 167, 177; 577 NW2d 909 (1998)
(“[A]n assignee stands in the shoes of the assignor and acquires the same rights as the assignor
possessed.”).

        Plaintiff, as an assignee, was subject to the same claims and possessed the same rights as
Hosey. Thus, Hosey was subject to the fraud provision in the insurance policy, and plaintiff was
as well. Because the trial court did not err by concluding as a matter of law that Hosey made
fraudulent representations regarding her application for PIP benefits, and because plaintiff was
subject to the same contractual provision as an assignee, the trial court did not err by rejecting
plaintiff’s argument it was an innocent third party.

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                                         C. PRECLUSION

        Plaintiff claims defendant is barred under res judicata and collateral estoppel from raising
the issue of fraud because defendant failed to raise the issue against Hosey.

       Plaintiff failed to raise these issues in the trial court and thus, they are not preserved for
review. Total Armored Car Serv, Inc v Dep’t of Treasury, 325 Mich App 403, 412; 926 NW2d
276 (2018). “This Court may review an unpreserved issue if it is an issue of law for which all the
relevant facts are available.” Vushaj v Farm Bureau Gen Ins Co of Michigan, 284 Mich App 513,
519; 773 NW2d 758 (2009). Because all the facts necessary to resolve plaintiff’s arguments are
available, we will review them.

        We review unpreserved issues for plain error affecting substantial rights. Henderson v
Dep't of Treasury, 307 Mich App 1, 9; 858 NW2d 733 (2014). “To establish an entitlement to
relief based on plain error, the injured party must show (1) that an error occurred, (2) that the error
was plain, and (3) that the plain error affected [its] substantial rights.” Total Armored Car Serv,
Inc, 325 Mich App at 412 (quotation marks and citation omitted). “[A]n error affects substantial
rights if it caused prejudice, i.e., it affected the outcome of the proceedings.” In re Utrera, 281
Mich App 1, 9; 761 NW2d 253 (2008).

                                  1. COLLATERAL ESTOPPEL

         “Generally, for collateral estoppel to apply three elements must be satisfied: (1) a question
of fact essential to the judgment must have been actually litigated and determined by a valid and
final judgment; (2) the same parties must have had a full and fair opportunity to litigate the issue;
and (3) there must be mutuality of estoppel.” William Beaumont Hosp v Wass, 315 Mich App 392,
398; 889 NW2d 745 (2016) (quotation marks and citation omitted). “This doctrine is strictly
applied in that [t]he issues [in both cases] must be identical, and not merely similar.” Keywell &
Rosenfeld v Bithell, 254 Mich App 300, 340; 657 NW2d 759 (2002) (quotation marks and citation
omitted) (alteration in original). “The previous litigation must have presented a ‘full and fair’
opportunity to litigate the issue presented in the subsequent case.” Lastly, “[m]utuality of estoppel
requires that in order for a party to estop an adversary from relitigating an issue that party must
have been a party, or in privy to a party, in the previous action. In other words, [t]he estoppel is
mutual if the one taking advantage of the earlier adjudication would have been bound by it, had it
gone against him.” Monat v State Farm Ins Co, 469 Mich 679, 682-684; 677 NW2d 843 (2004)
(alteration in original).

        In this case, plaintiff’s argument that collateral estoppel bars defendant from raising the
issue of fraud fails under the first element, because the issue of whether Hosey made false
statements was not actually litigated in the lawsuit between Hosey and defendant. See Wass, 315
Mich App at 398. Because this essential element of collateral estoppel is not present, the trial court
did not err, let alone plainly err, by failing to deny defendant’s motion for summary disposition on
the basis of collateral estoppel.

                                        2. RES JUDICATA

       “The doctrine of res judicata is intended to relieve parties of the cost and vexation of
multiple lawsuits, conserve judicial resources, and encourage reliance on adjudication, that is, to

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foster the finality of litigation.” Garrett v Washington, 314 Mich App 436, 441; 886 NW2d 762
(2016) (quotation marks and citations omitted). “For res judicata to preclude a claim, three
elements must be satisfied: (1) the prior action was decided on the merits, (2) both actions involve
the same parties or their privies, and (3) the matter in the second case was, or could have been,
resolved in the first.” Id. (quotation marks and citations omitted).

        With respect to the first element, a settlement agreement is treated as a decision on the
merits for purposes of res judicata. Ditmore v Michalik, 244 Mich App 569, 576; 625 NW2d 462
(2001). Defendant and Hosey resolved Hosey’s claims against defendant in a settlement
agreement. Thus, the settlement between Hosey and defendant was a decision on the merits,
satisfying the first element of res judicata. See Ditmore, 244 Mich App at 576.

        With respect to the second element, an assignee is generally not treated as being in privity
with the assignor for purposes of res judicata. Aultman, Miller & Co v Sloan, 115 Mich 151, 154;
73 NW 123 (1897). However, in TBCI, PC v State Farm Mut Auto Ins Co, 289 Mich App 39, 44;
795 NW2d 229 (2010), this Court recently concluded in the context of a provider-assignee that
such provider is in privity with the insured-assignor for claims under the no-fault act. TBCI, PC v
State Farm Mut Auto Ins Co, 289 Mich App 39, 44; 795 NW2d 229 (2010). Thus, under TBCI,
plaintiff was a privy of Hosey for purposes of res judicata.

        Under the third element of res judicata, defendant argues it was not able to raise the issue
of fraud in its litigation with Hosey because the dispositive motion cutoff date passed before it
knew of Hosey’s fraud. The evidence presented by defendant, however, belies this assertion. First,
the ISO Claims document—relied on by defendant to show Hosey filed previous insurance
claims—was dated September 26, 2017, before Hosey even filed her complaint against defendant.
In addition, the surveillance video of Hosey procured by defendant was taken October 10, 2017,
also before Hosey filed her complaint against defendant. Defendant cannot now contend that it
did not know the facts of Hosey’s false statements before the dispositive motion cutoff date when
it was apparently investigating those false claims, including procuring surveillance video, before
Hosey even filed her complaint.

        Defendant further asserts that under Ternes Steel Co v Ladney, 364 Mich 614; 111 NW2d
859 (1961), our Supreme Court concluded that res judicata does not bar raising a defense in the
second proceeding when it was not raised in the first. However, defendant misinterprets Ladney.
In that case, our Supreme Court held:

       [W]hen a litigant’s right to affirmative relief is independent of a cause of action
       asserted against him and it is relied upon only as a defense to that action, he is
       barred from seeking affirmative relief thereon in a subsequent proceeding. But if
       he does not rely upon his claim as a defense to the first action, or as a counterclaim
       thereto, he is not barred from subsequently maintaining his action for affirmative
       relief in an independent suit. [Ladney, 364 Mich at 619 (emphasis added).]

Defendant has not brought a suit for affirmative relief; rather defendant seeks to assert a defense
against plaintiff that it could have asserted against Hosey. Thus, Ladney does not apply to the facts
of this case.

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        As defendant is quick to point out, plaintiff is an assignee of Hosey. What defendant fails
to appreciate, however, is that as an assignee of Hosey, plaintiff “stands in the position of [Hosey],
possessing the same rights and being subject to the same defenses.” See Burkhardt, 260 Mich App
at 653. As a result of the settlement between defendant and Hosey, defendant is precluded from
raising the issue of fraud against Hosey. See Ditmore, 244 Mich App at 576. Thus, defendant is
also barred from raising the issue of fraud against plaintiff, Hosey’s assignee, who possesses the
same rights as Hosey, who is protected by res judicata from defendant’s fraud allegations.

       Accordingly, the trial court plainly erred in granting summary disposition to defendant
when res judicata barred the fraud claim against plaintiff.

                                        IV. CONCLUSION

        Reversed and remanded for further proceedings consistent with this opinion. We do not
retain jurisdiction.

                                                              /s/ Cynthia Diane Stephens
                                                              /s/ Deborah A. Servitto
                                                              /s/ Anica Letica

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