What a tangled web an insurer is left to un-weave, when at first an insured does deceive. Sounds like a line from a scary child’s fairy tale, doesn’t it?
Fortunately, like a knight in shining armor, the Michigan Court of Appeals recently issued a significant ruling in favor of insurers dealing with fraudulent motor vehicle claims.
In a recent case, Bahri v. IDS Prop. Cas. Ins. Co., 2014 WL 5066518 (Mich. Ct. App. Oct. 9, 2014), the Michigan Court of Appeals held that the plaintiff’s fraudulent representations precluded payment of personal injury protection (PIP) benefits to the plaintiff and the intervening plaintiffs, two physicians who treated the plaintiff. The court also held that uninsured motorist benefits were not payable as the plaintiff’s vehicle did not make direct or indirect contact with a third vehicle.
Here are the facts of this litigation tale. The plaintiff was involved in a motor vehicle accident while exiting an alley in Detroit on Oct. 20, 2011. According to the contemporaneous police report, only two vehicles were involved in the accident. However, the plaintiff claimed during deposition testimony that a third car was involved.
The plaintiff subsequently sought PIP benefits from the defendant insurer. The insurer had issued a no-fault policy to the plaintiff on Oct. 12, 2011. The plaintiff submitted invoices to the defendant insurer for replacement services for the period of October 2011 through February 2012. Surveillance video, however, showed the plaintiff engaged in bending, lifting, driving and running errands during this time period.
The plaintiff filed a complaint in Wayne County Circuit Court on June 6, 2012 seeking recovery of PIP and uninsured motorist benefits. The insurer moved for summary disposition, arguing that the payment was precluded due to the plaintiff’s fraudulent representations and the fact the “phantom” third car never struck the plaintiff’s vehicle. The trial court granted summary disposition to the insurer. The intervening plaintiffs, the treating physicians, appealed.
The appellate court began its analysis by examining the fraud exclusion of the policy and held that it did apply in this case. The court stated that the plaintiff had presented an invoice for services provided dating from Oct. 1, 2011, some 19 days prior to the accident. The court held that this document was, therefore, false “on its face” because it sought payment for services provided before the accident.
Furthermore, the court noted that the insurer had provided surveillance evidence showing the plaintiff engaged in activities “inconsistent with her claimed limitations” on the dates in question. The court held that this evidence belied the requirement of replacement services and that there was no genuine issue of material fact regarding the plaintiff’s fraud and the plaintiff’s claim was therefore precluded. The court further held that as the intervening plaintiffs “stand in the shoes of the plaintiff,” their claim was similarly barred.
The appellate court then addressed the claim for uninsured motorist benefits. The court held that as the policy required some form of physical contact with the insured, and the insured admitted that the “phantom” third car never struck the plaintiff or caused another object to strike the plaintiff, benefits were not due under the policy. The court also noted that based on the plaintiff’s fraudulent representations, coverage under the policy would not have been applicable.
Finally, the appellate court denied the intervening plaintiffs’ motion for sanctions under MCR 2.114 and MCR 2.625. The court held that because the intervening plaintiffs had failed to properly move for sanctions in the trial court, the issue was not properly before the court. Furthermore, the court held that summary disposition was properly granted in light of the plaintiff’s fraud.
As always, the facts of each particular case are essential, and it is important for adjusters to develop strategies for investigating and defending these kinds of fraudulent and suspicious claims.
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