Michigan Court of Appeals; Docket # 328473; Published
Judges K.F. Kelly, Gleicher and Shapiro; Unanimous, Per Curiam (with Judge K.F. Kelly concurring in the result only)
Official Michigan Reporter Citation: Not Applicable; Link to Opinion; Concurrence
STATUTORY INDEXING:
Priority Rules for Payment of PIP Benefits: Exception for Occupants [§3114(4)]
TOPICAL INDEXING:
CASE SUMMARY:
In this unanimous published per curiam Opinion involving a passenger’s claim for PIP benefits under the driver’s no-fault policy, as well as allegations of fraud on behalf of the passenger, the Court of Appeals held that defendant-insurer’s motion for summary disposition was properly denied because the passenger was not a party to, nor an insured under, the driver’s no-fault policy.
Plaintiff was injured while a passenger in a vehicle owned and operated by Timothy Williams. Because plaintiff did not have her own no-fault policy and did not reside with anyone who did, she filed a claim for PIP benefits against defendant Auto-Owners, who was Williams’ no-fault insurer. Plaintiff requested compensation for medical services and replacement services related to household chores. Auto-Owners denied plaintiff’s claim, asserting that she misrepresented her need for the replacement services and, as such, violated the policy’s fraud exclusion, which said: “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.” Auto-Owners claimed this exclusion applied to plaintiff, even though she was a passenger in the vehicle and was not the policyholder. Plaintiff then filed this action against Auto-Owners, seeking PIP benefits. The trial court granted Auto-Owners’ motion for summary disposition on plaintiff’s claim for replacement services (a ruling that plaintiff did not appeal), but denied summary disposition on plaintiff’s claim for medical services.
Auto-Owners relied on Bahri v IDS Property Casualty Ins Co, 308 Mich App 420 (2014), where the Court enforced a fraud provision in an auto policy to bar a claim for PIP benefits when the policyholder filed a claim for replacement services before the date of the loss. The Court held, however, that the law of Bahri did not apply in this case because plaintiff was merely a passenger in the vehicle and not the policyholder.
The Court quoted Rohlman v Hawkeye Security, 442 Mich 520, 524-525 (1993), for the proposition that because PIP benefits are mandated by statute, the No-Fault Act is the “rule book” for deciding issues regarding PIP benefits, whereas the policy is the contract between the insurer and the insured. The Court further noted that in Harris v Auto Club Ins Ass’n, 494 Mich 462, 471-472 (2013), where a motorcyclist sought PIP benefits from the insurer of the motor vehicle that struck him, the motorcyclist could not take advantage of policy provisions because his claim did not flow from the policy but rather solely from the No-Fault Act. Thus, in this case, plaintiff’s claim for PIP benefit was controlled solely by the No-Fault Act, and defendant insurer could not raise the fraud provision in its policy against plaintiff, who was not the policy holder.
The Court observed that this was consistent with the language of the statute. Policyholders file their claims under §3114(1), which says: “a personal protection insurance policy … applies to the person named in the policy, the person’s spouse, and a relative of either domiciled in the same household.” Passengers, on the other hand, file their claims under §3114(4), which says: “a person suffering accidental bodily injury arising from a motor vehicle accident while an occupant of a motor vehicle shall claim personal protection insurance benefits from insurers.”
The Court of Appeals further explained that the difference in the language of §3114(1) and §3114(4) is that a no-fault policy does not “apply” to a passenger’s claim for benefits. The Court noted that §3114(4) does not, in fact, reference the policy at all and as a result:
“Plaintiff was not a party to, nor an insured under, the policy; she was injured while a passenger and because neither she nor her spouse or resident relative had a no-fault policy, defendant was required to pay her benefits pursuant to statute, not pursuant to a contractual agreement.”
The Court of Appeals continued by finding meritless the public policy argument advanced by Auto-Owners, mainly that the statute should not control because insurers will lose their ability to deny fraudulent claims. “As always, if an insurer concludes that a claim is fraudulent, it may deny the claim,” the Court stated.
Further, the Court said the facts in this case were “very different” from the facts in Bahri, where the insurer presented unrebutted evidence that plaintiff claimed replacement services for a time period before the auto accident had actually occurred. According to the Court: “In this case, it is clear that questions of fact exist as to whether plaintiff made material representations and, if so, whether they were made with the intent to defraud defendant.” Defendant insurer had the burden of proof to establish fraud. However, the evidence presented by defendant did not conclusively establish fraud. The Court noted that while in Bahri the unrebutted evidence demonstrated that the plaintiff, over a period of seven weeks, had repeatedly engaged in a wide range of chores on the days for which she claimed that someone else did them for her, a single instance where plaintiff was observed wringing a shirt out did not demonstrate that she could do laundry. The Court stated:
“While such repeated activities are sufficient to establish the elements of fraud beyond a question of fact, a single episode of wringing 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.”
Therefore, because Auto-Owners did not present sufficient evidence that there was no question of material fact as to any element of its affirmative defense, its motion for summary disposition was properly denied for that reason as well, the Court of Appeals ruled.
Judge K.F. Kelly concurred in the result only.