Michigan Court of Appeals; Docket # 338475; Unpublished
Judges Swartzle, Cavanagh, Kelly; unanimous on the first issue; 2-1 on the second issue, Per Curiam
Official Michigan Reporter Citation: Not Applicable; Link to Opinion; Link to Dissent
STATUTORY INDEXING:
Disqualification from PIP benefit entitlement-Fraud [§500.3113]
TOPICAL INDEXING:
Intervention by Service Providers and Third Party Payors in PIP Claims
Actual Fraud
CASE SUMMARY:
In this non-unanimous unpublished per curiam opinion, the Court of Appeals upheld the trial court’s grant of summary disposition denying Plaintiff Lucia Zamorano M.D., PLC (“Zamorano”) an independent cause of action against co-Defendant State Auto Insurance Company (“State Auto”) and reversed the trial court’s grant of summary disposition against Plaintiff Michael Pitts (“Pitts”) for misrepresentation on his benefits form. The Court upheld the trial court’s grant of summary disposition against Zamorano because of the Michigan Supreme Court’s ruling in Covenant Med. Ctr., Inc. v. State Farm Mut. Auto. Ins. Co., 500 Mich. 191, (2017), which denied providers an independent cause of action against insurance companies in a no-fault action. The Court reversed the trial court’s grant of summary disposition against Pitts because it was not clear if Pitts made his misrepresentations recklessly or with knowledge that they were false.
Pitts was involved in an automobile accident and initially received PIP benefits from State Auto. After some time, State Auto stopped making the payments and alleged fraud against Pitts. Pitts brought an action to recover benefits. Zamorano, intervened as a medical provider to recover PIP benefits for medical services it provided to Pitts. State Auto moved for summary disposition asserting fraud by Pitts and that he was barred under the fraud exclusion clause of the no-fault contract.
With regard to Pitts’ misrepresentations, State Auto pointed to three specific representations that Pitts made on his application for benefits. First, Pitts claimed that his vehicle was stopped at the time of the accident. Second, Pitts denied receiving treatment for the same or similar injury in the past. Third, Pitts denied receiving any previous wage loss compensation from workers’ compensation or Social Security benefits. The trial court granted State Auto’s motion for summary disposition against both Pitts and Zamorano because it found Pitts to have committed bright line fraud and Zamorano’s claim was dependent upon Pitts’ claim.
It should be noted that the trial court decided this case prior to Covenant. As such, the trial court did not address any issues regarding Zamarano’s standing, but instead held that the provider’s claim must be dismissed because it was dependent upon Pitts having a valid claim for no-fault benefits, which the trial court found he did not have based on fraud.
Issue I Summary Disposition on Zamorano’s Claim.
The Court upheld the trial court’s denial of Zamorano’s claim because Covenant abolished independent statutory actions by medical providers in no-fault cases. Between the trial court’s order for summary disposition and the Court of Appeals’ trial, the Michigan Supreme Court held in Covenant, that medical providers did not have an independent cause of action against insurance providers. Further, the Supreme Court held that its decision in Covenant applied to cases that were pending on appeal. Id. At 195-96. Although the issue of standing was not brought up at the trial court, the Court of Appeals found that it was appropriate to consider the issue. In light of Covenant’s mandate that medical providers not have an independent cause of action, the Court found that Zamorano did not have standing to bring a claim.
“In Covenant, the Supreme Court clarified that healthcare providers do not have an independent cause of action against insurers to recover no-fault PIP benefits for services provided to an injured insured. Id. at 195-196. Covenant applies retroactively to cases that were pending on direct appeal, such as the present case, when Covenant was decided.”
Issue II Summary Disposition on Pitts’ Claim.
The Court of Appeals found a genuine issue of fact regarding fraud because it was not clear if Pitts had made false statements recklessly or with knowledge that they were false. The insurance policy contained a “fraud exclusion clause,” which allowed State Auto to deny benefits if the claimant made fraudulent statements. The Court explained that there were four factors used to determine insurance fraud: (1) that the misrepresentation was material, (2) that it was false, and (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. When reviewing the record, the Court found several facts that would dispute an allegation of fraud against Pitts. First, Pitts testified in interrogatories and depositions that he had in fact been moving. Second, Pitts testified in interrogatories that he had applied SSI benefits and suffered from minor back pain before the accident. Third, Pitts did not read the application, but merely signed it without reading it. Fourth, Pitts testified in interrogatories that he was not sure if his workers’ compensation claim against Ford in 1990 was in fact a workers’ compensation claim. Fifth, Pitts testified that he made his representations regarding previous benefits because he believed that the questions about workers’ compensation benefits only pertained to benefits associated with the accident. Taken together, the Court found that there was a genuine issue of material fact that Pitts made his representations recklessly or with knowledge that they were false.
“Even assuming that State Auto established that Pitts made material representations that were false in his application for no-fault benefits, the evidence summarized above creates a genuine issue of material fact regarding whether Pitts made the representations with knowledge that they were false or made them recklessly without knowledge of their truth.”
Therefore, the Court overturned the lower court’s order for summary disposition regarding fraud. The Court did uphold the lower court’s order for summary disposition regarding summary disposition against Zamarano in light of Covenant.
Concurrence and Dissent
Judge Swartzle concurred in full with the Court’s decision on issue I. However, the judge would have affirmed the lower court’s decision to grant summary disposition in favor of State Auto on issue II. Because the plaintiff signed the application without reviewing it and was unaware of who filled out the application, Judge Swartzle would have found that Pitts made his representations recklessly, without knowledge of the truth.
“By not reviewing the application, by not recognizing the handwriting in the application, and by not even knowing who filled out the application, plaintiff clearly acted recklessly with regard to the truthfulness of the statements made in the application.”
