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Kelley v Home-Owners Ins Co (COA – UNP 6/28/2018; RB #3770) 


Michigan Court of Appeals; Docket # 334778; Unpublished
Judges O’Brien, Cavanagh, and Stephens per Curiam
Official Michigan Reporter Citation: Not Applicable; Link to Opinion 


Actual Fraud
Evidentiary Issues

In this unanimous per curiam opinion, the Court of Appeals reversed the jury verdict in favor of Plaintiff Karen Kelley (“Kelley”) and found that the trial court improperly denied Defendant Home-Owners Insurance Company (“Home-Owners”) to present an affirmative defense of fraud. The Court reversed the trial court’s denial of the fraud defense because it found that Home-Owners presented competent evidence to create a genuine issue of material fact regarding Kelley’s fraud.

Kelley was injured in a motor vehicle accident and was examined by the emergency department at Sparrow Hospital on the same day. Kelley submitted paperwork to Home-Owners seeking to recover auto no-fault PIP benefits for medical expenses, work-loss, and replacement services. The replacement services claimed were 140 hours of dog walking and 13 instances of grocery shopping from August 23, 2013 to October 31, 2014. Home-Owners surveilled Kelley for three days and had video evidence of her walking her dogs and grocery shopping on her own. Based on this video evidence and a fraud exclusion clause in the no-fault contract, Home-Owners denied benefits to Kelley. Kelley brought an action against Home-Owners to recover benefits.

The trial court refused to allow Home-Owners to present a defense of fraud at trial. As the case proceeded, Kelley withdrew her replacement services claim. The jury subsequently returned a verdict in Kelley’s favor. Home-Owners brought this action arguing that it was wrongly denied a defense and it should have been allowed to present evidence of Kelley’s alleged fraud. Both sides sought summary disposition on appeal.

The Court of appeals found that Home-Owners presented sufficient evidence to create a genuine issue of material fact regarding fraud, and it should not have been precluded from presenting evidence on the issue. The Court cited to Bahri v IDS Prop Cas Ins Co, 308 Mich App 420, 423; 864 NW2d 609 (2014) to explain that the Court will review the evidence in a light most favorable to the non-moving party when there is a motion for summary disposition regarding fraud. Here, Home-Owners presented evidence that established Kelley had walked her dogs and done light grocery shopping on days that she claimed replacement benefits for. A reasonable juror could have found that these activities constituted fraud. The Court however did not find that summary disposition for Home-Owners would be appropriate because Kelley’s claims were for specific dates, not a continuous period of time as was the case in Bahri. Therefore, it was possible that Kelley did not commit fraud. The Court also rejected Kelley’s argument that the fraud exclusion clause only applied to the accident because the language of the exclusion clause made it clear that it applied to the case at bar. Finally, the Court found that the trial court erred by refusing to instruct the jury to reject the entire claim if it found fraud. The Court argued that a defendant has a right to present its valid defense and have that defense presented to the jury. Therefore, denial of the jury from considering a valid defense was in err.

“[T]he defendant did present competent, albeit inconclusive, evidence that the plaintiff made false or exaggerated claims of injury. Because plaintiff, also, presented competent evidence that the injury claims were valid through both her own testimony and her physician, the issue of the nature and extent of her injury was one to be determined by the trier of fact. Neither party was entitled to summary disposition. However the court erred in removing the question of fraud from jury consideration as discussed in the next section of this opinion.”

Thus, the Court ruled that summary disposition was inappropriate, but the trial court erred in barring Home-Owners from presenting a defense of fraud.

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