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Butrus v IDS Prop Cas Ins Co (COA – UNP 1/14/2021; RB #4206)


Michigan Court of Appeals; Docket # 349884; Unpublished 
Judges Kelly, Stephens, and Cameronper curiam 
Official Michigan Reporter Citation: Not Applicable; Link to Opinion

§500.3113 Disqualification From PIP Benefit Entitlement (Misrepresentation / Fraud as a Basis to Rescind Coverage)


In this unanimous unpublished per curiam opinion, the Court of Appeals vacated the trial court’s holding finding summary disposition for defendant on this issue of whether plaintiff was barred from recovering no-fault benefits in light of alleged misrepresentations by plaintiff following a 2017 auto accident. In doing so, the Court found that the trial court had failed to address whether plaintiff’s alleged misrepresentations barred her from recovering no-fault benefits based on fraudulent procurement of the insurance policy, or whether she was barred from recovering benefits based on the application of the fraud exclusion provision in the subject policy. Moreover, the Court found that to the extent the fraud exclusion policy applied to the alleged misrepresentation, the trial court failed to determine whether plaintiff was entitled to benefits as a party to the policy or on a statutory basis, which distinction the Court noted is particularly significant following the Michigan Supreme Court’s decision inMeemic v Forston, ___ Mich __, __; __NW2d __ (2020) (Docket No. 158302) slip op.

The plaintiff in this case was involved in two motor vehicle accidents. The first occurred in 2016, and the second in 2017. This case pertains to plaintiff’s 2017 accident for which plaintiff sought personal protection insurance benefits (PIP) and uninsured (UM) and underinsured motorist (UIM) benefits. At the time of the accident, plaintiff was listed as one of the drivers under a policy issued to her husband and son. The policy contained a fraud-exclusion provision that “barred coverage when ‘any insured or person making [a] claim under this policy’ intentionally concealed or misrepresented material facts, engaged in fraudulent conduct, or made false statements in connection with the claim for benefits.” During discovery, plaintiff submitted answers to interrogatories that indicated her daughter was the sole-service provider of household-replacement services while her husband was the sole provider of attendant care. Defendant moved for summary disposition and challenged plaintiff’s claim for household-replacement and attendant care services, arguing that plaintiff had knowingly misrepresented material information in her submissions to defendant. Specifically, defendant argued that plaintiff’s submissions to defendant included forms from her first accident and included different service providers than plaintiff had identified in the discovery responses for the second accident. The court entered an order granting summary disposition in favor of defendant, which stated, in pertinent part, that “there exists no genuine issue of material fact concerning whether Plaintiff is entitled to payment of No-fault benefits by Defendant.” 

In examining the trial courts holding, the Michigan Court of Appeals recognized that there are different types of fraud that could potentially bar a person from claiming no-fault benefits. The Court first recognized that pursuant to Bazzi v. Sentinel Ins Co, 502 Mich 390; 919 NW2d 20 (2018), “[a] common-law fraudulent-procurement defense may be raised to a claim for coverage mandated by the no-fault act.” The Court further recognized that pursuant to Bahri v IDS Prop Cas Ins Co, 308 Mich App 420; 864 NW2d 609 (2014), “a fraud exclusion in an insurance policy may be enforced when the fraud relates to proof of loss as a claim.” Moreover, the Court recognized that, pursuant to the Michigan Supreme Court’s holding in Meemic v. Forston, ___ Mich __, __; __NW2d __ (2020) (Docket No. 158302) slip op., a fraud exclusion may be enforced against a policy holder pursuant to his/her contractual agreement, but a fraud exclusion “does not govern a non-contracting party or injured person who does not qualify as an insured under the policy,” because the no-fault benefits of these individuals are not governed by contract but rather by statute. 

The Court of Appeals ultimately found that the trial court failed to address whether plaintiff’s misrepresentations barred her from recovering no-fault benefits based on fraudulent procurement under Bazzi, or whether she was barred from recovering no-fault benefits based on fraud relating to the proof of loss under Bahri, and, if so, whether she was claiming no-fault benefits as a party to the policy or on a statutory basis as distinguished inMeemic. In this regard, the Court stated:

"In the present case, the trial court concluded that there was no genuine issue of material fact. However, as a precursor to that determination, it failed to address whether plaintiff was receiving benefits pursuant to the terms of the policy or statutory benefits, the type of fraud at issue and when it occurred, and the remedy for any alleged fraud. Indeed, the trial court failed to address the evidence upon which it relied to conclude there was no genuine issue of material fact. Therefore, it is unknown if the trial court found fraud, the perpetrator of the fraud, and whether the fraud pertained to the policy of insurance, or statutory benefits. Thus, we return this case to the trial court for an appropriate analysis of the issues in light of the applicable law."

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