Michigan Court of Appeals; Docket #348048; Unpublished
Judges Letica, Gleicher, and O’Brien; Per Curiam
Official Michigan Reporter Citation: Not Applicable; Link to Opinion; Link to Partial Concurrence and Dissent
STATUTORY INDEXING:
Not Applicable
TOPICAL INDEXING:
Actual Fraud
Cancellation and Rescission of Insurance Policies
SUMMARY:
In this 2-1 unpublished per curiam decision (Gleicher, dissenting), the Court of Appeals affirmed in part, reversed in part, and vacated in part the trial court’s summary disposition order dismissing Plaintiff Estate of Calvin Bernard’s first- and third-party claims against Defendants Grange Insurance Company of Michigan (“Grange”), Janice Marie Avers, and Anchor Bay Packaging Corporation (“Anchor Bay”), and remanded for further proceedings. With respect to the Bernard Estate’s first-party claim against Grange, the Court of Appeals held that Bernard had committed fraud in his claims for replacement services, and concluded that it was still bound by Bahri v IDS Prop Cas Ins Co, 308 Mich App 420 (2014) despite the Supreme Court and Court of Appeals’ subsequent, seemingly contradictory holdings in Meemic Ins Co v Fortson, 506 Mich 287 (2020) and Williams v Farm Bureau Mut Ins Co, ___ Mich App ___ (2021). With respect to the Bernard Estate’s third-party claim against Avers and Anchor Bay, the Court of Appeals held that, even though Bernard’s policy with Grange was voided ab initio, that did not actually mean he failed to maintain the proper security at the time of the collision. Therefore, he was allowed to proceed with his third-party action against those defendants. Additionally, the Court of Appeals held that the Bernard Estate presented sufficient evidence to create a question of fact as to whether Bernard suffered a serious impairment of body function.
Bernard was rear-ended by a semi-truck driven by Avers and owned by Anchor Bay, and subsequently sought PIP benefits, including replacement services, from his no-fault insurer, Grange. Grange denied Bernard’s claims for benefits pursuant to an IME, and in Bernard’s resultant first-party action against Grange, Grange filed a motion for summary disposition, arguing that Bernard had committed fraud in his claims for replacement services. Specifically, Grange was surveilled lifting items, driving another individual around who would perform various tasks while Bernard either waited in the car or stood next to him without difficulty and watched him work, and getting in and out of his vehicle without difficulty. Based on the surveillance evidence, the trial court granted Grange’s motion for summary disposition, finding that Bernard had submitted fraudulent claims for replacement services.
Bernard also filed a third-party claim against Avers and Anchor Bay, who, after the trial court dismissed Bernard’s first-party action against Grange, also moved for summary disposition, arguing that Bernard’s fraud rendered his policy void ab initio, “meaning that [he] did not have proper security under MCL 500.3101 at the time of the accident,” precluding him from pursuing a third-party action against Avers and Anchor Bay pursuant to MCL 500.3135(2)(c). Additionally, Avers and Anchor Bay argued that the Bernard Estate failed to present sufficient evidence to create a question of fact as to whether he suffered a serious impairment of body function. The Bernard Estate argued, in response, that his no-fault policy with Grange was not rescinded or voided before he filed suit, and that the trial court did neither in its summary disposition order. It further argued that his medical records, including an affidavit from his orthopedic spine surgeon, were sufficient to create a question of fact as to whether he had suffered a serious impairment in his cervical and lumbar spine which impacted his general ability to lead his normal life. Ultimately, the trial court granted Avers and Anchor Bay's motion, ruling that “Bernard’s contract with Grange had been rescinded on the basis of Bernard’s fraud,” and that he therefore could not pursue his third-party claim against Avers and Anchor Bay.
On appeal, regarding its first-party claim against Grange, the Bernard Estate first argued that Grange waived its fraud defense because it did not cite fraud as a reason for denying his claim for PIP benefits originally. The Court of Appeals disagreed, noting that the Supreme Court has held that “ ‘[w]aiver and estoppel are founded upon knowledge of facts,’ and a defense asserted before litigation cannot be said to be waived until the insurer has knowledge of the relevant facts regarding the defense.” Martinek v Fireman’s Ins Co, 247 Mich 188 (1929). In this case, Grange denied Bernard’s claim initially on the basis of an IME, at which point it was not aware that he had allegedly committed fraud in his replacement services claims.
"The record reflects that when Grange first denied Bernard’s claim for no-fault benefits on October 24, 2016, the allegedly fraudulent replacement services documentation had not yet been discovered. According to Grange’s claims manager, Irene Armesto, at the time Bernard’s claim was initially denied, Grange was not yet aware that Bernard may have engaged in fraud with respect to the submission of his replacement services calendars. Plaintiff has not presented contrary evidence suggesting that Grange had in fact discovered that fraud had taken place at the time the denial letter was transmitted. Additionally, it was after Bernard made inaccurate representations in his discovery responses, as well as during his deposition, which occurred after the initial denial letter, that Grange became further aware of Bernard’s fraud. Therefore, Bernard’s argument that Grange waived, or was estopped from raising, the defense of fraud is not persuasive."
The Bernard Estate next argued that, irrespective of its waiver argument, the trial court erred in granting summary disposition to Avers and Anchor Bay on the basis of fraud. The Court of Appeals disagreed, declaring that it was bound to follow its prior holding in Bahri v IDS Prop Cas Ins Co, 308 Mich App 420 (2014) because Bahri was not specifically overruled or abrogated by Meemic Ins Co v Fortson, 506 Mich 287 (2020), despite that panel reaching a seemingly inapposite conclusion. In a footnote, the Court of Appeals acknowledged that, in Meemic, the Michigan Supreme Court “held that a fraud-exclusion provision in a no-fault insurance policy that voided the policy in the event of a fraudulent claim (similar to the fraud-exclusion at issue in this case) was invalid and unenforceable as applied to mandatory no-fault benefits.” However, again, because Meemic did not specifically overrule Bahri, the Court of Appeals held that it was still bound to follow Bahri under the rule of stare decisis.
The Court of Appeals further rejected the Bernard Estate’s argument that this case should be controlled by Williams v Farm Bureau Mut Ins Co, ___ Mich App ___ (2021), in which the Court “held that Meemic concluded that ‘antifraud provisions are invalid to the degree they purport to apply to’postprocurement fraud.” The Court of Appeals noted, however, that “Meemic itself states that it should not be read ‘to suggest that a contractual provision that rescinds a contract because of postprocurement fraud is invalid in all circumstances.’” Based on the “in all circumstances” language, the Court of Appeals held that it was still bound to follow Bahri, even though, as the dissent pointed out, “Meemic ‘undermined a portion of Bahri’s holding,’ and that ‘a fair reading of Meemic leads to the inescapable conclusion that when it comes to postprocurement fraud, Bahri’s [holding ought no longer be given controlling effect]’”.
“We acknowledge that the dissent believes this case should be controlled by Williams v Farm Bureau Mut Ins Co, Mich App; NW2d (2021) (Docket No. 349903), because this Court in that case held that Meemic concluded that “antifraud provisions are invalid to the degree they purport to apply to” postprocurement fraud. Yet Meemic itself states that it should not be read 'to suggest that a contractual provision that rescinds a contract because of postprocurement fraud is invalid in all circumstances.' Meemic, 506 Mich at 307. The dissent ardently avoids this clear and unequivocal pronouncement from Meemic, and suggests that, by reading this portion of Meemic to mean what it says, this opinion fails to follow 'the letter' of Meemic. Meemic, however, explicitly states that antifraud provisions are not invalid as applied to postprocurement fraud in all circumstances, and we are 'bound by stare decisis to follow the decisions of the Supreme Court.' Charles A Murray Trust v Futrell, 303 Mich App 28, 48; 840 NW2d 775 (2013). The dissent further contends that our conclusion requires declaring a conflict panel, but it does not as this Court need not convene a conflict panel to follow a Supreme Court decision, even if a decision of this Court conflicts with the Supreme Court’s decision. Id. at 49.
Further, as already explained, Meemic explicitly recognized Bahri and declined to overrule or otherwise abrogate its holding. Similarly, a special panel of this Court has not overruled or abrogated Bahri’s holding. Therefore, we are bound to follow Bahri’s holding under MCR 7.215(J)(1). To conclude otherwise would mean that Williams overruled Bahri, which it clearly could not do. See MCR 7.215(J)(1). The dissent asserts that this Court can choose to not follow Bahri because Meemic “undermined a portion of Bahri’s holding,” and that “a fair reading of Meemic leads to the inescapable conclusion that when it comes to postprocurement fraud, Bahri’s [sic][. . .]"
Turning then to the actual, purported fraudulent acts committed by Bernard, the Court of Appeals held that the surveillance footage of Bernard driving his truck, getting in and out of his vehicle, putting gas in his truck, and loading a large appliance into his truck belied his claims for replacement services on the dates that he was surveilled, in which he “indicated that [his girlfriend Stephanie] Bridgeforth performed replacement services such as cooking, cleaning the kitchen, vacuuming, dusting, buying groceries, running errands, taking out the garbage, doing laundry, changing linens, and driving.”
“In support of his claim for replacement services, Bernard submitted calendars for the months of May through December 2016, all signed by his then girlfriend, Stephanie Bridgeforth. The replacement services calendar for the month of August 2016 indicated that Bridgeforth performed replacement services such as cooking, cleaning the kitchen, vacuuming, dusting, buying groceries, running errands, taking out the garbage, doing laundry, changing linens, and driving. The replacement services calendar indicates that on August 9, 2016, Bridgeforth performed services for Bernard such as cooking, cleaning the kitchen, and dusting. On August 17, 2016, Bridgeforth vacuumed, cleaned, dusted, cooked, and made beds for Bernard. The day before, on August 16, 2016, Bridgeforth cleaned the kitchen, cooked, and ran errands for Bernard.
However, Grange produced surveillance evidence confirming that on August 9, 2016, and August 17, 2016, Bernard was driving his truck for lengthy periods of time as part of his work collecting scrap metal, getting in and out of the vehicle without difficulty, putting gas in the truck, cleaning and dusting off a large appliance, and then putting the appliance into his truck and moving it around while in the truck bed with the assistance of another man. Like the plaintiff in Bahri, Bernard submitted the replacement services calendars to support his claim for replacement services, but the surveillance evidence, which showed him engaging in an active lifestyle as he went about his work, belied his claim that he required replacement services. Like in Bahri, '[r]easonable minds could not differ in light of this clear evidence that plaintiff made fraudulent representations for purposes of recovering PIP benefits.' Bahri, 308 Mich App at 426. Additionally, there was no genuine issue of material fact about whether Bernard intentionally concealed a material fact when he submitted documentation in support of his alleged need for replacement services but was aware that he did not require such services because he was able to go about his daily work activities, including cleaning and lifting a large appliance as depicted in the surveillance video. Therefore, the record evidence confirmed that Bernard suppressed the truth with the intent of defrauding Grange.”
The Bernard Estate next argued that Bernard’s fraud did not render his policy with Grange void ab initio, and that he did, in fact, maintain the proper security under MCL 500.3101 at the time of subject crash. The Court of Appeals hedged in its holding, ruling that the policy was rescinded, but that Bernard nonetheless maintained the required security at the time of the collision. For similar, convoluted reasons to those discussed above, the Court relied again on Bahri and not Meemic in holding that Grange’s policy was voided ab initio, but that that is a contractual remedy, and does not actually alter the past. Therefore, Avers and Anchor Bay could not rely on the contractual remedy for Grange in arguing that Bernard did not maintain the required security at the time of the collision.
“As a factual matter, it is uncontested that, at the time that Bernard was injured, he was maintaining proper security for his motor vehicle by virtue of his policy with Grange. Despite this fact, the trial court concluded that Bernard did not have proper security because his policy with Grange was rescinded. It is true that rescission, as a contractual remedy, works to 'undo [a contract] from the beginning,' Wall v Zynda, 283 Mich 260, 264; 278 NW 66 (1938) (quotation marks and citation omitted), so 'it is as if no contract had been made,' Bazzi v Sentinel Ins Co, 502 Mich 390, 409 n 10; 919 NW2d 20 (2018). But this contractual remedy is a 'legal fiction,' Esurance Prop & Cas Ins Co v Michigan Assigned Claims Plan, 330 Mich App 584, 593; 950 NW2d 528 (2019), the fiction being that courts pretend the contract never existed between the relevant parties, see, e.g., Bazzi, 502 Mich at 412 (holding that even though an insurance contract was rescinded between the insurer and the entity that took out the insurance, the same contract may not have been rescinded between the insurer and a third-party beneficiary of the insurance contract). The legal fiction is intended as a contractual remedy, and it does not actually alter the past.
The issue here is whether Bernard, in fact, had proper security in effect at the time of his injury. The uncontested reality is that he did in the form of his insurance policy with Grange. The subsequent rescission of that policy as a contractual remedy for Bernard’s fraud does not alter the reality that, at the time of Bernard’s injury, he indeed had an insurance policy with Grange. Accordingly, because Bernard had the policy with Grange at the time of the accident and that policy constituted proper security for purposes of MCL 500.3101(1), we conclude that the bar to recovery in MCL 500.3135(2)(c) does not apply in this case.”
Avers and Anchor Bay argued, alternatively, that they were still entitled to summary disposition because there was no genuine issue of material fact as to whether Bernard suffered a serious impairment of body function. The Court of Appeals disagreed, holding that Bernard suffered an objectively manifested impairment based on his numerous symptoms from his neck and back injury, including decreased range of motion, pain, and radiating numbness. Furthermore, his imaging revealed multiple, identifiable cervical and lumbar spine injuries, at least one of which required that he undergo a fusion surgery after the crash.
“Moreover, with regard to the first prong of the analysis in McCormick, 487 Mich at 196, Bernard presented evidence that he suffered from an objectively manifested impairment of a body function, because he testified in his deposition that he had undergone fusion surgery in January 2017, and had experienced pain in his neck, chest, and back that prevented him from lifting objects over 20 pounds and from bending over. Bernard also experienced numbness in his legs, as well as swelling in his feet and legs. Bernard did not have a full range of motion in his neck and he experienced pain in his low back. Bernard also had pain and cramping in his hands. Dr. Kornblum also stated that Bernard was experiencing 'spinal pain and numbness' that radiated into his hands, and that he incurred 'abnormal pathology' in the manner of a C5-C6 disc herniation with cord impingement, and C6-C7 displacement. Bernard also had 'L4-L5 disc herniation and an accompanying anterolisthesis at that level.' ”
The Court of Appeals next held that Bernard’s injuries related to an important body function because they affected his ability to stand, lift, and walk, all of which were required of him as a scrap metal collector and in order to conduct his snow removal business. Additionally, the Court of Appeals held that the Bernard Estate presented sufficient evidence that Bernard’s injuries affected his general ability to lead his normal life because he could no longer participate in numerous recreational activities he enjoyed prior to the crash and because his ability to work was affected.
Lastly, the Court of Appeals vacated the trial court’s award of attorney fees to Grange and remanded for further proceedings regarding that issue. Specifically, the Court held that the trial court failed to specify whether it was awarding fees under MCR 2.403(O) or under the no-fault act: MCL 500.3148(2), specifically. Furthermore, the trial court failed to consider all the factors set forth in Pirgu v United Servs Auto Ass’n, 499 Mich 269 (2016) for awarding attorney fees.
