Michigan Court of Appeals; Docket #348670; Unpublished
Judges Beckering, O’Brien, and Swartzle; Per Curiam
Official Michigan Reporter Citation: Not Applicable; Link to Opinion
STATUTORY INDEXING:
Not Applicable
TOPICAL INDEXING:
Fraud/Misrepresentation
SUMMARY:
In this unanimous unpublished per curiam decision, the Court of Appeals—on remand from the Supreme Court—affirmed its prior order in which it vacated a judgment entered in favor of Plaintiff Russell Loiola in Loiola’s first-party action against Defendant Citizens Insurance Company of America (“Citizens”), and ordered a new trial for various reasons. The Supreme Court vacated part of the Court of Appeals’ prior order—in which the Court of Appeals held that Citizens was not required to plead fraud as an affirmative defense with particularity—and remanded to the Court of Appeals for reconsideration of that part of its order in light of a separate panel’s holding in Glasker-Davis v Auvenshire, 333 Mich App 222 (2020). In Glasker-Davis, the Court of Appeals held that a no-fault insurer raising fraud as an affirmative defense must do so with particularity. Thus, in revisiting that issue on remand, the Court of Appeals held that Citizens failed to plead fraud with particularity as an affirmative defense, but ordered that the trial court grant Citizens leave to amend its affirmative defenses.
Russell Loiola suffered a traumatic brain injury in a hit-and-run motor vehicle collision in 2010 and had his subsequent claim for no-fault PIP benefits through the Michigan Assigned Claims Plan (“MACP”) assigned to Citizens. After several years, Citizens stopped paying Loiola’s no-fault PIP benefits, and in Loiola’s resultant first-party action, Citizens alleged, among other things, that Loiola committed fraud and was therefore precluded from recovering PIP benefits pursuant to MCL 500.3173a(2). Loiola ultimately prevailed at trial, but, for various reasons, the Court of Appeals vacated the judgment in Loiola’s favor and remanded for a new trial. In its opinion, the Court of Appeals specifically rejected Loiola’s argument that Citizens failed to plead fraud with particularity as an affirmative defense, holding that MCR 2.112(B)(1)’s requirement that allegations of fraud be plead with particularity applied only to the original pleadings in a case—not to affirmative defenses. Loiola then sought leave to appeal to the Supreme Court, and in lieu of granting leave, the Supreme Court vacated only the portion of the Court of Appeals’ opinion that dealt with the issue of Citizens’ failure to plead fraud with particularity as an affirmative defense, and remanded to the Court of Appeals for reconsideration of that issue in light of Glasker-Davis.
Glasker-Davis was decided one week after the Court of Appeals’ issued its original unpublished opinion in this case. In Glasker-Davis, a separate panel held “that a ‘defense premised on an alleged violation of an antifraud provision in an insurance policy constitutes an affirmative fraud defense,’ and that such a defense must be pleaded with particularity.” In this case, the Court of Appeals held, first, that Citizens did not plead fraud with particularity—“[Citizens] provided no information about what statements Loiola made, when the statements were made, or how the statements were incorrect or false.” Despite this failing, the Court of Appeals held that Citizens must be allowed to amend its affirmative defenses, especially considering the fact that Glasker-Davis was decided after Citizens filed its defenses in this case, and because there was no evidence that Citizens was acting with “bad faith or dilatory motive” in failing to plead fraud with particularity as an affirmative defense.
"Although Citizens failed to plead fraud with particularity, Citizens nevertheless raised the applicability of MCL 500.3173a(2) in its affirmative defenses, giving Loiola notice that fraud was an issue. Further, at hearings before trial, the issue was discussed in more detail, including Citizens’ specific assertions that Loiola engaged in fraud by, among other things, mispresenting his history to doctors during examinations and by claiming to have worked more hours than reported on forms submitted to Citizens. Cf. VHS of Mich, Inc. v State Farm Mut Auto Ins Co, ___ Mich App ___, ___; ___ NW2d ___ (2021) (No. 352881); slip op at 9 (concluding that the defendant should be allowed to amend its answer to the complaint when, although the defendant did not plead fraud as an affirmative defense with specificity, the defendant provided the plaintiff ‘with reasonable notice that it would be pursuing a fraud defense’). Indeed, evidence supporting Citizens’ fraud claim was already presented to the jury during the trial. See MCR 2.118(C) (allowing for amendment of pleadings to conform to the evidence). These circumstances do not suggest that amendment would prevent Loiola from receiving a fair trial on remand. See VHS of Mich, Inc., ___ Mich App at ___; slip op at 9.
Moreover, leave to amend should be freely given when justice so requires, MCR 2.118(A)(2), and to the extent Citizens failed to properly plead fraud with particularity or to move to amend its affirmative defenses, it should be noted that Glasker-Davis was decided after the proceedings in this case. Prior to Glasker-Davis, as noted in this Court’s previous opinion, it was questionable whether fraud as an affirmative defense needed to be pleaded with particularity. There is nothing to suggest that there was bad faith or dilatory motive by Citizens that would support denial of a motion to amend. See generally Weymers v Khera, 454 Mich 639, 658; 563 NW2d 647 (1997).
In summary, pursuant to this Court’s recent decision in Glasker-Davis, Citizens was required to plead fraud as an affirmative defense with particularity. Citizens’ first responsive pleading included general references to fraud, but it was devoid of the particularity required to plead fraud under MCR 2.112(B)(1). Nevertheless, given that affirmative defenses may be amended at any time and this case is being remanded for a new trial, on remand, the trial court should allow Citizens an opportunity to move to amend its affirmative defenses, and Loiola be given an opportunity to respond. See WA Foote Mem Hosp v Mich Assigned Claims Plan, 321 Mich App 159, 196; 909 NW2d 38 (2017) (remanding with direction that the plaintiff be allowed to move to amend its complaint ‘so that the trial court may address the attendant issues in the first instance’), aff’d in part, vacated in part on other grounds 504 Mich 985 (2019)."
