Michigan Court of Appeals; Docket #359083; Unpublished
Judges Yates, Jansen, and Servitto; Per Curiam
Official Michigan Reporter Citation: Not Applicable; Link to Opinion
In this unanimous, unpublished, per curiam decision, the Court of Appeals reversed the trial court’s summary disposition order dismissing Plaintiff Harley Reed’s action for No-Fault PIP benefits against Defendant State Farm Mutual Automobile Insurance Company (“State Farm”). The Court of Appeals held that a question of fact existed as to whether Reed committed fraud when making representations about his injuries to State Farm, and whether State Farm could deny his claim as a result. Notably, the Court of Appeals declined to apply Williams v Farm Bureau Mut Ins Co of Mich, 335 Mich App 574 (2021) to this case, because State Farm was seeking to deny Reed’s claim for PIP benefits under his policy, not void his policy altogether. The Court further interpreted Meemic Ins Co v Fortson, 506 Mich 287 (2020) as standing for the proposition that the Plaintiff’s entire claim for PIP benefits could be denied on the basis of fraud, even aspects of it that are unrelated to any fraud.
Harley Reed suffered injuries as a result of being rear-ended by another vehicle. After the accident, Reed sought PIP benefits from State Farm, his No-Fault insurer, and State Farm required that he submit to an examination under oath (“EUO”). During the EUO, Reed testified that he experienced constant pain which forced him to reduce his work schedule, but that he continued to perform his job and the occasional physically demanding activity out of economic necessity. At some point, State Farm hired a private investigator to surveil Reed, and the investigator documented Reed carrying a five-gallon bucket, helping to move a refrigerator, and bending at the waist. State Farm then denied Reed’s claim for PIP benefits and moved for summary disposition in his resultant first-party action, alleging that Reed had committed fraud. Reed responded by noting that he never claimed to totally abstain from physically demanding activities, just that he experienced pain while performing such activities and sought to avoid them whenever possible. The trial court ultimately agreed with State Farm, ruling that no reasonable juror would conclude that Reed had not committed fraud.
The Court of Appeals reversed the trial court’s summary disposition order, holding that a question of fact existed as to whether the statements Reed offered in his EUO were fraudulent. “[Reed] never asserted that he completely abstained from activities,” the Court noted, rather, “He simply stated that his injuries made some of those activities more difficult, so he tried to avoid them.” Surveillance footage of Reed performing physical activities on a select few occasions, therefore, did not necessarily contradict his statements.
“To prove plaintiff made false statements about the severity of his pain, defendant presented photographs of plaintiff carrying or lifting buckets and helping to move a refrigerator weeks before his EUO. But plaintiff never denied that he engaged in those types of activities. Rather, he asserted that he used other means to move heavy objects whenever he could, and he explained that, despite his pain, he undertook those activities purely out of economic necessity. And to explain the picture of a refrigerator being moved, plaintiff offered his sworn statement that he merely put his hands on the refrigerator to guide it, not to lift it. The trial court dismissed plaintiff’s explanations for the activities depicted in the photographs that State Farm obtained, observing that no juror would believe plaintiff’s explanations. But under Michigan law, a trial court ‘may not resolve factual disputes or determine credibility in ruling on a summary disposition motion.’ Burkhardt v Bailey, 260 Mich App 636, 647; 680 NW2d 453 (2004). Plaintiff has never asserted that he completely abstained from any activities. He simply stated that his injuries made some of those activities more difficult, so he tried to avoid them. Consequently, whether plaintiff’s statements about the severity of his injuries were fraudulent cannot be resolved by the photographs documenting plaintiff’s work activities. Instead, there remains a question of fact that can only be determined by an assessment of plaintiff’s credibility. Because an assessment of credibility can play no role in the resolution of State Farm’s motion for summary disposition under MCR 2.116(C)(10), we must reverse the trial court’s award of summary disposition and leave the issue of plaintiff’s credibility for resolution at trial. See El-Khalil, 504 Mich at 160.”
Interestingly, although the Court held that a question of fact existed as to whether Reed committed fraud, it also determined that State Farm would be able to deny his entire claim if it turned out that he did. The Court acknowledged that under Williams, State Farm could not void Reed’s policy on the basis of post-procurement fraud, but determined that under Meemic, an insurer can reject an entire claim on the basis of post-procurement fraud, including any aspect of the claim unrelated to the fraud.
“The legal question posed by defendant’s request for summary disposition pursuant to MCR 2.116(C)(10) is becoming increasingly difficult to answer under Michigan law. Historically, this Court has held that an insured’s false statement in making a claim for insurance benefits justifies the denial of the claim if the false statement is ‘material,’ i.e., reasonably relevant to the insurer’s investigation of the claim. Bahri v IDS Prop Cas Ins Co, 308 Mich App 420, 424-425; 864 NW2d 609 (2014). But recently, we carved out an exception to that rule for false statements made by an insured party during the course of litigation over insurance benefits, as opposed to statements made before litigation. Haydaw v Farm Bureau Ins Co, 332 Mich App 719, 723; 957 NW2d 858 (2020). And more recently, we held that an insured’s false statements to an insurer made after procuring a no-fault insurance policy could not be used to void the policy. Williams v Farm Bureau Mut Ins Co of Mich, 335 Mich App 574, 581; 967 NW2d 869 (2021). But neither of those recent opinions deals with the circumstances in this case, where State Farm merely denied a claim—as opposed to voiding a no-fault policy—based upon false statements made after the insurance policy was issued but before litigation commenced. Instead, this case fits comfortably within our holding in Fashho, 333 Mich App 612, which stands for the proposition that an insured’s false statements made after procurement of an insurance policy can justify denying a claim, as opposed to voiding the policy. Id. at 618-622; see also Shelton v Auto-Owners Ins Co, 318 Mich App 648, 655; 899 NW2d 744 (2017) (‘if an insurer concludes that a claim is fraudulent, it may deny the claim’).”