Michigan Supreme Court; Docket No. 117505; Published
Opinion by Justice Taylor; 5-2 (Justices Kelly and Cavanagh concurring in part; dissenting in part)
Official Michigan Reporter Citation: 466 Mich. 588, Link to Opinion 
STATUTORY INDEXING:
12% Interest Penalty on Overdue Benefits – Nature and Scope [3142(2) (3)]
TOPICAL INDEXING:
Not applicable
CASE SUMMARY:
In this 5-2 Opinion by Justice Taylor, Justices Kelly and Cavanagh concurring in part and dissenting in part, the Supreme Court held that an examination under oath (EUO) provision in an automobile no-fault insurance policy was not enforceable as a condition precedent to the insurance company’s duty to pay no-fault PIP benefits. However, the majority held that EUO provisions may be included in no-fault policies as long as they do not conflict with the statutory requirements of the No-Fault Act. In this case, the EUO provisions were in conflict with the No-Fault Act and thus not enforceable. The court also held that such provisions were enforceable in connection with a claim for uninsured motorist benefits, because such claims are contractual only.
Peter Cruz was involved in an automobile accident while driving a car insured by State Farm. Cruz provided State Farm with what State Farm subsequently acknowledged to be reasonable proof of the fact and amount of the loss sustained as required by section 3142(2) of the No-Fault Act. Notwithstanding this compliance, State Farm sought to require compliance with its “examination under oath” contract provision that conditioned payment of benefits on the submission by the insured to such an examination as often as reasonably asked. With respect to his claim for uninsured motorist benefits, State Farm likewise insisted upon compliance with its EUO contract provisions, which the insured refused. Cruz requested arbitration of his uninsured motorist claim, which proceeded without State Farm’s participation. An award was entered in favor of Cruz, and suit was then filed seeking to enforce the arbitrators’ award. Additionally, the same lawsuit sought an order requiring payment of no-fault PIP benefits under the State Farm policy. The trial court vacated the arbitration award based upon Cruz’s failure to submit to the EUO. The trial judge also ordered plaintiff to comply with the EUO provision regarding both the uninsured motorist benefits claim and the no-fault PIP benefits claim.
The Court of Appeals reversed the trial court in part and affirmed in part, concluding that the EUO provision is contrary to the No-Fault Act. The Court of Appeals held that the EUO could be enforced by having it stand as a condition precedent to the insurer’s duty to pay uninsured motorist benefits, as those benefits are not statutorily mandated.
In reversing the Court of Appeals with respect to its determination that the EUO provisions were contrary to the no-fault statute, the Supreme Court held that such provisions are only precluded when they clash with the rules the Legislature has established for mandatory insurance policies, such as no-fault insurance policies. In that regard, the court stated:
“. . . we conclude that an EUO that contravenes the requirements of the No-Fault Act by imposing some greater obligation upon one or another of the parties is, to that extent, invalid. Thus, a no-fault policy that would allow the insurer to avoid its obligation to make prompt payment upon the mere failure to comply with an EUO would run afoul of the statute and accordingly be invalid. However, an EUO provision designed only to insure that the insurer is provided with information relating to proof of the fact and the amount of the loss sustained, i.e., the statutorily required information on the part of the insured–would not run afoul of the statute.”
In this case, because State Farm had acknowledged that reasonable proof of the fact and the amount of the loss had been received, State Farm’s duty to pay benefits to its insured began 30 days thereafter. The court stated that defendant’s attempt to require plaintiff to submit to an EUO as a condition precedent to payment of no-fault PIP benefits was impermissible, and, on remand, defendant must pay the PIP no-fault benefits as determined by the trial court–including arrearages and statutory allowed penalties. MCL 500.3142(3).
Justice Weaver, in a concurring opinion, wrote separately to emphasize that the court’s holding should not be construed as one that would permit insurers to avoid their duty to pay no-fault benefits by merely claiming in every case that an insured who refused an examination under oath has failed to supply reasonable proof.
Justice Kelly, joined by Justice Cavanagh, agreed with the majority’s holding that State Farm could not make payment of personal injury protection benefits contingent on plaintiff submitting to an examination under oath. However, the dissent stated that the majority’s assumption that EUO provisions are needed to avoid fraud, tilts the scale in favor of the insurer. It allows the insurer to add to the contract a provision that raises the quantum of proof necessary to establish a no-fault claim. The dissent expressed the concern that the majority’s opinion sets the stage for insurance abuse.
