A Groundbreaking Case: Bahri v. IDS Property Casualty Insurance Company and its Impact on No-Fault Law in Michigan
By: Angelo C. Testa
Should it stand, the Michigan Court of Appeals rendered an opinion in October of 2014 that will potentially have a momentous and long lasting effect on No-Fault Law in Michigan. In Bahri v. IDS Prop. Cas. Ins. Co., the Court of Appeals of Michigan ruled that any No-Fault policy that contains a “general fraud” exclusion can be voided if the insured/plaintiff commits fraud in connection with the loss or accident for which coverage is sought. Thus, one act of fraud by a plaintiff will bar that plaintiff from recovering any PIP benefits under their policy.
The facts of Bahri are straightforward. The case involves an automobile accident that occurred on October 20, 2011. Prior to the subject accident, the defendant issued to the plaintiff a No-Fault automobile policy that contained a general fraud exclusion.[1] The police report indicated that only two vehicles were involved in the accident. However, the plaintiff testified at her deposition that a third car was involved in the accident.
Following the accident, the plaintiff sought PIP and uninsured motorist benefits from the defendant. With respect to replacement services, the plaintiff submitted to the defendant “Household Services Statements” which indicated that multiple replacement services were provided daily to plaintiff from October 2011 through February 2012. The statements indicated that plaintiff was receiving replacement services for the entire month of October even though the accident occurred on October 20. Furthermore, surveillance video during this time period captured the plaintiff bending, lifting, driving, and running errands.
The defendant filed a motion for summary disposition, arguing that pursuant to the terms of the policy, PIP benefits and uninsured motorist benefits were precluded because of plaintiff’s fraudulent representations. Moreover, in regard to uninsured motorist benefits, the defendant argued that because the phantom third vehicle did not strike plaintiff’s vehicle, the plain language of the policy precluded the payment of uninsured motorist benefits. The trial court agreed with the defendant, and the Court of Appeals affirmed the decision, stating that “[b]ecause there is no genuine issue of material fact regarding plaintiff’s fraud, and therefore her inability to recover benefits under the policy, we affirm the trial court’s grant of summary disposition.”
The plaintiff has filed an Application for Leave to Appeal to the Michigan Supreme Court, which is still pending. Nonetheless, should this decision stand, it will clearly be a victory for all No-Fault insurance companies in the State of Michigan. The obvious impact, as discussed above, is that plaintiffs who deceit and defraud their insurance companies will be unable to recover any benefits under their policy, regardless of whether the fraud is connected to a particular benefit. Thus, if a plaintiff commits fraud on their attendant care statements, then he or she will be unable to recover attendant care benefits, as well as all other benefits under their policy, such as medical bills and wage loss.
However, the Bahri decision will do more than simply disallow benefits to those who commit fraud. Rather, this decision will likely alter potential plaintiff’s PIP claims all together. Plaintiffs and their respective attorneys will presumably use much more caution when asserting their PIP claims against insurance companies. Because one act of fraud can destroy an entire case, Bahri will likely act as a deterrent to fraudulent, and even weak, no-fault claims that are asserted against automobile insurance companies. A decrease of fraudulent and weak claims translates to a decrease of contested claims by insurance companies, and eventually a decrease of claims in general. Accordingly, this decision may ultimately decrease the number of litigated no-fault cases in Michigan. For insurance companies, that is surely a good thing. However, only time will tell as to how long it will take before these effects actually transpire.
Although an attorney may naturally be quick to make a Bahri argument when deceit or fraud is suspected on the part of the plaintiff, it is important to use caution. As noted above, an attorney would be essentially arguing to void an entire policy when basing a dismissal on Bahri, thus making any all benefits unrecoverable under the policy. As insurance adjusters can attest, voiding a policy is a very serious matter. In fact, such an action often requires corporate approval within an insurance company. Therefore, it is critical that any attorney who wishes to use Bahri as a basis for dismissal discuss this plan of action with the adjuster and/or claims specialist. As long as defense attorneys and insurance companies alike understand the importance and magnitude of Bahri, this case can be used as extremely valuable weapon in defending No-Fault claims in Michigan.
[1] The language of the policy was: “We do not provide coverage for any insured who has made fraudulent statements or engaged in fraudulent conduct in connection with any accident or loss for which coverage is sought under this policy.” Language such as this is essential for Bahri to apply.
For more information or questions on how this pertains to cases you are handling please e-mail the author here.