Court of Appeals Imposes Strict Penalty for Misrepresentations Made in Support of Assigned No-Fault Claim

By: Steven M. Couch

On October 24, 2017, the Michigan Court of Appeals issued its published opinion in Candler v. Farm Bureau General Insurance Company of Michigan (No. 332998), holding that the plaintiff’s submission of three fraudulent documents in support of a no-fault claim administered on behalf of the Michigan automobile insurance placement facility (“MAIPF”) was a sufficient basis to order summary disposition of the plaintiff’s claims. This resolved a question about the proper interpretation of MCL 500.3173a, the statute that sets forth the penalty for submitting false statements or documents in support of an assigned no-fault claim. The Court’s decision now provides insurers handling these matters on behalf of the MAIPF with an effective tool to defend against abusive claims.

Since 2014, no-fault insurers have invoked the rule set forth in Bahri v. IDS Property Casualty Ins. Co., 308 Mich. App. 420 (2014), in defense against fraudulent claims. The Bahri court held that a carrier could bar coverage if the insurance policy at issue contained language that rendered a claim ineligible for payment in the event of fraud or misrepresentation in support of the claim. However, Bahri has no direct applicability to assigned claims because such claims are solely governed by statute, not by any policy of insurance. Within this framework, counsel defending suits arising out of assigned claims had at least one fewer tool to defend against fraudulent claims.

In Candler, the Plaintiff submitted calendars in support of his claim for attendant care services that were purportedly provided by his brother. These included calendars reflecting that his brother provided those services in August, September, and October 2015. Unfortunately for the Plaintiff, the truth came out in discovery that his brother only provided those services until July of that year and that his signature on the forms for the following three months had been forged. Upon learning of this, the defendant filed a motion for summary disposition on the basis of MCL 500.3173a (2), asserting that Plaintiff was not eligible to receive any PIP benefits because of his false statements in support of his claim. After hearing defendant’s motion for summary disposition and reviewing the parties’ supplemental briefing, the trial court denied the motion.

A panel of the Michigan Court of Appeals took up the question and reversed the trial court in a 2-1 decision. The majority opinion by Judge Henry Saad analyzed the language of the statute which states in relevant part that, “A person who presents or causes to be presented an oral or written statement . . . as part of or in support of a claim to the [Michigan automobile insurance placement facility] for payment or another benefit knowing that the statement contains false information concerning a fact or thing material to the claim commits a fraudulent insurance act . . . .” (emphasis in opinion) The Court of Appeals held that the misrepresentation need not be made to any particular person or entity, so long as the misrepresentation was used “as part of or in support of a claim to” the MAIPF. If such misrepresentations were made, then there are sufficient grounds to render the claim ineligible for payment.

In dissent, Judge Thomas Cameron argued that, in order to render the claim ineligible for payment, the statute requires that the misrepresentation must be made directly to the MAIPF. That is, under Judge Cameron’s analysis, a misrepresentation made to a servicing insurer would not render the claim ineligible for payment, particularly where the misrepresentation was identified and never forwarded to the MAIPF, as was the case in Candler. The dissent further drew a distinction between the MAIPF and the servicing insurers, arguing that because the two are handled differently under Chapters 31 and 33 of the Insurance Code, they must function differently under MCL 500.3173a, which references only the MAIPF, not the servicing insurer. Nevertheless, the majority interpreted the statute to mean that a misrepresentation in support of a claim that had been made to the MAIPF – not the presentation of the misrepresentation itself to that entity – Is what ultimately works to bar coverage under the statute.

With this binding decision, claims assigned to insurers by the MAIPF through the Michigan Assigned Claims Plan are now on essentially equal footing with those claims brought under conventional no-fault policies so far as a claimant’s fraudulent statements and actions are concerned. Previously, the defenses available to combat fraud in assigned claims were ambiguous because Bahri did not apply and the questions remained about the interpretation of MCL 500.3173a. Now, in light of this precedential opinion, insurers administering these claims on behalf of the MAIPF have a clear path to defend against fraudulent assigned claims cases just as they would against those brought under their own policies of insurance.

For more information or questions on how this pertains to cases you are handling please e-mail the author here.