Williams v. Farm Bureau Mut. Ins. Co. of Mich.

• Decision Date: 28 January 2021
• Docket Number: No. 349903,349903
• Citation: 967 N.W.2d 869,335 Mich.App. 574
• Parties: Marilyn WILLIAMS, Plaintiff-Appellant, and Mercyland Health Services and Greater Lakes Ambulatory Surgery Center, Intervening Plaintiffs, v. FARM BUREAU MUTUAL INSURANCE COMPANY OF MICHIGAN, Defendant-Appellee.
• Court: Court of Appeal of Michigan — District of US

335 Mich.App. 574

967 N.W.2d 869

Marilyn WILLIAMS, Plaintiff-Appellant,

and

Mercyland Health Services and Greater Lakes Ambulatory Surgery Center, Intervening Plaintiffs,

v.FARM BUREAU MUTUAL INSURANCE COMPANY OF MICHIGAN, Defendant-Appellee.

No. 349903

Court of Appeals of Michigan.

Submitted November 10, 2020, at Detroit.

Decided January 28, 2021, 9:25 a.m.

Perkins Law Group, PLLC, Detroit (by Stephen J. Chacko and Todd Russell Perkins ) for plaintiff.

Kopka Pinkus Dolin PC (by Mark L. Dolin, Farmington Hills, and Erin R. Katz ) for defendant.

Before: Gleicher, P.J., and K. F. Kelly and Shapiro, JJ.

Shapiro, J. Plaintiff Marilyn Williams appeals the trial court's order granting summary disposition in favor of defendant Farm Bureau Mutual Insurance Company of Michigan under MCR 2.116(C)(10), on the basis that plaintiff made a false or fraudulent statement related to her claim for no-fault benefits in violation of an antifraud provision in its policy. In light of the Supreme Court's recent decision in Meemic Ins. Co. v. Fortson , 506 Mich. 287, 954 N.W.2d 115 (2020), we reverse.

I. BACKGROUND

Plaintiff was injured in an automobile collision on September 1, 2016. She filed a claim for personal protection insurance (PIP) benefits with defendant, her no-fault insurer. Defendant denied the claim and plaintiff filed suit on October 20, 2017.

Defendant moved for summary disposition on the ground that plaintiff's policy, including her PIP coverage, was void because she had violated an antifraud provision in the policy by making false statements to defendant after the auto accident regarding her employment, the extent of her injuries, and her need for assistance. Because the issue presented is purely legal, we need not recapitulate the details of the alleged fraud. The provision defendant relied on stated that the policy would be void if a claimant made a material misrepresentation either in procuring the policy or in the course of postprocurement claims. The relevant provision in the policy reads:

The entire policy will be void if, whether before or after a loss, you, any family member, or any insured under this policy has:

1. Intentionally concealed or misrepresented any material fact or circumstance;

2. engaged in fraudulent conduct; or

3. made false statements;

relating to this insurance or to a loss to which this insurance applies.

Significantly, defendant does not claim that plaintiff committed fraud in the inducement, i.e., that plaintiff made any material misrepresentations when applying for and purchasing defendant's no-fault policy. Nor does defendant claim in its motion that the evidence concerning the accident, injury, and treatment, seen in the light most favorable to plaintiff, would be insufficient to qualify for PIP benefits. Defendant sought dismissal solely on the allegations of postprocurement fraud. The trial court granted the motion, and this appeal followed.

II. ANALYSIS

A

In Meemic , 506 Mich. 287, 954 N.W.2d 115, the Michigan Supreme Court considered whether a no-fault insurer may rely on a contractual antifraud provision to deny a claim or void or rescind a policy when the benefits in question are those mandated by statute, such as PIP benefits, as opposed to optional coverages such as uninsured motorist coverage. The Court concluded that as to benefits mandated by the no-fault act, MCL 500.3101 et seq. , a no-fault policy may not provide for defenses to coverage other than those in the no-fault act or that existed in common law and were not abrogated by the act. The Court unambiguously concluded that antifraud provisions are invalid to the degree they purport to apply to misrepresentations or fraud that occurs after the policy has been issued (postprocurement fraud) but upheld such provisions as long as they are limited to fraud in the inducement (preprocurement fraud). In the opinion's concise opening paragraph, the Court explained the legal problem and resolved it:

Meemic Insurance Company seeks to void its policy with defendants Louise and Richard Fortson and stop paying no-fault benefits to their son. Although the benefits are mandated by statute, Meemic seeks to avoid its statutory obligations by enforcing the antifraud provision in the policy. The issue before the Court is the extent to which a contractual defense like the one here is valid and enforceable when applied to coverage mandated by the no-fault act, MCL 500.3101 et seq. We hold that such contractual provisions are valid when based on a defense to mandatory coverage provided in the no-fault act itself or on a common-law defense that has not been abrogated by the act. Because Meemic's fraud defense is grounded on neither the no-fault act nor the common law, it is invalid and unenforceable. [ Id. at 293, 954 N.W.2d 115 (emphasis added).]

In determining that the antifraud provision did not have a basis in the common law, the Court distinguished postprocurement fraud from fraud in the inducement:

[T]he fraudulent activity at issue here did not relate to the inception of the contract. The fraudulent attendant-care bills ... neither induced Meemic to enter into the policy nor deceived Meemic as to the contents of the policy. Meemic could not possibly have relied on any fraudulent misrepresentations when it agreed to insure the Fortsons in 2009 because, at the time, they had not yet made any of the alleged misrepresentations.... In short, Meemic's contract-based fraud defense fails because it is not the type of common-law fraud that would allow for rescission. [ Id. at 309-310, 954 N.W.2d 115 (emphasis added).]

The Court forcefully reiterated its view that a no-fault policy may provide for nonstatutory policy-based exclusions and defenses only as to optional coverages, not mandatory ones such as PIP benefits: "[O]ne thing that is not open to debate is that the [no-fault] act governs the coverages it mandates, and the insurance policy controls coverages that are optional (i.e., not required by the act)[.]" Id. at 297-298, 954 N.W.2d 115. The Legislature did not include postprocurement misrepresentations among the grounds in MCL 500.3113 on which a court may conclude that the claimant is not entitled to PIP benefits, though it could readily have been included.¹

It is clear that the text of the no-fault act does not authorize insurers to void or rescind a no-fault policy on the basis of fraud or misrepresentation. Because fraud is not a statutory defense, the sole remaining question is whether that defense existed at common law and survived the adoption of a no-fault system. Meemic concluded that under the common law, fraud constituted grounds to void a contract only as to preprocurement fraud:

[W]e must consider whether Meemic's fraud defense is available at common law. As we explained in [ Titan Ins. Co. v. Hyten , 491 Mich. 547, 555, 817 N.W.2d 562 (2012) ], "Michigan's contract law recognizes several interrelated but distinct common-law doctrines—loosely aggregated under the rubric of ‘fraud’—that may entitle a party to a legal or equitable remedy if a contract is obtained as a result of fraud or misrepresentation." The key phrase is "if a contract is obtained as a result of fraud or misrepresentation." Id. [ Meemic , 506 Mich. at 304-305, 954 N.W.2d 115.]

The Court continued, "At common law, the defrauded party could only seek rescission, or avoidance of the transaction, if the fraud related to the inducement to or inception of the contract." Id. at 305, 954 N.W.2d 115. Thus, where the fraud alleged was not in "the inducement to or inception of the contract," there is no common-law basis to rescind or avoid performance.

Meemic also explained that applying such antifraud provisions to mandatory coverage undermines the entire no-fault system. It stated that "[t]o allow such provisions would reduce the scope of the mandatory coverage required by the no-fault act, as supplemented by the common law. It would in short, vitiate the act. " Id. at 302, 954 N.W.2d 115 (emphasis added). And were there any doubt as to the import of its decision, the Court recapped its holding at the end of the opinion: "[W]e hold that [the] contractual antifraud provision is invalid and unenforceable because it is not based on a statutory or unabrogated common-law defense." Id. at 316, 954 N.W.2d 115 (emphasis added).

In the instant case, the allegedly fraudulent statements were made postprocurement and did not influence or induce the policy's procurement. The rule of law clearly set forth in Meemic requires that we reverse the trial court.

B

Whether postprocurement fraud could void a PIP policy has only became significant since this Court's decision in Bahri v. IDS Prop. Cas. Ins. Co. , 308 Mich. App. 420, 424-425, 864 N.W.2d 609 (2014), which applied an antifraud provision to postprocurement fraud in a PIP case. Prior to Bahri , no case of record had ever held that false statements by a Michigan no-fault insured—other than those relevant to fraud in the inducement—were grounds to void or rescind a policy. Since Bahri , claims of fraud asserted by no-fault insurers against their insureds have become commonplace.

Bahri did not provide extensive analysis in support of its holding. Rather, it relied exclusively on Mina v. Gen. Star Indemnity Co. , 218 Mich. App. 678, 686, 555 N.W.2d 1 (1996), rev'd in part on other grounds 455 Mich. 866, 568 N.W.2d 80 (1997), a fire insurance case governed by a wholly different statute, MCL 500.2833. That statute not only permits insurers to incorporate antifraud provisions in their policies, its plain text requires fire insurance policies to include a provision "[t]hat the policy may be void on the basis of misrepresentation, fraud, or concealment." MCL 500.2833(1)(c). Such a clause in a fire insurance policy is entirely consistent with the controlling statute. However, Mina provides no support for the notion that such a clause is consistent with the no-fault act, which does not contain such language. And Bahri neglected to examine or explain why...