By: Ronald M. Sangster, Jr.,Law Offices of Ronald M. Sangster PLLC
Dismissal of PIP Claim Based on Bahri … Was It Really Fraud or Just a Mistake?
With its decision in TBCI Inc v State Farm, 289 Mich App 39, 795 NW2d 229 (2010), the Court of Appeals took its first significant step toward applying a fraud exclusion in a no‑fault insurance contract to bar an entire claim for no‑fault benefits. In that case, the underlying claimant had submitted a claim for attendant-care-service benefits, and in the context of the claimant’s own suit for PIP benefits, the jury affirmatively determined that the claim was fraudulent. After the claimant’s trial, one of his medical providers, TBCI Inc., filed its own separate cause of action to recover payment of the medical expenses incurred by the underlying claimant. In defense, State Farm relied upon the fraud exclusion contained in the claimant’s insurance policy and argued that, pursuant to that exclusion, the claimant was no longer entitled to recover any benefits under the insurance contract. State Farm further argued that, because the medical provider was “in privy” with the underlying claimant, the medical provider’s claim for payment of medical expenses was likewise barred. Applying the principles of
res judicata, the Court of Appeals affirmed the dismissal of the provider’s cause of action, based on State Farm’s fraud exclusion. Unfortunately, the effect of the Court of Appeals’ decision in
TBCI was limited because
TBCI involved two separate proceedings – an affirmative finding of fraud by the trier of fact in the first proceeding, and a subsequent claim by a medical provider in a second proceeding to recover said expenses.
The Court of Appeals finally put some teeth into the insurer’s fraud exclusion when it released its seminal decision in Bahri v IDS Property Casualty Ins Co, 308 Mich App 420, 864 NW2d 609 (2014).
Bahri marked the first time the Court of Appeals applied an insurer’s fraud exclusion in a
pending action to dismiss an entire claim for no‑fault benefits. In
Bahri, plaintiff was involved in a motor-vehicle accident on October 20, 2011. As part of her claim, she submitted a claim for household-replacement-service expenses dating back to October 1, 2011 – three weeks before her involvement in the subject accident! Furthermore, surveillance revealed that plaintiff was fully capable of performing many of the activities for which she was seeking compensation under her household-replacement-service claim. Given these facts, the Court of Appeals had no problem concluding that such claims were fraudulent on their face:
We agree with the trial court that the fraud exclusion applied in the instant case. In order to substantiate her claims for replacement services, plaintiff presented a statement indicating that services were performed by “Rita Radwin” from October 1, 2011, through February 29, 2012. Because the accident occurred on October 20, 2011, on its face, the document plaintiff presented to defendant in support of her PIP claim is false, as it sought recoupment for services that were performed over the 19 days preceding the accident. [Bahri, 308 Mich App at 425.]
Furthermore, to the extent that the surveillance videos contradicted the information contained on the household-replacement-service forms, the Court of Appeals likewise had no problem concluding that the entire claim was barred by virtue of the fraud exclusion in defendant’s insurance policy:
This evidence belies plaintiff’s assertion that she required replacement services, and it directly and specifically contradicts representations made in the replacement services statements.
Reasonable minds could not differ in light of this clear evidence that plaintiff made fraudulent representations for purposes of recovering PIP benefits. Stated differently, we find no genuine issue of material fact regarding plaintiff’s fraud.
Because plaintiff’s claim for PIP benefits is precluded, intervening plaintiffs’ claim for PIP benefits is similarly barred, as they stand in the shoes of plaintiff. [Bahri, 308 Mich at 426 (emphasis added; citation omitted).]
Significantly, it was plaintiff’s fraudulent household-replacement-service-claim forms that barred her medical provider’s claims for payment of the medical expenses incurred by plaintiff, as a result of the injuries suffered in the subject accident. Interestingly, it was the intervening plaintiffs/medical providers who were the actual appellants in that litigation – not the injured plaintiff!
After Bahri, the Court of Appeals has subsequently issued multiple unpublished opinions that have affirmed the dismissal of plaintiff’s
entire cause of action in light of a fraudulent claims submission. For example, in
Ward v State Farm, unpublished opinion per curiam of the Court of Appeals, issued September 15, 2016 (Docket No. 327018); 2016 WL 4954184, plaintiff submitted a claim for no‑fault benefits with her insurer, State Farm, arising out of a motor vehicle accident that occurred on September 29, 2013. Specifically, she submitted a claim for household-replacement-service expenses under MCL 500.3107(1)(c), and in support, she submitted forms that were allegedly filled out by the service provider, Ashley Wutzke. She also submitted a claim for work-loss benefits, on the basis that she was unable to continue her employment at a day-care center due to the injuries suffered in the subject accident. However, the service provider, Ashley Wutzke, testified that she never performed household chore services during the period of time referenced in the claim forms, and the documentary evidence obtained from plaintiff’s employer showed that she had been discharged due to employee misconduct. The lower court granted defendant’s motion for summary disposition pursuant to
Bahri and the plaintiff appealed.
In affirming the decision of the lower court to dismiss plaintiff’s entire cause of action, the Court of Appeals stated:
Plaintiff also contends that the trial court improperly made a credibility determination when it allegedly credited the deposition testimony of the purported service provider and discredited plaintiff’s testimony. Plaintiff testified that her friend, Ashley Wutzke, came to her home literally every single day from September 30, 2013, until February 2, 2014, to perform services, such as cleaning, washing, and driving plaintiff. But when deposed, Wutzke testified that she never cleaned plaintiff’s home and only took plaintiff shopping and drove her to appointments. While “[t]he court is not permitted to assess credibility, or to determine facts on a motion for summary judgment,” [citation omitted], it is clear that reasonable minds would find this blatant inconsistency fatal to plaintiff’s claim, see
Bahri, 308 Mich App at 425-426 (holding that “reasonable minds could not differ in light” of evidence that clearly contradicted the plaintiff’s assertions that she required replacement services).
Moreover, assuming arguendo that the above, clear dichotomy between plaintiff’s testimony and Wutzke’s testimony is insufficient under a motion for summary disposition to show that plaintiff made a false statement in an attempt to conceal a material fact from defendant, plaintiff also made other statements that warrant judgment in favor of defendant. Plaintiff asserted that she was entitled to wage-loss benefits because, although she did not want to, she “had to” leave work “because of the accident.” But the documentary evidence contradicts plaintiff’s assertion. Defendant produced plaintiff’s records from her daycare employer, which described a series of warnings for the failure to adhere to company policy that ultimately led to her termination. Due to this clear documentary evidence, reasonable minds could not differ on the conclusion that plaintiff made a false statement with the intent to conceal a material fact from defendant in relation to her wage-loss claim. See
id. Therefore, pursuant to the contract’s plain terms, “[t]here is no coverage under th[e] policy,” and defendant was entitled to summary disposition.
Notably, all coverage is forfeited under the policy if a false statement was made “in connection with any claim under this policy.” (Emphasis added.)
Therefore, plaintiff’s false statement in connection with her wage-loss claim voids all coverage under the policy, including her claim for medical benefits. Accordingly, were we to hold that the trial court impermissibly engaged in making credibility determinations when it ruled that plaintiff’s statement that Wutzke provided replacement services was false, we affirm on the alternate ground that plaintiff made a demonstrably false statement—based on documentary evidence instead of mere conflicting testimony—related to why she was terminated from her job. [Ward, slip opinion at pp 4-5 (italics in original, emphasis added).]
Importantly, the Court of Appeals emphasized that the insurer’s evidence of fraud must “directly and specifically contradict” the claims that were presented by the plaintiff, before the fraud exclusion would be triggered.
In Thomas v Frankenmuth Mut’l Ins Co, unpublished opinion per curiam of the Court of Appeals, issued July 12, 2016 (Docket No. 326744); 2016 WL 3718352, the Court of Appeals likewise dismissed plaintiff’s entire cause of action, based upon a fraudulent claim for transportation-service expenses. In that case, plaintiff was injured in a motor vehicle accident on July 6, 2013. Plaintiff’s treating physician, Dr. James Beale, M.D., instructed plaintiff not to drive for six months. In his deposition, plaintiff denied that he ever drove an automobile at any time during this six-month period. However, surveillance conducted by Frankenmuth showed that plaintiff was driving a vehicle on two separate occasions while, at the same time, using non-emergency medical transportation on those very same days. After suit was filed, Frankenmuth moved for summary disposition pursuant to the language of its fraud exclusion, set forth in the policy. The lower court granted the insurer’s motion for summary disposition based on
Bahri, supra, and rlaintiff appealed.
On appeal, the Court of Appeals likewise affirmed the decision of the court below to dismiss plaintiff’s cause of action in its entirety. As noted by the Court of Appeals:
Bahri compels a similar conclusion in this case. Plaintiff’s claim for PIP benefits involves, in large part, a claim for transportation services due to his purported inability to drive. Yet plaintiff was observed driving his car multiple times on the same day he availed himself of medical transportation services. Further, when offered a chance to perhaps explain why he drove on that particular day, plaintiff instead represented multiple times that he had not driven at all during the relevant time period. These representations were thus “reasonably relevant to the insurer's investigation of a claim.”
Bahri, 308 Mich App at 425. Plaintiff’s argument that
Bahri is distinguishable because
Bahri, in part, involved claims for replacement services that had not actually been provided, is unavailing. The
Bahri Court specifically noted that the surveillance belied the plaintiff’s assertion that she needed help with the tasks she was observed performing without help, including revealing that she was driving on a day that she stated that she required transportation assistance.
Id. at 425-426. The fact that plaintiff in this case in fact actually availed himself of transportation services on the day he was observed does not defeat the fact that he was observed performing an activity “inconsistent with [his] claimed limitations” on a day that he asserted he required transportation.
Id. at 425. Further, we also find unpersuasive plaintiff’s argument that his repeated assertions during his deposition that he did not drive were innocent mistakes. If they were not knowing misrepresentations, then they were certainly reckless ones, in the face of the proof that he drove his car at least twice on the same day he availed himself of transportation services. [Thomas, slip opinion at p 3.]
Once again, the insurer prevailed because its surveillance “directly and specifically contradicted” a claim actually presented by Plaintiff; namely, a claim for transportation services.
Finally, in Diallo v Nationwide Mut’l Fire Ins Co, unpublished opinion per curiam of the Court of Appeals, issued November 15, 2016 (Docket No. 328639); 2016 WL 6780735, plaintiff was injured in a motor vehicle accident that occurred on July 2, 2013. Plaintiff subsequently presented a claim for household-replacement-service expenses through August of 2014. However, from April 2014 through August 2014, plaintiff was in Europe while her husband/service provider remained at home. Upon discovering the fraud, defendant moved for summary disposition under
Bahri, which was granted by the circuit court.
On appeal, the Court of Appeals again affirmed the dismissal of plaintiff’s cause of action, relying on Bahri. In this case, the Court of Appeals commented on how similar the facts in this case were to
Bahri, when it noted:
The facts of the present case reveal that plaintiff submitted claims for household replacement services for every day from April 1, 2014, through the end of August of 2014. Those forms list the address as plaintiff and Sarr’s [plaintiff’s husband] home address. The forms in question were all signed by Sarr. The forms indicate that there were “multiple providers” but only listed the names of Sarr and Khallo Diallo, plaintiff’s mother.
It is further undisputed that during the months of April, May, June, July and part of August, plaintiff was in Europe. It is also undisputed that Sarr and Khallo were not in Europe during those times …. [Diallo, slip opinion at p. 4.]
Given the fact that the person receiving the services was an entire continent away, the Court of Appeals had no difficulty concluding that plaintiff’s entire cause of action should be dismissed.
Accordingly, on this record, we are presented with a strikingly similar case to Bahri. Here, as in
Bahri, it was physically impossible for the household replacement services to be performed in the manner outlined in the submitted claims. In
Bahri, there were claims made for replacement services that were impossible to exist because the claimed days occurred before the accident that allegedly caused the injuries occurred. In the present case, household services claims were submitted by Sarr when he was undisputedly in Michigan and plaintiff was undisputedly in Europe. Further, both plaintiff and Sarr provided sworn testimony that the submitted replacement service forms reflected that Sarr actually performed the services that were claimed. Quite frankly and simply, that was impossible because Sarr and plaintiff were on different continents, an ocean away from one another. [Diallo, slip opinion at p. 5.]
Again, the Court of Appeals was able to reach this result because the evidence obtained by the Defendant “directly and specifically contradicted” a claim that had been presented by the underlying Plaintiff.
By contrast, where the insurer fails to show a “direct and specific contradiction” to the plaintiff’s claim, plaintiff may be able to survive a Bahri motion. Such was the case in
Sampson v Jefferson, unpublished opinion per curiam of the Court of Appeals, issued July 14, 2016 (Docket No. 326561); 2016 WL 3855882. In
Sampson, plaintiff was injured in a motor vehicle accident on December 20, 2012. He was diagnosed with a fracture of the cervical spine. He also sustained cervical and lumbar spine disc herniations as well as an injury to his left shoulder. As a result of these injuries, plaintiff submitted a claim for household-replacement-service expenses during the month of March 2013. The household-service-claim form for March 2013 was described as a “blank grid seven squares across, labeled Sunday through Saturday, and five squares down, presumably for the weeks of the month.” Significantly, there were no dates in any of the squares, even though all 35 squares had been filled out with handwritten letter, which designated which services were performed. Notably, the service provider indicated that he did not drive plaintiff around, or run errands for plaintiff, every day of the month. The insurer obtained videotaped surveillance of plaintiff on March 6, 2013, and March 9, 2013, which showed him driving a car to a gas station and back home, taking a child’s bicycle out of the car, removing a duffle bag from the car and going to a store and getting some pizza. The lower court denied the insurer’s motion for summary disposition, and the Court of Appeals accepted the insurer’s interlocutory appeal. The same panel that issued the decision in
Thomas v Frankenmuth concluded that the evidence presented by the insurer did not “directly and specifically contradict” the claim submitted by plaintiff. Therefore, at the very least, there existed an issue of fact as to whether or not plaintiff’s claim was barred by virtue of the fraud exclusion in defendant’s policy. As noted by the Court of Appeals:
Although the videotape recordings depict plaintiff driving and running errands for a short time on March 6, 2013, and for a few hours on March 9, 2013, the videotape recordings do not establish that the household services statement contained a false representation. The videotape recordings are consistent with plaintiff’s deposition testimony. Specifically, plaintiff testified that in March 2013, he stopped wearing his neck brace all the time because his doctor instructed him not to become dependent on it and because plaintiff did not want to be perceived as disabled. He testified that he began to drive approximately one month after the accident because he had no help and therefore had no choice but to drive. Plaintiff did not indicate that he could drive without pain or without exacerbating his injury. He did not testify that he could drive at any time during the day. Plaintiff had a shoulder injury that prevented him from lifting anything over his head or lifting anything more than 10 or 15 lbs. However, plaintiff explained ‘I still had some strength and I was taking a lot of pain medication. So I was in pain, but when I was taking my mediation, I wasn’t really in that much pain because of the medication.’ With regard to the replacement services, plaintiff testified that Beard performed all the tasks that plaintiff could no longer do, including cooking and cleaning. He testified that Beard consistently came to his house to help him during the first six months after the accident.
The videotapes only depict plaintiff at several points during the day on March 6, 2013, and March 9, 2013, and they do not depict plaintiff’s conduct during every hour of the relevant days. Plaintiff contended that he could perform certain tasks during certain times of the day when his pain level was not too high and his pain medications did not prevent him from doing so. There is nothing depicted on the videotapes that contradicts plaintiff’s position or establishes that the services were never performed on those days. Beard is depicted in the March 9, 2013, videotape recording, which further supports plaintiff’s contention that Beard provided replacement services for him on the days in question.
Additionally, Defendant did not prove falsity because the forms do not establish on what dates the driving and errand-running services were claimed. Again, the squares are not pre-numbered to correspond with the dates of the applicable month, no numbers were added, and there were no affidavits or testimony to otherwise establish what entries corresponded to what dates. [Sampson, slip opinion at pp. 3-4 (emphasis added).]
Again, this case emphasizes the importance of securing evidence that “directly and specifically contradicts” a claim that was actually submitted by plaintiff, either during the claim stage or during the course of litigation.
These cases dealt with fraud exclusions contained within an insurance policy. Obviously, in a case being handled by the Michigan Assigned Claims Plan and its assigned insurers, there is no “policy.” However, the MACP and its assigned insurers have the benefit of a statutory “fraud exclusion,” found at MCL 500.3173a(2). This section of the No‑Fault Act provides:
A person who presents or causes to be presented an oral or written statement, including computer-generated information, 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 under section 4503 that is subject to the penalties imposed under section 4511. A claim that contains or is supported by a fraudulent insurance act as described in this subsection is ineligible for payment or benefits under the assigned claims plan. [MCL 500.3173a(2) (emphasis added).]
To date, there have been no decisions from the Michigan Court of Appeals interpreting this provision. However, the author is confident that if presented with evidence which “directly and specifically contradicts” a claim presented by a plaintiff, whether at the claims stage or at the litigation stage, the same result should apply as in Bahri,
Diallo – plaintiff’s entire cause of action should be dismissed. Otherwise, the policyholders of the state, which fund the Michigan Assigned Claims Plan, would end up being responsible for payment of claims that are based, in part, on fraud.