Changes to Michigan No Fault Insurance Fraud Rules

Michigan Auto Law
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A recent Michigan Court of Appeals ruling – which applied a landmark decision by the Michigan Supreme Court from 2020 – has put an end to insurance companies exploiting overly broad anti-fraud provisions in policies to deny Michigan insurance benefits to people injured in car accidents. The one-two punch of these significant No-Fault insurance fraud rulings now sends a clear message to the insurance companies, claims adjusters and insurance defense lawyers that car accident victims’ rights cannot be trampled on and taken away by claiming whatever they want as fraudulent.

The justices on the Supreme Court and the judges on the Court of Appeals have now stopped a practice that has caused real harm to numerous innocent and injured car accident victims. Of course, these two rulings just clarify what should have been clear to the insurance companies all along.

Using insurance fraud clauses to strip away all of a car accident victim’s benefits based on their statements or actions after the car crash has no legal basis in Michigan law. The No-Fault law, passed by the Legislature in 1973 and amended in 2019, does not allow it. And the Michigan common-law, which has existed for decades and decades, also does not allow it.

Accusing car accident victims of fraudulent behavior

Insurance companies have been using these provisions in their policies to exploit car accident victims’ mistakes – no matter how innocent or how inconsequential – during the claims process or during legal discovery to take away all Michigan insurance benefits.

This allowed the insurers to save millions of dollars. And until now, they’ve been largely getting away with it.

The defense playbook is simple: the adjusters or defense lawyers comb through all of the forms submitted by a car accident victim. They do the same with depositions and interrogatories. They hire private investigators. The goal of all of this is to find a mistake, some inaccurate statement – no matter how small, innocent, or insignificant it is – and then use this information to accuse the car accident victim of having committed fraud.

Accusing the car accident victim of fraud or “fraudulent insurance acts” holds particular significance because then the insurance company can avail itself of the overly-broad and draconian “anti fraud” provisions its own lawyers had drafted and inserted into the policy. Using its own definition of fraud, the insurer would then seek to “void” the entire policy and walk away from all legal and financial responsibility for the victims’ Michigan auto insurance benefits.

Draw the wrong trial court judge for a car accident lawsuit - as hundreds of people did - and the insurance companies would get away with it, too.

The result of this strategy has been devastating. Thousands of Michigan car accident victims have had their insurance benefits denied in recent years as insurance companies became more aggressive and more emboldened to claim nearly anything as fraud.

Courts stop abuse of fraud provisions in insurance contracts

The two new cases that will now protect car accident victims from having their Michigan insurance benefits completely terminated because of an accusation of No-Fault insurance fraud were decided by the Michigan Supreme Court and the Michigan Court of Appeals.

In MEEMIC v. Fortson, the Michigan Supreme Court ruled that MEEMIC’s antifraud provision which sought to void the entire policy based on alleged fraud concerning a car accident victim’s attendant care benefits was invalid and unenforceable because it has no legal basis in either Michigan’s auto insurance law nor Michigan’s long-standing common-law.

In Williams v. Farm Bureau, the Michigan Court of Appeals relied on MEEMIC v. Fortson to rule that Farm Bureau’s antifraud provision which sought to void the entire policy based on its insured’s alleged false statements related to her No-Fault claim after her car accident was invalid and unenforceable. The Court of Appeals explained that MEEMIC “held that antifraud provisions in Michigan auto insurance policies apply to fraudulence in the inducement but not to allegations of postprocurement fraud. Accordingly, the policy provision on which defendant and the trial court relied is ‘invalid and unenforceable’ to the degree an insurer seeks to apply it to allegations of postprocurement fraudulent in a claim under a mandatory coverage, as in this case.”

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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