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Latest insurance company scam allowing claims adjusters to rip-off customers

By accusing auto accident victims of “fraud,” and then later dismissing charges ‘without prejudice,’ insurers intentionally avoid paying insurance benefits

Here’s the latest insurance company scam so insurance companies can avoid paying legitimate no fault insurance benefits to the people who need them…

A number of  insurance companies have come up with a  “trick” to  avoid  paying no-fault benefits to seriously injured auto accident victims.  And then when these insurance companies finally do pay, they often end up paying less than what they SHOULD have paid.  Instead, they pay a “compromised” amount.

Understand, insurance companies have been accusing people of fraud and all sorts of nasty things for years.  Since Michigan has no bad faith laws, and no consumer protection act, or even punitive damages to punish and deter odious corporate behavior, they’ve saved millions of dollars accusing completely innocent people of all sorts of nasty things. For instance, take a look at this Channel 7 News expose:

The new wrinkle to this “trick” centers around the auto insurers’ gaming of Michigan’s “res judicata” rule, which prevents a litigant from raising the same issue over and over until the litigant gets the result he or she wants.

Here is how it works:

  • When a seriously injured auto accident victim sues an auto insurer for non-payment of no-fault benefits, the auto insurer accuses the victim of fraud.
  • Then, when the victim agrees to settle, rather than litigate his lawsuit, the insurer agrees to “drop” or dismiss the fraud charges “without prejudice.”

And, that is where the “trick” kicks in.

By allowing the “fraud” accusations to be “dismissed without prejudice,” the auto insurer ensures that it can use the argument to force a settlement again in the future. Such as when the victim files a another lawsuit because the auto insurer has again refused to pay No Fault benefits.

Believe it or not, the Michigan Court of Appeals has ruled this “trick” is legal under Michigan’s “res judicata” rule.

Res Judicata ‘trick’

In Brafman v. Auto Club Insurance Association, et al., after Kenneth Brafman sued ACIA for unpaid, accident-related No-Fault benefits, the insurer accused him of “misrepresentations and … fraud …”

Nevertheless, a settlement was reached, the case did not go to trial and ACIA’s fraud “counterclaims” were “voluntarily dismissed … without prejudice.”

However, Brafman sued again to collect unpaid, accident-related no-fault benefits, and ACIA responded by reviving its previous fraud accusations.

Brafman objected, invoking the “res judicata” rule. He asked the court to bar ACIA from bringing up the fraud accusations because they had been dismissed with the first lawsuit.

The Michigan Court of Appeals disagreed, noting that the deciding factor  was the “without prejudice” nature of the previously dismissed claims:

“[A]n order of dismissal without prejudice … does not act as res judicata of the merits of future legal proceedings on the same subject. … ‘A dismissal of a suit without prejudice [as occurred with Brafman’s first lawsuit] is no decision of the controversy on its merits, and leaves the whole subject of litigation as much open to another suit as if no suit had ever been brought.’ … The order [in Brafman’s first lawsuit] dismissed all claims without prejudice, leaving open the possibility that a party could raise those claims in a later lawsuit.”

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Blog Author Steven M. Gursten
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