Contrary To Michigan case law and No Fault law, Detroit-area judges are using a poorly reasoned case to wrongfully dismiss No Fault claims
Mention the name “Bahri” around Michigan attorneys who represent people injured in automobile accident cases these days, and you may hear some colorful, unrepeatable (for purposes of this legal blog) words and phrases. To say Bahri v. IDS Property Casualty Insurance Company – a Michigan Court of Appeals October 9, 2014 ruling, which was approved for publication on December 9, 2014 – is a poorly reasoned decision is putting it mildly (read more here).
And to say Bahri has stirred up a lot of controversy – not to mention ill will among the plaintiff’s bar and a also growing number of defense lawyers who are being told by their claims adjusters to file “Bahri motions” is an understatement.
- First, because judges – unfortunately it seems it’s mostly Wayne County judges at the moment – are using the Bahri case to deny present and future No Fault benefits on the basis of a car crash victim’s alleged “fraud.” This is despite that fact that such a draconian “cut off” conflicts with the No Fault Law’s statutory requirements and often when there are very significant fact issues as to whether the claimed acts actually are or are not fraudulent at all.
- Second, in their incomplete analysis of the Michigan No Fault Law, these Wayne County judges are overlooking the fact that the most an auto insurance company can recover for a car crash victim’s alleged fraud is attorney fees – as an “offset against” No Fault benefits that “are then due or thereafter come due …”
In Bahri, the court concluded that, because a car crash victim made mistakes in her claims for No Fault replacement services, she could be disqualified from receiving all present and future No Fault insurance benefits (i.e., reimbursement for medical expenses, wage loss) on the basis of her alleged/so-called violation of a “general fraud exclusion” in her auto insurance policy.
Auto No Fault insurance policy cannot violate the law
By allowing a car crash victim to forever be disqualified from receiving present and future No Fault benefits on the basis of an alleged violation of an auto insurance policy’s “general fraud exclusion,” the Bahri ruling has impermissibly and unlawfully allowed an auto insurance contract (i.e., policy) to contradict and trump the requirements of Michigan’s No Fault Law.
Under Michigan case law, as set forth by the Michigan Supreme Court:
“[A]n unambiguous contractual provision … is to be enforced as written unless the provision would violate law or public policy.” (Rory v. Continental Insurance Company, Michigan Supreme Court, July 28, 2005, #126747, Page 14)
In the context of an auto insurance policy and the Michigan No Fault Law, the above principle should be understood to mean:
“[A] policy exclusion that conflicts with the mandatory coverage requirements of the no-fault act is void as contrary to public policy.” (Husted v. Auto-Owners Insurance Company, 459 Mich 500, 512 (1999))
In Cruz v. State Farm Mutual Automobile Insurance Company (July 17, 2002, #117505), the Michigan Supreme Court ruled:
- “[A]n examination under oath (EUO) provision in an automobile no-fault insurance policy,” which the auto insurer sought to use as “a condition precedent to its duty to pay no-fault benefits,” could not be enforced because it “conflict[ed] with the statutory requirements of the no-fault act.” (Pages 1-2)
- Because the EUO provision of the auto insurance “contract is in conflict with the [No Fault] statute, it is contrary to public policy and, therefore, invalid.” (Page 14)
Based on the Supreme Court’s reasoning, conditioning payment of No Fault benefits (which is required by the No Fault Law) on non-violation of a “general fraud exclusion” conflicts with the No Fault Law’s statutory requirements and thus, violates public policy.
Under the No Fault Law, only a limited number of actions will disqualify a car crash victim from receiving No Fault benefits. (MCL 500.3113) Contrary to the exclusion provision’s language and some judges’ interpretation of Bahri, so-called “fraudulent statements” or “fraudulent conduct” are not among the statutorily provided “disqualifiers.”
No Fault ‘fraud’ remedy = attorney fees
Our No Fault Law says nothing about disqualifying a car accident victim on the basis of allegations of fraud (in particular, when those allegations are coming from the claims adjuster, defense attorney and insurance company that’s otherwise on the hook to make the payments and who are the parties alleging fraud).
The No Fault Law does specifically say what an insurance company’s remedy would be for a car accident victim’s alleged fraud.
The No Fault Law says that an auto insurer who spends money on an attorney to defend “a claim that was in some respect fraudulent” “may be allowed by a court an award of a reasonable sum against a claimant as an attorney’s fee …” (MCL 500.3148(2))
Significantly, the next part of the statute, which addresses how the attorney’s fee can be paid, is the clincher for the argument above that the No Fault Law doesn’t allow disqualification based on fraud.
The statute says:
The attorney fees owed to the auto insurer because of the car crash victim’s “fraudulent” actions “can be treated as an offset against” No Fault benefits that “are then due or thereafter come due …” (MCL 500.3148(2))
In other words, it’s presumed and understood that payment of No Fault benefits will continue even if a car crash victim’s claim for No Fault benefits “was in some respect fraudulent …”
Now someone just needs to copy and print this blog post off for some of the judges in Wayne County.