Justices offer no protection against loss of all No Fault benefits based on alleged fraud; However, there’s a glimmer of hope for auto accident victims
Bahri v. IDS Property Casualty Insurance Company is a terrible decision. It is a very dangerous case.
And it is now the law of the land.
If Michigan lawyers were looking for some protection against this “judge-made” law that imposes the most draconian penalties possible based upon the mere allegations of No Fault “fraud” – from the insurance company responsible for paying No Fault insurance benefits (no conflict of interest there!) – then we should definitely not look to the Michigan Supreme Court for help.
In a stunning display of what I can only describe as willful disregard, the justices of Michigan’s highest court recently refused last Wednesday, September 16, 2015, to review the Michigan Court of Appeals’ egregiously erroneous ruling in Bahri v. IDS Property Casualty Insurance Company.
Not only should the high court have granted leave to appeal in order to correct the unsound legal reasoning of the Bahri decision. But the Michigan Supreme Court review was equally – if not more – necessary in order to end the shameful ways that some trial court judges are misapplying Bahri to deny all present and future No Fault auto insurance benefits (also known as personal injury protection, or PIP benefits) to seriously injured auto accident victims.
From what I am seeing as a No Fault lawyer at motion call, these auto insurers are denying No Fault benefits based on exaggerated allegations of so-called “fraud.” This often includes minor mistakes on any injured auto accident victim’s “House Services Statement,” also known as a replacement services claim.
How did the Michigan Supreme Court drop the ball on Bahri?
Since its release in October 2014 and its approval for publication in December 2014, I’ve been very vocal about my criticism of Bahri.
In my October 29, 2014, blog post, “Open season on No Fault claimants after recent Bahri case,” I made the following prediction:
“Mistakes – even innocent and innocuous mistakes – can get any accident victim labeled a ‘fraud’ … [and, thus,] can cause you to lose all of your No Fault insurance benefits and protections if you are ever accused of fraud. That’s the cautionary tale of Bahri, a recent Michigan Court of Appeals case where a No Fault auto insurance company successfully denied No Fault PIP benefits to an auto accident victim, on the basis that mistakes in her replacement services statements were really “fraudulent representations.” Bahri just gave aggressive defense lawyers and insurance companies a terrible new weapon to use to try to deny the insurance benefits to just about anyone if they can show any mistake, no matter how innocent, and label it as fraud.”
Sadly, my legal prediction has proved all too accurate.
“[J]udges – 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.”
The Supreme Court, rather than rectifying this obvious miscarriage of justice, has chosen to turn a blind eye to the prejudice and real harm that allegations of fraud are causing to Michigan auto accident victims.
Important legal strategies still intact for No Fault Insurance Lawyers
To the extent there’s any silver lining to this judicial and legal disaster, it is this:
The justices’ short shrift treatment of Bahri in their three-line order did nothing to negate, undermine or otherwise reject two very important arguments that auto accident victims can and should make to combat the harmful – and all too frequently fatal effects – of Bahri.
Specifically, the Michigan Supreme Court has left untouched the following legal strategies:
- Bahri’s denial of all present and future No Fault benefits as a penalty for alleged “fraud” by an accident victim is not authorized by the No Fault law, which limits an auto insurer’s recovery for alleged fraud to a reimbursement for attorney fees – but only as an “offset against” No Fault benefits that “are then due or thereafter come due …” To learn more, please check out my blog post, “Attention Wayne County judges: ‘Bahri’ case does not stand for what you think it does.”
- If an auto insurer does not provide the proper “notice” as required by the Insurance Code, then any attempt by the insurer to deny all present and future No Fault benefits based on alleged No Fault fraud will be deemed “unenforceable.” As I noted in my August 5, 2015, blog post, “No notice = No cancelling auto insurance policy for alleged fraud,” the Director of the Michigan Department of Insurance and Financial Services (DIFS) recently issued a Bulletin wherein he stated, among other things, that “Insurance policy form provisions that provide for termination or rescission without notice [i.e., compliance with the “applicable notice provisions in the Insurance Code”] in the event of fraud in connection with a claim are not enforceable.”
As the Michigan Supreme Court has sadly refused to correct this obvious conflict of interest – that the same insurance companies who are responsible for paying No Fault benefits are also the ones who are deciding what is fraudulent, based upon the adjuster’s “interpretation” of a surveillance video or a monthly submittal for replacement services – it is now up to the legal community and specifically the auto accident attorneys in Michigan who will have to stand up for their clients.
No one else will.
Although I would have preferred a clear repudiation and reversal of Bahri, I believe the Bahri-defense strategies discussed above will prove to be a significant help.
The only other option left is for attorneys to explain to clients that as insurance companies look for ways to avoid paying claims, they will be more likely to authorize surveillance, and use this to then allege fraud and avoid paying valid PIP claims. Many lawyers, including myself, will be looking at these cases and explaining to clients that if we do a clear cost-benefit analysis, it may be smart to drop these HHS and replacement services claims altogether. If you are seriously injured and you are depending on your insurance company to pay out hundreds of thousands of dollars in medical care and pay for three years of wage loss, it probably just doesn’t make sense in many cases to jeopardize all of this for a HHS replacement services claim that, assuming every possible penny was awarded (it never is) only amounts to $7,200 a year.
It’s disgusting. It leaves a bad taste in my mouth. It means the insurance companies are once again getting away with something. But we have a very conservative and pro-insurance company Republican Supreme Court in this state, and we have some pretty terrible judges out there (read my Attention: Wayne County Judges blog above). That means walking away from a HHS replacement services claim when you have a very strong auto case may be the best thing that smart lawyers can actually do for their clients these days.