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False statements ‘void all coverage’ for car accident victim under No Fault car insurance policy

September 20, 2016 by Steven M. Gursten

Based on victim’s ‘blatant inconsistency’ and ‘false statement,’ court rules ‘all coverage is forfeited’ including ‘claim for medical benefits’; this case is an urgent wake-up call for all accident attorneys and car accident victims


What’s the #1 most dangerous mistake a car accident victim can make? In most states these days, I would guess it is social media (I recently spoke at a legal seminar where one insurance defense attorney was bragging how social media these days is like 24-hour surveillance of the accident victim).

But it is not the biggest mistake a person can make in Michigan.

In Michigan, for any person injured in a motor vehicle accident who is seeking to claim auto No Fault insurance benefits, there is a different #1.

Not telling the truth – including anything that can be construed as being false, misleading or otherwise untrue – is now deadly. It can actually result in a person’s lawsuit and legal rights to No Fault Personal Injury Protection benefits being dismissed!

Of course, what an insurance company claims adjuster or an insurance defense lawyer claims is a “false statement” and what is actually a false statement can be quite different.

That said, making “false statements” is rapidly becoming the quickest way for auto accidents victims in Michigan to permanently lose any and all medical benefits they’ll need to recover and rebuild their lives, thanks to an extra-judicial, draconian extension of fraud and what insurance companies can do if they claim a fraud has been perpetuated by a person injured in a car wreck who makes a No Fault claim for insurance benefits.

The ruling in Ward v. State Farm Mutual Automobile Insurance Company is the latest jarring example of this very troubling and misguided trend in this state.

In Ward, the Michigan Court of Appeals ruled that State Farm could invoke a “false statements” provision in its auto insurance policy to permanently cut-off a car accident victim’s No Fault medical benefits based on an allegedly “blatant inconsistency” and a “false statement” by the victim:

“[P]ursuant to the contract’s plain terms, ‘[t]here is no coverage under th[e] policy, and [State Farm] 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.’ Therefore, plaintiff’s false statement in connection with her … claim voids all coverage under the policy, including her claim for medical benefits.”

If ever there has been a wake-up call for attorneys who represent people injured in motor vehicle accidents (and considering the extra-judicial extension of fraud defenses now being allowed by Michigan courts, lawyers representing all personal injury victims – not just those injured in car wrecks), the disappointing Court of Appeals ruling in Ward is just that call.

Auto insurance companies are now literally on the hunt to find any reason – no matter how big or small – that they can claim as fraud to then use as the basis for a denial and cutting-off No Fault Personal Injury Protection benefits. Extraordinary profit-margins in Michigan have not stopped the Courts from continuing this trend of favoring insurance companies over consumers and injured accident victims.

And, sadly, it’s now all Michigan automobile accident victims who find themselves in the insurers’ eager sights. After all, the more serious the injury, or the bigger the possible claim for wage loss or attendant care, the bigger the incentive the auto insurer has to try to find something they can claim as fraud to then suspend or deny payouts.

State Farm’s ‘false statements’ provision

Here’s the lethal policy language that appeared in State Farm’s policy – and will, no doubt, appear in very short order in the auto insurance policies of every other Michigan auto insurer:

“There is no coverage under this policy if you or any other person insured under this policy has made false statements with the intent to conceal or misrepresent any material fact or circumstance in connection with any claim under this policy.”

Fatal ‘false statements’

Relying on its “false statements” policy provision in order to cut-off the Ward car crash victim’s No Fault medical benefits, State Farm insisted the victim made two sets of “false statements.”

First, the auto insurer argued that that the victim sought replacement-services benefits even though “the alleged service provider, Ashley Wutzke, testified that she did not provide any cleaning services to plaintiff.”

Specifically, “[p]laintiff 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.”

The Court of Appeals concluded “it is clear that reasonable minds would find this blatant inconsistency fatal to plaintiff’s claim …”

Second, State Farm argued the victim in Ward “misrepresented her claim for lost wages because she was fired for misconduct, not because of an accident-related injury.”

The court noted:

“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.”

Insurer need not prove ‘reliance’ on false statements

The motor vehicle accident victim in Ward argued that State Farm couldn’t cut off her No Fault medical benefits because the car insurance company hadn’t proved that it relied on her alleged “false statements.”

The court rejected the victim’s argument, noting that, under the insurer’s fraud provision in its auto insurance policy, the insurer need not prove it “relied on any of plaintiff’s misrepresentations …”

Specifically, the appellate judges said (in footnote 5): “[A]lthough common law fraud requires a showing of detrimental reliance …, under an insurance policy with language similar to the contract at issue here, reliance need not be proved.”

Instead, said the court, all State Farm needed to show to invoke its fraud provision was that “false statements” were “made … with the intent to conceal or misrepresent any material fact or circumstance in connection with any claim under this policy.”

My 2 cents on Ward v. State Farm and Bahri

Fraud should never be condoned. But what is considered a false statement by an insurer can easily be an honest mistake by a person. Most people would wilt under the microscope that auto insurers will now use to examine auto accident No Fault claims. Even the most honest person may forget a day in a calendar month, or try one-time to do something, such as taking the garbage out, and then forget to admit she tried it. Try, right now, to recall every time you’ve gone to a doctor. Did you forget that right shoulder from 12 years ago? Does that make you a fraud?

The Bahri decision, and this extension in Ward, are incredibly troubling. Insurance companies with a blatant conflict of interest will be the judge, juries, and in many cases the executioners of people’s legal rights. Pro-insurer wording in an insurance contract written by skilled lawyers does not trump state law. It does not abrogate the legal rights that every Michigan driver has under the Michigan No Fault Act.

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