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‘Hatcher’ exposes how insurer used ‘Bahri’ to deny PIP benefits

April 25, 2017 by Steven M. Gursten

Mistakes, ‘inconsistent’ or ‘erroneous’ statements not enough to show ‘fraudulent intent’ in claims for replacement services, wage loss benefits under No-Fault

Hatcher Bahri No-Fault fraud

In yesterday’s blog post, I discussed how the Michigan Court of Appeals has brought much-needed sanity to stop the insurance companies who have been abusing the Bahri No-Fault fraud rule” declaring nearly anyone a fraud based upon any mistake, no matter how innocent or inconsequential that mistake may be.

The Court ruled in Hatcher v. Liberty Mutual Insurance Company that the mere fact that a car crash injury victim may have made a mistake on a form or an inconsistent statement to his insurance company doesn’t make him or her a “fraud.”

In today’s blog post, I want to talk about the specifics of Hatcher and how the appellate court shot down several of the Bahri “fraud” arguments that insurers typically have been making as a way to get out of paying vital and contractually promised No-Fault benefits such as:

As an auto accident attorney, I cannot overstate the importance of the Court of Appeals ruling in Hatcher.

By holding that “inconsistent statements,” “mistakes of fact or isolated examples of conduct inconsistent with a claim for benefits” and/or “false statements [that] are made as a result of inadequate memory, unintentional error, confusion, or the like” do not — standing alone — add up to No-Fault fraud, the court has provided car crash victims and their attorneys with the protection they need to fight back against insurers’ fraud-based attacks.

Since it came out in 2014, insurance company defense lawyers have use the “Bahri No-Fault fraud rule” to parlay every mistake or inconsistency – no matter how slight or inconsequential – into a full-blown denial of all present and future No-Fault benefits to car crash victims.

Do inconsistencies about ‘past medical history’ make someone a fraud?

In Hatcher, Liberty Mutual Insurance Company tried to get out of paying the victim’s No-Fault medical benefits (reimbursements for accident-related medical expenses) based on the victim’s “past medical history” statements during her deposition being “inconsistent” with her “medical records.”

The judges were not persuaded:

  • “After review of plaintiff’s deposition and the medical records, it is clear that the records show, at most, minor inconsistencies with plaintiff’s deposition testimony.”
  • The “failure to recall an episode of ‘mild neck pain’ from seven years ago is not sufficient to prove fraudulent intent rather than a failure of memory.”
  • “Where defendant does correctly identify portions of plaintiff’s deposition testimony that are inconsistent with past medical records, defendant fails to present evidence as to how the inconsistency demonstrates that plaintiff knew her statements were false at the time she made them or how they are material.”
  • “[F]rom the outset of this litigation, plaintiff cooperated in the production of her medical records. If she knew such complaints were present in those records she would either have revealed them in deposition or attempted to withhold the records. These circumstances weigh heavily in favor of a finding that the omissions in her deposition were not intended to defraud.”

Does a contradiction or mistake about replacement services prove No-Fault fraud?

The Hatcher judges were equally unconvinced by Liberty Mutual’s argument that the motor vehicle accident victim had committed No-Fault fraud because the affidavits submitted by her “household services” or “replacement services” provider were “contradicted” by his deposition testimony.

Agreeing with the trial court, the appellate judges said the insurer had taken the provider’s deposition testimony “out of context.”

Plus, the court was unmoved by the insurer’s complaint that the car crash victim had “helped” her employer during the period of time she was claiming replacement services:

“That plaintiff occasionally assisted [her] while receiving help herself is hardly inconsistent and is not grounds to conclude on summary disposition that her request to defendant for payment to [her household services provider] for his work in doing laundry, cooking, and cleaning the house were attempts to fraudulently claim benefits.”

Do erroneous, inconsistent, or incorrect statements about work history constitute No-Fault fraud?

To Liberty Mutual’s claim that the Macomb County auto accident victim “made material misstatements about her work history with the intent to defraud” on her claim for No-Fault wage loss benefits, the court replied:

  • The insurer “has not offered an argument as to how the erroneous statements made by plaintiff were material to the amount of the wage loss claim.”
  • As for an “incorrect” answer in the car accident victim’s “initial interrogatories,” the court observed that Liberty Mutual Defendant “offer[ed] no reason why this mistake … is either material to the claimed benefit or suggests fraud,” adding that the victim, “when shown this interrogatory answer at her deposition,” “immediately corrected it …”
  • As for an inconsistency between the victim’s and her employer’s testimony about when the victim started work, the judges, again, pointed out that Liberty Mutual had “not state[d] how this difference affected the wage loss claim nor how it conclusively demonstrates intentional misrepresentation, rather than a mistake.”

On the issue of “fraudulent intent” on the part of the motor vehicle accident victim, the court called the insurer’s arguments “speculative”:

  • “There is no evidence of collusion or planning [or evidence to contradict her employer’s affidavit].”
  • “At all times in this litigation, plaintiff has signed releases for all of her employment records, IRS records, and unemployment records without objection or delay. Such open disclosure, while not dispositive, certainly weighs against the conclusion that plaintiff was attempting to deceive defendant about her work history or wages.”

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