Court scolds State Farm that inconsistencies — taken out of context and in response to a confusing question — are not undisputed evidence of car insurance fraud
This is how out of control Michigan’s auto law has become in recent years after the infamous Bahri v. IDS Property Casualty Insurance Company, where no matter how benign or inconsequential something is, insurance adjusters and insurance defense lawyers will now use it to accuse any auto accident victim of “car insurance fraud” in an attempt to avoid paying out on legitimate and owed claims.
In our latest example, a car crash injury victim was accused of engaging in fraudulent behavior just because his testimony about having received No Fault replacement services differed from that of his replacement services provider.
There could be a dozen or more benign and innocent excuses for this, but it didn’t stop State Farm from screaming “fraud!” at its own customer. This is where we are today. No matter how small, no matter how innocent, any mistake might be enough for an auto insurance company to call someone a “fraud” – to accuse their own customers of a crime – in order to avoid having to pay auto No Fault benefits to a car crash victim.
In fact, that’s exactly what State Farm did in a recent Michigan Court of Appeals case.
State Farm accuses own customers of car insurance fraud to avoid paying No Fault claim – again.
In Spencer v. State Farm Mutual Automobile Insurance Company, State Farm argued that “inconsistencies” in deposition testimony — between car accident victim Michael Spencer’s and his replacement services provider — amounted to “fraudulent misrepresentations,” which excused the insurer from paying No Fault benefits.
Astonishingly, the trial court bought into State Farm’s nonsense and dismissed Spencer’s lawsuit for nine months of unpaid, overdue No Fault replacement services.
Prudently, the Michigan Court of Appeals reversed, ruling unanimously that State Farm hadn’t proved Spencer’s “deposition statements” were fraudulent behavior to the extent necessary to justify dismissal.
Specifically, the appellate judges concluded that State Farm’s alleged “inconsistencies … regarding services during the time period for which [Spencer] seeks reimbursement [were] not clearly supported by the record” for the following reasons:
- Spencer “has not sought reimbursement for services provided before his accident.”
- “There is no indisputable [videotape] evidence … that [Spencer] performed activities inconsistent with his claimed limitations or requested reimbursement for services not actually rendered.”
- The inconsistencies attributed to Spencer that State Farm said were “fraudulent misrepresentations” were supported by “only a few pages of deposition transcript …” and appeared to have been “remove[d] … from their context …”
- Spencer’s alleged inconsistent statement was made in response to a “confusing question” by State Farm’s defense lawyer, to which the Court of Appeals noted: A “response to a confusing question is not undisputed evidence of fraud.”
- “[W]e find no evidence on which to determine” whether, “if [Spencer’s] statements were false, he knew that they were false or made them recklessly, and whether [he] made the statements with the intent that defendant would rely on them.”
Lessons for Michigan car accident lawyers after Spencer v. State Farm
At a time when Michigan car accident lawyers are on high alert to protect our clients against the frequent, specious, and flimsy fraud claims by insurance company defense lawyers, the Spencer ruling comes as very welcome news.
Since the original horrible and reckless Bahri ruling that unleased all this nonsense, insurers, defense lawyers, claims adjusters and some judges who use these motions to dismiss as a docket clearing mechanism, have all run amok at finding ways to cast every innocent misstatement and inconsequential mistake as deliberate fraud to get out of contractual obligations to pay legitimate No Fault claims.
Now, thanks to the court’s more recent and far more sensible rulings in Shelton v. Auto-Owners, Hatcher v. Liberty Mutual and Spencer, much-needed common sense limits are being placed on insurers’ ability to use “fraud” accusations to abuse and exploit car accident injury victims.
What must an auto insurer show to prove car insurance fraud in order to avoid paying No Fault benefits?
The Spencer court explained that, in order for an auto insurer to void a policy based on fraud and, thus, avoid having to pay No Fault benefits, the insurance company must prove the following:
- A material and false misrepresentation of fact was made to the insurer by the insured/car crash victim.
- The insured/car crash victim knew the misrepresented fact was false (and/or misrepresented the fact “recklessly … without any knowledge of its truth …”
- The misrepresented fact was made “with the intention that the insurer would act upon it.”
What were the inconsistent statements that State Farm claimed were car insurance fraud?
After being injured in an October 17, 2013, Wayne County car crash, Michael Spencer received No Fault replacement services from his sister, Barbara Cooper.
In late October 2014, Spencer sued State Farm for unpaid No Fault replacement services that were owed to his sister for services she provided to him from January 16, 2014, through October 29, 2014.
During depositions in the case, Spencer allegedly made statements that were inconsistent with his sister’s about replacement services that were provided during a different time period — January 2015 through August 2015.
State Farm insisted the deposition inconsistencies showed that replacement services were not actually given and, thus, that Spencer’s statements were “fraudulent misrepresentations” precluding his recovery of any No Fault benefits under the policy.
In ruling against State Farm, the Court of Appeals made the following observation about this time period issue:
“The inconsistencies between plaintiff’s and Cooper’s testimony regarding services rendered between January 2015 and August 15 were not material to the issues presented in the lower court. Plaintiff made clear that he was not seeking reimbursement for services rendered during that time period.”