Change in Michigan’s No Fault Insurance Fraud Rules

Change in Michigan’s No Fault Insurance Fraud Rules

The Michigan Court of Appeals has recently applied a landmark decision by the Michigan Supreme Court from 2020 and has ended anti-fraud provisions by insurance companies to deny Michigan insurance benefits to people injured in car accidents. The ruling clearly stated a message to the insurance companies, claims adjusters and insurance defense lawyers that they cannot fraudulently take away or trample with the rights of car accident victims.

The Michigan Supreme Court and the Michigan Court of Appeals decided on protecting car accident victims from having their Michigan insurance benefits completely terminated because of an accusation of no-fault insurance.

In Meemic Ins Co v Fortson, _____ Mich _____ ; _____ NW2d _____ (2020) (Docket No. 158302), the Michigan Supreme Court ruled that MEEMIC’s antifraud provision which sought to void the entire policy based on alleged fraud concerning a car accident victim’s attendant care benefits were invalid and unenforceable because it had no legal basis in either Michigan’s auto insurance law or Michigan’s long-standing common-law.

In Williams v. Farm Bureau Mut. Ins. Co., No. 349903 (Mich. Ct. App. Jan. 28, 2021), the Michigan Court of Appeals relied on MEEMIC v. Fortson to rule that Farm Bureau’s antifraud provision which sought to void the entire policy based on its insured’s alleged false statements related to her no-fault claim after her car accident claim was invalid and unenforceable. The Court of Appeals explained that MEEMIC “held that antifraud provisions in Michigan auto insurance policies apply to fraudulence in the inducement but not to allegations of postprocurement fraud. Accordingly, the policy provision on which defendant and the trial court relied is ‘invalid and unenforceable’ to the degree an insurer seeks to apply it to allegations of postprocurement fraudulent in a claim under a mandatory coverage, as in this case.”

The Supreme Court justices and the judges on the Court of Appeals have now banned such provisions which are not in favor of victims who succumbed to injuries in a car accident. These rulings clearly define the law to the insurance companies.

Earlier, insurance companies were using insurance fraud clauses to shred all of a car accident victim’s benefits based on their statements or actions after the car crash. The new rulings have no legal basis of such statement in Michigan law. The No-Fault law, passed by the Legislature in 1973 and amended in 2019, does not allow it. Also, the Michigan common-law, which has existed for decades, does not allow the same. These fraudulent policies adopted by the insurance companies were used to take advantage or to exploit car accident victims’ mistakes and to take away all Michigan insurance benefits.

The defense attorney and the adjusters would do their research carefully regarding the documents submitted by a car accident victim, hire private investigators and also go through with depositions and interrogatories by the victim. The purpose behind this research was to find a minute detail which goes against the victim, some inaccurate/insignificant statement and then use this information to accuse the car accident victim of having committed fraud.

These companies draft or insert these fraud provisions into the policy in such a way that when these companies prove or accuse the car accident victim of fraud or “fraudulent insurance acts”, they put the insurer in a situation that insurer/victim had to void the whole policy and step back from all legal and financial responsibility for the victims’ Michigan auto insurance benefits.

This strategy by these big insurance companies have spoiled thousands of Michigan car accident victims because their insurance benefit had been denied. The end of such anti-fraud provisions is surely a sigh of relief to the victims.