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Shelton v. Auto-Owners Insurance Co.

Court of Appeals of Michigan

February 14, 2017

TYANN SHELTON, Plaintiff-Appellee,
AUTO-OWNERS INSURANCE COMPANY, Defendant-Appellant. and DWAYNE WILLIAMS, Plaintiff, and MICHIGAN CRNAS STAFFING, LLC, Intervening Plaintiff,

         Wayne Circuit Court LC No. 13-010612-NF

          Before: K. F. Kelly, P.J., and Gleicher and Shapiro, JJ.

          SHAPIRO, J.

         In this No-Fault personal injury protection (PIP) case, defendant sought summary disposition based upon a fraud exclusion clause in its policy. Defendant asserted that plaintiff made fraudulent statements concerning her need for replacement services and so was excluded by the policy from all PIP benefits. The trial court granted summary disposition as to replacement services, a ruling from which plaintiff has not appealed.[1] The trial court denied the motion as to payment for medical services and from that ruling, defendant appeals by leave granted.[2] We affirm.

         Shelton alleges she was injured in a single-car collision on January 22, 2013. The vehicle was owned and operated by Timothy Williams; Shelton was a passenger. She sought PIP benefits from defendant because she did not own a vehicle nor reside with a relative who did. Thus, defendant, as Williams's insurer, was to provide her with those PIP benefits to which she was entitled under the No-Fault Act. MCL 500.3114(4)(a). Plaintiff claimed PIP benefits that included medical expenses and replacement services for household chores, beginning in January 2013.[3] Defendant denied the claim and plaintiff brought suit.

         Defendant moved for summary disposition asserting that plaintiff was not entitled to PIP benefits under an exclusionary clause in the policy reading:

We will not cover any person seeking coverage under this policy who has made fraudulent statements or engaged in fraudulent conduct with respect to procurement of this policy or to any OCCURRENCE for which coverage is sought.

         Defendant argues that this policy exclusion applies to plaintiff despite the fact that she is not a policyholder, and that the evidence demonstrates beyond a question of fact that plaintiff engaged in fraud as defined in the policy. Defendant relies largely on Bahri v IDS Prop Cas Ins Co, 308 Mich.App. 420, 423-426; 864 N.W.2d 609 (2014), in which we held that a fraud provision in an insurance contract could bar a claim for PIP benefits when the policyholder filed a claim for replacement services for a date prior to the subject accident. However, both the law and the facts of this case differ substantially from those that existed in Bahri.

         The law governing application of the policy exclusion in Bahri is not applicable in this case. In Bahri, the provision applied to the plaintiff in that case because "defendant issued [the subject] no-fault automobile policy to [the] plaintiff." Bahri, 308 Mich.App. at 421. In this case, however, plaintiff was not a party to, nor an insured under, the policy; she was injured while a passenger and because neither she nor her spouse or resident relative had a no-fault policy, defendant was required to pay her benefits pursuant to statute, not pursuant to a contractual agreement.

         The Michigan Supreme Court stated in Rohlmanv Hawkeye Security, 442 Mich. 520, 524-525; 502 N.W.2d 310 (1993), that

"PIP benefits are mandated by statute under the no-fault act, MCL 500.3105; MSA 24.13105, and, therefore, the statute is the 'rule book' for deciding the issues involved in questions regarding awarding those benefits. On the other hand, the insurance policy itself . . . is the contract between the insurer and the insured . . . ."

         The Supreme Court adhered to this principle in Harris v Auto Club Ins Ass'n, 494 Mich. 462, 471-472; 835 N.W.2d 356 (2013), a case involving a motorcycle-automobile collision. MCL 500.3114(5)(a), using language paralleling the language used in MCL 500.3114(4)(a), provided that if the injured motorcyclist, his spouse or a resident relative did not have a no-fault policy then his no-fault benefits would be paid by the insurer of the owner or registrant of the automobile. In Harris, the Court stated that plaintiff could not take advantage of the uncoordinated medical benefit provision in the policy because his claim did not flow from the subject policy, but "solely by statute." Harris, 494 Mich. at 472 The Court held that:

[The plaintiff] is not claiming benefits under a no-fault insurance policy that he or anyone else procured. [He] is neither a third-party beneficiary nor a subrogee of the no-fault policy issued to the person that struck him and thus he [was] not eligible to receive benefits under that policy. Rather, [the plaintiff's] right to PIP benefits arises solely by statute. [Id.]

         Defendant's argument is directly contrary to the grounds for the holdings in both Rohlman and Harris. Here, as in those cases, plaintiff's no-fault benefits are governed "solely by statute." Thus, the exclusionary provision in defendant's no-fault policy does ...

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