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IN THE MICHIGAN SUPREME COURTAppeal from the Michigan Court of Appeals
(Sawyer, P.J., and Beckering and Boonstra, J.J.)
ALI BAZZI, Supreme Court No. 154442
Plaintiff-Appellant, COA Docket No. 320518and
Trial Court No: 13-000659-NFGENEX PHYSICAL THERAPY, INC. On Appeal from Wayne Circuit Courtand ELITE CHIROPRACTICE CENTER, PC, Hon. Lita M. Popke
Intervening Plaintiffs-Appellants,and
TRANSMEDIC, LLC.
Intervening Plaintiff,v
SENTINEL INSURANCE COMPANY,
Defendant/Third PartyPlaintiff-Appellee,
and
CITIZENS INSURANCE COMPANY,
Defendantv
HALA BAYDOUN BAZZI and MARIAM BAZZI,
Third-Party Defendants.
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Stacey L. Heinonen (P55635)MIKE MORSE LAW FIRMAttorney for Plaintiff and InterveningPlaintiff Genex Physical Therapy, Inc24901 Northwestern Highway, Ste 700Southfield, MI 48075(248) [email protected]
Stefania Gismondi (P74277)FOSTER SWIFT COLLINS & SMITH PCAttorney for Third Party Defendants28411 Northwestern Hwy Ste 5001 Northwestern PlzSouthfield, MI 48034(248) [email protected]
Mary Massaron (P43885)PLUNKET COONEYCo-Counsel for Defendant/Third PartyPlaintiff Sentinel Insurance38505 Woodward Ave Ste 2000Bloomfield Hills, MI 48304(248) [email protected]
Drew W. Broaddus (P64658)SECREST WARDLECo-Counsel for Defendant/Third PartyPlaintiff Sentinel Insurance2600 Troy Center DrPO Box 5025Troy, MI 48084(616) [email protected]
Donald M. Fulkerson (P35785)Attorney for Amicus Michigan Associationfor JusticePO Box 85395Westland, MI 48185(734) [email protected]
Kenneth A. Tardie (P25044)KENNETH A. TARDIE & ASSOCIATESAttorney for Intervening Plaintiff TransmedicLCC18 1st StreetMount Clemens, MI 48043(586) [email protected]
John D. Ruth (P48540)ANSELMI MIERZEJEWSKI RUTH &SOWLE PCAttorney for Defendant Citizens Insurance1750 S Telegraph Rd Ste 306Bloomfield Hills, MI 48302(248) 338-2290
Kimberlee A. Hillock (65647)WILLINGHAM & COTE PCAttorney for Amicus Insurance Institute ofMichigan333 Albert Ave Ste 500East Lansing, MI 48823(517) [email protected]
Liisa R. Speaker (P65728)Jennifer M. Alberts (P80127)SPEAKER LAW FIRM, PLLCAttorneys for Amicus Coalition ProtectingAuto No-Fault230 N Sycamore StreetLansing, MI 48933(517) [email protected]@speakerlaw.com
James T. Mellon (P23876)MELLON PRIES PCAttorney for Amicus MMRMA2150 Butterfield Dr, Ste 100Troy, MI 48084(248) [email protected]
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AMICUS CURIAE BRIEF BY THE COALITION PROTECTING AUTO NO-FAULT
Constantine N. Kallas (P28532)Michele L. Riker-Semon (P63291)KALLAS & HENK PCAttorneys for Amicus QBE InsuranceCorporation43902 Woodward Ave, Ste 200Bloomfield Hills, MI 48302(248) 335-5450, ext. [email protected]@kallashenk.com
Maurice A. Borden (P34603)SONDEE, RACINE & DOREN, PLCAttorney for Amicus Michigan DefenseTrial Counsel310 W Front St, Ste 300Traverse City, MI 49684(231) [email protected]
George T. Sinas (P25643)Stephen H. Sinas (P71039)Thomas G. Sinas (P77223)SINAS DRAMIS BRAKE BOUGHTON &MCINTYRE, PCGeneral Counsel and Associate LegalCounsel for Amicus Coalition ProtectingAuto No-Fault3380 Pinetree RoadLansing, MI 48911(517) [email protected]@[email protected]
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TABLE OF CONTENTS
Index of Authorities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . v
Statement of Question Presented . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Statement of Interest of Amicus Curiae CPAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Statement of Facts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Argument . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
I. The Legislature created a system of compulsory insurance, along with adetailed framework of whom may claim benefits and how, and where theLegislature did not exclude innocent third parties claiming benefits under afraudulently procured policy, this Court must not read such an exclusion intothe statute. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
A. The Michigan No-Fault Act creates a system of compulsory insurance,and where that compulsory insurance is at issue, it is the rules of theNo-Fault Act that govern and no insurance policy may be morerestrictive than the provisions of the Act. . . . . . . . . . . . . . . . . . . . 6
B. The No-Fault Act requires individuals to obtain their benefits fromparticular insurers in a designated order of priority, and to file noticeof injury within one year of an accident. . . . . . . . . . . . . . . . . . . . . 8
C. Nowhere in the No-Fault Act is there a remedy that permits insurersto deny benefits to a third party on the basis of fraud by the owner ofthe policy. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
II. The Legislature provided a different statutory recourse for insurancecompanies that ultimately pay claims to third parties under policiesfraudulently procured by other individuals, and it is to that statutory remedyinsurers must turn. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
III. Failure to adhere to the strict requirements of the No-Fault Act and theremedy that the Legislature provided will create chaos and deprive innocentinjured individuals of benefits, leaving them with no recourse. . . . . . . . 15
Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Relief Requested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
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INDEX OF AUTHORITIES
Cases:
Bazzi v Sentinel Ins Co, 315 Mich App 763, 768; 891 NW2d 13 (2016) . . . . . . . . . . . . 5
Cooper v Jenkins, 282 Mich App 486, 490-491; 766 NW2d 671 (2009) . . . . . . . . . . . 14
Cruz v State Farm Mutual Auto Insurance Co, 466 Mich 588; 648 NW2d 591 (2002) . 7
Feld v Robert & Charles Beauty Salon, 435 Mich 352, 362-363; 459 NW2d 279 (1990) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Perez v State Farm Mutual Auto Insurance Co, 418 Mich 634; 344 NW2d 773 (1984) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Rohlman v Hawkeye-Sec Ins Co, 442 Mich 520, 524-525; 502 NW2d 310 (1993) . . . . 7
State Farm Fire & Cas Co v Old Republic Ins Co, 466 Mich 142, 146; 644 NW2d 715 (2002) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13, 14
Titan Ins Co v Hyten, 491 Mich 547, 554; 817 NW2d 562 (2012) . . . . . . . . . . . . 7, 8, 15
Statutes and Court Rules:
MCL 500.3101 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6, 10, 13
MCL 500.3105 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7, 10
MCL 500.3107 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
MCL 500.3113 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2, 4, 10, 11, 13-15
MCL 500.3114 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8, 9, 14
MCL 500.3115 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8, 9, 14
MCL 500.3135 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
MCL 500.3145 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9, 15
MCL 500.3171 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
MCL 500.3172 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
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MCL 500.3174 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9, 15
MCL 500.3176 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
MCL 500.3177 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1, 2, 4, 12-16
Other Authorities:
2014 PA 489 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2016 PA 346 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
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STATEMENT OF QUESTION PRESENTED
1. Does the plain language of the No-Fault Act permit injured third parties, who arerequired by law to turn to the insurance policy of a stranger, to obtain benefits fromthat policy in spite of a later-discovered fraud by the policy owner because the No-Fault Act does not specifically exclude such injured persons from obtaining benefitsand because the statutory recourse for insurers is found in MCL 500.3177?
Circuit Court answered: Yes.
Court of Appeals answered: No.
Appellant answers: Yes.
Appellee answers: No.
Amicus Curiae CPAN answers: Yes.
STATEMENT OF INTEREST OF AMICUS CURIAE CPAN
CPAN is a broad-based coalition formed to preserve the integrity of Michigan’s
model no-fault automobile insurance system. The central mission of CPAN is to protect and
preserve the vitality of the Michigan auto no-fault insurance system so that it continues to
provide assured, prompt, and comprehensive coverage for Michigan citizens injured in
motor vehicle collisions.
CPAN consists of seventeen major medical groups and seven consumer
organizations. CPAN’s member organizations are identified below:
CPAN: Coalition Protecting Auto No-Fault
Medical Provider Groups Consumer Organizations
1. Michigan Academy of PhysicianAssistants
1. Brain Injury Association of Michigan
2. Michigan Assisted Living Association 2. Michigan Association for Justice
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3. Michigan Association of Chiropractors 3. Michigan Paralyzed Veterans ofAmerica
4. Michigan Brain Injury Provider Council 4. Michigan Protection and Advocacy
5. Michigan Home Care and HospiceAssociation
5. Michigan Disability Rights Coalition
6. Michigan Nurses Association 6. Michigan Senior Advocacy Council
7. Michigan Orthopaedic Society 7. Michigan Guardian Association
8. Michigan Orthotics and ProstheticsAssociation
8. Peckham
9. Michigan Osteopathic Association
10. Michigan Rehabilitation Association
11. Michigan Society of Oral and Maxillofacial Surgeons
12. Michigan State Medical Society
13. Michigan Dental Association
14. Michigan Association of NeurologicalSurgeons
15. Michigan Independent CaseManagement Council
16. Michigan Committee on Trauma
17. Michigan Podiatric Medical Association
It is CPAN’s fervent belief that Michigan’s auto no-fault insurance system cannot
survive unless the Michigan Appellate Courts interpret the No- Fault Act as the Legislature
intended, and do not add means for insurers to avoid providing benefits that were not
written into the statute by the Legislature. This includes applying the plain language of MCL
500.3113 and MCL 500.3177 to instances where an insurer attempts to avoid paying first
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party no-fault benefits to someone other than the owner or registrant of a vehicle, who was
required by statute to turn to the policy of a stranger for benefits, on the basis of fraud in
the owner’s procurement of the insurance policy.
INTRODUCTION
The Michigan No-Fault Act creates a comprehensive scheme of insurance coverage
with mandatory requirements for both insurers and insureds. The insured must provide
notice of injury to his or her insurer within a year of the accident, and must file his or her
claim with the appropriate insurer in a designated order of priority set out in the statute.
When such a claim is filed, the insurer must provide prompt benefits upon reasonable proof
of loss. The mandatory requirements of the No-Fault Act ensure prompt and assured
payment of benefits in exchange for reduced tort liability. The goal is that every person who
purchases the required insurance can safely rely on the system for benefits when injured
in a motor vehicle accident.
As a result of this mandatory framework for benefits, however—in particular, the
mandatory order in which insureds must look to insurers for benefits—many injured
individuals are forced by statute to look to policies of complete strangers for benefits after
an accident. They are forced to trust that stranger’s policy, as they must file their claim for
benefits with the highest priority insurer, and must provide notice of their injury to that
insurer within one year. After that year is over, they may no longer file their claim with any
other insurer with whom they have not filed that notice of injury. Thus, they rely on that
single policy, belonging to a complete stranger, and the No-Fault Act, to ensure they
recover benefits.
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The Court of Appeals’ decision in this case eliminates the right of these people to
recover no-fault benefits, even though they have done nothing wrong. It permits an insurer
to deny benefits to an innocent third party simply because the insurer discovers that the
policy owner, to whom the third party is a complete stranger, committed fraud. Due to the
one year notice requirement of the No-Fault Act, the Court of Appeals’ decision further
leaves the injured person with no recourse in any situation where a fraud is discovered after
a year has already passed since the accident.
A closer look at the No-Fault Act demonstrates that the Court of Appeals’
interpretation was not intended by the Legislature. It has long been held by this Court that
a policy that is more restrictive than the No-Fault Act is unenforceable, and the No-Fault
Act does not permit insurers to refuse to pay benefits to an innocent third party due to fraud
committed by another person. The Legislature provided a specific list of persons excluded
from obtaining benefits, MCL 500.3113, and did not carve out an exclusion for the type of
situation involved in this case.
Instead, the Legislature provided an explicit statutory remedy to insurers consistent
with the purposes of the No-Fault Act. A rescission of an insurance policy on the basis of
fraud causes the motor vehicle involved to be uninsured, and the insurer may sue the
owner or registrant of the uninsured motor vehicle and seek reimbursement under MCL
500.3177 for the benefits paid. By expressly providing that an insurer who pays benefits
for injury arising out of use of an uninsured motor vehicle may sue the owner or registrant
of the uninsured motor vehicle, MCL 500.3177, the Legislature has provided a clear
mandate as to how these cases must proceed. Benefits must be provided to the person
who is not the owner or registrant of the uninsured motor vehicle, and the insurer may sue
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the owner or registrant to recover the loss. Permitting an insurer to refuse to provide these
benefits to the injured person—rather than providing the benefits and recovering the loss
from the owner or registrant of the vehicle—directly contravenes the mandatory framework
the Legislature established in the No-Fault Act.
If allowed to stand, the Court of Appeals’ decision will create chaos, as third parties
who are required to obtain benefits from a policy that is not their own would always be
required to file a claim with the assigned claims facility in order to preserve their claim, in
case the priority insurance policy is later found to be fraudulently procured. In some
circumstances, this may be impossible and the injured person may be left with no recourse
at all. This Court must reverse the Court of Appeals to honor the Legislature’s intent and
maintain the effectiveness of the No-Fault Act.
STATEMENT OF FACTS
Plaintiff Ali Bazzi was injured in an automobile accident while driving a vehicle
owned by his mother and insured by Mimo Investments, LLC. Bazzi v Sentinel Ins Co, 315
Mich App 763, 768; 891 NW2d 13 (2016). Although the vehicle was insured under a
commercial automobile policy, the insurer, Sentinel Insurance, maintained that Plaintiff’s
mother and sister fraudulently procured the policy because the vehicle, which was insured
for commercial use, was actually leased to the Bazzis by Mimo Investments for personal
and family use. Id. Sentinel also asserted that Plaintiff’s mother and sister failed to disclose
that Plaintiff would be a regular driver in their application for insurance. Id. After the
accident, Sentinel rescinded the policy on the basis of fraud and refused to pay PIP
benefits to Plaintiff. Id. at 769.
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Sentinel moved for summary disposition as to Plaintiff’s claim for benefits, which the
Trial Court denied. Id. Sentinel appealed, and the Court of Appeals reversed in a published
opinion, holding that if an insurer can establish fraud, it may rescind a policy and deny
payment of PIP benefits even to innocent third parties. Id. at 781-782.
ARGUMENT
I. The Legislature created a system of compulsory insurance, along with adetailed framework of whom may claim benefits and how, and where theLegislature did not exclude innocent third parties claiming benefits under afraudulently procured policy, this Court must not read such an exclusion intothe statute.
A. The Michigan No-Fault Act creates a system of compulsory insurance,and where that compulsory insurance is at issue, it is the rules of theNo-Fault Act that govern and no insurance policy may be morerestrictive than the provisions of the Act.
The Michigan No-Fault Act governs the rights of every person injured in an accident
in Michigan. The Act creates a system of compulsory insurance wherein all owners or
registrants of motor vehicles registered in Michigan must maintain personal protection
insurance, property protection insurance, and residual liability insurance. MCL 500.3101(1).
These individuals sacrifice their rights in tort, other than in cases of serious injury,
intentional harm, or other limited circumstances, MCL 500.3135(3), in exchange for the
right to recover first party no-fault benefits for “all reasonable charges incurred for
reasonably necessary products, services and accommodations for an injured person’s care,
recovery, or rehabilitation.” MCL 500.3107(1)(a).
Injured persons are required to claim their benefits from insurers in accordance with
the rules laid out by the Act. An insurer, then, “is liable to pay benefits for accidental bodily
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injury arising out of the ownership, operation, maintenance or use of a motor vehicle as a
motor vehicle, subject to the provisions of this chapter.” MCL 500.3105(1).
This Court has reinforced in numerous cases that personal protection insurance
benefits are mandatory, see Rohlman v Hawkeye-Sec Ins Co, 442 Mich 520, 524-525; 502
NW2d 310 (1993), and the minimum scope of their coverage is determined by statute. In
Rohlman, for example, this Court referred to the No-Fault Act as the “rule book” for deciding
issues regarding those benefits. Id. “Collateral agreements between the insured and the
insurer” are valid only when they “do not alter the coverage or remedies provided by
statute.” Id. at 525 n.4. Because a “compulsory insurance statute” is “concerned with the
injured or harmed third persons,” an insurer may not, through contract with one individual,
deprive third persons of their statutorily mandated benefits. Id.
In Cruz v State Farm Mutual Auto Insurance Co, 466 Mich 588; 648 NW2d 591
(2002), this Court held that mandatory PIP benefits could not be conditioned on submission
of the insured to an examination under oath. In spite of State Farm’s argument that the
examinations under oath were important to prevent fraudulent claims for benefits, this Court
held that the rules of the No-Fault Act are rules, and must be followed. Id. at 597-598, 600-
601. Because the No-Fault Act requires an insurer to pay PIP benefits within 30 days of
reasonable proof of loss, the insurer could not refuse to pay the benefits on the basis of
failure to submit to an examination under oath. Id. at 596, 598.
Most recently, in Titan Ins Co v Hyten, 491 Mich 547, 554; 817 NW2d 562 (2012),
this Court acknowledged for a third time that “when a provision in an insurance policy is
mandated by statute, the rights and limitations of the coverage are governed by that
statute.” This differs from provisions in insurance policies that are “not mandated by
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statute,” which “are entirely contractual and construed without reference to the statute.” Id.
Titan did not concern mandatory PIP benefits, and by expressly distinguishing those
mandatory benefits from non-mandatory benefits, it left open the question presented by this
case—a question that must be answered by looking to the No-Fault Act itself.
B. The No-Fault Act requires individuals to obtain their benefits fromparticular insurers in a designated order of priority, and to file notice ofinjury within one year of an accident.
The No-Fault Act requires all individuals to obtain their benefits in a specifically
prescribed way, from particular policies and insurers based on the specific circumstances
of the accident. This requirement is delineated in MCL 500.3114 and 3115. Persons
suffering accidents are required to claim benefits within this mandatory order of coverage,
and often this requires an individual to claim benefits from a policy to which that individual
is a complete stranger.
One example of “strangers” to a policy being required to seek first party no-fault
benefits from the policy is found in MCL 500.3114(2), concerning operators and passengers
of motor vehicles operating in the business of transporting passengers. With some listed
exceptions, passengers of such vehicles are required to claim benefits from the insurer of
the vehicle—not from their own insurance policy. MCL 500.3114(2).
A second example stems from accidents involving employer-owned vehicles. MCL
500.3114(3). The employee or family member who suffers an injury in an accident involving
the employer-owned vehicle must claim benefits from the insurer of that vehicle—procured
not by the injured individual but by his or her employer. MCL 500.3114(3).
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Third, a motorcyclist suffering injury from an accident must claim personal protection
benefits first from the insurer of the motor vehicle involved in the accident, and second from
the insurer of the operator of the motor vehicle, before obtaining any benefits from the
motorcyclist’s own policy. MCL 500.3114(5).
Finally, pedestrians, bicyclists, and others not occupying any motor vehicle when
injured in an accident must claim benefits from the insurers of the owner, registrant, or
operator of the motor vehicle involved. MCL 500.3115(1).
In all of these circumstances, an individual is forced to go to a policy that is not his
or her own to seek benefits from a stranger’s insurer. If the owner of the policy committed
fraud in the procurement of the policy, the third party seeking benefits most likely had no
involvement whatsoever in the fraud. Perhaps more importantly, the third party has no
means of knowing that the fraud occurred, or that the policy is defective as a result.
In addition to requiring that injured persons claim benefits from a particular insurer
based on statutory priority, the No-Fault Act also imposes a time constraint on an individual
seeking benefits. Either an action for personal protection benefits must be filed within one
year of the accident, or written notice of injury must be provided to the insurer within that
year. MCL 500.3145(1). Such notice must be provided to the Michigan automobile
insurance placement facility—also within one year of the accident—if the person seeks
benefits through an assigned claims plan. MCL 500.3174.
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C. Nowhere in the No-Fault Act is there a remedy that permits insurers todeny benefits to a third party on the basis of fraud by the owner of thepolicy.
The question before this Court is whether an insurer may deny benefits to a person
who is claiming them under another person’s policy if that policy is later determined to be
fraudulently procured. This remedy exists nowhere in the No-Fault Act and impedes the
Legislature’s purposes with the Act.
The broad contours of MCL 500.3105(1) establish that, as a general rule, every
injured person is entitled to personal protection insurance benefits. The Legislature
delineated the exceptions to this general rule in MCL 500.3113, which provides,
A person is not entitled to be paid personal protectioninsurance benefits for accidental bodily injury if at the timeof the accident any of the following circumstances existed:
(a) The person was willingly operating orwillingly using a motor vehicle or motorcycle thatwas taken unlawfully, and the person knew orshould have known that the motor vehicle ormotorcycle was taken unlawfully. [the unlawfultaking exception]
(b) The person was the owner or registrant of amotor vehicle or motorcycle involved in theaccident with respect to which the securityrequired by section 3101 or 3103 was not ineffect. [the uninsured owner exception]
(c) The person was not a resident of this state,was an occupant of a motor vehicle ormotorcycle not registered in this state, and themotor vehicle or motorcycle was not insured byan insurer that has filed a certification incompliance with section 3163. [the out-of-statevehicle exception]
(d) The person was operating a motor vehicle or
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motorcycle as to which he or she was named asan excluded operator as allowed under section3009(2). [the excluded operator exception]
(e) The person was the owner or operator of amotor vehicle for which coverage was excludedunder a policy exclusion authorized undersection 3017. [the “Uber” exception]
MCL 500.3113 (emphasis added). Thus, these types of injured persons represent the
categories of injured people the Legislature intended to exclude from obtaining PIP benefits
under the No-Fault Act.
Nowhere in MCL 500.3113, nor anywhere else in No-Fault Act, did the Legislature
include an exception for third parties claiming benefits under fraudulently obtained policies.
The Legislature did include an exception for an “owner or registrant of a motor vehicle”
involved in the accident with respect to which insurance was not in effect. MCL
500.3113(b). If the insurance was “not in effect” because the insurance policy was
fraudulently obtained, this subsection would exclude the owner or registrant of that motor
vehicle from obtaining benefits. The Legislature did not, however, exclude benefits for
anyone other than the “owner or registrant” of that motor vehicle. The Legislature did not
exclude an occupant, a non-owner, an operator, or any other innocent third party.
The Legislature has amended MCL 500.3113 twice in the past few years. It
amended the section in 2014, effective January 13, 2015, to add subsection (d) (the
excluded operator exception) and again in 2016, effective March 21, 2017, to add
subsection (e) (the “Uber” exception). MCL 500.3113, as amended by 2014 PA 489 and
2016 PA 346. The Legislature could have added additional subsections to exclude
additional persons but did not choose to do so. The absence of an exclusion for third
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parties when insurance is procured fraudulently indicates a legislative intent to include
these third parties within the general group of persons who are entitled to personal
protection insurance benefits. See Feld v Robert & Charles Beauty Salon, 435 Mich 352,
362-363; 459 NW2d 279 (1990) (“[T]he principle of expressio est unius exclusio alterius is
well recognized throughout Michigan jurisprudence.”). They are, after all, innocent of the
fraud that was committed by the person who procured the policy. There is no statutory
basis for insurers to deny innocent third parties benefits because of fraud committed by
another in the procurement of the policy.
II. The Legislature provided a different statutory recourse for insurancecompanies that ultimately pay claims to third parties under policiesfraudulently procured by other individuals, and it is to that statutory remedyinsurers must turn.
Just as the Legislature excluded owners and registrants of an involved vehicle from
coverage when their insurance policy is not in effect at the time of the accident, the
Legislature further provided a different type of recourse for insurers who pay benefits to
third parties on the basis of a fraudulently procured policy. The insurer may sue the owner
or registrant to recover the benefits paid. MCL 500.3177 provides,
(1) An insurer obligated to pay personal protectioninsurance benefits for accidental bodily injury to a personarising out of the ownership, maintenance, or use of anuninsured motor vehicle as a motor vehicle may recoversuch benefits paid and appropriate loss adjustment costsincurred from the owner or registrant of the uninsuredmotor vehicle or from his or her estate. Failure of such aperson to make payment within 30 days after judgment is aground for suspension or revocation of his or her motor vehicleregistration and license as defined in section 25 of theMichigan vehicle code, Act No. 300 of the Public Acts of 1949,
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being section 257.25 of the Michigan Compiled Laws. Anuninsured motor vehicle for the purpose of this section is amotor vehicle with respect to which security as required bysections 3101 and 3102 is not in effect at the time of theaccident.
MCL 500.3177 (emphasis added).
There are multiple ways a motor vehicle may come to be uninsured. The one that
is relevant here is when the insurance policy is rescinded due to fraud. Once the insurance
policy covering the vehicle is rescinded, it is an uninsured motor vehicle. By the plain
language of MCL 500.3177, the insurer who was “obligated to pay personal protection
benefits” for use of that “uninsured motor vehicle” may recover such benefits from the
“owner or registrant of the uninsured motor vehicle.” MCL 500.3177.
“When the Legislature has unambiguously conveyed its intent in a statute, the
statute speaks for itself, and judicial construction is not permitted.” State Farm Fire & Cas
Co v Old Republic Ins Co, 466 Mich 142, 146; 644 NW2d 715 (2002). By expressly
excluding only the owner or registrant of an uninsured motor vehicle from coverage, MCL
500.3113(b), and providing that an insurer who pays benefits for injury arising out of use
of an uninsured motor vehicle may sue the owner or registrant of the uninsured motor
vehicle, MCL 500.3177, the Legislature has provided a clear mandate as to how these
cases must proceed. Benefits must be provided to the person who is not the owner or
registrant of the uninsured motor vehicle, and the insurer may sue the owner or registrant
to recover the loss.
As this Court has recognized, the No-Fault Act provides for payments where the
owner or driver is uninsured in order to effectuate the purpose of the No-Fault Act to
provide “assured, adequate and prompt recovery for economic loss arising from motor
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vehicle accidents.” Perez v State Farm Mutual Auto Insurance Co, 418 Mich 634, 649 n.23;
344 NW2d 773 (1984). The issue of reimbursement is a separate issue to be determined
after benefits are paid. Cooper v Jenkins, 282 Mich App 486, 490-491; 766 NW2d 671
(2009). Although this Court has not yet applied this section to the situation where a policy
is rescinded due to fraud, there is no basis in the plain language of the statute for such a
situation to be treated differently. See State Farm v Old Republic, 466 Mich at 146. A
vehicle that is uninsured because the insurance policy was rescinded is an “uninsured
motor vehicle,” and MCL 500.3177 draws no distinction between types of uninsured motor
vehicles.
There is no question that in a case such as this one the innocent third party is
entitled to benefits. Only an owner or registrant of an uninsured vehicle is not entitled to
benefits. MCL 500.3113(b). Thus, the appropriate, and mandated, course of action for an
insurer to take is to pay the benefits to the third party, and seek reimbursement from the
owner or registrant of the uninsured motor vehicle under MCL 500.3177. The absence of
any other remedy for fraud in the No-Fault Act and explicit inclusion of a remedy under
MCL 500.3177 make this so.
This interpretation is consistent with the rest of this mandatory statutory framework,
as well, as it provides every innocent party with a remedy rather than leaving some with no
benefits. The injured person is required to seek their benefits from the highest priority
insurer and has no choice but to look to the policy of a complete stranger. See MCL
500.3114 and 3115. The insurer is required to pay those benefits, as long as the person
is not the owner or registrant of the uninsured motor vehicle that was involved in the
accident. MCL 500.3113. The insurer may then seek to recover the loss from the only
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actually culpable party—the owner or registrant who had no insurance because of his or
her fraud in procuring that insurance. MCL 500.3177. Where the Legislature provided a
complete framework for dealing with the situation this case presents, and where the
recovery of mandatory personal protection benefits is governed by statutory rules, these
rules must be followed.
In Titan, this Court stated that “[t]hird-party victims of automobile accidents have a
variety of means of recourse under the no-fault act, and it is to those means that such
persons must look, not to a judicial articulation of policy that has no specific foundation in
the act itself and was designed to modify and supplant the details of what was actually
enacted into law by the Legislature.” Titan, 491 Mich at 565-566. Here, however, Amicus
CPAN simply asks this Court to require injured persons and insurers alike to pursue the
very recourse the Legislature provided in the No-Fault Act.
III. Failure to adhere to the strict requirements of the No-Fault Act and the remedythat the Legislature provided will create chaos and deprive innocent injuredindividuals of benefits, leaving them with no recourse.
The Court of Appeals’ decision creates real problems for injured persons who have
to seek benefits from any policy that is not their own. These problems stem primarily from
the fact that, as mentioned above, an injured person must provide notice of injury to his or
her insurer, or to the assigned claims facility, within one year of the accident. MCL
500.3145(1); MCL 500.3174.
Following the No-Fault Act, an injured person is required to file notice of injury with
the insurer of the highest priority. He or she may do so, following the law to the letter, and
not discover until over a year after the accident that the insurer is claiming the policy was
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fraudulently procured. Assuming the person had not yet filed notice with assigned
claims—and he or she had no reason to—the person is no longer able to pursue benefits
from assigned claims as recourse. He or she will not be able to obtain the no-fault benefits
to which he or she is entitled.
This is even more problematic when one considers that an injured person is not
permitted to file a claim with assigned claims during the 1-year statutory period unless
there was a known “dispute between 2 or more automobile insurers concerning their
obligation to provide coverage.” MCL 500.3172(1). Thus, even if the injured person wished
to file notice with the assigned claims facility as a safety net, he or she may not be able to.
Even if the person may file notice with the assigned claims facility, the Court of
Appeals’ decision would require every person seeking benefits under any policy that is not
his or her own to file notice with the assigned claims facility, just in case they cannot
ultimately obtain coverage from the priority policy—even though assigned claims is
supposed to be a last resort. This filing of likely unnecessary claims would be burdensome
to the assigned claims facility, whose costs would ultimately be imposed upon all motorists
through higher insurance premiums. MCL 500.3171(1); MCL 500.3176.
If, on the other hand, this Court interprets the No-Fault Act as described in this brief,
the injured person would receive benefits from the highest priority insurer, and that insurer
could sue the owner or registrant of the vehicle for reimbursement under MCL 500.3177.
The No-Fault Act’s purpose and the Legislature’s intent would both be effectuated.
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CONCLUSION
With respect to mandatory PIP benefits, the Legislature provided a detailed
framework regarding who a claim must be submitted to and how. The Legislature, likewise,
provided recourse to an insurer in situations where the involved motor vehicle was
uninsured (whether due to a rescinded policy or otherwise). This Court should effectuate
the Legislature’s intent by requiring insurers to pay benefits promptly even when they allege
fraud in the procurement, and to pursue their fraud claims later against the owner or
registrant of the uninsured motor vehicle.
RELIEF REQUESTED
Amicus Curiae CPAN respectfully requests that this Court reverse the decision of
the Court of Appeals and hold that insurers are obligated to pay benefits to an injured
person in spite of rescission of an insurance policy after the accident.
Date: November 21, 2017 Respectfully submitted,
/s/ Jennifer M. Alberts Jennifer M. Alberts (P80127)Liisa R. Speaker (P65728)SPEAKER LAW FIRM, PLLC230 N. Sycamore St.Lansing, MI 48933
George T. Sinas (P25643)Stephen H. Sinas (P71039)Thomas G. Sinas (P77223)SINAS DRAMIS BRAKE BOUGHTON &MCINTYRE PC3380 Pinetree RdLansing, MI 48911
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