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After initial settlement, Auto Club preserves claim of misrepresentation to defend subsequent PIP claim

In 2007, Kenneth Brafman sought PIP benefits from his auto insurer, the Auto Club Insurance Association, related to transportation services.  The Auto Club defended the claim, in part, by filing a counter-claim alleging that Brafman committed fraud or misrepresentation in seeking PIP benefits.  In 2009 the parties settled the suit by payment of $20,000.00 to Brafman.  As part of the settlement, the Auto Club dismissed its counterclaim "without prejudice."  Later in 2009, Brafman filed a claim for overdue PIP benefits incurred after the settlement.  The Auto Club filed a counter-claim once again, but included in it claims related to alleged misrepresentations occurring before the prior settlement.  The Brafmans argued that the "old" counterclaim allegations should be dismissed as part of a contract for settlement.

The Trial Court agreed with the Brafmans, but the Court of Appeals overturned the decision and reinstated the Auto Club counter-claim.  It ruled that dismissals without prejudice are not a determination on the merits, and therefore a party dismissing without prejudice is not subject to res judicata, meaning that a subsequent claim is not barred by the original decision or settlement.  in other words, the Brafmans got "out-lawyered."  Their pre-2009 claims were adjudicated by the settlement, but the Auto Club's claims were preserved.
Thompson O’Neil, P.C.
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Traverse City, Michigan 49684
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