Court of Appeals affirms fraud-type verdict against State Farm
In 2004, Patricia Paquette sued her son Richard's auto insurance carrier, State Farm, for fraud and misconduct related to its failure to pay Personal Injury Protection benefits for Richard's care. Richard suffered a catastrophic brain injury in 1985 and Patricia cared for him at home. She maintained that State Farm concealed its duty to pay a reasonable sum for attendant care and basically defrauded Richard of his right to benefits. State Farm claimed that it had no duty to advise her with regard to her son's legal PIP benefits and that, in any event, even if it committed misconduct, Ms. Paquette was too late in filing suit.
A jury found in favor of the Paquettes and State Farm appealed. The insurer claimed that the Paquettes were required to sue within one year of incurring any unpaid benefit and that fraud or other equitable estoppel claims could not be pursued in the context of the no fault act. The Court of Appeals reviewed the related legal history and pointed out that even the Engler Majority--which had reversed 19 years of case law in reinstating the "one-year back" rule--had maintained that insureds could bring a "late" action under "unusual circumstances." The latter ruling in the Devilliers case was reinforced in the 2008 Cooper v. Auto Club decision, where the Court expressly allowed a no fault PIP fraud case against the ACIA to proceed to trial.
In reliance on these decisions, the Court of Appeals unanimously affirmed the jury's decision in favor of the Pacquettes and allowed them to collect their long-overdue attendant care benefits (benefits which most likely still represented a substantial savings for the insurer when compared with the cost of institutionalizing Richard). It held that if an insurer induces a false belief through acts, representations or silence, and an insured reasonably acts in reliance on that belief to her detriment, the insurer will not be allowed to profit by its misconduct.
The Court also rejected State Farm's claim that it was error for the Judge to dismiss potential jurors who were also State Farm insureds. The insurer argued that its insureds should be allowed to sit in judgment on its conduct and would not be biased. No court agreed with this argument.