Fraud case against Auto Club allowed to proceed
Sharon Strozewski sued the Auto Club Insurance Association, alleging that it fraudulently denied her proper payment for quitting her job to care for her two small children who suffered severe brain damage in a car accident. Her case came back to the Court of Appeals, after appeal to the Supreme Court, to determine whether the insurer could properly be charged with defrauding two brain-damaged very young children. The Court concluded that even though the children were no misled by the alleged fraud, their representative, Strozewski, was: therefore a fraud case was viable.
In previous appellate decisions in this case, which was originally filed in 2003, the Auto Club had argued that the one-year back statute of limitations in the no fault act precluded any action by the children's mother. The Court of Appeals had accepted this argument and refused to toll the one-year statute during the children's infancy. The Supreme Court had rejected the lower court's decision, finding that the allegations of actual fraud by the Auto Club's adjusters took the case out of the one-year no fault statute. The Supreme Court concluded that if fraud occurred, it was irrelevant that the measure of damages was the statutory scheme of benefits provided under the no fault act which, standing alone, would have precluded suit after one year.
The Auto Club had argued that since the children were the injured parties entitled to services, and since they received those services, they had not been defrauded and should be dismissed as party/claimants. It further argued that if the injured persons entitled to services were not actually defrauded, then the allegedly-defrauded mother who provided the services should not be a proper party to the lawsuit, eligible to pursue the claim. The Court rejected this line of defense, holding that the injured party has standing to pursue a claim for proper payment of a service provider. It further held that the children--as the injury victims with standing to sue--were entitled to the benefit of the minority-tolling provision that allows a child to sue for fraud even after the six-year statute of limitations period.
One of the three judges who considered the appeal would have dismissed the mother's claim, citing the previous decision of the Court of Appeals in Johnson v. Wausau. Judge Meter felt that the appellate procedure rules required him to follow the holding in Johnson, where the Court ruled that a caretaker in a similar setting could not sue the insurance agent for fraud because she could have availed herself of the advice of an attorney and chose not to do so. The Johnson court essentially held that an insurer can't be guilty of fraud as long as there are attorneys who could be consulted to "test" the insurer's wrongful and fraudulent representations. To his credit, Judge Meter called for a conflict panel in the Court of Appeals to reconsider the holding in Johnson.