Michigan's Supreme Court won't protect insurers from fraud
While the activist majority of Michigan's Supreme Court will stretch a long way to protect the insurers and Chamber of Commerce who secured their appointment to the Court, they ruled on June 25 that they would not protect insurers from outright fraud claims. The majority had earlier reversed 19 years of no fault law to require that suit on no fault PIP benefits be brought within one year of the date of any expense or service. Sharon Strozewski sued AAA alleging that the Auto Club had defrauded her of proper benefits for caring for her two severely disabled children; this week the Court held that if she proved all of the elements of fraud, she could win her case, despite the one-year limitation, because actual fraud has a longer statute of limitations.
Strozewski's two daughters were catastophically injured in a motor vehicle collision back in 1987. At the time, she worked outside the home, earning $50.00 per day. She alleges that the AAA adjuster persuaded her to stay home and care for the girls in return for $50.00 per day. To induce her to accept this arrangement, he allegedly told her that if she did not agree, she would personally owe for the girls' care; that her parental obligation to care for the girls minimized AAA's obligation; that if she did not accept the arrangement, the girls would have to be institutionalized; that this $50 dollar-per-day rate was not negotiable and that AAA was not obligated to pay a market rate.
The Court held that the Plaintiff can recover proper compensation for the years when she was under-paid, provided she can prove this actual fraud occurred, even though she did not sue within one year. At the same time, the Court attached a number of warnings, exceptions, provisos and all manner of dicta to the decision, in an effort to discourage or defeat similar claims. For example, it warned that insureds should recognize that they are in an adversarial relationship with the insurer, and therefore cannot make a fraud claim if:
1. they have failed to educate themselves about the insurer's obligations;
2. the insurer's misrepresentations contradict the policy language which the insured is presumed to have read and understood;
3. the misrepresentations are of opinion or future conduct, and not objectively, false existing fact; and
4. are not "mere negotiation"; that is, "the mutual discussion and bargaining preceding an agreement to pay PIP benefits". In other words, an insurer apparently can make casual false statements to an unsophisticated insured in the process of negotiating away its statutory duties, if it does so carefully.
It was a relief to see that there are some limits on what Michigan's Supreme Court will do for insurers and the Chamber of Commerce, and there are a few statements in the majority opinion that seem to recognize the "perceived expertise" of insurance companies and the reasonable reliance of insureds on their insurer's representations. Sadly, though, taken in its entirety, the Cooper opinion reads as a sop thrown to one severely abused single mother, and a convoluted solution to the combination of sanctioned insurer misconduct and an unrealistic one-year PIP statute of limitations.