Pretty Little Liars: Court of Appeals Confirms the Extent a Policy’s Fraud Exclusion Bars Recovery of PIP and UM/UIM to a Claimant Under MCL 500.3114(4)

Although unpublished, Cannon provides a concise overview of the interplay between the decisions of Bahri, Shelton and Forston, and the extent to which an insurer may void coverage based on the policy’s fraud exclusion. Cannon reaffirms the following important principles:

Where first-party benefits are statutorily mandated, they cannot be abrogated by the policy. See Bazzi v Sentinel Ins Co, 502 Mich 390 (2018).

If the claimant is both a policyholder and an insured party, an insurer must prove the insured committed all four of the elements outlined in Bahri to invoke the fraud provision of the policy. Bahri v IDS Prop Cas Ins Co, 308 Mich App 420 (2014).

A medical or healthcare provider, even if innocent of fraud, may be properly denied payment for services based on a policyholder’s fraud. Bahri v IDS Prop Cas Ins Co, 308 Mich App 420 (2014).

Where the claimant is not a party to the no-fault policy but is entitled to benefits under the No-Fault Act’s priority provision, the provisions of the policy’s fraud exclusion do not apply to statutorily mandated first-party benefits. Shelton v Auto-Owners Ins Co, 318 Mich App 648 (2017).

A person entitled to coverage under MCL 500.3114(1) as a member of a policyholder’s household does not lose his or her statutory right to PIP benefits on the basis of fraudulent claims submitted by the policyholder. Meemic Ins Co v Forston, 324 Mich App 467 (2018), lv. pending.

UM and UIM coverage is not statutorily mandated and, therefore, is controlled by the policy’s language and, therefore, fraud committed by any insured can bar those claims.

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