Whether the policy’s fraud-exclusion clause governed plaintiff-pedestrian’s claim for no-fault benefits; Shelton v. Auto-Owners Ins. Co.; No-fault priority statute; MCL 500.3114(4); Fraud; Bahri v. IDS Prop. Cas. Ins. Co.; Mina v. General Star Indem. Co.

In this case involving a pedestrian’s claim for no-fault benefits, the court reversed the trial court order granting defendant-Progressive summary disposition, and remanded. Plaintiff-Hoeft was stuck by a vehicle driven by Progressive’s insured, T. Progressive argued that the language in the policy’s fraud-exclusion clause was “clear, unambiguous and enforceable against” Hoeft and his mother, also a plaintiff. However, Hoeft’s claim was “governed by the statute, not the no-fault policy, and the parties did not address the source of his no-fault benefits in the proceeding below.” Resolution of this case was governed by Shelton, where the court “held that an insured who is not a party to the no-fault policy, but who is eligible for benefits pursuant to the no-fault statutory priority provision, MCL 500.3114, is not subject to the policy's fraud exclusion.” In this case, “Hoeft was injured while a pedestrian, and because neither he nor his spouse or resident relative had a no-fault policy, Progressive was required to pay him no-fault benefits pursuant to MCL 500.3114(4), not pursuant to Progressive’s contractual agreement with its insured.” And as a result, he was not subject to the fraud-exclusion clause included in T’s no-fault policy. But, as noted in Shelton, “a no-fault insurer may deny a claim that it believes to be fraudulent.” Nonetheless, the court noted that a unilateral denial is “not the end of the matter, but rather merely the initiation of a disagreement that, if suit is brought, must ultimately be resolved by a court.” Thus, it reviewed whether there was a question of fact as “to whether Hoeft and his mother committed fraud in connection with the attendant-care claim.” As to the allegation of fraud based on Hoeft’s mother’s statement about the number of hours of attendant care, Progressive contended that this statement was false. The court held that to the extent that the trial court found no question of fact relating to the alleged fraud, it “erred because it did not properly view the evidence in the light most favorable to Hoeft and his mother.” The court found that a reasonable jury could determine that they were “attempting to accurately account for the time she spent providing attendant care and the time that Hoeft’s stepfather provided attendant care.” Also, a jury could decide “that, although the attendant-care forms contained discrepancies, when Hoeft’s mother completed them she did so based on her belief that the forms were accurate and so she did not intend to defraud Progressive.” Finally, the surveillance records were “insufficient to establish clear evidence of fraud and the absence of a disputed question of material fact.”