Why is Auto Insurance Fraud Part of Your Car Accident Case?

After a car accident, you are likely focused on recovering from your injuries and paying the bills. Once your no-fault complaint is filed, your insurance provider may bring a variety of technicalities into the case. One popular defense right now is to claim auto insurance fraud. That might leave you wondering what fraud has to do with your injuries or your right to no-fault benefits.

What is Auto Insurance Fraud?

Most auto insurance policies contain a "fraud exclusion". It says that if a policy holder made any fraudulent statements on their policy application or claim or engaged in fraudulent conduct connected to the claim process, the entire policy is void. These exclusions were designed to keep the insurance companies from having to pay when a person lied on their application or staged a car accident to collect the benefits. However, over time, even technical details have become grounds for an auto insurance fraud defense.

Auto Insurance Fraud Defenses are on the Rise

In 2014, the Michigan Court of Appeals decided Bahri v IDS Property and Casualty Insurance Co, 308 Mich App 420 (2014). That opinion held that violations of the general fraud exclusion in a no-fault auto insurance policy could cut off coverage for an injured motorist's entire claim for PIP benefits. In that case, the "fraud" had to do with excessive claims for benefits. The injured plaintiff was requesting daily replacement service benefits. The insurance company found a surveillance video showing she was able to bend, lift, drive, and run errands — the same activities she said she needed help with. The court said this was auto insurance fraud. More than just denying her claim for replacement services, the court said the fraud destroyed Bahri's entire claim because the whole insurance policy was void.

In the years since Bahri, the auto insurance companies have been on the hunt for fraud exclusion cases. Seemingly every claim that goes to court is put under a microscope, looking for missed traffic tickets, incorrect addresses, and overstatement of needed benefits. Common auto insurance fraud claims include:

  • Stating the wrong address on an application to get a better rate
  • Failing to include secondary drivers
  • Omitting tickets or convictions resulting in points on a driving record
  • Failing to report a non-injury accident
  • Overstating claims for benefits

Auto insurance fraud is now a popular way for insurance defendants to use technicalities to get around paying mandatory no-fault benefits. When an investigation reveals one of these technical misstatements, insurance companies will use it to defeat a motorist's otherwise-valid claim for no-fault benefits.

Why Does an Insurance Company Claim Fraud Before It Knows What is Going On in the Case?

It can be frustrating for personal injury plaintiffs to be accused of auto insurance fraud at the very start of the case. Insurance defense attorneys will often raise fraud defenses before they have even reviewed the file. Then when they don't find any misrepresentation, the defense just fades quietly into the background. The insurance company is never forced to admit they were wrong about there being any wrongful behavior.

It may be offensive to injured motorists, but there is a reason insurance companies do this. Fraud is what the Michigan court rules call an "affirmative defense." This is something that will defeat a claim even if everything the plaintiff says is true. In a car accident setting, the affirmative defense of fraud says even if the claimant was in a car crash that resulted in injuries and required covered medical treatment, time off work, or replacement services, the insurance company still doesn't have to pay because the claimant violated the fraud exclusion.

Affirmative defenses, like auto insurance fraud, must be included in a defendant's first response to a complaint. In the recently published Court of Appeals decision, Baker v Marshall, (Docket No. 335931, decided April 5, 2018) the court explained that if a defendant insurance company doesn't raise a fraud defense in its answer or initial motion for summary disposition, the issue is waived. The company is legally prohibited from bringing it up later.

The court said the purpose of a pleading (including the defendant's Answer to Complaint) is to give the other side notice of claims or defenses, so that party can prepare a response. In Baker, the insurance company didn't do that. Instead, it surprised the personal injury attorneys with a claim of auto insurance fraud a year into the case. The defendant's motion for summary disposition left the plaintiff and her attorneys very little time to investigate the claims and create a response. The Court of Appeals said that was against the court rules and reinstated her claims for PIP benefits and uninsured motorist benefits.

Because of this court rule, lawyers on both sides of a car accident case tend to include all possible claims and defenses at the start of the case. As investigations, discovery, and depositions reveal what really happened, the unnecessary theories fall by the wayside, leaving only what applies to that particular case. Those key issues are then be submitted to case evaluation, arbitration, or eventually a decision by a judge or jury.

The process of filing and finishing a car accident lawsuit includes many twists and turns. You could find yourself unexpectedly facing an auto insurance fraud defense. That's why it is so important to have a team of experienced personal injury attorneys to help. At Sachs Waldman, we know how to respond to the insurance companies' affirmative defenses. We will help you develop your case using doctors, experts, and even your own testimony, to get you the no-fault benefits you need. If you have been seriously injured in a car accidentcontact our Detroit personal injury law office at 1-800-638-6722.

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