In a recent case decided by the Michigan Supreme Court, Meemic Insurance Company sought to void its automobile insurance policy and stop the payment of no-fault benefits. Meemic has been providing no-fault benefits for the son of the policy holders. Justin, the son, suffered serious injury when he fell from the hood of a moving car. Brain damage left him in need of constant supervision. Instead of sending him to a rehabilitation center, Justin’s parents decided to provide round-the-clock attendant care at home. Meemic agreed to pay the parents $11.00 per hour for the attendant care, and the parents submitted billings. After some years, Meemic investigated and found the son had been in jail for several months and at drug rehabilitation for several weeks, but the parents had continued to bill Meemic for attendant care during those times.
Meemic sought to avoid its statutory duty to pay by enforcing the antifraud provision in the insurance policy. The issue before the Supreme Court was the extent to which a contractual defense, like the antifraud provision, is valid and enforceable if it would limit the coverage mandated by the Michigan no-fault act. The Supreme Court decided that the contractual provisions (such as the antifraud provision) are valid when based on a defense to coverage mandated by the no-fault act or on a common law defense not abrogated by the no-fault act. In this case, Meemic’s antifraud provision was found to be invalid and unenforceable, because its fraud defense was not based on the no-fault act or on common law, but solely on the contract.
The Supreme Court decided that insurers are permitted statutory defenses and common-law defenses that the no-fault act has not displaced, but that an insurance contract cannot go beyond statutory or common-law defenses to limit mandatory coverage. Because the no-fault act does not provide a fraud defense to personal injury protection coverage, Meemic’s antifraud defense was not statutory. Its antifraud defense was not permitted by common law because generally the breach of a contract does not entitle the injured party to entirely avoid the contract. Expect the resolution of the case to include reimbursement or an order for the parents to reimburse Meemic for the attendant care paid when their son was not being provided attendant care. The opinion notes that an insurer can reject fraudulent claims without rescinding the entire policy.
The case is Meemic Insurance Company v. Fortson (Michigan Supreme Court docket no. 158302, July 29, 2020) and can be found at: https://law.justia.com/cases/michigan/supreme-court/2020/158302.html
