The Denial is in the Details: Combating Fraud in Claims for Attendant Care and Replacement Services

The Denial is in the Details: Combating Fraud in Claims for Attendant Care and Replacement Services


The no-fault act allows individuals to make claims for allowable expenses and replacement services. Attendant care (e.g., assistance with grooming and showering) falls under the umbrella of allowable expenses. Replacement services are services that the injured person required before and after the injury but can no longer provide for himself or herself because of the injury. They include household services like cooking, cleaning, grocery shopping, and laundry.

It’s common for individuals closely related to the allegedly injured person to provide these kinds of services. As a result, claims for attendant care and replacement services are ripe for fraud. Fortunately, an insurer has a tool to combat this situation. In Johnson v Geico Indemnity Co (Docket No. 351838), the Michigan Court of Appeals held that an insurance company that includes a fraud provision in an applicable insurance policy may void the contract or deny coverage based on an insured’s fraudulent misrepresentations.


Background on Johnson v Geico

Plaintiff Kimberly Johnson allegedly sustained serious injuries in a motor vehicle accident. Johnson, unpub op at 1. Subsequently, she claimed no-fault benefits from Geico Indemnity Company, contending that she was unable to perform common household tasks and personal care because of injuries she suffered in the accident. Id. As part of her claim, Johnson submitted affidavits to Geico stating that her boyfriend and son performed a variety of services for her, including things like cooking and dishwashing. Id. at 1, 4. Geico denied her claims for attendant care and replacement services, so Johnson filed suit. Id. at 1-2.

Geico moved for summary disposition, arguing that Johnson’s policy was void under the insurance contract’s fraud provision. Id. at 2. Geico relied on evidence that Johnson traveled to Ohio and Florida without her son and boyfriend during times when they allegedly provided services for her. Id. In response, Johnson argued that even though she traveled out of state without her caregivers, they performed household tasks at her home while she was away. Id. She also contended that other people provided personal care services while she traveled, citing a variety of reasons for why she didn’t include those individuals’ names on the claim forms. Id.

The trial court denied Geico’s motion for summary disposition, and Geico appealed.


Court of Appeals’ Analysis and Ruling

The Court of Appeals reversed the trial court’s order in a unanimous decision.

The Court explained that the no-fault act requires insurers “to pay benefits for accidental bodily injury arising out of the ownership, operation, maintenance or use of a motor vehicle,” including allowable expenses and replacement services. Johnson, unpub op at 3 (quotation marks omitted), quoting MCL 500.3105(1) and citing MCL 500.3107(1)(a), (c). However, the Court explained that “an insurer may void an insurance policy when an insured makes fraudulent misrepresentations in support of a claim for benefits.” Johnson, unpub op at 3, citing Bahri v IDS Prop Cas Ins Co, 308 Mich App 420, 424 (2014). Under Bahri, an insurer must establish four elements to void an insurance policy on the grounds that “the insured willfully misrepresented a material fact”:

(1) “The misrepresentation was material”;

(2) “it was false”;

(3) “the insured knew that it was false at the time it was made or that it was made recklessly, without any knowledge of its truth”; and

(4) “the insured made the material misrepresentation with the intention that the insurer would act upon it.” [Johnson, unpub op at 3, quoting Bahri, 308 Mich App at 424-425.]

“A statement is material if it is reasonably relevant to the insurer’s investigation of a claim.” Johnson, unpub op at 3, quoting Bahri, 308 Mich App at 425. The insurance policy at issue in Johnson included a fraud provision that tracked these elements. Id.

The Court of Appeals then noted that, in general, whether an insured committed fraud is a fact question. Id. However, when there are no issues of material fact surrounding the application of a fraud-related clause in an insurance contract, whether the insured committed fraud is a matter of law for the court to decide. Id.

In concluding that Johnson committed fraud as a matter of law, the Court of Appeals reasoned as follows:

First, the Court determined that Johnson submitted affidavits for replacement services and attendant care that she knew were false or prepared recklessly. Johnson, unpub op at 4-5. The Court based this conclusion on the fact that the information in the affidavits was impossible. The affidavits alleged that she received 12 hours of attendant care per day plus replacement services from her boyfriend and son while she was traveling out of town without them. Id. Next, the Court held that Johnson’s false representations were material because she sought reimbursement for attendant care and replacement services with the expectation that Geico would pay benefits under the policy. Id. at 5. The Court also noted other issues with Johnson’s claims that people other than her son and boyfriend provided attendant care while she was out of state. Id.

In sum, because Johnson made knowingly false, material misrepresentations to Geico in an attempt to obtain no-fault benefits for attendant care and replacement services she had not received, Geico properly voided the policy and denied coverage based on the fraud provision in the insurance contract. Accordingly, the Court of Appeals reversed the trial court’s ruling and remanded the case for the entry of an order granting summary disposition in Geico’s favor.


Driving Forward

Nowadays, it’s common for insureds to claim no-fault benefits for attendant care and replacement services regardless of the extent of their injuries. Many of the alleged caregivers share a close personal relationship with the insured. Considering these relationships, insurers and their counsel should closely scrutinize attendant-care and replacement-services claims for inconsistencies and irregularities. Insurers also should include a fraud provision in every policy as a standard underwriting procedure. Johnson makes it clear that a careful analysis of claims for attendant care and replacement services may be a catalyst to void an entire insurance policy under a fraud provision.

Johnson filed an application for leave to appeal in the Michigan Supreme Court. Considering other recent fraud-related opinions issued by Michigan’s appellate courts in the no-fault context, parties and their counsel should keep an eye on whether the Supreme Court grants leave to appeal.

If you have questions about fraud or misrepresentations in no-fault claims, please feel free to contact the author, Joshua M. Stapp. More information about Collins Einhorn’s General and Automotive Liability Practice Group is available here.

Have questions or looking for further information? Contact one of our attorneys.