Butross Dawood Fashho v. Liberty Mutual Insurance Company

If this opinion indicates that it is “FOR PUBLICATION,” it is subject to
revision until final publication in the Michigan Appeals Reports.
STATE OF MICHIGAN
COURT OF APPEALS
BUTROSS DAWOOD FASHHO, FOR PUBLICATION
September 17, 2020
Plaintiff-Appellant, 9:00 a.m.
v No. 349519
Macomb Circuit Court
LIBERTY MUTUAL INSURANCE COMPANY, LC No. 2018-000408-NF
Defendant-Appellee.
Before: RIORDAN, P.J., and O’BRIEN and SWARTZLE, JJ.
PER CURIAM.
Plaintiff appeals as of right the trial court’s opinion and order granting summary disposition
to defendant. We affirm.
I. BACKGROUND
Plaintiff was injured in a motor-vehicle accident on July 27, 2017. Plaintiff sought personal
protection insurance (PIP) benefits, including wage-loss benefits, from defendant, his no-fault
insurer. Defendant initially paid plaintiff’s PIP benefits, but, at some point in late 2017, it decided
to review whether plaintiff’s continued claim for PIP benefits was warranted. As part of its review,
defendant had plaintiff surveilled. The surveillance showed plaintiff, the owner of an automotive-
repair shop with a tire-shredding facility in the back, working at his business without any apparent
restrictions—he was loading and unloading tires from his work van, carrying around heavy tools
and parts related to his business, pushing vehicles, and driving to customers’ homes to perform
vehicle repairs. Because of what defendant saw during its surveillance, it terminated plaintiff’s
PIP benefits in January 2018.
Plaintiff thereafter filed suit to recover payment of PIP benefits. During discovery, plaintiff
testified that for several months after the accident, he could not perform his regular duties at his
business, and that, at the time of his deposition, he was still unable to perform most of those duties.
Defendant moved for summary disposition, asserting that plaintiff’s PIP claim was barred
by virtue of the fraud exclusion in the parties’ contract. In support of its assertion, defendant
pointed to plaintiff’s testimony and the contradictory surveillance evidence. In response, plaintiff
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argued that his policy did not contain a fraud exclusion, and that even if it did, the evidence only
created a question of fact whether he made material misrepresentations intended to defraud
defendant.
The trial court eventually granted defendant’s motion for summary disposition in a written
opinion. The trial court explained that plaintiff’s statements to defendant were material and false
as demonstrated by the surveillance evidence that contradicted his testimony, that he knew his
statements were false, and that they were made intending for defendant to rely on them.
II. STANDARD OF REVIEW
Defendant moved for summary disposition under MCR 2.116(C)(8) and (10), but because
the trial court relied on evidence not included in the pleadings, “we treat this as a grant of summary
disposition pursuant to only MCR 2.116(C)(10).” Attorney General v Flint City Council, 269
Mich. App. 209, 211; 713 NW2d 782 (2005). Our Supreme Court explained the process for
reviewing a motion filed under MCR 2.116(C)(10) as follows:
A motion under MCR 2.116(C)(10) tests the factual sufficiency of the
complaint. In evaluating a motion for summary disposition brought under this
subsection, a trial court considers affidavits, pleading, depositions, admissions, and
other evidence submitted by the parties, MCR 2.116(G)(5), in the light most
favorable to the party opposing the motion. Where the proffered evidence fails to
establish a genuine issue regarding any material fact, the moving party is entitled
to judgment as a matter of law. [Maiden v Rozwood, 461 Mich. 109, 120; 597 NW2d
817 (1999) (citations and quotation marks omitted).]
III. FRAUD EXCLUSION
We first address plaintiff’s argument that his policy with defendant did not contain a fraud
exclusion. “[I]nsurance policies are subject to the same contract construction principles that apply
to any other species of contract.” Rory v Continental Ins Co, 473 Mich. 457, 461; 703 NW2d 23
(2005). Courts must therefore “construe and apply unambiguous contract provision as written.”
Id. When interpreting contracts, words are given their “plain and ordinary meaning.” Id. at 464.
In his response to defendant’s motion for summary disposition, plaintiff attached a copy of
his policy renewal and policy declarations and claimed that these documents represented his true
policy with defendant. Because there was “no reference whatsoever to a fraud exclusion” in these
documents, plaintiff concluded that the policy did not have a fraud exclusion. Yet a cursory review
of these documents demonstrates that plaintiff’s argument is meritless. The declarations page
states, “The following forms and endorsements are applicable to your policy: Amendment of
Policy Provisions – Michigan AS 2281 05 16 . . .” And the document titled “AS 2281 05 16”
(which defendant provided to the trial court) states:
FRAUD
This policy was issued in reliance upon the information provided on your
application. Any changes we make at your request to this policy after inception
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will be made in reliance upon information you provide. We may void this policy
if you or an “insured” have concealed or misrepresented any material fact or
circumstance, or engaged in fraudulent conduct, at the time application was made,
at the time changes were requested, or any time during the policy period.
We may void this policy or deny coverage for an accident or loss if you or an
“insured” have concealed or misrepresented any material fact or circumstance, or
engaged in fraudulent conduct, in connection with the presentation or settlement of
a claim.
We may void this policy or deny coverage for fraud or material misrepresentation
even after the occurrence of an accident or loss. This means we will not be liable
for any claims or damages which would otherwise be covered. If we make a
payment, we may request that you reimburse us. If so requested, you must
reimburse us for any payments we may have already made.
Almost 100 years ago, our Supreme Court explained, “‘In a written contract a reference to
another writing, if the reference be such as to show that it is made for the purpose of making such
writing a part of the contract, is to be taken as a part of it just as though its contents had been
repeated in the contract.” Whittlesey v Herbrand Co, 217 Mich. 625, 628; 187 N.W. 279 (1922)
(quotation marks and citation omitted). See also Forge v Smith, 458 Mich. 198, 207; 580 NW2d
876 (1998) (“Where one writing references another instrument for additional contract terms, the
two writings should be read together.”). Because the document that plaintiff provided to the trial
court unambiguously states that the terms of “AS 2281 05 16” are part of the parties’ agreement,
the two writings are read together. And because AS 2281 05 16 includes a fraud exclusion, even
the document that plaintiff provided to the trial court supports defendant’s position that plaintiff’s
policy with defendant includes a fraud provision. Plaintiff’s argument to the contrary is meritless.
IV. SUMMARY DISPOSITION
The trial court granted summary disposition to defendant because it concluded that
defendant could deny coverage to plaintiff pursuant to the policy’s fraud exclusion based on
plaintiff’s fraudulent statements to defendant. In Bahri v IDS Prop Cas Ins Co, 308 Mich. App.
420, 424-425; 864 NW2d 609 (2014), this Court held that to deny coverage because
the insured has willfully misrepresented a material fact, an insurer must show that
(1) the misrepresentation was material, (2) that it was false, (3) that 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) that the insured made the material
misrepresentation with the intention that the insurer would act upon it. [Quotation
marks and citation omitted.]
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“A statement is material if it is reasonably relevant to the insurer’s investigation of a claim.” Id.
at 425 (quotation marks and citation omitted).1
After the trial court granted summary disposition to defendant, this Court issued Haydaw
v Farm Bureau Ins Co, ___ Mich App ___; ___ NW2d ___ (2020) (Docket No. 345516). In
Haydaw, this Court held that a defendant-insurer could not deny a plaintiff-insured’s request for
benefits based on fraudulent statements made after litigation between the parties commenced. Id
at ___ (slip op at 4). Because the trial court in this case relied extensively on plaintiff’s deposition
testimony when granting defendant’s dispositive motion, we ordered supplemental briefing from
the parties to address Haydaw.2
Having reviewed the parties’ supplemental briefs, we conclude that Haydaw has no impact
on the outcome of this case. We read Haydaw as standing for the unremarkable proposition that
an insurer cannot assert that it denied a claim because of fraud that occurred after litigation began;
the fraud must have occurred before the legal proceedings. This recognizes the reality that a
plaintiff-insured only commences suit after the defendant-insurer denies the plaintiff’s claim, and
that denial cannot possibly be based on an event that has not yet taken place. This does not mean
that a defendant cannot rely on evidence of fraud obtained after litigation commences. It simply
means that the evidence must relate to fraud that took place before the proceedings began.
With this understanding of Haydaw, we now review the evidence in this case. Before
litigation, plaintiff claimed wage-loss benefits of $800 per week. After defendant had plaintiff
surveilled and saw plaintiff working his old job at his shop, defendant denied plaintiff’s wage-loss
claim. During plaintiff’s deposition, he explained that before the accident, he paid himself a wage
of $800 per week, and that after the accident, he stopped paying himself wages because he was
unable to do the same job he was doing before the accident. Defendant had plaintiff expand on
this, and plaintiff explained that before the accident, he was responsible for working on cars,
changing tires, picking up tires from other automotive businesses for disposal, loading and
unloading trucks, picking up automotive parts from various stores, traveling to and from the
junkyard, carrying various tools related to his auto-repair business, and assisting customers.
Plaintiff explained that when he returned to work after the accident, he was unable to do most of
those things; he just focused on “dealing with customers” and “his managerial functions.” He said
that he “absolutely [could] not” do any of the labor-intensive positions previously required of him.
He admitted, however, that he “could probably pick up a tire and move it,” and had indeed lifted
a tire “once” because the shop was “really busy.”
Defendant’s surveillance of plaintiff through the fall and winter of 2017 told a different
story, however. That surveillance showed that plaintiff was capable of performing many if not all
of the tasks he claimed he could not. Several surveillance photographs show plaintiff carrying
1
In Meemic Ins Co v Fortson, ___ Mich ___; ___ NW2d ___ (2020) (Docket No. 158302, p 12 n
10), our Supreme Court reaffirmed that “[a]n insurer can reject fraudulent claims without
rescinding the entire policy.”
2
Fashho v Liberty Mutual Insurance, Co, unpublished order of the Court of Appeals, entered
August 14, 2020 (Docket No. 349519).
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tires and various tools, including a large tank, to and from his vehicle in October and December
2017. Photos also show plaintiff pushing vehicles around his shop’s lot. In the surveillance report,
the investigator described plaintiff’s conduct related to lifting objects, like how he carried tires and
rims, automotive parts, air tanks, a floor jack, a sledge hammer, and other tools. The report also
described plaintiff’s trips to a residence to repair a tire, describing how he left his auto-repair shop
“carrying an air reservoir/tank and two jugs,” loaded them into his van, drove to the customer’s
home, unloaded the tank, inflated the tire of the customer’s vehicle, carried the tank back to the
vehicle, and left. Plaintiff then returned to his repair shop, loaded a floor jack, power tool, and
sledge hammer into his vehicle, and returned to the customer’s residence, where he carried each
of those tools to the customer’s car, using the floor jack to “jack[] up the vehicle,” and removed
the vehicle’s tire. According to the report, plaintiff returned to his shop with the tire, then departed
once again to the residence, where he “rolled the tire to the” customer’s car, “mounted the tire on
the vehicle,” pulled the floor jack to his van, loaded it into the van, and returned to his repair shop.
The evidence defendant presented established that plaintiff’s representation about his need
for wage-loss benefits because he could not perform all of his job functions after the accident was
untrue. Plaintiff claimed that he could not pay himself the $800 per week after the accident like
he had before the accident—and therefore required wage-loss benefits—because he could perform
only the managerial aspects of his job and not the heavy-lifting aspects. But defendant’s
surveillance of plaintiff showed that plaintiff could, and in fact did, perform the heavy-lifting
aspects of his job.
Unlike in Haydaw, plaintiff’s representation that he needed wage-loss benefits because he
could not perform all of his job functions after the accident was made before litigation commenced,
and defendant rejected plaintiff’s claim for benefits on the basis of the surveillance evidence it
obtained before litigation showing plaintiff’s representation to be untrue. While plaintiff made
false statements after litigation commenced, defendant did not deny plaintiff’s claim for wage-loss
benefits because of those statements. Instead, plaintiff’s false statements made after litigation
began, about why he could not do his old job and required wage-loss benefits, only reaffirmed
defendant’s initial determination that plaintiff made a misrepresentation about needing wage-loss
benefits. Thus, Haydaw does not control this case, and the trial court correctly determined that
reasonable minds could not differ with regard to the fact that plaintiff had made misrepresentations
about his need for wage-loss benefits.
This misrepresentation was material because it was reasonably relevant to defendant’s
investigation of plaintiff’s claim for benefits. See Bahri, 308 Mich. App. at 425. Reasonable minds
could not differ with regard to the fact that plaintiff knew that his representation was false, or made
it without knowledge of its truth, because he was the one performing the same functions of his job
that he did before the accident while claiming a need for wage-loss benefits. Lastly, reasonable
minds could only conclude that plaintiff made the misrepresentation with the intent that defendant
pay him wage-loss benefits.
In sum, because reasonable minds could not disagree that defendant established all of the
elements in Bahri, 308 Mich. App. at 424-425, defendant had the contractual right to deny coverage
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on plaintiff’s claim based on plaintiff’s misrepresentations pursuant to the fraud exclusion in
plaintiff’s policy. The trial court did not err by granting summary disposition to defendant.3
Affirmed.
/s/ Michael J. Riordan
/s/ Colleen A. O’Brien
/s/ Brock A. Swartzle
3
The trial court initially denied defendant’s motion for summary disposition, but ultimately
granted it after defendant moved for reconsideration. On appeal, plaintiff challenges this decision,
arguing that the trial court should not have granted defendant’s motion for reconsideration because
it simply repeated the arguments from defendant’s original motion. In Yoost v Caspari, 295 Mich
App 209, 220; 813 NW2d 783 (2012), we explained that when a party files for reconsideration,
the trial court “has the discretion to give a litigant a ‘second chance’ even if the motion for
reconsideration presents nothing new.” Thus, the trial court’s decision here was not improper.
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